Dan Rohinton Linde PLC LIN-N PAST TOP PICK Jan 03, 2025

Huge winner so far. Very well run. Not much competition in the space. Not a ton of growth ahead. Price being driven by infrastructure spend in the US. Look elsewhere for better valuations. Could look at on a major pullback.

LIN is one of the larger basic materials names in the US. It is a $197B company with a decent yield of 1.3%, a premium valuation of 27X forward earnings, but a strong and growing revenue base of $32.5B. It has decent debt levels, a growing margin, and strong cash flow generation, of which it uses most to repurchase shares. While its shares trade at an expensive valuation, its performance has been excellent, and its fundamentals continue to grow and expand. We would be comfortable owning LIN as part of a long-term position. 

Materials which we think might be in great demand in the future include: lithium and cobalt (lithium-ion batteries for EV and renewable energy storage), graphene (exceptional strength and conductivity), and advanced alloys (aerospace and automotive industries).
Unlock Premium - Try 5i Free

It reports Tuesday. They supply industrial gas to hospitals, oil/gas, semi-makers, dollar stores and vinters. It does fine when the economy struggle and great when it thrives.

Their tech is used in carbon capture and clean hydrogen systems. It could be an idea for the future, but he's not a buyer of ideas, but of taking ideas and making them a viable business. Maybe LIN can do it or not.

Like many industrials, it had a great run, but lacked a blow-out quarter. LIN needs to show volume growth.

Its industrial gas makes it unique. Regional monopolies. Quality compounder. Allocates capital reasonably at high rates of return. Disciplined payout ratio, share buybacks. Reasonable valuation. Quality defense, benefiting from manufacturing renaissance. Yield is 1.2%.

Can benefit no matter the political landscape in the US.

An industrial, but classified as a materials company because they make industrial gases. Low beta. Mission-critical inputs. Long-term, take-or-pay contracts. A happy shareholder.

(Note the short timeframe.) Still likes it. Multi-year compounder going forward.

Largest industrial gas company in the world, estimated 30% market share. Competitive advantage is density of network and proximity to customers. Long-term, take-or-pay contracts, a guaranteed return. Supplies the healthcare, semiconductor, and green energy industries. 

Should do well in any sort of economic environment. Tends to grow earnings even in a recession. Well managed. She expects earnings to grow in range of 10%. Yield is 1.1%.