Latest updates are at the bottom - this lot starts in 2019:

Missed expectations in FY18 with 64.3 cps of EPS, but still growth. They keep growing and raising their dividend every year, paying an additional big special dividend about every 5 years. One of the best quality companies on the ASX. Always look expensive, but they probably always will.

. . . . . . .

Update: 17-Mar-2020: Those 5 year special dividends used to look pretty good, and we're overdue for one now, but ARB are not spitting off the same amount of profits that they once were - well, they are, but it's off higher revenue, so their costs are also higher. Basically, while their ROE and profit margins are still OK, they have reduced from where they used to be - and they may be putting more money back into the business now - rather than distributing it all to shareholders. They are now a truly global business, with manufacturing facilities in Australia and Thailand - and they sell their products all over the globe.

Something to keep in mind when you look at reducing car sales in Australia is that (1) they are selling globally, not just in Australia, and (2) 4WD sales as a percentage of overall car sales keeps increasing, so more and more people are buying SUVs and larger 4WD vehicles - rather than traditional sedans, so ARB's market is in the only part of the overall vehicle market that is still growing.

That said, not everyone will customise or accessorise their 4WD or SUV. Some are quite happy with the standard models straight off the showroom floors. However, the serious 4WDers do spend significant money on their vehicles, and ARB are at the quality end of the market, and can charge accordingly.

They won't be completely immune from the COVID-19 impact, but they will get through this better than many other businesses. For instance, not everyone will want to stay home, and one of the safest holidays people can take, is away from everybody else in a four wheel drive, camping, fishing, whatever.

Great businesses, plenty of insider ownership, their MD (Andrew Brown) and Board Chairman (Roger Brown) are both brothers of ARB's founder, Anthony (Tony) Ronald Brown (hence the ARB name - his initials) and Andrew and Roger together own almost 6 million ARB shares (7.45% of the company), worth over $90 million.

They always maintain a rock solid balance sheet (avoiding debt, and paying it down very quickly whenever they do use debt) and they look after their shareholders, as well as their staff and customers, who seem to all really like the company.

Additionally, the ARB share price has dropped 25% in the past few weeks - as have many other companies too of course - but this is another clear example of a company that has NOT become worth 25% less during that time, and therefore represents an opportunity to pick up shares in a quality company at lower prices. ARB usually trades at a healthy premium, because it is a high quality company, so these opportunities are worth taking advantage of in my opinion.

Update: 16-Sep-2020: Quality rises to the top! Raised valuation/TP to $27.70. They are close to fair value up here - I am holding, but not buying more.

Update: 17-Mar-2021: Nice chart! New PT = $42.77. Still holding ARB in two of my portfolios, including my SMSF. Also on my Strawman.com Scorecard. Excellent Management! Do not bet against them!

Premium products that sell at premium prices, and their customers are prepared to pay for quality and reputation. Selling globally to retail (4WD owners) and to OEMs (original equipment manufacturers, i.e. car and truck manufacturers and retailers).

ARB work closely with OEMs to ensure that their products work seamlessly with the vehicles they are designed for, so - for instance - the bull bars don't overload the front suspension or change the centre of gravity too much (do not affect the steering or tyre wear), and work with the airbags and other safety systems, and are designed so they do not interfere with the engine cooling, the headlights, indicators, or the number plate position, etc.

Often the bull bars incorporate an extra set of indicators, lights, and/or a new number plate position, but these are always designed with input and feedback from the OEMs, who have to be happy with the end product. Many OEMs fit ARB bull bars and other 4WD accessories as standard kit on certain models.

Despite all of that, sales to OEMs is just part of ARB's business. Most of their revenue still comes from selling a huge range of 4WD accessories directly to end users - the owners of 4WDs, who like to customise their vehicles to their own specifications.

