A Small Cap Equity holding: Curtiss-Wright Corporation (CW, $117.19): “The ‘Wright’ time to Hold” by: Dominic Brisson, AIM Student at Marquette University

Curtiss-Wright Corporation (CW, $117.19): “The ‘Wright’ time to Hold”

By: Dominic Brisson, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• Curtiss-Wright Corporation (NYSE: CW) is a precision component manufacturer that develops products for the aerospace & defense, commercial industrial, and nuclear power generation industries. CW serves the United States where they generate most revenues followed by the UK and China which are the next largest areas served.  

• CW continues to press forward with their One Curtiss-Wright Vision, which was implemented in 2013 designed to improve margins through internal restructuring. They continue to maintain their goal of achieving 17% adjusted operating margins and CW finished at 16.3% in FY ’20.

• During FY ’20, CW spent $200MM on share repurchases and they intend to spend an additional $50MM on share repurchases during FY ’21.

• CEO, David Adams, announced in Dec. ‘20 he was stepping down and will remain chairman of the Board. Mr. Adams is being replaced by Lynn Bamford who previously served as President of CW’s Defense and Power segments.

• Curtiss-Wright closed their PacStar acquisition in the 4^th quarter of FY ’20 and management expects this to expand their end market exposure to military ground forces spending.

• As a result of the pandemic and headwinds in the aerospace & defense industry, CW exhibited a YoY revenue decrease of ~3.9% and project revenues rebounding toward $2.5B in FY ’21.

• In FY ’20, CW announced they were changing their reporting segments from Commercial/Industrial, Defense, and Power to Aerospace & Industrial, Defense Electronics, and Naval & Power. 

Key points: In FY ’20, Curtiss-Wright’s adjusted operating margin was 16.3% which represented a 20 bps decrease from FY ’19. CW’s adjusted operating margin decreases were attributable to commercial industrial market challenges related to the COVID-19 pandemic. Despite small margin decreases, CW was able to navigate the pandemic challenges successfully as their One Curtiss-Wright Vision’s restructuring and cost cutting initiatives helped them to sustain their competitive adjusted operating margins of 16%+. Looking ahead to FY ‘21, with more favorable long-term trends, CW believes their Aerospace & Industrial segments profitability will improve reaching FY ’19 levels at 16.5%+ adjusted operating margins. In addition, CW expects to see margin improvement in their Naval & Power segment as they reap the benefits of prior year restructuring savings and the wrapping up of their CAP 1000 program.

Curtiss-Wright continues to be a strong winner due to their leading operational performance and they have generously rewarded shareholders through share buybacks. In FY ‘20, CW repurchased $200MM of their outstanding shares, of which $150MM were opportunistic buybacks. In FY ‘21, CW plans to use $50MM for share repurchases and under their current board approved buyback program they can repurchase up to $200MM during FY ‘21. CW’s FY ’20 share repurchases reflect management’s confidence in their businesses strength as they capitalized on 2020 COVID-19 mispricing. 

This past December, CW’s CEO David Adams announced he would be stepping down after 7 years in a planned departure. With Adams stepping down, in accordance with Curtiss-Wright’s succession plan, Lynn Bamford will replace him and step away from her current role as President of CW’s Defense Electronics and Naval & Power Generation segments. Lynn brings immense experience to the role having served in multiple leadership positions with Curtiss-Wright for over 30 years and recently as President of their Defense & Power segment since Jan ‘20. 

In the 4^th quarter of FY ‘20, CW finished closing their acquisition of PacStar communications for $400MM which develops battlefield communications hardware and software for US Army ground forces. Given PacStar’s offerings are aligned with US Army modernization initiatives, CW’s management expects this business to experience mid-high single digit revenue growth under their leadership into FY ’21. 

Lastly, CW recently announced the changing of their reporting segments to simplify their story. Under this new structure, CW is now reporting under Aerospace & Industrial, Defense Electronics, and Naval & Power. CW sought to adjust their segments, to better reflect the end markets served. One example of this is with CW’s new structure, their valve business is housed under their Naval & Power segment given its sales are highly dependent on the Naval industry. 

What has the stock done lately?

