Company Reports

We view TriNet as well placed to take share of the expansive, fragmented small and midsize business payroll and human capital management market, through industry consolidation and rising demand for comprehensive, outsourced solutions. Regional providers or do-it-yourself solutions such as Intuit’s QuickBooks or Microsoft Excel service most of the small-business market, creating meaningful scope for greater penetration by value-added providers like TriNet.

The top healthcare real estate stands to benefit disproportionately from the Affordable Care Act. With an increased focus on higher-quality care being performed in lower-cost settings, the best owners and operators in the industry, which can provide better outcomes while driving greater efficiencies, should see demand funneled to them from the best healthcare systems. Additionally, the baby boomer generation is starting to enter its senior years, and the 80-plus population, an age range that spends more than 4 times on healthcare per capita than the national average, should almost double in size over the next 10 years. Long term, the best healthcare companies are well positioned to take advantage of these industry tailwinds.

The challenge for Itaú Unibanco will be to navigate a volatile Brazilian economy and uncertain political environment, which is still working through the impact of high inflation, which exceeded 12% in April 2022 and the high interest rates intended to fight it. That said, conditions are improving as inflation has moderated, falling to under 4% in May 2024, and the Brazilian central bank has begun to cut rates, reducing them to 10.50% from a high of 13.75%, creating prospects for a soft landing for the Brazilian economy. The bank will face margin headwinds from lower interest rates, but a healthier economy should lead to higher loan growth and reduced credit risk for the bank.

With its advantageous exposure to the coffee and tea markets and alignment with current consumer trends, JDE Peet's enjoys an edge over many of its competitors that are working to optimise their brand portfolios. We believe the company can continue to be one of the drivers of the ongoing consolidation of the coffee sector while delivering solid returns, thanks to its established supply chain position, brand strength, and durable cost advantage.

While AGF Management's struggles are far from over, we believe the firm is on the right track. Long bouts of investment underperformance and increased competition have weakened the firm's competitive position in the Canadian market over the past decade. The company also relies more heavily on third-party distributors than its peers, with the Big Six banks and insurance companies (which handle the bulk of fund distribution in Canada) looking to expand their own fund manufacturing operations. While embedded commissions have endured, we expect the growth of fee-based accounts and increased transparency around fees and performance to put pressure on active managers with higher-than-average fees and below-average performance.

Tilray cultivates and sells cannabis in Canada and exports into the global medical market. It also sells CBD and alcohol. The company is the result of legacy Aphria acquiring legacy Tilray in a reverse merger and taking the target name in 2021.

American Electric Power operates numerous utilities, providing investors protection from any one adverse regulatory ruling. Nearly all of the company’s $43 billion capital investment plan from 2024-28 focuses on regulated investments.

Verisk Analytics is the data and analytics backbone of the U.S. property and casualty insurance industry. The firm leverages a vast contributory database and industry relationships dating to its origin as an insurance provider consortium to derive analytical solutions that improve underwriting and claims outcomes, and operating efficiency. Alongside a contributory database with over 32 billion standardized records of insurance transactions, Verisk has established a proprietary database of P&C risks facing over 16 million commercial properties, environmental hazards facing every postal address in the U.S., and is a leader in catastrophe modelling used by insurers, financial institutions, and governments.

UiPath offers end-to-end cross-application process automation software. It deploys a combination of automation technologies including robotic process automation, application programming interface, artificial intelligence, and low-code/no-code functionality to automate complex, multistep processes. UiPath’s core RPA technology boasts leading market share by revenue and has garnered accolades from industry analysts for superior product functionality and strategy.

The substantial price premium that Lindt & Spruengli commands over mainstream brands—estimated to be around 100% in the United States and the United Kingdom and around 25% in large European markets—together with its leading market share in key regions signals the presence of durable competitive advantages from brand intangible assets in the form of brand strength. This has led us to award Lindt a wide moat rating, supported by the company’s ability to maintain its premium positioning over the long term by pricing in line with inflation and peers, and its focus on a segment of the chocolate market that has experienced somewhat stable competition and is largely shielded from the threat of private label.

