Arcure just met my criteria and looks like a great risk/reward. I'll see if I like such small companies, but fundamentally it looks great and fitting into my portfolio.
I can’t predict the future. But I can analyze the past. It’s a high quality company with above average margins through cycles. In the past they always came out of a cycle stronger. I’ve heard a bit to the left and to the right. Their machines seem to be Ferraris in its niche.
Agreed, the risk reward is great. Hermle has industry leading margins and can keep most of them during a downturn. Add a fortress balance sheet and secular tailwinds over the long-term.
I actually don't think that the competitive advantage and pricing power were the issue. I still believe that they have an advantage over their competitors, but the unpredictability (2 weeks of visibility) of the underlying commodity destroys all advantage they have. Lessons learned.
A key indicator of a competitive advantage is pricing power supported by strong barriers to entry. However, the significant price decline and the lack of substantial barriers, as suggested by competitors in Mexico and new factories in the U.S., indicate otherwise. This does not align with the characteristics of a business with a strong moat.
Well, distribution can certainly be an advantage. However, two points to consider: 1) If there's no pricing power, it might suggest that the advantage isn't as significant as it seems, or that competitors have found ways to bypass it. 2) Regardless, without pricing power and with limited barriers to entry (not just the Mexico aspect—according to the transcript, new competitors are building factories in the U.S., which is why worse results are expected next year), the business might struggle to sustain its current level of profitability over time.
Great Portfolio!
Thank you Thierry, cool to see you on Substack!
I ll give a try for my missing EN community :-) Lets see!
Great read. Curious, what was the catalyst for the move into micro caps now?
Arcure just met my criteria and looks like a great risk/reward. I'll see if I like such small companies, but fundamentally it looks great and fitting into my portfolio.
Nice move on Hermle! I’m also buying more at this prices. Maybe shares get more cheap
Let's see if it works out. So much negativity priced into the shares, meanwhile they keep investing for the upturn.
I can’t predict the future. But I can analyze the past. It’s a high quality company with above average margins through cycles. In the past they always came out of a cycle stronger. I’ve heard a bit to the left and to the right. Their machines seem to be Ferraris in its niche.
Agreed, the risk reward is great. Hermle has industry leading margins and can keep most of them during a downturn. Add a fortress balance sheet and secular tailwinds over the long-term.
Where are you based?
Southern Germany
Atkore was so painful.
Indeed, management lost a lot of credibility.
Also, I overestimated its competitive advantage and pricing power (which was even worse than anyone imagined).
I actually don't think that the competitive advantage and pricing power were the issue. I still believe that they have an advantage over their competitors, but the unpredictability (2 weeks of visibility) of the underlying commodity destroys all advantage they have. Lessons learned.
A key indicator of a competitive advantage is pricing power supported by strong barriers to entry. However, the significant price decline and the lack of substantial barriers, as suggested by competitors in Mexico and new factories in the U.S., indicate otherwise. This does not align with the characteristics of a business with a strong moat.
You're right on the Mexico part actually. I still believe however that the wide network is an advantage.
Well, distribution can certainly be an advantage. However, two points to consider: 1) If there's no pricing power, it might suggest that the advantage isn't as significant as it seems, or that competitors have found ways to bypass it. 2) Regardless, without pricing power and with limited barriers to entry (not just the Mexico aspect—according to the transcript, new competitors are building factories in the U.S., which is why worse results are expected next year), the business might struggle to sustain its current level of profitability over time.