FPA Queens Road Small Cap Value Fund on Vontier Corporation
Thesis
Vontier was a new Q2 purchase and manufactures tanks, pumps and payment systems used primarily by gas stations and convenience stores. Since its 2021 separation from Fortive, the company has worked through an EMV-related sales pull-forward and a reorganization of businesses originally assembled by Danaher. Management argues that convenience-store growth should provide a renewed source of demand. The fund believes the market is discounting too much of the recent weakness and initiated the position at roughly nine times earnings.
“We believe that shares are attractively priced at roughly 9x earnings.”
Key risks
- Post-EMV demand headwinds may last longer than expected
- The portfolio reorganization may not produce the expected improvement
- Long-term changes in fueling demand could pressure portions of the business