Weekly Compilation of Fund Letters - week ended Mar 14, 2025
Wasatch Long/Short Alpha Fund
Wasatch Long/Short Alpha Fund Q4 2024 Commentary (Mutual Fund:WALSX)
Company Name: ICF International, Inc. (ICFI)
Market Cap: $1.4B
On the long side, one of the Fund’s largest detractors was ICF International, Inc. (ICFI). ICF is a technology, management and policy consultant that provides services to government and commercial clients, with the U.S. government accounting for a significant portion of its revenue. The stock dipped in reaction to Donald Trump’s plans to substantially cut government spending. However, we don’t believe those cuts will have much effect on ICF. In fact, if federal government spending cuts are on the way, we could envision a scenario in which departments rely more heavily on consultants such as ICF.
Company Name: Acadia Healthcare Company, Inc. (ACHC)
Market Cap: $2.8B
Turning to short positions, contributors were stocks that declined in price. The largest contributor among those shorts was Acadia Healthcare Company, Inc. (ACHC). The company provides behavioral health services through its network of facilities around the country. We shorted the stock because we felt its business model was deteriorating. The stock was down after the company reported quarterly operating results that were not well received by the market. Additionally, the stock fell after news that the Veteran Affairs Department is investigating whether Acadia has defrauded government health insurance programs. That news was the latest in a string of investigations involving the company.
Company Name: IonQ, Inc. (IONQ)
Market Cap: $4.9B
Among shorts, detractors are those stocks that rose in price. One of the largest among this group was IonQ, Inc. (IONQ), a quantum computing company. IonQ announced a new contract win during the period. But the stock’s rise was likely due more to news that Google had unveiled a new quantum chip that drastically reduces computation times. This news heightened investor enthusiasm for the field of quantum computing. However, we believe enthusiasm surrounding the company is out of touch with the company’s fundamentals, and we continue to hold a short position in the stock.
https://www.firsteagle.com/sites/default/files/2023-10/FE-SCO_commentary.pdf
First Eagle Small Cap Opportunity Fund
Company Name: TTM Technologies, Inc. (TTMI)
Market Cap: $2.3B
TTM Technologies manufactures electronic components, including advanced printed circuit boards, radio frequency components and microwave/microelectronic assemblies. The company has been executing on a plan to grow its higher-margin engineered product business and reduce exposure to its cyclical consumer-oriented commodity business. It reported strong results for its most recent quarter, with growth in the higher-margin aerospace/defense and data center computing end markets. TTM has also been increasing its production capabilities with the opening of a new printed circuit board manufacturing plant in Malaysia. The company appears well positioned to benefit from investment in artificial intelligence, and we believe the ongoing execution of this growth plan will support valuation expansion.
Company Name: Graham Corporation (GHM)
Market Cap: $327M
Graham Corporation manufactures mission-critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy and process industries. The company reported strong sales, margin improvement and a growing backlog for its most recent quarter and raised its forward earnings outlook. These results were attributable to the successful acquisition of specialty turbomachinery maker Barber-Nichols in 2021, which helped expand Graham’s defense and space business. We like the company’s strong financial position and disciplined approach to balancing growth initiatives with returning cash to shareholders through stock buyback.
Company Name: Remitly Global, Inc. (RELY)
Market Cap: $4.6B
Remitly Global is an online remittance service that provides money transfers to over 150 countries. The company reported better-than-expected results for its most recent quarter and raised its forward guidance. These results eased concerns that the company’s large marketing spend would not generate sufficient revenue growth. Assuming continued strong execution, Remitly should continue to grow sales and earnings.
Company Name: Universal Technical Institute, Inc. (UTI)
Market Cap: $1.4B
Universal Technical Institute offers transportation and skilled-trades training programs, as well as continuing education programs in the allied health, dental, nursing, patient care and diagnostic fields. The company is undergoing a multiphase “North Star Strategy” to accelerate growth, diversification and optimization; this plan includes new programs and geographic expansion, higher investment in marketing and admissions, and workforce optimization and facilities utilization. UTI reported better-than-expected results for its most recent quarter, with growth in both its transportation and skilled trade segment and its healthcare business.
