4. Graco Inc. (NYSE:GGG)
Number of Hedge Fund Holders: 27
Graco Inc. (NYSE:GGG) is an American industrial manufacturing company that specializes in fluid-handling systems and products. The company is highly committed to continuous innovation, consistently investing around 4% of its revenue in research and development (R&D), more than twice the average spent by its peers. By dedicating more resources to R&D, Graco collaborates closely with its customers to develop tailored products and accessories that meet their specific needs. This partnership fosters strong, lasting relationships, creating a significant competitive advantage for the company’s operations. In the past six months, the stock has surged by over 9%.
Graco Inc. (NYSE:GGG) reported revenue of $520 million in the third quarter of 2024, which fell by 4% from the same period last year. The company continued to face weak demand in its core end markets, particularly in the Asia Pacific region, which negatively impacted sales for the third quarter. The decline in demand was broad-based, with the Industrial and Process segments experiencing the most significant effects. However, despite the lower volume, the company’s gross margin remained strong.
Madison Investments highlighted the strengths of Graco Inc. (NYSE:GGG)’s business in its Q3 2024 investor letter. Here is what the firm has to say:
“During the quarter we added three new holdings: Graco Inc. (NYSE:GGG), Lithia Motors, and Asbury Automotive. Graco is the leading manufacturer of fluid handling equipment designed for difficult-to-handle materials with high viscosities, abrasive and corrosive properties, or precise ratio control. While the company has customers across several cyclical end-markets, around 40% of revenue is from parts and accessories, which have a more stable demand profile. Graco’s premium products provide a strong return on investment (ROI) for its customers, helping to reduce their use of labor, material, and energy as well as improve quality and environmental performance. The company’s products also represent a small portion of an end users’ total expense. As a result, Graco has strong pricing power and best-in-class margins, including gross margin above 50% and earnings before interest and taxes (EBIT) margin approaching 30%. We’ve long admired this business and their exceptional management team. With the stock underperforming on general economic weakness, valuation in the shares appeared reasonable, providing a good entry point.”
On December 6, Graco Inc. (NYSE:GGG) declared a 7.8% hike in its quarterly dividend to $0.275 per share. This marked the company’s 23rd consecutive year of dividend growth, which makes GGG one of the best dividend stocks on our list. The stock has a dividend yield of 1.15%, as of December 16.
With a collective stake value of over $375.6 million, 27 hedge funds tracked by Insider Monkey held stakes in Graco Inc. (NYSE:GGG) at the end of Q3 2024. With over 1.1 million shares, Fundsmith LLP was the company’s leading stakeholder in Q3.
