Exponent: Leveraging Historic Relationships to Drive Organic Growth

Jonathan Isaac of Quilt Investment Management presented his investment thesis on Exponent, Inc. (US: EXPO) at Wide-Moat Investing Summit 2020.

In doing so, Jonathan posed the question, “Are Buffett’s economic goodwill and ‘share of mind’ the same concept?” He compared the historical example of The Coca-Cola Company with the contemporary example of Exponent.

Thesis summary:

Exponent, Inc. is a multidisciplinary consulting firm providing scientific and technical services to organizations to address and prevent failures. Like Coca-Cola in the mid-to-late 1980s, Exponent has a dominant position in its core market—reacting to failures—while being able to grow organically within that market, and in new markets.

Coke from that period and Exponent both exhibit how a highly profitable, relatively non-cyclical business with a sticky customer base can accelerate organic growth through boosting its instances of use throughout the average day of the customer. For Coke, this meant expanding the Coke Megabrand of soft drinks in order to take market share from water, and moving towards the adoption of fountain and vending channels internationally. For Exponent, this means flipping the script from helping firms react to failures, to helping them prevent potentially costly failures.

In an increasingly complex technological world, Exponent’s expertise in battery consulting and the interactivity between humans and machines (what Exponent calls “Human Factors”), positions Exponent to further leverage its historic customer relationships to drive organic growth.

Disclaimer/Disclosure: Accounts managed by Quilt Investment Management, LLC currently own shares of Exponent, Inc. (EXPO), and may transact in the shares, or in any other security mentioned, without future updates. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of specific securities, investments, or investment strategies. Additionally, the information should not be construed as Quilt Investment Management, LLC’s solicitation to effect the rendering of personalized investment advice for compensation, over the internet or otherwise. This is not a research report and/or a recommendation. The mention of any security does not constitute a recommendation. Investments involve risk and, unless stated otherwise, are not guaranteed. Always be sure to first consult with a qualified financial adviser and/or a tax professional before investing, and to verify any information deemed to be accurate. Past performance is not indicative of future performance.

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About the instructor:

Jonathan Isaac is President and Portfolio Manager of Quilt Investment Management, LLC, a registered investment adviser in Portland, Oregon. Jonathan’s recent writings incorporate the work of Warren Buffett, alongside philosophers such as Michel Foucault and Gilles Deleuze, in order to analyze the shifting delineations of competitive advantage throughout time. Jonathan is a graduate of Grinnell College.

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