Winter 2019

Damon Ficklin and Jeff Mueller discuss their investment in Tencent, highlighting its strong position in the changing consumer landscape in China.

Damon Ficklin and Jeff Mueller mention Alibaba as part of their investment strategy, reflecting confidence in its growth potential despite market challenges.

Adobe is discussed as a key investment by Damon Ficklin and Jeff Mueller, indicating their belief in its strong business model and growth prospects.

Starbucks is mentioned by Damon Ficklin and Jeff Mueller as a part of their portfolio, suggesting confidence in its brand strength and market position.

Damon Ficklin and Jeff Mueller include Align Technology in their discussions, indicating a positive outlook on its growth and innovation in the dental industry.

Dov Gertzulin mentions Contura Energy as a position, reflecting his focus on middle market opportunities and potential for recovery in the energy sector.

Dov Gertzulin discusses Tropicana Entertainment as part of his investment strategy, indicating a focus on special situations in the gaming and hospitality sector.

Dov Gertzulin includes Twin River Worldwide in his discussions, suggesting a belief in its potential for growth and recovery in the gaming industry.

Lions Gate Entertainment is undervalued due to its strong content library and growth potential in streaming services. The company is well-positioned to capitalize on the shift towards digital consumption, and its recent strategic moves enhance its competitive edge in the entertainment industry.

Lionsgate is positioned for significant growth due to its strong content library and the upcoming scarcity of content in the market. The company is expected to reach 7 million subscribers by 2021, driven by international expansion and investment in original content. Additionally, Lionsgate remains an attractive acquisition target, with a potential valuation based on a 13x multiple for M&A scenarios.

We are long Nordstrom with a price target of $94, representing 46% upside on 11/12/2018’s price of $64.30. Despite common perception, Nordstrom is not only a traditional department store, but it also generates over 50% of its revenue from e-commerce and Nordstrom Rack. Continued outperformance in these favorable pockets of the retail industry will support growth in cash flows and a valuation re-rating.

Nordstrom is undervalued compared to its peers, trading at a six-turn valuation discount despite better performance and growth opportunities in the off-price segment through Nordstrom Rack. The company is expected to generate strong cash flows and has a favorable risk-reward profile, with a target price of $94 representing a 46% upside.

Lions Gate is positioned to benefit from the streaming service market as a complement to larger services like Netflix and Hulu, with its Starz segment offering a low-cost option targeting underserved demographics. The company is expected to see growth in both its OTT subscribers and linear Pay TV subscribers, leading to a price target of $26, representing a 44% upside.

Alibaba is a dominant player in the Chinese e-commerce market and is well-aligned with China's strategic direction towards a consumer-driven economy. The company has significant growth potential as China's middle class expands, and it has reinvested heavily into its payment platform, Alipay, which is the leading payment platform in China.

JD is a direct competitor to Alibaba but is heavily weighted towards a low-margin, capital-intensive business model. While JD has advantages in logistics, Alibaba's dominance and reinvestment strategies position it better for future growth, making JD less attractive in comparison.

Tencent is another high-growth company that is part of Polen's investment strategy. Its strong fundamentals justify its higher valuation, and it is expected to continue growing at a significant rate.

Adobe is a top holding due to its competitive advantage and strong opportunity for reinvestment at high incremental returns. The transition to a subscription model has made revenue more predictable and sustainable, allowing for price increases and solidifying its monopoly in digital content creation.

Starbucks is expected to continue growth from both the US and China, with a strong established position in China despite short-term headwinds. The strategy of opening more stores rather than optimizing for same-store sales is seen as a long-term growth play with good return economics.

Despite a recent hiccup in performance due to disappointing promotions and new competitors, Align Technology is well-positioned for long-term growth. The brand equity of Invisalign is likened to that of Botox, suggesting strong consumer loyalty and market potential as vanity increases. The company is expected to capture a larger share of the teeth correction market, which currently stands at sub-10%.

Contura Energy is the largest metallurgical coal company in the US, formed during the bankruptcy of Alpha Natural Resources. The shares trade at about 2.5x estimated EBITDA and 3.5-4x free cash flow, which is considered very attractive compared to peers. Despite cyclical risks, the valuation presents a compelling investment opportunity.

DG Capital Management owns Twin Rivers, which is merging with Dover Downs. Twin Rivers has shown incredible financial performance and operates leading casinos, making it an attractive investment as it lists on the NYSE.

In 2018, DG Capital Management held post-reorg equity in Tropicana, which was trading at a significant discount to peers despite generating great cash flow and having almost no net debt. The company was seen as a prime asset for acquisition due to its strong management and improving financials.