Johnson Controls (NYSE:JCI) shares have underperformed since the $18B Tyco merger, which also brought a new CEO, George Oliver, whom we know and respect from his days at Tyco. We believe JCI had been undermanaged prior to the merger, and Oliver has the opportunity to improve operations in addition to achieving the merger synergies. Roughly three-quarters of revenues and two-thirds of earnings come from the legacy Tyco fire and security business and JCI’s legacy HVAC and building automation businesses. JCI is also the largest producer of lead-acid automotive batteries with nearly 40% market share. While this business is lower growth, the fundamentals tend to be fairly stable as aftermarket accounts for 75% of sales.
From David Herro (Trades, Portfolio)s' Oakmark Global Select Fund fourth quarter 2017 commentary.
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