Modine Manufacturing Company (MOD)

Modine makes heat exchangers — and unexpectedly became a supplier of data centre cooling.

Historically the company made radiators for lorries and industrial machinery: a mature, cyclical market with thin margins. Several years ago management began sorting the lines by return and exiting those where money cannot be made.

The freed-up capital went into data centre cooling: chips used to train models generate so much heat that the problem turned from engineering routine into the industry's bottleneck. Margins there are several times automotive ones and demand is structural. Risks: customer concentration in the new line, the automotive cycle in the old one and execution under fast growth. The company pays no dividend.