Hedge funds' best ideas #29

Feb 10, 2025 · 16:18

STOCKANALYSISCOMPILATION

↗ https://stockanalysiscompilation.substack.com/p/hedge-funds-best-ideas-29

<div class="subscription-widget-wrap-editor"><div class="subscription-widget show-subscribe"><div class="preamble">Thanks for reading Stock Analysis Compilation! Subscribe for free to receive new posts and support my work.</div><form class="subscription-widget-subscribe"><input class="email-input" name="email" tabindex="-1" type="email" /><input class="button primary" type="submit" value="Subscribe" /><div class="fake-input-wrapper"><div class="fake-input"></div><div class="fake-button"></div></div></form></div></div>Don't hesitate to send me any interesting research you come across.You can also follow me on Twitter <a href="https://twitter.com/StockCompil">@StockCompil</a>This article may be truncated by some email providers, so I suggest you read it directly on Substack for a better reading experience.<div><hr /></div><h3>Pernas Research on Parrot $PARRO FP</h3>Thesis: Parrot is transitioning from consumer drones to focusing on enterprise and government contracts, positioning itself for future growth in a competitive market.Source: <a href="https://drive.google.com/file/d/1fE815fQ087Y4a1td0A1kuUfNIOrs9dlv/view?usp=drivesdk">https://drive.google.com/file/d/1fE815fQ087Y4a1td0A1kuUfNIOrs9dlv/view?usp=drivesdk</a>Analysis: Parrot (PA:PARRO) — mrkt cap 143mm; Price 4.75; EV/EBITDA NA. STARTER POSITION INITIATED. Traded on the Paris stock exchange, PARRO was one of the pioneers in introducing consumer drones and achieved significant early success. However, Chinese competitors, particularly DJI, eventually entered the market and became dominant players. As drone technology has advanced, its applications have expanded from a consumer hobby to critical tools for tactical warfare. Over the past five years, PARRO has shifted its focus to enterprise and government contracts in Europe and the USA, driven by a challenging consumer market and the appeal of larger government contracts. This pivot has positioned PARRO in a more defensible market with higher barriers to entry. We believe drones, AI, and UAVs represent a substantial growth trend, and PARRO is well-positioned to capitalize on this opportunity. The company generates approximately $80 million in annual revenue, with a 40% yoy growth rate with about 40% of its revenue coming from the USA. It is nearing profitability after significant revenue gains and cost restructuring, and supported by a clean balance sheet, PARRO’s future looks promising.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Merion Road Capital on Monarch Cement $MCEM US</h3>Thesis: Monarch Cement is a straightforward investment opportunity in a single cement facility with promising future margins due to recent capital investments, including a $35 million solar project.Source: <a href="https://drive.google.com/file/d/10aET3PELxZ-AEx8CPpKjuwNuJXgx4czo/view?usp=drivesdk">https://drive.google.com/file/d/10aET3PELxZ-AEx8CPpKjuwNuJXgx4czo/view?usp=drivesdk</a>Analysis: Monarch Cement: Monarch is a straight forward company – a single cement facility in Humbolt, KS and portfolio of related distribution assets. Illiquidity and a dual shareholder structure creates the opportunity to own a fantastic asset at a very reasonable price. For those who have been with me long enough, this is not unlike a former holding, Ash Grove Cement, which we owned into its announced sale at a premium of more than 100%. While I have traded around MCEM over the years, I initiated our current holding in mid-2023. MCEM has been going through a period of relatively heavy capital investments, highlighted by the recent funding of a solar project for $35mm. The completion of the solar assets should reduce the capital burden and lead to increased margins in the coming years.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on Netflix $NFLX US</h3>Thesis: Netflix is leveraging its streaming leadership to expand into advertising and live events, with strong subscriber growth and operational excellence, indicating significant future growth potential.Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk</a>Analysis: Netflix (NFLX) has cemented its position as the global leader in streaming while rapidly expanding into advertising and live events. With consumer spend across its regions at only 6—7% penetration, we believe the company has continued runway for growth. Netflix has reported 15% YoY revenue growth to $9.8 billion and a 52% increase in EBIT to $2.9 billion. The promise of operating leverage has shown up dramatically, coupled with subscriber growth—adding ~22.5 million net new subscribers globally in the first three quarters of 2024, maintaining engagement levels of two hours per day per member, a remarkable achievement. Moreover, Netflix’s nascent advertising business now represents 10% of subscribers and has seen 35% QoQ (Q3) growth in ad-supported monetization, underscoring its potential. Netflix is leveraging its leadership in streaming to expand into high-growth verticals like advertising and live events, combined with curated local content and disciplined margin expansion, presenting growth opportunities and the ability to further increase their dominance in the entertainment ecosystem.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Kerrisdale Capital on Red Cat Holdings $RCAT US</h3>Thesis: Red Cat’s overstated military contracts and projections cast doubt on its growth prospects.Source: <a href="https://drive.google.com/file/d/1Cf-xBEFy0l8GqnnqSraS3GE5om9cSrNe/view?usp=drivesdk">https://drive.google.com/file/d/1Cf-xBEFy0l8GqnnqSraS3GE5om9cSrNe/view?usp=drivesdk</a>Analysis: We are short shares of Red Cat Holdings, a $1 billion drone manufacturer that’s added more than $900 million in market capitalization over the last 9 months mostly in anticipation of an award for the production of the US Army’s short range reconnaissance (SRR) drone and the supposedly massive market opportunity unlocked by such a high-profile endorsement. But expectations for both the SRR contract size and the potential for follow-on sales bear almost no relationship to reality.Army budget documents clearly delineate an SRR budget for 2025 of just under $25 million, and an expectation of about the same in the medium term. The Army also intends to refresh the SRR model every 2–3 years while remaining open to switching contractors. That contrasts sharply with Red Cat management’s crafty portrayal of a sole-source contract worth close to $400 million over 5 years, and $80 million in 2025. Investors should also consider that Red Cat preemptively announced the program win without the Army’s permission, weakening its position in contract negotiations and even, in a worst-case scenario, endangering the award.Red Cat’s depiction of a huge follow-on market consisting of the other US military services, US government agencies, and US-allied militaries is also a fantasy. The Air Force has little infantry and thus little use for an infantry drone, and the Marines and Coast Guard have preexisting drone programs. The only other relevant government agency is Customs and Border Patrol, and its budget documents indicate near term drone procurement of just $1 million. Meanwhile, management has been talking about massive imminent drone sales to NATO allies for the last 3 years with nothing to show for it, which could be because European militaries are more inclined to modify cheaper and better Chinese drones or because there’s an array of smaller home-grown European drone suppliers already supplying these customers.Just like those elusive NATO contracts, Red Cat has been setting near-term deadlines for a “mass production” facility since 2022, but having devoted almost no capex to one, still can’t manufacture large quantities of drones. 2025 guidance, though, assumes that Red Cat will produce 3 new drone models, each at triple the speed of the company’s historical best seller. One of those new drones, the Edge 130, comes to Red Cat through a 2024 acquisition and has never been produced as more than a prototype.Red Cat’s declarations and projections rarely materialize, and we believe the same will be true of both the company’s 2025 guidance and the parameters of the SRR contract. Almost immediately following the SRR win, two key executives — including George Matus, the brains behind the SRR-winning drone — resigned and sold most of their stock. Share sales have also been made by other insiders. Having set almost impossible expectations, Red Cat is set to be blown out of the sky.