Sensata's (ST) strong record as a supplier of sensors and controls to multiple markets (but primarily auto OEMs) didn't really protect the shares when growth started to slow in 2015 and 2016, and investors began to worry that newer entrants like Amphenol (APH) and TE Connectivity (TEL) were pushing the company aside. While the 2015-2017 period was not a great one for the company, it looks like the prophets of doom went a little overboard, as Sensata's growth has been recovering and with it the share price as well.

I liked Sensata shares back in May of 2017 when they traded below $40, but it's harder for me to argue that there's substantial undervaluation now. What's more, light vehicle production isn't looking so strong outside of China, and we're in the later part of the semiconductor cycle. I like the prospects for Sensata to continue growing content and diversifying beyond autos, but I don't see the shares as particularly undervalued anymore.

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Sensata Back To A More Reasonable Level

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

Materion Past The Worst

Back in April, I thought that Materion (NYSE:MTRN) shares looked a little too cheap and the stock and the shares have since climbed almost 20%. There really aren't many good comps for Materion, so the performance of companies like Eastman Chemical (NYSE:EMN) or Johnson Matthey (OTCPK:JMPLD) isn't all that instructive, nor is the performance of specialty steel, nickel, and titanium alloy companies like Carpenter (NYSE:CRS) or Allegheny (NYSE:ATI). Basically, this is a case where the cheese stands alone, though connector companies like TE Connectivity (NYSE:TEL) and Amphenol (NYSE:APH) do tend to travel in similar directions and have some shared end-market exposures.

The good news for Materion is that business seems to be recovering, as revenue has logged two consecutive sequential improvements and should do so again in the third and fourth quarters. Margins have held up reasonably well through this downturn and free cash flow has remained positive. While I do believe that improving conditions in smartphones, aerospace, satellites, and telecom infrastructure should help the company post better growth over the next three to five years, it's important to remember that Materion has never been a champion in terms of reported return on invested capital or FCF generation. The shares do look a little undervalued, though, and improving momentum in its core addressed markets could still leave a little room for further appreciation.

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Materion Past The Worst

Seeking Alpha: Fourth Quarter Results Suggest The Street Still Underestimates 3M

Shares of the multi-armed conglomerate 3M (MMM) are up about 10% since I last discussed the company, but the story hasn't really changed all that much. Trouble in a few businesses masks an otherwise relatively solid story and Wall Street sell-analysts can barely muster tepid enthusiasm for the shares. Europe and assorted technology markets represent a risk to 2012 results, but fourth quarter results suggest that most of the risk here is to the upside.

3M Steps Over A Low Bar In Q4
To be fair, 3M's outperformance in the fourth quarter was against pretty weak expectations. Still, nearly 6% in constant currency revenue growth is nothing to sneeze at. Organic revenue growth of 3.3% (about one-third coming from volume) was not so spectacular, but did represent a sequential improvement - suggesting that 3M's performance may have bottomed in December.


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Fourth Quarter Results Suggest The Street Still Underestimates 3M