2025年最佳长期投资股票推荐

Aurizon shares present an attractive yield, supported by high-quality rail infrastructure and haulage operations. Significant downside is already reflected in the share price, and our analysis indicates that the risks for investors are tilted towards the upside. Haulage volumes are gradually recovering after an extended period of wet weather. Earnings are expected to benefit from Consumer Price Index-linked tariffs, along with recent developments and acquisitions. We believe that environmental concerns are exaggerated, creating an opportunity for investors to acquire a company of above-average quality at a discounted price. Aurizon primarily transports coking coal from globally competitive mines, and a commercially viable alternative to coking coal for steel production remains distant.

We find the shares of Bath & Body Works to be attractive, currently trading at approximately a 50% discount to our fair value estimate of $61. The company possesses a strong competitive advantage in the substantial addressable markets it serves. Its robust brand intangible asset is reinforced by its leading position in the bath and shower, as well as the candle and air freshener sectors, particularly due to its swift adaptation to consumer trends. The company's narrow moat is reflected in the anticipated 34% average return on invested capital, excluding goodwill, over the next decade, significantly surpassing our 8% weighted average cost of capital estimate. While we project limited growth in its North American footprint, with nearly 1,900 owned stores already established, we expect that product innovation and enhancements in store formats will drive both top- and bottom-line growth over time. Additionally, improvements in omnichannel strategies, such as buy online and pick up in store, are expected to remain integral, alongside loyalty program updates that will enhance conversion rates and profit potential. The company's emphasis on international expansion is likely to benefit both its physical and digital channels, projecting an average international sales growth of 6% over the next decade. This strategy will aid Bath & Body Works in enhancing its brand intangible asset on a global scale. We anticipate that these opportunities will contribute to an average sales growth of 3% in the long term, aligning with global growth forecasts (according to Euromonitor) for the bath and shower and soap industries. Consequently, this will lead to additional market share gains for Bath & Body Works, further solidifying its already dominant position.

Baxter shares are currently trading at a significant discount to our estimated value. We acknowledge the short-term market concerns stemming from the recent management transition and potential tariffs; however, we believe there is a considerable margin of safety in the shares. In recent quarters, demand for many of the company's products has been on the rise due to increased medical utilization. Additionally, new product launches, such as the Novum IQ pump platform, are contributing to this demand. Provided that tariff exposure remains manageable, as management has recently indicated, Baxter presents a compelling margin improvement opportunity. Most inflationary pressures in its supply chain are subsiding, and important new group purchasing organization contracts will come into effect in 2025, which should enhance product pricing. We anticipate that profits will grow at a relatively rapid pace in the near term, eventually stabilizing at a more normalized growth rate in the high single to low double digits over the long term.

Budweiser APAC is the leading beer brewer in China by sales value, holding approximately a 40% share in the premium segment. The company boasts a nationwide distribution network and a diverse portfolio of international premium beer brands, supported by the significant resources of its parent company, Anheuser-Busch InBev. Budweiser APAC has also shown proficiency in digitalizing its channel management, which we believe gives it a competitive advantage over its peers and is crucial for seizing premiumization opportunities in the long term as volume growth stabilizes. We anticipate that the long-term premiumization trend in China's beer sector will persist, despite current sluggish consumer sentiment, due to a favorable competitive environment and shared objectives among major brewers in pursuing price growth over the long term.

Domino's Pizza is a high-quality company with significant growth potential. Recent declines in same-store sales growth and a slowdown in store openings may overshadow the vast opportunities within its global network. Our earnings growth forecast primarily relies on franchisees launching new stores. The profitability of franchise locations and the demand for new stores are closely linked to same-store sales growth, which we anticipate will rebound starting in fiscal 2026, alongside a broader recovery in the fast-food sector. We project a 20% compound annual growth rate in earnings over the next five years. Additionally, we expect to receive an update on the company's long-term plans during its strategy day in the first half of fiscal 2026, which should alleviate some of the uncertainty surrounding the stock.

The market is currently undervaluing Endeavour's long-term earnings outlook, which is considered defensive. Consumers are opting for more affordable options and purchasing in bulk for at-home liquor consumption. We believe that the recent performance in liquor retailing is indicative of cyclically weak demand driven by cost-of-living challenges. Nevertheless, we anticipate that liquor sales momentum will improve, with sales growth expected to stabilize in the mid-single digits starting from fiscal 2026. Over the long term, we view liquor demand as defensive, supported by factors such as inflation, population growth, and a structural shift towards premiumization. Additionally, earnings in the smaller hotels segment are demonstrating resilience.

We believe FMC shares are significantly undervalued, currently trading in 5-star territory well below our $95 fair value estimate. FMC's narrow moat is derived from its patent-protected and differentiated premium crop protection products, which farmers are willing to pay a premium for due to their effectiveness in combating pests, including insects, weeds, and fungi that can harm crops and diminish yields. Recently, FMC shares experienced a sell-off as the market expressed concerns about the growth outlook following two years of declining profits and management's guidance for lower results in the first half of 2025. This decline has primarily been driven by inventory destocking, as farmers and farm retailers accumulated excess supply during 2021 and 2022 due to concerns over COVID-related supply chain disruptions. As supply chains began to normalize in 2023, the excess inventory started to unwind, negatively impacting sales. This inventory fluctuation was particularly pronounced in Brazil, FMC's largest market. Consequently, while FMC outperformed its crop chemicals peers in 2021 and 2022, it has underperformed since then. Another challenge is that FMC's diamides, a class of insecticides that target ryanodine receptors in insects, are set to go off patent in 2025. These diamides accounted for 35% of sales in 2024 and represent FMC's largest product category. However, the company has a robust pipeline of new products that we anticipate will more than offset the decline in diamide profits in the coming years. We expect the end of inventory destocking and growth in new product sales to drive FMC's sales and profits back to growth starting in the second half of 2025. Increased profits should serve as a catalyst for the shares in the upcoming quarters.

Fortune Brands Innovations is a narrow-moat-rated manufacturer of building products, featuring a portfolio of well-established brands such as Moen (plumbing fixtures), Master Lock (security), Therma-Tru (doors), and Fiberon (composite decking). Although Fortune Brands operates globally, around 90% of its revenue is generated from the US and Canada, with two-thirds of North American housing-related revenue linked to the repair and remodel (R&R) market, which is less cyclical compared to new construction. Over the past two years, the stock has significantly underperformed the Morningstar US Market Index due to concerns regarding near-term US housing fundamentals amid rising mortgage rates, as well as the company's exposure to tariffs. With tariff exposure projected to account for approximately 11% of 2024 revenue, there is potential for profit margins to be impacted if not addressed. However, management is confident in their ability to fully offset these incremental tariff costs through price increases, cost-reduction initiatives, and supply chain adjustments, and we find their mitigation plan credible. We maintain a positive long-term outlook for the US housing market, anticipating a robust rebound in US residential construction by 2027, along with a mid-single-digit long-term growth trajectory for R&R spending. The R&R market is expected to benefit from secular trends such as an aging housing stock and the growing adoption of smart home and energy-efficient products. We believe Fortune Brands will outpace the growth of the US R&R and new-construction markets, particularly due to its expanding range of connected products, including smart plumbing fixtures, leak detection devices, and home security solutions. Currently, we view the stock as significantly undervalued. The existing valuation suggests that operating margins may not exceed 17% again; however, we believe Fortune Brands can achieve operating margins closer to 18% with improved demand. During its 2022 investor day, management outlined a strategy aimed at reaching a long-term operating margin of 20%-22%. Our valuation approach is more conservative, but there remains considerable upside potential if management successfully realizes its long-term profitability goals.