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Platinium AM on Richemont $CFR SW</h3>Thesis: Richemont is a high-quality luxury goods maker with strong jewellery brands, poised for growth despite the current industry downturn.Source: <a href="https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk">https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk</a>Analysis: Richemont – jewellery to shine? Another new position initiated over the quarter is the luxury goods maker Richemont. The opportunity in Richemont is the classic one – a high-quality company suppressed by an industry wide downturn. The luxury industry is in recession as the Covid boom has turned to bust. This started with a fall away in the US and European ‘aspirational buyer,’ followed by a 30% fall in Chinese demand. The appeal of Richemont versus other luxury companies sits in its two jewellery houses, Cartier and Van Cleef & Arpels. There has been a persistent trend towards branded jewellery. The luxury jewellery market was 15% branded in 2007. It sits at 30% today. The category is becoming less reliant on gifting and weddings and increasingly driven by self-purchases. Despite the growth, the luxury jewellery market remains far less crowded than other luxury categories, with Cartier and Van Cleef accounting for 40% of industry sales alone. The other impressive aspect (and a good indicator of the health of the brands) is the performance of Richemont’s jewellery houses through the downturn, where sales have continued to grow while most other luxury houses saw declines. With Richemont trading on 18x (ex cash on balance sheet) and with both recent Swiss watch exports and US/EU credit card data pointing to luxury spend bottoming, adding Richemont to the portfolio made sense on both the short and long-term horizon.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Platinium AM on Rentokil $RTO LN</h3>Thesis: Rentokil is a global leader in pest control with a stable business model and potential for growth through acquisitions, despite current market concerns.Source: <a href="https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk">https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk</a>Analysis: Rentokil, the global pest control leader, is another position we built up over the past six months. Most of its revenue is earned in USD. For us, Rentokil combines a stable underlying business with idiosyncratic upside drivers. Rentokil operates in pest control (~80% or revenue) and hygiene businesses globally and has a workwear business in France. The common thread across these businesses is that they provide services at the customer location and rely on establishing dense networks of customers to drive scale and efficiency. The pest control industry is still fragmented and acquiring local competitors improves margins through increased route density. Rentokil has a long global pedigree of managing pest control and hygiene and is the #1 player across the majority of the developed world. Its 2022 acquisition of Terminix made it the pest control leader in the US. Since completing the acquisition, Rentokil's shares have twice fallen 20% on concerns about Rentokil's ability to speed up growth at Terminix. We think the market is too focused on short-term integration success rather than longer-term prospects. It's highly likely Rentokil can fix Terminix, though it might take longer than expected. Moreover, Rentokil is likely to become a pure-play pest control company by divesting the Hygiene & Wellbeing and French Workwear businesses. With an activist like Trian Partners on the register, this move is likely to accelerate. Rentokil's valuation is very attractive, below both its historical trading range and where private transactions typically price it.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Platinium AM on NICE $NICE US</h3>Thesis: NICE is an Israeli company offering cloud-based contact center software with strong margins and growth potential, particularly through AI module sales as large enterprises transition from legacy systems.Source: <a href="https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk">https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk</a>Analysis: A good example of this, and a recent addition to the fund is Israeli company NICE. NICE provides cloud-based contact centre software to customers operating large/complex call centre operations (think major insurance companies or a government service like Service NSW). This software is multifaceted – including the digital telephony and call routing, software that manages the call centre staff, CRM software and new AI modules used to handle call centre workloads. Given NICE’s focus on the complex end of the market, new customers go through a major integration process shifting their systems to a cloud offering. Once complete this can lead to very long customer lifecycles with little churn. This allows NICE to earn circa 20% EBIT margins, well ahead of many other SaaS vendors. Cloud-based communications software is relatively early in its adoption cycle. Estimates suggest 35% of the industry has made the shift, with the early adopters concentrated in the SME sector, given the easier integration process. However, we are now seeing large enterprises shift from legacy on-premise systems. This could fuel NICE’s growth for many years to come. The other interesting aspect is NICE’s ability to sell AI modules. The cost of call centre operations is largely labour (software is <10% of total costs) and staff turnover is high, so AI tools to divert workloads and assist in training create tangible savings for customers. When it comes to new software capability, distribution is often key and NICE is in an excellent position to tailor new AI functionality to call centre applications and sell it to their customer base. The company says there is rapid take-up of new AI modules and we expect this will allow NICE to increase its revenue per user.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Platinium AM on Rheinmetall $RHM GR</h3>Thesis: Rheinmetall is poised to benefit from increased European defense spending driven by political pressure and public support, as it is projected to hold 50% of the continent's ammunition capacity by 2026.Source: <a href="https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk">https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk</a>Analysis: We initiated a position in Rheinmetall, a German defence company. Trump’s election should create greater pressure on European NATO-partners to increase defence spending towards 3% of GDP or even higher. While the story of European re-arming is well understood, the extent might not be fully priced in. After the German elections in late February the debate on higher defence spending will gain more traction and leading political figures are already advocating increased military investment. Latest surveys also indicate broad support from German voters. Given this reawakened focus on defence, demand for Rheinmetall products is unlikely to fall. A bottom-up analysis estimates that restocking Europe’s munitions stockpile will take ~6 years and Rheinmetall will have 50% of total European ammunition capacity by 2026.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on Qualcomm $QCOM US</h3>Thesis: Qualcomm's pivot to Automotive, IoT, and AI positions it for significant long-term growth beyond handsets.Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1kLddUaynDZvEXQdoX7lfLnK1giZyPk4h/view?usp=drivesdk</a>Analysis: Qualcomm is transitioning beyond its traditional handset business, focusing on high-growth markets in Automotive and Internet of Things to drive future revenue streams. We have already seen this strategy flowing through the PnL and we are confident in the firm’s execution abilities going forward.Core Opportunity: Qualcomm is transitioning beyond its traditional handset business, focusing on high-growth markets in Automotive and Internet of Things to drive future revenue streams. We have already seen this strategy flowing through the PnL and we are confident in the firm’s execution abilities going forward.Competitive Advantage: <ul><li>Automotive Strength: Automotive revenue rose ~55% in FY 2024 to $2.9 billion, further supported by over 10 new design wins with global automakers for advanced driver-assistance systems (ADAS), connectivity, and digital cockpit solutions.</li><li>IoT Growth: IoT revenue reached $1.4 billion, reflecting steady traction in smart devices and industrial applications.</li><li>AI Expansion: Qualcomm’s Snapdragon platform is expanding AI capabilities, including Copilot+ for PCs and advanced automotive applications, enhancing its premium market positioning.</li></ul>Investment Case: Despite potential near-term headwinds in the handset market, Qualcomm’s diversification into Automotive and IoT offers compelling long-term growth potential. Its strong presence in high-growth markets and expanding AI-driven solutions position it for a meaningful transformation over the next three years. We believe their diversification strategy, which has already started producing results, retains years of growth.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Upslope Capital Management on QinetiQ $QQ/ LN</h3>Thesis: QinetiQ is a high-quality UK defense company well-positioned to benefit from increased UK and European defense spending, with a strong financial model and undervalued shares.Source: <a href="https://drive.google.com/file/d/1jWeC2tvpqa37WmQNYK3kLsJ-vTfvZsGI/view?usp=drivesdk">https://drive.google.com/file/d/1jWeC2tvpqa37WmQNYK3kLsJ-vTfvZsGI/view?usp=drivesdk</a>Analysis: QinetiQ (QQ.