Nick Heymann, Co-Group Head of global industrial infrastructure at William Blair & Company, is currently recommending stocks that have been able to avoid the oil and gas downturn and that have minimal foreign exchange headwinds. He says one such company is ADT Corp (ADT).
“They are in home automation with no oil and gas exposure and fairly nominal foreign exchange — about 11% of their sales are in Canada,” Heymann says. “So they have largely been able to dodge two of the biggest challenges facing most diversified industrials this year.”
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Heymann also likes ADT because the company is continuing to optimize the performance of its existing business model, which is based on its Pulse home automation installed security systems. ADT is on the cusp of growing its total user base sequentially and generating positive year-over-year free cash flow growth, which Heymann says are the last two key fundamental performance metrics to turn positive for the company.
“The company is well-positioned to be able to participate in what could be an exciting area for significant incremental free cash flow growth, and that’s the do-it-yourself monitored home automation space,” Heymann says. “This is a segment of the market today that represents about 78% of the North American security market, which so far has never been tapped.”
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