After further review, we recommend selling the small VNT position that came out of the FTV spin-off and put the proceeds into FTV.
Reasons for the sale:
Risks are greater than opportunities:
- 70% of 2019 sales came from their GVR business (retail fueling stations). We see the longer term risk no so much the decline in chip card readers in the US in 2021 (that can be offset by growth in other markets), but rather the upcoming obsolescence of gas stations as electric cars become a greater part of the vehicle pool globally. While currently only 1% of the car pool today, EV are estimated to be 10% of the car pool in 10 years. This could prove conservative as more countries ban ICE. And as car manufacturers increase production of EV that get better and better. The UK banning the sale of ICE starting in 2035 (including hybrid vehicles). France is planning the ban for 2040. Diesel cars will be banned sooner in some cities (2025 for Paris, Madrid, Mexico City, Athens). See the list below of all the countries that have announced an upcoming ban – this include China that is thinking about a ban as well.
- The switch to electric vehicles will also have an impact on their Matco Tools business (20% of sales): EV engines have 1/3 of the ICE engines maintenance. This is due to the fact that ICE engines contains hundreds of moving parts in its motor and drivetrain, vs. and EV engine that contains roughly 20. Less parts means less maintenance, and less trips to the auto repair shop.
While those two major risks to VNT are longer term in nature (short-term, the company could benefit from the increased sale of used cars due to COVID and emerging markets growth), it would require extensive M&A to shift the business towards the electric vehicle trend and/or the smart cities theme that is also growing but only 1% of sales today.
So what about Fortive now?
Fortive is focused on products that provide critical workflow solutions in productivity and safety. In addition to instruments that measure and control, they are also adding a set of Software solutions and data analytics capabilities.
3 segments targeting the control/sensor/measuring of liquids/gas/electricity in various end markets:
Some examples of what they actually make:
Gems: this company makes various sensors and control systems that find application in numerous end markets. Below are only a few:
- In healthcare: pressure switch to measure the cooling system of medical imaging equipment, fluid control for medical lasers.
- In the Alternative Energy space Gems makes sensors critical for wind turbines, by monitoring the hydraulic pressure that maintains the blade pitch, essential to maximize the amount of power generated, while protecting the blade from damage.
- Gems sensors are also used by the Marine markets, both commercial and military. Since a picture is worth a thousand words, here’s where you can find their sensors on boats:
Dynapar: its products are also used across many end markets such as aerospace & defense, elevatorsm passenger rails and even medical imaging.
- Example of and encoder used in the medical imaging field: “MRI is a noninvasive diagnostic technique that uses nuclear magnetic resonance to produce cross-sectional images of organs and other internal body structures. Dynapar offers a range of industry duty encoders designed to comply with FDA manufacturing guidelines for MRIs and X-Ray imaging. In x-Ray machines our encoders move water in and out of the machine, while in CT Scan and MRI machines they move patients in and out and measure the rotating speed.”
Anderson-Negele: hygienic sensors for the food, beverages, and life sciences industries:
- They have a product called a refractometer: it measures the sugar content in orange juice to guarantee a consistent taste experience (thank you!!).
- Their turbidity sensor measures the wine clarity: even before the smell and taste experience, the color and clarity of the wine needs to be consistent and pleasant. A California-based wine maker installed the ITM-4 sensor to monitor the turbidity in their clarification process prior to bottling. This allowed increased production yields and consistent monitoring (Thank you again!!).
Thanks,
Julie