The following is a brief introduction to each of your portfolio companies, with a description of why we believe they deserve a position in the Marlin portfolio.
Alibaba is the largest e-commerce player in China with an overall online shopping market share of over 70%.
Alibaba is the online marketplace leader in China and is over five times larger than its nearest competitor. It has sustainable competitive advantages through its extensive network and scale. Alibaba is also a major beneficiary of strong online shopping growth in China due to continued urbanisation, increasing incomes and a poor physical retail infrastructure in many Chinese cities. Alibaba is expected to grow in excess of 25% per annum over the next few years.
Alphabet is the holding company which owns the world's leading internet search provider, Google. Google is the world's most visited website and the largest global advertising platform by advertising revenue.
Alphabet has wide moats arising from its dominant position in online search, significant intellectual property and a strong brand. We believe Alphabet is well-positioned to grow strongly as global advertising budgets gradually shift away from television to digital formats.
Amazon is the dominant e-commerce platform in the Western Hemisphere. Alongside the e-commerce platform, the company offers marketing services to vendors and subscriptions to customers, which includes everything from free shipping to music and video. Amazon’s AWS (Amazon Web Services) business is the largest global cloud computing platform, helping clients with data storage and computing power.
Amazon.com sits at the crossroads of powerful megatrends. These include growth in e-commerce, migration of advertising spend online and the increasing adoption of public cloud. The company has significant scale and network advantages. With a long growth runway, Amazon is in a prime position to monetise these opportunities.
Boston Scientific is a leading manufacturer of innovative medical devices used to treat a range of medical conditions to over 30 million patients each year. Boston Scientific focuses on minimally invasive therapies, which generally improve patient outcomes versus traditional surgery and reduce the overall cost of treatment for health systems.
Boston Scientific is well positioned with market-leading positions in a number of fast-growing medical device markets. With a strong pipeline of new product launches and a track-record of investment in innovation, we expect Boston Scientific to sustain its above-market growth and increase its market share.
Danaher is a leading player in the Lifesciences and Diagnostics industries where it provides its customers with the cutting-edge tools to help them to diagnose disease; and discover and manufacture new drug therapies to treat those diseases.
An aging population and growing healthcare spend are driving the need for increased innovation in the diagnosis and treatment of chronic disease. With a leading portfolio of tools and services in these end markets, Danaher is well-positioned to benefit from this investment in healthcare innovation. Driven by a well-renowned culture of continuous improvement and investment, we expect Danaher to grow its market share as it becomes an increasingly essential partner to its customers.
Dollar General is the leading discount retailer in the US, selling a range of everyday household items including food and cleaning products, as well as toys, stationery, and basic apparel. Dollar General has a talented management team, strong track record, and a scale advantage over its competitors. Its stores offer an attractive proposition to a growing cohort of US households that are financially stretched and are not well served by traditional retailers.
There are currently 19,000 Dollar General stores across the US, and the company is rolling out approximately 1,000 new stores every year. We believe the company should continue to deliver strong earnings growth as Dollar General expands its store base at attractive returns, takes market share, and repurchases shares. Along with the growth story, we think Dollar General’s business model has defensive qualities. Low price points and value proposition supports its business in difficult economic environments, with sales growth actually accelerating in the last two recessions as consumers traded down.
Within Dollar Tree, there are two banners, Dollar Tree and Family Dollar, with the latter being acquired in 2015. Both banners have around 7,500 stores.
Dollar Tree is a best in class retailer. Over the last 5-years, same-store-sales growth has averaged 3% and 5% over the last decade. Very impressive when you consider everything in store has a fixed price of US$1. Dollar Tree sells a 50/50 mix of everyday and discretionary items with the latter focusing on events like birthdays and back to school or on twelve or so different holidays (Valentine’s Day, St Patricks, Easter, Halloween, Christmas, etc.). The chain’s fast moving assortment creates a treasure hunt experience that results have shown resonates well with consumers.
Family Dollar is slightly different discount store with a multi-price point offering and selling predominantly everyday items (toothpaste, bread, laundry detergent, etc.). Family Dollar customers are financially stretched with an annual household income of US$35,000.
