Video Script
One of our core positions, and our largest stock in industrials (at 30 April 2021). Atlas Copco is a long-established global manufacturer of industrial tools and equipment, and is a leader in vacuum and compressor technologies, selling its industrial equipment to a broad range of end-users, notably the autos, industrials, construction, and semi-conductors industries.
It is a leading player in air compressors - compressed air is sometimes referred to as the fifth utility - critical in powering certain industries. Reasons we like Atlas Copco:
- It gives us exposure to many parts of the industrial cycle, with its diverse end-user markets exposure
- It is also well-diversified geographically, which reduces the risk of exposure to one single country or regional economic cycle
- More than a third of its revenues are derived from service, providing resilience through the cycle
- It has scale benefits, giving the company greater R&D firepower and leverage, making the company more innovative than the competition
- This in turns gives it stronger pricing power, which is an important characteristic we seek in companies
- It is best in class within the industrials sector in terms of returns on invested capital
- It has managed to more than cover its cost of capital through the cycle, even during past severe recessions, making it one of the high-quality cyclical businesses within the Industrials sector globally
Finally, it is exposed, directly or indirectly, to some attractive structural growth opportunities, notably related to:
- Green infrastructure initiatives such as renewable energy and efficient buildings construction
- Electric transportation - both railway infrastructure and electric vehicles
- 5G telephony infrastructure upgrades that are currently being undertaken
- Healthcare infrastructure which is in need of upgrades
All in all, Atlas Copco is a company that fits our search for companies that have quality growth profiles and sustainable business models.
The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were, or will prove to be, profitable.
Important Legal Information
This information is issued and approved by Franklin Templeton Investment Management Limited (FTIML). It does not constitute investment advice.
The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were or will prove to be profitable. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.
Past performance is not a guide to future returns. The return may increase or decrease as a result of fluctuations in the markets, in currency and/or in the portfolio.
Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.
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The opinions contained in this document are those of the named manager(s). They may not necessarily represent the views of other Martin Currie managers, strategies or funds.
Shares in investment trusts are traded on a stock market and the share price will fluctuate in accordance with supply and demand and may not reflect the value of underlying net asset value of the shares. The majority of charges will be deducted from the capital of the company. This will constrain capital growth of the company in order to maintain the income streams.