Company Reports

BeiGene is an emerging Chinese biotechnology company with a global leading position in hematologic cancers thanks to its core drug Brukinsa. Since its approval in 2019, Brukinsa’s stronger efficacy and superior safety profile have allowed BeiGene to gain market share from existing drugs. In the next five years, we expect Brukinsa to continue contributing more than 50% of BeiGene’s total revenue.

Population growth and economic growth in Arizona have helped Pinnacle West ride through a turbulent couple of years dealing with state regulators. Some of those regulatory setbacks have reversed and Pinnacle West could be on the verge of another long run of attractive earnings growth and dividend increases.

As the majority shareholder of Canada’s largest retailer Loblaw as well as leading real estate investment trust Choice Properties, George Weston capitalizes on resilient consumer demand for groceries and pharmacy services, and benefits from synergies between the two operating subsidiaries. We view its financial performance as anchored by steady dividends from the retail and property arms, but don’t think the firm has a durable competitive edge based on our no-moat rating on Loblaw, which makes up the bulk of revenue and profits for the holding company.

Telenor is the incumbent telecom operator in Norway and operates in Nordic and Asian countries. Its business is mature and growing slowly with high reliance on mobile operations, but it generates significant free cash flow and has increased dividends nicely in recent years. Telenor expanded into emerging markets earlier than many European telecom operators.

Lam Research is one of the largest providers 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.

Tesco, the largest grocery retailer in the United Kingdom in terms of sales and store network, has successfully completed an ambitious turnaround. It has had one of the worst times in its history over the past decade, including an accounting controversy in 2014 and a subsequent decline in profits and growth owing to the advent of discounters in the UK food retail business.

Lamb Weston offers investors pure-play exposure to the frozen potato market as North America’s largest producer (more than 40% share), followed by McCain (30%), Simplot (20%), and Cavendish (7%-8%) though it trails McCain globally. The firm primarily sells French fries to restaurants. Despite its niche focus, we view frozen potatoes as boasting robust demand growth.

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.

Zions Bancorporation is one of the smaller regional banks that we cover. It is primarily a commercial bank focused on small to midsize businesses in the western half of the United States, where on-the-ground relationships are key. Although Zions struggled during the financial crisis, it has made meaningful improvements to its credit risk management and operational efficiency. We think the main determinants of the bank’s future success will be the interest-rate environment, the stability of the deposit base, and the ability to maintain and improve operational efficiency.

Regions Financial is a midsize U.S. regional bank, primarily concentrated in the Southeast. After the disastrous acquisition of AmSouth before the global financial crisis, Regions has stabilized its core operations and turned into a solid regional bank. It has shied away from dramatic acquisitions since and has improved its risk-management and underwriting capabilities, becoming a safer bank in the process. Regions also boasts one of the more advantaged deposit bases under our coverage, with lower costs leading to extra profitability. The bank's focus on improving operational efficiency and building out fee-generating businesses has also improved its profitability profile, as the firm has managed to keep its expense growth to a minimal level for years now while also increasing fees.

M&T Bank is a midsize regional bank with operations throughout the Northeastern United States. The bank has a valuable commercial real estate franchise, with much of the rest of its business comprising other commercial-focused (as opposed to retail-focused) operations, although the bank does have retail operations. M&T has a history of good management, good underwriting, and deep on-the-ground relationships. The bank is a solid regional operator.

Fifth Third is a midsize regional bank, primarily concentrated in the Midwest. The bank has a mix of commercial and retail banking offerings, as well as a healthy mix of corporate banking/capital markets, wealth, and payments fees.

Gallagher is somewhat of a tollbooth business. The company enjoys sticky customer relationships and its revenue is driven by insurance transactions, which are stable as most insurance purchases are non-discretionary. Since its fees are often set as a percentage of premium levels, it does have some exposure to the insurance pricing cycle, but revenue for the business is still fairly steady. The company’s cost structure is flexible, and capital needs are minimal. The net result is relatively healthy and stable free cash flow.

FactSet has built an attractive subscription-based business providing data and analytics to the financial-services industry. FactSet is best known for its research solutions, which include its core desktop offering geared toward buy-side asset managers and sell-side investment bankers. Research is the largest component of the firm’s annual subscription value but is FactSet’s slowest-growing segment due to its maturity and pressures on asset managers. In addition, as acquisition deal volume has decreased, this has pressured the investment banking side of FactSet’s research business.

TC Energy faces many of the same challenges as Canadian pipeline peer Enbridge but also offers important contrasts. Both firms offer a 5%-7% growth profile and a utilitylike 95%-98% of earnings that are highly regulated or contracted, with several years of project backlog. Enbridge largely focuses on oil assets, while TC’s focus is natural gas.

Humana remains a top-tier medical insurer and pays US caregivers to provide services through an integrated and value-based approach while also making the insurance experience easy to navigate for end users. Perhaps not surprisingly, given its founding as a nursing home in the 1960s, Humana places a special focus on serving elderly people, especially in its top-tier position in Medicare Advantage plans. Given US demographic trends and the increasing penetration of Medicare Advantage plans in the eligible population, Humana remains at the forefront of one of the fastest-growing areas in US medical insurance.

Bouygues is a conglomerate with disparate businesses. In its construction segment, it develops big infrastructure projects such as motorways, rails, power plants, and tunnels. Despite having small margins, the construction business is usually more resilient to the cycle as infrastructure spending tends to be less affected by recessions than residential construction. Bouygues’ cost structure is highly variable, so when difficult times come, the group can adjust its cost base rapidly, although this also prevents it from benefiting from operating leverage in times of high demand. Both Bouygues Construction and Immobilier (residential construction) have high exposure to France, as a significant portion of business comes from there. Through Equans, acquired in 2022, Bouygues gained exposure to attractive end markets like solar energy, nuclear energy, and data centers.

GEA Group is a leading supplier of highly engineered capital equipment and solutions to the food processing and pharmaceutical manufacturing industries. GEA’s reputation for innovation and safety positions the company to win equipment orders—particularly from customers who are sensitive to reputational risk from incidences of food contamination and those who wish to differentiate their product offerings.

GPT’s strategy is to operate a diversified portfolio of high-quality property assets in Australia’s largest cities and to reshape exposure by taking advantage of structural tailwinds such as rising e-commerce and population growth. This is executed by divesting low-yielding assets, actively developing logistics sites, and replenishing landbanks. Today, the retail and office segments, including contributions from their respective funds management, each account for around 40% of the group’s funds from operations. Logistics contributes less than a quarter. In 2010, the retail/office/logistics split was about 60%/30%/10%. The gross lettable area of logistics sites has roughly doubled over the past decade, mostly on the eastern seaboard of Australia.

About two thirds of Ingenia Communities’ midcycle EBITDA is from land-lease property sales and rent. Ingenia collects rent on about 16,000 property sites, across 100 land-lease, rental, and holiday park communities on Australia’s east coast. The firm’s strategy is to build higher-end communities primarily in Australia’s coastal and outer metropolitan areas. Following significant land acquisitions over the past few years, Ingenia has a pipeline of about 5,000 new dwellings, and more than a dozen sites currently in development or planning. All are targeting over-55s and leveraged to the thematics of aging population and the rising cost of housing.