We own Dollar Tree for three reasons. Firstly, when Dollar Tree bought Family Dollar in 2015 the retailer was underperforming due to lack of investment. After three years of paying down debt, Dollar Tree is now in a financial position to ramp up Family Dollar investment through store remodels and customer proposition initiatives, which we expect to flow through into better financial results. Secondly, there is a possibly Dollar Tree could move away from its US$1 fixed price, which if executed well, could be a tailwind for sales growth. Lastly, we think Dollar Tree has counter-cyclical qualities.
Edwards Lifesciences is the global market leader in the treatment of heart valve disease, which impacts millions of people worldwide and carries a poor prognosis if left untreated. Edward’s main product allows for the treatment of this disease without the need for risky open heart surgery.
Edwards Lifesciences continues to lead the industry in innovation, investing in the development of new products which both improve medical outcomes for patients and help doctors treat a wider range of previously untreated patients using a lower risk approach. With a dominant market share and continued investment in research and development, Edwards Lifesciences is well positioned for long term growth.
Floor and Décor is a leading specialty retailer in the US. The company warehouse format stores, which are roughly the size of a Bunnings, only offer hard surface flooring. The company offers the industry’s broadest in-stock assortment at everyday low prices. Floor and Décor has 123 stores across 30 states.
The company has potential to dominate the niche hard surface flooring category, which has been growing mid-single digits year over year. There is significant runway for future store growth with the potential to quadruple its footprint to around 400 stores. Given the company’s size and scale, Mom and Pop retailers, which have 50% market share, cannot compete on price or service with Floor and Décor.
Gartner is a leading research, consulting, and advisory company. Its information technology research service is seen as a ‘must-have’ at most large corporates and is used by 75% of Fortune 1,000 companies. Gartner provides up-to-date industry research and analysis to help these business leaders make informed decisions around their technology, such as the selection of software vendors or current best practice in cyber-security or cloud infrastructure.
In a world of constant technological change and business model disruption – Gartner’s research and analysis is becoming increasingly important to help companies to navigate this challenging environment. Gartner estimates there are 138,000 businesses globally that could use its service, of which just over 13,000 are current customers – indicating a long growth runway. Gartner is now looking to replicate this model in adjacent business functions including HR, Finance, and Supply Chain, with early progress looking promising.
Greggs is a vertically integrated food-on-the-go operator in the UK. The company operates more than 2,000 stores and is the leader in the UK take-away sandwich and savoury market.
Greggs continues to be an attractive long-term growth story with the potential to gain share of a fragmented market given the strength of Gregg’s value proposition. We see plenty of opportunity for Greggs to continue rolling out stores, while also implementing strategic initiatives (e.g. evening trade, delivery, click and collect) to increase sales turnover at established stores.
Known as a contract research organisation (CRO), Icon provides specialised services in clinical trial management for pharmaceutical and biotechnology companies.
The increasing complexity and regulatory requirements of clinical trial management are forcing pharmaceutical and biotechnology companies all over the world to seek the help of specialist CROs such as Icon. Icon’s global footprint and broad strengths in clinical management make it one of only a few companies qualified to provide these services. Growth is being driven by this increased shift to outsourcing, the increase in drugs being tested and larger trials required by regulatory bodies such as the FDA.
MasterCard is the second largest payment network in the world, operating in 210 countries and supporting more than 2 billion cards across its network.
MasterCard's growth outlook is underpinned by the secular shift to electronic payments and away from cash, particularly in emerging markets where MasterCard has significant presence. These structural growth drivers combined with increasing margins and high cash flow generation (allowing for substantial share buybacks) supports a strong growth outlook over the medium to long term.
Previously known as Facebook and has rebranded to Meta Platforms Inc who is the parent organization of Facebook.
Facebook owns four of the most dominant social networking and messaging platforms in the world – the Facebook App, Instagram, Messenger and WhatsApp. It monetises these platforms by selling advertising slots to millions of businesses globally.
The average US user spends over an hour a day on Facebook and Instagram combined. This high user engagement, combined with Facebook’s unparalleled ability to deliver an audience of over 2 billion users to advertisers, has created one of the most valuable advertising platforms in the world. We see significant growth ahead as Facebook captures a significant share of advertising dollars as media budgets move away from TV and towards digital platforms.
Microsoft is a dominant software business that develops, manufactures, licenses, sells and supports software products, and is viewed by many IT departments as their most critical vendor. Products and services include many well-known franchises such as the Windows operating system, Office productivity applications, Azure cloud services, LinkedIn and Xbox.
