Stockchase Opinions

Brett Girard, CPA, CA, CFA Littelfuse Inc. LFUS-Q HOLD Jul 24, 2020

He holds this. The company makes fuses in the electric automotive space. The challenge in the short term is if unemployment continues in the US, consumers will hold back on big ticket expenses. This may curtail sales. People need to research this more on their own.
$172.735

Stock price when the opinion was issued

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COMMENT
Leading manufacturer of fuses used in cars. As electronic vehicles are more widely used, company will benefit. Recent selloff in shares presenting good buying opportunity. Current 18x P/E is a reasonable valuation. Long term hold and currently owns shares.
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Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

TOP PICK
Stockchase Research Editor: Michael O'Reilly As the name implies, the company manufacturers fuses and switches used to protect virtually any industrial and commercial electronic component. Recently reported earnings beat expectations by over 50% and support a ROE over 20%. It trades at 18x earnings compared to peers at 30x. It pays a small dividend that has been growing over 11 consecutive years and is supported by a payout ratio under 20% of cashflow. We recommend a stop loss at $210, looking to achieve $309, upside potential over 20%. Yield 0.82% (Analysts’ price target is $309.00)
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This is a Panic-proof Portfolio opinion which is available only for Premium members

Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

PAST TOP PICK
(A Top Pick May 10/22, Up 8.5%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with LFUS is progressing well. To remain disciplined, we recommend trailing up the stop (from $210) to $230.
premium

This is a Panic-proof Portfolio opinion which is available only for Premium members

Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

PAST TOP PICK
(A Top Pick May 10/22, Down 8.1%)Stockchase Research Editor: Michael O'Reilly Our PAST TOP PICK with LFUS has triggered its stop at $230. To remain disciplined, we recommend covering the position at this time.
BUY

We all use fuses, including for EVs. He's owned this for 10 years. They also make sensors for cars and LED lights. The stock hit highs last September, but is cheaper than. Trades at 22x PE, but historically it's 14x. The market expects earnings growth.

TOP PICK

It provides fuses, silver protectors to the automotive, industrial and data centres as well as other component parts for electrification of the world. Data centres are an important part of AI technology. It has done well in growing the business at 10 to 12% on a yearly basis and we're looking at a dividend growth rate of 12% per year.       Buy 2  Hold 6  Sell 0

(Analysts’ price target is $267.88)
BUY

Carmakers have been slumping (i.e. Tesla), so consider car suppliers instead. LFUS makes fuses, which cars (and other products) need. It's had a good run in recent years and will offer good exposure to EV trend in coming years.

DON'T BUY
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

LFUS is $6.1B market cap, trading at 29X earnings with a 1.04% yield. Net debt is about 1X cash flow, and EPS growth has been decent, though a decline is expected this year before about 30%+ growth in 2025. Versus a group of Bloomberg peers, it is cheaper on P/E but has a lower return on equity and much lower growth (at least this year, -6% vs +16%). Its yield is average versus peers. All-in, while we don't have a lot really against it, with some debt and less growth it just does not compare so favourably with peers. 
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BUY

All the energy that's about to be consumed through electrification needs fuses. Smartphones have not been growing, but if Apple's iPhone with AI has traction, should see a pickup. A lot of automakers are struggling, and that's 2/3 of its business.

Still generates free cashflow and turns profits into 100% free cashflow. Financial flexibility to get them through these slower times. If stock price falls so that the portfolio position falls to 2%, he buys more to bring it up to a 3% weighting.

PAST TOP PICK
(A Top Pick Feb 12/24, Down 2%)

Small cap, so higher rates have impacted WACC. Secular tailwinds around EVs, data centres, alternative energy -- they all need fuses. Auto sales still weak, but pivoting to data centres with room for significant expansion over time.