I've finished my read through the FY25 annual report and listened to the most recent conference call for SGH and have some updated thoughts to share.
I understand the 10% plunge that the lower earnings growth guidance caused but it really didn't change my long term optimism on the stock and gave me a chance to top up my holding for the first time since liberation day (where I got a very small parcel at $43) at $47.50. So I've effectively paid 21 times adjusted FY25 earnings at a 1.3% fully franked dividend yield (I was fortunate enough to build the majority of my position in the 2022 bear market between $16 and $23)
Rather than focusing on a FY26 that's likely to show some pretty sluggish growth I'm looking more at the extremely refreshing and (in my experience) unusually enterprising attitude that management and the board of directors have. It's so refreshing for them to unapologetically list TSR as their primary aim along with the focus on generating both operating and free cash flow (I'm increasingly confident that Ryan has lifted his playbook from the excellent book Outsiders by William Thorndike if anyone would be interested in looking that up). Clearly his family has 51% of the company meaning the incentives really couldn't be more aligned but the owners mindset they often talk about also flows through to the rest of the directors. The smallest share holding of all the board members is still worth 220k with the Chairman holding 5 million dollars worth of stock in his own right and Rachel Hergman having purchased over 1 million worth of stock on market in FY25.
There is also a focus on more of the executive pay being "at risk" with 75% of Ryan Stokes pay being performance based and the other executives averaging 70%. KMP's are given 5 years to hold the equivalent of 100% of their fixed annual renumeration in stock after joining the company and amazingly 19% of the 11 thousand industrial division employees are shareholders.
I could see SGH continuing to outperform over the next 10 years and am very comfortable having it as a large holding in my portfolio.
Would love to discuss further with some other long term holders or have my perspective challenged by some bears!
SGH Price at posting:
$48.21 Sentiment: Hold Disclosure: Held
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