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Sartorius AG is a leading provider of single-use biopharmaceutical fermentation and fluid management solutions. It offers products and services for life science labs and bioprocessing. For bioprocessing, Sartorius performs consultations and custom installations of biomanufacturing systems for its drugmaker clients, which include bioreactors, filtration and purification systems, and cell analysis systems. This equipment has high disposable consumable requirements, including single-use bioreactor bags, filters, tubes, and containers. The company’s proven expertise in single-use technology, or SUT, and the regulation-validated nature of biomanufacturing gives Sartorius an attractive razor-and-blades model and supports a wide economic moat.

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Sartorius AG is a leading provider of single-use biopharmaceutical fermentation and fluid management solutions. It offers products and services for life science labs and bioprocessing. For bioprocessing, Sartorius performs consultations and custom installations of biomanufacturing systems for its drugmaker clients, which include bioreactors, filtration and purification systems, and cell analysis systems. This equipment has high disposable consumable requirements, including single-use bioreactor bags, filters, tubes, and containers. The company’s proven expertise in single-use technology, or SUT, and the regulation-validated nature of biomanufacturing gives Sartorius an attractive razor-and-blades model and supports a wide economic moat.
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Sartorius Stedim Biotech, the bioprocess subsidiary of Sartorius AG, is a leading provider of single-use biopharmaceutical fermentation and fluid management solutions. Sartorius performs consultations and custom installations of biomanufacturing systems for its drugmaker clients, which include bioreactors, filtration and purification systems, and cell analysis systems. This equipment has high disposable consumable requirements, including single-use bioreactor bags, filters, tubes, and containers. The company’s proven expertise in single-use technology, or SUT, and the regulation-validated nature of biomanufacturing gives Sartorius an attractive razor-and-blades model and supports a wide economic moat.
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Conagra’s business has evolved over the years, from a conglomerate, reinforced by its 2012 acquisition of Ralcorp that bolstered its private-label exposure (later divested at half the purchase price), to its present focus on growing through building brands (rather than just boosting volume). However, food is competitive, and we don’t think it has a portfolio of leading brands and entrenched retailer relationships to warrant pricing power, a handicap relative to branded peers. In addition, it spends notably less in product development and marketing, and we're skeptical better efficiency closes the gap. A subscale portfolio lacking strong brands combined with continued underspending is likely to leave it an industry laggard, in our view.
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PPG Industries is a globally diversified producer of paints and coatings. The company is the world's largest producer of coatings after the purchase of selected Akzo Nobel assets. PPG's products are sold to a wide variety of end users, including the automotive, aerospace, construction, and industrial markets. The company has a footprint in many regions around the globe, with less than half of sales coming from North America in recent years. PPG is focused on growing its coatings and specialty product offerings and expanding into emerging regions, as exemplified by the Comex acquisition.
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As one of the major players in the home care sector in China, Blue Moon has been an early mover in terms of product innovation and channel penetration, which has driven above-industry sales growth in recent years. The majority of Blue Moon’s sales come from laundry detergent, where the market has grown at a CAGR of midsingle digits in the past decade. Consumption premiumization coupled with rising per capita income have led to a market transition from powder detergent to liquid detergent. Blue Moon was one of the early movers in the latter category and has been the market leader in terms of value share for the past 10 years consecutively. Likewise, the company’s early entrance in the liquid soap market with competitive offerings has helped secured its number one position during the same period, despite the advent of international peers such as Procter & Gamble and Reckitt Benckiser. These investments in products that could cater for shifting consumer preferences have conferred satisfactory returns for Blue Moon.
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Vesync focuses on the online marketing and sale of self-designed and self-developed small home appliances and smart home devices, mainly through Amazon (more than 75% of sales in 2023). According to NPD Group, in 2023, Vesync’s Levoit air purifiers ranked first in the US in terms of sales value, with market share of 29%.
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China East Education is the largest vocational training education provider in China. It started from and is best known for its culinary arts education. Over the last three decades, it has benefited from the rapid expansion in China’s labor market, which created strong demand for vocational training education. We think that remains a driver for China East over the next five years given continued industrial upgrading and shortage of skilled labor.
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Aegon has long been plagued by what is sometimes considered a strength of the insurance industry: the diversification of products and geographies. The problem with this lies in the point at which a company chooses to diversify and whether it has pinned down its expertise and market leadership before it moves on to another product or country. In this case, a business can apply what it learned through establishing the local and narrow competitive advantage to its new country or product group. In sum, diversification should be carried out only with core ascendency, and it should be carried out in a very focused and strategic way. Aegon has not done this.
