An Industry Leader Poised to Benefit From the 'Electrification Gold Rush'

The U.S. energy grid is about to undergo a massive overhaul...

Today, just about everything we interact with uses electricity. And soon, electric vehicles ("EVs") will intensify our focus on electrification.

As this plays out, we'll see a greater push toward increasing access to electricity – and the products that supply it. Just look at California...

Since January 1, 2020, all new home builds and major alterations in the state have had to accommodate EVs – as mandated by the 2019 California Green Building Standards Code. And multifamily units, like apartment buildings, must make at least 10% of their parking spaces EV-friendly.

In short, to make EV charging safe and ubiquitous, California now requires dedicated, heavy-duty electrical equipment. With more states sure to follow, that's good news for today's company...

Atkore (NYSE: ATKR) is a leading manufacturer of "conduit" – the tubes and pipes used to protect electrical wiring in buildings.

Throughout the world, it's illegal to install electricity in buildings without conduit. So Atkore – which leads most product categories in this area – sees consistently high demand...

As the No. 1 manufacturer of polyvinyl chloride, or PVC, conduit (out of just two or three companies that sell 75% to 80% of the world's supply) and the No. 2 manufacturer of steel conduit (out of only three companies that sell 92% of the global supply), nobody has a bigger market advantage than Atkore.

Over the past six decades, the company has grown from one mill with 10 employees to 42 manufacturing sites, 41 distribution facilities, and roughly 4,000 employees around the world. And during the past 12 months, it has generated $3.6 billion in revenue from a diversified customer base... This includes major electrical-product and industrial distributors and big-box retailers, like Home Depot, HD Supply, and W.W. Grainger.

Atkore has also amassed a team of sales engineers that meets with contractors and explains how these new products can make their jobs easier.

This may not seem that important, but only the top companies in lower-margin industries like construction can devote scarce capital toward creating new products and hiring dedicated sales staff.

Atkore also has a website portal that features all of its newest product ideas...

One new product is the MC Glide armored cable line. Selected as 2021's Wire & Cable Product of the Year by construction-materials magazine Electrical Construction & Maintenance, the cable uses a patented armor coating to reduce friction, helping wires snake through metal studs and ceilings with ease. This saves a lot of time in the construction process. And like conduit, there will likely be plenty of demand for MC Glide during the "electrification gold rush."

New products from Atkore's Safety & Infrastructure segment will also see rising demand based on the electricity generated from solar energy. That's because this segment manufactures and sells the structures that support solar-panel arrays. And, recently, the International Energy Agency reported that solar installations "continue to break new records," which is a harbinger of strong growth.

These products will be in high demand as electrification continues to pick up speed. The company's business looks even more promising when we review its strong financials...

As Atkore has grown, it has spread its costs over a widening revenue base. Thicker margins today are also part of a multiyear effort to increase operational efficiency and productivity.

If Atkore simply maintains its current margins, it will continue to be a market-dominating cash-gusher... The company's free cash flow has swelled roughly 18-fold since 2013, thanks to rapid growth in cash flow from operations.

That's part of the benefit of being an acquisition-fiend like Atkore. It's buying new products and existing manufacturing capabilities without spending money to build from scratch. That's why companies with the resources to become serial acquirers enjoy an advantage over their competitors.

All of Atkore's products will be in high demand as the hot trend in energy-grid electrification continues. Even better, it's far and away the leader in its industry. That should be a long-term tailwind for shares moving forward.

Sometimes investing is simple.