We believe narrow-moat Hanesbrands is an attractive investment, trading at approximately a 70% discount to our fair value estimate of $16.30. Our moat rating is based on the company's strong intangible brand assets. Hanesbrands owns several well-known brands in basic innerwear in the United States and Australia, many of which command higher prices and achieve greater sales volumes than competing brands. In 2024, Hanesbrands sold its Champion brand to Authentic Brands Group for a favorable price of $1.2 billion, with the potential for an additional $300 million in earn-outs. This sale enables Hanesbrands' management to concentrate on enhancing its core brands and products. Additionally, the divestiture is expected to positively impact margins, as innerwear has historically demonstrated more consistent profitability compared to Champion. Hanesbrands generates over 70% of its sales in the U.S. but also has significant international growth opportunities. The company has seen particular success in Australia, where its Bonds brand and others hold dominant market shares. Hanesbrands is actively working to reduce its debt, which we believe is highly advantageous for shareholders. The firm has eliminated its quarterly dividend and is utilizing nearly all of its available free cash flow for debt reduction. Proceeds from the Champion sale have also been directed towards retiring debt. In the first quarter of 2025, Hanesbrands refinanced debt maturing in 2026 with new loan facilities that mature in 2030 and 2032. The company ended the quarter with $2.3 billion in debt, a decrease from $3.3 billion at the end of the first quarter of 2024. During the same period, the firm reduced its debt/adjusted EBITDA ratio from 5.0 times to 3.6 times.

We believe the market has a short-sighted perspective on IDP Education, influenced by recent declines in volumes and regulatory uncertainties. While we acknowledge that the short-term outlook appears weak and forecast a decline in IDP’s earnings for fiscal 2025, we anticipate that the company will continue to gain market share as the industry favors quality operators like IDP. We see significant long-term value, as the caps on foreign students are temporary and address short-term cyclical issues. The pricing outlook is also positive in the near term, with IDP negotiating better terms and universities planning to increase tuition fees due to an undersupply. We expect IDP to benefit from the long-term macroeconomic factors that support the international education sector.

Kering, the second-largest luxury group by revenue, is currently trading at an appealing discount. While the momentum of Kering's flagship brand, Gucci, is experiencing a slowdown, the brand's strong recognition, substantial marketing resources, control over over 90% of its distribution, and access to top managerial and creative talent position Gucci to sustain its pricing and desirability over the long term.

Kilroy Realty, a no-moat company, presents an attractive investment opportunity due to its high-quality office portfolio, which appears undervalued following the recent selloff of office REITs. While we acknowledge the uncertainty surrounding the future of office spaces and anticipate a challenging environment for office owners in the near to medium term, we believe the recent market reaction has been excessive. The current implied valuation of Kilroy’s shares does not align with the prevailing private market valuations of its office portfolio. Long-term investors may find this stock appealing, as it is trading significantly below our fair value estimate of $59 per share. Kilroy’s office portfolio is among the best in the publicly traded REIT sector, with an average age of just 11 years, compared to 30 years for its peers. Additionally, Kilroy excels in other important metrics, such as rent spread and sustainability. The company is well-positioned to capitalize on the growing flight-to-quality trend, as employers increasingly seek to bring employees back to the office. However, there are risks to consider. The recovery in physical office occupancy levels has been slow; according to Kastle Systems' weekly work barometer, average occupancy remains around 50% of pre-pandemic levels. Furthermore, Kilroy's geographic concentration in California and significant exposure to the technology and life sciences sectors pose additional risks to our investment thesis.

We believe that Melrose, with its wide economic moat, is an attractive investment opportunity as it currently trades at approximately a 65% discount to our fair value estimate of GBX 800. Melrose Industries, through its subsidiary GKN Aerospace, is a prominent supplier of engine and structural components, with 70% of its revenue derived from long-term contracts where it serves as the sole-source provider. In the engine segment, the company boasts a well-diversified portfolio across both narrow-body and wide-body aircraft, functioning as a Tier 1 supplier with established positions on 90% of active engines, and engaging in risk and revenue-sharing partnerships for 74% of these engines. The company maintains long-term partnerships with all major engine original equipment manufacturers, including Pratt & Whitney, GE, Safran, and Rolls-Royce. With its RRSP contracts, Melrose is well-positioned to capitalize on the recovery of the civil aerospace sector post-pandemic and the substantial growth anticipated in the engine aftermarket. Despite the pandemic's challenges, air travel has demonstrated resilience, particularly in the leisure segment, alongside a rising demand for narrow-body aircraft. By 2023, global flight hours had returned to 2019 levels and are projected to grow at an average rate of 8% throughout our forecast period. Aerospace manufacturers have ramped up production efforts, and we expect this trend to persist in the long term to meet the soaring demand for aircraft and engines, a situation exacerbated by a shortfall of approximately 2,500 aircraft due to the pandemic and issues surrounding the Boeing 737 MAX. By 2029, we anticipate that 57% of the engine segment's future profits will be derived from the aftermarket, up from an estimated 53% in 2024. While the majority of GKN's portfolio consists of non-rotating parts that last the entire lifespan of an engine, the RRSP contracts entitle the company to aftermarket sales generated by its partners. Furthermore, profit growth in the engine division is expected to be bolstered by a doubling of repair service sales by 2026 and enhanced defense partnerships, particularly with the Swedish Gripen and F-35 jets. Lastly, we foresee the structures division also benefiting from positive trends in both civil and defense markets, along with improved profitability as GKN restructures its portfolio and exits unprofitable contracts.

Moderna's shares have experienced significant volatility, with investors initially overly optimistic in 2021 regarding the company's technological potential, followed by a more pessimistic outlook on its growth post-coronavirus. While we maintain modest expectations for sales of the firm's COVID vaccine due to the substantial demand driven by the pandemic in 2021 and 2022, we believe that Moderna's pipeline of mRNA-based vaccines and treatments is progressing rapidly across various therapeutic areas. Despite a decline in sales during 2023-2024 in anticipation of new product launches, we remain confident in the long-term sales trajectory of the company's diversified pipeline. We see strong validation of Moderna's technology in respiratory virus vaccines (with an RSV vaccine set to launch in 2024 and a COVID/flu combination vaccine expected in 2026), oncology (with a potential melanoma launch by 2027), and rare diseases (with accelerated approvals anticipated starting in 2027).

Nice is the global leader in cloud-based contact center as a service (CCaaS) software, holding approximately 15% market share. We believe the market is overly pessimistic regarding cloud revenue growth, which has led to the stock’s valuation multiples declining to multiyear lows. However, we view this as a timing issue and anticipate a recovery in cloud revenue growth. The industry has shifted its growth focus from small and medium-sized businesses to large enterprises, a transition for which Nice is well-positioned. Although Nice has secured numerous large enterprise deals, the conversion from bookings to revenue has been slow due to the complexities involved in implementing software at large enterprises and the additional delays in decision-making as companies develop their artificial intelligence strategies. We consider this a temporary challenge. We expect strong secular drivers to re-emerge, including the increasing adoption of CCaaS in the market and the advantages of AI for CCaaS providers, as customers seek to reduce labor costs, their largest expense.

