Timeless Compounders

Asset light industrials with low Capex to Free cash flow (2025) ​$6920 - Lasertec: 4% 🇯🇵 $CGNX - Cognex: 5% 🇺🇸 $BMI - Badger Meter: 8.5% 🇺🇸 $AME - Ametek: 8.5% 🇺🇸 $GGG - Graco: 9% 🇺🇸 $NDSN - Nordson: 9% 🇺🇸 $DPLM - Diploma PLC: 10% 🇬🇧 $OTIS - Otis: 10.4% 🇺🇸 $HEI - Heico: 11% 🇺🇸 $GTT - Gaztransport & Technigaz: 12% 🇫🇷 $EMR - Emerson Electric: 12.4% 🇺🇸 $KNEBV - Kone: 12.5% 🇫🇮 $LRCX - Lam Research: 13% 🇺🇸 $ITW - Illinois Tool Works: 13% 🇺🇸 $ASABY - Assa Abloy: 14% 🇸🇪 $IDXX - IDEXX Lab: 15% 🇺🇸 $PH - Parker Hannifin: 15% 🇺🇸 $VRT - Vertiv: 15% 🇺🇸 $INDT - Indutrade: 15% 🇸🇪 $HLMA - Halma: 17% 🇬🇧 $MTD - Mettler-Toledo: 18% 🇺🇸 $ATCO - Atlas Copco: 20% 🇸🇪

🚨 Stay tuned tomorrow for an upcoming deep dive on a French 🇫🇷specialized distributor that has quietly compounded value for decades ⏳ While the company operates in a cyclical industry, its unique business model and financial discipline make it a "sleep well" stock for long-term investors 🛌🏝️ Today, it trades at a very reasonable valuation and has made it to my portfolio last week ✅

Thx - really appreciate you took the time — and you are largely right on your points. Your illustration sums it well: If MoD grows 5x while generating real incremental profit dollars, a drop in the blended Service margin rate from 25% to 21% is not a problem — it actually shows a business successfully scaling a new high-growth segment. I would even say it is a good problem to have. But it all depends on whether that is the true reason, so far the segmentation does not allow us to see the M&R margin trajectory cleanly I have one small reservation however which is that the scenario u describe requires two conditions to hold simultaneously: some sort of stable sub-segment margins and robust volume growth across both businesses. What $OTIS suggests however is that both are moderating at the same time — not just the rate. Portfolio unit growth is being guided from 4% to approximately 3%, the China conversion rate is confirmed as structurally lower and staying lower, and ex-China retention hasn't yet improved toward the 96% target. So this is where I got a bit worried Anyhow, the risk worth watching over the next few years is whether portfolio growth moderation and China conversion dynamics (quality over quantity) constrain the flywheel's more than modernization compensates for. On the 5-year horizon you mention — I think that Schindler is facing the same issue and to a lesser extent $KONE - On a quick check seems Kone and Otis are making opposite strategic bets in China service right now. Otis is deliberately narrowing its China service footprint — accepting lower unit counts in Tier 3-6 cities in exchange for profitable Tier 1-2 density. Kone is going the other direction — taking more China NE volume and building a broader service base even at lower per-unit margins. To add more verifiable context to this, I will check soon Kone and Schindler's latest results to see whether the same issues are showing up there or whether they are specific to Otis. So there is some noise - I am really split on whether or add more here as my position is large enough - but if turns out that these are mostly non-structural issue could be a very good point to add more... Thx again 🙏

@TimelessCpnd Re: Service margins If Maintenance+Repair grew 2x and Modernization grew 5x at constant margins over X years, overall Service margins would crash from 25% to 21%. Would you be unhappy?

$OTIS is growing its service business with a positive outlook despite the global construction slump

@olensrud @LionCubsFund Indeed very summarized and each with upsides and downsides - ideally owning both models in portoflio 🙏

Investor is very different to Lifco, Lagercrantz etc. Where the serial acquirers typically acquire capital light industrials at low multiples to collect and reinvest cash. That model doesn’t work for Investor due to size. Instead, Investor tend to buy platforms, who then reinvest capital themselves But this looks different for the different parts of their portfolio. Listed companies like $ATCO invest organically and inorganically. Wholly owned companies consist of high quality platforms with high margins, high ROIC and reinvestments. Here they generate their own cashflows, a key focus for the last decade EQT a very different beast, but also with an exceptional track record. Similarity across the group is that their companies tend to be well positioned in their markets. Famous examples are Atlas Copco exiting the engine market for more niche verticals where they could earn higher returns in the 50’s or something

Why are the best investors obsessed with the "Swedish Serial Acquirer"? 🇸🇪 It’s a masterclass in capital allocation: buy niche, profitable firms, leave them alone, and reinvest the cash. The result? Multi-decade compounding machines. A thread on the best small-cap ideas. 🧵

@olensrud @LionCubsFund By the way so Lager out of your top 3 - for quality reasons, valuation reason or any other reason ?

