🔹 Abbott Labs (ABT US) by Longleaf Partners Global Fund Abbott Labs ($ABT US)Fund: Longleaf Partners Global Fund Thesis: Abbott Labs is a diversified healthcare company with durable EPS growth, a safe dividend, downside protection, and potential upside from portfolio actions. Source: Read the original letter ↗ Analysis: Abbott Labs – This diversified healthcare company is a new holding (owned previously in the 2010s) and is off to a strong start for us. In the first part of the year before we invested, Abbott slightly missed earnings estimates while it was digesting its acquisition of Exact Sciences, along with a variety of turmoil in the medtech and infant nutrition industries. Its stock fell almost 40% (there’s the earnings overreaction theme again) from its high last year to our purchase price in the second quarter. The stock reported a solid quarter in July that suggested Abbott can soon get back to its decades long- history of high-single to low-double-digit EPS growth along with a safe and growing dividend. The company also began moving on from unwarranted infant nutrition liabilities to further protect the downside. Additional upside could come from the fact that Abbott has spun off or sold multiple businesses in its history and could consider such moves again. Access our full research database on Abbott Labs Adaptive Biotechnologies Corp. ($ADPT US)Fund: Alger Small Cap Focus Fund Thesis: Adaptive Biotechnologies develops immune-system diagnostics and is supported by improving results, a path to profitability, and broader clinical adoption of clonoSEQ. Source: Read the original letter ↗ Analysis: Adaptive Biotechnologies develops diagnostic tools that analyze the immune system to help detect and monitor disease. Its primary product, clonoSEQ, identifies minimal residual disease, or cancer cells that remain after treatment, in patients with certain blood cancers. Shares contributed positively during the quarter after the company reported stronger-than-expected results, raised its outlook, and reaffirmed its expectation of reaching profitability and generating positive free cash flow by year-end. Sentiment improved further after leading clinical guidelines specifically referenced clonoSEQ for monitoring multiple myeloma, which could encourage broader adoption among community cancer specialists. Access our full research database on Adaptive Biotechnologies Corp. ADI Global Distribution, Inc.Fund: Ariel Investments Small Cap Value Strategy Thesis: ADI Global Distribution is a market-share leader in security and smart-home distribution with scale advantages, growth potential, and strong cash generation. Source: Read the original letter ↗ Analysis: Also during the quarter, we acquired ADI Global Distribution, Inc. (ADIG) following its spin-off from our existing holding, Resideo Technologies, Inc. (REZI). As the market share leader in security, residential audio-visual and fire/life-safety distribution, we believe ADI benefits from significant scale within a highly fragmented industry. Following the spin-off, the share price was muted following soft near-term challenges associated with the recently acquired Snap One smart-home business. We view this weakness as an attractive entry point to owning a durable company with consistent growth, margin expansion potential and strong cash generation, supported by increasing demand for connected technologies and smart-home solutions. Access our full research database on ADI Global Distribution, Inc. 🔓 Unlock the full research databaseThis week’s ideas are a sample. The real edge is the full searchable archive: The Associate ($19/mo) gives you every pitch we’ve indexed — 3,000+ across 300+ funds — searchable by fund, sector or ticker, plus the entire quarterly-letter archive. The weekend of PDF-hunting, already done for you. The Rainmaker ($29/mo) adds Warren AI to ask questions across the whole corpus in plain English. Airbnb, Inc. ($ABNB US)Fund: Baron Real Estate Fund Thesis: Airbnb operates a global travel marketplace and is seen as entering a durable multi-year growth re-acceleration driven by pricing tools, boutique hotels, and loyalty. Source: Read the original letter ↗ Analysis: Shares of Airbnb, Inc. performed well in the quarter following strong second quarter results that exceeded expectations and a confident outlook for sustained growth acceleration. Airbnb operates a global marketplace connecting travelers with unique accommodations and experiences across over 220 countries and regions. Top-line growth was in the high teens with cash flow growth exceeding 20% in the quarter. With a dynamic pricing rollout that enables hosts to use real-time demand and market data to optimize occupancy and nightly rates, a boutique hotels platform buildout, and a forthcoming loyalty program representing meaningful untapped opportunities, we believe Airbnb is in the early stages of a durable, multi-year growth re-acceleration. Access our full research database on Airbnb, Inc. Allstate ($ALL US)Fund: Lorne Steinberg Wealth Management Steinberg Equity Strategies Thesis: Allstate is a large auto and home insurer with disciplined underwriting, sophisticated analytics, low capital intensity, and strong free-cash-flow generation. Source: Read the original letter ↗ Analysis: This financial strength has underpinned a long track record of both dividend growth and meaningful share buybacks which has seen the number of shares outstanding decline by half over the past 15 years. Allstate’s 10- year annualized return is 16%. Allstate Allstate is one of the largest property and casualty (auto & home) insurance providers in North America, operating through both a dedicated agent network as well as its direct-to-consumer National General banner. A disciplined underwriter, they are known for sophisticated data analytics, which allows them to price risk accurately and achieve industry-leading levels of profitability. The business model requires