New car inventories are normalizing.
For New Vehicles, industry inventory remains well below historical levels, and we have seen some recovery, but there is a wide variation amongst brands and models.
AutoNation continues to buyback shares at a torrid pace.
During the quarter, we invested $305 million, reducing our share count by 2.4 million shares or 5% in the quarter.
Blackstone is the largest business not yet in the S&P 500.
Earlier this week, S&P Dow Jones updated the eligibility rules for their flagship indices to once again include companies with multiple share classes. This important development follows a consultation period in which they engage a broad universe of market constituents. Blackstone is, by far, the largest company by market cap, not included in the S&P 500 today. We are hopeful that this development paves the way for our inclusion which would be very positive for our shareholders.
Blackstone thinks tight real estate lending today will create scarcity that fuels higher prices tomorrow.
The pullback in capital markets is further constraining the new supply pipeline for most types of real estate, which is likely to intensify as regional banks provide a meaningful portion of U.S. construction lending. This is quite positive for real estate over time. Aside from the supply-demand dynamics, the single most important driver for real estate valuations is the level of the 10-year treasury. While rising rates have been a significant headwind for real estate valuations recently, we've seen a reversal with the 10-year yield down 65 basis points from its high last year.
Asset-light businesses with predictable and intelligent capital allocation are among our favorite.
Finally, we remain true to our asset-light brand-heavy strategy, relying on our people and track record to grow. We continue to operate with minimal net debt and no insurance liabilities. Over the past 5 years, we've generated $22 billion of distributable earnings and have paid out 100% of these earnings through dividends and buybacks. Our share count has remained flat over this period despite AUM more than doubling. There are a few firms in the world with such a shareholder-friendly approach to returning capital to investors. Our unleveraged capital-light model is especially valuable in a time like this.
Philip Morris — April 20, 2023
PM continues to flex its pricing power. Pricing has slightly lagged costs which was intentional and calculated to maximize long-term revenue.
Our total organic net revenue per unit grew by plus 4.4%, with strong combustible pricing of plus 7.4%, partially offset by HTU dynamic in Japan and Germany, which I will come back to momentarily.
Newly-acquired Zyn has a dominant position in the US.
Retail value share for ZYN [in the U.S.] also remained strong at 75.6%, highlighting its premium positioning and superior brand equity.
Watsco sees several tailwinds ahead for its business.
There are several important regulatory and industry catalysts for growth that will play out in the next few years.
2023 saw the introduction of deadly mandated high efficiency standards for HVAC equipment, which will deliver price benefits in 2023 and beyond.
2025 will also mark the introduction of new refrigerant standards, which historically has made it harder to repair existing systems and more tomato replacements.
We also see continued movement towards electrification and greater adoption of heat pumps, which generally come at higher prices and higher margins. Sales of heat pumps to 7% in our company during the first quarter, outpacing overall growth rates.
CEO Albert Nahmad’s words sound like they’re right out of Berkshire Hathaway.
Well, I want to say that I think our reputation for our culture is our best selling play. Private equity entered the industry. I don't know the impact of higher rates is going to have on private equity as competitors to mint acquisitions. But we're a different kind of buyer from private equity in for the long term. We like building the legacy people have created a business, very unique in that position. And yes, we're always, always active in M&A. We think of that as a strategic way for us to expand our footprint throughout North America. And I don't think that that's how we're going to change. That will private equity come and go, we'll see. But doesn't doesn't -- remember, there are over 1,000 distributors out there. And does it mean that we're not going to be active in it.
McDonald’s is seeing the effect of inflation on its customers but that didn’t stop the company from growing same-store sales 13% last quarter.
We are seeing a slight decrease in units per transaction. So things like did someone add fries to their order, how many items are they buying per order, we're seeing that go down in most of our markets around the world slightly, but it's still going down.
We are seeing, in some places, resistance to pricing, more resistance than we saw at the outset.
I think the dynamic has been in reverse over the last probably 12 to 18 months versus what you would see typically, meaning food away from home inflation has actually been lower than food at home. I think you're starting to see that shift back to more traditional kind of dynamics.
Allison Transmission — April 27, 2023
Allison has been a consistent repurchaser for over a decade. The company’s pricing power and low multiple make repurchases highly accretive to intrinsic value. Allison’s current repurchase authorization is worth 22% of its market cap.
During the first quarter, we increased our quarterly dividend by 10% to $0.23 per share, marking the fourth consecutive year of dividend increases. Also during the quarter, we repurchased 1% of our shares outstanding with 60% of our shares outstanding repurchased since Allison's IPO in 2012.
We ended the first quarter with approximately $1 billion of authorized share repurchase capacity.
Selling water heaters never goes out of style.
Earlier this month, our Board approved our next quarterly dividend of $0.30 per share, which represents our 83rd consecutive year of dividend payments.
T. Rowe is managing their business for the long-term, and maintains a high bar for M&A opportunities. Management will not pursue M&A just for the sake of near-term growth (much to the Street’s chagrin).
Look, we want to manage this business with a very long-term lens. I think that we do want to have more exposure to parts of the business, whether it is product or vehicle or asset class or geography that have more tailwinds of growth, and we think we can do that organically. But we also will continue to look very seriously at acquisition opportunities. But I think we have a very high bar for acquisitions. They need to have minimal disruption to our ability to deliver on our existing commitments to clients and our culture. They have to be a strategic fit. They have to make financial sense. Most deals in this industry, the weight of the evidence would suggest that they haven't been compelling.
