Company Reports

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.

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.

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.

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.

We've been big proponents of consolidation among the US-based asset managers, expecting firms to pursue scale in existing product sets as well as pursue nonaffected investment products like alternative assets to offset the impact of fee and margin compression driven by the growth of low-cost passive products.

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.

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.

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.

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.

Several issues have made it increasingly difficult for asset managers that are running predominantly active portfolios to generate positive organic AUM growth. Poor relative active investment performance, the growth and acceptance of low-cost index-based products, and the expanding power of the retail-advised channel are leaving them more dependent on market gains to increase their managed assets. We believe there will always be room for active management, but the advantage of getting and retaining placement on platforms will go to asset managers with greater scale, established brands, solid long-term performance, and reasonable fees.

Singtel is the incumbent telecommunications company in Singapore and has expanded into emerging markets in the Asia-Pacific region and India. Singtel’s solid free cash flow is supported by its market-leading position in Singapore and as the second-largest service provider in Australia. Emerging-markets investments hold significant presence in their respective markets and deliver cash flow through dividends to the group. Along with consistent dividend streams from its investments, we expect Singtel to deliver moderate growth in profits and free cash flow despite strong competition in its core Australian and Singapore markets. Most excess cash generated from its core telecom businesses and investments will likely be paid back to shareholders through dividends with the company committing to a 70%-90% dividend payout ratio.

Charter Hall Retail REIT owns or partially owns an Australian portfolio of about 50 convenience-focused shopping centres, and several hundred service stations leased to BP, and Ampol in Australia, Gull in New Zealand. More than half of rent comes from tenants we view as unlikely to ever miss rental payments.

Eni’s strategy to achieve carbon neutrality in 2050 mirrors that of many peers as it seeks to invest in new low-carbon businesses. Although, its legacy hydrocarbon business will remain the primary earnings driver during the next decade like peers, it is differentiating itself with a satellite model by separating its business segments for potential public listing or outside investment. Although novel, we have our doubts this structure will be fully appreciated by the market as opposed to outright divestment and return of capital as others are doing.

Williams-Sonoma has carved out a modest position in the $750 billion global home category and the $80 billion US business-to-business industry, according to the firm. It has historically launched most of its brands organically in underserved segments, which has supported some brand awareness, facilitating top- and bottom-line growth. Its ability to drive business relies on customer loyalty and smart marketing and merchandising and the firm has access to a lengthy history of customer analytics stemming from its catalog days. This should help Williams-Sonoma maintain its market share as it attempts to enter adjacent categories.

Nufarm is a major producer of crop-protection products including herbicides, fungicides, and pesticides, selling into all major world markets. The company is leveraged to growing demand for crops for biofuels, and food from rapidly industrializing markets such as China and India. Growth should come from astute brand and offshore business investments and from a customer service-focused strategy. However, the global crop-protection markets are competitive and earnings are cyclical, given a reliance on seasonal conditions. Sumitomo Chemical's investment in Nufarm endorses the quality of its global distribution. Collaboration broadens product portfolios and adds distribution in Asia.

We expect Xero’s near- and medium-term strategic focus to revolve around rationalizing its areas of investment, especially against a backdrop of normalizing demand for business software.

We expect GDS Holdings to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, Guangzhou, Hong Kong, Chengdu, and Chongqing. As its network of interconnected data centers grows it can more easily cater to the demand from its key cloud service provider customers allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. The company is also excited about its international expansion into Southeast Asia. The company has announced an equity funding deal for its international business, raising USD 672 million for 47.3% of the business from private equity investors. Management has not ruled out further private equity capital raises for the international business and an IPO of this business is also a possibility down the track.

PDD Holdings is a social e-commerce platform that encourages users to enjoy lower prices by teaming up to make purchases. Easier sharing of PDD deals with social contacts through Tencent’s social network leads to lower traffic acquisition costs versus peers. The firm focused on low-tier cities and white-label merchants, followed by the CNY 10 billion program launched in 2019 to subsidize consumers for higher-priced products such as Moutai, Apple iPhones, and agricultural products. PDD aims to offer good value across a wide range of categories and price points. To increase average revenue per user, PDD uses subsidies to induce consumers to make purchases in categories they haven't purchased in before. PDD's active buyers in the year ended March 2022 were 882 million, likely higher than that of Alibaba, though we estimate its spending per active user was 37% of Alibaba. CEO Chen Lei expressed his goal in 2021 to continue subsidies so as to replace Alibaba as the shopping platform of choice for the 1 billion consumers in China.

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.