Spring 2017

Yum China is well-positioned to capitalize on the growing demand for fast food in China, with a strong brand presence and a robust expansion strategy. The company has demonstrated consistent revenue growth and profitability, making it an attractive investment opportunity.

Alaska Airlines has a strong competitive position in the U.S. airline industry, with a focus on operational efficiency and customer service. The company is expected to benefit from industry consolidation and rising travel demand, making it a compelling investment.

Corning is a leader in specialty glass and ceramics, with strong growth prospects driven by demand in the technology and telecommunications sectors. The company's innovative products and solid financials make it an attractive investment.

Dollarama is well-positioned in the discount retail sector, benefiting from consumer trends towards value shopping. The company's strong store expansion and solid financial performance make it a compelling investment opportunity.

Sherwin-Williams is a high-quality business that benefits from strong brand loyalty and a robust distribution network. Its consistent performance and growth potential in the paint and coatings industry make it a solid investment.

Sberbank has a strong market position with close to 50% market share of Russian retail deposits and is well-capitalized, allowing it to withstand economic downturns. The management's decision to avoid government capital infusion demonstrates their commitment to independence and long-term performance.

Gazprom possesses some of the most undervalued energy assets globally, with decent corporate governance and earnings primarily in U.S. dollars. The Russian government's interest in dividends aligns with minority shareholders, making it an attractive investment despite high capital expenditures for new pipelines.

YUMC is at an inflection point with a unique buying opportunity due to stabilizing same store sales growth (SSSG) after years of volatility. The company has improved its food safety processes, has a strong consumer brand, and is well-positioned to benefit from digital and delivery trends, which will drive future growth. The valuation remains attractive with a target price of $45, offering a 35% upside.

Alaska Airlines is expected to gain significant market share in California, which presents a $3 billion incremental revenue opportunity. The street underestimates Alaska's cost advantages and its ability to profitably expand as the dominant west coast carrier. With a low cost structure and a strong position in key markets, Alaska is well-positioned for growth, with a 5-year price target of $218, representing a 154% upside.

Alaska Airlines is positioned to become the dominant player on the West Coast due to its low-cost structure and potential for capacity expansion at key airports like LAX and SFO. The company has opportunities to swap gates and focus on California, which is more valuable for its operations than expanding to the East Coast. The risk/reward is skewed in favor of a long position as Alaska could significantly increase its market share and profitability.

Corning is undervalued due to market misperceptions about its core earning assets and growth potential in optical fiber and Gorilla Glass. With a projected earnings power of $2.27 per diluted share for 2019, Corning should trade at a multiple of 17x, leading to a target price of $38.50, representing a 51.4% total return over two years. The company is committed to returning excess cash through share repurchases and dividend increases, which will force the market to reevaluate its valuation.

Corning is expected to achieve a multiple in the high teens due to a continued ROIC inflection driven by cash returns and the ability to grow sales without significant capex. The market is overlooking growth opportunities in optical networking and Gorilla Glass, which could significantly boost revenues as demand for optical fiber increases and the auto glass market adopts innovative solutions.

Dollarama is considered a strong investment due to its robust business model and growth potential in the discount retail sector.

Dollarama is positioned for significant growth with a projected EPS increase to ~$10 over the next five years, driven by new store openings, same-store sales growth, and share buybacks. The market undervalues its potential, with a target price of C$225 based on a forward P/E of 19x, down from the current 26x.

Sherwin-Williams has compounded at approximately 22% since the recovery of 2009 and around 15.5% over the past thirty years. The company boasts high returns on invested capital of 30% or better and has a strong distribution system, making it a compelling long-term investment.

Colgate may get expensive at times, but it provides stability to the portfolio with very little downside risk, despite not being the best IRR idea. It serves as an anchor position due to its consistent performance and reliability.

MasterCard is effectively reducing the entropy associated with cash transactions by facilitating more efficient credit and debit transactions, positioning itself as a leader in the payment processing industry.

Visa, like MasterCard, is also focused on reducing transaction inefficiencies associated with cash, thereby enhancing its competitive advantage in the payment processing sector.

While TransDigm is a great business run by competent management, the investor has become uncomfortable with the company's focus on shorter-term profitability at the expense of long-term resilience, leading them to step aside from their position.

The investor sold IBM as they became less comfortable with its long-term competitive advantage in enterprise due to the rise of Amazon AWS, and they prefer investments with multiple ways to win rather than path-dependent outcomes.

Although Phillips 66 has been a good investment, the investor feels uncertain about the next ten years for a significant portion of its business, particularly refining, due to the technological cost curve coming from solar energy.

Danaher is viewed as a constantly evolving, systemic transformation with a culture focused on continuous improvement. The company's adaptive and resilient system allows it to react and change course effectively, giving confidence in its ability to solve for end-markets over time.

We added Amazon to the portfolio this year, and it was one of those investments that we were fighting our own biases versus understanding the propensity and the potentiality of the outcome that was staring us in the face.

Samsung Electronics was undervalued due to concerns about its smartphone market share loss and a slowdown in its DRAM semiconductor business. However, the consolidation in the DRAM market suggested that pricing would remain stable, allowing Samsung to maintain healthy margins even during downturns. The stock's valuation appeared attractive given the potential for significant upside with limited downside risk.

Samsung Electronics is undervalued due to its strong free cash flow generation and significant cash reserves exceeding $60 billion. The company's disciplined capital allocation and potential for returning cash to shareholders suggest a favorable outlook, with a base case indicating more than 100% upside in stock price.

Nick Briody pitches a short on Smucker’s, indicating concerns about the company's valuation and potential challenges ahead.

Cliff Sosin believes Herbalife is a legitimate company with strong economics and a loyal customer base. Despite initial skepticism influenced by a short seller's presentation, Sosin's research revealed that Herbalife's turnover is the lowest in the industry, indicating customer satisfaction and a sustainable business model.

Credit Acceptance Corp. is part of a portfolio that focuses on subprime lending, which is often misunderstood. The company plays a crucial role in providing financing options to individuals who may not qualify for traditional loans, thus supporting their financial mobility.

Cimpress is included in the portfolio as a stable investment alongside other positions, indicating a diversified approach to investing in companies with growth potential.

Ashtead Group is a rental company that is part of a diversified investment strategy, focusing on companies that provide essential services and have growth potential in the rental market.

WRLD operates in the installment lending space, which is more user-friendly than payday lending. The company has a strong community presence and a loyal customer base, which supports its financial performance. Recent management initiatives to modernize operations and improve customer acquisition through online and direct marketing are expected to drive growth and restore volume.

We recommend a long on Yum China Holdings (YUMC) with a 2-year price target of $45, offering 35% upside from today’s price of $33. We see a bull-case upside of 61% and an attractive upside/downside ratio of 2.7x. We project a 64% EPS upside in the next three years driven by sustainable comparable sales growth and margin expansion opportunities.

The investor believes in the long-term growth potential of Dollarama, expecting a store count growth of 1,700 stores, which represents a 9.1% CAGR over five years, outperforming the 5% consensus. They also anticipate sustained same-store sales growth driven by an improved product mix.

Sherwin Williams is identified as a compounder business that is often overlooked, suggesting it has strong growth potential and stability. The mention of waiting for the right price indicates a strategic approach to investing in this company.