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Ionis reported a larger net loss in the first quarter of 2024 than in the first quarter of last year, due to lower royalties on rare disease drug Spinraza from partner Biogen as well as higher operating expenses as the pipeline advances. This was relatively in line with our expectations, and we’re maintaining our $62 fair value estimate, as we think the firm’s $2.2 billion in cash will help support the firm as it begins a series of key drug launches. We still expect Spinraza is capable of mid-single-digit growth annually, based on solid global demand, although we do expect a slight dip in 2024 due to the timing of orders and competition. Amyloidosis drug Wainua, partnered with AstraZeneca, generated $5 million in sales among polyneuropathy patients in its first quarter on the market, with launches outside the US coming later this year and data for the larger potential indication, cardiomyopathy, still likely in 2025. Alnylam’s similar drug Amvuttra also reduces production of the disease-causing protein; it already competes with Wainua in polyneuropathy and will generate phase 3 data in cardiomyopathy this summer. We expect the firms to share this multi-billion-dollar potential market relatively equally if both are approved, given Wainua’s convenient monthly self-injections. Overall, we think Ionis is making solid progress with its pipeline and commercialization strategy, which should help it build a larger portfolio of medicines that help support the firm’s narrow moat.
Karen Andersen

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Agco is a pure-play agricultural equipment company that has traditionally been focused on tractors. We believe it will continue to be a top-three player in the ag industry. The company has been successful in emerging markets, where customers typically look for reasonably priced equipment. In developed markets, it faces competition from industry leaders Deere and CNH, which provide customers high-quality and strong-performing products, making it difficult for Agco to gain ground. The company’s peers help customers reduce the total cost of ownership through improved fuel efficiency, limited machine downtime, and consistent parts availability.
Dawit Woldemariam
Company Report

DraftKings has extended its leading daily fantasy sports position, first established in 2012, into one of the top positions in the North American sports betting and iGaming market, with the company, along with FanDuel and no-moat MGM, holding a combined 75%-80% revenue share. While sports betting and iGaming are currently legal in around 40 and seven states, respectively, we expect another handful to be added to each market the next few years, as governments look to capitalize on tax revenue generated from the growing activity, which is benefiting from an improved product (parlay and in-play wagering) and technology (customized content) offering across the industry. As a result, we estimate the North American sports betting and iGaming market to reach more than $40 billion in revenue in the early part of the next decade from over $16 billion in 2023.
Dan Wasiolek
Company Report

Core Laboratories is the premier provider of reservoir characterization services. Its foundational core analysis business has been virtually untouched over the last several decades, and the firm has done well to augment its business in line with customer preferences without straying from its niche expertise. Over the last few years, the firm has leveraged its core analysis data to develop a robust portfolio of fluids analysis services, which now represent about 65% of Core’s annual revenue. It’s also leveraged its large swaths of data to develop its Production Enhancement segment, which largely focuses on well completions in the U.S.
Katherine Olexa
Company Report

TCL Zhonghuan strives to achieve global leadership in solar silicon wafer production. Its solar wafer capacity overtaken longtime champion Longi Green Energy in 2022 and became the largest in the world. After years of investment in smart manufacturing, Zhonghuan has built the most automated factories in the industry. This helps increase output and reduce costs.
Cheng Wang
Company Report

ChampionX is a diversified oilfield-services firm providing specialty chemicals solutions and artificial lift services for oil and gas development and production. It also manufactures polycrystalline diamond cutter inserts for drilling and mining rigs. About two thirds of ChampionX’s overall business involves specialty chemicals. The firm is one of the largest specialty chemicals providers in oilfield services: ChampionX and Baker Hughes together control roughly half of the global market.
Katherine Olexa
Company Report

Expeditors International ranks among the top 10 global freight forwarders in a highly fragmented industry, and its record of impressive financial performance leads the industry. The company operates more than 250 offices on six continents, with a core focus on Asia-North America trade lanes, though it's also been gradually expanding its presence on key intra-China and European freight lanes over the past decade. As a global forwarder, the company contracts with airlines and ocean carriers for cargo space then fills that capacity with customers' freight. A large customs brokerage operation (including warehousing and distribution services) complements air and ocean services, along with multimodal and final-mile delivery services in North America (Transcon). Expeditors' asset-light model generated excellent returns on capital of almost 40% over the past decade, with help from its wide economic moat, which is rooted in the network effect.
Matthew Young
Company Report

Under the leadership of former CEO Steve Demetriou, Jacobs Solutions transformed its portfolio to increase recurring revenue and reduce cyclicality. In 2017, Jacobs acquired CH2M for $3.3 billion to bolster its presence in the transportation, water, nuclear, and environmental services end markets. In April 2019, Jacobs Solutions completed the sale of its energy, chemicals, and resources, or ECR, business to WorleyParsons for $3.3 billion. Jacobs Solutions operates four business segments: critical mission solutions, people & places solutions, divergent solutions, and PA consulting.
Krzysztof Smalec
Company Report

Baker Hughes represents one of the “big three” oilfield service firms, in league with industry heavyweights Schlumberger and Halliburton. It maintains sizable share in several end markets, including specialty chemicals and directional drilling, and it’s maintained the lead in specialty chemicals since at least 2008. The majority of Baker Hughes’ revenue comes from international (non-U.S.) markets, which tend to be less volatile, but challenges associated with the inherent cyclicality of oil and gas markets are ever-present. We expect demand for oil and gas will remain high over the next few years, presenting ample growth opportunities in Baker Hughes’ core market.
Katherine Olexa
Company Report

