Skip to Content

Company Reports

Recent Updates

Persimmon updated investors on its first-quarter trading performance. While homebuyer appetite is improving from its nadir in 2023, Persimmon’s first-quarter net private sales rate—of 0.61 homes per active sales outlet—is little changed from its prior update in March 2024. Consequently, we expect to lower our 2024 estimates given the lack of improvement in homebuyer demand in 2024 year to date and with Persimmon guiding to 10,000-10,500 home completions in 2024 (approximately 8% below our previous forecasts). Nonetheless, Persimmon shares remain attractive, trading at a 43% discount to our GBX 2,300 fair value estimate, which we don’t expect to change materially after downwardly revising our 2024 financial estimates.

All Reports

Company Report

BE Semiconductor Industries understands well how to operate in a cyclical industry like semiconductors. Supply/demand balances can change rapidly in the chip industry, so equipment suppliers need flexibility to adapt. Besi runs a very flexible business model by (1) multisourcing from different suppliers to rapidly adapt capacity to demand changes, (2)
Company Report

Rheinmetall has a well-diversified portfolio across geographies and platforms, with 70% of its revenue from its defense business and 30% from its civil one. Escalating global security concerns are driving higher growth in the defense market as many countries in Europe have underspent since the Cold War ended. European nations are expected to boost defense budgets to a minimum of 2% of gross domestic product, a trend likely to accelerate due to the Russia-Ukraine war. This situation offers a significant opportunity for Rheinmetall to benefit from its well-diversified geographical presence and product portfolio. Rheinmetall generates over 30% of its revenue from Germany, 36% from other European countries, 16% from Asia (with a particular focus on Australia), and the rest from the US and other markets.
Company Report

Meta's Facebook is the largest social network in the world, with over 3 billion monthly active users. The growth in users and user engagement, along with the valuable data that they generate, makes Meta’s platforms attractive to advertisers. The combination of these valuable assets and our expectation that advertisers will continue shift their spending online bodes well for the firm’s top-line growth and cash flow.
Company Report

With a reputation for being the “Intel of the bicycle business,” Shimano’s bicycle components can be found in most high/medium-end bicycles produced by leading frame manufacturers such as Trek and Giant. The firm’s components are part of “groupsets,” which comprise gears, brake-related parts, derailleurs, cranksets, chain, bottom brackets, and cassettes. The newly developed high-end groupsets produced by Shimano tend to be first used by professional cyclists and then the technology ultimately flows to its entry-level groupsets. The company has a history of about 100 years, with a strong brand that is backed by its reputation for quality. As a result, the firm now boasts a leading market share of about 50% in the bicycle components industry. While experienced cyclists will likely choose a brand based on individual preferences in usability, we believe a brand especially influences purchasing at the entry-level within the high-end bicycle product category, which is where Shimano has a particular competitive advantage over its competitors.
Company Report

Lam Research is one of the largest providers in the world of wafer fabrication equipment for semiconductors, and we believe its strong portfolio, particularly for memory chip production, should enable it to maintain and increase its large market share. In our view, Lam will benefit from increasing chip complexity over the long term, including progress toward higher memory chip density and high-bandwidth memory. We expect Lam to increase sales in the midsingle digits over the course of market cycles and over the long term.
Company Report

ServiceNow has been successful so far in executing a classic land-and-expand strategy. First, it built a best-of-breed SaaS solution for IT service management, or ITSM, based on being modular and flexible, having a superior familiar user interface, offering a way to automate a wide variety of workflow processes, and becoming a platform to serve as a single system of record for the IT function within the enterprise. Having established itself in ITSM and the IT operations management, or ITOM, market, the firm moved beyond the IT function. The same set of product design features and technologies allowed ServiceNow to bring its process automation approach to HR service delivery, customer service, finance, and operations. The firm then introduced more sophisticated and industry-specific versions of its core solutions. In September 2023, ServiceNow was one of the first software companies to release generative artificial intelligence solutions. Each of these products carries higher pricing to help drive incremental growth and boost margins.
Company Report

LG Energy Solution, or LGES, was spun off from LG Chemical’s battery subsidiary in December 2020 and listed on the Korea Exchange in January 2022. LG Chemical retains around an 82% share of LGES. The company is one of the top lithium-ion rechargeable battery suppliers globally. It is the third-largest global battery maker for electric vehicles, or EVs, with 15% share by shipment in 2023, according to SNE Research. The company’s customers include many leading automakers such as Tesla, General Motors, Volkswagen, and Hyundai.
Company Report

Great Wall Motor is China’s largest sport utility vehicle and pickup truck manufacturer. Unlike other local automakers who often team up with foreign brands to produce vehicles, Great Wall is dedicated to developing mass-market homegrown cars. The company’s unique SUV-focused strategy has yielded excellent results historically—returns on invested capital averaged 34% during 2013-2017 when China’s SUV market enjoyed rapid growth, far exceeding its weighted average cost of capital. We attribute Great Wall’s past dominance in the SUV space to first-mover advantages.
Company Report