Company Name: Air Transport Services Group, Inc. (ATSG)
Market Cap: $1.4B
Air Transport Services Group provides medium widebody freighter aircraft leasing, air-cargo transportation and support services.
During the third quarter, the company entered into an agreement to be acquired by a private equity firm at an attractive premium to its market valuation. The all-cash deal is expected to close within the next six months.
Company Name: CareDx, Inc (CDNA)
Market Cap: $1.1B
CareDx provides diagnostic surveillance solutions for organ-transplant recipients, including testing products and services to match donors with recipients and monitor post-transplant care. Expectation-level testing volumes reported for the latest quarter disappointed investors hoping for better results.
Company Name: Century Communities, Inc. (CCS)
Market Cap: $2.1B
Century Communities constructs entry-level homes in the US, primarily in the Sun Belt. Rising mortgage rates necessitated higher incentives to clear inventory, pressuring gross margins. With a solid track record of strong operational execution, Century appears well positioned to weather cyclical downdrafts in housing. As demand for affordable housing continues to outstrip supply, Century should be able to gain share in new and established communities.
Company Name: Tronox Holdings plc (TROX)
Market Cap: $1B
Tronox produces titanium dioxide pigment to brighten and strengthen paints, coatings and other products. Higher interest rates during the quarter dampened the outlook for existing-home sales, a catalyst for paint demand, while anticipated weaker new-home sales also dampened restocking. Tronox is well positioned to weather the cyclical downturn in housing. Recent trade barriers in the EU and Brazil combined with potential tariffs on Chinese titanium dioxide could provide competitive pricing relief while industry consolidation may further ease pressure.
Company Name: Zeta Global Holdings Corp. (ZETA)
Market Cap: $4B
Zeta Global operates a multichannel data-driven cloud platform that utilizes artificial intelligence to provide consumer data to enterprise clients and provides marketing automation software worldwide. Financial results for the most recent quarter came in weaker than expected and also relied on a heavy mix of political and advocacy ads, which is not part of Zeta’s core focus. Recently surfaced questions about Zeta’s acquisition accounting and data-collection practices triggered our exit from the position.
Company Name: Beazer Homes USA, Inc. (BZH)
Market Cap: $660M
Beazer Homes is one of the nation’s largest home builders, serving entry-level buyers primarily in the western and southeastern US. Shares traded down in the quarter on rising mortgage rates. Additionally, the company’s gross margins have been pressured by a mix shift toward more speculative construction and increased incentives to motivate sales. We remain constructive on the shares: secular prospects for homebuilders remain strong as the US housing market remains underbuilt, and Beazer is well positioned to grow earnings as they increase penetration.
Greenhaven Road Capital Main Fund
Company Name: PAR Technology Corporation (PAR)
Market Cap: $2.6B
PAR’s underlying point of sale (POS) business has an annual churn of less than 5%. This is a fantastic, stable base upon which to build a business that will “get there.” Their continued growth and their successful price increases further aid their ability to “get there.” Through a combination of organic growth and acquisitions, PAR ended the year as a much larger and stronger company, growing annual recurring revenue ('ARR') from $137M at the end of Q4 2023 to more than $270M at year-end 2024.
The company has several paths for continued organic growth, including the rollout of Burger King (U.S.), which has already contracted with PAR. As another positive sign for PAR’s cross-selling initiatives, Burger King just bought PAR’s back- office solution for their U.S. corporate stores. Other paths for organic growth include increasing penetration in convenience stores with their loyalty and payments products (just launched), offering PAR’s existing customer base POS solutions for their international operations (thanks to the TASK acquisition), continued cross-selling (payments, back office, loyalty, online ordering), and continued new logo wins (I expect another Tier 1 customer this year). I believe PAR will also continue to fuel growth via acquisitions. For example, PAR recently bought an analytics platform that is immediately accretive and can be sold across the company’s customer base for years to come.
Looking forward, the competitive landscape remains favorable, the pipeline strong, and the value proposition compelling. The multiple may contract, but I believe that, even without any new acquisitions, in 2 years this company will be more than 50% larger on a recurring revenue basis, substantially profitable, and able to handle its debt, which does not come due until 2030. Even if PAR is not “there” quite yet, they still had a transformative year in 2024 and are well-positioned for profitable growth going forward. I believe that they can become a Rule of 40 company next year.
