Crown Holdings

Often lost in the pizzazz of the scrolling headlines on explosive growth, or new fads and fashions, there is a swathe of companies that quietly trundle on, year in year out, out of sight out of mind. Some of these companies though, are hidden gems, unpolished perhaps, but waiting, heaving with potential for those who can tear themselves away from CNBC, mute Twitter and recognize long-term structural change in often sedate, perhaps dusty industries. Take beverage cans. Tin cans first came to shopkeeper’s shelves in the 1930s as an attractive, lighter, space saving alternative to glass bottles. Popularity, though, was slow to catch on as the metallic interior often hit the taste of the drink it canned. Then some clever bean sorted that, Coors designed the ring-pull and cans were up and off to the till. Today the can industry is in the midst of a quiet revolution. For years the sector was next to no growth, then the world woke up to plastic. Specifically the tower blocks of plastic floating in the oceans, and the catastrophic long-term environmental damage being done. Plastic bad, recyclable tin cans good. Pepsi et al didn’t hold back, and can demand ripped back. The market is now sold out. KAPOW. In a consolidated industry prices are easing higher as demand driven by craft beers, spiked seltzers, and sparkling water, outstrips supply. Capacity is being added, but not quick enough to meet surging demand. Contracts are typically three to five years with a high level of pass through on input costs, and, due to economies of scale, barriers to entry are high. In the context of a sector that was able to grow earnings during the Great Recession, as consumers shifted to home consumption, this is proper defensive growth; in a can. And the seismic change in industry dynamic currently underway, offers companies like Crown Holdings, a chance to snatch a headline or two of their own. In time a higher multiple, less leverage, more cash back to shareholders, and the front page of Barron’s might beckon too.