Company Reports

We expect Altium’s strategy to focus on continuing to take market share with its core design software suite and to expand usage of its online marketplace for electronic components, Octopart, as the industry digitizes.

We expect Technology One’s strategic focus to revolve around increasing the number of products used by its local government and education customers in Australia and New Zealand. To a lesser extent, we expect Technology One to focus on vertical expansion and geographic expansion into the UK education market.

WiseTech’s long-term strategy centers on becoming the operating system for the logistics industry as the industry digitizes.

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 Hansen’s strategy to focus on pursuing inorganic growth opportunities, either through geographic expansion of existing functions or expansion into new functional adjacencies.

We expect Objective’s strategy to focus on investing heavily to continue expanding its product portfolio, both organically and inorganically. Over the past decade, Objective invested heavily to adapt its core enterprise content management software suite to evolving customer needs, especially around the transition to the cloud and remote working. We view these trends as maturing and we don’t see other trends requiring a similar magnitude of investment on the horizon. As such, we believe Objective will increasingly have capacity to deploy capital into more industry-specific applications of ECM, such as for assessing building development applications and compiling new regulations. We view the expansion into planning and building most favorably, with Objective’s products already commanding dominant market shares in Australia and New Zealand, both of which have outsize construction sectors.

We expect SiteMinder’s strategy to be wide-ranging, including a focus on attracting new customers, increasing penetration of its current product suite, and developing and launching new products. We view SiteMinder’s strategy as appropriate, despite its wide-ranging nature, as all three focus areas provide large and highly winnable opportunities.

Geely Automobile is one of China’s largest automakers, selling about 1.7 million cars in 2023. Unlike state-owned automakers, which often team up with foreign brands to produce vehicles, Geely is dedicated to developing mass-market homegrown cars.

China Feihe strives to be a topnotch domestic infant milk formula, or IMF, producer in China. It has been able to price its products at a premium comparable with imported products, and is marketed as tailored for Chinese babies. The company has invested considerably in building out its sales network in maternity stores across China, as the category is mainly sold through this channel. Feihe possesses a scalable distributing and retail outlet network in the country.

Yidu Tech provides AI solutions to hospitals, policymakers, and life sciences companies using its algorithm, Yiducore, which works by aggregating and converting raw data sets that lie within the IT systems of hospitals in China into structured and standardized data. Its algorithm is embedded in 2.6 billion full-cycle medical records covering 600 million patients from hospitals and provides models from real-world evidence. As more hospitals and disease registries partner with Yidu, Yiducore can process AI solutions more efficiently and accurately as it adds incremental data to its algorithm. As a result, hospitals can use real world-based evidence from the records to determine the best course of action for treatment and drugs for their patients. We think that the rich amount of data from medical records is a barrier entry, and Yidu has built a client base comprising 88 of the top 150 hospitals. We also believe that it is gaining traction commercially with life sciences companies but this has not yet translated to 40%-50% year-on-year revenue growth as previously forecast. Life sciences companies can use the medical database, insights, and disease models to increase chances of clinical trial success while shortening the cost and time. There are switching costs as life sciences companies are unlikely to switch solution provider mid-clinical trial, and should a trial be successful through all four phases, the recurring life span of a contract could potentially last nine years.

Since its initial public offering in late 1995, MSC Industrial has increased its top line at an impressive 11% compound annual rate. Over the past 25 years, MSC has become one of the largest industrial distributors in United States and is especially well known in the metalworking industry, where we estimate it enjoys approximately 10% market share. MSC has historically been a conservatively capitalized company, but it is not afraid to flex its balance sheet when the right opportunity presents itself. The company spent $900 million to acquire J&L Industrial Supply in 2006 and Barnes' North America distribution business in 2013, which bolstered its metalworking and inventory-management products and services.

