Investing in compounders

Compounders are companies that can deliver sustainable and long-term growth, and whose earnings can be compounded to increase shareholder value over many years or even decades.

Two good examples of compounders in our portfolio are:

ASM International (+100% return in our portfolio in 2021) is a Dutch leading supplier of semiconductor process equipment for wafer processing, such as deposition, epitaxy, and plasma-enhanced chemical vapor deposition (PECVD). The company is a long-term structural beneficiary of the semiconductors market. It has surprised even the most aggressive bulls in its delivery of growth (sales 27% 18-21E CAGR). The projected sales growth CAGR for 2021-2025 is 18%.

Axon Enterprises ( +49% return in our portfolio in 2021 as of 21 October 2021) is a US based global leader and disruptor in connected public safety technologies. It is the market leader in law enforcement body cameras with its cloud-connected Body and Flex cameras, citing penetration in 43 of the 69 largest US cities. We believe recent police actions and protests worldwide in 2019-2020 (USA, EU, HK, etc.) could elevate the importance of body cameras and non-lethal options for all police officers, benefiting officers and citizens alike. Axon has estimated its total TAM (total addressable market) at above $10 billion, vs. $681 million of 2020 revenue.