Nike's shares have declined by approximately 20% over the past year and are currently trading at significant discounts to our valuation. Fiscal year 2025 was one of the company's most challenging periods in decades, with issues further intensified by increased tariffs on U.S. imports. Despite these challenges, we believe CEO Elliott Hill, who took on the role in October 2024, is implementing effective strategies to enhance Nike's brand value, which underpins our wide moat rating. Hill's overarching strategy, termed "Win Now," focuses on strengthening the company's ties to global sports—its greatest advantage—while reducing unnecessary costs. In the long term, we anticipate that Nike can achieve mid-teens EBIT margins by boosting full-price sales, launching new merchandise, and expanding sales in high-margin markets. Under former CEO John Donahoe, Nike emphasized direct selling over product development, which inadvertently opened doors for more innovative competitors in key categories. Additionally, demand for sportswear in critical markets such as North America (44% of fiscal 2025 revenue) and Greater China (15%) has softened due to economic challenges. Hill, who has 32 years of experience at Nike, including his last role as president of consumer and marketing before retiring in 2020, possesses extensive insider knowledge. He faces significant work ahead to strengthen relationships with wholesale partners and enhance full-price selling through company-owned digital channels, but we believe he is capable of meeting these challenges. To manage inventory ahead of new product launches, Hill has increased discounting, particularly in footwear, as Nike reduces reliance on overexposed lines to make way for more competitive offerings. As a result, near-term performance may be below expectations. However, we project that Nike will return to sales growth and improve operating margins by fiscal year 2027.

Following the successful development of a COVID-19 vaccine in November 2020, the hotel industry, along with the broader REIT sector, experienced a rally as investor confidence grew, with expectations of a return to pre-pandemic business levels. However, the emergence of the delta and omicron variants led to a decline in hotel stock prices, even as the rest of the sector continued to perform well. Many hotel companies have struggled to generate positive corporate cash flows since the onset of the pandemic; the rise in virus cases has hindered the industry's recovery and prolonged the period of negative cash flows. We believe the current environment presents an opportunity for investors to acquire Park Hotels & Resorts at a price below our fair value estimate. We assess that the company's balance sheet is robust enough to withstand ongoing disruptions in the hotel industry for the foreseeable future. Although numerous businesses have delayed their plans to fully return employees to the office, which subsequently postpones the recovery of hotel demand driven by business travel, we do not expect this disruption to significantly impact the long-term demand for Park's portfolio of high-quality hotels. Additionally, Park's management has demonstrated effective management of hotel net operating income during the pandemic, exceeding our expectations, which gives us confidence in their ability to navigate the current challenges facing the hotel sector. We anticipate that Park will recover from the pandemic, experiencing several years of strong growth, and will return to its 2019 peak levels by the end of 2024.

Polaris' shares are currently trading at over a 40% discount to our fair value estimate of $70 per share. The company's strong brands, innovative products, and Lean manufacturing practices contribute to its wide economic moat. We believe Polaris will continue to leverage its research and development, high-quality standards, and operational excellence to drive demand. Historically, the company has generated exceptional returns on invested capital, including goodwill, and is projected to achieve a 17% return on invested capital (ROIC) by 2034, significantly exceeding our 10% weighted average cost of capital assumption. Recently, the stock has faced pressure due to challenges related to tariffs, which are expected to have an incremental impact of nearly $225 million in 2025, as well as slowing consumer conversion rates and cautious dealer behavior—factors we consider to be temporary. Consequently, the company has retracted its previous 2025 outlook, which anticipated a sales decline ranging from 4% to 1% and adjusted earnings per share of $1.10. The updated tariff expectations now suggest a potential EPS loss in 2025. As dealer inventory levels improve, we expect wholesale shipments to align more closely with consumer demand. We are optimistic that long-term demand driven by new product launches will support shipment growth and profit enhancement beyond 2025. From 2026 to 2034, we project the company will achieve an average sales growth rate of 3.5%, with earnings per share growing at a high-single-digit rate over the long term.

Ramsay is experiencing robust patient revenue growth; however, group profitability is being affected by inflationary pressures, reduced government support, and increased investment in digital initiatives. Despite these challenges, we anticipate long-term margin expansion as Ramsay reduces its reliance on agency staff, normalizes case mix and volumes for nonsurgical services, improves capacity utilization, and realizes efficiencies from digital investments. Notably, labor shortages are beginning to ease, and Ramsay is actively investing in recruitment and training efforts. The company has also negotiated higher reimbursement rates to address cost inflation and has strengthened its balance sheet by divesting its stake in Ramsay Sime Darby. For further details, please refer to our Ramsay Stock Pitch published in December 2023.

No-moat Realty Income is currently trading at a significant discount to our $75 fair value estimate. We attribute the decline in share value since August 2022 to rising interest rates. Our analysis indicates that Realty Income is the most sensitive REIT among those we cover, displaying the strongest negative correlation with interest rates. The company has established itself as "The Monthly Dividend Company," which has attracted many investors during periods of low interest rates. However, these investors may shift their focus to risk-free Treasuries as interest rates increase. Moreover, Realty Income sets its annual rent escalators relatively low, which means it depends on executing billions of dollars in acquisitions each year to drive overall growth. The rise in interest rates has narrowed the spread between the company's acquisition cap rates and the weighted average cost of capital used to finance those acquisitions, potentially hindering growth. Nevertheless, Realty Income has increased its acquisition volume over the past several years and continues to acquire at a positive spread over its cost of capital. In 2023, the company executed $9.5 billion in acquisitions at an average cap rate of 7.1%, significantly above the average interest rate of around 5% on the debt issued to fund these transactions. Additionally, the company’s $9.3 billion acquisition of Spirit Realty, which closed in January 2024, is expected to enhance shareholder value. We believe that management will continue to identify opportunities that boost funds from operations, thereby supporting ongoing dividend growth for shareholders. The recent selloff driven by rising interest rates presents an attractive entry point for investors, especially if the Federal Reserve announces further rate cuts.

Renault ranks approximately 12th globally in vehicle sales, with an annual total of 2.3 million units. Despite this position, the company's well-executed transformation strategy has allowed it to achieve operating margins comparable to those of larger competitors. Currently, Renault operates at 90% capacity. The company benefits from a favorable mix, including the rapidly growing, higher-margin Dacia brand and an increasing proportion of C models, moving away from its historically dominant B model portfolio. Additionally, Renault is gradually reducing its shareholding in Nissan, which provides a cash buffer and potential upside if the entire stake is acquired. Notably, Renault has no exposure to US import tariffs.

