Business Strategy & Outlook
CrowdStrike is a leader in endpoint security, a necessity that aids in protecting devices and networks, and its threat hunting and breach remediation services are topnotch. While nefarious threat actors are continually upping their attack methodology to create zero-day attacks and are using the rise in entities using cloud-based resources to their advantage, CrowdStrike developed a methodology to turn any entities’ weak-point into better protection for all of its clients. CrowdStrike’s cloud-delivered endpoint protection platform continuously ingests data from all of its installed agents to enhance its protection solutions while keeping all users up to date against the latest threats. CrowdStrike’s customer base, revenue, and margins will experience profound growth throughout the 2020s as customers update their endpoint and workload security requirements in a hybrid-cloud world. CrowdStrike’s endpoint protection platform melded the needs of next-generation antivirus, threat intelligence, endpoint detection and response, and other features like managed threat hunting into a consolidated management plan. The lightweight agents, installed on physical devices like servers and laptops, or in virtual machines and cloud environments, are continually improving through its cloud database algorithms, becoming more capable as more data is received. CrowdStrike’s solutions establish customer switching costs and its network effect makes changing vendors a challenge as clients rely on having the latest threat protection. Alongside a persistent talent shortage in cybersecurity and firms attempting to manage disparate toolsets for various parts of endpoint security, entities are challenged to stay secure in networking environments without distinct security perimeters. CrowdStrike’s experts supplement these overwhelmed or short-staffed teams, and the firm also offers breach remediation and proactive testing services. CrowdStrike is in the early stages of becoming a market mainstay as businesses and governments rapidly adopt cloud-based endpoint protection platforms.
Financial Strengths
CrowdStrike is a financially sound company that will be able to generate solid free cash flow and expand its margin profile throughout the 2020s. CrowdStrike had its initial public offering in June 2019 and has historically operated at a loss on a GAAP basis. CrowdStrike’s capital deployment efforts true to a land-and-expand strategy, whereby CrowdStrike initially has elevated sales and marketing expenses to gain a customer cohort before expanding its revenue per customer while lowering its operating costs per customer (on a revenue percentage basis). CrowdStrike can benefit from cross-selling and up-selling tangential products to its existing base and new clients, while also converting breach remediation service clients to be product customers. As of the end of fiscal 2022, CrowdStrike had $2.0 billion of cash, cash equivalents, and marketable securities and $740 million of debt. With a strong balance sheet and free cash flow generation, CrowdStrike is to pay its obligations on time.
Bulls Say
- CrowdStrike’s innovative endpoint security solutions, delivered as a platform, are quickly attracting customers as clients want to consolidate their myriad legacy security tools. Its threat remediation services are a powerful tool in landing new subscription clients.
- After landing a client, CrowdStrike can gain significant margin leverage via the cross-selling and up-selling of additional security modules.
- Larger firms, with much longer operating track records versus CrowdStrike, have been adding endpoint security into their portfolios that can disrupt technology partnerships and go-to-market strategies.
Company Description
CrowdStrike Holdings provides cybersecurity products and services aimed at protecting organizations from cyberthreats. It offers cloud-delivered protection across endpoints, cloud workloads, identity and data, and threat intelligence, managed security services, IT operations management, threat hunting, identity protection, and log management. CrowdStrike went public in 2019 and serves customers worldwide.
(Source: Morningstar)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice. The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
Business Strategy & Outlook
Huntington Bancshares did not fare well in the aftermath of the financial crisis, largely because of the poorly timed acquisition of Sky Financial in 2007. Although it seemed a reasonable combination at the time with significant footprint overlap, the potential for considerable synergies turned into massive losses due to the subprime mortgage business and bad commercial loans. Under its new leader, Stephen Steinour, Huntington embarked on a strategy shift in 2010 that focused on delivering strong customer service to middle-market businesses and retail clients. The bank also took steps to improve its internal credit procedures and shore up its balance sheet. This strategy has been successful. Commercial and consumer relationships have grown, Huntington has been successful at expanding relationships across multiple product lines, and overall fee income has improved. In 2016, the bank stated that 47% of its commercial clients used four or more of its products or services, up from 22% in 2010, while 52% of retail customers used at least six or more services, up from 43% in 2013. Huntington returned to the acquisition front in a big way in 2016 with the purchase of FirstMerit. This added much-needed scale and efficiency while improving market share. After cutting over 40% of FirstMerit’s original cost base, Huntington sold its more expensive product set in new and underpenetrated markets. Growth in home lending in Chicago and growth from the RV/boat financing unit have been very strong, indicating that the merger worked. Meanwhile, Huntington’s auto financing franchise remains strong as ever.
