Buying a toll road business and more

As an investor with Titan, you’ve likely heard us reference our “watchlist” in the past – a shopping list of companies we want to buy when the price is right.

On Wednesday, we saw that opportunity and initiated positions in several new holdings for our Offshore strategy: Oracle (ORCL), STMicroelectronics (STM), and Vinci (VCISY).

The result of the trades increased our net exposure from 78% to 87% in Offshore while reducing our strategic cash weight to ~13%.

Let’s dive in.

Not so sleepy software

Founded by tech visionary Larry Ellison, Oracle (ORCL) was at one point considered a sleepy software company resting on their laurels. Fast forward to today and the company is in the midst of a transition from a predominantly on-premise technology platform to a cloud centric offering. 

Powered by its Oracle Cloud Infrastructure, we believe the company is now well-positioned to become the fourth major cloud services provider (reminder: AWS, Microsoft Azure, and Google Cloud are the three large incumbents). Now, hidden behind a legacy software business, is a fast growing cloud platform that, according to our research, is oftentimes preferred by artificial intelligence practitioners.

The combination of a hybrid cloud approach and a large on-premise customer base which generates a meaningful revenue uplift when moving to the cloud, leads us to believe that a compelling growth story may be lying inside the once sleepy software giant.

Despite reporting a lackluster second quarter, we believe the company has been unfairly punished and took the opportunity to initiate a starter position.

Mission critical to electrification

STMicroelectronics (STM) is a leading provider of microcontroller ("MCU"), analog, and other semiconductor products and solutions.

The company supports one of the broadest product portfolios and functions as one of the major beneficiaries of electric vehicle adoption and the broader electrification of the economy. Notably, it is the leading supplier of specialty semiconductor devices to Tesla.

The industrial and personal electronics end markets have been impacted by the economic slowdown and STM has not been immune. The slowdown, combined with what we believe is an oncoming down cycle in Automotive semis, has caused the company to trade at a discount relative to historical valuations and the recent decline has created an attractive entry point for long-term investors.

As cyclical end markets normalize, we expect the company to emerge from the slowdown as a more efficient business than before. Adding STM to Offshore allows us to take advantage of the recent fundamental pullback and initiate a long-term position in a clear market leader.

A literal “toll road” business

Vinci (VCISY) is one of the largest infrastructure companies in the world with leading market positions in transportation infrastructure, energy contracting, and construction. Quite literally a “toll road” business.

Our thesis is driven by three main components:

1.) A dominant “concessions” business (e.g., toll roads, airports) with a strong portfolio of assets that should provide key competitive advantages and strong free cash flow.

2.) Vinci’s legacy construction business overshadowing the earnings power of its higher growing segments like its Airport business  - Vinci owns strategic airport assets in Paris which we believe should see meaningful tailwinds when hosting the Olympics in 2024. 

3.) Overall under appreciation of the company’s M&A potential. 

Vinci has been weighed down recently by speculation surrounding business durability and regulatory concerns. Despite the recent performance, we believe the company remains well positioned to deliver strong results over the long-run.

The results of the trades increase our Offshore net exposure to ~87% and meaningfully reduce our strategic cash as we head into 2024. As always, let us know if you have any questions about the recent trades; we’re happy to assist.

– Your Titan Team

Disclosures:

Titan Global Capital Management USA LLC ("Titan") is an investment adviser registered with the Securities and Exchange Commission (“SEC”). Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Please refer to Titan's Program Brochure for important additional information. Titan’s affiliate, Titan Global Technologies LLC (“TGT”), is a registered broker-dealer and member of FINRA/SIPC. Contact Titan at support@titan.com.

Trade communications are meant for informational purposes only. Statements made in these communications represent opinions and conjecture, and should not be construed as a guarantee of future results. Communications may contain forward-looking statements, which reflect our current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. We do not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise. 

References to specific stock performances are provided for historical context and are not indicative of future results. Please note that any mention of gains or losses in our trade communications reflects those at the strategy level. Actual gains or losses realized in individual client accounts may vary based on factors such as the timing of individual trades, new or recurring deposits, and the specific cost basis for each holding in a client's account. As such, the figures presented may not represent the actual gains or losses experienced by any individual client.Valuation assessments in our communications are based on internal analysis and are for informational purposes only. They should not be the sole basis for investment decisions and may differ from others' views or assessments. No warranty is made regarding their accuracy or completeness.

All investments involve risk and the past performance of a security or financial product does not guarantee future results or returns. There is always the potential of losing money. Keep in mind that while diversification may help spread risk, it does not ensure a profit or protect against loss. The rate of return on investments can vary widely over time, especially for long term investments. Past performance is no guarantee of future results. 

There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. There is always the potential of losing money when you invest in securities or other financial products. Investors should consider their investment objectives and risks carefully before investing. The price of a given security may increase or decrease based on market conditions and clients may lose money, including their original investment and principal. The information provided does not take into account the specific objectives, financial situation, or particular needs of any specific person. This is not an offer, solicitation of an offer, or advice to buy or sell securities, or any other product offered by Titan or any third party.

The content provided in this email is for informational purposes only and is not investment or financial advice, tax or legal advice, an offer, solicitation of an offer, or advice to buy or sell securities or investment products. Please visit www.titan.com/legal for important disclosures.