Company Reports

Agco is a pure-play agricultural equipment company that has traditionally been focused on tractors. We believe it will continue to be a top-three player in the ag industry. The company has been successful in emerging markets, where customers typically look for reasonably priced equipment. In developed markets, it faces competition from industry leaders Deere and CNH, which provide customers high-quality and strong-performing products, making it difficult for Agco to gain ground. The company’s peers help customers reduce the total cost of ownership through improved fuel efficiency, limited machine downtime, and consistent parts availability.

We think GoDaddy’s position as the world’s leading domain registrar creates a unique opportunity to capture demand from newly formed businesses and upsell complementary products beyond domain registration. We expect the one-stop-shop model will appeal to micro- and small businesses looking to establish and manage a ubiquitous online identity with integrated commerce solutions. The initial domain registration process is typically a customer's first interaction with GoDaddy, and acts as an onramp for additional products. For example, an entrepreneur seeking an online presence for their idea may approach GoDaddy for a domain registration initially, and as a natural extension purchase a subscription to a domain linked email account, website building tools and commerce solutions.

EOG's capital allocation strategy sits somewhat alone relative to other US exploration and production, or E&P, players. While the consolidation bug has bitten its peers and the integrated majors, EOG principally focuses on organic exploration efforts. And, like other US E&P peers, EOG has embraced a capital allocation policy that emphasizes returning cash to shareholders, yet retains a willingness to invest in modest production growth. Finally, in an industry that overextended itself during the shale revolution, EOG pivoted sooner than most to becoming a low-cost provider. Combined with an enviable asset mix, including a leading position in the Delaware Basin, these factors position EOG as a premier shale player with industry-leading returns on capital.

In February 2020, Gardner Denver acquired the former Ingersoll Rand’s industrial business in a transformative reverse Morris trust transaction. The combined entity took on the Ingersoll Rand name and stock ticker.

Though Tandem Diabetes has made a splash in the insulin pump market as the latest entrant in the US, the firm is still endeavoring to establish itself as a major competitor. On this rather lengthy path between the initial 2012 launch of its original t:slim pump and consistent positive earnings, Tandem still has a few years to go, from our perspective.

Adient is the automotive seating business of Johnson Controls that was spun off to JCI shareholders in a taxable transaction Oct. 31, 2016. Adient leads the seating market with about 33% share globally. It is common for a spinoff to be ignored or misunderstood, but we think ignoring Adient just because it is an auto-parts supplier is shortsighted. Seating is one of the stickiest parts of the supplier sector since it is very difficult to take out an incumbent on a vehicle program, and automakers need suppliers that can consistently deliver high-quality seats in a just-in-time system all over the world. Automakers have global platforms and are willing to pay for the right supplier rather than the supplier simply with the lowest price. We think the seating sector can benefit from autonomous and electric vehicles rather than be hurt by the change because AVs and EVs open up new seating configurations and possibly more electronics content in seats.

Bio-Rad develops products and solutions for the life sciences research and clinical diagnostic markets and enjoys niche market leadership in diagnostic quality controls, antigens, and digital polymerase chain reaction, or dPCR, molecular testing. Bio-Rad’s business relies on the razor-and-blade model typically seen in the diagnostic market, and consumable reagents account for about 70% of total sales, with these reagents often sold at a higher margin than their associated equipment and instruments.

With pandemic-related changes in consumer behavior around travel in the rearview mirror, economic performance of Norwegian Cruise Line Holdings is on a path to the generation of excess economic rents. As consumers returned to cruising after the 15-month sailing halt that ended in July 2021, they regained their appetite for travel, bolstered by the value proposition the holiday provides, an interest that continues to persist. With ships fully deployed at historical occupancy levels, pricing surpassed prepandemic levels in 2023 and continues to show momentum in 2024. While Norwegian could intermittently see pricing competition in periods of macroeconomic distress, we believe its freestyle offering and attractive itineraries will keep passengers engaged with the brand. On the cost side, while higher oil prices and unfavorable foreign exchange could elevate costs at times, we expect management will focus on extracting further efficiencies as the business continues to scale. Over time, we expect both pricing and costs to normalize at low-single-digit rates.

MasTec is a leading infrastructure construction company for customers in the telecom, renewable energy, utility, and oil and gas pipeline industries. The company primarily operates in North America.

XPO got its start in mid-2011, when entrepreneur Brad Jacobs led an equity investment in expedited freight brokerage firm Express-1 Expedited Solutions. Jacobs launched an acquisition strategy targeting the asset-light US highway brokerage industry. By mid-2013, XPO's deal focus evolved beyond truck brokerage into heavy-goods last-mile delivery, intermodal, and global contract logistics. Then in 2015, XPO jumped into the asset-based trucking landscape with the acquisition of less-than-truckload carrier Con-way.