-LON) – New Long QinetiQ is a global defense company based in the UK, focused primarily on AUKUS (Australia – 9% of sales, UK – 66%, and US – 18%) customers. QQ offers experimentation, testing, engineering and technology services to military and government entities (99% of sales). QQ has some similarities to another Upslope UK defense long, Chemring. However, QQ seems to be a steadier, “higher quality” business with a more diversified product base. Additionally, QQ appears optimally positioned to capture a potential surge in UK and European defense spend. The Company’s offerings lend themselves well to a rapidly evolving “battlefield” – i.e. lots of testing/engineering services for new products vs. dependence on legacy systems – and the prospect of serving a broader region in need of building up its own localized defense base.Financially, QinetiQ operates an attractive model with a history of regular, disciplined tuck-in acquisitions, a modest but active buyback program, and a conservative balance sheet (0.5x net leverage). Shares are cheap on virtually all metrics – relative to the stock’s own history (7.5x EBITDA vs. LT range of ~7.0x – 9.0x) and relative to global defense peers (~40% discount on various metrics). In my view, the relative discount vs. global peers is due to QQ’s smaller size and reliance on UK defense spending – qualities that, ironically, I believe will serve the company particularly well in the years ahead.Key risks include: dependence on UK and other (already-stretched) government budgets, integration risk from recent U.S. acquisition, potential hacking/sabotage by adversaries, and FX.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Upslope Capital Management on VF Corp $VFC US</h3>Thesis: V.F. Corp's new leadership and financial improvements signal early but promising signs of a turnaround.Source: <a href="https://drive.google.com/file/d/1jWeC2tvpqa37WmQNYK3kLsJ-vTfvZsGI/view?usp=drivesdk">https://drive.google.com/file/d/1jWeC2tvpqa37WmQNYK3kLsJ-vTfvZsGI/view?usp=drivesdk</a>Analysis: V.F. Corp is the parent company of a number of well-known consumer brands, including The North Face (~36% of revenue), Vans (28%), Timberland (16%), and (my personal favorite) Altra Running (% undisclosed). The Company has had a brutal few years as it completely lost its way under prior management. In the past 18 months, an activist has gotten involved and a new turnaround-focused CEO (successfully turned around Logitech and Old Spice brand), Bracken Darrell, has been brought in. To date, Darrell has “cleaned house” and appears to have put VF back on the right path. It’s still early days, but there are clear qualitative and financial signs that a real turnaround is afoot.On the qualitative front, the Company has made several impressive hires for key roles. Other than the new CEO, the next most notable hire was the new head of Vans – VF’s most challenged and arguably most important brand today. In June 2024, Sun Choe, the longtime Chief Product Officer at Lululemon, announced her resignation from LULU. In response to this news, LULU shares fell -7% the next day – a ringing endorsement of her talents. Sure enough, VF announced Choe’s appointment as the Global Brand President of Vans one week later.Financially, VF has made tangible progress on three fronts: improved balance sheet, cleaned up channel inventory, and stabilizing gross margins. The most vital of these action items was the balance sheet, which VF significantly repaired through the sale of its Supreme brand (an ill-fated acquisition under prior management that the company took a bath on) for $1.5 bn. While leverage remains high, cash flows are strong and improving, and the transaction enabled VF to address all large, near-term maturities, buying the company ample time to execute. On the inventory and gross margins fronts, inventories have improved for five consecutive quarters, while gross margins have shown increasing signs of stabilization, including a +100 bps y/y increase last quarter.While success is not a foregone conclusion, sell-side analysts continue to be skeptical of the turnaround (just one in four Analysts have a Buy rating – not far from all-time lows) despite mounting evidence of qualitative and financial progress. Not uncommon for a turnaround, shares appear fully valued on today’s depressed operating margins; however, a credible management team aims to roughly double margins by 2027/2028. This would make shares attractive today, even with negligible revenue growth (an overly conservative assumption for a successful turnaround).Key risks include: cyclical/discretionary end markets, still-elevated leverage, potential supply chain challenges, tariff exposure, and turnaround execution risk. Although brand turnarounds are notoriously difficult, the qualitative and financial progress to date makes me optimistic about VF’s chances of success. Given the inherent risks, however, this will not be a huge (e.g., top 5) position.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Plural AM on Seaport Entertainment $SEG US</h3>Thesis: Seaport Entertainment is a newly spun-off company from Howard Hughes focused on revitalizing its valuable properties in Lower Manhattan, with an estimated intrinsic value growth projected over the next three years.Source: <a href="https://drive.google.com/file/d/1oCC_BwRUKD6kLINkEhUXDzAZa8_czsms/view?usp=drivesdk">https://drive.google.com/file/d/1oCC_BwRUKD6kLINkEhUXDzAZa8_czsms/view?usp=drivesdk</a>Analysis: Seaport Entertainment (SEG) was spun out of Howard Hughes in July 2024. The company is a complex group of loss-making properties primarily in Lower Manhattan that Howard Hughes invested $1.5bn into. Seaport trades for a market cap of $340mm and has net cash. Our thesis is that a couple of the stabilized properties are worth most of the market cap, while the new and aligned management team will be able to turn around several of the other key buildings. We first invested in the company in Q4 at $27/shr, the stock trades at a similar price today, and we believe intrinsic value in three years is around $55/shr. We published our 35-page thesis on the company in November here.Seaport’s new management team have already made several significant improvements since our initial investment. The company’s most valuable asset in our view is Pier 17, which is 10 minutes walk from Wall St and overlooks the Brooklyn Bridge. The Pier makes money from its rooftop concert venue, restaurants on the ground floor, and three floors of office space in between. Significant improvements are being made in all three areas.First, the company announced that from next winter the rooftop will be enclosed with a glass structure so that it can extend its successful concert series year round. Secondly, the 25% of largely unproductive space on the ground floor is being redeveloped into a new dinning and entertainment space. And thirdly, 13,605 sqft of empty office space will be leased to a dining and nightlife concept as part of a broader repositioning of the Pier towards entertainment.Seaport’s most problematic property, the loss-making Tin Building food hall next to Pier 17, has also seen improvements. Management are shutting down several of the unsuccessful restaurants, expanding the successful ones, consolidating back-of-house operations, and reducing the total number of staff required.None of these changes by themselves will materially turn Seaport’s properties around, but we are encouraged by the volume and pace of the changes. We continue to believe that we are at the beginning of an entire neighborhood of Manhattan appreciating in value.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>LVS Advisory on Wynn Resorts $WYNN US</h3>Thesis: Wynn Resorts is a compelling investment opportunity, benefiting from a rebounding gaming market and luxury travel trends, along with an undervalued portfolio and strong revenue growth.Source: <a href="https://drive.google.com/file/d/1E-bD8UtK-rEYLUpoyTh3kn3h0GWPe9z8/view?usp=drivesdk">https://drive.google.com/file/d/1E-bD8UtK-rEYLUpoyTh3kn3h0GWPe9z8/view?usp=drivesdk</a>Analysis: Wynn Resorts (WYNN) Core Opportunity Wynn Resorts combines world-class properties with exposure to Macau’s rebounding gaming market and emerging luxury travel trends. Recent development projects, combined with a re-valuation of the legacy portfolio place Wynn in a compelling and overlooked position. Competitive Advantage • Revenue Growth: Wynn’s revenues have increased 2.5x since 2007, while free cash flow has grown to $1 billion annually, all while equity has remained flat. • Portfolio Expansion: New properties in Macau, Encore Boston Harbor, and upcoming projects in the Middle East and New York enhance its global footprint. • Undervalued Assets: Despite trading at mid 2000 levels, Wynn offers high-quality assets with strong tailwinds at attractive valuations. Investment Case We believe Wynn will capitalize on global gaming recovery and experiential luxury demand. Its unique portfolio and disciplined management make it a standout opportunity in the hospitality sector.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on Alibaba $BABA US</h3>Thesis: Alibaba is well-positioned for growth due to its core business recovery, strong cash reserves, and emerging cloud and AI opportunities, presenting a compelling investment opportunity.Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1kLddUaynDZvEXQdoX7lfLnK1giZyPk4h/view?usp=drivesdk</a>Analysis: Alibaba (BABA) Core Opportunity Alibaba's focus on stabilizing its core businesses, coupled with growth of its cloud and AI divisions, positions the company for a breakout. With 25% of its market cap in cash, we believe Alibaba offers a highly compelling risk/reward opportunity from a valuation perspective. Competitive Advantage - Core Business Recovery: Alibaba's e-commerce platforms, including Taobao with 930 million monthly active users, remain instrumental in China's retail landscape. Revenue grew 5% YoY in the latest quarter, reflecting strategic improvements in user experience and pricing. - Cloud and AI Growth: Alibaba's Cloud Intelligence Group saw revenue rise 6% YoY, with AI-related products achieving triple-digit growth for five consecutive quarters, positioning them well in this critical sector. Even as competitors begin to arrange in a similar oligopoly setup to the U.S.-based hyperscalers, we believe this business remains underappreciated. - Financial Strength: With $61.8 billion in cash and $21.6 billion in free cash flow generated in FY2024, Alibaba has the resources for strategic investments and shareholder returns. Investment Case Alibaba's financial foundation, dominance in e-commerce, and emerging cloud and AI opportunities offer a compelling valuation-driven thesis. With political and regulatory concerns easing, the company is well positioned to deliver significant upside. We believe geopolitical concerns, including those around the variable interest entity (VIE) structure, will subside.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Merion Road Capital on United Bank of Alabama $UBAB US</h3>Thesis: United Bank of Alabama is a strong investment due to its significant capital surplus, stock performance, and growth potential, projected to generate $7-$8 in normalized earnings.Source: <a href="https://drive.google.com/file/d/10aET3PELxZ-AEx8CPpKjuwNuJXgx4czo/view?usp=drivesdk">https://drive.google.com/file/d/10aET3PELxZ-AEx8CPpKjuwNuJXgx4czo/view?usp=drivesdk</a>Analysis: United Bank of Alabama: UBAB was both our largest position and positive contributor to performance for the year (the stock closed at $57.00, up 37%, and paid out some modest dividends as well). I estimate that the bank ended Q3 with more than $50.00/share in excess capital which they can use for share repurchases or business growth. In Q4 the company repurchased 5.5% of their shares outstanding in a block transaction struck at $54.25/share. UBAB will continue to benefit from their low-cost perpetual preferred capital, access to CDFI programs like New Markets Tax Credits and Capital Magnet Fund Awards, and top-tier operating platform. I believe that they can continue to generate $7-$8 in normalized earnings, putting them at 7.5x.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Platinium AM on Zoetis $ZTS US</h3>Thesis: Zoetis is the leading global innovator in animal medicine, with strong growth and promising new treatments for Osteoarthritis in pets, despite concerns over pricing and regulatory adjustments.Source: <a href="https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk">https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk</a>Analysis: Zoetis is the global leader in animal medicine. The company is the leading innovator in this industry, particularly in cat and dog treatments. Zoetis’ underlying business is thriving, with profits up 14% over the past year and with the launch of some competing products unable to dent their momentum. Their next leg of growth should come from an innovative treatment for Osteoarthritis in cats and dogs, a disease where there have been few effective treatment options. This new drug has some rare side effects that the FDA is monitoring and so may require adjusted labelling. This drug has been available in the UK, EU and Switzerland for around two years and continues to sell well despite a similar label adjustment. However, Zoetis isn’t cheap so investors are skittish when it comes to potential obstacles. We have confidence in this business and are keen to add to our position on pullbacks.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on Tesla $TSLA US</h3>Thesis: Tesla is positioned for significant long-term growth, leveraging its leadership in autonomous driving, energy storage, and electric vehicles while competitors scale back their efforts.Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1kLddUaynDZvEXQdoX7lfLnK1giZyPk4h/view?usp=drivesdk</a>Analysis: Tesla (TSLA) Core Opportunity As highlighted in our 3Q investor letter, we believe Tesla’s leadership in real-world AI continues to be underestimated by the market. After a period of relatively flat growth, we see Tesla at the cusp of the next S-curve of transformation, driven by advancements in autonomous driving, energy storage, and electric vehicles. These multi-trillion-dollar markets offer Tesla a unique, integrated growth trajectory unmatched by competitors. Competitive Advantage - Autonomy Leadership: Tesla’s Full Self-Driving (FSD) program has surpassed 2 billion miles of real-world data, leveraging its proprietary inference computers (now approaching version 5), installed in millions of vehicles. This insurmountable data advantage is then fed into Tesla’s supercomputer with ~90,000 H100-equivalent GPUs— and growing. - Energy Storage Potential: Tesla’s energy division is a hidden gem that we believe is poised to become a trillion-dollar business. This is a business which, while around for several years, remains in relative infancy in terms of its growth potential. In 2024, energy storage deployments increased by 113% compared to 2023. And Tesla’s Shanghai megapack factory has now been completed, unlocking an additional 40 MW of battery generation. We are highly optimistic on this business heading into 2025. - EV Market Dominance: While competitors scale back EV programs, Tesla continues to lead with manufacturing efficiencies and a fully integrated approach that combines EVs with autonomy at scale. 2025 will see the launch of the Model Y Juniper and continued evolution of EVs paired with autonomy. We strongly believe that the future of the automotive industry lies in electric vehicles (EVs) combined with autonomous technology. Given the lengthy lead times for legacy OEMs to adopt new technologies, Tesla’s strategic dominance in this area is more robust than ever. Investment Case Tesla’s leadership across autonomy, energy, and EVs positions it as a long-term growth driver in multiple markets. As legacy automakers retreat, Tesla remains the only major player outside China fully committed to both EVs and autonomy.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Platinium AM on Toyota $7203 JP</h3>Thesis: Toyota is maintaining industry leadership with record high earnings and strong demand for hybrids while effectively navigating production challenges.Source: <a href="https://drive.google.com/file/d/1kLddUaynDZvEXQdoX7lfLnK1giZyPk4h/view?usp=drivesdk">https://drive.google.com/file/d/1kLddUaynDZvEXQdoX7lfLnK1giZyPk4h/view?usp=drivesdk</a>Analysis: Toyota is different. However, this narrative does not apply to Japan’s largest automobile manufacturer – Toyota. Where other legacy makers are feeling pressure, last year saw Toyota reach record high earnings with operating margins nearly double the global industry average. Their competitive position in key markets (including China) remains intact, held back only by vehicle availability, while in the US vehicle inventory and incentive spending is at or near industry lows. Hybrids are booming and Toyota’s dominance of the category and strong brand equity means they can’t keep up with demand. This contrasts with the weakening position seen at most legacy makers who went all-in on EVs only to see demand falter as mainstream buyers baulked. Today, Toyota has worked through some temporary production halts in 2024 and is on-track to see volumes rise in 2025 as production normalizes. As we have written before, Toyota’s multi-pathway strategy to lower fleet emissions – and its emphasis on hybrids – is now paying off handsomely. We expect Toyota to secure strong cash flows over the next several quarters, maintaining industry leadership and providing the flexibility to deploy capital for innovation as and when needed. We think the market is still to fully appreciate the strength of the Toyota brand. Toyota is now the largest position in the Fund.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on Taiwan Semiconductor Manufacturing Co. (TSMC) $TSM US</h3>Thesis: Taiwan Semiconductor Manufacturing Co. (TSMC) is a dominant market leader in the semiconductor industry with significant revenue growth, strong AI demand, and an attractive valuation, solidifying its competitive advantage.Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1kLddUaynDZvEXQdoX7lfLnK1giZyPk4h/view?usp=drivesdk</a>Analysis: Taiwan Semiconductor Manufacturing Co. (TSMC) is the world’s largest dedicated chip foundry, holding an impressive 67% share of the global foundry market. Its dominance is even more pronounced at the cutting edge of semiconductor technology, playing a critical and unparalleled role. Their lead has only been strengthened recently and they have begun to take advantage of their pricing power.Core Opportunity: TSMC posted 34% YoY revenue growth in November 2024 to $8.55 billion, with robust demand across AI, high-performance computing, and 5G technologies. AI processor-related revenue is projected to triple in 2024, contributing a mid-teens percentage of total revenue. Geographic diversification into Arizona, Japan, and Germany will help mitigate geopolitical risks. Early production out of their new Arizona fab has shown promising yields after a relatively brief period of time. TSMC trades at a forward P/E of 20.9x, below its five-year average of 23.1x.Investment Case: TSMC’s technological leadership, financial stability, and favorable industry tailwinds position it as a resilient, innovative market leader. Their position has only been strengthened recently. There is minimal need for a second-best player in the industry—and TSMC is far and away the dominant leader.