Since FirstMerit, Huntington has completed several bolt-on acquisitions, including HSE in 2018 and Capstone Partners in 2022 to help further build out their capital markets unit. Huntington also completed another sizable banking acquisition in 2021 with TCF Financial, in a classic cost-saving, market-overlap play. Beginning to get a true feel for more normalized financials following the acquisition. The initial impression is that the bank may struggle to reach its goal of 17%-plus returns on tangible common equity through the cycle.
Financial Strengths
Huntington is in solid financial health. The bank has been generating profits since 2010, with returns on tangible equity handily exceeding its 9% cost of capital. Huntington reported a common equity Tier 1 capital ratio of 9.3% as of September 2022, and given the bank’s moderate to low appetite for risk, this seems very reasonable to us
Bulls Say
- A strong economy and higher rates are all positives for the banking sector and should propel revenue and profitability even higher.
- Huntington’s recent acquisitions have improved the bank’s scale and share, and more revenue growth could be right around the corner.
- Huntington has taken advantage of new markets and product sets from its acquisitions, growing fee income and taking some share along the way. This could continue, potentially allowing Huntington to grow revenue faster than peers.
Company Description
Huntington Bancshares is a regional bank holding company headquartered in Columbus, Ohio. The bank has a network of branches and ATMs across eight Midwestern states. Founded in 1866, Huntington National Bank and its affiliates provide consumer, small-business, commercial, treasury management, wealth management, brokerage, trust, and insurance services. Huntington also provides auto dealer, equipment finance, national settlement, and capital market services that extend beyond its core states.
(Source: Morningstar)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice. The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
Business Strategy & Outlook
Hub Group is the second-largest intermodal marketing company and also ranks among the 20 largest asset-light truck brokers in terms of gross revenue. In its flagship intermodal division, Hub contracts with the Class I railroads for the line-haul movement of its owned containers. It operates the second-largest fleet in the industry, with exclusive access to more than 30,000 containers, and enjoys an approximate 10% market share. By gross revenue, J.B. Hunt is the largest intermodal marketing company, followed by Hub and the intermodal divisions of STG Logistics, Schneider National and Knight Swift. Hub has constructed intermodal and truck brokerage networks of sufficient scale to be attractive to customers (shippers) and suppliers, both of which benefit from using a larger intermediary.
Sophisticated IT systems and market know-how enable customers to outsource intermodal shipping to an expert specialist, while Hub’s large volume of loads and significant control of containers make it an attractive customer to the Class I railroads. The company’s primary rail carriers are Norfolk Southern in the East and Union Pacific in the West. Rates in the competing truckload market corrected in 2019, pressuring intermodal value proposition relative to trucking, and initial pandemic disruption pressured container volume into early 2020. However, truckload capacity tightened drastically by mid-2020 (remaining scarce through most of 2022), while contract pricing soared across all modes and underlying intermodal demand jumped on heavy retail shipper restocking (intermodal cargo is mostly consumer goods). The onset of rail service shortfalls in second-half 2021 has throttled Hub’s container volume growth despite otherwise positive freight demand, but the firm is working diligently with the railroads and customers to minimize the issue. A growth across Hub’s intermodal can be seen, truck brokerage and dedicated operations will take a breather in 2023. That said, for intermodal 2.5%-3.0% normalized U.S. retail sales growth and conversion trends to support 3.0%-3.5% industry container volume expansion longer-term, with 2.0%-2.5% pricing gains on average.
