The biggest returnfrom the smallest room
It cannot be said often enough, the best investment ideas often originate from daily life.
It cannot be said often enough, the best investment ideas often originate from daily life. In fact, the one that is literally at your fingertips, is easily overlooked. Several times a day we push a button and expect the toilet bowl to be rinsed. If that button displays the name Geberit, we will never be disappointed.
The Swiss company Geberit has achieved a quasi monopoly in the field of high end flushing solutions. With the acquisition of Sanitec in 2015, the company has added a full range of bathroom amenities such as walk-in showers and elegant storage cabinets. All of the highest quality. Every year tens of thousands business to business customers from sectors such as building and retail receive training in Geberit’s own learning centers all over the world. Online facilities are available as well. In addition, Geberit account managers are on standby to offer tailor-made advice. No wonder that plumbers remain loyal throughout their careers.
That is what we call a moat; the relationship between the producer and the client is so strong that competitors are unable to come between them.
How do you achieve such a strong position? It takes years of hard work. At Hoofbosch we attach great value to a long track record in order to analyse how a company is able to handle opportunities and threats. The case of Geberit is very convincing. The business started in 1874 and has been investing in people and quality for almost 150 years. The company places particular emphasis on the solid education and further training of all employees. It also promotes the internationalisation of its workforce. Experience abroad and the transfer of know how are to the advantage of both employees and the company. A lot of attention is paid to innovation. The equivalent of 2,5% of sales is spent on research and development. As a result there is a lot of knowledge inside the products. That is how Geberit stays ahead of the competition.
Located in a low-key business park, the company receives its visitors in a no frills reception area where one of its own toilet bowls is showcased.
Another aspect that we consider important when selecting a (potential) investment is simplicity. This is one of the reasons that we like to visit the head office before investing in a company. Our experience with Geberit was also very positive in that regard. During our visit we saw people that work hard and are proud of what they do. Located in a low-key business park, the company receives its visitors in a no frills reception area where one of its own toilet bowls is showcased. Visitors can walk around it to have a ‘look behind the scenes’ at the flushing system. We observed board members and plumbers mingling on the executive floor. Finally, we heard that when the new CEO wanted to park his old BMW in front of the office, the doorman initially referred him to the factory site further on. In any case, chauffeur-driven cars are a rarity in Switzerland.
Due to the prices Geberit can charge for its quality products and the down to earth approach of the company, the margins are excellent. This makes it possible to pay a stable or even slightly increasing dividend each year. Exactly what we are always looking for at Hoofbosch.