Spring 2019

The team recommended a long position in Dollarama with friendly activism, believing that the company has significant growth potential and can enhance shareholder value through strategic initiatives.

The team pitched a long position on Dean Foods' 6.50% Senior Unsecured debt, highlighting the potential for recovery and value in the distressed debt market.

Yen Liow mentioned Black Knight as one of his durable compounders, indicating confidence in its long-term growth and market position.

Yen Liow highlighted GoDaddy as a durable compounder, suggesting it has strong growth potential in the domain registration and web hosting market.

Yen Liow mentioned TransDigm as a durable compounder, reflecting confidence in its business model and growth trajectory in the aerospace sector.

Yen Liow referred to Constellation Software as a durable compounder, indicating belief in its ability to generate consistent growth and value.

Black Knight has a near monopolistic position in mortgage servicing software with strong pricing power and low churn. The company benefits from a regulatory environment that increases compliance costs for competitors, enhancing its competitive advantage.

Charter Communications is a valuable asset as a content-agnostic provider of high-speed internet, which is hard to replicate. The company is expected to grow free cash flow per share at 30% for years.

We recommend a long position in Dollarama due to its potential for significant growth through store expansion and operational improvements, including adopting zone pricing and optimizing its logistics network. The proposed strategies could lead to a target price of C$81, representing an attractive risk/reward profile with a potential IRR of 11%.

We recommend buying DF 6.50% 2023 Senior Unsecured bonds at the current price of $66 due to Dean Foods' accelerating cost-cutting initiatives, long-term industry demand stabilization, overlooked growth opportunities, and strong liquidity. The bond offers a compelling risk versus reward profile as the market has priced in a worst-case scenario, while DF is cash flow positive and has a strong liquidation value.

TransDigm operates in the aftermarket aerospace components sector, which has extremely high barriers to entry due to FAA regulations. This creates a subscription-like revenue model as they provide parts for the long life of aircraft, ensuring consistent revenue growth.

Constellation Software is a serial acquirer in the vertical market software space, characterized by high barriers to entry and low churn. The company has demonstrated exceptional capital allocation skills, compounding at almost 40% for 12 years.

GoDaddy has a strong customer care team that acts as a profit center and is well-positioned to capitalize on the growing need for businesses to establish an online presence. With only 18.5 million customers out of an estimated 500 million independent SMBs globally, there is significant room for growth.

We are recommending a long in Dollarama with friendly activism, projecting a 4-year price target of C$81.5, representing +97% upside and an 18% IRR. Dollarama is the largest dollar store chain in Canada with a significant market share and potential for growth through accelerated store openings and strategic pricing initiatives.

ALGN is a highly innovative technology company with a strong competitive advantage due to its patented processes and significant market share in the clear aligner space. Despite recent patent expirations leading to increased competition, ALGN's unique capabilities and market positioning, particularly in treating complex cases, suggest continued growth and a robust long-term outlook.

Carsales.com Ltd is positioned to benefit from its dominant online platform in the Australian auto market, which has strong network effects and high EBITDA margins. Despite recent economic challenges, the company's core segments are performing well, and its international marketplaces are growing rapidly. The stock is currently undervalued, with a target price of AUD $22.62 per share, representing a 75% total return opportunity.

Amazon has a booming business model with a significant portion of its revenue coming from marketplace products sold by third parties, which allows for high gross profit margins. Additionally, their Web Services division is a major operation, and their investment in retailing with their own stores could enhance their distribution capabilities. This dynamic growth leads to a high valuation multiple of 26x in year 5, suggesting strong future earnings potential.

MasterCard has been a long-term holding for Stewart Asset Management, indicating confidence in its business model and growth potential. The firm has owned MasterCard since its IPO, suggesting a strong belief in its ability to generate consistent returns over time.

Restoration Hardware is innovating in the retail space by creating destination stores that attract customers, which is a unique approach compared to traditional retail. Despite concerns about their debt and slower sales growth, the CEO's vision and the potential for significant market share growth make it an interesting opportunity.

ADP is a well-managed company with a strong market position in payroll and HR services, generating recurring revenue. Although growth is expected to be slower due to its size, the company is still projected to double its earnings over the next five years, making it a solid long-term hold.

Costco has been a major position for years due to its strong business model, which includes a significant portion of profits from membership fees. This recurring revenue stream is a key factor in its attractiveness as an investment.

Williams-Sonoma appears to be successfully navigating the retail landscape, suggesting it may be insulated from Amazon's competition. This resilience in a changing market presents a potential investment opportunity.

We recently increased our position in Disney, which looks like it could be a relatively slow grower yet is still a very strong company. They have their basic growth business with movies and parks that generates a lot of money, and we think that the new streaming business is going to have fair growth and will make them a better company in five years.

Costco has reached a global scale and shares the benefits of that scale with its consumers, making it hard to compete against. With a gross margin of 12% and a net margin of 2%, it operates efficiently in a competitive market.

Givaudan is the world's dominant flavors and fragrances company, which has unexpectedly high switching costs and is critical for products like yogurt, making it a profitable business.

Spirax-Sarco, which makes steam traps, has a margin comparable to Apple's and is considered an iconic business due to its trifecta business model.

Trex, which makes plastic decking, has impressive financial metrics with a return on assets of 27% and return on equity of 47%, both of which are increasing, indicating strong business performance.

Kone, a Finnish elevator company, profits mainly from maintenance contracts, making it a very profitable business model, especially outside of China where capital equipment sales dominate.

John Hempton is instinctively long on GE, indicating a belief in its potential despite negative sell-side opinions.

Valeant was trading at 10x revenue despite making a loss, with adjusted accounting claiming a 55% margin. The company was involved in unethical practices, and despite being well-funded, it was expected to go bust due to unsustainable business practices.

Herbalife operates on a business model that combines physical goods with social reassurance, leading to high retention rates among distributors. The retention rate has improved from 49% to about 65%, indicating a strong and honest business model that counters criticisms about being a rip-off.