Company Name: Lifecore Biomedical, Inc. (LFCR)
Market Cap: $215M
Of our top holdings, Lifecore faces the most uncertainty in "getting there." But the path exists: They can triple production with no additional capital investment. Their largest customer, Alcon, is through its destocking phase. Alcon also has contractual minimum volume step-ups that will kick in for 2027. The terms of the contracted volume step- ups have not been disclosed, but I estimate them to be on the order of $25M in the medium term and more than $50M in the long term.
At recent conferences and on investor calls, there has been a noticeable increase in management’s references to the potential for new contracts for existing drugs (tech transfers) as well as the potential for a large contract with a multinational company.
Thus, in addition to the contractual step-ups that should help drive revenue, multiple other levers are being pulled. The combination of cost containment and revenue growth/operating scale make the path to improved margins quite plausible.
The new CEO, Paul Josephs, brings substantial business development experience from Mylan. Because of investments already made, Lifecore can nearly triple production with no additional capital required. With increased volumes and better expense management, management presentations have indicated that EBITDA margins should increase from 15% to 25%+ in the medium term. The final ingredient for being a multi-bagger would be multiple expansion. For context, two other CDMO businesses, Catalent and Avid Biosciences, were recently purchased for more than 22X EBITDA and 6.3X sales, respectively.
Simple math shows the potential: At $300M revenue and 25% EBITDA margins, you get $75M EBITDA. Apply a 15X multiple and assume 50M shares after debt conversion, and you reach $20 per share versus today's sub-$7 price. There is also the potential for higher multiples and higher EBITDA margins. We are not playing to make 5% or 10% here. Interestingly, the CEO made his first open market purchase of shares this year and took a contract heavily tied to share price.
Company Name: Cellebrite DI Ltd. (CLBT)
Market Cap: $3.9B
Cellebrite has a decade-long history of growing quickly and profitably and is a Rule of 50 company (growth rate + EBITDA margin), growing their recurring revenue by 26% while maintaining EBITDA margins of 24%. I believe this trend should continue as they are in the beginning of an upgrade cycle: management expects 15% of the customer base to have upgraded in 2024, leaving a long runway for 2025 and 2026. The company should accelerate its federal opportunity by obtaining FedRamp certification in 2025, which will make it easier for Federal customers to purchase Cellebrite products. Even without FedRamp, the U.S. Federal government represents more than 30% of revenue.
As discussed in previous letters, I believe Cellebrite will be a large beneficiary of AI as they are integrating it into their products, and I believe they are well-positioned to dramatically increase customer productivity. They have distribution, data, and guardrails to make sure only the proper data is analyzed. Since agencies are constrained on hiring talent, software is the most viable path to reducing case backlogs and increasing closure rates (the KPIs of Cellebrite’s customers). Cellebrite should be able to capture some of the incremental value they will deliver.
While I have little doubt that Cellebrite will “get there,” I do wonder who the CEO will be and if it will remain an independent public company. After 20 years at the helm, Yossi Carmil stepped down from the CEO role at the end of 2024, announcing the plan after reporting Q3 revenues exceeding $100 million. Good for him! Cellebrite’s Executive Chairman of the Board, Tom Hogan, has stepped into the interim CEO role. Tom has a long history in software and was an operating partner at Vista Equity, which has a great playbook for optimizing software companies. I speculate that Tom will become the permanent CEO and may, in the medium term, try to sell the company to Axon Enterprise (AXON), which is a 5% shareholder.
Company Name: MarketWise, Inc. (MKTW)
Market Cap: $261M
We sold almost all our MarketWise (MKTW) holdings during the quarter, nearly concluding our worst investment since the founding of the Partnership. In retrospect, I underestimated just how large of a beneficiary the company, a multi-brand content and technology platform for self-directed investors, was from Covid. I take some solace in that, during the entire IPO and subsequent 3+ years, insiders were net buyers of shares and the largest holders and board members never sold a share. I had high hopes for Porter Stansberry as CEO. He led the company for the 20 years before their IPO. His numbers were a thing of beauty. Profitable growth year after year after year. He left the company shortly before the IPO but returned in 2023. People matter and when he left the CEO role, I began to think about the exits. MarketWise built an incredible business with only $50K of invested capital, and they may in fact be able to rebuild the growth algorithm, but we are unlikely to be shareholders for that journey.
