Company Reports

As a fully integrated waste hauler, Waste Connections leverages its large network of collection routes that bestows significant control over the waste stream, funneling trash from commercial, industrial, and residential end markets into its valuable landfill assets. Waste Connections' secondary and rural market strategy faces less competition and delivers higher profit margins relative to larger, urban-focused competitors Waste Management and Republic Services.

In February 2020, Gardner Denver acquired the former Ingersoll Rand’s industrial business in a transformative reverse Morris trust transaction. The combined entity took on the Ingersoll Rand name and stock ticker.

Rolls-Royce holds a prominent position in the global commercial and military aerospace propulsion and power system sectors. Its commercial aerospace segment generates approximately 50% of group sales, and the company is a market leader with a dominant 58% market share in wide-body aircraft engines.

Trimegah Bangun Persada Group is the largest pure-play nickel supplier in Indonesia, based on AME Research’s estimates for 2022 mined nickel production volume. Since its establishment in the early 2000s, it has gained vital support from its parent Harita Group. Harita is a domestic conglomerate with over 100 years of business experience across natural resources, energy utilities, and shipping to palm oil plantations.

We think Sega Sammy is now seeing new opportunities through the globalization of its well-established intellectual property, or IP, with expanding platforms and markets. In addition, the acquisition of Rovio has also helped to expand its IP library, providing positive synergy in growing its mobile game business, and expanding its global presence. We expect all of this to improve Sega’s competitiveness and growth outlook. Coupled with the solid operation and decent profitability at Sammy’s pachinko and pachislot machine business, this should allow it to generate economic profit well into the future, unlocking the company’s long-term value.

The strong secular trend where very wealthy individuals grow their wealth ahead of the growth in global GDP is set to remain in place. The demand for bespoke financial planning and wealth management services will continue to be strong. However, we anticipate that fee margins will remain under pressure as competition increases with many financial services firms expanding their presence in the wealth management market.

Apple, which has established itself as a consumer electronics behemoth over the past decade, has propelled Hon Hai into the world’s largest contract manufacturer. Despite its entrenched position in Apple, which accounts for around 55% of the group’s revenue, Hon Hai is faced with increasing competition in the traditional assembly business at a time when smartphone demand has matured. As a result, its returns on invested capital have fallen to 12% in 2022 from 23% in 2016.

We are positive on Elastic's prospects in the full-stack monitoring, security, and search markets. The firm's solutions benefit from secular tailwinds driving an accelerating increase in data for enterprises to secure, search through, and monitor. In our opinion, the firm's sticky product portfolio, broad swath of products that enable clients to conduct a variety of mission-critical tasks, and increased penetration in the enterprise market have enabled Elastic to form a narrow economic moat around its business.

Disney is managing the evolution of the media industry, most notably the shift from linear television viewing to on-demand, direct-to-consumer, or DTC, streaming services. Disney was perfectly positioned to take advantage of the traditional model, with its ownership of a national broadcast network, in ABC; the top sports network, in ESPN; and a leading children’s network, in the Disney Channel. These remain very valuable assets that give Disney advantages as the industry evolves, but challenges exist, and we don’t think the new media landscape will be as profitable as the prior one.

CSPC is one of the largest and oldest pharmaceutical companies in China. Anchored by its nervous system business segment due to its flagship drug NBP, CSPC has a portfolio of innovative and generic drugs covering a wide range of diseases. NBP is a Class 1 new chemical drug for acute ischemic stroke. Class 1 drugs under the Chinese classification system are innovative drugs that have never been marketed globally. Thanks to its portfolio breadth, CSPC has been growing its revenue with a 10-year historical compounded annual growth rate of 25.0%, exceeding GDP growth.

Iress is positioned to deliver improved earnings growth through the strategic refocusing on its core business units in Asia Pacific, mainly in Australia. The core business consists of a trading and market data product, a wealth management platform and a superannuation administration system. This follows a prolonged expansion into lower-returning noncore and overseas markets, which have eroded the firm’s economic returns.

We award a wide moat to Arca Continental. We think brand intangibles from its status as a top five bottler to wide-moat Coca-Cola, coupled with cost advantages given its large manufacturing and distribution scale, should support the firm’s competitive position and excess investment returns for more than 20 years.

