Atlas Copco: The Only Three Things That Matter
A deep dive into the Swedish industrial conglomerate
Atlas Copco represents the values we believe in: a long-term commitment to innovation, quality, and sustainability. Its ability to adapt and lead in industrial markets worldwide speaks to its culture of continuous improvement and respect for its employees and customers. This is the essence of what has made Atlas Copco a global leader for more than a century. - Jacob Wallenberg
Hi reader and welcome to yet another Best Anchor Stocks deep dive,
If you have not read the prior deep dives, I just want to remind you they are accessible through the “Deep Dives” tab in bestanchorstocks.com, but I’ll leave them below too:
Five Below: A Profitable, Repeatable, and Scalable Model. I ended selling Five Below and wrote an article explaining why here.
I’ll profile a surprisingly “undiscovered” company in this deep dive: Atlas Copco. I am not claiming it’s undiscovered due to its size (around $85 billion market cap) but rather because, due to its location (Sweden), the company seems to operate undiscovered for many US-based investors. Many act surprised when they find out that Atlas Copco has achieved an 18% total return CAGR since 1990. That’s an outperformance of 7% per year against the S&P 500:
Not only has Atlas Copco performed incredibly well in the past, but it’s also positioned to keep doing so in the future. It’s highly likely that its products and services have played an important role in manufacturing any product you are currently using, or maybe even drinking/eating. The company is a diversified industrial business with a mission-critical presence in most modern industrial processes. This is one of the things that makes the company appealing, but not the only one.
As usual, I’ll go over pretty much everything there’s to know about the company. The deep dive will be divided as follows:
Section 1: History and What the company does
Section 2: The Financials and Growth Drivers
Section 3: Competition, the Moat, and Risks
Section 4: Management & Incentives, and Capital Allocation
Section 5: How the company complies with the Best Anchor Stock traits
Section 6: Current status and valuation
Section 7: Concluding remarks
Before jumping directly to the company’s story and what it does, let me share a snapshot:

The section on Atlas Copco’s history is shared for free, with the rest reserved for paid subscribers. Paid subscribers also have access to a pdf which is shared after the history section. If you want to have access to this and the rest of the deep dives, don’t hesitate to join Best Anchor Stocks:
Section 1: Atlas Copco’s story - 150 years, one common denominator
Back when I added Atlas Copco to my portfolio in 2022, it was by far the oldest company in it. This is no longer the case after the additions of Deere and Hermes, but it doesn’t make its story less impressive. Note that unlike Hermes and Deere, Atlas Copco not only has a long history but also quite a dynamic one.
As you might know, I focus quite a bit of company age, not because I believe the past is a perfect proxy of the future, but because I take it as a good sign if a company has been able to survive 150 years while being perfectly positioned to take advantage of future trends. This, in my opinion, is an excellent indicator of a superior business culture.
Atlas Copco’s story starts with Eduard Fränckel, a 35-year-old senior official at the Swedish State Railways. Mr. Fränckel gave a public presentation in the early 1870s, where he wondered why there were no railroad specialty companies in Sweden despite all the resources available in the country.
One of the attendants was A.O. Wallenberg, the founder of Enskilda Bank. The surname Wallenberg is very important for Atlas Copco, even today. Mr. Wallenberg saw the opportunity and, together with three other influential people, decided to start a company to fill this gap. The only requisite for the new company was that Eduard Fränckel should be the managing director. Luckily for Wallenberg, Fränckel accepted the position, and in 1873, AB Atlas was born in Stockholm. The objective of AB Atlas was to provide the railroad industry with all the necessary materials.
The early years were great, but the company’s fate soon changed when a recession hit the country in the 1880s. AB Atlas’ production dropped by 70%, Eduard Fränckel was replaced by Oscar Lamm, and the company was reconstituted as Nya Aktiebolaget Atlas. Oscar Lamm’s first task was to diversify the company to avoid a similar episode in the future.
The company marched firmly in its diversification journey, jumping into industrial tools in the 1890s. However, an even more important event occurred at the end of that decade. In 1899, the company acquired an American compressor company for in-house use. The company soon began manufacturing and selling compressors to outside customers, a segment which now makes up almost 45% of Atlas Copco's revenue and an even more significant portion of its profits.
Atlas’ majority owners (the brothers K.A. and Marcus Wallenberg) and Oscar Lamm, continued their journey to diversify the business further and jumped into the manufacturing of diesel motors during the early days of the 1900s. A new company, AB Diesels Motorer, was founded to pursue this venture. The new venture was a great success, and in 1917, AB Diesels Motorer and Nya Atlas merged to constitute a new company: Atlas Diesel.
Atlas Diesel had two distinct segments: pneumatics & compressors, and diesel engines. (Just a small comment here: it’s honestly outstanding how many centenary companies had to completely adapt to the shift from horses to cars despite this not even being their main business. Hermes and Deere are good examples of this too).
Once again, an economic crisis stood in the way of the company’s success. The post-war depression of the early 20s and the Great Depression of 1929 posed a significant challenge to Atlas Diesel and led to two financial reconstructions in 1925 and 1934. One of the reasons for the trouble was the company’s overcapacity combined with a highly-capital intensive structure due to engine production. Even though management managed to grow the diesel business in the following years, the company abandoned this venture in 1948 to focus on pneumatics due to the latter's higher margins. The name of the company was subsequently changed to Atlas Copco. Copco comes from a Belgian subsidiary called (CO)mpagnie (P)neumatique (Co)mmerciale and reflected the new focus of the business.
The company’s story is fascinating and has shaped how the company operates today. This continuity would not have been possible without the Wallenberg family, who still remain one of the company's majority shareholders through Investor AB, owning more than 17% of the outstanding shares and an even larger voting power. If you want to read more about the company's history, Atlas Copco proudly provides a website.
Now that we know its history, let's take a look at what the company does today.