Hunting for Hidden Champions in Europe

Monday, Mar 27 2017 by
Hunting for Hidden Champions in Europe

In his book, “Hidden Champions of the 21st Century”, the business consultant Hermann Simon discusses the idea that small to mid-sized firms, which operate in niche markets and are market leaders in their industries, tend to become very successful. In this article, we will use his findings to identify the top ranking Hidden Champions in the market, analyse how they have performed, and randomly select a few Hidden Champions for particular focus.

What makes these companies “Hidden”?

A key element of “hidden” companies is that the range of products they make often go unnoticed by consumers, as they often form part of the supply chain. It may be that the company supplies the equipment, components, or systems that contribute towards the end product, reducing their own “distinctiveness”.

These types of companies include some of the following: Jungbunzlauer, the Austrian-Swiss company that provides the citric acid for every Coca-Cola produced and sold in the world, Mumbai based Essel Propack, one of the global market leaders for laminated tubes for toothpastes and other similar products, and Switzerland’s Lantal, a global leader in customised cabin interiors for passenger aircraft, whose customers include the likes of Boeing and Airbus.

Additionally, there is a desire for these Hidden Champions to remain hidden and maintain a low profile, so that they may continue to focus on what counts - their business. The book credits Jim Collins for making a telling distinction between “show horses” and “plough horses”. He explained that “The plough horses do not put much time or effort into grooming their public image, so they save time and energy to concentrate on their true purpose: conducting good business”.

However, a trend has started to take swing, which shows that more and more Hidden Champions are beginning to unveil themselves. At the time of writing, in 2009, Hermann Simon had found that the number of hidden champions listed on the stock exchange had risen sixfold in the last decade.

Finding the Hidden Champions

The initial step in modelling Hermann Simon’s strategy is to filter for the top 20% of stocks in the market with the strongest blend of Quality, Value and Momentum. That was done by using Stockopedia’s StockRanks.

In his book, he specified that the companies he was looking for must also generate revenues below $4 billion, drawing focus on only smaller to mid-sized companies.

He also found that the highest proportion of…

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As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.

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Valmet Oyj is a Finland-based company, which is engaged in the development and provision of services and technologies for the pulp, paper and energy industries. The Company’s services cover whole cycle from maintenance outsourcing to mill and plant improvements and spare parts. It operates in four business lines: Services, Pulp and Energy, and Paper, which comprise development of products and services and global customer projects in the areas of paper, pulp, tissues, paper and board, as well as bio-energy; and Automation, comprising process automation systems business. The Company operates domestically and abroad, including South, Central and North Americas, China, Asia and Europe. more »

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Bergman & Beving AB, formerly B&B Tools AB, is a Sweden-based supplier of industrial consumables, industrial components and related services for the industrial and construction sectors in the Nordic region. The Company’s activities are divided into five business areas, namely: Tools and Machinery, Personal Protective Equipment, Fastening Elements, Industrial and Construction Consumables and Workplace Equipment. Its range of products includes hand tools, metal and woodworking machinery, cutting tools, compressed air technology, personal protective equipment, work clothes, first aid equipment, fastening elements, screws, adhesives, kitchen fixtures, electrical devices and lighting, workplace equipment, environmental assurance and lifting devices, among others. The Company’s customers comprise mainly of companies operational within the industrial and construction sectors. more »

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WashTec AG is a Germany-based company engaged in the provision of vehicle washing solutions. The Company and its subsidiaries focus on developing, manufacturing, selling and servicing car wash products. The Company operates through three geographical segments: Core Europe, North America, and Asia/Pacific. Its product portfolio comprises, among others, roll-over wash equipment, self-service wash equipment, commercial car wash equipment, wash tunnels,water reclaim systems and the spare parts. It also provides repair and maintenance services, including full service and call-out services, markets related products, such as detergents and care products, and provides sales financing services. The Company distributes its products in approximately 70 countries. WashTec AG is the parent company of the WashTech Group. more »

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18 Comments on this Article show/hide all

Howard Adams 27th Mar '17 1 of 18

A nice article. I shall certainly look more deeply into the companies which your screen selects as well as the three you picked out. Thanks for posting it.


