Let’s be honest, no one enjoys going to the dentist! However, its ones of those critical examinations that everyone should do regularly. Now I know what your thinking, why is this IT professional that writes about finance promoting the benefits of dental hygiene? It’s to create an amazing transition to a company that I have owned for the past 2 years – SDI (ASX: SDI).
SDI is a leading manufacturer of dental materials, everything from adhesives to teeth whitening products and specialized dentistry equipment. Established in 1972 the business has grown from humble beginning to having its products sold in over 100 countries. You can say it’s grown one tooth at a time (apologies, that will be my last joke).
Firstly, this company is unbelievably small by ASX standards and is by far the smallest company in my portfolio, but I challenge you to research their track record and compare it to any ‘market darlings’ currently in your holdings.
Bull Case:
In my opinion all manufacturing companies need to find the correct balance between selling their products and allocating capital into their research and development efforts. SDI commitment to research and product improvement has seen many of their cosmetic dental products enjoy patent protection while gaining real traction in the marketplace.
Secondly, due to its track record the company also benefits from an established distribution network that not only trust the brand but rely on them for business-critical products.
Bear Case:
SDI operates in a very lucrative market with high fees (have you been to the dentist lately?). This provides opportunities for global players to enter the market, which would mean competition for SDI and potentially lower margins. However, the business is clearing holding its own and has the track record to support it.
Conclusion:
As explained earlier SDI is the smallest company in my portfolio, but proudly one of my favorites! This business continues to grow and compete in a global industry which is a testament to the long term thinking of its management team past and present. My holdings in SDI also gives me access to the popular healthcare section of the ASX where blue chip shares have traditionally dominated. Finally, as the saying goes, good things come in small (white) packages. Happy Investing!
