Amphenol Stock Quietly Continues to Impress
Few people have ever heard of Amphenol, even though they are a pretty big company. Their stock’s performance over the last 7 years has been something to watch though.
Amphenol sure sounds like a prescription drug, perhaps even a barbiturate, a cousin of Alphenal perhaps, which many people use to relax and sleep. Amphenol might be a real sleeper as far as stocks go, but those who have been invested in it have had a pretty relaxing time over the last 7 years, and have found a nice prescription indeed for steady and impressive gains over this time.
Amphenol specializes in connectors, the kind of things that you find on the end of your cables when you connect them to something.
Amphenol started in this business all the way back in 1932, and while the electronics industry back then was nothing like it is today, they did have electronics, using things like vacuum tubes, which are still even used today.
The company got its start manufacturing sockets for these tubes, and during the Second World War, they became the primary manufacturer for these socket connectors, used at the time in things like radios and aircraft.
From there, Amphenol’s sophistication grew with the expansion of electronics, which of course today play a primary role in just about every aspect of our lives. Their products are used in a diverse number of applications, and are used by the aerospace industry, in industrial applications, by the auto industry, in computers and other information technology, with fiber optic cables, in mobile phones and other wireless technology, in medical devices, as well as in high end audio cables.
The market for all of this globally is $65 billion dollars, and Amphenol is the second biggest producer of them with annual sales of $7 billion. The company now has its sights on the even bigger sensor market, another thing that we might not think a lot of money is spent on but now boasts a $150 billion a year market.
Amphenol Has Shown Real Resilience Lately
Amphenol may be pretty unknown among the public but it’s 24 billion market capitalization puts it right up there with much more famous companies such as General Mills and Southwest Airlines. This amount has steadily grown over the last few years, with their stock averaging a 16% return per year versus the 11% that the S&P 500 has delivered.
What is most impressive about Amphenol stock is the way that it has put in these gains, in a nicely steady manner, in a way that investors love to see. The last 7 years have been virtually a straight line up when viewed on a long-term scale, where the stock has moved from about $25 a share to getting close to touching $100.
Like so many stocks, Amphenol did struggle in the fourth quarter of 2018, going from an all-time high of $96.99 on September 13 to end the year at $75.07, this really wasn’t that out of line with the way that the market fell.
We made it all the way back though on March 21, at $96.56, and currently set at 94.44 as of Friday’s market close. There aren’t many big technology stocks that can say this, or many big stocks period for that matter.
Part of the charm with Amphenol might be that so many of its investors really are in it for the long haul, where we avoid the ups and downs that we so often see with other stocks. We did see a fairly typical amount of selling off to close out last year, but this was really the market downturn that knocked them around during this time, and they have sprung back from this very nicely.
This Stock May Still Have a Lot of Upside
This stock has also performed this way generally, where things pull back and Amphenol stock hasn’t really dropped all that much in reference to the market but does tend to move up more, as its 2019 performance of +29% year to date provides an example of. With all the things going on in the market, tempering its growth by way of concern and even fear, Amphenol’s stock is gaining traction.
When you find a stock that has significantly more volatility than the market to the upside but not really a noticeable extra amount to the downside, this is an investor’s dream really, or as least should be. This is Amphenol, and people are starting to take notice more now.
Morgan Stanley’s Craig Hettenbach is among them, and Hettenback is particularly excited about Amphenol’s continued expansion into the sensor market by way of acquisition. They do have the money to spend and he sees them on a course to expand their business with this meaningfully.
Hettenback sees the stock going as high as $150 a share, which would represent a 56% gain over where we currently stand. If this expansion with sensors doesn’t pan out, he still has a price target of $100. This isn’t near as exciting, but if the downside is a still a gain, that sure looks like a nice deal.
Stock performance is never just about the company though, and we do need to be wary of market risk, the kind that knocked this stock down as well as just about everything else a half a year ago. None of this was really about company performance, and it probably won’t be next time either, so we have to still keep an eye on the charts even with the real gems.
This might be one of the best stocks you’ve never heard of, but now you have.
Editor, MarketReview.com
John’s sensible advice on all matters related to personal finance will have you examining your own life and tweaking it to achieve your financial goals better.
Contact John: john@marketreview.com
Topics of interest: News & updates from the Securities and Exchange Commission, Stock Markets, Bonds, Loans & more.