Robotics & Industrial Machinery
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GNRC $295
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We added Generac to the Global Leaders Club this month; its earnings and guidance support our Strong Buy thesis
(21 Feb 2022) Companies listed on the NASDAQ have, overwhelmingly, seen their share prices crushed over the past few months, with some big names falling 50% or more from their 52-week highs. For many, based on their nonexistent earnings, the drop is understandable. For others, the pullback has been irrational. Power generation equipment maker Generac Holdings (GNRC $295) certainly falls in the latter camp. After falling 50% from its November high of $524, we added shares of this great American company to the Penn Global Leaders Club on the fourth of this month. The company just reported earnings and gave guidance for 2022: both sides of the coin were stellar. Revenues for the fourth quarter came in at just over $1 billion, representing a 40% spike from the same quarter of the previous year. Earnings per share (EPS) was $2.51 versus expectations for $2.42. For the fiscal year, sales hit a record $3.75 billion, a 50% increase over the previous year. As for guidance, management expects net sales in 2022 to increase somewhere in the 35% range, based on strong global demand—especially in clean energy markets—and increased home standby production capacity. The team also cited recent acquisitions as a catalyst. Shares spiked 16% on the report, and then proceeded to fall back down with the rest of the index. Generac is in an incredible position right now: the company is generating huge profits from its existing business line, but is also poised to be an industry leader in the renewable energy market. Investors seem to be missing that point. We removed FedEx (FDX $222) from the Penn Global Leaders Club to make room for Generac, picking up shares of the company at $280. Our target price is $550. |
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DM
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3D printing firm Desktop Metal to go public with a "blank check"
(26 Aug 2020) It seems to be all the rave on Wall Street this year: the SPAC, or Special Purpose Acquisition Company. A SPAC is a blank-check company that either does not have its own business plan or builds one around a merger with another company. In an upcoming issue of the Penn Wealth Report, for example, we discuss the SPAC Fortress Value Acquisition Corp (FVAC $12) funding America's return to rare earth mining via its "blank check" to MP Materials, owner of the Mountain Pass mining operation in California. Now, another SPAC, Trine Acquisition Corp, will provide advanced 3D printing "unicorn" (a startup valued at over $1B) Desktop Metal $575 million to go public under the symbol DM within the next few months. Desktop is a leader in 3D printing, producing stainless steel, aluminum, and other metal alloy parts in large quantities at an assembly line rate. CEO Ric Fulop said the company's latest machines will be able to "print" critical components for the aerospace industry at 100-times the speed of current high-end printers at about one-twentieth the cost. He gives the example of a water impeller pump for a BMW auto; it would typically cost $80 to produce the pump, but one of Fulop's machines created it for $5. Desktop Metal may truly usher in the 3D world promised by advocates for years. Forget the low cost of labor in countries like China, imagine Fulop's machines pumping out intricate metal parts en masse here in the United States. That could bring about a transformational shift in global economics, greatly reducing America's reliance on cheap overseas labor. Think that is a pie-in-the-sky promise? Remember how we were once at the mercy of OPEC for our energy needs? Keep an eye out for DM when it goes public later this year. |
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WMT
Bossa Nova Simbe Robotics |
Walmart is about to launch a new robotic workforce at its stores. (13 Jan 2020) Remember when you would go to the store to pick up a few items, find the shortest checkout lane, then proceed to get stuck behind someone reaching down to leisurely pull out their checkbook? It may seem archaic, but that scenario was commonplace not all that long ago. Now, with debit cards, smartphones, and self-checkout lanes, that problem has been alleviated, but stores are still struggling with the critical task of keeping items in stock. Walmart (WMT $93-$116-$125), the world's largest brick-and-mortar retailer, has a tactical plan to change that: deploy an army of six-foot-tall shelf-scanning robotic workers to diligently roam each aisle, sending alerts to employees' hand-held devices when an item is out of stock. Within relatively short order, Walmart will have over 1,000 of the robots, designed by privately-held Bossa Nova Robotics, roaming through its stores. While Walmart hasn't released the metrics, the company's senior vice president of store innovations said the enhancements will greatly reduce the odds of an item not being available to shoppers. While Bossa Nova is supplying the current crop of robot workers, Simbe Robotics has a competing device. Both of these tech companies are US-based. While Bossa Nova and Simbe are privately-held, NCR Corp (NCR $25-$35-$36), which has supplied Walmart with self-checkouts for years and cash registers for decades, will service the robotic workforce.
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CAT
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Caterpillar drags the market down to start the week off with a whimper. (28 Jan 2019) Before Nvidia's disconcerting comments about China, we had Caterpillar's (CAT $112-$125-$169) less-than-comforting earnings report. Echoing what the chipmaker said, Cat posted a decline in sales to the Asian region thanks to—you guessed it—cooling Chinese demand. As for the numbers: Cat did ring up sales of $14.34 billion over the course of the quarter, up 11% Y/Y, but earnings per share came in at $2.55 versus the $2.99 expected. As seems to be a recent theme, the company also tamped down expectations for the full year, offering guidance which would equate to four more quarters like the one just reported on. Cat dropped over 9% on the day, and now sits just about $12 above its 52-week low. If the global economy is, indeed, slowing down, big machinery companies like Cat will be some of the hardest hit. We still like the industrials sector, but we are avoiding this sub-industry.
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PRLB
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(12 Jul 2017) Stock of the Day: Proto Labs proves that the 3D revolution is just beginning.
Remember all the frenetic excitement surrounding 3D printing a few years ago? From a chew toy for the family dog to a habitat on the moon, we envisioned these amazing devices pumping out virtually everything within a few years. The topic has cooled, but the industry has not. Take Proto Labs, Inc. (PRLB), for example. This $1.8 billion small-cap growth company was founded in 1999 with the stated goal of radically reducing the time it took to fabricate injection-molded parts. Headquartered in Maple Plain, Minnesota, and with manufacturing facilities in the UK and Japan, Proto Labs can rapidly manufacture custom parts for companies in the medical device, electronics, appliances, automotive, and consumer products industries. The company has sales of roughly $300 million per year and has turned a profit year in and year out. PRLB is currently selling for $68.85 per share. |
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CAT
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(02 Feb 2017) Caterpillar falls on news of law enforcement raids. Industrial giant Caterpillar (CAT $69-$94-$99) fell over 4% on Thursday following reports that a number of its facilities have been raided by fed officials. Law enforcement agents from the IRS, the FDIC, and the Commerce Department took part in the raid on at least three CAT facilities, including its Peoria, Illinois headquarters. The actions seem to be related to accusations that the company used a Swiss unit of the firm, CSARL, to shelter capital from taxation. Had it dropped a bit more, we might have jumped back in. Great company. Still a bit overvalued.
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PCAR
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Machinery. Raising stop-loss on Paccar in Global Leaders Club after 44% gain. Just over one year ago, on 03 Dec 2015, we saw a great industrial company sitting in a deeply-undervalued state. When we picked up truck manufacturer Paccar (PCAR $48-$69-$70) for $48 per share, it had a $16 billion market cap. Now, at $69.38 per share, it is a $24 billion company with a 45 p/e. That's a bit frothy for us, and we are placing a $68.50 stop-loss on the maker of such brands as Kenworth and Peterbilt, which we will raise as required (unless it fills, of course).
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