Black Creek Global Leaders Update as of March 2, 2026

Transcript

Hi, there, Heather Pierce from Black Creek Investment Management. Thanks for joining us for our scheduled podcasts that we plan to produce on a more regular basis for our clients. Understanding you've been, in many cases very long-term supporters of a strategy and a discipline that has been in place for (20) twenty years at Black Creek and upwards of (4) four decades in terms of overall discipline and the way in which we invest. Thanks again for the time. Wanted to give you an update on our portfolios and our outlook for the next quarter or so, understanding that we invest for the very long term; we are a boutique manager which has high conviction, high concentration, idiosyncratic portfolios that tend to behave very differently than an index and have been investing in this fashion for a very long time, as mentioned I wanted to give you a sense of our positioning today and our outlook for what we anticipate in terms of how the portfolio should behave in periods of volatility, which we certainly are experiencing today. For those of you that are avid market students, you will see that this is a period that is of extreme narrowness, it has been this way for over (3) three years now, in very high concentration with respect to the US, but likely more very narrowness for the upwards of (6) six years now; kind of post COVID period, but has only become more and more narrow. What we have seen in the last year or so, is some, I would say some positive signs with respect to broadening out on a global scale, with outperformance of some of the markets that we have over invested in, but remains extremely volatile, extremely basket oriented. This is for us a huge opportunity in our minds because companies get put in baskets and kind of, the old adages is “baby in the bath water” and in our view, some of these businesses do not have the same risk profile that underlying basket may have. So that is why we have our very concentrated global portfolio today we have (30) thirty names in the portfolio. They are extremely global in nature, much more than the index, so those of you that that are aware we are at, you know, all time peaks generally speaking the last couple of years for US equities as a percentage of the ACWI world - sorry the - MSCI ACWI and MSCI world indices, and these are levels that we've not seen in multiple decades, so US is well over 70% of the world and if you look at the GDP basis relative to that it it's around 30% of global GDP. So, this creates opportunity because of that overvaluation, particularly in the very high-flying US tech sector. We've seen extreme volatility that has been created from AI. This has only been magnified on a year-to-date basis. This for us again is opportunity; I’ll give you an example: We've seen startup companies that make press releases that have had millions and billions of market cap moved around in companies that have legacies of over (100) hundred years of doing business, so in our minds, there's certainly some froth. This creates opportunity. Most recent example of that would be software AI company startup that was publicly press released, some success in terms of trucking and freight forwarding software. This literally had an extreme outsized impact on anyone that that is involved with freight forwarding and logistics and trucking on a global scale, so, within our portfolio, for example, Kuehne & Nagel, which is a Swiss based company, very asset light, very high returns on capital. The business has been investing heavily in their own tech stack for well over a decade. This is a company that is benefiting and will benefit in our minds from the advent of artificial intelligence. It's a highly fragmented industry in our minds, Kuehne & Nagel, is positioned to gain, they are one of the few players that is now utilizing advanced software. They've input a layer of cloud with the hyper-scalers and now are utilizing their own proprietary technology to increase digitization. They are using things like AI and blockchain to increase productivity. This is, in our minds, a winner, but has been positioned in a basket that has been extremely volatile with other players that have off the shelf software, which potentially is subject to some disintermediation in our minds… so highly fragmented, share gainer, excellent balance sheet, asset light, well managed, global scale and has been unduly punished in the short term from what is an upstart with limited history. So, this is the type of example of what we're seeing in terms of volatility out there are other examples of companies that we think are positioned to do very well and are actually seeing increased new business or companies like FTI. We've owned FTI for about (16) sixteen years across the firm. The weightings have changed; this is also similar to Kuehne & Nagel. We will and have successfully trade around core positions; this is not something that we enjoy doing, but we will trade around core positions when something does very well and becomes in market favor over a short period of time and then obviously the volatility brings that that company down. FTI is a prime example of that. At one point the company was 1% of the portfolio and trading at very high valuations but still had a positive IRR (Internal Rate of Return), which is how we view things over that decade time frame. Today it's close to a 4% position in the portfolio and that is because it has come down substantially because of concerns about human capital businesses and consulting businesses being displaced by artificial intelligence. We view this as a very different business. They have broadened their company to be much more global, they have focused on new business lines, they’ve moved into areas, not just restructuring and bankruptcy, but economic consulting. They have new develop, new business lines with respect to helping companies at a board level, understand the impacts of artificial intelligence, cyber security. They are expanding in the area of M&A advisory and restructuring advisory. These are all areas that on a global scale have become real advantages for their business and again unduly punished because consulting in general and human capital businesses in general have been perceived to be AI disrupted. Another, one other, example would be Gartner, which is a relatively new position in the portfolio, software business. Obviously, high consulting aspect in terms of the Gartner's Magic Quadrant. Helping people understand very integrated and complex tech investments at a CIO level within companies, this business, very high returns, very high margin structure. Also, global nature has come down again because of concerns of artificial intelligence and displacement. Last company I'll quickly touch on that is on the flip side is we've seen a move from hardware data centre investment all the way through to what now is commodities, so you can't have these technology investments and significant investments in artificial intelligence and electrification, if you don't actually have them, the mining and minerals that are associated with that and we have owned Weir for about (8) eight years now and Weir has done extremely well near term, but is a industry-leading adopter of artificial intelligence within the minds. So even though Weir has been a very strong performer, it continues to be an IRR that relevant in the portfolio and importantly as strong diversifier. I would encourage everyone to look at their portfolios today and ask themselves if they have proper diversification after what has been a very long period of technology or performance and US outperformance. Our view is this is a super opportunity for people to readjust, globalize, diversify given so many other sectors have come under extreme pressure. The portfolio today is very broad in terms of industry segments where the companies earn their revenues, how they earn their revenues and ultimately much more non-US in terms of company headquarters. We remain very confident in the portfolio today even after a decade plus of double digit returns to investors, we still have strong double-digit IRR's within the portfolio and I think that is with conservative assumptions, it is with the recession assumption within all of our businesses that have the cyclical component to them and in the near term, with (4^th) fourth quarter reporting, we have actually in most cases increased our expectations for businesses. Our largest position Bureau Veritas reported last week, very strong numbers and operating margins, both of which were above our expectations. Elanco, which is a leader in Pet and Animal Farm care, also very strong numbers on the organic side of revenue as well as margin expansion. Both of those companies we had to increase expectations in our models. Thanks for your time, lots of companies covered, but hopefully that gives you a sense of our optimism for the portfolios going forward. I would say less so for the broader indices and the perhaps the insulation that is offered by having a global portfolio in very geopolitical uncertain markets as well as AI disruptive concerns. We believe these companies have enduring businesses many of them have been around for generations. Thanks so much and look forward to speaking to you again.