Winter 2017

Adient is the largest manufacturer of auto seating and is viewed as a misunderstood business with significant competitive barriers. The company is expected to benefit from the shift towards autonomous vehicles and has opportunities to improve margins and expand into adjacent markets like aerospace and trains. Despite cyclical concerns in the auto industry, Adient's valuation at approximately 4x to 5x earnings presents a compelling investment opportunity.

China Mobile is a dominant wireless carrier in China with over 750 million subscribers and a 66% market share. The company is expected to benefit from the increasing data usage as consumers migrate to smartphones, and its current valuation implies low growth, which does not reflect its potential for double-digit growth in free cash flows.

Michelin has strong pricing power in the tire market, particularly for high-end vehicles. Despite concerns about the cyclical nature of the auto industry, tires are a consumable product that need to be replaced regardless of new car sales, positioning Michelin well for continued demand.

Fidelity National Financial operates in a consolidated industry providing necessary title insurance services. The company's CEO, Bill Foley, has a strong track record of creating value through strategic asset management and capital allocation, making it a compelling investment opportunity.

Assurant is a niche insurer that has shown resilience and adaptability in its business model. With a new CEO from outside the industry, the company is focusing on profitable niches and has a history of share repurchases when undervalued, indicating potential for upside as it evolves its offerings.

The short thesis for Cardtronics is based on declining cash usage, limited growth opportunities, and the loss of its largest customer, which will increase competition. The company is trading near its 52-week high and is overvalued at 25x FY16E earnings, with a target price of $30.3, indicating a 36% downside.

Carriage Services is well-positioned to benefit from demographic tailwinds as the Baby Boomer generation ages and passes away, leading to increased demand for funeral and cemetery services. The company operates in a consolidating industry with significant barriers to entry and possesses a decentralized management model that allows for the acquisition of high-quality local businesses. Despite recent stock price dislocations, the underlying fundamentals and management quality suggest that Carriage is undervalued and has strong growth potential.

The senior secured 2018 bonds of Soho House offer a compelling risk-adjusted return due to the stable, recurring revenue nature of the business, which has a growing member base and low churn. Despite being perceived as highly leveraged, the company is in a growth phase that underrepresents its true earnings power, making the current yield of approximately 8% attractive given the business's quality and short duration.

East West Bank (EWBC) is positioned as a relationship bank with a strong track record of financial performance and a diversified loan portfolio. The bank's expertise in facilitating business between Chinese and American markets, along with its asset sensitivity to rising interest rates, makes it an attractive investment. Despite facing regulatory challenges, these issues are viewed as transitory, and the bank's long-term growth potential remains strong.

Ameren (AEE) is a regulated utility with a history of good returns, but it faced challenges during the financial crisis when it cut its dividend, leading to a sharp stock sell-off. The new management's plan to focus on essential capital expenditures and improve returns positions the company well for recovery, making it a potential investment opportunity.

Rupal Bhansali views Microsoft as an enterprise staple deserving of a valuation multiple similar to consumer staples. Despite market perceptions of Microsoft as a high-risk technology company, Bhansali believes its dominance in the enterprise market with products like Outlook and Office 365 provides a stable and recurring revenue stream, leading to significant returns with low risk.

ValorBridge focuses on earlier-stage healthcare companies that target niche markets, leveraging existing relationships to accelerate growth. They also invest in established businesses with superior management teams that can grow free cash flow.

ValorBridge owns a web-based scheduling company for emergency rooms that functions similarly to OpenTable, allowing patients to schedule ER visits, which enhances efficiency and patient experience.

TransDigm is highlighted for its ability to run at higher levels of leverage due to stable revenue growth in the aftermarket aerospace sector, which compounds equity growth over time.

Liberty is mentioned as a company that effectively uses leverage to compound equity growth, benefiting from stable revenue growth in the cable industry.

ValorBridge owns stakes in an industrial distribution and service company for gas stations and fuel depots, which is expected to grow free cash flow based on superior management.

ValorBridge invests in a company that buys distressed consumer credit portfolios from banks at low prices, managing the collections process to generate returns.

ValorBridge holds passive stakes in an industrial gas distribution company, which is part of their strategy to invest in established businesses with growth potential.

ValorBridge has a stake in the largest manufacturer of wine bottle closures, indicating a focus on established companies with solid growth prospects.

Norbord is a Canadian-listed company with a significant portion of its operations and profits tied to the housing rebound in the U.S., making it an attractive investment opportunity.

Foot Locker is facing significant challenges as its largest supplier, Nike, shifts focus towards direct-to-consumer sales, which threatens Foot Locker's inventory advantage. Additionally, the average sale prices for basketball shoes, a key revenue driver, are plateauing and declining, compounded by increased competition from brands like Adidas and Under Armour. These factors suggest a potential decline in Foot Locker's market position and profitability.

Foot Locker is facing significant challenges due to its reliance on Nike, which accounts for 73% of its sales. A decline in Nike's average selling prices (ASPs) and market share will directly impact Foot Locker's gross margins and profitability. Additionally, the proposed border adjustment tax could further erode profits, making it difficult for Foot Locker to sustain growth in a mature retail environment.

Axalta is an undervalued coatings company with a strong market position and durable competitive advantages. The company generates significant free cash flow and is expected to achieve GDP+ sales growth due to its focus on the stable auto refinishing market. With ongoing cost-cutting initiatives and a favorable market structure, Axalta presents an attractive investment opportunity with a price target of $35, implying ~20% upside.

Axalta is positioned to benefit from its strong market position in the coatings industry, with a diversified customer base and ongoing cost-cutting initiatives that are expected to enhance margins. The company has a solid growth outlook driven by emerging markets and a focus on tuck-in M&A, which can be accretive given its current valuation. The stock is trading at a discount compared to peers, providing an attractive entry point for investors.