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Growth factors: how Shimano symbolises our style

September 2022

Key Points

  • The Japanese bike components maker fulfils many of the attributes that we associate with growth
  • Its brand has a reputation for reliability and innovation, and the activity it’s involved in, cycling, is increasingly popular
  • The firm also dominates its sector, and its managers’ interests align with those of the business


Shimano’s DURA-ACE brand of low-weight road bike components is popular with professional and enthusiast cyclists. © Corbis/Getty Images.

Please remember that the value of an investment can fall and you may not get back the amount invested.

Each stock in our portfolio earned a place based on its own merits. However, our philosophy and approach lead to recurring characteristics. 

We bought a stake in Shimano in 2012. The Japanese bicycle components maker typifies the International All Cap Strategy’s holdings in the following ways:

1. Strong tailwinds to growth

Public interest in cycling is growing, both as a leisure pursuit and for day-to-day travel. The health benefits of exercise, the environmental advantage the activity has over other types of transport and an increasing number of cycle routes and related infrastructure should all sustain Shimano’s growth over the next decade.

2. Loyal customers

Shimano’s brand is well known within the bicycle industry. It stands for quality, reliability and innovation. Customers expect to pay a premium for its components. And Shimano recognises the implicit bargain involved: it consistently invests and innovates to maintain its brand strength.

3. Positioned to drive returns

The bicycle sector’s value chain is hour-glass shaped. Numerous operators supply raw materials, and many retailers sell the end-product. But there’s a narrowing point in the middle, where only a handful of component makers thrive. That’s where Shimano operates, specialising in gears and drive chains. That’s helped it deliver high returns on capital and sustainable profits.

4. Aligned management

We look for management teams that take a genuinely long-term view and act like company owners. Shimano’s President, Yozo Shimano, is the founder’s grandson and has a substantial equity holding.

Conclusion

Shimano has demonstrated an admirable focus on its core business and the creation of long-term value.

Read more from the anthology:

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This communication was produced and approved in September 2022 and has not been updated subsequently. It represents views held at the time of writing and may not reflect current thinking.

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