Stock Talk
Launched 9 Months Ago
Hi, I’m Papa Phil, the founder of a space called Stock Talk. I combine my decades in Finance, Entrepreneurship & Technology with my passion and curiosity, to make it easier for people to invest or trade.
Ah, the 1850s gold rush, when fortune hunters stampeded across the American West, hoping to strike it rich. But here’s the twist: you weren’t just in the market for gold; first you needed a good pickaxe, a reliable donkey, and a gold pan, along with a hearty stomach for leaky canned rations and disappointment. Sure, a few hit it big, but most didn’t. And the ones that made real money weren’t the ones panning for gold at all. They were the sellers of the picks, pans, and shovels.
Let’s talk Amphenol Corporation, a golden gem in their own right. The modern-day equivalent of those 19th-century purveyors of tools, except instead of picks and shovels, they’re selling the smallest pieces of the infrastructure that is powering the entire tech and industrial revolution.
The “Tools” of Today
Amphenol (APH) isn’t mining gold or digging for silver, they’re providing the tools that keep our modern world running via connectors, sensors, cables, fiber optics, and other interconnect solutions. If you’ve used a smartphone, driven a car, or flown on a plane, chances are you’ve relied on an Amphenol product without knowing it. Sectors they provide to include Commercial Aerospace, and Defense to Industrial, IT and Data Communications, Mobile Devices, and Mobile Networks.
The Gold Rush 2.0
Now, you may be wondering: “What makes Amphenol get into a Papa Phil article? It’s simple, others are trying to strike gold with splashy investor departments and shiny products, Amphenol is sitting pretty in the background, supplying the essential components that make it all tick. Think of them as the behind-the-scenes operators who are too humble to boast about the riches they’re quietly stacking up. But trust me, they’re making a mint. The stock is up from $65 in mid-May to $108 closing Friday the 29th of August, that’s only 3 1/2 months, all this fresh off a 2 for 1 stock split in May of 2024. They also split 2 for 1 in 2018 and 2021. If you’re wondering about too much of their stock floating around from these splits, they also buy back shares fairly aggressively.
Their P/E is at 43, but we will dismiss that as pyrite, the stone known as fool’s gold, for it is immaterial and not worthy of much consideration in this discussion. Most industrial manufacturers do not get to gross margins in the mid 30% range and net margins at 17% (over last 5 years). Earnings growth rates are 12% now and revenue is projected to be at $27 billion by end of 2027, that is close to doubling todays $15 billion.
The Real Money Is in the Tools
In the 1850s, the miners were chasing their dreams while the suppliers of picks, pans, and other mining gear were raking in profits from the chaos. Sound familiar? In today’s tech “gold rush,” the real money doesn’t always just come from being on the cutting edge of innovation, it comes from providing the necessary gear to get there.
They are positioned as the go-to source for companies looking to power their devices, vehicles, and systems. And just like the 1850s, the miners may not get rich, but the ones selling the tools? Well, they’re the ones laughing all the way to the bank.
The Hidden “Moat”
Now, why should you care? The moat around Amphenol’s business is made of solid steel, and no, I’m not talking about its physical products. I mean its business model. Amphenol’s has 250 manufacturing plants in 40countries around the world and 90% of their workforce is outside the USA. They have a built-in competitive advantage, it’s tough to replicate the combination of cutting-edge technology, a diversified customer base, and global distribution channels.
The company has grown by buying up smaller firms in the same space, meaning it’s continuously widening that moat. When you control the interconnects that power the world, you’ve got a pretty defensible business, even in the tariff laden world of today. Here is the best part of their acquisition success, they seamlessly integrate each new purchase quickly, and accurately into their own logistical large nugget of gold.
Conclusion: The Amphenol Investment Goldmine
So, here’s the big takeaway: if you’re looking for gold in today’s markets, don’t go for only the flashy “gold mines” of new technologies, go for the Amphenol’s of the world, the ones that supply the essential tools that make everything else work. Like the gold rush of old, it’s the suppliers that get the steady returns, while the dreamers of the mellow yellow gilded nuggets chase after the big strike.
Amphenol’s like the person who sold picks and pans, 170 years ago at the local mercantile store, in the town of Shady Gulch. This time though, the golds in the steady, predictable cash flow from industries that aren’t going away anytime soon.
And with that, I’ll leave you with this: the only thing shinier than gold is the steady stream of Amphenol buying out companies and splitting their stock for the enjoyment of their shareholders. So, maybe it’s time you start panning for some of that, eh?
Results are not typical. I teach methods that have made other traders’ and investors’ money, but that does not guarantee you will make money. Success in trading and investing requires work and dedication. Past performance does not indicate future results. All trading and investing carries risk.
