Kone Already Getting Ample Reward For Its Quality

Quality deserves a premium, but the market seems to be going overboard with Kone (OTCPK:KNYJY) (KNEBV.HE) (also spelled “KONE”), as this Finnish elevator and escalator company is indeed a high-quality company, but one that seems unlikely to grow enough to justify the valuation. Future service growth in China is a valid driver, as is equipment growth in India and other markets, and I don’t dismiss the possibility of a value-building mega-merger, but the share price already seems to contemplate nearly double-digit free cash flow growth from a company serving a market likely to grow in the low-to-mid single digits.

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Kone Already Getting Ample Reward For Its Quality

Seeking Alpha: UTX Looks Like A Bargain, But Share Loss Is A Worry

One of the reasons that conglomerates often used to carry discounts to pure-plays was the fear/belief that management teams struggled to keep a careful over all of the moving parts of the businesses in the stable. In the case of United Technologies (UTX) I can see the point. While UTC looks to be in excellent shape to benefit from the ongoing commercial aviation upswing, I do worry a bit about businesses like Otis and Climate Control.

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UTX Looks Like A Bargain, But Share Loss Is A Worry