The past 3 months have been very volatile for Curtiss-Wright and its stock has seen minor swings up and down. From January 19, 2021 to January 27, 2021 Curtiss-Wright saw a significant decline of 11.5% as growth and momentum stocks outperformed during this time. Since that plummet, CW has improved but suffered a 7% decline from February 24, 2021 to February 25, 2021 as the market reacted to their FY ’20 results. However, since the FY ’20 release the company’s shares have bounced back and CW remains below its 52 week high. 

Past Year Performance: CW has increased 44.48% in value over the past year. Much of CW’s gain occurred with the broader market in early November in response to the positive vaccine news regarding Pfizer and Moderna’s vaccines which was a positive catalyst for aerospace & defense as well as industrial companies.

Source: FactSet

My Takeaway

Since being pitched in November ’20, CW has had relatively stagnant performance in the AIM Small Cap Equity Fund. CW was added to the portfolio at $111.83 a share on November 23 and continues to remain below its price target of $135.62. As a value added contributor to the military, CW is positioned to continue growing as defense budgets grow domestically and abroad while CW aligns their offerings with the DoD’s modernization initiatives to remain competitive. CW’s NTM forward P/E currently is at 16.7 and they have historically been above 19 during years prior to the pandemic, indicating it is still undervalued. Furthermore, I believe CW’s new reporting segments will give investors greater clarity into their end markets which may act as a catalyst for P/E re-rating as investors begin to appreciate the growing percentage of CW’s revenues coming from Military spending. For these reasons, it is recommended CW’s stake be held in the portfolio as the investment thesis continues to play out.

Source: FactSet

An International Equity holding: Rio Tinto (RIO, $75.06): “Rio Uh-Oh” by: Thomas Washington, AIM Student at Marquette University

 Rio Tinto (RIO, $75.06): “Rio Uh-Oh”

By: Thomas Washington, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

• Rio Tinto plc Sponsored ADR (NYSE:RIO) engages in the exploration mining, and processing of mineral resources. Its operations are segmented by: Iron Ore, Aluminum, Copper & Diamonds, Energy and Minerals, and Other Operations. RIO’s revenue’s mainly come from the U.S., China, Japan, India and Canada. 

• A class action lawsuit has been filed against RIO regarding the cause of delays of the firm’s Mongolian based Oyu Tolgoi mine. The lawsuit alleges RIO concealed information concerning the delay of its most important growth project.

• RIO recently announced its selection of Bill Gates-backed clean energy start-up, Heliogen to power its borates mine located in Boron, California.

• The integration of artificial intelligence into the operation of solar panels will make California’s largest open pit mine significantly more efficient therefore increasing margins. 

Key points: Management of Rio Tinto has been shaken up since the destruction of two ancient Aboriginal Rock shelters in May 2020. Investor and public backlash resulted in the release of Chief Executive Jean Jacques. RIO’s chairmen and non-directing executive are both scheduled to step down after the year’s general annual meeting.

The Juukan Gorge, one of Australia’s most significant archeological research sites, had shown evidence of human habitation dating back 46,000 years. An inquiry by the Parliament of the Commonwealth of Australia resulted in the conclusion that the mining giant “knew the value of what they were destroying but blew it up anyway.” The cave sat above 8 million tons of high-grade iron ore believed to be valued around $132M.

A new claim in the class action lawsuit against RIO on March 25, 2021 included the testimony of 12 individuals who worked for RIO or its contractors. The claim details the use of defective Chinese steel, incompetent engineering and poor procurement as the reasons for the projects significant delays and increases to cost. The lawsuit is hinges on the argument that RIO did not act in a timely manner informing investors of the project’s new costs and changes in schedule.

Rio’s partnering with Heliogen will result in the utilization of AI to control a network of mirrors used to make steam. This use of concentrated solar technology will make California’s largest open pit mine also the first in the country to use this type of power. RIO and Heliogen have already began securing government permits and plan to begin operations in 2022. 

What has the stock done lately?

Since RIO’s announcement to release Chief Executive Jean Jacquees on May 3, 2021, the stock has dropped 16% from $90 to $75 per share. While the stock is still up 76% over the past year, testimonies in recent claims against the company regarding delays of its Oyu Tolgoi mine shift the class action court case overwhelmingly against the firm. The implementation of AI controlled solar power will eventually drive margins if it can weather the current challenges to its ESG. 

