ATKR

Publicly traded companies mentioned herein: ABB Ltd (ABB), Atkore Inc (ATKR), Eaton Corp (ETN), Encore Wire Corp (WIRE), Hubbell Incorporated (HUBB), Mitsubishi Corp (MSBHF), Nucor Corporation (NUE), nVent Electric plc (NVT)

Highlights

The presenter is short shares of Aktore (ATKR), a leading supplier of mechanical, electrical, and safety infrastructure products. The presenter believes that ATKR has been an extraordinary beneficiary of a significant favorable supply/demand imbalance primarily in the PVC and conduits category markets in FY2021 and FY2022. Revenues increased dramatically for the Company as Net Revenues went from $1.765B in FY 2020, to $2.928B in FY 2021, and $3.914B in FY2022 driven almost exclusively from price increases (and not volume increases) for plastic pipes and conduits. Supply line disruptions were driven by COVID related labor shortages, bad weather in the Southwest US, the Suez Canal cargo ship blockage in 2021, and a factory fire-all combining to cause significant imbalances giving ATKR unusual pricing power. The presenter noted that with significant labor constraints for skilled blue collar craftsmen during 2021 and 2022, ATKR and its distributors were able to pass through high unit prices as construction companies could not afford to underutilize workers because of supply constraints or during pricing disputes. The presenter believes this pricing dynamic for what is essentially a commodity product will not continue and will normalize gradually over the next twenty four months.