Carl Zeiss Meditec: Unique Business in Many Ways

Henrik Andersson presented his in-depth investment thesis on Carl Zeiss Meditec (Germany: AFX) at Wide-Moat Investing Summit 2015.

Carl Zeiss Meditec is a unique business in many ways. What stands out is its sole focus on the ophthalmology (eye) market, which is in a multi-decade growth phase, and the company´s emphasis on reinvestments of cash flows to increase its competitive position over time. Carl Zeiss´s planning horizon stretches out generations, in people and in products. The company is a global leader in microsurgery and ophthalmology; encompassing cataract surgery, age related conditions, neurosurgery, intraocular lenses and eye diagnostics. Some people see the Zeiss-family ownership of 65% as a negative aspect, we view it as a guarantee for keeping the time-arbitrage advantage intact. Currently at an appetizing valuation due to headwinds in its systems business, hedging losses from currency swings and lack of overall margin progression during 2014, the presentation will cover why one need to look beyond these factors and the face multiple of 19x 2016 earnings in order to “see clearly” the opportunities that Carl Zeiss brings. Our normalized level of free cash flow – always calculated with a conservative bent – points toward a 10% implied annual rate of return.

Note: We experienced a technical issue while recording this session. As a result, we recorded the session in two parts, which are available for your listening and download below.

About the instructor:

Henrik Andersson has worked within a framework of investing in quality franchises in a concentrated portfolio setting since the early 2000s. After five years as an assistant fund manager and analyst at Handelsbanken Asset Management, in 2003 he launched a discretionary portfolio named European Quality with 15 holdings, inspired by Peter Cundill’s approach of “never shoot into the broom”. That later branched out to a family of funds named the Selective Funds. In 2011 he joined Didner & Gerge, an employee-owned asset management boutique, to launch a Global Equity Fund together with a colleague. D&G Global is now applying the same principles they have used for over a decade in trying to identify sustainably great companies with an appealing valuation starting point. Over the years, an increased emphasis has been put on corporate leadership with a clear preference for owner-operated companies with a history of outstanding operations.