We believe the market has not fully recognized Roche's robust drug portfolio and its industry-leading diagnostics, which together create sustainable competitive advantages. The challenges posed by declining COVID diagnostic revenue and competition from generics and biosimilars for older drugs have diminished by 2025, allowing the strength of the firm's leading drug portfolio to come to the forefront. We anticipate that the firm's research and development expenditures are becoming increasingly efficient, and recent acquisitions in obesity and immunology have the potential to generate multi-billion-dollar sales. As a leader in biotech and diagnostics, this Swiss healthcare giant is uniquely positioned to steer the global healthcare industry towards safer, more personalized, and cost-effective solutions. The synergy between its diagnostics and drug development teams provides Roche with a distinctive in-house perspective on personalized medicine, as well as new opportunities for improved diagnosis and treatment in areas like Alzheimer's disease. Roche's expertise in oncology has expanded into a more diversified portfolio that includes neurology, hematology, oncology, and ophthalmology, with strong patent protections anticipated to remain in place through the end of the decade.

We consider SiteMinder to be a strong industry leader with a substantial and attainable market opportunity. We anticipate that the hotel industry will consolidate around larger software providers, such as SiteMinder, which can distribute significant fixed technological and regulatory costs across a broader customer base. In our opinion, economic downturns will further expedite this trend. Additionally, we believe that SiteMinder's new platform products will raise switching costs and foster network effects, leading to considerably higher terminal margins.

Challenging economic conditions in New Zealand, along with structural headwinds affecting the mobile and IT sectors due to budget constraints from government and enterprise customers, have revealed Spark NZ’s inflated cost base. While earnings are currently weak, they are anticipated to recover as the New Zealand economy improves. Additionally, there is likely to be a renewed emphasis on cost management, with achievable cost-reduction targets. In terms of our earnings and dividend projections, we expect the balance sheet to remain stable and potentially improve through asset sales. This outlook is not currently reflected in the share price or in Spark’s competitive mobile business, which benefits from a stable and rational industry structure, with Spark holding the leading market share.

Cyclical rather than structural weakness has created a buying opportunity in wide-moat Spirax, presenting approximately 60% upside from current levels. Analyzing fiscal 2024 results between the first and second halves indicates that the business is on track to achieve 250 basis points of EBIT margin expansion in the medium term, driven by a recovery in biopharma end markets. This recovery supports our projected 9% EPS compound annual growth rate through 2028. The shares are currently trading at 24 times depressed earnings, a conservative valuation for a company that has historically grown at about twice the rate of global industrial production and possesses a strong competitive moat. Additionally, valuation multiples are significantly below their long-term average.

Shares of wide-moat Estée Lauder have declined by 28% over the past year, primarily due to ongoing weak demand in China and investor doubts regarding the company's profit recovery strategy. Recent changes in top management, including the CEO and CFO, have further contributed to uncertainties. We believe the shares, currently trading at a 33% discount to our $120 fair value estimate, present a compelling investment opportunity, and we recommend that investors seeking exposure to the attractive beauty care market consider buying in. Although the challenging consumer environment in China has created short-term obstacles for Estée and its beauty industry peers in regaining market growth, we maintain that the trends toward premiumization and Estée Lauder's competitive position remain strong. We believe the current challenges in China are manageable, as the new management team is effectively utilizing the company's strong brands, solid channel relationships, and various research and manufacturing initiatives in Asia to enhance its market position and long-term growth prospects. While we now project a high-single-digit sales decline for fiscal 2025 due to ongoing issues in China, we anticipate that revenue growth will accelerate to a mid-single-digit average for the remainder of the 10-year forecast period. This growth is expected to be driven by Estée's focus on the structurally appealing premium skincare market. Additionally, we forecast that the operating margin will recover to 16% by fiscal 2034, supported by an improved channel mix (moving away from heavy promotions in department stores), manufacturing efficiency improvements, and cost-reduction strategies.

We believe that narrow-moat Kraft Heinz should be on investors' shopping lists, as it is currently trading at a 50% discount to our fair value estimate of $51 and offers a 5% annual dividend yield. Market skepticism appears to focus on the firm's ability to avoid a lasting volume contraction in the face of persistent cost pressures (including potential impacts from looming tariffs), subdued consumer spending, and increased competition following recent price hikes. However, we consider these concerns to be unfounded, as the company has moved away from previous management's focus on short-term profitability and cash flows. Since mid-2019, Kraft Heinz has strategically pursued sustainable efficiencies, increased brand spending (investing in product innovation and marketing at a mid-single-digit percentage of sales, which aligns more closely with industry peers), improved its capabilities in category management and e-commerce, and utilized its scale to adapt more effectively to changing market conditions. We believe the company is committed to this strategy. We anticipate that these initiatives will enable Kraft Heinz to achieve low-single-digit annual sales growth while maintaining operating margins in the low 20s.

Shares of VF, the owner of The North Face, Timberland, Vans, and eight other brands, are currently trading at approximately a 70% discount to our valuation following a sharp decline due to concerns over tariffs and other factors. We assess the firm as having no economic moat, as Vans and several other key brands have faced challenges since the pandemic. Nevertheless, VF remains one of the largest apparel companies in the US and operates in appealing market segments. In response to these challenges, CEO Bracken Darrell is executing a strategy to revamp Vans, launch a new platform in the Americas, cut costs, and manage debt more effectively. VF successfully reduced its total debt by $2 billion in fiscal year 2025, bringing it down to $4 billion from $6 billion, primarily through free cash flow generation and the sale of Supreme for $1.475 billion. We view VF’s reduced valuation as an opportunity to invest at a discount in a company that is positioned for improved profitability. The adjusted operating margin was a modest 5.9% in fiscal 2025, an increase from 4.8% in the previous fiscal year. We anticipate that operating margins will return to double-digit levels within approximately three years, supported by more stable sales from Vans and other brands, cost reductions, and various initiatives. During its October 2024 investor event, VF established reasonable fiscal 2028 targets, including an adjusted operating margin of at least 10%, an adjusted gross margin of at least 55%, an adjusted selling, general, and administrative margin of 45% or less, and net leverage of 2.5 times or less. VF has attracted the attention of activist investors advocating for significant changes, such as cost reductions and the divestiture of noncore brands. Darrell is implementing many of these changes, although it seems the company plans to retain its remaining brands for the time being. In the future, we believe that Dickies and some other brands may be sold.

Woodside shares have experienced a decline of approximately 30% since mid-2023, significantly lagging behind the broader market. Although oil prices have also dropped by more than a third from their previous levels, this reaction in share price appears unjustified. Currently, the shares are the most undervalued relative to our fair value estimate since the end of the COVID bear market. While some believe that the era of hydrocarbons is coming to an end, demand for oil and gas continues to grow. Predictions of an imminent peak followed by a rapid decline in demand are likely to be overly optimistic. Substantial investment in hydrocarbons is necessary in most demand scenarios to compensate for the natural decline in supply. Our valuation of Woodside is based on two primary assumptions: a hydrocarbon production growth of 15% to 225 million barrels of oil equivalent per day and a Brent crude price of USD 60 per barrel. We anticipate a marginally negative five-year EBITDA compound annual growth rate (CAGR) of 2.0%, resulting in an EBITDA of USD 8.1 billion by 2028, considering that our midcycle Brent price is projected to be 20% below current levels.

We consider Yum China to be a long-term beneficiary of demographic changes in China. There is considerable potential for increased fast-food penetration, primarily fueled by enduring trends such as longer working hours for urban consumers, a rapid rise in disposable income, and smaller family sizes. We believe that investors are undervaluing the company's long-term growth potential and the opportunities for margin improvement as Yum China progressively transitions towards a greater focus on franchising.