17-Sep-2021: Update: Raising my PT (not valuation) to $48, which is basically where they closed today. They are a top quality company, with excellent management who have plenty of skin in the game themselves and think like shareholders (because that's what they are), however I wouldn't be buying them up here, and certainly not above $50 at this point, although that may look like a cheap level in another 5 years time. They just keep on kicking goals.

I hold ARB in my Strawman portfolio and in 2 of my real life portfolios also, one of which is my SMSF. They are a buy and hold position in all three portfolios. Happy to take the volatility but also happy in the knowledge that their management will keep adding value over time and keep growing revenue and profits, and that the share price will therefore keep rising over time.

They have a decent quality premium baked in already at these levels, but they arguably deserve that premium. Covid-19 hasn't hurt them at all. It's probably helped them if anything. However people who think they've been major Covid-19-beneficiaries and therefore their revenue and profits have been unusually inflated and are due to decrease as the global situation returns to some sort of new normal are probably not giving their management enough credit.

ARB are the initials of the founder of the company, Anthony (Tony) Robert Brown, and today it is his two brothers, Andrew Brown (MD) and Roger Brown (ARB's Chairman) who are the A & R Brown who run ARB, and they run it VERY well. I am very happy to back them to navigate through whatever comes their way going forwards, just as they do when they go 4-wheel-driving or rally-car racing on the weekend.

They know the industry, and they know their own competitive advantages within the industry. They are simply the best at what they do, and people who are serious about 4WDing and 4WD accessories are prepared to pay a premium for the best gear and the best service from people who know their stuff.

In summary, one of the best quality companies on the ASX, certainly one of the best management teams, and there's a fair bit of that priced in already, but that's OK. A hold, but possibly not a buy up here. I hold.

P.S. When I first started adding content here about ARB they were known to pay large special dividends around once every 5 years, but that seems to no longer be the case. The last big one was $1/share in 2014 when their SP was $12 to $13/share, so based on that 5 year cycle, their next big special div was due around 2019/2020, but guess what happened in early 2020? Due to uncertainty around Covid-19 in Feb/March 2020, ARB decided not to pay an interim dividend, but they almost doubled their final dividend (39.5 cps vs 21 cps the previous year) and in 2021 they've declared dividends worth 68 cents/share, so their dividends continue to rise, but they may not pay any more of those really big special dividends going forwards. I think it all depends on what their options are at the time.

If there are no clear opportunities to reinvest their profits back into the business for high rates of return I am confident that they will always return excess funds to their shareholders as they always have done, however I would prefer them to reinvest in the business and pay ordinary dividends as they have been doing in recent years, which has resulted in excellent growth, both in terms of the business fundamentals and the share price.

Update: 28-Oct-2022: I'm no less bullish on ARB, however I think that my previous price target of $48/share is probably too high for the mid-term, as ARB got a big Covid-boost at the start of covid-19, which resulted in a share price spike at that time, however sales are now returning to more moderate growth, similar to pre-Covid.

In that light, while I still consider ARB to be one of the highest quality companies on the ASX, with one of the best management teams, and I still own shares, I am lowering my price target to $37/share for a 3 year price target, so by late October 2025. They're still growing, still increasing revenue, profits, and dividends, and they're a global company with plenty more room to grow yet, so I'm happy to maintain exposure to ARB.

13-April-2024: Update: I still hold ARB in my largest real money portfolio and here, however I sold them out of my SMSF at $39.76/share in late Feb (2024) along with another very high quality company that I've held for years and like a lot, but that also looked fully priced, Monadelphous Group (MND), which I sold for $13.77/share. With those funds I added NEU (Neuren Pharmaceuticals) to my super (@ $20.36) & topped up my GMD (Genesis Minerals) position (@ $1.62), I then sold two of my gold miners in early March, so RMS and RRL were sold out of my super and replaced with DVP (Develop Global) @ $2.30 and I topped up my S32 (South32) shares at $2.99. Six weeks later S32 is higher at $3.29 (was $3.34 on Thursday), DVP is lower at $2.22, NEU is $20.76, GMD has shot up to $1.985, and MND is a little higher at $13.86. ARB is now $39.64, so around what I sold them for, but they've been as high as $41.83 over recent weeks, which, as I said, looks fully priced to me, as good as they are, and they are very good.

