The power of brand names is the consistency, durability, and trust they impart to consumers, who rely upon the products in their daily lives. Oftentimes, however, there are other companies behind the scenes that are working extra hard to make those brands meet those demands.
Everywhere electricity is used
John Bromels (Littelfuse): On the starship Enterprise, it's easy to know when the ship's been hit, thanks to the showers of sparks that seem to fly everywhere. But in your home, if an electrical gadget gets fried by a power surge, a lightning strike, or just a malfunctioning component, the showers of sparks will probably be replaced by -- if anything -- a small "click."
That's thanks to products from Littelfuse, which manufactures fuses, circuit breakers, and other electrical circuit protection components. Littelfuse's products are used in everything from washers and dryers to industrial machinery, and its clients include every major automobile manufacturer.
When things are going well, of course, you don't even know that Littelfuse's products exist, even though they're protecting you every time you use an electrical device or vehicle in which they're installed. When things go wrong, you probably still don't think much about them, even though they're often what's causing a device to shut down as opposed to emitting showers of sparks.
Because Littelfuse's is a cyclical business -- dependent on industries like automobiles, construction, and major appliances -- a recent slowdown in the Chinese auto market has hurt the stock. However, CEO Dave Heinzmann predicts improvement in the second half of the year. With electric and electronic devices only becoming more common, this unseen but vital company is one to keep an eye on.
AMD is playing to win
Jamal Carnette, CFA (AMD): If you've used a PC today to send a work email, play a game of Fortnite, or simply browse the internet, it's increasingly likely you've done so using AMD's processors. The semiconductor manufacturer continues to steal market share from Intel's central processing unit (CPU) and graphic processing unit (GPU) businesses, and it's just getting started.
It wasn't always this way. When CEO Lisa Su took the reins in 2014, the company was struggling to keep its head above water, destined to be a commodity supplier in the rapidly declining laptop and PC market.
Su transformed the company by focusing on the higher-end GPU markets and on data center applications. Shares are up approximately 800% on her watch, including a 60% year-to-date gain. Although bears continue to predict AMD's rally will end, citing competition from NVIDIA, cryptocurrency headwinds, and rich valuations, the stock continues to power higher.
The newest catalyst is AMD's partnership with Samsung to bring its Radeon graphics technologies to Samsung chipsets. Not only is Samsung the largest smartphone maker, but the company also makes mobile chips for many manufacturers, including phone rival Apple. This makes AMD an instant force in the mobile market while adding high-margin licensing fees and royalty payments to the top line. Even after AMD's amazing rally, the company has further room to run.
Sailing on a whiskey river
Rich Duprey (MGP Ingredients): Want to kick back with a nice glass of premium whiskey at the end of a hard day? Maybe some bourbon or rye? You wouldn't be alone. The so-called "browns" of the spirit world have been in high demand, and that has helped the world's largest distiller Diageo post growing sales over the past few years -- its stock is up 22% in 2019.
What many are not aware of is that Diageo contracts much of its premium and superpremium whiskey from MGP Ingredients , a contract producer from Indiana that actually supplies more than 1 million barrels of whiskey to the industry. To put that in perspective, the Distilled Spirits Council of the U.S. says 23 million barrels of whiskey were produced in 2018. An article by Forbes earlier this year noted MGP and Calgary's Alberta Distillers produced about 90% of the rye whiskey bottled in the U.S.
But MGP Ingredients also produces food-grade industrial alcohol that finds its way into vinegar and food flavorings, hairsprays and hand sanitizers, cleaning solutions, and pharmaceuticals. Additionally, it sells fuel-grade alcohol to increase the octane and oxygen levels in gasoline and distillers' feed, which is used in animal feed as a high-protein additive. Wheat starches are sold to food processors and find their way into pudding and pie fillings, angel food cakes, soups, sauces, gravies, and frostings. And wheat proteins are used in white bread, hotdog buns, and hamburger rolls.
In short, there's a good chance that something you eat or drink every day is touched by MGP Ingredients. But whiskey is its primary business, and as there is no letup of demand in sight for this brown spirit, MGP has plenty of growth before it.