Universal Music should be a primary beneficiary of the ongoing growth we expect throughout the music industry. Universal is the largest of the major record companies and currently has an impressive roster of both older and more modern artists. We believe the record companies will remain integral to maximizing recording artists’ earnings, and the moats the major record companies have should enable them to maintain relationships with current stars and continually sign the next generation of talent while also maintaining control of legacy songs and recordings for many years. With Universal’s scale, resources, and current roster, we think it is better positioned than any peer.

Warner Music is the third-largest of the three major record companies, and it should be a primary beneficiary of the ongoing growth we expect throughout the music industry. We believe record labels will remain integral to maximizing recording artists’ earnings, and the moats the major record companies have should enable them to maintain relationships with current stars and continually sign the next generation of talent while also maintaining control of legacy songs and recordings for many years.

Five9 is squarely positioned to benefit from industry tailwinds including the transition of contact center operations to the cloud, and a shift toward digital first customer engagement and automation. While we forecast Five9 will continue to take market share, the firm faces intensifying competition from contact center as a service, or CCaaS, peers, and communication industry titans competing for a slice of the massive contact center cloud transition pie. In this environment, we expect Five9 will need to continue to invest heavily in go-to-market efforts and product innovation to attract and retain new clients, weighing on profitability upside.

Along with Equifax and TransUnion, Experian is one of the Big Three credit bureaus. Experian's US core credit bureau business is relatively mature and, as a result, the company has been expanding through adjacent products and in emerging markets.

Banco Santander Chile is the largest bank by assets in the Chilean market. This scale has afforded the bank the second-cheapest deposit base in the country, significantly contributing to Santander Chile’s impressive returns on equity, which are typically in the upper teens. The bank has benefited from the introduction of the "Superdigital" and "Santander Life" accounts that are part of a larger trend toward increased adoption of digital banking in Chile. The bank’s digital offerings are tailored to reach an estimated population of 4.5 million unbanked Chilean citizens and have allowed the firm to trim down the size of its branch network.

Philips is a one-stop shop for imaging-related devices with an established footprint in many hospitals, which positions it to benefit from long-term healthcare trends like the transition to noninvasive or minimally invasive procedures and increased hospital demand for efficiencies. Through several divestitures and acquisitions, Philips has transformed itself from an industrial medical conglomerate into a healthcare company and primary supplier across hospitals, which facilitates the introduction of new products and the displacement of smaller suppliers with more depth in a single product line but lack of breadth. In many of its underlying markets, the company operates in an oligopoly where significant market share is controlled by a few players. Several of Philips' products require proprietary software or service; this provides stability to cash flows and helps to lock in customers. In addition, the company has carried out several divestments and acquisitions, which we believe has reinforced its positioning.

Tesla is one of the largest battery electric vehicle automakers in the world. In less than a decade, the company went from a startup to a globally recognized luxury automaker with its Model S and Model X vehicles. The company competes in the entry-level luxury car and midsize crossover sport utility vehicle markets with its Model 3 and Model Y vehicles. Tesla also sells a light truck—the Cybertruck, and a semi truck. The company plans to launch an affordable SUV and luxury sports car in the future.

Paylocity's unified platform appeals to clients who prefer an all-in-one payroll and human capital management, or HCM, solution. Clients can customize through add-on modules, including talent management and benefits administration, alongside core payroll functionality, and integrate with over 400 third-party providers, including referral partners such as benefit brokers. A unique feature of Paylocity's platform is the complementary inclusion of communication and engagement tools, including social collaboration platform Community, and video, survey, and learning management tools. These features aim to drive higher employee engagement and satisfaction, benefiting the client as well as Paylocity by entrenching the software into the business.

While Rakuten is most notable for its e-commerce platform, Rakuten Ichiba, we believe the company’s success in Japan lies in its first-mover advantage in establishing a comprehensive ecosystem composed of e-commerce, fintech, and mobile network services. Over the years, Rakuten accumulated over 40 million monthly active users, and close to 80% of users use more than two Rakuten services. We identify the convenience of accessing multiple services with one Rakuten ID and Rakuten’s point reward system as the main contributors for user stickiness.