Portfolio: Zacks Deep Value

Littelfuse is a diversified industrial technology manufacturer focused on circuit protection, power control, and sensors sold into transportation, industrial, and electronics end markets worldwide, with about 16,000 employees across more than 20 countries. Its business model emphasizes “design‑in” positions on long‑life platforms, which gives the company the benefit of high switching costs for their customers, along with aftermarket/MRO channels, which together have supported resilient revenue around the low‑to‑mid single‑digit billions and strong free cash flow across cycles. As such, the company has been able to compound free cash flow per share at 13% annually for 20 years. Secular drivers include electrification of vehicles and industrial equipment, renewable energy, grid modernization, and rising protection and sensing content per system, complemented by an expanding power‑semiconductor portfolio and steady bolt‑on M&A.

The investment thesis is that Littelfuse offers a high‑quality, cash‑generative way to play long‑term electrification and safety trends with a history of value‑accretive acquisitions and disciplined capital allocation, returning roughly 40% of free cash flow to shareholders over time while reinvesting the balance into organic growth and M&A. We believe mid‑teens growth in earnings per share and free cash flow per share is sustainable over the next 5 years, resulting in similar stock price returns, with potential for even stronger returns if valuation multiples are re-rated higher if power semis and EV/renewables exposure scale faster than expected. Key risks include cyclicality in electronics and industrial production, integration and pricing risk around acquisitions, and competition in power semiconductors, but the near‑term outlook calls for a return to double‑digit revenue growth in 2026 as end markets recover and recent acquisitions (e.g., grid and protection assets) contribute, supporting a positive multi‑year earnings and cash‑flow trajectory. The stock has cooled off nearly -15% from the recent all-time highs, but is still up over +30% over the past year, suggesting now would be a decent long-entry point for patient investors with a 1+ year time horizon.