Adam Weiss and James Crichton founded Scout Capital Management in 1999. The pair spoke at the Value Investing Congress on Tuesday. In their presentation, they discussed two value stocks – Williams Companies (WMB) and Sensata Technologies Holding N.v. (ST).
Weiss and Crichton are Bullish on Williams Cos. $WMB
Adam Weiss and James Crichton bought a stake in WMB worth more than $180 million in the second quarter. They say the stock is trading at $24 a share while they see a $47 a share upside. The pair say it is a quality stock. Its long distance pipeline is very attractive. It has value on its own but the high cost of building new pipelines mean that barriers to entry for other companies is high. While there are risks, like the fact that it is capes intensive, they think WMB will have no problem reaching its 7-10% EBITDA as most of its business is fee based. Weiss and Crichton also expect that WMB will increase its dividend yield in January.
Sensata is Also a Favorite of the Scout Capital Pair
Adam Weiss and James Crichton also like Sensata Technologies. They are forecasting growth of 10% per annum over the next few years for the safety products company. The company’s products are essential for safety and environmental preservation, and for users the switching cost is very high. They say that there is no alternative for customers who want to switch after the product is installed. Also, because of the nature of its products, WMB has low labor and production costs, citing the fact that for WMB every $1 in EBITDA translates to 70 cents in profit.