Portfolio at the end of November 2024
November performance: +8.8%
YTD: 27.6%
We began a new position in ATOSS Software. The top contributors to performance were $Fortinet(FTNT)$ and $Fair Isaac(FICO)$ . The top detractors from performance were $KLA-Tencor(KLAC)$ and $Applied Materials(AMAT)$ .
FCF ROC = 38%
FCF per share CAGR (5yr) = 24%
FCF Linearity (5yr) = 0.94
FCF Margin Expansion (5yr) = 6%
FCF Yield = 2.73%
Take a look at the below table. AMAT and KLA have higher and more consistent FCF per share growth. $ASML Holding NV(ASML)$ generally has lower returns on capital and higher CAPEX.
ATOSS offers a mission-critical product at a low-cost to their clients. The product is embedded in the operations of their clients and adds a lot of value, in terms of efficiency and data analytics. If a client were to end their contract with ATOSS, the cost savings from ending the contract are likely to be met with increased inefficiencies that would consequently increase costs elsewhere. Together this supports the argument that ATOSS has strong pricing power, which is perhaps best demonstrated by their significant growth rate, decreasing COGS margin, low client churn rate and high recurring revenue rate.
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