Compass Diversified Holdings (CODI)

History and Background

Compass Diversified Holdings (CODI) was founded in 1998 and went public in 2006. It operates as a holding company that acquires and manages middle-market businesses across various industries. Its strategy involves acquiring companies with strong market positions and growth potential, improving their operations, and eventually selling them for a profit.

Core Business Areas

• Advanced Circuits: One of the largest manufacturers of rigid printed circuit boards in North America.
• 5.11: A leading provider of purpose-built apparel and gear for law enforcement, fire, EMS, and military professionals, as well as outdoor enthusiasts.
• Altor Solutions: A provider of custom-engineered packaging solutions for various industries.
• Marucci Sports: A manufacturer and distributor of baseball and softball equipment, including bats, gloves, and apparel.
• Lugano Diamonds: Designer, manufacturer, and retailer of fine jewelry.
• Sterno: Manufacturer and marketer of portable warming fuels and creative foodservice solutions.
• Velocity Outdoor: Manufacturer and distributor of outdoor sports and recreation products, including airguns, archery equipment, and optics.

Leadership and Structure

CODI is led by Elias Sabo (CEO). The company operates with a decentralized structure, where each subsidiary is managed by its own leadership team. CODI's management team focuses on capital allocation, strategic oversight, and operational improvements at the portfolio level.

Key Offerings

• Advanced Circuits Printed Circuit Boards: Rigid printed circuit boards (PCBs) used in various electronic devices and systems. Market share data is not publicly available at a granular level. Competitors include TTM Technologies (TTMI) and Sanmina Corporation (SANM).
• 5.11 Tactical Apparel and Gear: Purpose-built apparel, footwear, and tactical gear for law enforcement, military, and public safety professionals, as well as outdoor enthusiasts. Market share data is not publicly available. Competitors include Vista Outdoor (VSTO) through their brands like CamelBak and Blackhawk, and also direct competitors such as Under Armour (UAA) and Carhartt.
• Marucci Sports Baseball Bats: High-performance baseball and softball bats used by professional and amateur players. Marucci has a significant market share in the MLB bat market. Competitors include Rawlings, Wilson, and Easton.
• Sterno Warming Fuel: Portable warming fuels used in catering, foodservice, and outdoor cooking applications. Sterno holds a significant market share in the catering and foodservice warming fuel market. Competitors include private label brands and other fuel manufacturers.

Industry Overview

CODI operates in diverse industries, including manufacturing, consumer products, and industrial services. These industries are subject to economic cycles, changing consumer preferences, and technological advancements.

Positioning

CODI positions itself as a long-term investor focused on acquiring and growing middle-market businesses. Its competitive advantage lies in its operational expertise, capital allocation skills, and diversified portfolio.

Total Addressable Market (TAM)

Because CODI's companies operate in vastly different markets, TAM is difficult to calculate. They are positioned to benefit from growth within each specific segment, with the overall CODI strategy to deploy capital in the best performing areas to maximize returns.

Key Competitors

• Brookfield Business Partners (BBU)
• Huron Capital
• The Carlyle Group (CG)

Competitive Landscape

CODI competes with other private equity firms, holding companies, and strategic buyers for acquisitions. Its competitive advantage lies in its operational expertise and diversified portfolio. Market share is difficult to determine due to the breadth of CODI's holdings.

Lugano Diamonds

• Year: 2023
• Acquisition Price (USD millions): 256
• Strategic Rationale: Expansion into luxury goods and diversification of the portfolio.

Historical Growth: CODI's historical growth has been driven by acquisitions and organic growth within its portfolio companies.

Future Projections: Future growth projections will depend on analyst forecasts and macroeconomic conditions.

Recent Initiatives: Recent initiatives include acquisitions of new businesses, divestitures of underperforming assets, and operational improvements within existing portfolio companies.

Compass Diversified Holdings presents a mixed picture. Its diversified business structure and experienced leadership team are strengths, yet it depends on economic conditions and is subject to acquisitional risks. Its high debt levels present a weakness that should be watched. They should focus on streamlining and continuing integration of acquired companies.

Data Sources:

• Company filings (10-K, 10-Q), press releases, investor presentations, financial news sources (e.g., Yahoo Finance, Bloomberg, SEC.gov).

Disclaimers:

This analysis is based on publicly available information and should not be considered financial advice. Market share data is estimated and may not be precise. Financial data should be verified with the company's official filings.