This time we’ll be tackling an entire industry: specialty chemicals distributors. I know that the name might be sleep-inducing, but please bear with me. This is one of my favorite industries, for reasons I’ll explain in detail below. While most of the time investors are focusing on finding the perfect stock to invest in, over the years I’ve found that keeping a few resilient, rapidly growing sectors on my watchlist provides plenty of opportunity for strong returns, particularly if one needs to react quickly when markets sour.
Great description. Very insightfull. Thanks for sharing.
Thoroughly enjoyed your overview of the specialty chemical distribution industry! Thank you!
Hi Toffcap, thank you so much for this great piece. Over the years, your VIC writeups and posts on your old blog have given so much to me and I cannot thank you enough. And thank you for making them free as well (although if you monetized them, I would be more than happy to oblige).
Quick question about the market: What gives you confidence that the pure play specialty chemical players such as IMCD and Azelis will gain market share/grow faster than Brenntag? Also, do you have any thoughts on how they can improve margins going forward? Looks like they have been doing so historically, but since economies of scale doesn't apply due to the near-0 fixed costs, I don't see how their profits don't just scale with revenue growth.
Finally, do you think the valuation gap to Brenntag is unwarranted? I understand Azelis is a better business but the gap seems too much to justify.