Atlas Copco: The best industrials business in the world is on sale, extremely resilient and will benefit from US reshoring

Too cheap to ignore, extremely resilient despite its share price action linked to the semi market and will benefit from US/West reindustrialisation long term

Welcome to the 3rd investment case and 3rd resilience, 2nd reshoring/sovereignty and China idea on Crack the Market (and the most comprehensive Atlas Copco investment case you will find online)! Discover why this industrial giant, which concentrates on helping customers increase their productivity and efficiency, is so defensive, profitable and may just benefit from the long term re-industrialisation of the US and the West.

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Twice a week, I will release deep dives into stocks and sectors that fit into the three themes that I see winning in this age of tariffs and deglobalization: resilience, sovereignty & reshoring, China. I will then deep dive into the opportunities in the AI data center value chain.

Take advantage of this once in a generation opportunity to build long term wealth by investing in great stocks that will deliver returns for your portfolio for years to come.

You can already read my first 6 deep dives, all of which I see as winners in this new world of tariffs and deglobalization:

• ASML (reshoring & China idea): The most innovative company in the world will 2.5x its EPS by 2030.

• LKQ (resilience idea): The most defensive business in the auto industry is a tariff winner and could become a compounder.

• Atlas Copco (resilience & reshoring idea): The best industrials business in the world is on sale, extremely resilient and will benefit from US reshoring.

• Badger Meter (resilience idea): The perfect business in the perfect end market, water meters are the definition of resilience.

• Knorr Bremse (resilience idea): Who knew making brakes was this lucrative? Rerating with self help story and upside from German infra plan.

• Flex (reshoring idea): The electronics manufacturing giant building Nvidia’s servers and enabling reshoring is becoming a better business.

After reading this article, you will understand what this company does, why it is so defensive and of such high quality, why its unique culture has been driving excellence for 20+ years and why it may just win long term from reshoring and investments in US manufacturing.

Atlas Copco is one of the highest quality industrial businesses in the world, providing critical products for customer operations (compressors, vacuum solutions, generators, power tools, and assembly systems), for which the energy efficiency of the product is critical and is differentiated by innovation (3/4 of the total cost of ownership/TCO is energy and represents 1/3 of total customer costs) with solid HSD growth underpinned by its service activity (40% of sales), high and stable margins (>20% EBIT margin, 65-70% of sales are very resilient, EBIT margin only dropped 400bps during 2008-2009 whilst competitors became loss making, 75% of production costs are outsourced which allows great reactivity to cut costs in downturns), a play on thematic growth: energy efficiency of industrial processes, recovery of semiconductor equipment growth, reshoring longer term (especially in the US), with an amazing capital allocation, new platforms that will deliver growth medium term and all of this driven by a unique decentralized culture and very strong execution including on M&A. The company is currently trading at levels not seen in years with a very attractive valuation of mid teens EV/EBIT, far from the >20x (and even >30x) that it has traded at in recent years.

In this article I go through:

1. Atlas Copco’s business and how its position as a leader in industrial niches makes it indispensable to all companies worldwide.

2. How this industrial juggernaut is perfectly positioned to benefit from numerous megatrends: industrial automation, productivity, energy energy efficiency, digitalization/semi proliferation, reshoring. And how it is already investing in the future with 3 new technological platforms that will deliver future growth.

3. Why the business model is so defensive, especially in this new era of tariffs and deglobalisation thanks to the servicing of its products, and how the company maintains such a consistent margin across the group.

4. Why the company‘s strong cash generation and great balance sheet could point to accelerated return to shareholders.

5. Its unique governance and decentralized management culture, how it has delivered 20+ years of excellence and continues to be the real differentiator for Atlas Copco.

Atlas Copco Investment Case