Aurizon shares present an attractive yield, supported by high-quality rail infrastructure and haulage operations. Significant downside is already reflected in the share price, and our analysis indicates that the risks for investors are tilted towards the upside. Haulage volumes are gradually recovering after an extended period of wet weather. Earnings are expected to benefit from Consumer Price Index-linked tariffs, along with recent developments and acquisitions. We believe that environmental concerns are exaggerated, creating an opportunity for investors to acquire a company of above-average quality at a discounted price. Aurizon primarily transports coking coal from globally competitive mines, and a commercially viable alternative to coking coal for steel production remains distant.

We find the shares of Bath & Body Works to be attractive, currently trading at approximately a 50% discount to our fair value estimate of $61. The company possesses a strong competitive advantage in the large addressable markets it serves. Its robust brand intangible asset is reinforced by its leading position in the bath and shower, as well as the candle and air freshener sectors, which has been enhanced by its swift adaptation to consumer trends. The company's narrow moat is reflected in the 34% average return on invested capital, excluding goodwill, that we anticipate it will generate over the next decade, significantly surpassing our 8% weighted average cost of capital estimate. While we project limited growth in its North American footprint, with nearly 1,900 owned stores already established, we expect that product innovation and productivity improvements from evolving store formats will drive growth in both revenue and profits over time. Additionally, advancements in omnichannel strategies, such as buy online and pick up in-store, are expected to remain a key component of the business, alongside loyalty program enhancements that will boost conversion rates and profitability. The company's emphasis on international expansion is likely to benefit both its physical and digital channels, projecting an average international sales growth of 6% over the next decade. This will aid Bath & Body Works in enhancing its brand intangible asset on a global scale. We anticipate that these opportunities will contribute to an average sales growth of 3% in the long term, aligning with global growth forecasts (according to Euromonitor) for the bath and shower and soap industries. Consequently, this will lead to additional market share gains for Bath & Body Works, further solidifying its already dominant position.

Baxter shares are currently trading at a significant discount to our estimated value. We acknowledge the short-term market concerns stemming from the recent management transition and potential tariffs; however, we believe there is a considerable margin of safety in the shares. In recent quarters, demand for many of the company's products has been on the rise due to increased medical utilization. Additionally, new product launches, such as the Novum IQ pump platform, are contributing to this demand. Provided that tariff exposure remains manageable, as management has recently indicated, Baxter presents a compelling margin improvement opportunity. Most inflationary pressures in its supply chain are subsiding, and important new group purchasing organization contracts will come into effect in 2025, which should enhance product pricing. We anticipate that profits will grow at a relatively rapid pace in the near term before stabilizing at a more normalized growth rate in the high single to low double digits over the long term.

Budweiser APAC is the leading beer brewer in China by sales value, holding approximately a 40% share in the premium segment. The company boasts a nationwide distribution network and a diverse portfolio of international premium beer brands, supported by the significant resources of its parent company, Anheuser-Busch InBev. Budweiser APAC has also shown proficiency in digitalizing its channel management, which we believe gives it a competitive advantage over its peers and is crucial for seizing premiumization opportunities in the long term as volume growth stabilizes. We anticipate that the long-term premiumization trend in China's beer sector will persist, despite current sluggish consumer sentiment, due to a favorable competitive environment and shared objectives among major brewers in pursuing price growth over the long term.

Domino's Pizza is a high-quality company with significant growth potential. Recent declines in same-store sales growth and a slowdown in store openings may overshadow the vast opportunities within its global network. Our earnings growth forecast primarily relies on franchisees launching new stores. The profitability of franchise locations and the demand for new stores are closely linked to same-store sales growth, which we anticipate will rebound starting in fiscal 2026, alongside a broader recovery in the fast-food sector. We project a 20% compound annual growth rate in earnings over the next five years. Additionally, we expect an update on the company's long-term plans during its strategy day in the first half of fiscal 2026, which should alleviate some of the uncertainty surrounding the stock.

The market is currently undervaluing Endeavour's long-term earnings outlook, which is defensive in nature. Consumers are opting for more affordable options and purchasing in bulk for at-home liquor consumption. We believe that the recent performance in liquor retailing is indicative of cyclically weak demand driven by cost-of-living pressures. Nevertheless, we anticipate that liquor sales momentum will improve, with sales growth expected to reach stable levels in the mid-single digits starting from fiscal 2026. Over the long term, we view liquor demand as defensive, supported by factors such as inflation, population growth, and a structural trend towards premiumization. Additionally, earnings in the smaller hotels segment are demonstrating resilience.

We believe FMC shares are significantly undervalued, currently trading in 5-star territory well below our $95 fair value estimate. The company's narrow moat is derived from its patent-protected and differentiated premium crop protection products, which farmers are willing to pay a premium for due to their effectiveness in combating pests such as insects, weeds, and fungi that can harm crops and diminish yields. FMC shares experienced a sell-off as the market raised concerns about growth prospects following two years of declining profits and management's guidance for lower results in the first half of 2025. This decline has primarily been driven by inventory destocking, as farmers and farm retailers accumulated excess supply during 2021 and 2022 due to concerns over COVID-related supply chain disruptions. As supply chains began to normalize in 2023, the excess inventory started to unwind, negatively impacting sales. This inventory fluctuation was particularly pronounced in Brazil, FMC's largest market. Consequently, while FMC outperformed its crop chemicals peers in 2021 and 2022, it has underperformed since then. Another challenge is that FMC's diamides are set to go off patent in 2025. Diamides, a class of insecticides that target ryanodine receptors in insects, accounted for 35% of sales in 2024 and represent FMC's largest product category. However, the company has a robust pipeline of new products that we anticipate will more than offset the decline in diamide profits in the coming years. We expect the end of inventory destocking and growth in new product sales to drive FMC's sales and profits back to growth starting in the second half of 2025. Increased profits should serve as a catalyst for the shares in the upcoming quarters.

Fortune Brands Innovations is a narrow-moat-rated manufacturer of building products, featuring a portfolio of well-established brands such as Moen (plumbing fixtures), Master Lock (security), Therma-Tru (doors), and Fiberon (composite decking). Although Fortune Brands operates globally, around 90% of its revenue is generated from the US and Canada, with two-thirds of North American housing-related revenue linked to the repair and remodel (R&R) market, which is less cyclical compared to new construction. Over the past two years, the stock has significantly underperformed the Morningstar US Market Index due to concerns regarding near-term US housing fundamentals amid rising mortgage rates, as well as the company's exposure to tariffs. With tariff exposure projected to account for approximately 11% of 2024 revenue, there is potential for profit margins to be impacted if not addressed. However, management is confident in their ability to fully offset these incremental tariff costs through price increases, cost-reduction initiatives, and supply chain adjustments, and we find their mitigation plan credible. We maintain a positive long-term outlook for the US housing market, anticipating a robust rebound in US residential construction by 2027, along with a mid-single-digit long-term growth trajectory for R&R spending. The R&R market is expected to benefit from secular trends such as an aging housing stock and the growing adoption of smart home and energy-efficient products. We believe Fortune Brands will outpace the growth of the US R&R and new construction markets, particularly due to its expanding range of connected products, including smart plumbing fixtures, leak detection devices, and home security solutions. Currently, we view the stock as significantly undervalued. The existing valuation suggests that operating margins may not exceed 17% again; however, we believe Fortune Brands can achieve operating margins closer to 18% with improved demand. During its 2022 investor day, management outlined a strategy aimed at reaching a long-term operating margin of 20%-22%. Our valuation adopts a more conservative approach, but there remains considerable upside potential if management successfully realizes its long-term profitability goals.

