Improved Execution Has Significantly Boosted Colfax's Credibility

Credit where due - not only has Colfax (CFX) management reduced the cyclicality of the business in a relatively short time, it has also added a credible acyclical healthcare platform and improved the execution of its ESAB welding business. That progress has translated into strong outperformance, with the shares up almost 40% since my last update and leaving Colfax as one of the best-performing industrial/multi-industrial stocks of 2019.

With the move, the undervaluation I saw back in May has been corrected. From here on, the story is about ongoing execution in the Med Tech segment and the speed and magnitude of a short-cycle recovery for welding. With decent long-term revenue growth prospects (3% to 4%) and significant margin/FCF margin improvement potential, this is a name I'd watch through earnings as a potential buy on a pullback, should the welding business disappoint and/or overall sector guidance for the year lead to a broader de-rating.

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Improved Execution Has Significantly Boosted Colfax's Credibility