kupicoo Investment Thesis Compass Diversified ( NYSE: CODI ) is off to a great start according to its first quarter earnings report, with adjusted EBITDA up 28% YoY. The company is well-diversified and has various ownerships in innovative yet defensive businesses with valuable brands in my view. While I respect management's savvy acquisition track record, I think the stock is still fairly priced and unlikely to outperform the S&P 500.
If investors want stable income with low volatility, however, Compass Diversified may offer a better alternative to index funds as it will likely offer a smoother ride than the S&P 500. In the long term, however, I think Compass Diversified as this price point will not outperform the broader market so I give the stock a hold rating today. Company Overview Compass Diversified "is a publicly-traded holding company that provides shareholders with unique access to middle-market businesses – an attractive segment of the market historically reserved for private equity or other legacy players" according to its website.
They target smaller businesses that earn an attractive return on capital with highly valuable brands and a strong customer base. The company has a successful track record of creating value, as they have focused on defensive companies that can weather economic storms and perform well during cyclical lows in the economy. Their portfolio of companies can be categorized into two segments: branded consumer businesses and industrial business.