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Beach Energy produces oil, gas, and gas liquids from multiple wholly owned projects and joint ventures in the onshore Cooper, Perth, and Eromanga basins, and offshore in the Otway, Bass, and Taranaki basins. Beach merged with Cooper Basin joint-venture partner Drillsearch Energy in March 2016, which increased equity production to about 10 million barrels of oil equivalent. This more than doubled to over 20 million boe following the purchase of Lattice from Origin Energy in 2018. Lattice’s scale enhancing incorporation, expanding Beach’s footprint across multiple basins and production hubs, resulted in an increase in EBITDA margins. But even with Lattice, our no-moat rating stands. Despite Lattice’s advantages, Beach does not have sufficient resource life beyond 15 years.
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Intuitive Surgical continues to benefit from the ongoing global adoption of robotic surgery, even in the procedures we didn't view as likely to convert. Our long-term positive view about the company's competitive positioning is unchanged even as new competitors have finally arrived on the scene, and with the release of the next-generation platform early in 2024, Intuitive should maintain its dominance.
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About 75% of Stockland's capital is deployed in its commercial property portfolio. Of that, approximately half is retail property, the rest industrial and a smaller amount in office. The other 25% of capital goes into residential development and land-lease. The development business is cyclical and its contribution to earnings can swing substantially, while the commercial rental business is relatively stable. Earnings from the residential business have been remarkably resilient despite interest rate rises and house price falls, in part due to relative affordability from Stockland's developments and land-lease communities, and an undersupply of housing in Australia.
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SL Green Realty is a real estate investment trust engaged in the acquisition, development, repositioning, ownership, and management of commercial real estate properties, principally office properties. Most of its properties are in Manhattan. The company holds interests in approximately 31.8 million square feet, which includes ownership interests in 28.1 million square feet in Manhattan buildings and 2.8 million square feet securing debt and preferred equity investments. The strategy of the company is to maintain a high-quality portfolio of buildings in desirable locations and focus on creating value through new developments, capital recycling, and joint-venture investments. As an example, the company's $3 billion megaproject One Vanderbilt was completed amid the pandemic and has already achieved high occupancy rates.
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Hexcel is one of the three major manufacturers of advanced carbon fiber and resin composite materials for the aerospace and defense industry, though it supplies other industrial markets as well. Composites as a percentage of aircraft weight have increased with each generation of aircraft development as they are strong and durable enough for aerospace purposes but generally lighter and stronger than the metals they replace, which allows airlines to save on fuel expense when operating a lighter plane. We think this trend will likely persist over the next decade or longer, as aircraft development and replacement is a slow-moving process and several important aircraft types, notably narrow-bodies, still have low composite penetration. Hexcel's strategy is to provide composite materials to build successive generations of aircraft within the very consolidated aerospace and defense industry. The company has, over the years, expanded into multiple verticals, experienced downturns, and subsequently rationalized its product lines away from leisure and other undifferentiated applications.
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D.R. Horton is the largest US homebuilder with an extensive geographic footprint, wide product breadth, and affordable price point. Management is focused on expanding the business while generating steady returns on invested capital and positive cash flows throughout the housing cycle.
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Publicis is the second-largest player in advertising (based on revenue), operating in more than 100 countries. Its restructuring to improve availability of and access to its solutions has helped it generate competitive organic growth, increase focus on the faster-growing emerging and the overall digital ad markets, and maintain margins at levels above its peers.
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Quanta Services is a leading specialty contractor for customers in the utility, telecom, oil and gas, and renewable industries. Its strategic focus is positioning Quanta to take advantage of secular growth trends that drive increased demand for contracting services, such as electric grid investment and renewable energy deployment. The company has historically used acquisitions to supplement organic growth in achieving its strategy.
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Infosys is a leading global IT services vendor, with the typical menu of offerings from software implementation to digital transformation consulting to servicing entire business operations teams. We think Infosys has a narrow economic moat, similar to many of its peers, as we believe it benefits from switching costs and intangible assets, although we also see it benefiting from a cost advantage. While the company is experiencing labor shortages like the rest of the industry, we think its moat will be stable, and forays into higher-value industrials engineering will help ensure that Infosys does not miss out on substantial growth trends in the IT services industry.
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Essex Property Trust is the most geographically focused multifamily real estate investment trust, with a portfolio of high-quality multifamily buildings positioned entirely on the West Coast: Los Angeles, San Diego, San Francisco, San Jose, and Seattle. These markets should experience strong, long-term demographic trends like job growth, income growth, decreasing homeownership rates, high relative cost of single-family housing, and attractive urban centers that draw younger populations, which allows the company to maintain high occupancies and drive rent growth above the US average. Long term we expect the company's markets to see job and income growth above national average, which should continue to support above average net operating income growth, though some of these markets are experiencing near-term slowdowns. The company's solid internal operating outlook should be supplemented by its small but opportunistic development pipeline to create value for shareholders.

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