Welcome, Subscribers!
Today, as we roll out our 64th issue of Elevator Pitches, we want to take a moment to reflect and share an important update.
From our very first issue, our mission has been clear: to save you valuable time in your search for money-making ideas. We've diligently scoured the investment landscape, bringing you handpicked, insightful stock pitches from seasoned investment professionals right to your inbox.
To ensure the continual delivery of high-quality content, Elevator Pitches is moving to a paid subscription model.
Join Us
As a token of our appreciation for your support, we're offering an exclusive introductory rate: just $10 per month or $90 for an annual subscription. This is the lowest price we'll ever offer, and it's specially reserved for our early supporters like you.
What Does This Mean for You?
As a paid subscriber, you gain full access to all our carefully chosen stock pitches.
We understand that this is a significant change, but our promise remains the same: to be your most reliable source for efficient, time-saving investment insights.
Thank you for being part of our story so far. We're excited to continue this journey with you, with even more dedication and focus.
This week, we’re pleased to share pitches for 6 new ideas that cover a wide range of industries, including:
An innovative electrical solutions provider making waves in the industry.
A unique retail player with a stronghold in remote markets.
A legacy brand in the automotive maintenance sector, known for its quality products.
Disclaimer: Nothing here constitutes professional and/or financial advice. You alone assume any risk with the use of any information contained herein. We may own positions in the securities listed. Please do your own due diligence.
To the investment managers who read this, you can send us your letters at elevatorpitches@substack.com or on Twitter (and Threads!) if you’d like to be included in a future issue.
Let’s get to it.
Upslope Capital initiated positions in nVent Electric (NVT), a Pentair (PNR) spin-off, and North West Company (NWC.TO), a Canadian specialty retailer. Upslope traffics in high-quality and defensive mid cap stocks. These two certain qualify. We include their theses below.
nVent Electric (NVT) – New Long
nVent Electric is a leading supplier of electrical protection and connection components and systems. The company was originally spun out of Pentair in 2018. NVT is an inherently attractive business because it holds mostly dominant or leading market share positions for products with a high cost of failure and a relatively low overall cost to customers. This provides customer stickiness and real pricing power when needed. While macro-sensitive, the company is unusually well positioned today as a clear beneficiary of the IRA (Inflation Reduction Act) specifically, as well as the more general trends of reshoring and electrification. While the current up-cycle won’t last forever, NVT also appears to have a long runway for inorganic growth that should bolster growth over the long-run. Since its 2018 spin, NVT has begun to establish a solid track record of acquisitions, with six (mostly tuck-in) transactions representing over $700mm in company sales today.
Some other details and nuances that attracted me to the company: geographically, nVent is focused on North America (~70% of sales) and EMEA (20%). Most NVT products are simple in nature (see examples below), which reduces supply chain complexity/risk. In its core Enclosures segment (half of sales), NVT holds ~80% market share and is considered the gold standard (“the Kleenex of electrical enclosures” as one former employee effectively put it). In the Electrical & Fastening segment (30% of sales), NVT maintains a leading market position in a highly fragmented market. The company recently completed a big step towards consolidating this market by acquiring ECM Industries. NVT’s largest acquisition to date, ECM generated over $400mm of LTM sales and $100mm of EBITDA.
Financially, nVent generates significant free cash flow – historically converting ~100% of Adj Net Income (currently lower due to leverage from the ECM deal, but should revert as the company de-levers). Even post-ECM, NVT has a reasonable balance sheet (2.5x net debt/EBITDA). And finally, valuation appears reasonable at a ~5% 2024E FCFF yield.
Risks primarily include: cyclical end-markets (tied to industrial RE construction), potential for IRA/reshoring demand to wane, and M&A execution risk.