Midcap Investment Opportunity - Midcaps offer a blend of discovery value similar to small caps and financial quality/liquidity akin to large caps, making them fertile ground for active management [2] - Investors are typically underallocated in the midcap space [3] - Alger favors companies with strong balance sheets and cash flow generating capabilities to fund their own growth [4] RBC Bearings (RBC) Analysis - Alger invested in RBC Bearings (RBC) since 2020, viewing it as an exceptional company with the potential to become a large company [5] - RBC is a market leader in highly engineered precision bearings for commercial aerospace, defense, and industrial markets [5] - RBC's bearings are mission-critical, highly regulated, and essential for manufacturing operations, reducing wear and tear, energy loss, and facilitating power transmission [6] - The majority of RBC's products are sole-sourced, providing a strong competitive moat [6] - RBC has idiosyncratic drivers and pricing power, making it resilient to inflation and recession concerns [6] - Commercial aerospace is RBC's fastest-growing segment, expected to benefit from a multi-year cyclical recovery [6] - The commercial aerospace industry experienced a steep downturn in 2020 and 2021 due to COVID travel restrictions and the grounding of Boeing 737 Max, but these issues are now resolved [7] Tariff Policy and Competitive Advantage - Focus on companies like RBC Bearings that can control their own destiny due to differentiated products and pricing power [8] - Companies with differentiated products can pass tariff costs to customers because their products are mission-critical [8] - Alger focuses on companies with strong competitive advantages and pricing power [8]

Financial Data and Key Metrics Changes - The fourth quarter revenue decreased by 11% to $1.2 billion, slightly better than the expected 10% decline for the full year [39][47] - Full year revenue declined by 9% to $5.2 billion, with North American revenue down 11% and EMEA flat [47][49] - Gross margin for the fourth quarter increased by 170 basis points year over year to 46.7%, driven by lower product and freight costs [44][47] - Full year gross margin increased by 180 basis points to 47.9%, surpassing expectations [47][49] - The company reported a diluted loss per share of $0.16 for the fourth quarter, while adjusted diluted loss per share was $0.08 [46][49] Business Line Data and Key Metrics Changes - Apparel revenue decreased by 11%, while footwear revenue declined by 17% [43] - Accessories business saw a 2% increase, benefiting from strength in team sports and running [43] - Direct to consumer revenue was down 15%, primarily due to a 27% decrease in e-commerce sales [42] Market Data and Key Metrics Changes - North American revenue declined by 11%, primarily due to a decrease in the DTC business [39] - EMEA revenue decreased by 2%, remaining flat on a currency-neutral basis [40] - APAC revenue was down 27%, attributed to a highly competitive and promotional environment [40] Company Strategy and Development Direction - The company is focusing on higher quality revenue and brand strength while driving gross margin expansion [49][50] - A shift towards a category management operating model aims to enhance efficiency and decision-making speed [13] - The company is committed to reducing promotional activities to build a more premium brand image [39][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the evolving business environment and emphasized the importance of agility [6][37] - The company anticipates a modest top-line contraction for fiscal 2026 due to recent changes in trade policy [49][50] - Management highlighted the need for a disciplined approach to cost management while maintaining marketing investments [79] Other Important Information - The company has recognized $32 million in restructuring charges for the fourth quarter, with total charges expected to be between $140 million and $160 million [45][49] - Inventory was down 1% year over year to $946 million, aligning with expectations [46] Q&A Session Summary Question: Can you provide more details about the North American reset? - Management highlighted the importance of leadership and a structured approach to improve brand execution and consumer engagement [56][60] Question: How is the company planning to normalize e-commerce with reduced promotional activities? - Management noted positive traction in full-price sales and emphasized the need for a brand-inspired online experience [72][74] Question: What are the expected savings from the restructuring plan? - Management indicated that approximately $35 million in savings were achieved in fiscal 2025, with expectations of $75 million in annual run rate savings by the end of fiscal 2026 [78][79]

