Carlisle Isn't Flashy, But Has Some Dependable Multiyear Growth Drivers

 

It’s been quite a while since I wrote about Carlisle Companies (CSL); at the time I said I saw high single-digit annualized return potential from the company in line with the broader market. That was half-right, as the shares have more or less matched the S&P 500 since then, but have returned closer to 14% a year (or 15% if you reinvested dividends along the way), and have modestly outperformed the broader industrial space as well.

I continue to see Carlisle as a “sector/market-plus” sort of stock. I’d like to see more internal improvement from the Fluid Technologies business (aka CFT), but I like the long-term leverage to greener construction in Construction Materials (or CCM) and aerospace (Carlisle Interconnect Technologies (or CIT)). I don’t think Carlisle is remarkably cheap on its own, but that reflects my broader feelings about the market and industrials in general, and the valuation is at least reasonable or better on a relative basis.

 

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Carlisle Isn't Flashy, But Has Some Dependable Multiyear Growth Drivers

The Amphenol Machine Rolls On

Long-time readers know that I have a real soft spot for companies that make the "guts" of the equipment we use in our daily lives but don't often think about all that much. The connectors, interconnect systems, sensors, and cables made by Amphenol (NYSE:APH) certainly qualify; pretty much anything that uses electrical power uses connectors at some point.

Amphenol is among the market leaders in this nearly $50 billion industry, but the company has also been building its capabilities in other markets like coaxial cables and specialty cables, as well as sensors. Importantly, Amphenol doesn't try to be all things to all customers, and the company generally tries to focus on higher-margin, more complex product categories. Combined with ongoing M&A and very consistent high-end execution, Amphenol has been able to roughly double the industry growth rate while producing double-digit returns on invested capital. All of that makes it an excellent company, but alas, the valuation is no bargain now insofar as I can see.

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The Amphenol Machine Rolls On

Carlisle Companies Taking A Familiar Road To Growth

With over $3 billion in revenue and $7 billion in market cap, I'm surprised Carlisle Companies (NYSE:CSL) isn't a little better-followed than it is. While this conglomerate is heavily weighted toward construction, Carlisle's target markets are looking pretty healthy going into 2017 and management has done a good job of meeting and raising long-term growth and margin targets.

Following in the footsteps of companies like Danaher (NYSE:DHR), Illinois Tool Works (NYSE:ITW), and Parker-Hannifin (NYSE:PH) and with a clean balance sheet, I think Carlisle has a lot of options to add businesses through M&A in the coming years and improve them by applying its Carlisle Operating System. Although the stock looks rich now, that's a common issue in the market today and investors may want to run through due diligence with an eye toward adding shares if/when the market cools.

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Carlisle Companies Taking A Familiar Road To Growth

Seeking Alpha: Titan International Deflates After Disappointing Results

The CEO of Titan International (TWI) is hardly a wallflower, and that makes for the occasional interesting headline or entertaining press release. But whatever the entertainment value, Wall Street is a brutally results-oriented place and Titan's fourth quarter earnings didn't pass muster.

While investors have reason to be concerned about the extent to which a weak global construction market and a "weak everything" market in Europe will hurt results over the next year or two, and what the company's long-term free cash flow generation will look like, this pullback could be an opportunity to add shares of an increasingly global off-highway wheel and tire business.

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Titan International Deflates After Disappointing Results