Valens Equity Weekly Insights - 2023 02 07
Flex (FLEX) is the best-positioned outsource manufacturing partner to take advantage ofthe supply-chain supercycle. Uniform Accounting highlights the company's growth and
profitability potential from new business are not being priced in, indicating equity upside.
Flex is unique among the outsourced manufacturing industry in that a large portion of its
facilities are near, or on U.S. soil. Now that U.S. companies are in the process of adding
more near- and on-shore manufacturing back to their supply chains, Flex is in the process.
of winning new business, driving higher growth and profitability than the market expects.
Flex's management team is aligned to focus on margins, turns, and growth, the three
components of ROA expansion.
Management confidence in the Q2 earnings call about customer diversity suggests it can
maintain strong returns.
Ford (F) is being removed from the Conviction Long List. The company is heavily exposed to deteriorating consumer credit. We are closing up 10%.
FLEX
Flex is a provider of Sketch-to-Scale™ services that designs, engineers, manufactures, and supply chain services and solutions. Co. operates following segments: Communications & Enterprise Compute, which includes its telecom and networking business, server and storage platforms, and security appliance products; Consumer Technologies Group, which includes its consumer-related businesses in connected living and supply chain solutions; Industrial and Emerging Industries, which include energy and metering, semiconductor tools and capital equipment, and industrial automation and kiosks; and High Reliability Solutions, which include its medical, automotive, defense and aerospace businesses.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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