HL SELECT GLOBAL GROWTH SHARES
New Holding - Zebra Technologies
25 June 2020
We recently added Zebra Technologies to the HL Select Global Growth Shares Fund.
Zebra provides a wide range of products that help retailers, logistics and healthcare providers identify and track their inventory.
Their products include: barcode printers, for use in product ID and patient safety; mobile computing products, used for customer facing applications in retail and postal delivery services; barcode scanners, used at supermarket checkouts and in warehouses; and radio-frequency ID readers, used for high speed, non-line of sight tracking, e.g. for monitoring shipments and improved inventory accuracy.
Given the prevalence of Zebra’s products in its end-markers, this enables the business to also offer supplies, software and services, including maintenance, repair and tech support, generating more repeating revenue streams.
Industrial automation is an increasingly important theme in the supply chain of many industries, as companies look for more speed, accuracy and efficiency when managing the movement of their goods.
Zebra has more than 40% share of the market it operates in, supplying retail, manufacturing, logistics and healthcare industries with asset tracking tools and applications. For example, in the retail environment, Zebra’s barcode printers are used to label online delivery parcels and its mobile devices are used by shop assistants to help check if a product is in stock.
Mega trends including online shopping and the ‘internet of things’ are driving the underlying growth of Zebra’s business. The pick-up in e-commerce for home delivery and ‘collect from store’ increases the demand for more parcel labelling, scanning and tracking applications to allow for optimised movement along the supply chain.
The ‘internet of things’ and cloud computing have enabled ‘smart’ devices to capture more information than before and communicate in real-time. Zebra’s cloud based data analytics are allowing companies to make better business decisions based on the insights gained from the data, for example, when to order new stock if they’re running low, how to layout goods to maximise sales and how to minimise theft.
The Covid-19 pandemic has accelerated changes in consumer behaviour, as e-commerce shopping, online grocery shopping and ‘collect from store’ activity increased dramatically during lockdown. Logistics and inventory systems have been tested and we believe this will prompt additional investment in automation and warehouse fulfilment technology.
Zebra’s healthcare solutions could also benefit long-term, as hospitals experiencing increased strain and overcapacity could prompt investment in automation and digitisation to streamline processes, reduce costs and eliminate human error.
Historically there have been two major providers for the software on industrial mobile devices: Windows and Android. From this year, Microsoft will no longer support any of the Windows operating systems on these devices and so customers will have to switch to Android devices as they upgrade. Zebra has over 60% market share in Android industrial mobile devices and its revenue growth and market share will benefit over the next few years as a result of the switching.
Amongst its peer group, Zebra spends the most on R&D and this has led to the broadest and most innovative product portfolio on the market. This strengthens the relationship with third party resellers who account for most of Zebra’s sales and provide wide market access that Zebra would struggle to achieve alone. In turn, this bolsters Zebra’s market position and pricing power, creating strong margins that can be spent on further R&D. This is exactly the type of virtuous circle that we look for.for more information. Unless otherwise stated performance figures are from Bloomberg and estimates, including prospective yields, are a consensus of analyst forecasts from Bloomberg. They are not a reliable indicator of future performance. Yields are variable and not guaranteed.