I really really love Lifco, would tend to agree with you that they are higher quality probably - honestly the dental segment provides a uniquely defensive anchor - I haven't so far found anything similar or equivalent. How do you explain the recent pull back in your view ? Investor, I was a bit skeptical - sounded to me like a mutual fund a different animal from all others, no ? Also never considered as $ATCO is one of my largest holdings. The ABB exposure they have I always loved and never managed to get - very nice electrification play

@olensrud @LionCubsFund By the way so much looking forward to read your write up 🙏

Thx Ole. if valuation were equal, I find that Lagercrantz wins on quality. But given the current ~40–45% valuation discount on Momentum, it is a rare occasion where one can get a serial acquirer with a viable path for long-term compounding. To me, Addtech is the hardest to justify separately; it's priced similarly to Lagercrantz but with a slightly lower quality profile, making it the least compelling of the three on a risk/reward basis right now. Teqnion have not digged out but many suggest it is weaker For me now the question is : Do a go 60% momentum vs 40% Lagercrantz or the opposite 😄 like to what extent the momentum discount makes it the largest slice or should I really allocate more to the quality of lager

@olensrud @LionCubsFund Do you own it ole ?

@LionCubsFund I have a weak spot for Momentum Group myself, see why it’s such a large position of yours

@DurableCreators Cintas? Curious about heico still sounds a bit too much for me ? What is your take ?

Thinking $AXON, $TDG, $SPGI, $HEI.A, $MCO are all decently attractive here. Hoping they go a little lower in the coming weeks, but I don't think I'd be mad about buying them here.

I am sorry there are serious issues that are structurally and just posted a deep dive on this in my SUBSTACK - one example They initially guided for service margin expansion of 50-60bps and now 10-20bps. And they confirmed in JP Morgan conference this is the new norm and not just for the Q1

$OTIS CFO Cristina Mendez on Why Short-Term Noise Doesn’t Always Reflect Real Business Strength “All of the impacts we are seeing are temporary and not related to demand.” “We still see strong orders and backlog in place.” “This is mainly a matter of timing and calendarization within the year.” “Once conditions normalize, we can recover that performance.” “The core business remains strong underneath the noise.” gurufocus.com/stock/OTIS/sum…

@OptionsSean If you are wondering why check the deep dive I just posted today - a mix of issues and in particular margin expansion revised structurally and new equipment issues in the US Happy to get your insight and further exchange on this

$OTIS is taking the elevator down

Available here x.com/i/status/20393…

A follow-up to my Q3 2025 $OTIS deep dive, now incorporating Q4 2025 earnings, the official 2026 guidance, and the CFO's comments at the JP Morgan Industrials Conference on March 18, 2026 will be posted tomorrow

OTIS SUBSTACK DEEP DIVE 💥 $OTIS management blames the Middle East. I did the math. It doesn't add up ⚠️ The Middle East impact they cited implies roughly $3M of profit headwind. The EPS revision implies $12-20M. Something else is going on. Here is what I found after going through every line of the Q4 transcript and the March 18 JP Morgan CFO presentation: 1️⃣ An Americas NE execution miss was disclosed January 28, described as "delayed into Q1." By March 18 it had largely vanished from the narrative — replaced by geopolitics. 2️⃣ Service margin expansion has been quietly revised from ~50bps annually to 10-20bps. Structural, not temporary. The compounding story is slower than priced. 3️⃣ A new COO was hired in January. Not mentioned at the earnings call three weeks later. 4️⃣ Full year guidance was not formally reaffirmed at JP Morgan. "Too early to say" is not a reaffirmation. And yet — the modernization cycle is the strongest it has ever been. Orders +43% in Q4. Backlog at an all-time high. China government program expanding 15-40% in 2026. 9 million units globally now prime age for modernization, growing high single digits annually. The flywheel is not broken. The compounding speed has been repriced. Q1 in late April is the specific test. Full breakdown in the link. Worth a read before Q1 earnings. open.substack.com/pub/timelessco…

@VanguardEconomy Totally agree and will be posting on this today The Middle East alone as discussed by CFO in the JP Morgan conference does not mathematically explain the Q1 EPS downgrade. It's real, but it's being used as the headline explanation for a shortfall it only partially explains

Creemos que $Otis está ocultando una debilidad mayor en términos de retención, especialmente en CHina, lo que está penalizando su cartera de mantenimiento y debilitando su cuota de mercado. Otis Reporta un Q4 Sólido con Pedidos de Modernización +43%, Pero el Management Anticipa una Desaceleración del Crecimiento de Cartera que Pone en Cuestión la Sostenibilidad del Motor Principal del Negocio El líder mundial en ascensores reporta ventas Q4 de $3.796M (+3%) con margen operativo ajustado del 16,6% (+70pb), mientras China representa ya solo el 11% de los ingresos totales y el segmento de servicios alcanza el 47% de las ventas en ese país. La cartera de mantenimiento crece por 14º trimestre consecutivo hasta ~2,5M de unidades, y la guía 2026 apunta a crecimiento orgánico de dígito bajo-medio con BPA ajustado +dígito medio-alto. Análisis completo de los resultados ya disponible en PDF y video para miembros VER (hace 2 horas se publicó).

@NCheron_bourse Du génie

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