I still hold ARB in a larger real money portfolio, but they are not one of the 10 largest positions in that portfolio because they don't look like they have as much near term and mid term upside compared with some of the other positions.

Nothing has changed in my mind with ARB except the price. There is a quality premium or a management premium in the price, and that makes sense, but it also means that they look reasonably fully priced up around $40/share, so the upside is limited at these prices. They will still grow, no issue with that, they are not ex-growth or anything like that, they are a very high quality company and they are currently priced accordingly.

So ARB remains a company that I will always buy on decent dips in the absence of better alternative opportunities, and I'm happy to maintain a core ARB holding in my largest portfolio as well.

06-Feb-2025: Update:

I've been out of ARB for a little while, because they got up above $40 and then exceeded my price target, so looked fully valued to me. I jumped back on them this week because they dropped back below $40 and I thought $36 to $38 was a reasonable area to start accumulating ARB again, considering they were reasonably bullish in their outlook statement in October at their 2024 AGM, and they have become a tier 1 supplier to Toyota North America now which should result in an increase in OEM sales.

As I said over in my gold forum thread, I sold Westgold (WGX) out of my super earlier in the week, and because I was already overweight gold producers in my Super portfolio, I decided to rotate that money plus a bit more into a new ARB Corporation (ARB) position.

I've always liked ARB as a company, however I had exited them on valuation grounds last year - not because I didn't think they could go higher, I just saw more immediate likelihood of shorter term upside elsewhere at the time.

I think they are likely to report well this month for H1 of FY2025. When reading the following outlook statements, remember that ARB have very conservative management who tend to underpromise and overdeliver.

One headwind they have had is a welding labour shortage at Kylsyth, which they said at their AGM continues to be a constraint, however to help mitigate that skilled labour shortage here in Australia, they have expatriated 14 factory employees from ARB Thailand to Kilsyth. So, in that light, the skilled labour shortage here in Australia may not be such a major headwind.

My other concern had been about declining ROE, however I think that is likely to stabilise soonish.

Note their share count has been quite stable for a decade, because they tend NOT to use their shares to pay for acquisitions, they instead use cash and debt and then pay off the debt quickly; they never have much debt and are often in a net cash position.

Their book value has also increased every single year, which is another sign of a well managed company.

That info above is from Commsec, the slide above that and the one below this paragraph are both from ARB's 17th Oct 2024 AGM Presentation.

ARB are releasing their H1 results on 18 February, so in less than 2 weeks, so we'll get a better feel then for how they are travelling. I am expecting further progress overseas, especially in North America, and I'm excited that they are now working on an online channel as well which should boost their sales even further.

They have never been the cheapest option, both for what they sell, and when buying their shares, but they have intentionally positioned themselves at the quality end, and they have a lot of brand loyalty across their customers and clients. People are still prepared to pay more for higher quality gear, especially serious 4WD enthusiasts.

In terms of management quality, they haven't done anything to make me question their management. The gradual decline in their ROE is worth watching, however having double digit ROE (above 15% ROE) is still good for a consumer discretionary company that mostly sells aftermarket vehicle accessories in a competitive market.

They have always found new ways to grow without taking on excessive risk, and I think with companies like this, it pays to buy on pullbacks even when they still look expensive, because as long as management keep delivering they are unlikely to ever look cheap. They can just occasionally look a little cheaper than they were a month or two ago, as they do today (6-Feb-2025), possibly on tariff concerns. Whatever, I'll take it.

Disclosure: Holding, both here and in my SMSF.

No change to my price target today - I'll review it after I read their report on the 18th.