Fanuc Corp (FANUY)

Fanuc Corp (FANUY)

Postby winston » Wed Oct 12, 2016 9:21 pm

not vested

Fanuc Corporation (OTC: FANUY) is one of the largest manufacturers of industrial robotic equipment in the world.

Its robotic systems are primarily used in manufacturing. With companies rushing to implement robotics and automation, Fanuc a direct play on the high-growth robotics industry — though you may have never heard of it.

That’s because Fanuc has a reputation for being stealthy.

According to a report from Bloomberg, the company often conducts business by fax to keep computer viruses at bay. E-mail is mostly banned. There’s no investor relations department and no conference calls with analysts.

Despite its secrecy, I expect Fanuc to outperform the S&P 500 in the next three to five years.

Dan Loeb is one of the most powerful activist investors in the world. He likes taking big positions in companies and then agitating for change. His Third Point hedge fund has more than $4 billion in capital under management.

In 2015, Loeb initiated a position in Fanuc. Since then, Loeb’s powerful touch has been rewarding shareholders.

In February, Fanuc announced it was initiating the first share buyback in company history. Fanuc repurchased more than 2 million shares in the first half of the year, equivalent to 1.02% of the company’s value.

Loeb has also persuaded Fanuc to increase its dividend. Fanuc has been paying a steady dividend for the last five years. Earlier this year, Fanuc announced it would increase its payout ratio jumping to 60% of operating income.

That has shares offering a dividend yield of 2.48%, more than a 900% premium to ROBO’s 0.24% yield and a 25% premium to the S&P 500′s 2.0% yield.

Despite the positive outlook, Fanuc’s P/E ratio of 24.5 is a small premium to the industry average of 22.5 and its five-year average of 23.9.

Looking forward, I expect Fanuc to cash in on growing demand for industrial robots and Dan Loeb to continue pressuring the company to increase shareholder value with share buybacks and dividend hikes.

Risks To Consider: The yen is having a strong year as other global currencies weaken. A strong yen is bad for Fanuc because it makes its products more expensive in international markets.

Action To Take: Fanuc is a long-term buy and hold. It is becoming much friendlier to shareholders with its recent share buyback and dividend expansion. I expect shares to beat the S&P 500 in the next three to five years. In the meantime, reinvest the company’s dividend payment.

Source: Street Authority
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