The Once (and Future?) Misfit: Balchem Corp (BCPC)
A lesson in how a great business can fall from grace.
The Fallen Angel, Alexandre Cabanel, 1847, oil on canvas (Musée Fabre)
Sometimes one’s process is flawed.
A few days ago, in another universe, you probably would have been reading a profile of Balchem Corp. It has all the trappings of an unheralded wealth creator. Wall Street barely covers it. Its business is hard to understand. It is categorized as a specialty chemical manufacturer, a cyclical and commodity industry most investors avoid. And, perhaps most importantly, its returns were better than well-known great investments like Starbucks and Microsoft.
I had compiled a whole draft, profiling why it performed so well. All that was left was a short conclusion on why companies like this are prime examples of great investments hiding in plain sight.
Perhaps I would have powered through the conclusion and published it if I had been more caffeinated. (no joke, here’s the draft with a busted thesis, terrible spelling, and poor grammar on full display).
Fortunately, the coffee had worn off. I stepped away and went for a run to collect my thoughts. There were nagging questions that I couldn’t shake. When I started pulling on a few threads, the concept unraveled. What was once a great example of a misfit wealth creator is now a run-of-the-mill business corrupted by poor management incentives.
So this is the second attempt at profiling Balchem Corp., why it originally fit the profile, why I got it wrong, and the importance of constantly challenging one’s ideas and processes.