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Stericycle’s stock surged in late trading on May 24 after Bloomberg News reported that the medical waste specialist is considering a sale. Sources said other medical waste companies or infrastructure funds could be interested. We were surprised by this news, although we had thought that this could be the outcome for Stericycle someday, after it was further along in its turnaround story. We think Stericycle could be a good fit with traditional solid waste collection and disposal firms Waste Management or Republic Services, which may increasingly look to adjacent markets for growth. Indeed, Republic Services recently expanded into environmental solutions with its acquisition of US Ecology, which treats and disposes of hazardous and nonhazardous industrial waste. Our understanding is that WM struggled to profitably gain scale in the medical waste space years ago and exited most of its related businesses, and Stericycle handles medical waste collection and disposal activities for Republic Services as an alliance partner.

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Teva Pharmaceutical is the leading generic drug manufacturer in the world. By our estimate, roughly 70% of its total sales are derived from generics and off-patent branded drugs, and the company continues to suffer low- to mid-single-digit erosion year over year in developed markets like North America and the majority of Europe. Because price and margin headwinds exist predominantly in small-molecule oral tablets that are easy to produce, Teva has been downsizing its generics pipeline and focusing on complex generics. It historically went after 80% of drugs coming off patent, but it will now focus on just 60% because the incremental value from the remaining 20% is marginal. This enables the company to allocate development spending to other more profitable avenues, such as complex generics—drugs that have complex formulations or dosage forms or are injected or have more-complex administration. Complex generics are more difficult to manufacture, which limits competition. Price, volume, and margin are highly dependent on the competitiveness of a drug, so complex generics pave an opportunistic road for Teva. However, other players are employing a similar strategy, so success in this area relies on Teva’s ability to seek out profitable drugs and efficiently launch them to market.
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Lowe's is the second-largest home improvement retailer globally, set to capture around $84 billion in sales in fiscal 2024. With continued focus on retail fundamentals (merchandising, operational efficiency, supply chain improvements, omnichannel shopping experience, and customer engagement), Lowe's has been able to better leverage costs while maintaining its low-cost position. The firm retains some of the cost savings and passes the rest on to its customers through everyday low prices, creating a flywheel effect. Intangible asset and scale-based cost advantage support our wide moat rating.
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KKR has built a solid position in the alternative-asset management industry, using its reputation, broad product portfolio, investment performance track record, and a cadre of dedicated professionals to not only raise capital but to maintain its reputation as one of the go-to firms for institutional and high-net-worth investors looking for exposure to alternative assets. Unlike the more traditional asset managers, which have had to rely on investor inaction (driven by either good fund performance or investor inertia/uncertainty) to keep annual redemption rates low, the products offered by alternative asset managers can have lockup periods attached to them, which prevent investors from redeeming part or all their investment for a prolonged period.
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Genesis operates a mix of thermal (coal and gas) and hydro generation, with total annual production of approximately 7,000 GWh. The company's hydro generation provides it with low-cost generation during times when there is sufficient rainfall and/or snowmelt. Conversely hydro generation can fall sharply when inflow to the firm's lakes recedes because of insufficient rainfall. During such times, production from its thermal power plants can be ramped up to make up for the shortfall in hydro generation. Spot prices can increase dramatically during periods of low rainfall, reflecting the demand-supply mismatch caused by lower nationwide energy output. Such times tend to favor Genesis as the excess generation is sold at higher prices. Consequently, Genesis' profitability and margins can increase during periods of low rainfall and high electricity prices.
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For much of the past decade, we've bemoaned the fortunes of the traditional US-based asset managers, noting that they would face significant secular headwinds (from aging baby boomers to the growth of passive investing) and cyclical headwinds (leading to more-volatile equity and credit markets) that would pressure their top and bottom lines.
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Cromwell Property Group is an Australian property company that currently generates most of its income from rent on properties it owns, and a lesser amount from property funds management. The latter includes property management services, investment management, and property acquisitions and development, in collaboration with customers. The group tends to own co-investment stakes in funds or properties that it manages for clients, particularly in its wholesale business. This provides a degree of alignment with clients, as well as providing another indirect source of rental income.
