BCV Bulletin - Recent Trading Activity - July 2024
SELL: Johnson Controls International (NYSE: JCI)
We are exiting our position in Johnson Control’s International PLC (JCI). In early 2022 the company was delivering excellent results and had an attractive growth outlook supported by strong secular tailwinds in building efficiency and data center growth. At the time, the forecasted earnings per share (EPS) compound annual growth rate was 18-21% through to 2024, and 100% free cash flow (FCF) conversion. However, since this forecast, the company has navigated a period of supply chain disruption, which also coincided with a sustained period of management mis-execution. While JCI has a unique platform relative to its competitors, to benefit from strong secular growth, we do not feel confident that the company will meet the market’s expectations, and feel our capital can be more effectively allocated to other positions in our United States equity model, as noted below.
BUY: Alphabet Inc. (NASDAQ: GOOGL)
We are adding Alphabet Inc. (GOOGL) to our United States equity model. Alphabet is one of the largest technology companies in the world with several platforms used by billions of people across the globe. We believe that the company’s assets are currently being undervalued in the market, providing an attractive opportunity to add a high-quality business to our technology holdings. Alphabet has gained its edge primarily through running advertisements on its Google Search engine, as well as the widely used YouTube video platform. More recently, Alphabet has made significant investments into its cloud computing business, which has experienced tremendous growth as of late. Together, we believe that these elements form the core of Alphabets underlying business and are poised for growth in the future.
BUY: Deere & Company (NYSE: DE)
We are initiating a position in Deere & Company. Deere is one of the world’s leading manufacturers of agriculture production equipment, construction & forestry equipment, and associated parts, services, financing and technology. Deere has best-in-class equipment and technology, and operates in an industry with high barriers to entry and strong brand loyalty. We believe Deere has a long runway of growth opportunities as farmers seek to enhance crop production efficiency and produce more food with the same amount of arable land. The company will also benefit from global infrastructure spending and can utilize its technology leadership across all segments. Deere is trading at a discounted valuation owing to short-term industry headwinds, and we believe presents an attractive opportunity as an entry point.
BUY: HCA Healthcare, Inc. (NYSE: HCA)
We are also adding to our position in HCA Healthcare due to its unrivaled leadership and strategic advantages in the patient care space. HCA holds a commanding 26% market share, underpinned by its vast network of hospitals and outpatient centers, and strategic locations in high-growth states. In addition to its market leadership, HCA prioritizes rewarding shareholders through dividends, which have increased at an 11.4% cumulative annual rate over the last five years and share buybacks with the company repurchasing 5% of its float annually over the same period. This combination of market leadership, operational efficiency, consistent dividend growth, and strategic share repurchases makes HCA a compelling addition to our United States equity model.
This BCV Bulletin is prepared for general informational purposes only, without reference to the investment objectives, financial profile, or risk tolerance of any specific person or entity who may receive it. Investors should seek professional financial advice regarding the appropriateness of investing in any investment strategy or security and no financial decisions should be made based on the information provided in this document. Statements regarding future performance may not be realized and past performance is not a guarantee of future performance. This document and its contents do not constitute a recommendation or solicitation to buy or sell securities of any kind. Investors should note that income, if any, from any investment strategy or security may fluctuate and that portfolio values may rise or fall. BCV Asset Management Inc. does not guarantee the accuracy or completeness of the information contained herein, nor does BCV Asset Management Inc. assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. The information and opinions contained herein are subject to change without notice.