We believe narrow-moat Hanesbrands is an attractive investment, trading at approximately a 70% discount to our fair value estimate of $16.30. Our moat rating is based on the company's strong intangible brand assets. Hanesbrands owns several well-known brands in the basic innerwear market in the United States and Australia, many of which command higher prices and achieve greater sales volumes than competing brands. In 2024, Hanesbrands sold its Champion brand to Authentic Brands Group for a favorable price of $1.2 billion, with the potential for an additional $300 million in earn-outs. This sale enables Hanesbrands' management to concentrate on enhancing its core brands and products. Additionally, the divestiture is expected to positively impact margins, as innerwear has historically demonstrated more consistent profitability compared to Champion. Hanesbrands generates over 70% of its sales in the U.S. but also has significant international growth opportunities. The company has found particular success in Australia, where its Bonds brand and others hold dominant market shares. Hanesbrands is actively working to reduce its debt, which we believe is highly advantageous for shareholders. The firm has eliminated its quarterly dividend and is directing nearly all of its available free cash flow toward debt reduction. Proceeds from the Champion sale have also been utilized to pay down debt. In the first quarter of 2025, Hanesbrands refinanced debt maturing in 2026 with new loan facilities that mature in 2030 and 2032. The company ended the quarter with $2.3 billion in debt, a reduction from $3.3 billion at the end of the first quarter of 2024. During the same period, the firm decreased its debt/adjusted EBITDA ratio from 5.0 times to 3.6 times.

We believe the market has a short-sighted perspective on IDP Education, influenced by recent declines in volumes and regulatory uncertainties. While we acknowledge that the short-term outlook appears weak and forecast a decline in IDP’s earnings for fiscal 2025, we anticipate that the company will continue to gain market share as the industry favors quality operators like IDP. We see significant long-term value, as the foreign-student caps are temporary and a response to cyclical concerns. The pricing outlook is positive in the near term, with IDP negotiating better terms and universities planning to increase tuition fees due to an undersupply. We expect IDP to benefit from the long-term macroeconomic factors that support the international education sector.

Kering, the second-largest luxury group by revenue, is currently trading at an appealing discount. While the momentum of Kering's flagship brand, Gucci, is experiencing a slowdown, the brand's strong recognition, substantial marketing resources, control over over 90% of its distribution, and access to top managerial and creative talent position Gucci to sustain its pricing and desirability over the long term.

Kilroy Realty, a no-moat company, presents an attractive investment opportunity due to its high-quality office portfolio, which appears undervalued following the recent selloff of office REITs. While we acknowledge the uncertainty surrounding the future of office spaces and anticipate a challenging environment for office owners in the near to medium term, we believe the recent market reaction has been excessive. The current implied valuation of Kilroy’s shares does not align with the prevailing private market valuations of its office portfolio. Long-term investors may find this stock appealing, as it is trading significantly below our fair value estimate of $59 per share. Kilroy’s office portfolio is among the best in the publicly traded REIT sector, with an average age of just 11 years, compared to 30 years for its peers. Additionally, Kilroy excels in other important metrics, such as rent spread and sustainability. The company is well-positioned to capitalize on the growing flight-to-quality trend, as employers increasingly seek to bring employees back to the office. However, there are risks to consider. The recovery in physical office occupancy levels has been slow; according to Kastle Systems' weekly work barometer, average occupancy remains around 50% of pre-pandemic levels. Furthermore, Kilroy's geographic concentration in California and significant exposure to the technology and life sciences sectors pose additional risks to our investment thesis.

We believe that Melrose, with its wide economic moat, is an attractive investment opportunity as it currently trades at approximately a 65% discount to our fair value estimate of GBX 800. Melrose Industries, through its GKN Aerospace division, is a prominent supplier of engine and structural components, with 70% of its revenue derived from long-term contracts where it serves as the sole-source provider. In the engine segment, the company boasts a well-diversified portfolio across both narrow-body and wide-body aircraft, functioning as a Tier 1 supplier with established positions on 90% of active engines, and engaging in risk and revenue-sharing partnerships for 74% of these engines. The company maintains long-term partnerships with all major engine original equipment manufacturers, including Pratt & Whitney, GE, Safran, and Rolls-Royce. Due to its RRSP contracts, Melrose is well-positioned to capitalize on the recovery of the civil aerospace sector post-pandemic, as well as the significant growth anticipated in the engine aftermarket. Despite the pandemic's challenges, air travel has demonstrated resilience, particularly in the leisure sector, alongside a rising demand for narrow-body aircraft. By 2023, global flight hours had returned to 2019 levels and are projected to grow at an average rate of 8% throughout our forecast period. Aerospace manufacturers have ramped up production efforts, a trend we expect to persist in the long term to meet the soaring demand for aircraft and engines, a situation exacerbated by a shortfall of approximately 2,500 aircraft due to the pandemic and issues surrounding the Boeing 737 MAX. By 2029, we anticipate that 57% of the engine segment's future profits will be derived from the aftermarket, up from an estimated 53% in 2024. While the majority of GKN's portfolio consists of non-rotating parts that last the entire lifespan of an engine, the RRSP contracts entitle the company to aftermarket sales generated by its partners. Furthermore, profit growth in the engine division is expected to be bolstered by a doubling of repair service sales by 2026 and enhanced defense partnerships, particularly with the Swedish Gripen and F-35 jets. Lastly, we foresee the structures division also benefiting from positive trends in both civil and defense markets, along with improved profitability as GKN restructures its portfolio and exits unprofitable contracts.

Moderna's shares have experienced significant volatility, with investors initially overly optimistic in 2021 regarding the company's technological potential, followed by a more pessimistic outlook on its growth post-coronavirus. While we maintain modest expectations for sales of the firm's COVID vaccine due to the substantial demand driven by the pandemic in 2021 and 2022, we believe that Moderna's pipeline of mRNA-based vaccines and treatments is progressing swiftly across various therapeutic areas. Despite a decline in sales during 2023-2024 in anticipation of new product launches, we remain confident in the long-term sales trajectory of the company's diversified pipeline. We see strong validation of Moderna's technology in respiratory virus vaccines (with an RSV vaccine set to launch in 2024 and a COVID/flu combination vaccine expected in 2026), oncology (with a potential melanoma launch by 2027), and rare diseases (with accelerated approvals anticipated starting in 2027).

Nice is the global leader in cloud-based contact center as a service (CCaaS) software, holding approximately 15% market share. We believe the market is overly pessimistic regarding cloud revenue growth, which has led to the stock’s valuation multiples declining to multiyear lows. However, we view this as a timing issue and anticipate a recovery in cloud revenue growth. The industry has shifted its focus from small and medium-sized businesses to large enterprises, a transition that positions Nice favorably. Although Nice has secured numerous large enterprise deals, the conversion from bookings to revenue has been gradual due to the complexities involved in implementing software at large enterprises and the additional delays in decision-making as companies develop their artificial intelligence strategies. We consider this a temporary challenge. We expect robust secular drivers to emerge, including the growing penetration of CCaaS in the market and the advantages of AI for CCaaS providers, as customers seek to reduce labor costs, their largest expense.

