Earlier this month I made my first investment in Reliance Worldwide Corporation Ltd (ASX: RWC) shares.
Reliance Worldwide builds innovative and easy-to-use fixtures to enhance the productivity of plumbers globally. Its core product centers around the Push to Connect technology which is distributed under the brand of Sharkbite. The specific technology enhances the end-user experience by allowing plumbers to skip time-consuming tasks such as soldering and crimping pipes. Instead, they can just push the two pipes into the fitting.
Why I Like Reliance
In my opinion, Reliance Worldwide is one of the handfuls of Australian businesses that have successfully expanded globally. Built on a solid foundation, this growth is showing no signs of slowing down. The company has invested significant time and money in optimising its global supply chain and distribution networks. Importantly, this has not taken the place of Research & Development (R&D), ensuring a dominant position in key global markets including the US and Europe.
Reliance Worldwide has healthy margins across its product range. In my opinion, this is helped by its brand reputation and relentless focus on customer service. Due to the importance of Sharkbite (connecting pipes, including underground and behind walls), end-users are more inclined to stick to brands they can trust and are prepared to pay a premium for quality (and reliable) products.
These margins have attracted competitors and with the improvement in technology the barriers of entry are increasingly falling. New (and cheaper) competitors are a constant threat that shareholders need to be across.
However, going back to brand awareness, Reliance has benefited from the first-mover advantage and strategic customer relationships built over several years. Also, as more competitors enter the market, brand loyalty will become a major factor in consumer decision making. For example, several vendors sell a mobile phone with Apple (NASDAQ: AAPL) still benefiting from strong brand awareness and a loyal consumer base in spite of competition.
Another important consideration or risk for Reliance Worldwide is the global economic outlook and how external factors such as Brexit and the Trump administration will impact the business in key European and US markets. Fortunately, the geopolitical risk is somewhat countered by the increased activities in developing countries throughout Asia.
Buy, Hold Or Sell?
Taking all factors into consideration I am satisfied with my holdings in RWC and anticipate further growth in not only their product suite but an expansion of their consumer networks globally.
[ls_content_block id=”18457″ para=”paragraphs”]
Anthony owns shares of Reliance Worldwide and Apple.
