Valens Equity Weekly Insights for July 12, 2022

July 12, 2022

  • Generac Holdings Inc. (GNRC) has a dominant and growing market position for backup power generation and storage, a trend that is likely to grow for years. Uniform Accounting highlights that the market not pricing in these tailwinds, and Generac’s potential to grow and expand returns faster signal the potential for equity upside.

  • Generac owns 70%+ market share for household backup generators, a market with low penetration and accelerating demand. With households and businesses relying on more “essential” equipment like cell towers, temperature control, and IoT components, backup power itself is becoming an essential service. That’s why Generac has been able to expand its Uniform ROA for five consecutive years and grow investment above 10% in 12 of the last 13 years. With the market pricing in lower growth and fading returns, Generac should be able to outperform the market’s expectations.

  • GNRC’s management is closely aligned to focus on margin expansion and overall growth, two critical factors for driving equity upside.

  • Management confidence in the Q1 earnings call about margins, costs, and their long-term vision suggest management is executing on the company’s ongoing strategy.

  • Ichor (ICHR) is being removed from the Conviction Long List. The semiconductor industry is facing headwinds that are likely to remain for several quarters, so we are closing down 39%.

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