Past Year Performance: RIO is up roughly 76% over the past 52 weeks. During this same time the industry average stock price growth is 139%. RIO has noticeably underperformed its competitors. RIO was able to recover from its March lows but will likely not be able to return to its all-time high of $90 reached March 2, 2021 due to the challenges previously detailed. 

Source: FactSet

My Takeaway

Overall, Rio Tinto has seen a full recovery and strong growth over the past year. Although the company will be the first to implement groundbreaking technology at its sites, past actions have the power to significantly hinder RIO’s performance. As of now the company has helped the AIM fund, but I believe the ancient cave destruction and the covering up of project delays shows poor leadership and RIO’s stock will continue to fall. 

Source: FactSet

A Small Cap Equity holding: NexPoint Residential Trust Inc. (NXRT, $45.99): “Residential Real Estate is Continuing to Succeed with the Covid Recovery” by: Garrett Gajewski, AIM Student at Marquette University

  NexPoint Residential Trust Inc. (NXRT, $45.99): “Residential Real Estate is Continuing to Succeed with the Covid Recovery”

By: Garrett Gajewski, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• NexPoint Residential Trust Inc. (NYSE: NXRT) is a residential REIT that focuses on the acquisition, asset management, and disposition of multifamily real estate properties. Most of these properties are middle-income housing in great locations.

• NXRT tends to buy value-add opportunities that are located in large cities throughout the Southeastern and Southwestern United States.

• The residential real estate market is expected to grow at a CAGR of 5.77% from 2020 to 2025. 

• In 2021, the company received four buy ratings and two hold ratings from analysts, with an average analyst target price of $48.66. NXRT has a Net Asset Value (NTM) of $43.16 and an implied cap rate of 4.99%. The company also has a consistently increasing FFO and AFFO.

• The overall trend of NXRT has been a steep uptrend over the past five years. 

Key points: NexPoint Residential Trust Inc. has performed very well over the past five years. Its earnings are expected to grow at 4.1% for 2021 and 9% for 2022. Over the next decade, inflation is supposed to grow at over 2% annually, with 2021 inflation expected to rise at 2.24%. This high inflation can hurt companies such as growth tech stocks that already have high valuations. However, inflation tends to help REITs because the value of properties and rental income tend to grow higher with an increase in inflation. 

Currently, NXRT has an ROE of 10.6%, which is significantly higher than the REIT industry average of 5%. In order to get a return of this magnitude, NXRT takes on significantly more debt than even many of its peers. NXRT has a Debt-to-Equity ratio of 3.38, which is a little concerning. NXRT offers an enjoyable dividend yield of 3.03%. With increasing interest rates in the coming months and years, this could impose an issue for NXRT to issue new debt or equity securities in the future. Currently, Zacks Investment Research has given NXRT a rating of a 2, which signals a buy.

Since the Covid low in March, unemployment rates have dropped from 14.8% to 6.2% and are continuing to decrease. This is a great sign for the residential real estate market, especially for NXRT, because they focus on middle-income housing. This has drastically helped NXRT and brought them back to their normal rent collection levels. Additionally, with Covid vaccinations becoming available to more of the general public, this should allow the United States to get back to normal in the coming months. This “normal” should have a significant benefit to all areas of real estate, especially retail, residential, and entertainment. 

NXRT has given a slight diversification benefit to the AIM fund and has helped reduce the overall risk of the portfolio. Additionally, the added tax benefits of REITs are a huge benefit. With the corporate tax rate likely getting increased from 21% to 28% under the Biden Administration, this makes REITs look much more intriguing, as they can avoid taxation at the fund level due to their over 90% payout ratios.

What has the stock done lately?

NXRT was pitched and added to the AIM Small Cap Fund at a cost of $26.04 per share in early 2018 and has performed very well since being bought. In the past month, NXRT is up 2% and has fluctuated in price between $41 and $46. The price of NXRT is currently sitting around $45.99, meaning that the stock is up 77% since being purchased.

Past Year Performance: NXRT is up roughly 76% during the last 52 weeks. During this same time period, the Russell 2000 is up 100%. NXRT has noticeably underperformed the benchmark; however, the company has managed to recover fairly well from its March lows. NXRT has still been unable to reclaim its all-time high above $50, that was reached on February 18, 2020.

