I recently concluded interviews for a Senior Equity Analyst role at a major bank covering Industrials. Had a lot of fun piecing together the attached analysis as part of the interview process and thought I would share in public domain. All work belongs to me and is based upon publicly available sources.
Overall summary of winners and losers: https://imgur.com/2jPyoup
Here's the complete deck, about 24 pages https://imgur.com/a/P9kxH
Key takeaways
- Multi-line Industrials (MLIs) winners have been disciplined with portfolio decisions, focusing on secular growth tech sectors and have maintained very lean corporate centers that drive financial accountability, especially FCF conversion with OpCos
- MLI losers have been more diversified with large corporate centers and over-investment in cyclical positions and early stage tech where ROI has been slower than anticipated
- MLIs are increasingly focused on four major end markets and migrating to tech-centric positions in those end markets... divesting consumer, home, and other areas that are recent targets of competition from low cost suppliers in Asia and elsewhere
- GE Meltdown Round 2... pre-cursor to a breakup? Feels likley... Long-term degredation of OP% has followed GM%, which is a result of poorly times acquisitions (Alstom, BH) and weak Lighting and Renewables... Aviation and Healthcare if spun out would be more market value than current total GE based on peer P/E ratios... Becomes a buy once accounting concerns put to rest
- Concern re "who is the next GE" - further investigation... UTX? JCI? Accounting and Op% trends to be looked at
- Potential wave of M&A in Aerospace, as cash repatriated and in response to UTX/RCI... counter argument is who would buy at likely top of cycle. Safran?
- Winners: ROP, DHR (not FTV), HRS, PH (note: ROP, HRS already high PE)
- Losers: ETN, IR, CFX
Edit: typos
Submitted March 27, 2018 at 02:31PM by FundamentalsInvestor https://ift.tt/2pJttlt
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