Still, because of relatively inexpensive production costs, Sensata is able to maintain 30% cash flow margins.
Once established, Sensata signs long-term contracts with its customers and embeds its technology through customization and certification.
Crichton believes the market is undervaluing Sensata because it is a fairly new company with few comparable peers.
Despite its strong market share and positive growth prospects, Sensata is not immune to the floundering economy and recent market swoons.
For now, however, barring a new recession, Sensata does not appear to be in danger of seeing sales slump that badly.
Scout Capital is far from the only hedge fund to own Sensata.
Sensata produces a range of low-cost, high-value sensors and switches, used for things like car airbags, airplane circuit breakers and switches in large HVAC systems.
Sensata penetrates a market by starting small, selling circuits to customers.
Scout Capital, which announced a 5% stake in Sensata Technology Holdings in May of this year, presented their reasons for being bullish on the company today at the Value Investing Congress in New York City.
He reduces his forecasts and stock targets for 14 companies, including not only Arrow, but also Avnet, Ingram Micro, Tech Data, Synnex, Molex, Amphenol, Sensata, Tyco Electronics, Jabil, Flextronics, Sanmina and Motorola Solutions.
FORBES: Goldman Now Wary On Tech Supply Chain; Downgrades Arrow
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