Company Touch Tracker
This quarter our team engaged with 412 companies across the world, putting our trailing 12-month company touches at 1,693.
This past quarter, team members traveled domestically to Pennsylvania, Texas, Arizona, Georgia, Illinois, California and New York. Internationally, team members traveled to Australia, China, Canada, India Japan, United Kingdom and Taiwan and interacted with companies in Hong Kong, Italy, Indonesia, Finland, Brazil, Switzerland, Luxembourg, Sweden and Malaysia.
Australia Recap
Matt Kaelberer, Research Analyst, Karson Schrader, Research Analyst, Mark Madsen, Research Analyst and Portfolio Manager, and Todd Matheny, Head of Client Relations traveled to Australia in December. Here are some of Matt’s thoughts on their research trip.
Mark, Todd, Karson, and I spent a week in Australia in December 2024. In typical Grandeur fashion, our team participated in 27 meetings over 5 days in 4 different cities, which didn’t leave a lot of down time. The meeting schedule included a variety of companies with an emphasis on the Industrials, Mining and Financials sectors.
December is a great time to be in Australia as its high season for the “Aussie Summer.” The streets in Sydney were crowded with people, and the restaurants and bars seemed to overflow with energy. The city felt alive in a way I haven’t seen in many of the places I’ve traveled.
Australia is an easy place to visit culturally. As an American, I always feel at home. The people have a similar sense of humor and lifestyle as the US. The car radio stations play Classic Rock and American Country. Restaurants offer both familiar selections but also amazing exotic food options from all over the world. The grocery stores look like those in the US. Many Australians have spent time living in the US and follow US pop culture. As close political and military allies, our two countries have a very strong bond that I’m reminded of every time I go there. A strong US Dollar to Australian Dollar currently makes Australia a lot more affordable for Americans.
However, Australia has not been immune to the effects of inflation on consumers’ purchasing power. The Gross Domestic Product (GDP) growth was sluggish last year and is likely to remain tepid in 2025. Australia has always been an expensive place to live, and inflation of the last few years has made housing and consumables feel even more expensive.
From an investment perspective, Australia is an exciting market for micro-small cap managers like us. While there are more people living in Delhi, India than in all of Australia, its geographic size is nearly as big as the continental United States. Australia’s isolation from the rest of the world has influenced its number of home-grown companies. It is often easier to develop your own company than rely on imports of foreign companies. This creates an interesting dynamic where we can find mini versions of large, global companies operating exclusively in Australia. As we connect global dots, we can find intriguing investment opportunities by watching these smaller Australian companies follow a similar playbook as their larger global peers. We’ve also identified a few local companies which have expanded far beyond Australia and become the global leader in their industries, which can create an exciting investment opportunity as well.
We began our trip In Perth, a city known for its ties to the mining industry. While we don’t own many direct mining companies, we do own several asset-light mining services players which can experience cyclical market forces similar to the asset-heavy miners. Like other Industrial markets, the Mining industry has suffered the last year or two. Commodity prices skyrocketed during the post-Covid supply chain issues and heavy industrial growth of 2021-2022. Now these companies are lapping tougher comparables, suffering from wage and equipment inflation, and facing slower end-market demand. The management teams were bearish on the potential results for the first half of 2025 but have growing confidence that things could turn towards the end of the year. One leading indicator mentioned was that smaller mining companies have started to be acquired which is generally a sign that the mining cycle is strengthening. We identified a surprisingly large number of mining services companies with solid returns on capital and growth profiles. While we don’t expect these companies to ever be a large part of our portfolios, we can see where we might own a small weight spread across a number of players.
In Sydney and Melbourne, we met with several financial services companies. The Financial Services sector in Australia is largely driven by the Superannuation rules imposed by the government. By law, every working citizen of Australia must contribute a certain percentage of their income to their retirement funds each year. Many of the managers and advice providers for those funds are publicly traded and have ridden this wave the last few decades. Given the program started in the 90’s, we’re now starting to see the first workers with well-funded accounts retire. Over the next decade, we anticipate that number could increase dramatically as the retirement population grows. We believe this flood of retirees will drive the need for both investment advice and investment income over time.
Private credit is emerging as one of the natural solutions to address the need for income-generating investments. Similar to trends in the US, Australian banking regulators have continually pushed banks to simplify balance sheets and be more conservative generally. Private credit managers have stepped in to fill the needs regulators have created. The Australian private credit market is not exactly like the US, which is largely driven by direct corporate lending. The Australian private credit market is largely focused on the asset-backed space like real estate. The industry is still nascent but is expected to grow significantly and the local players are hoping to position themselves to fill the future demand. Our visits included every local private credit player in the country and they uniformly expressed confidence in the potential market opportunity of the space. We believe the fundamentals and growth trajectory of both the advice providers and the private credit companies may provide an attractive long-term investment opportunity.
Traveling to/from Australia from the US is not for the faint of heart. A typical flight from the west coast of the US can take over 15 hours. Getting from one side of Australia to the other by plane can be another five hours. While flying across Australia, we were informed that a fellow passenger had experienced a medical emergency and was quickly being attended to by the flight crew. It’s always a humbling reminder that while international travel may seem glamorous, emergencies can happen, and we do our best personally to ensure the safety of our team and teammates as we travel.
Given our investment strategy of finding high quality, micro-to mid-cap companies with healthy earnings growth potential, a visit to Australia every 12 to 18 months can be meaningful and productive. Australia is a wonderful place to visit and we’ve generated a nice list of actionable tasks for both our current portfolio holdings and potential new ideas.