Nike's shares have declined by approximately 20% over the past year and are currently trading at significant discounts to our valuation. Fiscal year 2025 was one of the company's most challenging periods in decades, with issues further intensified by increased tariffs on U.S. imports. Despite these challenges, we believe CEO Elliott Hill, who took on the role in October 2024, is implementing effective strategies to enhance Nike's brand value, which underpins our wide moat rating. Hill's overarching strategy, termed "Win Now," focuses on strengthening the company's ties to global sports—its greatest advantage—while reducing unnecessary costs. In the long term, we anticipate that Nike can achieve mid-teens EBIT margins by boosting full-price sales, launching new merchandise, and expanding sales in high-margin markets. Under former CEO John Donahoe, Nike emphasized direct selling over product development, which inadvertently opened doors for more innovative competitors in key categories. Additionally, demand for sportswear in critical markets such as North America (44% of fiscal 2025 revenue) and Greater China (15%) has softened due to economic challenges. Hill, who has 32 years of experience at Nike, including his last role as president of consumer and marketing before retiring in 2020, possesses extensive insider knowledge. He faces significant work ahead to strengthen relationships with wholesale partners and enhance full-price selling through company-owned digital channels, but we believe he is capable of meeting these challenges. To manage inventory ahead of product launches, Hill has increased discounting, particularly in footwear, as Nike reduces reliance on overexposed lines to introduce more competitive products. As a result, near-term performance may be below expectations. However, we project that Nike will return to sales growth and improve operating margins by fiscal year 2027.

Following the successful development of a COVID-19 vaccine in November 2020, the hotel industry, along with the broader REIT sector, experienced a rally as investor confidence grew, with expectations of a return to pre-pandemic business levels. However, the emergence of the delta and omicron variants led to a decline in hotel stock prices, even as the rest of the sector continued to perform well. Many hotel companies have struggled to generate positive corporate cash flows since the onset of the pandemic; the rise in virus cases has hindered the industry's recovery and prolonged the period of negative cash flows. We believe the current environment presents an opportunity for investors to acquire Park Hotels & Resorts at a price below our fair value estimate. We assess that the company's balance sheet is robust enough to withstand ongoing disruptions in the hotel industry for the foreseeable future. Although numerous businesses have delayed their plans to fully return employees to the office, which subsequently postpones the recovery of hotel demand driven by business travel, we do not expect this disruption to significantly impact the long-term demand for Park's portfolio of high-quality hotels. Additionally, Park's management has demonstrated effective management of hotel net operating income during the pandemic, exceeding our expectations, which gives us confidence in their ability to navigate the current challenges facing the hotel sector. We anticipate that Park will recover from the pandemic, experiencing several years of strong growth, and will return to its 2019 peak levels by the end of 2024.

Polaris' shares are currently trading at over a 40% discount to our fair value estimate of $70 per share. The company's strong brands, innovative products, and Lean manufacturing practices contribute to its wide economic moat. We believe Polaris will continue to leverage its research and development, high-quality standards, and operational excellence to drive demand. Historically, the company has generated exceptional returns on invested capital, including goodwill, and is projected to achieve a 17% return on invested capital (ROIC) by 2034, significantly exceeding our 10% weighted average cost of capital assumption. Recently, the stock has faced pressure due to challenges related to tariffs, which are expected to have an incremental impact of nearly $225 million in 2025, as well as slowing consumer conversion rates and cautious dealer behavior—factors we consider to be temporary. Consequently, the company has retracted its previous 2025 outlook, which anticipated a sales decline of 4% to 1% and adjusted earnings per share of $1.10. The updated tariff expectations now suggest a potential EPS loss in 2025. As dealer inventory levels improve, we expect wholesale shipments to align more closely with consumer demand. We anticipate that long-term demand driven by new product launches will support shipment growth and profit enhancement beyond 2025. From 2026 to 2034, we project the company will achieve an average sales growth rate of 3.5%, with earnings per share growing at a high-single-digit rate over the long term.

Ramsay is experiencing robust patient revenue growth; however, group profitability is being affected by inflationary pressures, reduced government support, and increased investment in digital initiatives. Despite these challenges, we anticipate long-term margin expansion as Ramsay reduces its reliance on agency staff, normalizes case mix and volumes for nonsurgical services, improves capacity utilization, and realizes efficiencies from digital investments. Notably, labor shortages are beginning to ease, and Ramsay is actively investing in recruitment and training. The company has also negotiated higher reimbursement rates to address cost inflation and has strengthened its balance sheet by divesting its stake in Ramsay Sime Darby. For further details, please refer to our Ramsay Stock Pitch published in December 2023.

No-moat Realty Income is currently trading at a significant discount to our $75 fair value estimate. We attribute the decline in share value since August 2022 to rising interest rates. Our analysis indicates that Realty Income is the most sensitive REIT in our coverage, displaying the strongest negative correlation with interest rates. The company has established itself as "The Monthly Dividend Company," appealing to many investors during periods of low interest rates. However, these investors may shift their focus to risk-free Treasuries as interest rates increase. Moreover, Realty Income sets its annual rent escalators relatively low, which means it depends on executing billions of dollars in acquisitions each year to drive overall growth. The rise in interest rates has narrowed the spread between the company's acquisition cap rates and the weighted average cost of capital used for funding these acquisitions, potentially hindering growth. Despite this, Realty Income has increased its acquisition volume over the past several years and continues to acquire at a positive spread over its cost of capital. In 2023, it completed $9.5 billion in acquisitions at an average cap rate of 7.1%, significantly above the average interest rate of around 5% on the debt issued to finance these transactions. Additionally, the company’s $9.3 billion acquisition of Spirit Realty, finalized in January 2024, is expected to enhance shareholder value. We believe management will persist in identifying opportunities that boost funds from operations, thereby supporting ongoing dividend growth for shareholders. The recent selloff driven by rising interest rates offers investors an appealing entry point, especially if the Federal Reserve signals any further rate cuts.

Renault ranks approximately 12th globally in vehicle sales, with an annual total of 2.3 million units. Despite this position, the company's well-executed transformation strategy has allowed it to achieve operating margins comparable to those of larger competitors. Currently, Renault operates at 90% capacity. The company benefits from a favorable mix, including the rapidly growing, higher-margin Dacia brand and an increasing proportion of C models, moving away from its historically dominant B model portfolio. Additionally, Renault is gradually reducing its shareholding in Nissan, which provides a cash buffer and potential upside if the entire stake is acquired. Notably, Renault has no exposure to US import tariffs.

