It's All in the Research

Gates Industrial Corporation (GTES)
This company is a leading manufacturer of belts and hoses used in vehicles and industrial machines. Heartland holds GTES in multiple Strategies.

Meeting at Headquarters
​​​​During his visit, Jacob met with the Investor Relations Team and toured the Gates Customer Experience Center, where he engaged in an in-depth discussion about the business and its products.

He observed Gates-manufactured components in action, gaining insight into their diverse applications. A key initiative—replacing traditional chains with lightweight rubber belts—was demonstrated through a hands-on comparison. Jacob noted the significant weight difference, highlighting the efficiency and innovation of Gates’ solutions.

​​​​​He also developed a deeper appreciation for the engineering behind seemingly simple products. Everyday items, such as sewing machines (see image), rely on Gates' belts for functionality.

Overall, Jacob found the research trip highly valuable, recognizing Gates’ products as effective and versatile solutions for modern machinery. 

Evaluating GTES Through the 10 Principles of Value Investing™

Using our proprietary framework of 10 qualitative and quantitative measures, GTES demonstrated several attractive characteristics: 

• Insider Ownership: Multiple insiders, including the CEO, purchased shares on the open market. This gave an encouraging signal of confidence.
• Sound Business Strategy: Gates is a high-quality leader in its sector, with stable revenue and cash flow driven by the replacement of mission-critical products. 
• Catalysts for Recognition: Margin Improvement Program and expansion into new business areas offer promising upside.
• Compelling Valuation: GTES trades at a low P/E and Price/Cash Flow, with a notable discount to intrinsic value. A technical overhang from a large shareholder’s sale of shares has contributed to undervaluation relative to peers.

Key Questions for Management 

1. How are tariffs affecting your business, and how do you compare to competitors?

2. Can you elaborate on opportunities in data centers and HVAC?
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3. What is Gates’ competitive edge in maintaining leadership?
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Main Takeaways

• Gates appears well-positioned relative to peers.
• Tariff relief could enhance pricing power.
• New growth avenues may unlock additional value.
• Overall, GTES presents as a high-quality business with long-term potential.

Thanks for following Jacob’s journey! Stay tuned for more exclusive insights ahead!