I've been pretty consistently bullish on Dover (DOV) as a business, if not always the stock, since Richard Tobin took over the CEO role almost four years ago, and since that time these shares have handily left the broader industrial sector in the dust, rising more than 100% and beating the sector by close to 70%, not to mention outperforming a host of well-loved industrial names like Allegion (ALLE), Honeywell (HON), Illinois Tool Works (ITW), and Roper (ROP).
There hasn't been any secret sauce here either, Dover has outperformed on the back of strong execution, including prudent portfolio transformation and excellent cost/leverage actions. Along the way, management has ignored the siren song of chasing growth by paying up to acquire exposure in areas like software.
With strong performance and underappreciated leverage to secular growth opportunities like automation and biopharma, my long-term growth rate has crept higher and higher. I do expect above-average growth here, as well as above-average margins and returns (ROIC, et al), but the valuation seems to capture that pretty well now. I can certainly go along with the idea of paying up to own superior businesses, but with prospective returns in the mid-single-digits on a longer-term basis, I don't see enough return to want to invest today.
Continue reading here:
No comments:
Post a Comment