Financial Strengths
Hub Group’s balance sheet is healthy, and the firm is not overly leveraged. At the end of 2021, Hub held a manageable amount of debt, which is normally used to help finance equipment purchases (especially intermodal containers) as well as tuck-in acquisitions like the 2020 Nonstop Delivery deal. Total debt came in near $275 million in 2021. Debt/EBITDA stood at less than 1 times in 2021, versus 1 time in 2020 and a five-year average near 1.3 times. The firm held roughly $160 million in cash at year-end 2021 versus an approximate $125 million in 2020. Historically, Hub’s model generated decent free cash flow in years when it wasn’t acquiring intermodal containers. Overall, free cash flow averaged 2.5% of gross revenue over the past five years, with capital expenditures approximating 3% of sales. Capital expenditures will likely come in near 5% of sales in 2022 due in part to investment in additional intermodal containers to capitalize on growth opportunities. The 2017 acquisition of Estenson, which provides asset-based dedicated trucking services, incrementally moved Hub into the capital-intensive truckload shipping business, and the operation originally required meaningful investment in tractors to support fleet growth. Most of the firm’s logistics-segment operations, including last mile and truck brokerage, are asset light by nature.
Bulls Say
- Contract pricing across the intermodal and truckload shipping sectors is likely to normalize in 2023 as capacity constraints diminish.
- Because of high inventory levels, retail customers’ trailer detention levels are abnormally high, contributing to network inefficiencies across Hunt’s.
- In Hub’s core intermodal division, transportation costs and customer satisfaction depend heavily on the performance of partner Class I railroads, which have been grappling with labor-related network headwinds.
Company Description
Hub Group ranks among the largest asset light providers of rail intermodal service. Roughly 60% of revenue comes from Hub’s intermodal and transportation solutions division. ITS includes its flagship intermodal operations, which use the Class I rail carriers for the underlying line-haul movement of containers, as well as its dedicated truckload unit. Asset light truckload and LTL brokerage makes up around 20%. The remaining 20% reflects Hub’s logistics division, which provides outsourced transportation management, warehousing and fulfillment, and final mile delivery. Hub is somewhat acquisitive in that it often makes tuck-in acquisitions which expand its brokerage, logistics, and dedicated truckload offerings.
(Source: Morningstar)
DISCLAIMER for General Advice: (This document is for general advice only).
This document is provided by Laverne Securities Pty Ltd T/as Laverne Investing. Laverne Securities Pty Ltd, CAR 001269781 of Laverne Capital Pty Ltd AFSL No. 482937.The material in this document may contain general advice or recommendations which, while believed to be accurate at the time of publication, are not appropriate for all persons or accounts. This document does not purport to contain all the information that a prospective investor may require. The material contained in this document does not take into consideration an investor’s objectives, financial situation or needs. Before acting on the advice, investors should consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation, and needs. The material contained in this document is for sales purposes. The material contained in this document is for information purposes only and is not an offer, solicitation or recommendation with respect to the subscription for, purchase or sale of securities or financial products and neither or anything in it shall form the basis of any contract or commitment. This document should not be regarded by recipients as a substitute for the exercise of their own judgment and recipients should seek independent advice. The material in this document has been obtained from sources believed to be true but neither Laverne and Banyan Tree nor its associates make any recommendation or warranty concerning the accuracy or reliability or completeness of the information or the performance of the companies referred to in this document. Past performance is not indicative of future performance. Any opinions and or recommendations expressed in this material are subject to change without notice and, Laverne and Banyan Tree are not under any obligation to update or keep current the information contained herein. References made to third parties are based on information believed to be reliable but are not guaranteed as being accurate.
Laverne and Banyan Tree and its respective officers may have an interest in the securities or derivatives of any entities referred to in this material. Laverne and Banyan Tree do and seek to do business with companies that are the subject of its research reports. The analyst(s) hereby certify that all the views expressed in this report accurately reflect their personal views about the subject investment theme and/or company securities.
Although every attempt has been made to verify the accuracy of the information contained in the document, liability for any errors or omissions (except any statutory liability which cannot be excluded) is specifically excluded by Laverne and Banyan Tree, its associates, officers, directors, employees, and agents. Except for any liability which cannot be excluded, Laverne and Banyan Tree, its directors, employees and agents accept no liability or responsibility for any loss or damage of any kind, direct or indirect, arising out of the use of all or any part of this material. Recipients of this document agree in advance that Laverne and Banyan Tree are not liable to recipients in any matters whatsoever otherwise; recipients should disregard, destroy or delete this document. All information is correct at the time of publication. Laverne and Banyan Tree do not guarantee reliability and accuracy of the material contained in this document and are not liable for any unintentional errors in the document.
The securities of any company(ies) mentioned in this document may not be eligible for sale in all jurisdictions or to all categories of investors. This document is provided to the recipient only and is not to be distributed to third parties without the prior consent of Laverne and Banyan Tree.