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herbie47 27th Mar '17 2 of 18

Thanks Keelan for the interesting article. I upgraded to Europe last December, I have the first 2 one my Euro watchlist and I own shares in Washtec. Not sure if you are including UK companies or not, I would have thought Coats (LON:COA) might qualify although the SR has fallen below 80 now. Also Ab Dynamics (LON:ABDP) and Tristel (LON:TSTL) spring to mind, again the SR has recently fallen below 80.

Other Euro ones although not all industrial maybe to consider are CE2, HOLCO, KTCG and PVL. I don't know enough about these companies to say whether they would qualify as Hidden Champions or not.

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Edward Croft 27th Mar '17 3 of 18

I just wanted to highlight to everyone reading this that Keelan has interned at Stockopedia over the last 2 summers.  If it wasn't for Keelan's tireless research, the Profit Warning Survival Guide would never have existed.  His work has had a huge impact on the way that many are carrying out their investing, especially to manage downside risk. Keelan hasn't had enough appreciation for this behind the scenes work - so I just wanted to offer a hat tip here !

PS - Keelan - this is an amazing piece. I can't actually believe how much you have learned about companies and markets at such a young age. You are ridiculously ahead of the curve.

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Paul Scott 27th Mar '17 4 of 18

In reply to post #177960

Awesome, thanks for all your work on the profit warning analysis, Keelan :-)
It was a fantastic project, and I can quite imagine that a huge amount of work went into it.
Indeed, I tried to start the project myself, and soon realised that it was a vast amount of work, way beyond my capability.

Regards, Paul.

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Graham Ford 27th Mar '17 5 of 18

Thanks for the article, interesting reading.

I'm not clear if the comments about Lungbunzlauer are Mr Simon's or yours. Sorry to be picky but.......Citric acid in Coca Cola? Are you sure? Perhaps you mean phosphoric acid. Also, are you sure the Lungbunzlauer product is in every can of Coke worldwide? I.e. Coca Cola worldwide single source a key ingredient which is essentially a commodity from a company with no manufacturing in Asia. Seems unlikely.

Ed made the point in another thread about a potential bias by selecting companies we've heard of. Not having read the book I don't want to be too critical but by hidden champions are we really just saying that there are a substantial number of companies out there of medium size that operate in the middle of the value chain that are highly successful in their market but are unfamiliar names?

Germany is well known for its highly successful Mittelstand companies so perhaps no surprise Mr Simon found plenty of his hidden champions there.

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underscored 27th Mar '17 6 of 18

Interesting. I have been looking for relatively well priced high fliers (Q & M rank >90, with SR > 90). I have found such screens to be heavily represented by Swiss/German/Nordic industrial companies.

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keelancooper 28th Mar '17 7 of 18

In reply to post #177927

Hi herbie47,

Thank you for your comments. I decided not to include UK companies within my screening criteria on the basis that Hermann Simon himself said that most of the Hidden Champions are to be found in German speaking and Scandinavian countries.

However, one could simply apply the same criteria to UK listed companies. As at today's date there are currently 17 companies that could be considered Hidden Champions. An example of these is Somero Enterprises Inc (LON:SOM). Somero Enterprises is engaged in the provision of laser-guided equipment for concrete slab placements in all types of construction projects. The company currently holds 56 patents, and has nearly 100% of the global laser screeding market share.

As to the European companies you mention, further research would need to be carried out to determine whether they could be categorised as Hidden Champions. Perhaps a project for the future!

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keelancooper 28th Mar '17 8 of 18

In reply to post #177960

Hi Ed,

Thank you for the kind words. It was a great experience working with the team on the Profit Warning Survival Guide, and I learned so much from it.

The Hidden Champions research was fascinating to carry out and I hope a lot of subscribers will enjoy it!

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keelancooper 28th Mar '17 9 of 18

In reply to post #177966

Hi Paul,

Happy I could help and take part in the project. It was indeed a lot of hard work but thoroughly worth it in the end! Thank you for your comments.

Regards, Keelan.

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keelancooper 28th Mar '17 10 of 18

In reply to post #177969

Hi Graham,

Thank you for your reflections. The comments made about Lungbunzlauer are indeed Mr Simon's. A number of websites suggest that citric acid and phosphoric acid are ingredients of different Coca-Cola beverages, but I suspect only the company itself can confirm one way or the other!