Baron Capital
Company Name: Red Rock Resorts, Inc. (RRR)
Market Cap: $4.9B
Red Rock Resorts, Inc. (RRR) is a “family business.” Red Rock was founded by Frank and Lorenzo Fertitta’s dad 40 years ago, after he had worked at several Las Vegas casinos in various positions from bellman to blackjack dealer to general manager of a downtown casino. That is when he had the idea to start a casino that catered to “locals” who worked in Strip casinos not to the tourists who vacationed annually or less frequently at Strip properties. The Fertittas’ vision of “locals” casinos has enabled Red Rock to create the second largest gaming business in America...after the Las Vegas Strip...bigger than Atlantic City...Chicagoland...and the Mississippi Coast...with virtually no competition!
Why? What is Red Rock’s competitive advantage? In 1997, Las Vegas enacted legislation that restricted development of casinos in communities near schools, shopping centers, and hospitals away from the tourist corridor on the Las Vegas Strip. Exceptions to these restrictions were given to properties that had already been zoned for casinos before residential development. The Fertittas then acquired land, had it zoned for casinos before communities were developed, and “land banked” almost all the properties in the Las Vegas Valley not on the Strip that can now be developed for casinos.
When Frank and Lorenzo spoke about their family’s Las Vegas “locals casinos” at the 2024 Baron “Building Legacy” conference, the brothers first mentioned they have “known Ron for more than 31 years!” It took us awhile to leave the glitz of the expensive and not as profitable Las Vegas strip casinos...but we finally began to invest in the Fertitta’s unique and competitively advantaged “locals” casinos in 2016. The stock has increased about 3.1 times since our initial investment, a 14.0% annualized rate of return. Red Rock is now our 16th largest investment and represents 1.1% of our Firm’s AUM.
Extravagant and glamorous, spare no expense, Las Vegas Strip casinos typically cost several billion dollars each to build. Those properties typically earn high single-digit unlevered returns on capital. Red Rock casinos, built in communities generally a half hour or more from the Strip, where the Strip employees live, are the “Cheers” bars of the casino industry. They cater not only to individuals who work in Strip casinos but increasingly, to the wealthy who have moved to Las Vegas from nearby high tax states. Red Rock’s patrons are served by dealers and hostesses who not only know their names but those of their children and grandchildren...and their favorite menu items and drinks. Red Rock’s customers visit on average four times a month, not once a year or every other year as is common for “The Strip” casinos’ guests. Red Rock’s casinos in general cost hundreds of millions to build, not billions, and earn nearly 20% returns on unlevered investment!
One more thing. When COVID-19 hit, and casinos and other hotels and resorts cut expenses and laid off employees, Frank and Lorenzo did the opposite. All their employees were notified that although Red Rock casinos would be closed during COVID, its employees would continue to be paid their salaries in full until Red Rock reopened their casinos! That’s the sort of thing “family businesses” do. The Fertittas regard their employees as family and along with their physical properties consider them their most important assets. Red Rock is now the preferred place of employment in that city...which means that its customers will likely be treated better by loyal Red Rock’s employees than anywhere else.
Baron Small Cap Fund
Baron Small Cap Fund | Q4 2024
Company Name: Intapp, Inc. (INTA)
Market Cap: $4.8B
Intapp, Inc. offers a software platform for professional services verticals such as private equity, legal, and consulting firms. Shares rose on strong quarterly results, with year-over-year revenue growth of 17% beating expectations and operating margins more than doubling compared to the same period last year. Management also reported a record pipeline for new deal activity, particularly in large enterprises, boosted further by demand for its new AI products. The favorable backdrop for M&A and capital markets deal activity created by the election outcome should also benefit Intapp indirectly, as stronger deal activity typically leads to higher fees, hiring, and technology investment in its investment banking and private equity end markets.