McDonald's' strategy, as laid out at its most recent investor day in December 2023, emphasizes its competitive strengths through an "MCD" framework: relevant marketing, core menu development, and the four Ds: digital, drive-thru, delivery, and development. The firm's approach strikes us as cogent, and appears to be meeting the evolving needs of today's restaurant consumer.

As one of the largest global automotive component suppliers, Denso has a diverse product portfolio that ranges from traditional powertrain/thermal components for internal combustion engine vehicles to relatively newer technologies such as electrification and advanced safety/sensing components. To adapt to a “once in a hundred years” transformation in the automotive industry, the company has been spending high amounts on research and development in recent years. In Japan, Denso has been engaging in various projects with its main original equipment manufacturer customer, Toyota Motor, as well as other components supplier companies in the Toyota Group, to jointly develop various technologies, including semiconductors, electrification, and advanced driver-assistance systems. We expect these initiatives will prevent commoditization of its key technologies, thus allowing the company to maintain its narrow moat.

Novonesis, created in 2024 through the merger of Novozymes and Chr. Hansen, is the global leader in the industrial enzymes and microbial solutions, or cultures, markets. Enzymes are biological catalysts that allow customers across many different industries to achieve greater yields, better performance, or lower costs for products and production processes, primarily by reducing raw material and energy requirements. Its microbial solutions portfolio caters to the food, beverage, agriculture, and human health end markets. Its products are essential for the fermentation process in dairy and for providing health benefits for dietary supplements and infant nutrition.

IQVIA (formerly QuintilesIMS) is the result of the merger of Quintiles, a leading late-stage contract research organization, or CRO, and IMS Health, a dominant player in life sciences data and analytics. The combined company has become a leader among CROs and in the life sciences data and analytics industry. Further, as a result of the merger, the company leads in real-world evidence, in which data from sources such as patient records or medical claims can be used to create clinical evidence for regulatory approval.

Carrier Global, a leading supplier of heating, ventilation, air-conditioning, and refrigeration products and related services, was spun off from United Technologies in April 2020. Since then, the firm has undergone a substantial transformation. Over the years following the spinoff, Carrier's management focused on strengthening the firm's balance sheet and organic reinvestment. Notably, the company sold its Chubb fire and security services business and its ownership stake in the Beijer joint venture to raise capital to pay down debt. Carrier also increased spending on research and development, its sales organization, and capital projects to support product development and growth initiatives.

Alnylam Pharmaceuticals is a pioneer in designing therapeutics based on RNA interference, or RNAi, a mechanism that occurs naturally in cells and silences overexpressed genes, which often cause protein misfolding and/or protein accumulation. Alnylam seeks to capitalize on the therapeutic potential of RNAi by creating small interfering RNA, or siRNA, that can treat diseases at the genetic level. When siRNA reaches its intended target, it can silence the gene that it contains code for, making it a potentially game-changing technology for difficult- to-treat diseases caused by genetic mutations.

Penn Entertainment has a leading omnichannel presence, which includes 43 physical casino assets, a digital portfolio encompassing an upgraded sports betting partnership with ESPN that launched in November 2023, iGaming, media, and a loyalty membership base of over 30 million. We estimate Penn held around a high-single-digit percentage revenue share of the $66.5 billion domestic commercial casino gaming market in 2023.

Amgen has its roots in providing supportive-care products to kidney disease and cancer patients, but the firm has expanded its portfolio to include innovative drugs in therapeutic areas ranging from cardiology to immunology. Despite headwinds from biosimilar and branded competition, Amgen's newer blockbusters like cholesterol-lowering drug Repatha defend its wide moat and keep free cash flow above 30% of sales in our forecast.

Legrand has established itself as a dominant player in electrical equipment, enjoying a leading market share in two thirds of its product ranges. Its brand reputation for reliability and extensive product range has created close-knit relationships with the key participants in the sales channels, creating high barriers to entry and resilient profitability. While the majority of its products are sold via major distributors, the key decision-makers in electrical equipment are electricians, who act on behalf of the end user. Legrand’s push-pull strategy reinforces its close relationships with stakeholders by offering distributors an extensive product range of over 300,000 products and frequent training on its regular product innovations to installers, who are largely insensitive to price and who value reputation and ease of installation above price.

Rayonier is the second-largest timberland real estate investment trust in North America, managing about 1.8 million acres in the southern United States, 500,000 acres in the Pacific Northwest, and over 400,000 acres in New Zealand. As a REIT, Rayonier distributes its REIT income to shareholders without having to pay corporate level incomes taxes. Cash flow is generated through timber harvesting and the sale of land that it determines has higher value than if it remained in its portfolio. Unlike some of its competitors, Rayonier is a pure-play REIT. The company generates most of its revenue from the sale of timber and does not produce wood or paper products. While some of its operations are subject to US federal and state income taxes (New Zealand business and log trading), a majority of Rayonier’s income is tax-exempt under its REIT status.