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Middleby CEO: We Still Have Room to Grow

In the video interview excerpt below, Motley Fool CEO Tom Gardner speaks with Middleby (NASDAQ: MIDD  ) CEO Selim Bassoul. Since becoming CEO in 2000, Bassoul has led a remarkable transformation at Middleby, turning the cooking equipment maker's stock into a nearly 50-bagger over that time. In the video below, Bassoul discusses how the company can continue its rapid growth.

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Tom Gardner: I want to come back to something you said in that answer, but my second challenge to Middleby as an investment, it's been a 50-bagger. I mean it's difficult for an investor to see a stock double and buy it.  You see a stock at 15, now it's at 30. You're like, "Ah, I should have bought it at 15." Then when it goes from 30 to 60, you're like, "Ah, I could have bought it at 30. I could have bought it at 15 and now it's up four times and I missed it." This stock is up 50 times. You are almost never going to find in American history, a 13-year period where a company goes up 50 times in value, 35% per year. 

So there is no way that a 50-bagger can be repeated over the next 13 years at Middleby, but it doesn't have to be a 50-bagger to be an incredible stock. Maybe it will be. Maybe this will be a $120 billion company in 13 years. I'm certainly not going to bet against you, but my question is for the investor who looks at this and says it's already had its run. 

Selim Bassoul: Tom, you sound like my brother. 

Gardner: I'm replicating your family members. 

Bassoul: Yeah, my brother is -- every year we meet because he is overseas and I'm here.  We meet at Christmas.  So when the stock ramped up from nine bucks to 20, he said "I missed the stock. I missed it." And then it went from 20 to 40 -- "Oh!  I missed it."  When it went to 80, he said, "Where does it go from here?" So I'm sure this coming Christmas he will say "I missed it" again, because he hasn't pushed that stock ever. 

I will tell you, the reason I believe in this company is that the fundamentals are right. One, it's not a hype, we don't have one customer that could basically, if they take their business away, there is no customer that is more than 5% of our company.

Number two, we don't rely on one technology, on one platform.  That was very dangerous a few years back. When I became CEO, we had 60 per-hour sales coming from three customers: Domino's, Papa John, and Pizza Hut.  Today, we don't have that type of tie-in to basically a segment of the customer or to one product line. 

Number three, I look at our margin accelerating as we provide more solutions in food processing. The [unclear] will last a few weeks in safety around the world. Food safety, whether it's suppliers supplying KFC chicken or this meat horse issue. There are going to be a lot of huge safeguards in emerging markets. This horsemeat issue, it's going to come back and people are going to say, "I need equipment and safeguard to make sure." Governments are going to come. Consumers are going to ask food processors to invest in equipment that safeguards their safety and their health. So on the food processing, we have a lot of exciting things happening. 

Also in emerging markets, we haven't even touched the precooked market.  All of those markets in India and China are looking to food processing to get there.

On the commercial side, example of waterless steamer, 30-second toaster, the kitchen of the future that we just did with Brinker, we have exciting, exciting technology and innovation that will continue growing our food service.

Then this is just the beginning of a platform for us that we can take totally internationally very well. So my feeling is the acquisitions, there's a huge pipeline of acquisitions. Number two, I think that if we continue growing at 20% earnings per share, in a way that doesn't put risk, and I think that's where I would like to bring back to your investors, to my investors at Middleby.

One of the issues that nobody talks about for Middleby is what is the risk factor of that company? The risk factor is minimal. We have not been affected. We've seen that even, what happened in 2009. If you go back and look at 2009, even though dipping so much in sales and organic sales, we kept on our EBIDTA. We did not lose money. We kept on our EBIDTA. It dipped a little bit, but it didn't much. 2009 is most probably the what-if scenario of the worst year I've had having been at the company for 18 years. So I think that if there is a repeat of 2009, we are ready and better equipped than we've been even when we faced 2008-2009.

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5/31/2016 3:39 PM
MIDD $124.09 Down -0.53 -0.43%
Middleby CAPS Rating: *****