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on Airbnb $ABNB US</h3>Thesis: Airbnb is uniquely positioned to capitalize on the growing demand for experience-driven travel through its scalable platform, strong financial discipline, and untapped expansion opportunities.Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk</a>Analysis: Airbnb (ABNB) Core Opportunity Airbnb’s founder-led platform meets demand for unique, meaningful travel experiences. It too retains an asset-light model which combined with disciplined execution have rapidly strengthened its financial position. We believe the company stands out in the experience economy and has additional opportunities for revenue diversification Competitive Advantage - Platform Scale: Airbnb facilitates 500 million annual bookings and continues to grow through geographic expansion and deeper urban and rural market penetration. - Host Flywheel: The co-hosting initiative reduces friction for hosts, enhancing supply and customer satisfaction while strengthening its network effects. - Financial Discipline: Airbnb has optimized all three financial statements, achieving profitability while maintaining significant growth levers. Investment Case With untapped expansion opportunities, a global brand, and a scalable platform, Airbnb is uniquely positioned to capitalize on the further shift toward experience-driven travel.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Plurial AM on Watches of Switzerland $WOSG LN</h3>Thesis: Strong Rolex partnerships and robust waitlist demand position Watches of Switzerland for steady growth despite broader luxury market challenges.Source: <a href="https://drive.google.com/file/d/1oCC_BwRUKD6kLINkEhUXDzAZa8_czsms/view?usp=drivesdk">https://drive.google.com/file/d/1oCC_BwRUKD6kLINkEhUXDzAZa8_czsms/view?usp=drivesdk</a>Analysis: Watches of Switzerland is a retailer and partner to Rolex and other luxury watch brands. We believe most of the company’s value lies in its relationship with Rolex, which only sells through authorized retailers like WoS who act as gatekeepers to the Rolex universe. That relationship gives WoS far superior economics to a typical retailer, a result of lengthy customer waiting lists, no online competition, and no inventory risk. WoS’s management are competent, experienced, and well incentivized, with CEO Brian Duffy owning nearly £40mm worth of stock. We first bought shares around £3.5, it trades at £5.0 today and on 13x this year’s FCF despite double digit growth. We think intrinsic value in three years will be around double today’s price.WoS reported strong fiscal H1 results in December, sending the stock up 13% on the day. Revenues were up 4% in constant currency terms, split -2% in Q1 and +11% in Q2. Management also reiterated full year guidance, stated that customer waitlists remained strong, and sales of certified pre-owned Rolexes were now the group’s second biggest brand just 15 months after launching.While these results do not appear eye-catching at first glance, investors were surprised that WoS had not been more impacted by the broad decline in demand for luxury goods. Indeed, the stock on a day-to-day basis often moves similarly to luxury goods companies like LVMH who generate much of their profits from China or Chinese tourists.These concerns are misplaced in our view. Chinese tourists make up less than 5% of WoS’s sales. Investors also often cite the decline in watch prices on the secondary market, yet these represent people reselling watches they have already bought from retailers. WoS does not sell into that market in a significant way.Instead, the company sells into the primary market and around 60% of sales are made up of waitlist brands (mostly Rolex). The waitlist cushions the impact from any cyclical decline, and these brands tend to have more affluent customers who are less impacted in the first place.In our view, the best indicator of supply and demand is therefore the current length of waitlists and how that compares versus history. While Rolex and Watches of Switzerland do not disclose this information, we collected 3,565 messages online where customers described actual Rolex purchases. Each message included the date they received their watch and how long their actual wait time was. This data shows that supply and demand is actually healthy, and that wait times are typically higher than pre-Covid levels despite declining since the peak of the bubble in 2022.That decline has plateaued, and with US financial markets near all-time highs and interest rates declining, WoS should at some point benefit from a cyclical recovery acting as a catalyst.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Holland Advisors on Wise Plc $WISE LN</h3>Thesis: Wise is a disruptive fintech company revolutionizing foreign exchange transfers with a customer-centric approach, low fees, and a unique end-to-end money transfer network that presents significant growth potential in a ripe banking market.Source: <a href="https://drive.google.com/file/d/1LmcgCHXrvxpgOhIvWYcEy52FQFTrUmzx/view?usp=drivesdk">https://drive.google.com/file/d/1LmcgCHXrvxpgOhIvWYcEy52FQFTrUmzx/view?usp=drivesdk</a>Analysis: Wise Plc is a business we invested in during 2024. We researched the company throughout the year and as we did so our conviction level on its SCA^5 and growth potential increased. We made it a sizable fund position over the summer (our book cost is £6.83) and its subsequent share price rise has seen it become one the fund’s largest holdings. Wise exhibits many of the traits we think great businesses possess. <ul><li>It is a disrupter in its field of foreign exchange transfers.</li><li>It is highly customer centric, offering very low and transparent fees.</li><li>It is very focused on having the lowest unit-costs possible.</li></ul>The company demonstrated its Scale Economy Shared (SES) mindset in Summer 2024 when announcing its 3/2024 final results. It reported a PBT margin that had risen from 15% to 31% during 2023 due to the operational gearing effect a c.30% growth in sales had on its largely fixed cost base. It then went on to guide analysts that future underlying margins would be c.13-16%. The reason for this fall being Wise was planning to heavily re-invest into its customer offer by reducing further its pricing for FX transfers. The stock market was not impressed and the share price fell. Wise’s SES model can also be seen in how it thinks about interest income. Interest income is the money banks make on unused account holder balances. It is a silent profit pool that is bigger when interest rates are higher. Wise never set out to make money this way, but fast growing account balances and rising interest rates saw its net interest income rise from zero in 3/2022 to £485m in 3/2024. Wise’s reaction to this was telling. It stated that it intends to give back to its customers 80% of the interest income it makes over a 1% level. No other bank in the world does this. We have noted in our Amazon and TSMC work that very few companies have taken the successful and powerful SES model into the B2B sector. Wise (and Nubank) are taking it into the banking sector and customers are loving it. Banking is an enormous market ripe for disruption, mostly populated by corporate incumbents who don’t have a customer centric approach or low unit-costs. Almost no banks globally are led by entrepreneurs and very few have much appetite for disruptive innovation. This suggests to us Wise’s potential growth opportunity could be very large. For some years now Wise has been saving individuals that use its services c.2.5% on their money each time they make a FX transfer with Wise vs a normal bank. News of these savings have spread and as a result two thirds of Wise’s new accounts now come by word of mouth. Millions of SME companies all over the world also lose c.2.5% of their money every time they do an FX transaction using their main bank. Wise’s multi-currency invoicing product looks set to save such companies billions of pounds over the coming decades. Wise has reached this point by building its own end-to-end money transfer network that is totally separate from that used by existing banks. It has taken time, effort and cost to build this network and Wise now believes this has given it an FX unit-cost base that few in the banking industry can match. An interesting endorsement of Wise’s scale and efficiency has come from a number of global banks who have chosen to use Wise’s network for their own client currency transfers rather than do it themselves. In the latter part of 2024 Standard & Chartered and Morgan Stanley joined this list. As western investors are familiar with these companies, we think the