IDEX Corp IEX

Idex Is a Cash Compounder With an Impressive Record of Capital Allocation and Margin Expansion

Idex owns a collection of moaty businesses that tend to be leaders in their niche end markets, typically holding the number-one or -two market share. The company manufactures a wide array of products, ranging from equipment used in DNA sequencing to wastewater pumps to Jaws of Life hydraulic rescue tools. Idex’s Lean manufacturing prowess allows it to effectively operate in a high-mix and low-volume environment, offering customers a wide variety of highly engineered products that are configurable or customizable. A common theme across the businesses is that they specialize in making mission-critical equipment that performs a vital function but typically constitutes a small part of the customer’s total bill of materials. This aspect contributes to Idex’s narrow moat through customer switching costs and allows the firm to command premium pricing.