David Fleer of Bristlecone Value Partners presented his in-depth investment theses on Rocky Mountain Dealerships (TSX: RME) and Cervus Equipment (TSX: CERV) at Wide-Moat Investing Summit 2018.

Thesis summary:

Canadian Agriculture Equipment Dealers: Two publicly-traded Canadian agricultural equipment dealers have consolidated ownership of significant clusters of local dealerships of the two large, global equipment manufacturers.

Rocky Mountain Dealerships is the largest North American dealer of Case / New Holland agriculture equipment and Cervus Equipment is a major Deere dealer.

At the manufacturer level, agricultural equipment is a well-established oligopoly, and many of the industry’s favorable competitive dynamics apply to the dealership business as well. While there are certainly offsets to the local dealers’ competitive strengths, given their intermediary position and dependence on the manufacturers, these are counter-balanced by their close relationships with end customers (farmers), exclusive distribution rights, and the critical support role they play in sustaining the manufacturers’ competitive position.

RME and CERV trade at modest valuations that give little recognition to their competitive position or their prospects for profitable growth. David believes this combination of factors sets the conditions for good investment returns.

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About the instructor:

David started his career in investment management in 1996. Prior to founding Bristlecone in 2004, David was a Senior Vice President and US equities portfolio manager/analyst at Oppenheimer Investment Advisers. David grew up in North Carolina, then moved to Massachusetts, where he earned a Bachelor of Arts degree in history from Amherst College (Amherst, MA) and a Master of Arts degree in art history from Williams College (Williamstown, MA), with a focus on Italian Renaissance. Researching and discussing investment ideas around the conference room table, it turns out, is not all that different than discussing Leonardo around the seminar table. David now lives in Los Angeles, California, with his wife, son and daughter. David has managed not to gain too much weight eating at Clementine, his wife’s bakery café, attempting to burn off the calories by playing and coaching (and sometimes just watching) soccer, among other pursuits.