Group 1: Company Overview - Warren Buffett's Berkshire Hathaway has a significant investment in Coca-Cola, valued at $29 billion, making it the third largest holding in the portfolio [3][4] - Coca-Cola has generated a total return of 22,400% since April 1975, showcasing its long-term profitability and growth potential [3][4] Group 2: Competitive Advantages - Coca-Cola possesses a wide economic moat, supported by its strong brand and global presence in over 200 countries with more than 200 different products [4] - The company's marketing strategy, including long-term sponsorships like the Olympics, enhances brand visibility and customer loyalty [5] - Coca-Cola has demonstrated strong pricing power, allowing it to consistently increase prices over time due to customer loyalty [5] Group 3: Financial Performance - Coca-Cola's operating margin has averaged 27% over the past decade, indicating robust profitability [6] - Berkshire Hathaway owns 400 million shares of Coca-Cola, generating an annual income of $816 million from dividends, with a quarterly payout of $0.51 per share [8][9] - Coca-Cola has increased its quarterly dividend for 63 consecutive years, appealing to income-focused investors [9] Group 4: Investment Considerations - While Coca-Cola has generated significant wealth historically, it has underperformed in the last five and ten years, making it less attractive for investors seeking high growth [10][11] - The mature nature of the beverage industry suggests muted growth prospects, indicating that substantial future returns may be unlikely [10][11]

Core Insights - Economic uncertainties, particularly regarding tariffs, have negatively impacted investor sentiment, with the S&P 500 index down 8% in 2025 as of April 14 [1] - Coca-Cola has performed well, with its shares rising 17% this year due to steady financial performance [1] Group 1: Coca-Cola's Market Position - Coca-Cola is considered to have an economic moat, supported by its strong brand presence, which is crucial for its success [3] - The company boasts a diverse product portfolio and a long operating history of over 100 years, along with effective marketing strategies [4] - Coca-Cola has a loyal customer base, which contributes to its resilience against market changes [5] Group 2: Pricing Power and Financial Performance - Coca-Cola's competitive position allows it to increase prices; in 2024, the company reported a 9% benefit from favorable pricing and mix [6] - Despite its pricing power, Coca-Cola's stock has not outperformed the S&P 500 over the past decade, with shares up 78% compared to the S&P 500's 160% increase [8] - The company's revenue growth has been muted, with a compound annual growth rate of just 0.2% over the last decade [10] Group 3: Future Outlook - Coca-Cola's growth is expected to align with broader GDP trends, suggesting limited potential for significant stock appreciation [10] - The company serves 1.9 billion servings daily and operates in 200 countries, indicating market saturation [9] - While Coca-Cola may not achieve market-beating returns, it remains an attractive option for dividend investors, having raised its dividend for 63 consecutive years with a current yield of 2.8% [12]

Core Viewpoint - Procter & Gamble (P&G) is positioned as a resilient investment option amid trade tensions, with a strong history of dividend increases and a diversified product portfolio [1][2]. Company Overview - P&G operates in approximately 70 countries and sells products in about 180 countries, with higher international sales than domestic sales [3]. - The company has a complex supply chain, featuring 24 U.S. manufacturing sites and 78 international manufacturing sites [3]. Competitive Advantages - P&G's size and leadership across multiple product categories provide significant advantages, making it one of the largest global players in personal and household products [4]. - The company's diversification across brands and categories allows it to manage costs effectively and pass on higher costs to consumers when necessary [5]. Pricing Power and Sales Growth - Despite facing inflationary pressures and currency fluctuations, P&G has achieved net sales growth through price increases [6][7]. - The company’s pricing power is attributed to its competitive advantages in size and product variety, which enhance its negotiating leverage with suppliers [8]. Financial Performance - P&G's net sales growth over the last three fiscal years shows resilience despite challenges: - Fiscal 2022: 5% growth (2% volume, -2% foreign exchange, 4% price, 1% mix) - Fiscal 2023: 2% growth (-3% volume, -5% foreign exchange, 9% price, 1% mix) - Fiscal 2024: 2% growth (0% volume, -2% foreign exchange, 4% price, 0% mix) [8]. Valuation Concerns - P&G's current price-to-earnings (P/E) ratio is 26.6, above its 10-year median of 25.7, indicating a premium valuation relative to historical averages [11]. - The company may face negative earnings growth in the upcoming fiscal year if tariffs persist, raising concerns about its valuation [11]. Investment Considerations - P&G is considered a foundational dividend stock, with a 2.5% yield that is higher than the S&P 500 average of 1.4% [13]. - Despite its high valuation, P&G is viewed as a reliable investment for risk-averse investors due to its competitive advantages and ability to manage tariff-related costs [12][13].