Royal Bank of Canada is one of the two largest banks in Canada by assets and one of six that collectively hold roughly 90% of the nation's banking deposits. The bank derives two thirds of its revenue from Canada, with the rest primarily coming from the United States. It has done an admirable job of expanding its nonbank lines of business, running efficient banking operations, and generating some of the best returns for shareholders in the industry. We believe RBC should remain one of the dominant Canadian banks for years to come, even as a more difficult macro backdrop pressures earnings growth in the medium term.

Ford is turning itself around by focusing on light-truck models in the United States, which we think is the right move, since light trucks are nearly 80% of U.S. industry new light-vehicle sales. Ford's challenge is to increase share profitably while elevating Lincoln into a global luxury brand. The mostly no-moat nature of the auto industry makes these tasks difficult, and we see headwinds from areas such as restructuring, commodities, and exchange while investments in mobility and electrification take years to bear fruit. Ford targets 50% global all electric volume by 2030 and an annual production rate of over 2 million battery electric vehicles by 2026, though CEO Jim Farley in July 2023 indicated flexibility on the latter's timing.

We believe Apple has cemented a long-term position atop the consumer electronics industry with a focus on a premium ecosystem of tightly integrated hardware, software, and services. We see the flagship iPhone as the linchpin of this ecosystem, from which Apple derives pricing power, switching costs, and a network effect. In our view, every other Apple device and service sees its greatest value from further locking in customers to this walled garden. This approach earns the firm a wide economic moat rating.

Canadian Imperial Bank of Commerce is the fifth-largest bank in Canada by assets and one of six that collectively hold almost 90% of the nation's banking deposits. CIBC is more Canada-focused than some of its more international peers, although this is changing after the acquisition of PrivateBancorp. The bank plans to eventually have up to 25% of revenue coming from the United States. Although CIBC has one of the larger domestic branch networks, its products haven’t typically had top share in Canada, though the bank has made significant strides since 2011, as it increased share in multiple categories and increased product numbers per customer. This improvement has slowed recently, however.

Citigroup has an international commercial banking franchise and a domestically focused retail banking unit. Within the bank's commercial operations (called the institutional clients group, or ICG), Citi has large trading, investment banking, international corporate banking, and custody operations. ICG is Citi's most unique business unit, as its global footprint is hard to replicate. This international presence will help Citigroup remain a bank of choice for companies with cross-border needs. While this global presence offers some advantages, there are weaknesses. It is expensive and complicated to maintain, and the bank's markets desk also produces low returns. As a result, returns for ICG have been mixed.

Toronto-Dominion is one of the two largest banks in Canada by assets and one of six that collectively hold roughly 90% of the nation's banking deposits. The bank derives approximately 55% of its revenue from Canada and 35% from the United States, with the rest from other countries. Toronto-Dominion has done an admirable job of focusing on its Canadian retail operations and growing into number-one or -two market share for most key products in this segment. The bank also has number-two market share for business banking in Canada. With over CAD 400 billion in Canadian assets under management and top-three dealer status in Canada, and being the number-one card issuer in Canada, Toronto-Dominion should remain one of the dominant Canadian banks for years to come.

Wells Fargo remains in the middle of a multiyear rebuild. The bank is still under an asset cap imposed by the Federal Reserve, and we don't see this restriction coming off in 2023. Wells Fargo has years of expense-saving projects ahead of it as the bank attempts to get its efficiency ratio back under 60%. We also see a multiyear journey of repositioning and investing in the firm's existing franchises, including expanding its middle-market investment banking wallet share, investing in the cards franchise, and revitalizing a wealth segment that has lost advisors for years. These tasks take on increased importance for a bank that has been on defense for years after its fake accounts scandal broke in late 2016.

After years of issues following the financial crisis of 2008, Bank of America has emerged as one of the preeminent U.S. banking franchises. The bank has one of the best retail branch networks and overall retail franchises in the United States, is a Tier 1 investment bank, is a top four U.S. credit card issuer, is a top three U.S. acquirer, has a solid commercial banking franchise, and owns the Merrill Lynch franchise, which has turned into one of the leading U.S. brokerage and advisor firms.