Newmont is the world’s largest gold miner, with a portfolio reflecting three major deals in recent years. First, it acquired fellow gold producer Goldcorp for a relatively mild premium in 2019. Not only did it avoid paying a high price, Newmont also extracted better performance at mines where Goldcorp struggled.

Perseus Mining owns three gold mines in West Africa. All were purchased as exploration licenses or development projects. In 2004, the company purchased the Tengrela project in Ivory Coast that became its 86%-owned Sissingue mine. The exploration license that became its 90%-owned Edikan mine in Ghana was bought in 2006, with its 90%-owned Yaoure mine in Ivory Coast acquired as a development project via the merger with Amara Mining in 2016. The purchase of Orca Gold in 2022 also brought the 70%-owned Meyas Sand gold project in Sudan into its portfolio.

South32 is a diversified midtier global mining company spun out from BHP in 2015. South32 has commodity diversification and its operations are generally in the bottom half of their industry cost curves. However, they generally lack maintainable competitive advantage given relatively high capital intensity, a lack of barriers to entry, and in some cases, relatively short reserve life.

Whitehaven Coal offers exposure to global energy and steel demand via thermal and metallurgical coal production. Its mines are in New South Wales, Australia. Salable coal production expanded from 10 million metric tons in fiscal 2014 to about 14 million metric tons in fiscal 2022, largely due to the ramp-up of Maules Creek and the expansion of the Narrabri mine. Driven by its purchase of the Blackwater and Daunia metallurgical coal mines in Queensland from BHP and Mitsubishi in April 2024, equity output is expected to grow to 36 million metric tons by fiscal 2028, split roughly half thermal coal and half coking coal.

Barrick Gold is the world’s second-largest gold miner by production, operating mines in 19 countries in the Americas, Africa, the Middle East, and Asia. Its large portfolio is a result of the 2019 acquisition of Randgold and the combination of its crown jewel Nevada assets with Newmont in a joint venture called Nevada Gold Mines that same year. With Barrick the operator and owning 61.5% of the partnership, NGM has been able to reduce costs thanks to the proximity of mines owned by the joint venture.

Rio Tinto is one of the world’s largest miners with operations in iron ore, aluminum (including bauxite and alumina), copper, and minerals (mineral sands, borates, salt, diamonds). Commodity demand is tied to global economic growth, China’s in particular. Rio Tinto benefited greatly from the China boom over the past two decades. The firm’s largest customer by far is China, with about 60% of sales in 2023. We think the outlook is for earnings to materially decline with demand for many commodities likely to soften with the end of the China boom, particularly iron ore which has disproportionately benefited from the boom in infrastructure and real estate investment.

New Hope offers exposure to global energy demand via increasing thermal coal production at a time when many other miners are winding down or selling their thermal coal assets. The strategy relies on demand for high quality thermal coal remaining robust longer-term. The purchase of a further 40% interest in the Bengalla coal mine in New South Wales in 2018 took its ownership of Bengalla to 80% after the company purchased its initial 40% stake in 2016. Along with the development of New Acland Stage 3, this sees New Hope reliant on thermal coal. We forecast equity salable thermal coal production to rise to about 13 million metric tons in fiscal 2028, up from roughly 7.5 million in fiscal 2023, driven by the ramp up of New Acland Stage 3.

Glencore ranks among the most diversified of the large global miners. As China is the key demand driver for nearly everything Glencore mines, diversification benefits are limited. Glencore’s oil and agriculture businesses (held through its 50% stake in Viterra, which has agreed to merge with competitor Bunge, likely effective in 2024) are less China-centric but relatively small contributors, while its marketing business (roughly 25% of forecast midcycle group EBITDA from 2028) should be relatively resilient to changes in China’s rate of economic growth.

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.

Rio Tinto is one of the world’s largest miners with operations in iron ore, aluminum (including bauxite and alumina), copper, and minerals (mineral sands, borates, salt and diamonds). Commodity demand is tied to global economic growth, China’s in particular. Rio Tinto benefited greatly from the China boom over the past two decades. The company’s largest customer by far is China, accounting for about 60% of sales in 2023. We think the outlook is for earnings to materially decline with demand for many commodities likely to soften with the end of the China boom, particularly for iron ore which has disproportionately benefited from the boom in infrastructure and real estate investment.