Source: FactSet

My Takeaway

Overall, NexPoint Residential Trust has seen a strong recovery over the past 52-weeks. There are several big factors that could benefit NXRT greatly in the coming months and years. The company has been in the AIM portfolio for almost three years now and has continued to be one of the portfolios best performing REITs. It is recommended that the AIM portfolio continue holding NXRT so the fund can keep taking advantage of the above average returns. 

Source: FactSet

 

 

JIm Bianco on the coming DeFi tsunami!

This is a great interview worth watching.

MARQUETTE FINANCE STUDENTS ADVANCE TO THE SEMI-FINAL ROUND OF THE AMERCIAS REGION OF THE CFA RESEARCH CHALLENGE

MARQUETTE FINANCE STUDENTS ADVANCE TO THE SEMI-FINAL ROUND OF THE AMERCIAS REGION OF THE CFA RESEARCH CHALLENGE

MILWAUKEE — March 29, 2021

Five students from Marquette University’s Applied Investment Management program have advanced from the Midwestern US sub-regional round of the Chartered Financial Analyst’s Institute Research Challenge to the semi-finals of the Americas region. This is the 11th time in the past 13 years that a Marquette AIM team has advanced beyond the Americas round of the CFA Research Challenge.

On Thursday, April 15^th, Marquette team will compete against Stetson University, University of Tulsa, and University of Maine. Throughout the regional round, scores will be based 100% on presentation scores. During the regional round, teams will be randomly assigned to semifinal breakouts. Teams will advance from the semifinal breakouts to the Regional Final.

The winner advances to the final round of the Americas on April 21^st with the Global finals the following day. The CFA Institute will livestream the Americas Final and Global Finals. Members of the winning team include Joseph Vitrano, Erik Floyd, Brook Seifu, Sean Dole, and Nicholas Rohrer. The team is advised by Dr. David Krause, faculty advisor and Joe Hodes, industry mentor and AIM alumnus.

"The CFA Institute Research Challenge is a rigorous global competition that tests our students' knowledge and application of investment management principles, ethics and professional standards," said Dr. David Krause, director of the AIM program. "To be among the few teams who are moving on to the sub-regional challenge is an honor for our students, and a testament to their hard work and commitment to the competition and their futures in the investment management profession. I'm very proud of all of our students who are participating in the CFA Challenge. Like past teams, they worked hard and delivered a quality product. I think they can do very well and I’m hopefully we continue to move forward in the competition."

About the CFA Institute Research Challenge

The CFA Institute Research Challenge is a global competition that tests the equity research and valuation, investment report writing, and presentation skills of university students. This annual educational initiative promotes best practices in equity research among the next generation of analysts through hands-on mentoring and intensive training in company analysis and presentation skills. Through the course of the competition, which requires hundreds of hours of preparation, participants receive mentoring from a professional research analyst as they analyze a publicly traded company, write a professional research report, and present their research results and recommendations to a high-profile panel of experts. Points are awarded to teams on the basis of their investment case, their poise, and their ability to answer the judges' questions. The teams are sponsored by local CFA Institute member societies or groups of volunteers, each of which previously hosted country heats of the Challenge. This year because of Covid-19, the challenges are being held virtually. For more information, visit cfainstitute.org.

Ben L'Empereur- Bancorp (CUBI) AIM Equity Presentation

 

Jack Cyganiak- InfuSystem (INFU) AIM Equity Presentation

 

Maddy Aubry -Carriage Services (CSV) AIM Equity Presentation

 

Quinn McDaniel -TAL Education Group (TAL) AIM Equity Presentation

 

Madi Daleiden - Mohawk (MWK) AIM Equity Presentation

 

Ryan Witt- QIAGEN (QGEN) AIM Equity Presentation

 

The Ninth Set of Spring Marquette AIM Program Student Equity Pitches / Q&A will be on Friday, March 26th

AIM Class of 2022 Student Equity Presentations on Friday, March 26th

 Because of the Covid-19 pandemic, we are not pitching live in the AIM Room on Friday afternoons during the spring 2021 semester; however, you can still participate.

 The 9th set of spring AIM equity presentations for the Class of 2022 on Friday, March 26, 2021.

