Spring 2023

The thesis on Simpson Manufacturing focuses on its strong market position and consistent financial performance, which are expected to drive future growth. The company has a solid balance sheet and is well-positioned to benefit from ongoing trends in the construction industry.

Daniel Bakalarz and Alex Furmanski have a long position in CDW Corporation due to its strong growth prospects in the IT solutions market and its ability to adapt to changing technology needs.

The investors hold a long position in Elevance Health, citing its robust business model and the potential for growth in the healthcare sector as key reasons for their investment.

Martin Marietta Materials is considered a strong long-term investment due to its solid fundamentals and growth potential in the construction materials sector.

SS&C is viewed as a compelling investment opportunity because of its strong market position and consistent revenue growth in the financial services technology space.

Carter's was purchased as a good business trading at a reasonable price, but top-line growth did not meet expectations, leading to a quick sale of the position when it became clear that the anticipated consumer behavior shift towards lower-priced goods in an inflationary environment was not occurring.

Despite challenges from TikTok and concerns over user privacy, Meta is considered a good business due to its superior ad infrastructure and the belief that it can leverage this advantage to compete effectively in the short-form video market.

CDW is the largest value-added reseller of IT products to small and medium-sized businesses in the U.S., consistently earning returns on capital in excess of 25% due to its low capital intensity. With a fragmented market and a small market share of around 5%, CDW has ample opportunity for organic growth, having outgrown the market by over 200 basis points per year since 2006.

Elevance is positioned well in the managed care space, which is becoming increasingly efficient as healthcare systems shift towards value-based care. The company benefits from a more consolidated market with less competition compared to traditional property and casualty insurers, leading to higher return on equity.

CDW has evolved from a transactional business to a service-oriented model, significantly increasing its service revenue and enhancing its competitive moat. The company's investment in technical staff and comprehensive IT solutions positions it well against smaller competitors.

UnitedHealth is at the forefront of the shift towards value-based care, which is improving cost control and health outcomes. Its vertical integration strategy, including ownership of primary care clinics and home healthcare assets, enhances its ability to manage costs effectively.

Simpson can grow cumulatively +5.4% through FY24, outperforming the consensus estimate of -5.7%. The company has a strong strategic priority to grow revenues above the rate of US housing starts while maintaining top-quartile ROIC and operating margins. Simpson has consistently achieved these targets, demonstrating its ability to gain market share and maintain pricing power despite economic fluctuations.

Trex is positioned to benefit from favorable macro drivers in the home-building sector, particularly in the Repair & Remodel market. The company has a strong brand presence and market share in composite decking, which is expected to grow significantly as it takes market share from pressure-treated wood. Despite short-term challenges, Trex's long-term growth potential remains robust, with a projected IRR of ~24% and a target price of $84 by 2025, representing a 190% upside.

The investor believes in Alphabet's competitive advantage and ability to deploy capital at high rates of return, which supports its growth potential.

Microsoft is viewed as a strong holding due to its competitive advantages and ability to grow the business over time.

Amazon is included in the Large Cap and Large Cap Concentrated Strategies due to its competitive advantages and growth potential.

The investor sees Silicon Valley Bank as having competitive advantages, including network effects tied to the innovation economy and venture capital, which could support its growth.

AIG is in the middle stages of a successful turnaround with a talented management team. The company is benefiting from strong pricing across the commercial insurance industry, making it a better opportunity on a risk-adjusted basis compared to banks.

SS&C Technologies is a market leader in back-office software and fund administration for alternative asset managers, holding over 20% market share. The business has strong characteristics and is under the radar, providing essential services like taxes and accounting for asset managers.

Martin Marietta Materials operates in a unique industry with local monopolies due to the difficulty of establishing new limestone quarries. The company generates significant free cash flow and has a strong track record of returning value to shareholders, making it a solid long-term investment.

Martin Marietta Materials is attractive due to its local monopoly in limestone aggregates used in construction, which makes it difficult to establish new competitors. The company has a strong cash flow and has recycled it into attractive investment opportunities, making it a compelling long-term investment.

Vulcan Materials has been a long-term holding since 1985, indicating a strong belief in its business model and market position. The company operates in a similar space to Martin Marietta, focusing on construction materials, which are essential for infrastructure development.

SS&C Technologies is seen as a compelling investment due to its strong EBITDA margins and high cash flow conversion, despite recent challenges in organic revenue growth following its acquisition of DST. The company's mission-critical services and high retention rates provide it with pricing power and a solid competitive position.

Avid Bioservices is a contract drug manufacturing organization that is expanding its manufacturing footprint. They are guiding to $150 million in revenue for fiscal '23 and could reach $400 million in revenue capacity within two to three years due to increased demand for biologic drugs. The company has a competitive advantage with a long track record and no regulatory issues with the FDA, making it a reliable choice for biotech firms needing manufacturing services.

CDMO has improved its balance sheet through capital raises and is now investing in future growth. The company is expected to add significant capacity, which could lead to a valuation of only 10 times free cash flow in a few years, making it an attractive investment given its recession-resistant nature and strong regulatory track record.

Thryv operates under a 'GoodCo, BadCo' framework, where its legacy Yellow Pages business provides cash flow to support its growing software business. The software product is competitively priced and targets small to medium businesses, with potential for significant growth in customer count and revenue, suggesting a possible 5x increase in stock price as the software revenue overtakes print revenue.

HGV is misperceived as a cyclical business with ESG concerns, but it is actually a cash flow machine with a significant portion of its revenue being recurring and predictable. The recent acquisition of Diamond Resorts presents a unique opportunity for revenue synergies that are not yet reflected in analyst estimates, and the company's asset-light development model allows for higher returns on capital. With a low valuation and a clear path to earnings improvement, HGV is positioned for growth despite market misconceptions.