relatively low capital intensity outside of regulatory reserves, allowing Allstate to convert its premium income into consistent free cash flow. Access our full research database on Allstate Alquiber Quality ($ALQ SM)Fund: Horos AM Funds Thesis: Alquiber Quality is a flexible leasing company growing its fleet profitably, with strong financial metrics that the market does not fully reflect. Source: Read the original letter ↗ Analysis: We used part of the proceeds from these sales to increase our exposure to the financial sector. Specifically, we increased our stake in Alquiber Quality (”Alquiber”) and initiated a new position in Línea Directa. As for Alquiber, the flexible leasing company continues to grow its fleet profitably, with enviable financial metrics that are not reflected in its stock market value. Obviously, the low liquidity of the stock—the Acebes family controls around 76%—contributes to this undervaluation. However, the small size of Horos Value Iberia allows us to take advantage of this type of opportunity. Access our full research database on Alquiber Quality Amazon.com, Inc. ($AMZN US)Fund: Fat Prophets Global Contrarian Fund Thesis: Amazon.com, Inc. could see growth reaccelerate thanks to AWS backlog, AI demand, custom silicon, advertising strength, and underappreciated long-term infrastructure returns. Source: Read the original letter ↗ Analysis: Two new positions were established in Amazon.com and Meta Platforms. After nearly a year of significant underperformance, Amazon could see growth reaccelerate on the back of Cloud revenue division Amazon Web Services (AWS). AWS boasts a $496 billion future backlog, rising demand for AI, and its own custom silicon portfolio to side-step GPU shortages. This is complemented by Amazon’s strong digital advertising segment and long-term returns on infrastructure investment, which investors might be underestimating. Access our full research database on Amazon.com, Inc. Apple ($AAPL US)Fund: Mar Vista U.S. Quality Portfolio Thesis: Apple is positioned by its ecosystem, installed base, recurring Services revenue, and consumer AI roadmap to compound value over time. Source: Read the original letter ↗ Analysis: Apple (AAPL) shares rallied during the quarter as the company reported healthy, broad-based growth across multiple product categories and geographies. Demand was strong across the iPhone, Mac, and Services businesses, while management provided an optimistic outlook, guiding to approximately 10% revenue growth and low-double-digit EPS growth despite supply constraints for leading-edge semiconductors. Apple also has a strong product roadmap that should provide a tailwind to near-term growth, while the expected introduction of a more capable Siri provides an important foundation for the continued development and adoption of Apple Intelligence. We continue to view Apple as a competitively advantaged business anchored by the strength of its ecosystem, brand, and large installed base. With more than 2 billion active devices and over 1 billion paid subscriptions, Apple benefits from a highly engaged and loyal customer base while generating a growing stream of high-margin, recurring Services revenue. The company’s substantial cash flow provides significant resources to invest in product innovation and emerging technologies while continuing to return capital to shareholders. Looking longer term, we believe Apple is well positioned to be a leader in consumer-centric AI as more intelligence moves from the cloud to edge devices. Apple’s combination of proprietary silicon, tightly integrated hardware and software, extensive installed base, and emphasis on privacy provides meaningful competitive advantages as AI capabilities become increasingly embedded across smartphones, computers, and other wearable devices. We believe the integration of Apple Intelligence across its ecosystem has the potential to enhance the value of its installed base, support future device upgrade cycles, and create additional opportunities for Services growth over time. Access our full research database on Apple Arm Holdings ($ARM LN)Fund: Baillie Gifford US Equity Growth Thesis: Arm Holdings should gain importance as computing becomes more specialized and energy efficiency matters more, deepening its competitive advantage over time. Source: Read the original letter ↗ Analysis: During the quarter, we initiated positions in semiconductor companies Arm and KLA. Both benefit from the growth of AI infrastructure, but the investment cases do not depend simply on today’s shortages persisting. Arm’s architecture should become increasingly important as computing becomes more specialised and energy efficiency becomes more important. KLA’s inspection and process-control tools become more valuable as semiconductor manufacturing grows more complex and the tolerance for defects falls. The world is going to need many more chips in the coming years, and the underlying technological challenges could further deepen the competitive advantages of Arm and KLA over time. Access our full research database on Arm Holdings Arm Holdings plc ($ARM US)Fund: Artisan Partners Developing World Fund Thesis: Arm could benefit from agentic AI demand for CPUs and its power-efficient CPU IP. Source: Read the original letter ↗ Analysis: From an investment standpoint, agents are anticipated to require different types of compute and in particular more CPUs that can orchestrate agentic workflows (i.e., application programming interface (API) calls, database calls and real-time requests). CPUs must also be paired with dynamic random-access memory (DRAM) to function optimally. These trends could bode well for Arm which sells intellectual property (IP) for CPU designs and its own power-efficient CPU chip, and for Micron which is one of four major global memory suppliers. Continue reading this post for free in the Substack app
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