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Shares I love: Atlas Copco

Atlas Copco has maintained a high market share and pricing premium
Shares I love: Atlas Copco
  • Atlas Copco is a manufacturer of industrial tools and equipment
  • It sells its industrial equipment to a broad range of end users globally

Zehrid Osmani, manager of Martin Currie Global Portfolio Trust (MNP), explains why he invests in Swedish multinational industrials company Atlas Copco (SWE: ATCO A). 

“Atlas Copco is one of our high-conviction positions. It is a long-established global manufacturer of industrial tools and equipment, and a leader in vacuum and compressor technologies.

“Atlas Copco’s key value propositions are air compressors, known as the fifth utility [because these are] critical in powering certain industries, and vacuum technologies, used in the semiconductor industry. The company has leadership positions in both areas which enables it to maintain a high market share and pricing premium.

“It sells its industrial equipment to a broad range of end users, notably the auto, industrials, construction and semiconductor industries. This provides Martin Currie Global Portfolio Trust with exposure to many parts of the industrial cycle and, coupled with Atlas Copco's good geograhical diversification, this reduces the risk of exposure to one country or regional economic cycle.

“Atlas Copco operates in a cyclical market, which presents a risk, although the company has been able to more than cover its cost of capital through the worst of the recessions historically, which makes it a quality cyclical. The company is backed by a powerful business model and derives over a third of its revenue from its service business. It uses its aftermarket relations and integration with customers to identify future opportunities and innovation requirements.

“It also leverages its scale to invest in focused research and development, and smart, targeted mergers and acquisitions. This allows Atlas Copco to stay ahead of competitors and achieve strong pricing power, which adds to its resilience in cyclical downturns. Pricing power is a key characteristic we seek in companies.

“Atlas Copco is also very well-run with a strong corporate culture and consistent return profile.

“We view Atlas Copco as a great way to gain direct or indirect exposure to some very attractive long-term structural opportunities such as green infrastructure, electric transportation, and 5G telephony and healthcare infrastructure upgrades.”