Gary Brode of Silver Arrow Investment Management presentation produced by sumzero and Institutional Investor on the long case for NCR Corporation (NYSE:NCR).

NCR

Man vs Machine vs The Future

In science fiction writer Frederick Pohl’s “The Midas Plague”, Pohl imagines a world where robots overproduce consumer goods forcing the poor to consume constantly while the wealthy live simple austere lives. Kurt Vonnegut’s “Harrison Bergeron” posits a world where the government uses technology to handicap people who are smart, attractive, or physically talented to ensure a world of complete equality and constant discomfort. Alternatively, Star Trek describes a much different future where access to unlimited energy and replicators that can instantly produce any food or consumer good means that all of humanity has unlimited material wealth. Whether the future is a utopia or a dystopia, whether it features greater or lesser equality, or whether it promises a higher standard of living or not, it seems that all agree that the future belongs to machines.

While it is interesting to debate whether machines replacing human jobs is “good’ or “bad”, these changes are taking place irrespective of our moral bias, or feelings on the matter. NCR Corporation (NYSE:NCR) began as the National Manufacturing Company in 1879 and in 1884 was renamed the National Cash Register Company. Many people view NCR as the sleepy manufacturer of ATMs which have been ubiquitous in the United States for 30 years. In contrast, we see NCR as a leader in producing technology that will replace human labor and reduce costs for business owners. We believe that a misperception about NCR’s growth opportunity as well as investor concern about a once-serious, but now-resolved pension issue has led to a value opportunity in the stock.

Financial Services

NCR Corporation (NYSE:NCR)’s product lineup is large and diverse. The Financial Services division sells automated equipment to banks including ATMs. This division accounts for a little over half of NCR’s revenue and a little under half of its segment EBIT. Financial Services had a weak third quarter this year with sales down 4% which was a primary reason the stock sold off after the earnings announcement. Sales to US-based financial institutions were weak and that lack of growth is acting as a weight on the stock price. On its recent earnings call, NCR said that fourth quarter bookings look strong.

H/T Curry Goat

Gary Brode of Silver Arrow Investment Management: Long NCR