 

This is the link for the AIM equity write-ups (each week’s write-ups will be available on Thursday mornings): AIM Write-ups 3/26/21

This is the link for the YouTube videos of the 8-minute student presentations (each week these will be posted on Thursday afternoons)

If you would like to participate in the live Q&A session with the student presenters on Friday at 1:00 pm CST on Teams, please email Jessica Hoerres at: jessica.hoerres@marquette.edu

 

Please feel free to submit questions to be asked of the students by emailing them to david.krause@marquette.edu

A Small Cap Equity holding: Axcelis Technologies, Inc (ACLS, $40.90): "Axcelis Has Put Away the Salsa, Uncertain of When the 'Chip' Shortage Will End" by: Graham Pedersen, AIM Student at Marquette University

 Axcelis Technologies, Inc (ACLS, $40.90): "Axcelis Has Put Away the Salsa, Uncertain of When the 'Chip' Shortage Will End"

By: Graham Pedersen, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• Axcelis Technologies, Inc. (NASDAQ:ACLS) designs, manufactures, and services ion implantation and other processing equipment used to fabricate semiconductor chips. The company was founded in 1978 and is headquartered in Beverly, MA. 

• During the ongoing pandemic, ACLS realized a 140% increase in operating income on a 38% increase in sales. 

• ACLS announced its first shipment of their new Purion H200 SiC Power Series implanter. 

• ACLS reported Q4 2020 earnings of $0.43 per share, compared to earnings of $0.29 per share in Q4 2019. 

• ACLS delivers new product extension capabilities enabling technology application in an emerging image sensor industry. 

Key points: 

ACLS's revenue in FY20 was $474.6 million, up from $343 million in FY19, a 38% increase. The company's systems revenue was $293.6 million, up 45% from $202.6 million in 2019. CS&I revenue was $181 million, up from $140.4 million the previous year, a 29% growth.

The Purion H200 is the first single coating high current implanter designed to cover all large dose implant applications. It is particularly well suited to the needs of foundries and power system manufacturers. The Purion H200 combines the productivity of high current tools with the precision and accuracy of medium current implanters, thanks to its innovative scanned spot beam design, which is based on the industry-proven Purion H high current beamline.

ACLS reported Q4 2020 earnings of $0.43 per share, beating the consensus estimate of $0.32 per share, representing an earnings surprise of 34.37%. ACLS posted $122.2 million in revenues for the quarter ending December 2020, surpassing the consensus estimate of $105.74 million. ACLS showed revenue growth of 13.5% year-over-year, and its price-to-earnings ratio is currently 32. The business has outperformed consensus EPS forecasts three times in the last four quarters.

The new Purion XEmax was created for high-performance image sensor applications that are just getting started. Multiple filtration systems are used in the upgraded beamline to eliminate energetic metal pollutants that could otherwise affect dark current and white pixel count levels. The new device is based on Axcelis' proprietary Boost Technology, which delivers beam energies and is installed on the cutting-edge Purion XE platform.

What has the stock done lately?

On Monday, Mar 15, ACLS reached a new 52-week high of $44.20, representing a 4.03% increase. The company's market cap is now $1.44 billion. From year to date, Axcelis shares have risen 33.2%, compared to 4.3% for the S&P 500. The stock's 50-day moving average is $37, and its 200-day moving average is $28.67. The Q1 2021 consensus EPS forecast is $0.34 on revenues of $126.4 million and $1.85 for the current fiscal year on revenues of $532.6 million.

Past Year Performance: 

Shares of Axcelis Technologies, Inc. have been trading within a range of $44.20 and $12.99 over the last 52-week period. ACLS has experienced a YTD gain of 46.12%, with a 52-week beta of 1.89. ACLS was closely following the Russell 2000 (Figure 1), although, when ACLS fell in early August, the Russell 2000 held firm and continued higher. ACLS has outperformed the benchmark from year-to-date, producing a 52-week gain of 154.64%, compared to that of the benchmark at 109.63%.

Source: FactSet

My Takeaway

With the growing uncertainty of how long the chip shortage will last, it’s hard to get behind companies involved in the production process. Due to businesses requiring a license to ship materials to China-based SMIC, the global impact worsens. With only two successful shipments of products year to date, Axcelis is floating in stagnant waters. Although it is unknown how long this shortage will last, Axcelis remains well-positioned to make a full recovery when this trade war comes to an end. Because of consistent EPS beats, annually growing financials, and industry-leading technology, I believe ACLS represents a hold in the AIM small-cap equity fund. 

