It may surprise you to learn that the company keeping your tires on the road also quietly supplies key materials inside the batteries powering electric vehicles (EVs), energy storage, and some of the largest data centers in the world.

This week’s Long Idea profits from both of these growing markets with an asset base that cannot be easily replicated: no new conventional plants have been permitted in the United States or Western Europe in decades.

We see upside in this stock because its valuation implies the company has no profit growth in its future.

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This stock presents quality Risk/Reward based on the company’s:

  • high regulatory barriers to entry, which make new investment uneconomical,
  • industry leading profitability,
  • multiple growth opportunities, namely western tire production and battery material expansion,
  • strong FCF generation that supports billions in dividends and share repurchases, and
  • cheap stock price that implies profits will never grow again.

Battery Demand is the Megatrend

Batteries are essential to the global energy system (including AI), future vehicle manufacturing, and the clean energy transition. Battery storage, in particular, is the fastest growing clean technology in the power sector. Additionally, batteries underpin the ongoing data center and AI infrastructure revolution and are critical to drone and robotics applications.

Figure 1: Annual Battery Demand by Application and Scenario, 2023 and 2030

Sources: IEA

Figure 1, from the International Energy Agency (IEA), highlights the projected growth in annual battery demand through 2030 in both its Stated Policies Scenario (STEPS) and Net Zero (NZE) scenarios.

In either case, a dramatic decline in costs due to advances in battery chemistry and manufacturing efficiencies is driving much higher adoption rates.

Looking ahead, Straits Research projects the conductive carbon additives market will grow 13% compounded annually through 2034. Additionally, Benchmark Minerals Intelligence projects global battery demand will grow 17% compounded annually from 2025-2030.

The relationship between EVs and batteries is virtuous too: as battery costs fall, EVs and storage options become cheaper, which then fuels more EV and battery demand.

Gigafactory Tailwind

In the United States alone, there are a dozen operational gigafactories, with an additional 20 under construction.

This company has moved to capitalize on this growth opportunity through capacity additions that are tuned to their customers’ gigafactory construction timelines. In particular, the firm has used its existing footprint to expand capacity in a capital efficient manner in the United States and China to meet growing demand.

As the U.S. increasingly constructs gigafactories, i.e. battery factories with a capacity of at least one GWh/year, and as regional supply chains are bolstered across the world, this company is a natural partner, thanks to the breadth of its product offerings and geographic reach.

Free Cash Flow Supports Capital Return

In the 3Q26 earnings call, the company’s CEO lauded how the firm had executed a “consistent, disciplined approach to capital allocation”, which applies to its capital return program as well.

From 2016 through 3Q26, the company generated a cumulative $2.8 billion in free cash flow (FCF), which equals 47% of the company’s enterprise value. Over the TTM, the company generated $391 million in FCF.

Over the same time, the company paid $2.0 billion in common dividends and share repurchases.

Figure 6: Cumulative FCF: Fiscal 2016 – Fiscal 3Q26

Sources: New Constructs, LLC and company filings

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