SNA - Snap-On

[nspo]

Opinions on the name? Premium toolmaker and franchisor that's been around since 1920, very Buffettesque brand and reputation among userbase, known for quality/durability, mechanics who use SNA products are viewed as upper-tier (similar to Milwaukee or Makita for construction), typically distributed through a fleet of service trucks. They've used acquisitions to diversify into aerospace, manufacturing, mining & O&G. As an anecdote, my father in law has a few hundred grand worth of industrial toolboxes and tools from Snap-On.

 

They've participated in a bunch of smaller acquisitions mostly related to mission-critical rescue tools, where safety and precision are needed. Because of the hazardous nature of these jobs, it seems that price indifference based on quality is present/pricing power over time. More recently, they've moved into diagnostics and Saas software that could lead to more recurring cash flows hitting their bottom line.

 

In sum: Seems pretty damn durable, trades at about 8.5% FCF yield, stands to benefit from used market/keeping vehicles longer(mechanical repair), because of quality there's probably some pricing power. Historic ROE's are in the high teens low 20%, and they've grown fcf at a CAGR of 6% over the last five years. Yielding 8.5% + 2% organic growth= 10%+ IRR. Based on the quality of the brand I'd argue that SNA should trade higher than an average business in the S&P. Therefore, there might be a cherry on top from multiple expansion (~30% to 16x fcf) at some point over 5 years.

[mjohn707]

I bought shares in a basket of panic-buying names during our recent turbulence, but I wasn’t aware of the finance division.  Please let me know if you find out that I own a subprime finance company masquerading as a sleeping Midwest industrial

[LC]

Owned it in the past but ultimately I don’t like the value proposition. The tools are overpriced.

[gfp]

Yeah I don't know anything about the company or their other divisions but I do know a lot about tools.  One of the problems is that the tools that used to be considered Chinese junk - like totally disposable crap - have steadily gotten better and better from a quality perspective.  Mechanics' tools are not rocket science.  Snap-On is known for excellent fit and precision - keeps you from rounding over a nut with an imprecise Chinese socket that may or may not be 12mm for instance.  But over time the imported stuff is getting steadily better and is now almost equal to Snap-On quality.  But they cost sometimes 10% to 20% of the Snap-On price.  But maybe the eponymous mechanics tools are just a small part of what this company has become now.  No clue

 

Owned it in the past but ultimately I don’t like the value proposition. The tools are overpriced.

[DooDiligence]

A lifetime ago, I worked as a setup mechanic at a local Honda motorcycle dealership & then went to work as an A & P for an FBO at our regional airport.

 

The SnapOn truck would show up every couple of weeks, at both locations to do collections on financed tools (the majority of sales were done on credit) and to close some new sales.

 

We'd all crowd around the truck to gaze in wide wonder at the joys that abound.

 

A few of the guys were straight up SnapOn groupies. I think it's like a woman who prefers a Tiffany mount even though there are plenty of affordable knock offs available.

 

The only thing I ever bought was a BluePoint pneumatic ratchet & a set of low profile swivel sockets (really useful in tight places).

 

99% of what's in my box are Craftsman because the quality is great & the prices are significantly lower (the lifetime guarantee is pretty enticing as well).

[LC]

Yeah I don't know anything about the company or their other divisions but I do know a lot about tools.  One of the problems is that the tools that used to be considered Chinese junk - like totally disposable crap - have steadily gotten better and better from a quality perspective.  Mechanics' tools are not rocket science.  Snap-On is known for excellent fit and precision - keeps you from rounding over a nut with an imprecise Chinese socket that may or may not be 12mm for instance.  But over time the imported stuff is getting steadily better and is now almost equal to Snap-On quality.  But they cost sometimes 10% to 20% of the Snap-On price.  But maybe the eponymous mechanics tools are just a small part of what this company has become now.  No clue

 

Owned it in the past but ultimately I don’t like the value proposition. The tools are overpriced.

 

What killed me was the Harbor freight lawsuit.

 

https://biztimes.com/snap-on-harbor-freight-settle-floor-jack-case/

 

HF claimed the floor jacks were made in the exact same Chinese factory  ;D ;D

[gfp]

Yeah - settled right before discovery.  You know those jacks were made in the same factory and Snap-On didn't want to see that out...  In related news I just got an AC Hydraulics floor jack from Denmark and its the best floor jack I've ever owned.  But I didn't have to pay for it

 

Yeah I don't know anything about the company or their other divisions but I do know a lot about tools.  One of the problems is that the tools that used to be considered Chinese junk - like totally disposable crap - have steadily gotten better and better from a quality perspective.  Mechanics' tools are not rocket science.  Snap-On is known for excellent fit and precision - keeps you from rounding over a nut with an imprecise Chinese socket that may or may not be 12mm for instance.  But over time the imported stuff is getting steadily better and is now almost equal to Snap-On quality.  But they cost sometimes 10% to 20% of the Snap-On price.  But maybe the eponymous mechanics tools are just a small part of what this company has become now.  No clue

 

Owned it in the past but ultimately I don’t like the value proposition. The tools are overpriced.

 

What killed me was the Harbor freight lawsuit.

 

https://biztimes.com/snap-on-harbor-freight-settle-floor-jack-case/

 

HF claimed the floor jacks were made in the exact same Chinese factory  ;D ;D

[nspo]

Can't agree more that they charge crazy prices for the tools. China knock-offs are getting really good as mentioned above. I've noticed this in fishing supplies, where I'm a bit more familiar. While easy to understand Snap's business, the question of whether the brand (Tiffanyesque) will continue to entice customers to keep buying at high levels is challenging. Might be in the too hard bucket. Would love to keep hearing some perspective from the guys in the trenches.