Spirax: Long-Duration Compounder Undergoing Mid-Life Crisis

Henrik Andersson of FW Invest presented his in-depth investment thesis on Spirax Group (UK: SPX) at European Investing Summit 2024.

Thesis summary:

Spirax is a multi-national, high-quality engineering group with three world-leading niche businesses. They provide knowledge, service, and products for the control and efficient use of steam and other industrial fluids worldwide.

Product areas:

• Steam Thermal Solutions (STS, 54% of revenue / 59% of EBIT). Leader in the design, manufacture, and maintenance of commercial steam solutions.
• Electrical Thermal Solutions (ETS, 22% / 16%). Critical heating applications for industrial processes and ultra-critical heating for industrial equipment.
• Watson-Marlow (WM, 23% / 25%). Designs and manufactures peristaltic pumps, niche pumps and fluid path technologies for a range of end markets.

Investment highlights:

• Moat durability. Spirax is a very resilient high-quality company with attractive long-term fundamentals.
• Net zero opportunity. Spirax is perfectly positioned to play a critical role in enabling the industrial transition to net zero.
• TAM expansion. Spirax aims to expand its addressable market through innovation, application engineering, and M&A.

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About the instructor:

Henrik Andersson has worked within a framework of investing in quality franchises in a concentrated portfolio setting since the early 2000s. After five years as an assistant fund manager and analyst at Handelsbanken Asset Management, in 2003 he launched a discretionary portfolio named European Quality with 15 holdings, inspired by Peter Cundill’s approach of “never shoot into the broom”. That later branched out to a family of funds named the Selective Funds. After three years at Brummer & Partners, he joined Didner & Gerge in 2011, an employee-owned asset management boutique, to launch a Global Equity Fund together with a colleague. Starting in 2024, Henrik is now diverting his full attention to wholly owned FW Invest, founded in 2012, which is applying those same principles in trying to identify operations with superior capital returns over long stretches, run by admirable leaders with an appealing valuation starting point.

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