penny is beginning to drop as to the abilities of the network that Wise has built. Wise is still run by its founder. It is obsessed with customer experience, low prices and product innovation. It also makes great returns on equity (c.30% without any leverage). All of these profits are reinvested for future growth and we suspect future returns on capital/equity will be just as high as today’s. As such it has the hallmarks of a Supernatural Compounder.Win-winsWise is also a great example of a proven disputer with a low unit-cost moat. Many venture capital start-ups have a disruptive idea behind them. What interests us is when such ideas have achieved real scale and thus possess unit-cost advantages that are hard to match. The risk of such businesses failing is much reduced, but they still have huge runways of growth ahead. There will be challenges and bumps in the road, but we think Wise has a chance of becoming world leading. Maybe it already is?A final observation on Wise is to recall Buffett’s view on looking for businesses that are a “win-win for the entire ecosystem”. Right now, every time a small business pays a supplier or issues an invoice in a foreign currency, they only receive c.97 cents in the dollar. Wise can change that to c.99.7 cents. This might not sound much, but it is a huge current friction that all SME’s/consumers suffer worldwide. At the same time banks whilst pocketing that c.3% maybe don’t make as much money as we think in FX. They don’t do much of it so are likely pretty inefficient. Soon Morgan Stanley clients will get far improved FX rates courtesy of its tie up with Wise. They will be richer and happier clients as a result. More consumers have maybe heard of Revolut than Wise, but Wise has the low-cost efficient network and the bigger banks can see that. <a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Platinium AM on Uber $UBER US</h3>Thesis: Uber is well-positioned to thrive in the autonomous vehicle market despite current competition, leveraging its existing business expertise as a cooperative partner for Waymo and Tesla.Source: <a href="https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk">https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk</a>Analysis: We recently bought a 1.5% position in Uber. Uber also fits into our demand side aggregation business model. The stock is down ~30% from its peak giving us a good entry point. The market is growing increasingly concerned about competition from autonomous vehicles (AV) amidst Waymo and Tesla’s much touted robotaxi ambitions. To run a profitable AV fleet, you need i) an AV software and hardware stack; ii) the capex to build and roll out a fleet; iii) customer acquisition; iv) to balance supply and demand and maximise fleet utilisation; v) customer service and support. Whilst Waymo possesses i) and Tesla i) and ii), Uber’s existing business has expertise in the rest. The more rewarding and rational path for the industry is one of cooperation where Waymo and Tesla plug into Uber’s existing network.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Merion Road Capital on Alphabet $GOOG US</h3>Thesis: Alphabet is well-positioned for future growth with its strong business fundamentals, advancements in AI and cloud services, and potential in autonomous driving and quantum computing.Source: <a href="https://drive.google.com/file/d/10aET3PELxZ-AEx8CPpKjuwNuJXgx4czo/view?usp=drivesdk">https://drive.google.com/file/d/10aET3PELxZ-AEx8CPpKjuwNuJXgx4czo/view?usp=drivesdk</a>Analysis: Alphabet: We have held GOOG for a long time (since 2018) on the basis of its immense business quality paired with an undemanding valuation, improving treatment of minority shareholders, and multiple options for value creation. Recently we have seen Alphabet bashed for losing the AI race to now heralded for its progress. I remain excited about their prospects with several near-term, mid-term, and long-term tailwinds. Near-term, Google Cloud continues its rapid growth and their latest large language model, Gemini 2.0, appears to have made significant progress to better serve consumer needs and improve GOOG’s other product offerings. Mid-term, Waymo is on the cusp of becoming a real value driver for the company; there are abundant articles discussing Waymo stealing share from the ride-share economy and launching in new geographies. Long-term, GOOG’s recently announced quantum computing chip positions it well for a future (many, many years away) where computing process are fundamentally different than today. All of these options are embedded in a company that already has an established and dominant earnings stream.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Platinium AM on Kuaishou $KUAISHOU HK</h3>Thesis: Kuaishou is a highly engaged Chinese short-video platform with a significant user base and improving profitability, making it materially undervalued.Source: <a href="https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk">https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk</a>Analysis: During the quarter we bought into the Chinese short-video company Kuaishou. A little over 700m people use the service each month, touching the majority of Chinese internet users. The user base is also highly engaged, spending over two hours on the platform each day they use it. With such a large established user base, the core business is relatively mature but management are increasingly focused on driving profitability and growing adjacent businesses like eCommerce. Margins have been rapidly improving and there are significant cash and investments on the balance sheet. Our sense is Kuaishou’s user base and use cases are more differentiated versus competitors than the market is giving them credit for. We believe this business is materially undervalued.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Upslope Capital Management on Charles River $CRL US</h3>Thesis: Charles River’s strong market position and improving fundamentals suggest potential upside as the biotech cycle turns.Source: <a href="https://drive.google.com/file/d/1jWeC2tvpqa37WmQNYK3kLsJ-vTfvZsGI/view?usp=drivesdk">https://drive.google.com/file/d/1jWeC2tvpqa37WmQNYK3kLsJ-vTfvZsGI/view?usp=drivesdk</a>Analysis: Charles River is a pharmaceutical services business, whose key offerings include drug discovery support and safety testing, research models, and outsourced manufacturing. The company holds leading market share positions in several of its business lines and has worked on ~80% of all drugs approved over the last five years. Customers are mostly biotech (40% of revenue) and pharma (30%) businesses – largely located in North America (70%) and Europe (25%). Like plenty of other healthcare businesses that boomed during the COVID era, Charles River has had a challenging few years. Just recently – yesterday to be exact – the Company disappointed the Street with soft guidance for 2025. In Upslope’s view, CRL is a cyclical compounder going through a…cyclical downturn. Today, shares trade in-line with where they did five years ago – despite revenue and FCF/share that are 50% and 30% higher (while being in the midst of a cyclical downturn – i.e. real earnings power should be materially higher). While the company relies on volatile end markets, over the long run its own free cash flow tends to march higher, driven by advances in and rising demand for drug development. Upslope’s key thesis points include: (1) Deep competitive advantages due to dominant scale and long history in markets that require significant trust and tend to be sticky due to regulatory considerations. (2) Closer to trough than peak fundamentals – CRL has a strong history of solid growth and steady margin expansion. Operating margins have been flat for four years, as growth has stagnated post-COVID. Big pharma budgets, a major driver for CRL, have already been cut significantly. The Company has had sluggish periods like this before and always rebounded nicely. Given these factors and the duration of the softness, it appears likely CRL is near a fundamental trough after which it should see growth reignite and margins expand again. (3) De-levered from 3.5x net to 2.5x and generates almost $450mm FCF/year. Potential to turn back on M&A and/or initiate a more serious buyback (note: the dollars weren’t huge, but CRL executed its biggest annual repurchase in a decade in 2024 – mostly in Q3). (4) Long-term optionality: a. Reshoring winner – likely, but hard to size: the BIOSECURE Act (expect a similar refreshed bill with the new Congress), which would force a certain amount of reshoring in drug manufacturing, has lingered before congress for some time. With the new seemingly more hawkish (vs. China) administration, a successor bill seems likely to pass and CRL should benefit, given its footprint. b. Long-term AI tailwinds – speculative, but potentially significant: AI-driven productivity improvements could drive a broad increase in drug development. Of course this is speculation, and progress is yet to be seen. But, if it happens, CRL should be a major beneficiary given how many drugs in development the company touches. (5) Reasonable valuation – especially considering near-trough conditions and optionality. Shares currently trade for 12x NTM EBITDA (vs. 10-14x historically – excluding 2020-2021 “bubble” years) and 18x EPS (15-20x) and 3x sales (2.5-3.5x).Key risks include: potential for extended pressure on pharma budgets and biotech funding, supply chain risks/challenges, “political” sensitivity due to business model, and rate sensitivity due to moderate leverage + early biotech funding exposure.