The Misfits: Applied Industrial Technologies (AIT)

Valuable lessons from North America's largest assembly line and automation parts distributor.

The New Town Market Square with St. Kazimierz Church, Bernardo Bellotto, 1778, oil on canvas (Royal Castle in Warsaw)

One investor misconception I hope to break with Misfit Alpha is that not every company capable of generating incredible returns needs to be a mega-cap company. 

Applied Industrial Technologies (NYSE: AIT) is another exhibit in my defense. 

This $6.4 billion parts and equipment distributor may not fit the profile of a huge winner, but it is a business that has generated about 13% annualized returns for more than half a century. That translates to a nearly 90,000% total return since 1968 (as far back as we can see with Koyfin).

Say it with me: Benign businesses executed spectacularly will consistently beat spectacular businesses executed benignantly. Let’s dig into what makes a benign business like Applied’s can translate so well to shareholder returns, what management is doing to ensure it continues this track record, and why even well-executed businesses can trip up. 

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Shoutout to Koyfin for their data and charts that make analysis like this possible. Koyfin has become an integral part of how I screen for, track, and analyze companies. It has made the analysis process much faster thanks to having a decade of data at my fingertips instead of manually going through stacks of quarterly and annual filings.

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