Given that RS has proven, several times in the past 20-30 years, that i can survive downturns and maintain margins during even the harshest of conditions, I have no doubt the company will continue to do just that in the environment we're moving forward into - as difficult as that environment may turn out to be.Īnd as little as that 1.66% dividend yield might sound like, the company has increased the company dividend by 17,900% since its IPO, with 30 increases since 1994, and 63 consecutive years of payment. RS shareholders, including myself, have seen very good returns, and we have every reason to be very pleased with company management. ![]() The return to shareholders here was over $840M, including both dividends and repurchases. RS went deep into CapEx during the last year, pushing almost $350M during 2022 alone, and planning to go half a billion for the next fiscal, over 66% of which is dedicated to organic growth. ![]() It goes to show you that it's more important what a company does with what it has, than it is to go and get more. Net sales were up to $17B and above, and this resulted in record OCF above $2.1B for the company, which is almost double the previous OCF record of $1.3B - again, RS showing strong profitability and WC management. This record was across almost every single metric, and it was despite ongoing volatility in the metal sector and broader pricing uncertainty overall. And, all of this leads to superb margins, seeing ranges of 25-30% on a gross basis, which for this sort of company is excellent.Īs with some other businesses in the field, RS reported record results for the 4Q22 and for the full year. RS remains an expert integrator of businesses, and has invested over $730M into M&A over the past 5 years, and has acquired 71 companies since 1994. So RS has both a metal-specific, a product-specific, a customer-specific, and a geographical diversification that offsets most localized product, metal, or geographical trends, and "flattens" the volatility out somewhat. Product diversification is even better, with the top focus being Carbon steel tubing, giving the company a 12% exposure to the product. The highest exposure comes from Carbon Steel, at around 50%+, but the company is diversified beyond this, coming in at 17% stainless, 15% aluminum, and 4% alloy. Unlike Norsk Hydro ( OTCQX:NHYDY), a company I own and invest in more than in RS out of Norway, the company isn't exposed to any one particular metal except steel. This is due to absolutely stellar margins, that arise from excellent diversification, an operating model that puts decisions in the hands of on-site managers (decentralization), as-needed inventory management, a through-cyclic pricing discipline, and minimal contractual sales, which helps managing working capital and minimizes the impact of changing metal prices. I mean that RS OCF/FCF stays high even in economic uncertainty. What on earth do I mean by "countercyclical cash flows"? It has outperformed peers and markets through its countercyclical cash flows. If you're an investor, or if you've read my previous pieces, you know that RS is a commodity play, with documented resilience, that at times can be argued to be almost negatively correlated to market drops. If you're a long-term RS shareholder, as i know at least one of my readers is, you've beaten the market handily - you've beaten my portfolio during the time, even if the path at times has been volatile - and don't let anyone tell you differently. You've either beaten a certain index or you haven't. This is part of why I like investing - it's a black-and-white field. The company has over 125,000 global customers, and if you've been an RS investor since day 1, you've done extremely well for yourself.īy that I mean, you've more than doubled the S&P500. RS is a VAP-adding metal processor, distributing metal products across fields, and specifics numbering over 100,000 in SKUs. With operations in 12 countries and 40 US states, it has significant coverage of its operations. This company is a fairly global business. ![]() Reliance Steel & Aluminum - Expecting performance from this metals company. Reliance Steel & Aluminum is somewhat different, given where it trades. ![]() Companies that have gone down, rather than up, and to make sure that I show you my thesis for them and why, if I do, I believe they still may outperform. I've taken some care over the past few weeks and months to highlight my failures in investing. I go into a company with care - and I don't go in all at once. Looking at the results since that time, I obviously should have gone far longer than I went here, but this is the result of diversification. I went in with a "BUY" rating, and quickly established a modest 0.15% position in my portfolio. This US-based metals company has been on my coverage spectrum for about a year, with official Seeking Alpha coverage started back in October of last year.
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