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Platinium AM on Fanuc $6954 JP</h3>Thesis: Fanuc is poised for growth as the US market prepares for a significant increase in manufacturing automation investments, driven by advancements in AI-capable robotics and supportive government policies.Source: <a href="https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk">https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk</a>Analysis: We initiated a position in Fanuc which is a stock we have been monitoring for some time as we foresee a potential boom in US manufacturing automation investment. Fanuc is a leading global supplier of machine tools and factory automation products – including robots. Fanuc’s robot segment now accounts for just under half of sales and grows at a double digit pace through cycles. The productivity benefits of adopting robotics are well known and robots have been widely used in manufacturing – particularly in automobiles – for decades. We believe the emergence of AI-capable robots, with much greater functionality than prior generations, means that cost effective automated robotics solutions can now be deployed across much broader areas of manufacturing, sharply increasing the total addressable market for Fanuc. Fanuc’s earnings are largely driven by industrial automation trends in key markets such as China, US, Europe and Japan. Demand is quite cyclical and we have been in a downturn for several quarters following an initial investment wave in the period following COVID. The US market, where Fanuc has a particularly strong competitive footprint, now looks primed for an upturn. While US manufacturing facility construction has boomed thanks to initiatives such as the Inflation Reduction and CHIPs Acts, we’ve yet to see a corresponding rise in related production machinery such as robots. Producers seem to have been waiting for post-election regulatory and policy clarity before committing to installing equipment. Given an increasingly clear commitment to onshoring, we now expect equipment spending to rise for the next several quarters, benefiting Fanuc and other portfolio holdings with exposure to factory automation such as Keyence, Daifuku and Mitsubishi Electric.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>LVS Advisory on Las Vegas Sands (LVS) $LVS US</h3>Thesis: Las Vegas Sands (LVS) is leveraging Macau's recovery and its leadership in Singapore to capitalize on high-end tourism growth through strategic investments and operational excellence.Source: <a href="https://drive.google.com/file/d/1E-bD8UtK-rEYLUpoyTh3kn3h0GWPe9z8/view?usp=drivesdk">https://drive.google.com/file/d/1E-bD8UtK-rEYLUpoyTh3kn3h0GWPe9z8/view?usp=drivesdk</a>Analysis: Las Vegas Sands (LVS) is leveraging Macau’s recovery and Marina Bay Sands’ Singapore dominance to drive growth. Investments in its global portfolio highlight its commitment to long-term value creation. Core Opportunity: LVS is leveraging Macau’s recovery and Marina Bay Sands’ Singapore dominance to drive growth. Investments in its global portfolio highlight its commitment to long-term value creation. Competitive Advantage: • Macau Recovery: Macau’s gross gaming revenue is projected to exceed $30 billion by 2025, driven by premium mass market growth and the Londoner Grand opening. With “keys out of inventory” due to renovation peaking in Q4 2024 and new renovations completed we believe the company’s Macau assets are offering highly compelling valuations. • Marina Bay Sands Leadership: Ongoing enhancements and the $8 billion IR2 project, expected to add $1 billion in annual EBITDA, reinforce its position as a premier luxury destination. • Robust Liquidity: With strong forward looking cash flow and adept licensing navigation we see LVS able to continue to invest in high-growth opportunities. Investment Case: LVS combines strategic investments with operational excellence to capture the next wave of high-end tourism growth. Its forward-looking approach makes it a leader in experiential luxury.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on Hyatt $H US</h3>Thesis: Hyatt is well-positioned for long-term growth through its asset-light model, strong loyalty program, luxury focus, and global expansion strategy.Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1kLddUaynDZvEXQdoX7lfLnK1giZyPk4h/view?usp=drivesdk</a>Analysis: Hyatt’s transition to an asset-light model makes it well positioned for flexibility and stable, long-term growth. By selling properties at premium multiples and reinvesting in brand acquisitions, Hyatt is increasing its global footprint and strengthening its portfolio.Competitive Advantage: - Loyalty Leadership: The World of Hyatt program has grown to 46 million members, a 22% YoY increase in 2024, with 30% more members per hotel than competitors. - Luxury Focus: Expanding soft brands allows Hyatt to maintain each hotel’s unique identity while benefiting from its extensive distribution network. - Global Expansion: Net unit growth (NUG) and revenue per available room (RevPAR) continue to rise, driven by strategic acquisitions and market entry.Investment Case: Hyatt’s strategy prioritizes luxury, loyalty, and global scale, with significant opportunity for multiple expansion and earnings growth. We believe its hyper-focused innovative model will deliver increasing cash flows and a significantly larger addressable market over the next 3—5 years.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on Goldman Sachs $GS US</h3>Thesis: Goldman Sachs is poised for sustained growth due to its leadership in investment banking and strong performance in asset and wealth management.Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1Z-LvX1cJ2qdQOjsvUbjfoTSrbFNXJKSQ/view?usp=drivesdk</a>Analysis: Goldman Sachs (GS) continues to lead investment banking while growing in asset and wealth management. Its adaptability and focus on core strengths position it for sustained growth.Key Highlights - Resilient Revenue: Q3 2023 revenue reached $12.7 billion (+7% YoY), driven by the Global Banking & Markets division, which contributed $8.6 billion (+7% YoY). - Investment Banking Leadership: Fees rose 20% YoY, maintaining Goldman’s #1 position in M&A and stock offerings. - Asset & Wealth Management Growth: Revenue climbed 16% YoY to $3.75 billion, with assets under supervision at $3 trillion.Investment Case Goldman’s pivot away from consumer products and focus on higher-margin businesses creates a more sustainable growth trajectory. With strong shareholder returns and potential upside in investment banking, Goldman retains their status as the top-tier financial institution.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Platinium AM on Galderma $GAL SW</h3>Thesis: Galderma is our largest single holding, showing strong growth in injectable aesthetics and skincare, with the potential for significant earnings boost from its newly approved eczema drug, Nemolizumab, set to launch in 2025.Source: <a href="https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk">https://drive.google.com/file/d/1ApFzGggtLAbNdoOMWTNq0RepXUeWV1UF/view?usp=drivesdk</a>Analysis: Swiss-based Galderma is our largest single holding. This newly public company was formerly a skincare joint venture between Nestle and L'Oreal. The twin engines of this business are injectable aesthetics and skincare. Both segments continue to grow at double-digit rates in stark contrast to the weakening demand in the broader beauty and skincare sectors. Their third segment, pharmaceuticals, has largely tracked sideways. However, their newly patented eczema drug, Nemolizumab, has performed well in clinical trials, was approved by the FDA and is set to hit the market early in 2025. The company spent USD 250m developing Nemolizumab in 2024 alone. As this drug begins to generate sales this headwind will become a huge tailwind to earnings and a third growth engine for the business.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on Amazon $AMZN US</h3>Thesis: Amazon is poised for growth and profitability through retail margin expansion, a rapidly growing advertising business, and the continued dominance of Amazon Web Services (AWS).Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk</a>Analysis: Amazon’s growth is anchored by three high-potential areas: retail margin expansion, a rapidly growing advertising business, and the continued growth and need for Amazon Web Services (AWS). Together, these pillars position Amazon for the next leg of growth and profitability.Competitive Advantage <ul><li>Retail Margin Expansion: With e-commerce still accounting for only 16% of retail sales in the United States (per the U.S. Census Bureau)—and even less globally—Amazon has significant room for growth. CEO Andy Jassy’s emphasis on AI-driven efficiencies, such as a possible 25% reduction in cost-to-serve, underscores the company’s ability to unlock new profitability in their now three-decade-old core business. More than a decade after the Kiva robotics acquisition, we see the potential for the next wave of automation to reduce variable cost per unit (VCPU) on the “pick and pack” and transportation side of the business as the decade progresses. Overall, we see EBIT margins expanding steadily throughout the next several years.