Qiao Ma, of Cooper Investors, says that while cordless power tool supplier Techtronic Industries is an industrial company, it is truly a technology company at heart.
Naming Hong Kong-listed stock as their top pick at 2021 Sohn Hearts & Minds Conference, Ma explains that Techtronic is more of a Silicon Valley company than an industrial company.
“Every component that goes into a Techtronic power tool product, every step of the production process has been carefully thought out to ensure they stay state of the art,” she says.
“Take the example of batteries. In 2004, Techtronic migrated all of its tools to lithium-ion batteries.
The other factor that stands out for Ma is that Techtronic specializes in a niche area.
“This type of obsession and focus on one thing gives them an incredibly deep and nuanced understanding of their clients,” Ma said.
Over the past 12 months, Techtronic has launched a wave of 500 new products, and Ma claims the expansion of the business category is limitless.
This type of product innovation is also reflected in the performance of the exercise.
Over the past 13 years, Techtronic has increased its sales by 13% per year. Even more impressive, its profits are increasing by 26% per year.
“This tells us one thing: that Techtronic is not increasing sales by cutting prices and competing on volume, but by creating a high-end end product and having a very healthy product margin,” she said.
This means that Ma is excited about Techtronic’s future for three reasons.
The first is that Techtronic is moving out of its main market in North America and expanding into Europe and Asia. Ma is also optimistic about expanding the company’s category and expanding its operating margin.
While Techtronic is currently a $ 170 stock, Ma believes within 12 to 18 months it will climb to $ 215.