Nashville's Tennessean newspaper reported July 9 that Hong Kong-based Techtronic Industries (OTC:TTNDY) had successfully purchased the assets of Oreck Corporation out of bankruptcy. Beating out an earlier bid from the Oreck family itself, who sold the company in 2003 to a private equity firm, Techtronic's three divisions make it a very attractive investment. This is one ADR worth a second look. 
 
Private Equity Drops The Ball
David Oreck founded Oreck in 1963 manufacturing upright vacuum cleaners for the U.S. hotel industry. From their it branched out to middle-aged housewives who could afford the vacuums, which weren't cheap. Offering a quality product with an impressive 21-year warranty, Oreck grew very rapidly until Oreck decided to sell the family business in 2003 to American Securities, a leading middle-market private equity firm. At age 80, Oreck thought he was leaving the business in good hands. Instead, American Securities took a profitable, growing business, with no debt, and sucked the life out of it. A decade later and Oreck tried to buy back his baby but was ultimately beaten to the punch by Techtronic's subsidiary, Royal Appliance, which also owns Hoover and Dirt Devil vacuums. Oreck's loss, fortunately or unfortunately, depending on how you look at it, is Techtronic's gain. 

SEE: ADR Basics: What Is An ADR?

Who is Techtronic Industries?
As I mentioned previously, it's a Hong-Kong company with three operating segments: Floor Care, Outdoor Products, and Power Tools & Accessories. In addition to the Hoover and Dirt Devil brands, it owns the Milwaukee, AEG and Ryobi power tool brands. Now I'm not the handiest guy in the world but even I've heard of all of these brands. In 2012, the company generated $3.85 billion in revenue with $260 million in operating income. Year-over-year sales increased 5.1%, gross margins by 90 basis points, operating income by 18.6% and net profits by 32.2%. In terms of its balance sheet, it's reduced its net-debt-to-equity from 73% on 2010 to 26% in 2012. Part of the reason for the lower debt-to-equity ratio is its free cash flow position has improved by $304 million over the last two years enabling it to pay off some debt. 
 
In terms of its overall business, 73% of its revenue in 2012 was generated in North America. More importantly, its North American revenue increased by 6%, 340 basis points higher than in the rest of the world. Its power tool segment has taken market share in both Canada and the U.S. in each of the last four years as it's Ryobi lithium ion cordless products have generated good sell through with its customers. Another of its growth plans is to transform the floor care segment of its business, which accounts for 26% of its overall revenue, into an innovation machine. Clearly, the Oreck purchase helps move it in that direction. CEO Joe Galli, who joined the company in 2006 with an impressive resume including executive stints at Stanley Black & Decker (NYSE:SWK), Newell Rubbermaid (NYSE:NWL) and Amazon (Nasdaq:AMZN), has embarked on a strategic plan entitled, "Powerful Brands, Innovative Products, Operational Excellence and Exceptional People." This is definitely a company on a mission. 

SEE: The Value Investor's Handbook
 
Why You Should Care?
This is a company operating at the top of its game and looking to improve upon that performance. Since Joe Galli became CEO in February 2008, its stock is up 137% compared to 35% for the SPDR S&P 500 (NYSEARCA:SPY). It doesn't matter what period you look at, Techtronic's outperformed both the index and its peers. Year-to-date it's up 31.6% compared to 21.1% for Makita (OTC:MKTAY) and 10.3% for Stanley Black & Decker, Joe Galli's former employer. 
 
Bottom Line
Rarely do I come across a company I view as flawless but Techtronic is pretty darn close. Its two founders, Horst Julius Pudwill and Professor Roy Chi Ping Chung, own 27% of its stock and appear firmly in control with a quality hired-gun to boot who's only 54 years of age and should be around for a while. If power tools are your thing, this is one ADR you definitely shouldn't overlook. It's a stock for the long run. 

Related Articles
  1. Investing News

    Bank Stocks: Time to Buy or Avoid? (WFC, JPM, C)

    Bank stocks have been pounded. Is this the right time to buy or should they be avoided?
  2. Stock Analysis

    Why the Bullish Are Turning Bearish

    Banks are reducing their targets for the S&P 500 for 2016. Here's why.
  3. Stock Analysis

    How to Find Quality Stocks Amid the Wreckage

    Finding companies with good earnings and hitting on all cylinders in this environment, although possible, is not easy.
  4. Investing News

    What You Can Learn from Carl Icahn's Mistakes

    Carl Icahn has been a stellar performer in the investment world for decades, but following his lead these days could be dangerous.
  5. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  6. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  7. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  8. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  9. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  10. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center