Sunday, April 26, 2020

Atlas Copco Offers Premium Performance At A Premium Price

Results are certain to get worse from here, but Atlas Copco’s (OTCPK:ATLKY) relatively strong performance in the first quarter underlines part of the reason why I love this company and why investors continue to bid it up to such a generous premium over typical industrial companies. While Atlas is by no means immune to the coming recession, the company has out-executed its competition over the years and continues to find new avenues of profitable growth in which to reinvest.

Of course Atlas isn’t cheap now. Even during the period of peak panic in March it was barely cheap by normal valuation metrics. If you’re waiting to buy Atlas when it’s inarguably cheap, you’re likely in for a long wait. I’m not suddenly turning into a “ignore valuation” type of investor, but there’s a point where you have to bow to reality, and the reality is that Atlas Copco is going to get a benefit of the doubt (lower implied discount rate/higher valuation) so long as it continues to execute at peer-leading levels.

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Atlas Copco Offers Premium Performance At A Premium Price

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