Nidec is a global top supplier of brushless DC motors, which have advantages over other types of motors in energy efficiency, silence, and durability. Owing to their efficiency, the majority of demand for brushless DC motors currently comes from IT applications, and Nidec has established top share in various applications, such as hard disk drive motors, optical disk drive motors, vibration motors for handsets, fan motors, and so on. Furthermore, we expect that Nidec could capture demand from new applications and industries. As approximately half of the electricity generated globally is consumed by motors, the adoption of efficient motors will be necessary to meet environmental standards in many other industries in the near future. We believe that Nidec can leverage its expertise in small precision motors for IT applications and will benefit from increasing demand for brushless DC motors in new business opportunities, such as automobiles, robots, and air conditioners.
Company Report

Regulated margins, mature markets, customer-paid research and development, and long-term revenue visibility allow defense contractors to deliver a lot of cash to shareholders, which we view positively because we don’t see substantial growth in this industry. Indeed, defense budgets usually ebb and flow with a nation's wealth and its perception of danger. In the US, both have been on the rise, and among many allies, notably Germany and Japan, geopolitics is leading to larger military budgets than we've seen for decades. For perspective, we estimate that the portions of the US defense budget relevant to contractors like General Dynamics and its competitors and subcontractors shrank between 2012 and 2017 by 2.6% annualized while these budgets grew between 2018 and 2023 by 6.5% annualized. We think the contractors' budget will continue to grow with modernization, but more moderately, averaging around 2.5%-3.0% over the next five years.
Company Report

Avery Dennison is the largest supplier of pressure-sensitive adhesive materials and passive radio frequency identifiers in the world. Rising consumer packaged good penetration in emerging markets should benefit label growth, while growth in omnichannel retailing and increased radio frequency identification, or RFID, adoption in other industries should aid RFID sales at Avery Dennison.
Company Report

Fortive, spun off from Danaher in 2016, has followed in its former parent’s footsteps and adopted the philosophy underpinning the proven Danaher Business System, which has its roots in the Toyota Production System. The Fortive Business System essentially involves acquiring moatworthy companies, expanding operating margins through Lean manufacturing principles, and redeploying cash flows into further mergers and acquisitions.
Company Report

Boeing is a major aerospace and defense firm that makes most of its money manufacturing large commercial airplanes. Its narrow-bodied planes are ideal for high-frequency, short-haul routes, and its wide-bodied ones are used for long-haul and transcontinental flights. Worldwide sales of narrow-bodies have increased over the past 20 years with the rise of low-cost carriers and middle-class consumers in emerging markets.
Company Report

We think Amphenol is a differentiated connector supplier, an excellent operator, and an exceptional steward of shareholder capital. Amphenol competes against myriad competitors in the fragmented electrical component industry, but its broad array of end markets allows it to expand the top line even amid an individual market downturn. We also think the firm’s singular ability to effect cost controls gives it the highest operating margins of its peer group, and allows it to quickly bring its numerous acquisitions up to firmwide profitability.
Company Report

We think Masco’s financial performance over the past decade has been as much of a self-help story as a story of improving end markets. Masco almost entirely refreshed its senior executive management team in 2014. Since then, it has taken significant measures to build a stronger and more consistent business model. The firm divested its most cyclical and least profitable businesses (it spun off its installation business, now named TopBuild, to shareholders in 2015 and sold its windows and cabinetry businesses in 2019 and 2020, respectively). Management also executed significant cost-reduction initiatives and shored up the firm's balance sheet.
Company Report

Lithia Motors' business model is strong because it is the only large publicly traded dealer operating in rural markets. These markets are unattractive to larger public dealers, as their management teams have no interest in small cities and they have import and luxury brand mixes more favorable to suburban markets. Nationwide, many Lithia brand stores have no competitors within 100 miles, giving Lithia pricing power.
Company Report

Idex owns a collection of moaty businesses that tend to be leaders in their niche end markets, typically holding the number-one or -two market share. The company manufactures a wide array of products, ranging from equipment used in DNA sequencing to wastewater pumps to Jaws of Life hydraulic rescue tools. Idex’s Lean manufacturing prowess allows it to effectively operate in a high-mix and low-volume environment, offering customers a wide variety of highly engineered products that are configurable or customizable. A common theme across the businesses is that they specialize in making mission-critical equipment that performs a vital function but typically constitutes a small part of the customer’s total bill of materials. This aspect contributes to Idex’s narrow moat through customer switching costs and allows the firm to command premium pricing.
Company Report

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.
Company Report

Range Resources focuses on the Marcellus Shale play in southwest Pennsylvania. Natural gas accounts for over two thirds of its production, but a portion of its acreage also yields natural gas liquids, which gives it indirect exposure to crude prices (NGLs are substitutes for certain refined oil products). In 2024, Range Resources is focused on executing a maintenance plan designed to maintain production while keeping spending to a minimum.

Sponsor Center