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VNT - Vontier


Broeb22
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Hello everyone, I wanted to share some rough napkin thoughts on Vontier given its recent spin-off from Fortive.

 

High-level I think its really interesting how much the Danaher complex has fragmented since 2014. From what I understand, going this path was a fundamental disagreement the Rales brothers had with Larry Culp, and why he ultimately left. 

 

We now have (that I know of):

DHR

FTV

VNT

NVST

NTCT

 

Either way, I think the VNT spin-off is interesting, but not necessarily cheap. Both FTV and VNT seem like decent businesses with good margins, though VNT houses some slower-growing businesses like Gilbarco Veeder-Root and Matco Tools.

 

I personally think FTV is "selling" high on VNT here because the EMV upgrade cycle at GVR is coming to an end, and that cycle drove years of above-normal growth for FTV, and I now believe that is reversing. So VNT faces some growth headwinds. With that in mind, I use their earnings a few years ago (lets say 2016) and use that as my expectation for ongoing earnings. On that basis, FCF is about $300 million and on a based of 170 million shares outstanding, that's about $1.75 per share. So, Vontier is trading ($28.76) at about 16x earnings using that admittedly imprecise math.

 

Mark Morelli has a strong reputation coming from Columbus McKinnon, where he had started a turnaround before moving to Vontier. Vontier's transportation focus in general is a pretty interesting space and there are businesses inside Vontier (GTT and Teletrac Navman) that provide them some entry into the IOT for transportation, which if I had to bet is the direction they will build towards.

 

I'm keeping my shares in the Vontier spin and if it trades down much further it could be an interesting spin-off opportunity given the almost-certain transformation that will occur in the company over the next few years which could make the whole business more fully valued. 

 

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Hello everyone, I wanted to share some rough napkin thoughts on Vontier given its recent spin-off from Fortive.

 

High-level I think its really interesting how much the Danaher complex has fragmented since 2014. From what I understand, going this path was a fundamental disagreement the Rales brothers had with Larry Culp, and why he ultimately left. 

 

Can I ask where that information comes from?

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Hello everyone, I wanted to share some rough napkin thoughts on Vontier given its recent spin-off from Fortive.

 

High-level I think its really interesting how much the Danaher complex has fragmented since 2014. From what I understand, going this path was a fundamental disagreement the Rales brothers had with Larry Culp, and why he ultimately left. 

 

Can I ask where that information comes from?

 

https://www.seattletimes.com/business/ges-new-ceo-has-a-reputation-for-transforming-companies/

 

Here's a quote from another article:

"I have some interests outside of the corporate world," Mr. Culp said in an interview, citing a growing attraction to education and fishing. "I was doing a lot of soul searching as I was getting ready to go into the 25th year with the company and the 14th year as CEO and I thought that I was ready to move on and the team was ready carry on in my absence," he said.

 

You don't go from "I want to fix education and catch some fish" to I want to turn around one of the most storied industrial conglomerates in the history of American business going through an unprecedented set of issues.

 

Like I said, I'm not an insider, so I cannot know for sure what really happened, but the first article reveals similar speculation that I had read years ago.

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  • 3 weeks later...

What do folks think of the first earnings release after the spin?

 

It seems like they have handled COVID-19 very well given the circumstances (like most other Danaher children have). I have medium-term concerns about the growth of the business without the benefit of the EMV rollout at GVR. That said, I think this split between Vontier and Fortive may be the most interesting split of any Danaher (or its children) have done because both Fortive and Vontier have clear strategic options/runways and Vontier's businesses were not getting many opportunities to invest behind them.

 

Long-term, it usually pays to bet on the Rales and their companies to do smart things even if it takes a while (see Colfax).

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Anyone see this company pivoting to EV future - charging, batteries, driverless cars infrastructure?

 

Yes, they have a minority investment in Tritium, an EV charging station manufacturer, and another investment in Driivz, an EV charging mgmt software.

 

I think they’re very much aware of the potential disruption within parts of the Vontier portfolio.

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Sounds good. I am perhaps too conservative but I rather own a legacy cash flow pumping machine that intelligently pivots to renewables than buy the pure play overpriced 100% renewable stocks like chargepoint or quantumscape , among others )

Money is flowing freely now but one day it may not and then having a 'private source of wealth' will come in handy.

 

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If there is one thing I feel with a high degree of certainty about any company associated with the Rales, it is that they have a thorough understanding of their competitive landscape. I think the companies breaking into different pieces will enable each company to further deepen that expertise.

 

Danaher’s experience with Cepheid where they took a break even business from 0% margins to 20% very quickly speaks to the potential for a Vontier to identify a fast-growing next gen technology at a seemingly high multiple but then rationalize parts of the operation that honestly probably needed it.

 

If there are people in the science fields on this board who know people at Cepheid during this transition, I would be interested to hear perspectives, good, bad, or indifferent. I think they cut a lot of costs that they believed was unfocused on the customer, so I’m sure not everyone views the Cepheid deal as glowingly as I just described it.

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