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AME - Ametek


giofranchi
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SQ Advisors (Lou Simpson) have made AME their n.1 position in Q3 2015.

 

https://twitter.com/Find_Me_Value/status/666266497266782209

 

I like the business very much and Mr. Hermance seems to have an outstanding track record of both organic growth and growth through strategic acquisitions.

AME’s debt load is very low compared to other companies that grow both organically and inorganically, which I like.

In attachment you may find the Q3 2015 financial factsheet.

And here is a link to an article about Mr. Hermance:

http://www.ey.com/US/en/Newsroom/News-releases/News-EY-US-EOY-2014-Frank-Hermance-AMETEK-Inc-National-Distribution-Manufacturing-Award-Winner

 

Has anybody been following AME for some time? Any thought?

 

Cheers,

 

Gio

AME_Q3-15.pdf

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Do you have any idea what % of revenues/op. income comes from maintenance/aftermarket vs. sales of new machines, etc?

 

A quick scan of the most recent 10-Q leads me to believe they don't break that out. The MD&A breaks down revenues over their two main operating segments, but that's it.

Screen_Shot_2015-11-16_at_15_02_03.thumb.png.f6998617ffe04286328a053b48afd3cd.png

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He is buying acquisitive companies and these are favorite targets of short sellers. Which is one good reason to be disciplined on the price you pay.

 

On the other hand, those companies, if they are not frauds, tend to sell for an high multiple of EPS most of the time. Therefore, if you are not willing to pay up for quality, you might not be able to invest in them.

 

I think a portfolio of 15-20 owner/operators that grow both organically and through acquisitions will do fine even if you are willing to pay up (still being conscientious about price, of course!), and despite short sellers.

 

If one of those 15-20 companies becomes the target of short sellers, then I’ll simply sell it! And replace it with another one I like (almost) as much. ;)

 

Cheers,

 

Gio

 

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If one of those 15-20 companies becomes the target of short sellers, then I’ll simply sell it! And replace it with another one I like (almost) as much. ;)

 

Excellent strategy. Buy Valeant at $200, spam the topic with praise for the CEO for a few months, sell at $80 during a bear raid and buy the next compounding owner operator with an 'entrepreneurial spirit'. Rinse and repeat with Lancashire, Biglari Holdings, Constellation Software and every other expensive stock where the CEO has spun a nice story.

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Excellent strategy.

 

A basket of owner-operators (focusing not only on the quality of management, but also on the quality of the businesses they own)? Not my idea! Ask Murray Stahl! ;)

 

Buy Valeant at $200, spam the topic with praise for the CEO for a few months, sell at $80 during a bear raid

 

Well, Valeant was the very first company I had invested in that was accused of fraud… I admit I didn’t know what to think nor how to react promptly. Lesson learnt.

 

Rinse and repeat with Lancashire, Biglari Holdings, Constellation Software and every other expensive stock where the CEO has spun a nice story.

 

Even if some turn out to be poorer businesses than I had thought, if the remaining 10-15 perform well, results could be satisfactory indeed!

 

I look for quality and I am willing to pay up (to a certain extent) when I think I have found it (again, don't ask me: ask Mr. Munger!). Then of course I might be wrong. And if I am wrong, I change my mind.

 

As always, instead of being sarcastic and criticizing the ideas of others, you should present to all board members your ideas…

 

Gio

 

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  • 1 month later...

I have done some work AME

 

Positives:

Generally the businesses are good.  I like a lot of them.

 

Negatives:

However - I think the CEO is a deal guy and BS artist that has jacked up prices and gutted the company of growth expenses. 

This is why organic growth has likely stalled.  Go read glass door and the annual letter of the company.

 

Pass for me.

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  • 3 weeks later...
  • 2 weeks later...

Believe it or not, I'm meeting with Lou Simpson tomorrow. Cold calls do work sometimes, folks. Will try to see if he's open to talking about it.

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Believe it or not, I'm meeting with Lou Simpson tomorrow. Cold calls do work sometimes, folks. Will try to see if he's open to talking about it.

 

Awesome!

 

Please post notes if you could. Good luck.

 

Will definitely do. Thanks!

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Believe it or not, I'm meeting with Lou Simpson tomorrow. Cold calls do work sometimes, folks. Will try to see if he's open to talking about it.

 

Awesome!

 

Please post notes if you could. Good luck.

 

Will definitely do. Thanks!

 

What else do you plan on discussing with him?

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Believe it or not, I'm meeting with Lou Simpson tomorrow. Cold calls do work sometimes, folks. Will try to see if he's open to talking about it.

 

Awesome!

 

Please post notes if you could. Good luck.

 

Will definitely do. Thanks!

 

Was Lou willing to discuss this idea?

 

We didn't discuss AME. Frankly, I was constrained for time (only had 30 minutes with him) and thought it'd be more valuable to talk about his career/investing more generally/advice for a novice like me entering the banking world rather than discuss specific names. But he said his portfolio is roughly the same as what it was in the last 13-F filing (I imagine the only real change is PCP, which he had mostly sold out of by then anyway). So it's probably still a high-conviction idea for him. He was quite optimistic about the markets and his portfolio overall.

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