We believe the market has not fully recognized Roche's robust drug portfolio and its industry-leading diagnostics, which together create sustainable competitive advantages. The challenges posed by declining COVID diagnostic revenue and competition from generics and biosimilars for older drugs have diminished by 2025, allowing the strength of the firm's leading drug portfolio to come to the forefront. We see the firm's research and development expenditures becoming increasingly efficient, and recent acquisitions in obesity and immunology appear poised for multi-billion-dollar sales potential. As a leader in biotech and diagnostics, this Swiss healthcare giant is uniquely positioned to steer the global healthcare industry towards safer, more personalized, and cost-effective solutions. The synergy between its diagnostics and drug development teams provides Roche with a distinctive in-house perspective on personalized medicine, as well as new avenues for improved diagnosis and treatment in areas like Alzheimer's disease. Roche's oncology expertise has expanded into a more diversified portfolio that includes neurology, hematology, oncology, and ophthalmology, with strong patent protections anticipated to extend through the end of the decade.

We consider SiteMinder to be a strong industry leader with a substantial and attainable market opportunity. We anticipate that the hotel industry will consolidate around larger software providers, such as SiteMinder, which can distribute significant fixed technological and regulatory costs across a broader customer base. In our opinion, economic downturns will further expedite this trend. Additionally, we believe that SiteMinder's new platform products will raise switching costs and foster network effects, leading to considerably higher terminal margins.

Challenging economic conditions in New Zealand, along with structural headwinds affecting the mobile and IT sectors due to budget constraints from government and enterprise customers, have revealed Spark NZ’s inflated cost base. While earnings are currently weak, they are anticipated to recover as the New Zealand economy improves. Additionally, there is likely to be a renewed emphasis on cost management, with achievable cost-reduction targets. In terms of our earnings and dividend projections, we expect the balance sheet to remain stable and potentially improve through asset sales. This outlook is not currently reflected in the share price or in Spark’s competitive mobile business, which benefits from a stable and rational industry structure, with Spark holding the leading market share.

Cyclical rather than structural weakness has created a buying opportunity in wide-moat Spirax, presenting approximately 60% upside from current levels. Analyzing fiscal 2024 results between the first and second halves indicates that the business is on track to achieve 250 basis points of EBIT margin expansion in the medium term, driven by a recovery in biopharma end markets. This recovery supports our projected 9% EPS compound annual growth rate through 2028. The shares are currently trading at 24 times depressed earnings, a conservative valuation for a company that has historically grown at about twice the rate of global industrial production and possesses a strong competitive moat. Additionally, valuation multiples are significantly below their long-term average.

Shares of wide-moat Estée Lauder have declined by 28% over the past year, primarily due to ongoing weak demand in China and investor doubts regarding the company's profit recovery strategy. Recent changes in top management, including the CEO and CFO, have further contributed to uncertainties. We believe the shares, currently trading at a 33% discount to our $120 fair value estimate, present a compelling investment opportunity, and we recommend that investors seeking exposure to the attractive beauty care market consider buying in. Although the challenging consumer environment in China has created short-term obstacles for Estée and its beauty industry peers in regaining market growth, we maintain that the trends toward premiumization and Estée Lauder's competitive position remain strong. We believe the current challenges in China are manageable, as the new management team is effectively utilizing the company's strong brands, solid channel relationships, and various research and manufacturing initiatives in Asia to enhance its positioning and long-term growth prospects. While we now project a high-single-digit sales decline for fiscal 2025 due to ongoing issues in China, we anticipate that revenue growth will accelerate to a mid-single-digit average for the remainder of the 10-year forecast period. This growth is expected to be driven by Estée's focus on the structurally appealing premium skincare market. Additionally, we forecast that the operating margin will recover to 16% by fiscal 2034, supported by an improved channel mix (moving away from heavy promotions in department stores), manufacturing efficiency improvements, and cost-reduction strategies.

We believe that narrow-moat Kraft Heinz should be on investors' shopping lists, as it is currently trading at a 50% discount to our fair value estimate of $51 and offers a 5% annual dividend yield. Market skepticism appears to focus on the firm's ability to avoid a lasting volume contraction in the face of persistent cost pressures (including potential impacts from upcoming tariffs), subdued consumer spending, and increased competition following recent price hikes. However, we contend that these concerns are unfounded, as the company has moved away from previous management's focus on short-term profitability and cash flows. Since mid-2019, Kraft Heinz has strategically pursued sustainable efficiencies, increased brand spending (investing in product innovation and marketing at a mid-single-digit percentage of sales, aligning more closely with industry peers), improved its capabilities in category management and e-commerce, and utilized its scale to adapt more effectively to changing market conditions. We believe the company is committed to this strategy. We anticipate that these initiatives will enable Kraft Heinz to achieve low-single-digit annual sales growth while maintaining operating margins in the low 20s.

Shares of VF, the owner of The North Face, Timberland, Vans, and eight other brands, are currently trading at approximately a 70% discount to our valuation following a sharp decline due to concerns over tariffs and other factors. We assess the firm as having no economic moat, as Vans and several other key brands have faced challenges since the pandemic. Nevertheless, VF remains one of the largest apparel companies in the US and operates in appealing market segments. In response to these challenges, CEO Bracken Darrell is executing a strategy to revamp Vans, launch a new platform in the Americas, cut costs, and manage debt more effectively. VF successfully reduced its total debt by $2 billion in fiscal year 2025, bringing it down to $4 billion from $6 billion, primarily through free cash flow generation and the sale of Supreme for $1.475 billion. We view VF’s reduced valuation as an opportunity to invest at a discount in a company that is positioned for improved profitability. The adjusted operating margin was a modest 5.9% in fiscal 2025, an increase from 4.8% in the previous fiscal year. We anticipate that operating margins will return to double-digit levels within approximately three years, driven by more stable sales from Vans and other brands, cost reductions, and various initiatives. During its October 2024 investor event, VF established reasonable fiscal 2028 targets, including an adjusted operating margin of at least 10%, an adjusted gross margin of at least 55%, an adjusted selling, general, and administrative margin of 45% or less, and net leverage of 2.5 times or less. VF has attracted the attention of activist investors advocating for significant changes, such as cost reductions and the divestiture of noncore brands. Darrell is implementing many of these reforms, although it seems the company plans to retain its remaining brands for the time being. In the future, we believe that Dickies and some other brands may be sold.

Woodside shares have experienced a decline of approximately 30% since mid-2023, significantly lagging behind the broader market. Although oil prices have also dropped by more than a third from their previous levels, this reaction appears unjustified. The shares are currently the most undervalued relative to our fair value estimate since the end of the COVID bear market. While some believe that the era of hydrocarbons is coming to an end, demand for oil and gas continues to grow. Predictions of an imminent peak followed by a rapid decline in demand are likely to be premature. Substantial investment in hydrocarbons is necessary in most demand scenarios to compensate for naturally declining supply. Our valuation of Woodside is based on two key assumptions: a hydrocarbon production growth of 15% to 225 million barrels of oil equivalent per day and a Brent price of USD 60 per barrel. We project a marginally negative five-year EBITDA compound annual growth rate (CAGR) of 2.0%, resulting in an EBITDA of USD 8.1 billion by 2028, considering that our midcycle Brent price is 20% below current levels.

We consider Yum China to be a long-term beneficiary of demographic changes in China. There is considerable potential for increased fast-food penetration, primarily fueled by enduring trends such as longer working hours for urban consumers, a rapid rise in disposable income, and smaller family sizes. We believe that investors are undervaluing the company's long-term growth potential and the opportunities for margin improvement as Yum China progressively transitions towards a greater focus on franchising in the long run.