Company Name: The Baldwin Insurance Group, Inc. (BWIN)
Market Cap: $2.6B
Shares of insurance broker The Baldwin Insurance Group, Inc. gave back some gains (up 61% in 2024) due to weaker financial results and an expected earnings headwind from the loss of an insurance partner. The company reported healthy14% organic revenue growth and modest margin expansion yet missed the Street’s more bullish expectations, which led to a modest cut to full-year EBITDA guidance. In addition, it disclosed the need to replace an insurance partner in 2025, resulting in a 3% to 5% headwind to earnings. Rising interest rates also weighed on shares due to an elevated leverage profile consisting primarily of variable rate debt. We continue to own the stock, as we expect Baldwin to gain market share while expanding margins and reducing leverage over the next several years. It is a neat, fast-growing business that we believe is on the path to being a more important distinctive player in its space.
Company Name: Installed Building Products, Inc. (IBP)
Market Cap: $4.8B
Installed Building Products, Inc. installs and delivers insulation and complementary building products for the U.S. residential and non-residential construction markets. Shares detracted on broader investor concerns that growth had stalled in its core residential market, with buyers facing headwinds, including crimped affordability (as mortgage rates continued to rise). We view these headwinds as somewhat temporary and remain optimistic about the company’s multi-year, multi-pronged growth strategy of organic and acquisitive growth.
Polen Global SMID Company Growth Portfolio
https://www.polencapital.com/sites/default/files/Polen_Global-SMID-Company-Growth_Commentary.pdf
Company Name: Warby Parker Inc. (WRBY)
Market Cap: $2.5B
Warby Parker, a U.S.-based omnichannel retailer of eyewear products with a unique vertically integrated direct-to-consumer business model, reported encouraging quarterly results. The company experienced compelling growth in its glasses business and continued momentum in contact lenses and optometry. The substantial investment in optometrists is yielding results, driving improved gross margins through enhanced utilization. Warby Parker appears to be emerging from a challenging period, where it was adversely impacted by post-pandemic changes in consumer behavior. Company management’s steps to reduce costs appear to be paying off. More recently, we’ve seen fundamentals starting to inflect, with marketing spend recovering now that margins have settled. We think the company has the potential to enhance its profitability as demand continues to recover and it completes and capitalizes on heavy investments in areas like optometry services, which previously weighed on margins.
Company Name: Revolve Group, Inc. (RVLV)
Market Cap: $1.7B
Revolve Group, an online apparel retailer targeting primarily the Millennial and Gen Z demographics, was another top performer after demonstrating improving fundamentals following a challenging period to end 2024, with the stock’s total return up over 100% for the year. While the consumer environment remains under pressure, we are encouraged by the company’s efforts to drive cost efficiencies, reduce return rates, expand product lines, and continue its international push. We believe Revolve is well-positioned to grow earnings at an accelerating rate over the near term while the long-term outlook remains intact.
Company Name: Insight Enterprises, Inc. (NSIT)
Market Cap: $4.9B
Insight Enterprises, a global provider of IT solutions to small and medium-sized businesses across various end markets, disappointed over the quarter. While the company has established itself as a trusted technology partner enabling IT modernization and cloud migration over recent years, during the fourth quarter, revenue, margins, and forward guidance were all below previous estimates. This was driven by challenging IT spending trends in Insight’s underlying client base. Our research suggests that Insight will benefit from a return to more normal levels of IT spending as companies prioritize hardware upgrades and continue to migrate workloads to the cloud.
Company Name: Cellebrite DI Ltd. (CLBT)
Market Cap: $3.8B
We also bought Cellebrite (CLBT), an Israeli company that is the global leader in digital forensics software. In layman’s terms, they hack cellphones and other electronic devices and then collect, analyze, and store that data for law enforcement. This business is seeing booming demand as digital evidence is now the most important evidence in most crimes. In addition, Cellebrite has been expanding its market by adding new product features and functionality that have allowed it to upsell and cross-sell customers and drive higher average revenue per user. We believe the business can grow revenues by 25% per year and maintain or expand its 25% EBITDA margins for the next three years while trading at a discount to its global peers.
Polen U.S. SMID Company Growth Portfolio
https://www.polencapital.com/sites/default/files/Polen_US-SMID-Company-Growth_Commentary.pdf
Company Name: Goosehead Insurance, Inc (GSHD)
Market Cap: $2.8B
Goosehead Insurance, a digitally enabled insurance brokerage business, was a top contributor on the back of positive earnings results including a rising 2024 revenue guidance. The company continues to execute well amidst a challenging macro backdrop, driving robust expense management, higher productivity, and compelling agent headcount growth.