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Investors in Xiaomi will be hoping the company can leverage its proven ability to manufacture and market good value-for-money smartphone hardware into a sticky software ecosystem that will allow the company to increase its margins and returns. It will also try to use its "Internet of Things" products to help build this ecosystem. During its IPO in 2018 the company committed to limit its margins on hardware products (smartphones and Internet of Things) to 5%, but in 2019 it started a premiumization strategy, helped with Huawei pulling out of the market and has been increasing its mix of higher-end products ever since. We expect this pivot toward higher-end products to continue over the next four to five years as it helps revenue growth and increases gross margins.
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We consider Workday to be a best-of-breed cloud-only platform for human capital management, or HCM, software. After debuting in 2005 as a first mover in the cloud HCM space at an ideal time—when enterprises were looking to make the move from on-premises to cloud software solutions—Workday has benefited from its timeliness as well as its high-quality product and reputation for smooth implementations. Now that customers have transitioned to a cloud solution with Workday, we think the possibility of another vulnerable event like the cloud migration that would leave Workday susceptible to customers switching, is unlikely. Instead, we see wide-moat Workday as having robust switching costs which, in our view, will only get stronger as the company builds off its core HCM offering.
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A confluence of several issues—poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel—has made it increasingly difficult for active asset managers to generate organic growth, leaving them more dependent on market gains to increase their assets under management. While we believe there will always be room for active management, the advantage when it comes to getting and maintaining placement on distribution platforms will probably go to asset managers that have greater scale, established brands, solid long-term performance, and reasonable fees—with Janus Henderson falling short in most of these categories.
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Through its access to high-quality mineral deposits, Sociedad Quimica y Minera de Chile is a large, low-cost producer of lithium, iodine, and nitrates used in specialty fertilizers. SQM’s crown jewels are its geologically advantaged lithium and caliche ore assets. SQM’s low-cost lithium deposit in the Salar de Atacama boasts the highest concentration of lithium globally and benefits from high evaporation rates in the Chilean desert. As electric vehicle penetration increases, we expect high-double-digit annual growth for global lithium demand, one of the best growth profiles among commodities.
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Live Nation is highly focused on live entertainment at venues ranging from intimate clubs to large stadiums. The firm controls over 338 concert venues that hosted over 50,000 events and 145 million fans in 2023. Ticketmaster, the firm’s ticketing platform, sold over 620 million tickets for over 10,000 clients in 2023. The firm is facing an antitrust lawsuit that seeks to break up the company's ticketing and concert promotions businesses, but we don't expect the outcome to have a material impact on operations or valuation.
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DuPont de Nemours is a world-renowned specialty chemicals company with a history spanning over 200 years and an ever-evolving portfolio. In the current iteration, DuPont is the specialty chemicals company created in 2019 from the DowDuPont merger and subsequent separations. However, by mid-2026, DuPont plans to separate into three companies.
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We assess that Charles Schwab is fine from a liquidity and capital standpoint, and that earnings should be on a tenable upward trajectory within the next year. While it is best known for its retail investor and registered investment advisor platforms, Charles Schwab is a savings and loan holding company that had around $300 billion of deposits at the end of 2023 and generates about half of its revenue from net interest income.
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Lincoln Electric is a manufacturer of welding, cutting, and brazing products, claiming leading market share globally. Alongside rivals ITW and ESAB, Lincoln Electric is one of the top three players offering a complete welding-solutions package, including equipment and consumables, which we think differentiates the firm from smaller competitors.
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KE Holdings, or Beike, is a leading real estate brokerage company in China with an over 30% share in gross transaction value, or GTV, for existing homes. It charges commissions on housing transactions through self-owned agents and collects service fees on existing-home transactions of connected third-party or franchise realtors. We think Beike has successfully combined the network reach of its online platform with an enhanced offline store experience to retain leadership in a competitive brokerage market. A continuing top-line growth, coupled with improved store efficiency, should translate to stronger operating leverage for Beike as well, in our view. That said, we expect slower turnover for lived-in homes and mounting competition to weigh on its commission rate. As the company cuts fee rates in main cities to ramp up GTV, we foresee a tempered uptick in margins over time.
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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.
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Allegro is the largest online marketplace in Central and Eastern Europe, or CEE, providing high-quality, affordable products to a growing regional consumer class. With 45%-50% share of the Polish e-commerce market, by our estimates, Allegro's key priorities tie to defending its commanding position in Poland, institutionalizing internal processes to drive capital-efficient growth, and expanding its third-party marketplace footprint into adjacent CEE countries.

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