Fall 2024 (50th edition)

Chris Waller runs a concentrated portfolio and holds a long position in Watches of Switzerland, indicating his belief in the company's growth potential in the luxury watch market.

Chris Waller has a long position in Seaport Entertainment Group, suggesting confidence in its business model and future profitability in the entertainment sector.

Elie Mishaan holds a long position in Limbach Holdings, reflecting his focus on companies with strong management engagement and growth prospects in the construction and engineering sector.

Elie Mishaan's long position in Vertiv indicates his belief in the company's potential to capitalize on the growing demand for data center infrastructure and services.

David Baron holds a long position in Spotify, suggesting confidence in its ability to grow its user base and monetize its platform effectively in the competitive streaming market.

David Baron's long position in On Holding reflects his belief in the company's innovative approach to athletic footwear and its potential for market expansion.

David Baron’s long position in SpaceX indicates a strong belief in the company's future growth and its pivotal role in the aerospace industry.

The thesis presented by Jared Duda, Joe Ferguson, and Garret Wallis focuses on Valvoline, Inc. as a strong long investment due to its solid market position and growth potential in the automotive services sector.

The team of Erik Listoe, Daniel Sohn, and Yifan Wang argues that BlueBird Corporation presents a compelling long investment opportunity due to its innovative product offerings and favorable market dynamics.

Nadim Rizk mentioned owning shares in Novo Nordisk, highlighting its strong fundamentals and growth prospects in the pharmaceutical sector, particularly in diabetes care.

Nadim Rizk noted his position in Taiwan Semiconductor Manufacturing Company, citing its critical role in the global semiconductor supply chain and robust demand for chips.

Nadim Rizk discussed his investment in Moody's Corporation, emphasizing its strong market position and consistent revenue growth in the financial services sector.

Valvoline is positioned to capitalize on significant growth opportunities in the automotive services market, with a target of expanding its store count from 1,800 to over 3,500. The company's strong unit economics, disciplined capital allocation, and focus on operational excellence will drive profitability and cash flow generation, making it a compelling investment. Additionally, Valvoline's management is proactively addressing the challenges posed by electric vehicle adoption, ensuring its relevance in the evolving market.

The investor has followed SPX Corporation for many years and has a lot of conviction in the company's management and its position in the HVAC space.

Spotify is a strong platform with a well-known brand that continues to invest in improving its services. With a large base of 600 million subscribers, there is significant potential to convert the 400 million free users to paid subscriptions. Additionally, Spotify's ability to raise prices without losing customers enhances its profitability.

On Holding operates in a large market with significant growth potential, especially as it focuses on enhancing athletic performance and expanding into new activities. With Nike's growth stagnating, On has the opportunity to capture market share and double its earnings over the next few years, potentially leading to a much higher valuation compared to Nike.

SpaceX has a strong cash flow and balance sheet, with significant growth potential in both its launch and Starlink businesses. The company's ability to reduce launch costs and leverage its monopoly position in the market supports its long-term growth strategy, making it a compelling investment regardless of its IPO status.

Novo Nordisk has disrupted the diabetes treatment market with its GLP-1 drugs, which have created a larger market opportunity despite impacting its own insulin business. The company has consistently generated strong financial results over the past 20 years and continues to innovate, making it a compelling long-term investment.

Taiwan Semiconductor has evolved from a good business to an incredible company over time, similar to Novo Nordisk. The company is a leader in semiconductor manufacturing, which positions it well for future growth as demand for chips continues to rise.

Moody's operates in a duopoly with S&P, providing a highly sticky business model that offers significant ROI for clients through cost savings on bond issuance. This creates a strong incentive for companies to seek ratings, leading to high margins and consistent demand for Moody's services.

Garrett mentioned Valvoline, Inc. as a stock he is considering, indicating a positive outlook on the company's performance.

We recommend a BUY for Blue Bird Corporation (NASDAQ: BLBD) with a base-case price target of $65, implying a 16.1% IRR through 2027. The company is positioned to benefit from structural tailwinds in the North American school bus market, including fleet electrification and a strong replacement cycle, which will drive robust growth. At its current price of $41, BLBD offers a compelling asymmetric risk-reward profile with upside potential to $110 in a bull-case scenario.

TerraVest is a Canadian small cap business in the storage tank sector that has generated returns on capital of about 25%. With a third of the company owned by insiders and management demonstrating high integrity and strong capital allocation skills, it presents a compelling investment opportunity. The company has limited debt and trades for 10 times free cash flow, making it an attractive option in the small cap space.

Watches of Switzerland is a leading retailer in the luxury watch market, particularly with Rolex, and has shown significant growth potential, especially in the US market where it has grown 30% annually over the last five years. The company trades at 12 times free cash flow, which is considered undervalued given its strong market position and expected double-digit earnings growth. The primary concern for investors is the recent acquisition by Rolex of another retailer, which may impact their relationship, but the long-term growth potential remains strong.

Seaport Entertainment Group is a spinoff from Howard Hughes, which has been weighed down by less desirable assets. The company is currently undervalued at $25 per share, especially with Pershing Square backstopping the rights offering, indicating strong confidence in its value. The assets owned by SEG, including valuable real estate in New York, are being acquired at a fraction of their original investment value, suggesting significant upside potential as the new CEO implements a turnaround strategy.

WOSG has a strong partnership with Rolex, generating high returns on capital. The company should focus on expanding its Rolex business rather than diversifying into lower-return areas. Acquiring smaller businesses with Rolex licenses could enhance its market presence and profitability.

Installed Building Products is an installer of residential insulation with a compelling growth story driven by management's ability to roll up the industry. The company has shown resilience through temporary decreases in EBITDA margin during integration phases, which presents a buying opportunity for long-term investors who believe in its growth potential.

Limbach Holdings caught our attention due to a management transition with the promotion of Mike McCann to CEO. The company, with a market cap of about $300M, fits our investment criteria in the SMID cap space, where we see potential for strategic value creation through accretive tuck-ins and operational improvements.

Limbach is transitioning its revenue mix from low-margin general contracting to higher-margin owner direct relationships, which has already improved profitability. With a strong balance sheet and a strategy to roll up smaller companies, LMB is expected to significantly increase EBITDA over the next few years, making it an attractive investment opportunity.

Vertiv has a leading market share in power distribution and thermal management products, with significant margin expansion opportunities under the guidance of experienced management. The company is well-positioned in a growing industry, making it a compelling investment.

Rudi van Niekerk from Desert Lion Capital believes in the long-term growth potential of VRT due to its strong management team led by Dave Cote, who is focused on improving operational efficiencies and driving margin expansion. The company has demonstrated its ability to maintain above 20% EBITDA margins and has a solid strategy for innovation and pricing power, which positions it well for future growth.

Rudi van Niekerk mentioned increasing exposure to LMB as part of a strategy to allocate capital to companies with strong value drivers, indicating confidence in its performance relative to other investments.

Elie Mishaan from Bryant Street Capital sold SPXC because its multiple exceeded their view of fair value, but he acknowledges that it has performed well since the sale, indicating a strong underlying business despite the decision to sell.

Spotify is founder-led with Dan Ek holding a 15% ownership stake, aligning his interests with those of investors. The company is expected to achieve over 20% revenue growth, and despite perceptions of operating in a commoditized market, the reliance of record labels on Spotify for distribution suggests a strong competitive position.

On is currently undervalued at 15-16x EBITDA, while its growth rate is significantly higher than that of competitors like Nike. With expected valuation at 30-35x EBITDA due to its strong growth and founder-led management, On presents an attractive investment opportunity, especially as it expands into apparel.