Restaurant Brands International — May 2, 2023
Fast food restaurants are relatively immune to the macroeconomic environment.
In terms of what the key drivers are of traffic and sales in our industry, I think the biggest one really is employment. That's really what drives our guests having money in their pockets and being out in the belt. And so that is probably the kind of the highest correlation item that we see towards our sales and traffic.
China is leading QSR restaurants towards automated ordering. In the US Wendy’s is testing AI-powered chatbots for taking orders.
I had a chance to see some of the latest digital innovation recently in China, where the front POS is becoming less relevant and nearly all orders come via online channels. Some brands are even beginning to sunset their kiosk programs to transition entirely to mobile ordering.
Burger King expects to close units this year while McDonald’s prepares to expand.
Historically, we've closed a couple of hundred units at Burger King U.S. each year and had a couple of years in the 300 to 400 range such as 2020. We currently expect gross closures in that 300 to 400 range here for the full year.
Brookfield Infrastructure Partners - May 3, 2023
Inflation and rising rates are not stopping Brookfield from realizing value in its durable infrastructure assets as evidenced by the attractive valuation multiples it realized on the recent sale of gas storage assets.
Most recently, we completed the sale of our interests in two U.S. gas storage assets to strategic buyers for gross proceeds of $235 million (BIP’s share – approximately $100 million). The sale included our interest in Tres Palacios in Texas and our Salt Plains facility in Oklahoma. We realized attractive transaction multiples for these assets of 21 times and 15 times EBITDA, respectively… As we move forward, we remain committed to our 2023 capital recycling objective and continue to see strong interest from potential buyers.
The dialysis market is finally starting to normalize after a long overhang from excess mortalities during COVID.
Moving on to treatment volume. Quarter-over-quarter treatments per day were up approximately 1% and better than the middle of our expected range. This was driven by net census gains due to both higher admit and lower mortality. Because of the annualization of access mortality from 2022, we still anticipate a reduction in overall treatment volume on a year-over-year basis and we continue to assume excess mortality over the balance of this year. That said, we're encouraged by our first quarter volume results. What we saw in Q1 proved to be a trend we would expect to finish the year in the top half of our volume forecast range of down 3% to flat relative to 2022.
McKesson is a cash flow machine and the cash is finding its way back to shareholders consistently.
For the fiscal year, we generated record cash flow, reflecting the broad-based strength of our businesses, the focus on working capital efficiency and disciplined capital investment. For the full year, we generated $4.6 billion in free cash flow, including $558 million of capital expenditures, which included investments to support our strategic pillars of oncology and biopharma services as well as investments in our distribution centers. We used our strong balance sheet to return $3.6 billion to shareholders through share repurchases, including $138 million in the fourth quarter…
When combining share repurchases with dividends paid, we returned approximately 85% of free cash flow to shareholders in fiscal 2023. We continue to utilize capital deployment as a method to drive value for our shareholders. Since the beginning of fiscal 2019, we returned $12.9 billion of cash to shareholders through share repurchases and dividends. Of this amount, approximately $11.5 billion has been returned through share repurchases, reducing our total shares outstanding by approximately 33%
It is unclear how SGLT2 inhibitors and the GLP-1 drugs will impact Davita, if at all.
On the SGLT2 inhibitors, you can see it happening both ways. It could take a patient who otherwise would have been incident to dialysis and allow them to remain in earlier stages of CKD longer and that would be a headwind. On the flip side, it could take patients who otherwise might have died before they were ever incident to ESRD, allow them to live longer and that would be a tailwind. So I think time will tell what's happening there.
TJ Maxx is seeing significant relief in ocean shipping rates, leading to better than expected profitability. Domestic rail and road shipping rates, however, appear to be more sticky and may not return to pre-pandemic levels. The majority of the freight increases domestically are driven by wage-rate increases, and those aren’t going to be rolled back, as in many industries.
But honestly, the majority is coming from the ocean. The domestic, the costs are a little stickier. The wage rates that have been implemented particularly in rail and truck, those aren't going to come back out. So we don't anticipate, at this time, huge domestic freight favorability. But again, the initiatives that we're putting in place to mitigate our freight expenses, we're very happy with. So as far as the recapture, we don't expect to recapture the full 300 basis points of incremental faith that we saw over the last 3 years.
HomeGoods will see a benefit from the liquidation of Bed, Bath, and Beyond, and management will be very targeted and geographic-specific based on the needs of local markets where BBBY is closing.
What we do do within our own systems here, and HomeGoods is very diligent on this. Strategically, we'll go in and we're able to do this with our planning and allocation system where we can look at which categories in Bed Bath & Beyond store, obviously, we know what they did for category business, and we can go in and rerank our HomeGoods stores and inventory at the nearby location where they have just vacated. And that's how -- we don't artificially change proactively without knowing. We don't just go in and say, oh, we should do more of this category of business because that's what Bed Bath and Beyond did. We did it by location and by the category of businesses we think they stood for. And we say, yes, there's more market share opportunity for us in those categories.
AutoZone operates in a highly rationale oligopoly that consistently enjoys pricing power.
I want to highlight that our industry has been disciplined about pricing for decades, and we expect that to continue. Most of the parts and products we sell in this industry have low price elasticity because purchases are driven by failure or routine maintenance. Historically, as costs have increased, the industry has increased pricing commensurately to maintain margin rates, increasing margin dollars. It is also notable that following periods of higher inflation, our industry has historically not meaningfully reduced pricing to reflect lower costs.
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Transcript Notes
Thanks! This is great.