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Daily Alert - 5/18/20

Analysts expect this HVAC company to grow at a 15% annual rate over the next five years.

Analysts expect this HVAC company to grow at a 15% annual rate over the next five years. The shares have a current dividend yield of 4.61%, paid quarterly.

Watsco, Inc. (WSO)
From Positive Patterns

Watsco is an HVAC company connected to Carrier Global Corporation (CARR) by a large joint venture. WSO is the largest distributor of HVAC equipment in the U.S. and about 61% of its sales are Carrier products. WSO is mostly located in the sunbelt states where it’s about staying cool. The company also does a significant aftermarket business in parts/compressors, coils, motors, etc.

Revenues are about $5 Billion, and WSO has around 32 million shares outstanding. This is a wonderful company with an A+ balance sheet. It has just a sliver of debt, around $370 Million. WSO also sports very strong free-cash flow. With low debt and the-business the way it is, WSO has a bright future ahead of it and a very clean runway.

The Nahad family has controlled the stock for decades and the son and father make for a dynamic duo. They have large skin in the game, and a very solid track record of being good to shareholders. These two guys are focused, quiet, and they deliver the goods.

WSO also pays a nice dividend too.

In 2009 WSO/CARR started a joint-venture for the USA/Latin America and the Caribbean. Carrier helps WSO offer premium level product. This also affords WSO the opportunity to sell parts/supplies, and many other things through its Carrier partnership.

Carrier Enterprise, the joint-venture is structured similar to WSO/other tack-on acquisitions with a de-centralized management structure that has run smoothly for the last 10 years, as WSO has gobbled up partnership/rights from CARR along the way. WSO owns about 80% of the joint venture.

In April 2011, Carrier Enterprise Northeast LLC embarked on another JV to distribute Carrier products in the Northeast. This made WSO a 60% owner of this JV with Carrier owning the other 40%.

In April 2012, Carrier Enterprise Canada L.P started a 3rd JV with UTC/Canada, previously 100% owned by CARR that now has WSO controlling 60% of the JV and Carrier owning the rest.

This has been a definite win for both companies, and I think it’s a win for WSO to own control/of these Joint Ventures.

The company is in the right niche right now and HVAC costs are going to rise, as demand for cleaner/fresher indoor-air is going to be an issue for the future that will demand attention and lots of money too.

Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, March 5, 2020