Microsoft is poised to benefit from the global trend of enterprises shifting their computing storage and power to the cloud. Microsoft’s Azure business unit is helping customers all over the world of all sizes make this transition to the cloud and should benefit from this secular trend for many years to come.
MSCI is a leading provider of indices, benchmarks, index data and analytics tools for the financial industry, and is known for their global and emerging market indices. Customers use the company’s indices to define the investment universe for their products, benchmark their performance and construct ETFs. MSCI serves over 6.6k clients in 95 countries and has over $13tn in assets-under-management benchmarked to their various indices. MSCI’s flagship indices include the All-Country World Index (ACWI), the World Index (all Developed Markets), and the Emerging Market Index.
MSCI has attractive growth tailwinds such as the growth of ETFs, increasing investment which aligns to specific themes (for example robotics or space exploration), indexation of other asset classes (such as fixed income), and greater focus on ESG & climate. MSCI is the most innovative index provider and has market leading products to capture each of these tailwinds. MSCI benefits from competitive advantages driven by strong brand, switching barriers, scale, and network effects which all results in high customer retention rates. MSCI has long-tenured management team with material ownership in the business, aligning them well with shareholders.
Netflix is the world’s leading streaming service with 222 million members in over 190 countries. Members pay a monthly subscription fee to access TV series, documentaries, feature films and mobile games across a wide range of genres and languages.
Netflix’s scale in creating original content and ability to spread this cost over a huge global audience base gives it a significant cost advantage versus peers. We believe this advantage will only get stronger with time, and ensure Netflix continues to gain subscribers for many years to come – there are 750 million potential subscribers globally (ex-China). We are also confident in the company’s ability to continue raising prices at a rate that lags the value of the content it delivers. Netflix has raised prices regularly since 2015, while maintaining best-in-class churn rates, and a standard Netflix subscription – equivalent to one or two movie tickets a month for countless hours of entertainment – still presents incredible user value compared to satellite or cable TV.
PayPal is a global leader in online payments.
We are attracted to PayPal due to its broad based and sustainable competitive advantages and strong growth prospects. PayPal has technology, scale and global network advantages which give it a considerable advantage over its competitors. Furthermore, PayPal benefits from continued growth in e-commerce.
Salesforce is the dominant provider of cloud customer relationship management (CRM) technology globally. 90% of Fortune 500 companies use Salesforce’s business-critical software offerings, such as Slack (communications) and Tableau (data visualisation).
Salesforce is well-positioned to continue capturing market share in the fast-growing software-as-a-business (SaaS) and platform-as-a-business (PaaS) markets. It benefits from customer switching costs, high customer lifetime value, and brand reputation as a reliable partner for Fortune 500 companies which assuages adoption concerns for new customers. We see a long growth runway ahead for Salesforce as businesses continue to digitise and move to the cloud.
Tencent is China’s largest online gaming company with over 50% market share and also owns WeChat, the leading social network and messaging platform with over a billion users. The WeChat app is deeply ingrained into daily life in China with the average user spending an hour a day on the platform doing everything from messaging, social feeds, news feeds, e-commerce, hailing cabs, ordering food, booking travel, paying utility bills and watching videos. Tencent also has leading positions in a range of adjacencies including digital payments (WeChat Pay), music & video streaming, and cloud computing.
While Tencent’s core business is its gaming business, the WeChat platform is allowing it to create significant value in adjacent areas such as advertising and payments which we do not think is fairly reflected in the current share price. The digital advertising opportunity in China is large and rapidly growing, and WeChat is ideally placed to capitalise given its share of online time and ability to connect businesses with users. Payments is also a large opportunity in a market where credit and debit cards aren’t widely used and cash is rapidly being displaced by WeChat Pay and AliPay.
From its origins as a health insurance company, UnitedHealth Group has expanded into the leading healthcare services company in the United States, encompassing insurance, provision of healthcare and other related businesses including pharmacy services, and technology services.
UnitedHealth Group is well positioned to benefit from three key trends in healthcare: an aging population and the increased outsourcing of this care to providers such as UnitedHealth; a shift towards value-based care; and the leveraging of data and analytics to drive efficiency. UnitedHealth Group has as strong competitive advantage driven by a combination of local scale, supported by large national infrastructure and a vertically integrated model – which should allow them to continue to gain market share across its business.