Strong New Product And New Market Development Have Driven Techtronic

Although I don't write about it often, Techtronic (OTCPK:TTNDY) has long been one of my favorite companies. The company behind brands like Milwaukee, Ryobi, and Hoover, Techtronic has shown itself to be more than just a low-cost manufacturer of power tools, as a strong product development effort has driven share gains in both the consumer/DIY market and the professional market, with the latter helping to drive strong, steady gross margin growth over the past decade-plus.

There are a lot of strong positive drivers still in place. I don't believe the company is close to exhausting its opportunities to take a share in the residential or commercial markets, and Europe is still largely an untapped market. Diversifying the manufacturing base should offer some improved long-term margin security, and newer categories like outdoor powered equipment still offer significant upside.

Unfortunately, that seems to all be in the price, particularly since the shares have rocketed higher over the past six months (up almost 115%). While I still love Techtronic from an operational perspective, I just can't get where I need to be on valuation to pound the table.

 

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Strong New Product And New Market Development Have Driven Techtronic

Policy Jitters Creating An Opportunity With Techtronic

Although I don't write on it often, Hong Kong's Techtronic (OTCPK:TTNDY) is a company that I've enjoyed following for a long time. The company behind well-known brands like Ryobi and Milwaukee are tools and Hoover and Dirt Devil in floor care, Techtronic has done a good job over the years of growing revenue and improving margins and ROIC (its performance on free cash flow has been less impressive). What's more, there's still room for the company to gain share in established markets like the U.S., add to its assortment of product offerings, expand into other markets, and drive more operating efficiencies.

The "but" is that investors have been frustrated lately by slower progress on margin improvements and worried about the potential ramifications of the new administration in Washington, D.C. As I don't believe Techtronic has outsized vulnerability to potential trade restrictions, and does have options for dealing with them, I think this could be an opportunity.

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Policy Jitters Creating An Opportunity With Techtronic

Seeking Alpha: Stanley Black & Decker Doesn't Inspire Yet

Arguably still best known as a power tools and hand tools company, Stanley Black & Decker (SWK) has spent considerable sums on M&A in the name of diversification. Thus far these deals haven't meaningfully helped the company's returns on capital nor its free cash flow generation, due in no small part to ongoing challenges with its Security business. Although Stanley Black & Decker doesn't look unreasonably valued relative to EBITDA and it has significant self-improvement potential, the shares already price in a lot of cash flow-based improvement.

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Stanley Black & Decker Doesn't Inspire Yet

Seeking Alpha: Techtronic Still Worth A Look As A Housing Recovery Play

My Top Idea call on August 20, 2013 to buy Techtronic (OTCPK:TTNDY) worked okay for a while, as the stock rose almost 20% through to year-end. Shortly thereafter, worries about the soundness of the housing play as an investing them started to creep into the market, stimulated by weaker housing starts and existing sales and worries about the economy as a whole. That took a lot of the steam out of Techtronic, as well as rival Stanley Black & Decker (SWK) and major retailing partner Home Depot (HD).

I believe the Techtronic story remains an appealing one. Techtronic has been a share-gainer in the U.S. with its Ryobi and Milwaukee tool lines, and still has yet to really address the European or major emerging markets in a big way. Likewise, I continue to believe that the company can do better with its floor care business, with a resulting uplift to margins. With margins and returns on capital heading in the right direction and a housing market only in the early phases of recovery, I still believe Techtronic has a lot to offer at these levels.

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Techtronic Still Worth A Look As A Housing Recovery Play

Seeking Alpha: Even After A Big Run, The Housing Recovery Can Take Techtronic Higher

Plenty of stocks tied to housing in one form or another have enjoyed strong rebounds, and toolmaker Techtronic (NASDAQ: TTNDY.PK) is no exception, as the shares have climbed almost 60% this year and nearly 1,000% from the depths of the housing/credit crash. With the remodeling/renovation market only just recovering and new housing construction still to come back, Techtronic should be looking at several years of above-average growth just on the recovery trade.

There's more to Techtronic than just a U.S. housing recovery. Techtronic has started to show progress in dealing with lagging margins and the company has barely scratched the surface of its opportunity in markets like Europe. Although these shares can respond violently to updates on the U.S. housing market, another 25% in the shares seems to be attainable on only relative modest margin improvement assumptions and fully executing on the opportunities in margins and Europe could send the shares as much as 50% higher.

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Even After A Big Run, The Housing Recovery Can Take Techtronic Higher

Investopedia: Stanley Black & Decker May Be Surprisingly Cheap

Every once in a while it's a good idea for investors to broaden their horizons and re-examine some ideas of the past. While I have been spending a fair bit of time on industrial supply companies and overseas toolmakers like Atlas Copco and Techtronic, it may be the case that there's an interesting stock here in the States. More to the point, Stanley Black & Decker (NYSE:SWK) has some challenges and real risks, but looks surprisingly cheap after its latest earnings report.

The Consummate Noisy Quarter 

Unfortunately, assessing Stanley's quarter takes a fair bit of work for all of the moving parts. The company reported revenue growth of almost 16%, with 6% organic growth from a 5% volume increase and a 1% price increase. This was a pretty solid result. Breaking it down, the Construction/DIY business saw 4% reported growth (or 8% organic growth after excluding Pfister), Industrial was up more than 11% (7% organic), while Security was up almost 47% as reported, but flat on an organic basis.

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Investopedia: Philips Needs A Shake Up

Although Dutch conglomerate Philips (NYSE:PHG) has bounced off the late 2008/early 2009 bottom in the stock, it has been many years since Philips was really a credible candidate for a long-term investor. Once an unquestioned leader in lighting and a strong competitor in consumer electronics, Philips has fallen victim to the bloat and malaise that seems to affect almost every conglomerate sooner or later. The question for investors now, though, is how long they are willing to wait for real signs of a new way of doing business at this company.



Weak Guidance Hamstrings the Stock
Philips surprised the market by preannouncing a disappointing second quarter. Management was sparse on details, but sales in the core lighting business only grew in the low single digits, while sales in consumer electronics have fallen from last year's level on weakness in Europe and a restructuring of the TV business.

Oddly, the company said nothing about the health care business, which is a substantial factor in sales and profits. That said, based on the performance at competitors like General Electric (NYSE:GE), Siemens (NYSE:SI), Varian (NYSE:VAR), Hologic (Nasdaq:HOLX) and ZOLL (Nasdaq:ZOLL), it would seem credible that Philips had a good, but probably not spectacular, quarter.

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