</li><li>Advertising Growth: Amazon’s advertising business, now at a $55 billion run rate and growing ~20% annually, benefits from its proximity to customer transactions, creating a unique AI-driven optimization advantage. With the increased inventory from Prime Video, we see healthy growth for years.</li><li>AWS Leadership: AWS has surpassed $100 billion in annual revenue, and has maintained EBIT margins of ~35% through 2024. We believe that the roughly $50 billion in CAPEX that Amazon will spend this year, the bulk of which dedicated to AWS, will provide dividends for years to come.</li></ul>Investment Case Amazon’s combination of retail, advertising, and cloud businesses provides a balanced portfolio of high-growth opportunities. Its ability to leverage AI across these areas creates a powerful, scalable growth trajectory.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on MGM Resorts $MGM US</h3>Thesis: MGM Resorts is transforming its business model by prioritizing luxury experiences and global expansion, making it a leader in the hospitality sector.Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk</a>Analysis: MGM is evolving beyond gaming, focusing on luxury experiences, strategic partnerships, and international expansion to redefine hospitality. Non-gaming sources now account for 70% of revenue at flagship properties like the Bellagio. Projects include a $10 billion integrated resort in Osaka and ventures in Brazil, Thailand, and the UAE. The BetMGM platform integrates digital engagement with physical resorts, appealing to millennial and Gen Z travelers.Investment CaseMGM’s focus on blending physical and digital experiences positions it as a global leader in hospitality. Its innovative strategy aligns with shifting consumer preferences, and we believe its long history of operational success will continue.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Nightview on Meta (META) $META US</h3>Thesis: Meta is a dominant force in global advertising, leveraging its extensive platform reach, AI advancements, and innovations in wearables to drive long-term growth.Source: <a href="https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk">https://drive.google.com/file/d/1zKO75wEfYPILlkHGkfOqRtGZm6-68MW_/view?usp=drivesdk</a>Analysis: Meta (META) Core Opportunity Meta’s platforms—Instagram, Facebook, WhatsApp, and Messenger—reach nearly half the world’s population daily, making it one of the most powerful advertising ecosystems globally. With investments in AI and augmented reality (AR), we believe Meta is also creating significant optionality for long-term growth. Competitive Advantage - Thriving Core Platforms: In Q3, we saw Meta achieve a 23% YoY revenue growth,—a testament to strong user engagement across its ecosystem. The advertising landscape as a whole continues to evolve and we believe Meta’s existing platforms offer a defined advantage in this new world. Existing platforms in the age of AI continue to be the most powerful indicator of future success in our opinion. - AI Leadership: Meta’s AI capabilities and the Llama AI model are driving efficiency and product innovation. In our view, these assets have been under-appreciated by the market while enhancing Meta’s ability to further scale and innovate its leading advertising business. - Wearables: The success of Ray-Ban AI glasses and progress on Project Orion signal Meta’s growing influence in smart wearables, positioning it as a leader in the next wave of consumer technology. Investment Case Meta’s unparalleled reach and advertising expertise, combined with AI-driven product innovation, provide a durable competitive moat. As the company continues to optimize monetization and invest in next-generation technologies, it is at the forefront of growth in the evolving digital advertising landscape.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div><h3>Plural AM on Jet2 $JET2 LN</h3>Thesis: Jet2 is a UK holiday package company with strong customer service and management, driving significant market share growth and profitability, currently trading at an attractive valuation with a promising outlook for future earnings.Source: <a href="https://drive.google.com/file/d/1oCC_BwRUKD6kLINkEhUXDzAZa8_czsms/view?usp=drivesdk">https://drive.google.com/file/d/1oCC_BwRUKD6kLINkEhUXDzAZa8_czsms/view?usp=drivesdk</a>Analysis: Jet2 (JET2.L) is a UK based package holiday business. The company is run by CEO Steve Heapy and CFO Gary Brown, both of whom have high integrity, exceptional customer focus, and concentrate on long term value creation when allocating capital. They have done an outstanding job, with Jet2’s excellent customer service and retention driving profitable market share growth from 2% to 22% over the last decade. We initially invested in the business around £5/shr, the stock trades at £14/shr today, and we think will be worth £30/shr in three years.Jet2 has the strongest competitive position in the industry, the best management team, a long runway for double-digit growth, and substantial net cash. It also reported another strong set of results in November with profits growing by 16%, on track to beat market expectations for the fiscal year, and a positive outlook for next summer.Despite this, the stock trades at 7x P/FCF.We have owned Jet2 since the inception of the fund and prior to that I personally first bought shares in 2012 at £0.7/shr. And while the stock has reflected the company’s strong performance over the long run, there have been several multi-year periods where the share price has drifted. These periods typically occur because investors dismiss Jet2 as an airline and become concerned about the UK macro outlook.Yet Jet2’s economics are very different to an airline and in our view understanding this is crucial to understanding why the company continues to succeed.Jet2 sells package holidays for an average of £850, taking customers from the UK to primarily sunny locations across Europe. Although Jet2 operates aircraft the customer is paying for their entire holiday, and the two hour flight is only about £140 of the total package. The far bigger part is the hotel or resort that Jet2 has ensured is high quality, good value-for-money, and that you will be taken care of if any issue occurs with the flight or hotel.In other words, Jet2’s strong customer service enables them to sell the peace of mind that you will enjoy your holiday. This makes the economics of package holidays very different to airlines.The most successful airline in Europe over the last couple decades is arguably Ryanair. Ryanair is known for low costs and poor customer service. The reality for short haul flights is that although customers complain about poor service they tend to return anyway if costs are low. In our view, this is why Ryanair’s culture and focus on low costs works even though its service is poor.Things are very different with holidays, where the priorities are almost reversed. If a company messes up your entire holiday, you are likely never returning.Jet2’s secret sauce is that it has the best customer service in the industry. Nearly 60% of its customers book another holiday with the company within two years, which is remarkable given Jet2 only flies to European destinations and not everyone takes a holiday every year. That customer retention number is only 40% at TUI, Jet2’s biggest competitor.This is a huge gap which explains why Jet2 has been gaining around 2ppts of market share each year. The most extreme example of this was during Covid. Whereas most travel companies treated customers and suppliers poorly, Jet2 refunded most customers quickly and in full. According to the UK government’s payment practice reports, in the six months to September 2020 Jet2 paid 76% of invoices within agreed terms vs 36% for TUI. The result is that Jet2’s market share increased by half from 14% to 21% during Covid. That increased share will add around £135mm to the company’s net income this year, compared to total customer deposits of £867mm in March 2020, which suggests that treating customers well is not only the right thing to do but also good business. We have found that investors dismiss customer service because it is qualitative. But it is the key reason why Jet2 is likely to earn £2/shr of net income this year. It earned £0.9/shr in 2019.<a href="https://finchat.io/?via=tom">Check here for the latest results, quarterly call and analysts' estimates.</a><div><hr /></div>Everything you read here is for information purposes only and is not an investment recommendation.<div class="subscription-widget-wrap-editor"><div class="subscription-widget show-subscribe"><div class="preamble">Thanks for reading Stock Analysis Compilation! Subscribe for free to receive new posts and support my work.</div><form class="subscription-widget-subscribe"><input class="email-input" name="email" tabindex="-1" type="email" /><input class="button primary" type="submit" value="Subscribe" /><div class="fake-input-wrapper"><div class="fake-input"></div><div class="fake-button"></div></div></form></div></div>