Turtle Creek
https://www.turtlecreek.ca/wp-content/uploads/2025/02/Turtle-Creeek-Quarterly-Commentary-2024-Q4.pdf
Company Name: Bread Financial Holdings, Inc. (BFH)
Market Cap: $2.3B
Moving on to specific companies, the largest positive contributor in our flagship fund, both for the quarter and full year, was our investment in Bread Financial (BFH). Bread is a regulated financial services company primarily focused on the issuance of private label and co-branded credit cards. It enjoys a strong return on equity (ROE) in excess of 25% as compared to Canadian banks that are in the low to mid teens. And while nearly 60% of Bread’s credit card holders have a prime credit rating, the remaining 40% have credit ratings that are below prime. Despite higher losses from serving these lower credit customers, the higher revenue yield results in higher ROEs. Bread is an excellent example of the power of our long term thinking. It was, in fact, a negative contributor to our performance in 2023 and 2022 before generating a significant positive return for us in 2024. And despite its healthy move this past year, we feel it still holds the potential for significant price appreciation in the near future and it remains one of our largest holdings. There are a number of potential tailwinds for Bread including an expanding traded price multiple, a shrinking share count due to repurchases and the possible dropping of a proposed rule by the Consumer Financial Protection Bureau (“CFPB”) to cap credit card late fees. Under prior Democrat administrations, the CFPB introduced numerous regulations and restrictions around the financial services industry. The proposed cap on late fees would have made it uneconomic to service lower credit score customers. Not only does the late fee importantly serve as a deterrent to skipping payments, it also adds to the total economic return that allows the provision of credit to these higher risk customers. The CFPB under President Trump is widely expected to be more business friendly and less focused on increasing an already hefty regulatory burden.
Company Name: WillScot Holdings Corporation (WSC)
Market Cap: $5.1B
The final company we added this year is WillScot Holdings (WSC). WillScot is the dominant provider of turnkey space solutions in North America: think modular offices, temporary classrooms, portable storage containers, etc. When we established the position, the company was in the midst of a large acquisition – buying a smaller competitor called McGrath Rentcorp. We were sceptical that the acquisition would be approved by the competition authorities and so didn’t include this acquisition in our financial forecast. As it turned out, WillScot had to cancel the proposed acquisition and announced a meaningful share repurchase program – right in line with our assumptions.
Company Name: ATS Corporation (ATS)
Market Cap: $2.6B
Another of our large holdings, ATS Corporation (ATS), delivers about 15% of their product from Canada to the United States, but they have sufficient capacity in the United States to shift production over time if tariffs are implemented. The most obvious example of a potential negative impact on our portfolio is BRP, an average size holding, which has the majority of their production in Mexico, so we are paying as close attention to the Mexican situation as we are to the Canadian.
ClearBridge SMID Cap Growth Strategy
Company Name: RadNet, Inc. (RDNT)
Market Cap: $3.7B
We added a new position in RadNet (RDNT), in the health care sector, which owns and operates freestanding diagnostic imaging centers. The imaging market is seeing secular growth from a shift in the site of care from the more expensive inpatient setting to freestanding centers like RadNet, which has both an attractive organic share opportunity and new construction and acquisition-based geographic expansion potential. AI applications also offer RadNet both an additional revenue stream and cost savings potential.
ClearBridge SMID Cap Growth Strategy
Company Name: Oklo Inc. (OKLO)
Market Cap: $3.2B
The wave of corporate interest in nuclear energy continued with another major announcement. Oklo (OKLO), a leading developer of molten sodium small modular reactors (SMRs), and Switch, a large data center operator, disclosed they had signed one of the largest corporate power agreements in history. Under the deal, Oklo will deploy 12 gigawatts of its SMR technology to power Switch's data centers across the United States. Oklo will develop, construct, and operate its Powerhouses-as it calls its SMRs-under a long-term series of power purchase agreements.
Switch CEO Rob Roy underscored the scale and significance of the agreement:
"Our relationship with Oklo underscores our commitment to deploying nuclear power at a transformative scale for our data centers, further enhancing our offering of one of the world's most advanced data center infrastructures to current and future Switch users."
