Corning: This Glass Is Far From Brittle

One of the first stocks I purchased using my new found value investing philosophies was Corning (GLW). It was the perfect vehicle for value investing with a low P/E, extremely low debt, and a great balance sheet. When I discovered the company in my weekly screening process, it jumped out at me as a possible candidate, and as I did more investigation, it quickly became clear that this “boring glass company” could be the right fit.

As I dug into it more, I thought this would make Benjamin Graham proud, and were the perfect vehicle for my further exploration of the principles that make value investing so great. My valuations of the company at the time of my first purchase in 2012 still hold up today and is such a great buy for long-term investors.

There a lot of great things going on with this company that we will dig into further and the continuing dividend and share buybacks have added even more value to the shareholders.

Business Overview

Corning can trace their beginnings to a glass factory that was established in 1851. Talk about longevity; they have been a leader in specialty glass for more than 165 years.

They are based out of Corning, New York and currently have approximately 40,000 people employed with them worldwide, speaking of worldwide they have plants in 17 countries. Corning offers investors five reportable segments that the business is broken up into.

They are:

Display Technologies – which manufactures glass substrates for liquid crystal displays or LCDs that are used primarily in TVs, computers, and notebooks. This segment comprises 34% of Corning’s sales for 2016.

Optical Communications – This segment produces optical fiber, cable, and connectivity solutions, and is broken up into two main product groupings – carrier networks and enterprise networks. Also, this segment contributes to consumer electronic devices or cell phones. This segment contributes 32% of Corning’s sales in 2016

Environmental Technologies – The focus of this segment is ceramic substrates and filter products for emissions controls in cars. This segment contributes 11% of Corning’s sales in 2016.

Specialty Materials Segment – This segment produces among other things glass ceramics used in display optics and semiconductor optics. The main claim to fame is the cover glass known as Corning Gorilla Glass. This segment contributes approximately 12% of sales for 2016.

Life Sciences Segment – The main focus of this segment is scientific laboratory products such as plastic vessels, specialty surfaces, and media. Most of us are probably familiar with the PYREX beakers from our high school chemistry class; Corning made them. This segment contributes approximately 9% of Corning’s sales for 2016

Two of the main products that Corning produces are LCD glass and Corning Gorilla Glass. Let’s take a little deeper dive into the both of them.

LCD – This stands for liquid crystal displays that are used primarily in televisions and computer screens. Corning is a leader in glass making, and they have created several technologies that allow them to create flat glass. That might sound like a duh, but substrate flatness is critical in the production of panels for LCD TVs. Any deviations from flatness can create distortions, and nobody wants to watch the Super Bowl through distortions.

Corning has created a proprietary fusion process where the glass is formed in air and then drawn down to form an incredibly flat piece of glass with very precise thickness controls. To see a video of this creation, it is amazing to see.

They continue to push the envelope on creating thinner, stronger and more durable glass, which has more and more applications. Corning has created four LCD types of glass that are utilized in many different applications. They are:

Eagle XG, the industry’s first LCD glass substrate that is free of heavy metals;

Eagle XG Slim Glass, a line of thin glass substrates that enables lighter-weight portable devices and thinner televisions and monitors;

Corning Willow Glass, the ultra-thin flexible glass for the next-generation consumer electronic technologies;

The family of Corning Lotus Glass, this high-performance glass is used in LCD, as well as OLED which allows for brighter, more energy-efficient displays with high resolutions.