Source: FactSet

An International Equity holding: Helen of Troy Limited (HELE, $220.52): “Troy Is Still Standing” by: Justin Nguyen, AIM Student at Marquette University

 Helen of Troy Limited (HELE, $220.52): “Troy Is Still Standing”

By: Justin Nguyen, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• Helen of Troy Limited (NASDAQ: HELE) provides diversified products from a wide range of business segments including: Health & Home, Houseware, and Beauty. The Health & Home provides healthcare and home products such as thermometer, water filtration systems, humidifiers, and air purifiers. The Houseware segment engages in providing food containers, tools, and cleaning products. The Beauty segment develops and sells hair care and related beauty products. 

•  HELE sold their Nutrition Supplements segment in 2017 to focus on the other three main segments.  

•. Strong first year in their strategic Phase II Transformation plan (FY20 – FY24) that emphasizes aggressive investment in global markets and strategic M&A. 

•  HELE acquired Drybar, a hair care and styling brand to strengthen their Beauty segment in early 2020. This move signifies the first highlight of their Phases II plan. 

• After signing exclusive global license of Revlon hair-care products for 100 years, HELE showed ambition in the beauty’s race. 

Key points: 

Helen of Troy Limited was pitched and added to the AIM International Fund in 2016. Since then, the company sold Healthy Directions, their struggling nutritional supplement segment in 2017. The sell was made after HELE acquired the Maryland company for only less than four years, and the goal is for HELE to focus on their three main segments. 

Helen of Troy Limited finished FY20 with a brilliant performance of revenue growing 9.2%, marking a successful start to the company’s Phase II Transformation plan. The plan evolves around aggressive investment in Asia Pacific and Europe. HELE also announced its new international president joined in 2019. Additionally, strategic M&A is also a main goal with concentration on leading brands as well as early-staged companies that show great potential. HELE’s online sales also erupted, amounting up to 25% of total sales FY21 YTD compared to just 6% in FY14. 

Helen of Troy is also seeing some fresh air in its beauty division as the company recorded outstanding growth of 56% YoY. The company’s latest acquisition Drybar contributed $17.5M, or 17% of total segment sales growth. CEO Julien Mininberg also recognized other potential in HELE’s Beauty portfolio such as Revlon’s highly-praised One-Step Volumizer which was referenced by Walmart and Amazon. The next step for this segment lies in smart and cautious M&A strategy, especially after the failure of the supplements segment. 

The company provided its guidance on FY21 revenue to be $2.075B - $2.1B, as well as an average annual growth of 2.5% - 3.5% from FY22-24. Economic bounce back and momentum from the surging digital sales are main drivers for the expected jump from last year. International distribution gains are also anticipated as HELE expanded its international business.

What has the stock done lately?

HELE was pitched and added to the AIM International Fund at a price target of $125.21 in 2016, and has since crushing that estimate with the current price at $220.25. The company’s share price went up to an all-time high at $263.89 in January 27, then stumbled as analysts revised their ratings. HELE is now trading at $220.52, up 0.6% YTD. 

Past Year Performance: 

HELE is up 26.04% during the last 52 weeks, outperforming the S&P 500 which rose by 20.39%. The company suffered a decline due to the pandemic, but thrived their way back and beyond with tremendous sales growth of 9.2%, their best since FY15. However, HELE is experiencing a downward slope on the market since the major drop in late January. 

Source: FactSet

My Takeaway

Positivity coming out of the pandemic in addition to a great start of their new strategic Phase II plan are two factors that make HELE a solid stock to keep in the portfolio. Since the appointment of CEO Julien Mininberg in 2014, the company went through a successful Phase I concentrating on business integration and acquisition. There are a lot of expectations awaited for Phase II, but HELE has shown composure to not chase growth through reckless M&A but rather focus further on organic growth and margin expansion. Helen of Troy is standing strong and looking as good as ever. 

