Company Reports

Keyera's integrated business model is now finally benefiting from the Key Access Pipeline System. The pipeline will connect the firm’s northern plants to its Fort Saskatchewan liquids hubs and will consist of pipelines for condensate and natural gas liquids mix. By increasing its proportion of long-term contracts and maximizing utilization rates across facilities, Keyera is positioned to take advantage of more stable cash flows in the future while capitalizing on Canadian oil sands, natural gas, and NGL growth.

E.On transformed itself in 2016 by spinning off Uniper, its commodities and power generation business, and ultimately selling its stake in Uniper to Fortum in January 2018 for EUR 3.7 billion. This deal refocused E.On on networks, retail, and renewables.

The top healthcare real estate stands to disproportionately benefit from the Affordable Care Act. There is an increased focus on higher-quality care in lower-cost settings. The best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is starting to enter its senior years, and the 80-and-older population, which spends more than 4 times on healthcare per capita than the national average, should almost double over the next 10 years. Long term, the best healthcare companies are well positioned to take advantage of these industry tailwinds.

Lithium Argentina is a pure-play lithium producer with two assets in Argentina. The company was created as a result of the former Lithium Americas separation, which separated the firm's Argentina and North America businesses.

Even with the intended benefits enhanced focus should unlock, we fail to see an enduring competitive advantage in WK Kellogg as a stand-alone business. For one, we surmise its leading market share position in the North American cereal aisle is diluted as its entire portfolio sits in a shrinking category. In our view, this dents its relationships with retailers that strive to stock shelves with key traffic drivers. Further, without ties to the faster-growing snacks arm (which now sits inside narrow-moat Kellanova), WK Kellogg is left with subpar scale (generating less than $3 billion in sales annually), which likely weakens its bargaining power when sourcing key ingredients, negotiating slotting fees, and securing advertising placements.

We award a narrow economic moat rating to Femsa based on the intangible assets and cost advantages at major subsidiaries Coca-Cola Femsa and the Oxxo small-format retail chain, which jointly make up 75% of the firm's total sales and 90% of operating profits.

We’ve long held that no-moat Church & Dwight lacks the scale, resources, and negotiating prowess of its larger brethren. We see this as an unenviable position, particularly when juxtaposed with persistent macro and competitive pressures, cost headwinds, and supply chain tension. Although Church has emphasized 40% of its mix skews toward value offerings, we're skeptical this alone will insulate it over the longer term. Rather, we posit Church’s category mix makes the firm susceptible to consumers trading down or out if their financial position warrants. Beyond the top line, we surmise material profit expansion could be delayed by intensifying competition (from well-resourced peers and lower-priced private-label offerings) if promotional spending steps up from relatively dormant levels of the past few years. As a smaller operator with less-entrenched retail relationships, we think this could put Church in the crosshairs, capping margins. Further, while inflationary headwinds in aggregate have died down, labor, transportation, and logistics remain elevated and could put added pressure on its margin trajectory.

For the first time in more than two decades, almost all of Public Service Enterprise Group's earnings are from its regulated transmission and distribution businesses in New Jersey, giving it a risk profile similar to most US utilities.

We expect Avita’s RECELL to pose a significant challenge to the standard of care for larger burns, currently a skin graft sourced from elsewhere on the patient’s body. We believe Avita will be successful based on the product’s clinical performance, ease of use and relative price point. RECELL creates Spray-on Skin within 30 minutes from a skin sample, typically less than 5% of the size required in a graft. It has been clinically demonstrated to heal the burn site as effectively as a skin graft without creating a large donor site wound.

Dexus is a diversified Australian REIT that generates income from charging rent; managing property for clients; funds management, which typically includes property management and investment management services; and development and trading.

With around 550 million monthly active users, Tencent Music Entertainment is the largest music streaming platform in China. The firm monetizes its services mainly through monthly subscriptions, livestreaming, and advertising.

BHP is the world’s largest miner by market capitalization. Its main operations span iron ore and copper, with smaller contributions from metallurgical coal, thermal coal, and nickel. The company is also developing its Jansen potash project in Canada. BHP merged its oil and gas assets with Woodside Energy in June 2022, vesting the Woodside shares it received to BHP shareholders, and exiting the sector. It purchased copper miner Oz Minerals in fiscal 2023.

As China rebalances away from infrastructure and construction-led growth, Anglo American is likely better positioned than most diversified peers. The company has greater exposure to consumption-oriented commodities like platinum and diamonds, which should enjoy better demand growth than investment-oriented commodities like iron ore and copper that prospered most in the past decade.

KDDI is Japan's second-largest telephone company, and Japan is one of our favorite wireless markets. In addition, the firm is now addressing most of our concerns regarding its long-term wireless strategy. Japan has three incumbent wireless operators, all of which have traditionally competed more on service and handset features than on price. Industry regulation in the country has been fairly benign, and the industry has traditionally successfully weathered threats to this competitive balance. In 2008, a fourth carrier, eMobile, entered the market, but it was acquired by SoftBank after only gaining about 3% share. This relatively benign competitive environment has allowed the industry to operate as an oligopoly, as evidenced by churn rates among the lowest in the world at less than 1% per month.

As a telecom and technology investment company, SoftBank Group represents a unique investment opportunity. The current portfolio is a mix of internet and technology investments with a stake in a developed-market mobile services business. Internet and artificial intelligence, or AI, are the two main themes likely to underpin most investments in the future. The company can invest in public and private markets both directly and through is Vision Funds that invest in mostly pre-IPO technology companies.

Starbucks is the largest specialty coffee chain in the world, generating $36 billion in sales during fiscal 2023. The firm’s attention to premium-quality coffee distinguishes it from chained competitors, alleviating pressure from quick-service peers and at-home consumption while underpinning substantially higher pricing for what has historically been a commoditized product. This positioning looks increasingly important to us moving forward, as vending, single-serve coffee machines, and quick-service restaurants continue to improve at the lower end of the market, and as China approaches a similarly tiered competitive equilibrium.

With over 1,400 affiliated retail locations across multiple different banners, no-moat Canadian Tire serves as one of Canada’s leading general merchandise retailers. The firm sells a wide assortment of goods spanning automotive parts, home furnishings, appliances, and home improvement items at its iconic namesake banner, which accounts for over 500 locations. Recent acquisitions of various sporting goods and apparel chains have further bolstered its footprint and given the firm an ingrained presence in Canadian communities.

Like peers, narrow-moat Kimberly-Clark has been inundated by a slew of challenges, including a tepid economic environment and elevated cost pressures. In this context, management has been forthright that its market share has lagged, and consumers are increasingly trading down to lower-priced options in select categories to preserve cash. We think this could prompt a step-up in promotions across its categories—now that industrywide supply/demand imbalances have largely been put to rest.

A decade-long transformation of Michigan's utility regulation and DTE Energy's business mix sets up the company for a long runway of growth investment opportunities. The clean energy transition is the cornerstone of this growth.

NOV is the fourth-largest diversified oilfield-services supplier after Schlumberger, Halliburton, and Baker Hughes. It competes with the Big Three in many end markets, but its significant presence in equipment manufacturing sets it apart. NOV is the largest original equipment manufacturer of rig systems for oilfield-services providers in both onshore and offshore markets. It's maintained majority market share for two decades, controlling over half the market.