BASF is the world’s largest chemical company, producing commodity and specialty chemicals in nearly every major category. The firm maintains a top-three market position in over two thirds of its businesses. Its products are sold to a wide variety of end markets ranging from industrials to transportation to pharmaceuticals to agriculture. The catalysts business generated around 17% of companywide revenue in 2023, while agriculture generated roughly 15%. The remaining 11 business lines accounted for roughly 10% or less.
Katherine Olexa
Company Report

Garmin specializes in GPS-enabled hardware and software for recreational and defense needs. The company became a household name with the debut of its automotive portable navigation device. However, as smartphone apps have disrupted the PND market, Garmin’s major revenue sources have shifted to its aviation and marine segments as well as its fitness and outdoor segments as the smartwatch market has taken off. We’re confident that Garmin will be able to uphold excess returns on capital in the long term, given the robust operating margins that we think the company will be able to maintain in its moaty segments: aviation, marine, and outdoors.
Julie Bhusal Sharma
Company Report

Spirit AeroSystems is the largest independent aerostructures manufacturer. The firm produces fuselages, wing structures, and structures that house and connect engines to aircraft. Spirit’s revenue has traditionally been almost entirely connected to the original production of commercial aircraft, but Spirit has a growing military aircraft segment and acquired parts of Bombardier's commercial jet business in 2020. Spirit's interim CEO since October 2023, Pat Shanahan, recently stated, "only the OEM can unlock that value" of the manufacturing intellectual property and highly integrated supply chain of large aerostructures production that Spirit offers, which amounted to a pitch for selling the company to Boeing and carving off other parts related to Airbus, which now owns the A220 line pioneered by Bombardier.
Nicolas Owens
Company Report

Bentley Systems is a moaty engineering software firm that has solid growth opportunities ahead, in our view. Since the 1980s, Bentley Systems has carved out its niche in the fragmented computer assisted design market, targeting public works and utilities needs, covering anything from roadway design to wind analysis. These applications are anything but discretionary in nature, as we see little chance of its users going back to pencil and paper for the design and modeling of infrastructure assets. But beyond these mainstay applications, over the last decade, Bentley has expanded its scope from purely single applications to platforms. Such platforms track project management and assets after the design and simulation phases of its applications, and we think they bode significant growth potential as their markets remain underpenetrated—like digital twin deployment. In addition to its platform approach, small to medium-sized businesses remain a growth avenue for the firm as they make up about half of Bentley’s $30 billion total addressable market but only about one third of revenue. These factors combined have us confident Bentley can achieve top-line growth over 13% over the next five years, with margin expansion in tow.
Brian Colello
Company Report

We think Williams is well positioned to benefit from clean energy investments as well as the need for AI and data centers to rely on gas and gas storage as a back-up to renewables. This is a positive for investors, creating a more stable financial profile and more high-return growth opportunities than most of its midstream peers. Clean energy investments could become a material growth area in the next few years, with the recent Orsted partnership a particularly attractive growth engine for its Northwest portfolio.
Stephen Ellis
Company Report

TIM, 67%-owned by Telecom Italia, is the smallest of the three major wireless carriers in Brazil, claiming about 24% market share based on customers served. The removal of Oi from the market in 2022 has greatly improved the competitive environment. While we expect TIM will generate steady results in the coming years, we believe the firm’s modest fixed-line footprint leaves it at a disadvantage to both its larger competitors.
Michael Hodel
Company Report

We view Rockwell as the highest quality automation player on the west side of the Atlantic based on quality, breadth of offerings, and shrewd strategic partnerships. Today, it is one of the best-in-breed competitors seeking to gain a stronger foothold where technology meets traditional manufacturing, which Rockwell deems the Connected Enterprise.
Dawit Woldemariam
Company Report

Vertex Pharmaceuticals was known for discovering blockbuster hepatitis C drug Incivek, which is now overshadowed by the company's robust cystic fibrosis franchise. Vertex's approved cystic fibrosis drugs—Kalydeco, Orkambi, Symdeko, and Trikafta—will make the firm eligible to treat about 90% of the CF population, assuming international and pediatric approvals. We expect Vertex to maintain its dominant position in CF, given the strong efficacy of its therapies, lengthy patents, and lack of competition, while developing pipeline candidates in other rare indications to spur growth.
Rachel Elfman
Company Report

DHL Group is the leading postal operator in Europe, among the top three international express package carriers, and the world's largest air and ocean forwarder. Its legacy German postal operations (roughly 12% of total revenue) face secular demand declines and are heavily regulated. However, we expect growth in the DHL segments and growth in the German (and international-domestic) parcel delivery operations to continue to offset declines in traditional mail-related activity (on average) over the freight cycle, and despite an overall soft freight and logistics backdrop in 2023 and into first-half 2024.
Matthew Young
Company Report

FMC is a pure-play crop chemical producer. It is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's crop chemical portfolio, which included the blockbuster diamide insecticides. At the same time, it divested its nonagriculture businesses.
Seth Goldstein
Company Report

We award a wide moat to Coca-Cola Femsa. We expect brand affinity from its status as wide-moat Coca-Cola's largest bottler by volume, combined with cost advantages from its massive manufacturing and distribution footprint, will reinforce its durable competitive position and maintain excess investment returns for more than 20 years.
Dan Su
Company Report

Sandoz is one of the largest off-patent pharmaceutical manufacturers in the world. It generates roughly 75% of sales from generic drugs and the remainder from biosimilars and it has a significant presence in Europe, a region that generates around half of its total sales. Generics, on average, suffer low- to mid-single-digit price erosion year over year, but we expect Sandoz to offset cost headwinds through more volume and new product launches. The firm also seeks to dedicate roughly $600 million over the next five years in expanding generics capacity which could help lift margins upon successful integration. We also forecast Sandoz to expand its presence in complex generics, such as injectables. They are more difficult and costly to develop/manufacture but also face less competition which helps to maintain higher price and margins compared with simple generics.
Keonhee Kim

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