Reliance Worldwide, worldwide, worldwide
The stock in focus this month is Reliance Worldwide (RWC). RWC design and manufacture plumbing fittings and valves that are used in residential and commercial buildings. They produce a premium product known for its high quality and reliability. Their flagship product is the Sharkbite push-to-connect (PTC) pipefitting.
PTC technology has been around for decades, but is still not widely used in construction. Of total US residential fittings, only around 10% are PTC. As most of the connections end up behind walls, there has been reluctance by plumbers and contractors to use the newer technologies until they have had enough time in the market to prove their success and reliability. Now that these solutions have been in the market for an extended period of time, and on the back of a focused education and marketing effort by Reliance, take up is continuing to grow.
Reliance is well-positioned to capitalise on this growth, holding the number one position in the key North American market for Brass PTC fittings, Plastic PTC fittings and Temperature and Pressure Relief valves. The recent acquisition of the more UK and Europe-focused John Guest, provides an extension and diversification of their geographic exposure.
While the business has these structural growth opportunities, it still sells in the very cyclical housing construction and renovation sector of the economy. Recent housing data in the US has been relatively weak, which has caused the share price of RWC fall to a point where we see an attractive entry point to gain exposure to longer term cash flows from future growth.
- Water leaks are a major problem in 135 million existing homes in the US
- Labour shortages in the plumbing industry have seen an increase in the use of labour-saving products such as PTC fittings
- Single family housing building starts in the US is estimated to reach 1,165,000 in 2022.
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