juzbeachy
Oct 6, 1:00 AM
$OTIS Took a starter position today. My thesis is: you’re buying a high-quality recurring-service franchise at a depressed valuation because the market is focused on weak new-equipment demand, especially China.
But Wall Street is completely ignoring the durable part of the business: once installed elevators need maintenance, repair, parts and eventual modernization for decades, which creates sticky recurring revenue and good cash generation. New installations are cyclical, but service/modernization provide ballast.
So the bet is that you don’t need a construction boom. You just need China/new-equipment weakness to stop getting worse while service keeps compounding. If that happens, the market can rerate OTIS from a beaten-down multiple back toward something closer to its historical quality premium. Can it go down from here? Yes. But risk reward seems favorable in the mid
$60’s.
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