Monday, November 19, 2018

Atlas Copco's CMD - Not All Bad, But Not Exactly Cheerful

In contrast to the ever-sunny, “what, me worry?” attitude of some corporate management teams that would have you imagining them smiling broadly even as the car rockets over the edge of the cliff, Atlas Copco (OTCPK:ATLKY) has a reputation for playing things pretty straight. That doesn’t mean that they’re always right, but it does mean that investors can generally trust them to give as accurate an assessment of the situation as possible.

To that end, Atlas Copco’s Thursday Capital Markets Day wasn’t exactly the sort of event that’s going to get investors feeling a lot better about this stock anytime soon. While management seems to believe the downside risk in Vacuum Technique is less worrisome than some of the more bearish sell-side analysts, and Power Technique could be a bigger contributor to growth than previously expected, all in all I’d say the tone was pretty conservative for the near term.

Atlas Copco shares have fallen roughly 50% from the start of the year and I have to admit getting more and more tempted to take a position, even given the risks around key markets like semiconductors and autos. While there is definitely a risk of things getting worse before they get better, and valuation still isn’t what I’d call cheap, buying these shares on sharp pullbacks has worked out pretty well in the past and I believe that will be the case again here.

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Atlas Copco's CMD - Not All Bad, But Not Exactly Cheerful

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