Source: FactSet

An International Equity holding: Horizon Therapeutics (HZNP, $94.49): “Look to the Horizon” by: Andrew Duwa, AIM Student at Marquette University

 Horizon Therapeutics (HZNP, $94.49): “Look to the Horizon”

By: Andrew Duwa, AIM Student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

•Horizon Therapeutics PLC. (NYSE:HZNP) is a specialty pharmaceutical company that engages in the research, manufacturing, and commercialization of products that address patients with rare and rheumatic diseases. Horizon aims to cut out a piece of the market by developing and offering specialty products and through mergers and acquisitions. The company is comprised of two main business segments composing of an Orphan segment representing 81% of sales in 2020 and contains many of the major products. The second division is the Inflammation segment, representing about 18% of sales. Horizon was founded in 2008 as a startup and is headquartered in Dublin, Ireland.   

•Horizon was added to the AIM International Fund in September of 2016 at a price of $19.16 and a price target of $27.36. The stock currently trades at $94.49 as of March 2^nd, 2021.  

• On January 31^st, 2021, Horizon announced that they will acquire Viela Bio, a manufacturer of precision therapies targeting novel pathways in autoimmune diseases 

• In January of 2020, the U.S. FDA approved Tepezza for the treatment of thyroid eye disease, providing a new drug for Horizon to capitalize on markets. 

Key points: 

Horizon has substantially grown since their first profitable quarter in 2016 through a combination of organic growth and mergers and acquisitions. Like many other pharmaceutical companies in FY 2020, Horizon has been impacted by the Global Pandemic. At first glance, Horizon’s sales increased substantially but can mainly be attributed to the addition of Tepezza into their approved product line. Sales for Tepezza were $820 million, representing around 37% of the total sales for the company. Even with this outstanding performance from this new product, Tepezza’s sales are expected to increase even more in the coming years due to reduced willingness of patients to visit doctors’ offices and hospitals where much of the diagnosis for this product occur. When analyzing the sales for 2020, existing product sales only grew about 6% over the entire company, which is concerning and needs to be monitored in the future. 

Horizon announced on January 31^st, 2021 that they will be acquiring Viela Bio for a price of $53.00 per share in cash for an estimated value of $3.05 Billion, with the deal finalizing at the end of Q1, 2021. Viela Bio specializes in the production and sale of therapeutics targeting novel pathways in autoimmune diseases. This acquisition is intended to expand Horizon’s current pipeline by adding 4 new drugs in 9 different clinical stages ranging from Phase III to Phase I treating rare, chronic, autoimmune disorders. With this acquisition, Horizon continues to build on their current plan for long term growth of constructing a robust pipeline and currently have 14 pipeline programs with an additional 6 trials expected to begin by year end 2021. 

What has the stock done lately?

Within the past month, Horizon’s stock has risen from $80.70 to $94.49 with a general positive trend, but a relative correction from $95.50 to $90.62, representing a drop of 5.11%. However the stock has quickly recovered from this and is approaching its monthly and 52-week high.  Horizon has moved in the opposite direction of the S&P 500 index 

Since Icahn released its restructuring proposal on October 28, 2015, American International Group's stock is up ~5%. That may not sound like much, but AIG has consolidated in the high $50/low $60s for the better part of the last six months, and not gone anywhere really. A positive catalyst is needed to breathe some new life into AIG's shares, and Icahn's presence might just do that.

Past Year Performance:

Horizon saw the typical market wide correction that occurred in Mid-March, with Horizon dipping to $24.87. Since the dip, the stock has recovered swiftly, being up 171.07% in the past year. The 52-week high is $96.54 and the low was $22.81. With this insane volatility, Horizon has been greatly outperforming the S&P 500 since May. 

Source: FactSet

My Takeaway

Horizon has continued to improve its positioning in the pharmaceuticals industry through organic and inorganic growth, namely with the recent release of the highly successful Tezeppa and acquisition of Viela Bio. Even with doubts of being able to be successful as a relatively recent start-up, Horizon is continuing to build out its pipeline and has shifted its business philosophy from short term survival to long term sustainable growth. However, even with all of these positives This company has seen exceptional growth in its price per share, growth that in the past year has exceed the initial target price by 3.36x. Because of this, it is recommended that the AIM International fund holds the position in the short run, and determine a suitable exit price in the mid-term. 

Source: FactSet