These announcements represent a seismic shift in how corporate America views nuclear energy. The demand for AI-driven computing is growing exponentially, and with it, the need for stable, carbon-free baseload power. The world's largest tech companies are no longer waiting for policymakers to act-they are directly investing in nuclear power to secure their energy future. This marks the beginning of what could be the most important investment cycle in nuclear energy since the mid-20th century.
Donville Kent Asset Management
https://donvillekent.com/wp-content/uploads/2025/03/DKAM-February-2025-Monthly-Commentary.pdf
Company Name: Enterprise Group, Inc. (E.TO)
Market Cap: $141M
A common comment of ours has been that long-term compounders don't get the respect they deserve because it is very hard for investors to understand the impacts of compound growth. In the case of Enterprise, they are a different company since launching their EPP division just a couple of years ago. There are some legacy viewpoints on the business where people don't see the transformation that has occurred.
This recent stock decline started when Canaccord initiated research on Enterprise. In our opinion, their projections will be embarrassingly wrong. The stock declined on the report because they projected significantly less growth and profitability than what we believe will occur. Our projections are more in- line with Raymond James which is projecting 50% higher EBITDA than what Canaccord has! They don't mention the IRR or ROIC for Enterprise at all. Nowhere in the report. This is the #1 reason why we have such high conviction in the stock.
The stock deserves a higher multiple because it has more than double the ROIC, quadruple the organic growth versus its comparables, and a net cash balance sheet versus the average extremely levered balance sheets of the competitors.
We're not focusing on "the next quarter" because we're confident on where the business will be in a couple of years. Their reported Ǫ4 coming later this month won't show the top line and profitability growth that is now baked in for 2025. We've been using any weakness as an opportune time to add to our position because their 2025 and 2026 results will be markedly higher. We expect that from the end of 2024 to the end of 2026, Enterprise will triple its earnings per share and is now trading on <6x 2026 cash earnings.6
The macro in the Nat Gas market continues to get more buy-in from some of the largest players. From a tariff perspective, Canada still produces the cheapest Natural Gas by a wide margin, meaning the imposed tariffs shouldn't hinder demand plus our ability to export to Asia for the first time ever comes online in a few months.
Shell (SHELL) expects a 60% Rise in Global LNG Demand by 2040 - Global demand for LNG is estimated to rise by around 60% by 2040, driven largely by economic growth in Asia, AI impact and efforts to cut emissions in heavy industries and transportation, Shell said in an annual report on Tuesday Demand for natural gas continues to rise globally as the world transitions to cleaner fuels. Industry forecasts LNG demand to reach between 630 M and 718 M metric tons a year by 2040, Shell said in its 2025 annual LNG outlook.7
Company Name: Zedcor Inc. (ZDCAF)
Market Cap: $232M
Zedcor is an example of a stock where the stock price seems to be dictating the narrative instead of the improving fundamentals. They should report a strong quarter but more importantly we foresee the business being orders of magnitude larger than it is today and we've been using the weakness in the stock market as a buying opportunity.
Considering where the company is now, we think the company will uplist the stock to the TSX this year. This should bring in some institutional investors that couldn't invest while on the venture as well as being a more stable investor base.
Company Name: MDA Space Ltd. (MDALF)
Market Cap: $2.3B
MDA Space reported Q4 results on Friday, March 7th, and the stock increased 18% that day. The results provided a great example of the available opportunities in this market. Their growth and backlog are being driven by the massive demand for low earth orbit satellites. The addressable market has expanded significantly because the launch costs have declined significantly in recent years. MDA has a $5 billion backlog of business and a $15 billion pipeline.
MDA Q4 Earnings Results
Revenue $347m +69% EBITDA $71m +69%
EBITDA Margin 20.5% Cash Earnings $40m +58% Net Cash balance sheet 2025 Guidance suggests 45% revenue growth and 40% EBITDA growth Stock is trading on less than 10x 2026 cash earnings.8 Tariff related "We have done detailed work and are deeply engaged with governments and agencies on both sides of the border. We believe our potential tariff exposure is manageable. Approximately 90% of our backlog is outside the US, and only about 25% of our suppliers are based in the US. We are confident in our ability to manage the situation without significant impact on our business."
Member discussion