Equity Highlights May 2024

Olivia Guillebeau

Welcome to Broyhill's Equity Highlights, where we share a few quick takes on recent news across the portfolio every month.  

We aim to make these highlights easy to read and easy to repeat. Feel free to share our work! 

Fidelity National Information Services Investor Day. After reading through Fidelity's most recent Investor Day transcript, our confidence in the company's earnings algorithm improved as management expanded on the rollout of its Modern Banking Platform and the accelerated growth of the Capital Markets segment.

Dollar stores are shutting down across America. They did this to themselves. All 371 99 Cents Only stores are set to close after the small-format retailer finally threw in the towel. While the sales mix for 99 Cents Only stores is similar to Dollar General's, less than 50% of DG stores are within a 5-mile radius of 99 Cents Only stores. 

Rationing Zyn cans to survive the shortage. After increasing guidance for Zyn shipments in the most recent earnings call, we suspected Philip Morris may still struggle to meet the growing demand for pouches. While the current shortage may temporarily drive users to competitors like on! and Velo, we'd argue that Zyn's brand loyalty is strong enough to recover volumes soon after the shortage is over.

Reading between the lines of Nintendo's FY2025 Guidance. In Nintendo's most recent earnings release, management announced guidance for FY2025. The guide includes a 24% drop in operating profit and a lackluster slate of games for the coming year. We think the lack of blockbuster games is a hint that the next-generation Switch console is likely to be released next year, which is consistent with our initial investment thesis.

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