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We liked Schneider's low working capital and lightweight business model, where the entire operating profit was converted into cash. We also saw that the company was well positioned for the strong growth in electrification and energy saving.

At the start of the new year, little indicated that many others shared this view. The price was at its lowest since 2017, slightly below our cost price.

Now, Schneider had raised its own guidance and would announce another raise a few months later. In addition, they announced a new buy-back programme and ambitions of lifting the operating margin by two percentage points. But the analysts did not fully believe these ambitions. Earnings also turned out to be slightly below estimates at the start of the year. Estimates for 2020 barely moved through the year.

And yet: From its nadir, on January 3, 2019, the stock delivered a return of 64 percent, with a remarkably steady increase throughout the year.

Why so strong?

We saw that the company was well positioned for the strong growth in electrification and energy saving.

Almost the entire return was due to higher pricing. This year, Schneider took the leap from decidedly unpopular to very popular.

The market obviously appreciated the company's positioning towards a greener and more energy efficient world. Browsing Schneider's website, you will quickly find keywords such as sustainability, climate, ethics and circular economy, and this is a company that seems to be putting its money where its mouth is. The company is not new – it was founded in 1838 – but management has been good at modernising and refining the strategy to meet the world of 2020.

And this has provided a good catalyst for rationalisation and stronger organic growth: For 2020 and 2021, clearly higher earnings growth is expected than in 2019.


The article is an excerpt from our 2019 annual report

Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager's skill, the fund's risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments.

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