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underscored 28th Mar '17 11 of 18

In reply to post #178149

What do you make of xp power?

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Graham Ford 28th Mar '17 12 of 18

In reply to post #178161

Hi Keelan

Looking at the data provided by the company Coca Cola contains no citric acid, but does contain phosphoric acid. I think perhaps Mr Simon has got confused, or not written very clearly. Citric acid in the natural world is found in citrus fruits e.g. lemons. So, it is in products like Sprite typically and the Coca Cola website confirms this. I still find it a bit odd that he selected Jungbunzlauer as I wouldn't see them as a dominant force in the citric acid market, more like last man standing (of major size) in Europe versus Chinese producers but perhaps their product mix and market position has changed since he selected them.

For me I think the main take away is to look at all the companies that meet the screening criteria regardless of whether they are a name you recognise or not as they might be a 'champion' in their field not known to the public in general. Thank you again for the interesting post.

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jonesj 28th Mar '17 13 of 18

Thank you for posting the review Keelan.

The book is of course 8 years old, so it may be interesting to read & see how many of the companies have seen more competitive pressure since then.

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DWit199 28th Mar '17 14 of 18

In reply to post #178176

Diet Coke contains citric acid.

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Brackendale 29th Mar '17 15 of 18

In reply to post #177960

Keelan, congratulations on the article. I wish I had known at your age what you know (not that I would have been intelligent enough to use it), and I feel very old reading that. Good luck, I hope the field provides you a lifetime of interest (both intellectual and compounded investment returns). Looking forward to your next article.

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keelancooper 30th Mar '17 16 of 18

In reply to post #178164

Hi underscored,

Despite XP Power (LON:XPP) meeting most of Hermann Simon's criteria to be a Hidden Champion, after further research, their 2016 annual results showed that they still have a relatively low market share of 6.1% across their global markets. This would imply that they do not meet the key criterion of being a market leader. However, one would need to compare their market share against their competitors to make a definitive judgement on this point.

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keelancooper 30th Mar '17 17 of 18

In reply to post #178266

Hi Brackendale,

Your words of encouragement are much appreciated!

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Andrew L 4th Apr '17 18 of 18

Interesting article. The three companies identified look interesting. Possibly something further to look into is the market share, competitive position and market outlook for each of the company's segments.

The tough part of the intermediate product type companies, is seems to me, is knowing the competitive position. Imagination, for example, was cut by Apple as a supplier recently. At least with consumer facing companies we can assess the product but this is much harder with intermediate product companies. However, there still seem to be some good intermediate product opportunities that don't get a lot of attention(James Halstead for example with its emphasis on commercial flooring).

Probably the key for intermediate product companies is to assess the trend in profit margins, market share and research & development.  The ideal is for market share gains at the same time that operating profit margins improve.  

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About keelancooper


After having approached the investing scene at the age of 12, I decided to follow lots of different Bulletin Boards in the UK and look for the most trendy resource stocks on the market. Aged 14, I was left with little over 20% of my original investments, with most of the companies bankrupt. I came across Stockopedia in 2013 and I was intrigued by the ranking systems and screening features that were on offer. I was a devout follower of Warren Buffett and I loved the idea that I'd be able to track the shares that would fall under his investment philosophy. Having read plenty of books on Warren Buffett, and Benjamin Graham's Defensive Investor I am inherently a contrarian investor. Stockopedia has given me the tools to scour the market for marked down unappreciated companies and analyse their valuation and quality characteristics. I created a fantasy fund to mirror this approach in 2015, to see how the strategy would work, and after continued market out-performance, I have integrated this strategy into my personal investing life.  In 2015, I flew from Dubai, where I attended school for my GCSE's and A-Levels, to the UK in April, to attend the UK Investor Show. This was where Ed and the Stockopedia team would be presenting the site to investors, and the perfect opportunity for me to speak to them and ask for an internship. After some conversations with Alex and Ed, they agreed for me to come for an internship in the summer. After such a rewarding experience I was fortunate enough to return again in the summer of 2016, this time round as a research analyst. During my second internship, I learned about technical chart analysis, contributed to various help pages on the website, and helped with the research for the eBook "Profit Warnings - the ultimate investor survival guide". I am currently on my third internship with the company, and hope to return after completing my university degree, which starts in September 2018.  more »

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