Otis Worldwide Corporation (NYSE:OTIS) is a leading developer of elevators and escalators that was spun off from American conglomerate United Technologies. Thomas Davies of VGI Partners explains the four factors which make the company attractive: 1) Its “razor blade” model of selling products upfront at low-cost, and then profiting from high-margin ongoing maintenance; 2) The company operates in an oligopoly; 3) Ongoing urbanisation, and 4) The recent spin-off from a broader conglomerate, which means a more focused business strategy.
“United Technologies milked Otis for its cashflow and reinvested that in other parts of the business. Now you’ve got a management team who's very focused on Otis and optimising the outcome and earnings for Otis’ business."
In this short video, Davies expands on why this company is on its way up, including opportunities in reducing costs and boosting margins through digitisation.
