Valens Equity Weekly Insights - 2022 07 12
Generac Holdings Inc. (GNRC) has a dominant and growing market position for backuppower generation and storage, a trend that is likely to grow for years. Uniform Accounting highlights that the market not pricing in these tailwinds, and Generac's potential to grow and expand returns faster signal the potential for equity upside.
Generac owns 70%+ market share for household backup generators, a market with low
penetration and accelerating demand. With households and businesses relying on more
“essential” equipment like cell towers, temperature control, and IoT components, backup
power itself is becoming an essential service. That's why Generac has been able to expand
its Uniform ROA for five consecutive years and grow investment above 10% in 12 of the
last 13 years. With the market pricing in lower growth and fading returns, Generac should
be able to outperform the market's expectations.
GNRC's management is closely aligned to focus on margin expansion and overall growth,
two critical factors for driving equity upside.
Management confidence in the Q1 earnings call about margins, costs, and their long-term
vision suggest management is executing on the company's ongoing strategy.
Ichor (ICHR) is being removed from the Conviction Long List. The semiconductor industry
is facing headwinds that are likely to remain for several quarters, so we are closing down
39%.
GNRC
Generac Holdings is a designer and manufacturer of a range of power generation equipment and other power products serving the residential, light commercial and industrial markets. The company's products include residential, commercial and industrial standby generators, as well as portable and mobile generators used in a range of applications. Other engine powered products that the company designs and manufactures include light towers which provide temporary lighting for various end markets; commercial and industrial mobile heaters and pumps used in the oil and gas, construction and other industrial markets; and a product line of outdoor power equipment for residential and commercial use.
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- 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
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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
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- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
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