I nearly always find something relevant and memorable in management meetings I attend, whether in our office or theirs. A recent visit by Mogens Bay, Chairman and CEO of Valmont (VMI), a diversified industrial company, is a case in point. We have had a modest sized investment in Valmont since 2009. We have since about doubled our money.
We think Valmontâs towers business will benefit from increased spending by utilities on more efficient electricity transmission and is well-positioned to grow. This is because the Federal Energy Regulatory Commission, in order to reduce our countryâs energy consumption, has granted utilities significant incentives to invest in transmission.
We believe Valmontâs world leading irrigation business is also exceptionally attractive and poised for growth. With the worldâs population expected to increase 30% by 2050, there will be increased demand for food. The world cannot meet its crop requirements without irrigation. This is because irrigated farmland provides better yields. Only 20% of cultivated agriculture worldwide is irrigated. Center pivot irrigation uses the least water, a scarce resource, and produces the best yields. Valmont has a 45% share of center pivot irrigation systems in North America and is increasing its share in the rest of the world. Center pivot irrigation has also been steadily increasing its current 56% share of irrigation.
When Mogens visited us recently to provide an update, he mentioned that he tries to visit all of his firmâs more than 100 worldwide plants regularly. When he does, he always talks to his factory workers. When I asked whether he has prepared remarks or speaks from the heart, he told us it was the latter. He explained that âthe culture of a business is whatâs important.â He said that he wants his general managers to be entrepreneurs âwho are passionate about what we doâŚmake highways safer, protect the environment, donât cut corners and commit to continuous improvement.â Mogens went on to say âwith plants around the world, somewhere someone is doing something wrong.â He finds âCan I show you what I do?â an effective way to communicate and train. âYou need to look yourself in the mirror every day and make sure you donât need to look down. Itâs all about how you treat your employees and customers. How you expect people to behave.â Mogens then remarked that âyou need to show people that you respect them and care about them.â To make that point, he frequently tells his fellow employees that Valmont âcould survive for a long time without its CEO. It couldnât last through lunchtime without its welders.â
Valmontâs home office is in Omaha, Nebraska. Omaha also happens to be the home of the worldâs most prominent investor. When Mogens finished updating us, I remarked that âthere must be something in the waterâ in Omaha. Mogens is an individual I think about when I tell our investors that âwe invest in people.â Itâs too bad we donât have a larger investment in his business, I thought. Itâs also too bad we didnât invest earlier. If we had invested in 1993, we would have earned 16.6% compounded annual growth for the past 21 years. The S&P 500 Index earned a compounded annual return over the same period of 9.4% per year.
From Ron Baron (Trades, Portfolio)âs Second Quarter 2014 Shareholder Letter.