Amil Bera of Advaya Investment Management presented his in-depth investment thesis on XPO Logistics (NYSE: XPO) at Best Ideas 2018.
XPO Logistics is a high-growth, best-in-class global logistics company, 60% in North America and 40% in Europe. The company provides contract logistics and transportation services. In transport, the company’s businesses include truck brokerage, less-than-truckload, last-mile logistics, intermodal and drayage, expedited, and global forwarding. The company has grown from $160 million in revenues in 2011 to over $15 billion today through acquisitions and market share gains.
CEO Bradley Jacobs has made over 500 acquisitions in his career and built billion dollar businesses, including United Waste and United Rentals. In 2011, he invested $150 million to purchase 71% Express-1 Expedited Solutions and renamed the company XPO Logistics. His plan was to follow the industry consolidation model he previously implemented to the highly fragmented logistics industry. The company invests heavily in technology, spending over $425 million annually to employ 1,600 full-time staff, including over 100 data scientists focused on predictive pricing and optimization.
Management is constantly improving margins through procurement cost savings, automation, asset utilization, labor management, improving pricing, culling money losing business, and expanding higher margin businesses as a portion of revenue. The company has proven itself a formidable competitor with an expanding moat in a high growth $1 trillion+ addressable market. The company benefits from a superior management team, incentivized sales force, competitive cost of capital, network effects from scale, and a strong reputation.
Recent rumors about acquisition interest from Home Depot, allegedly to fend off potential acquisition interest from Amazon, sent the stock to record highs. In our view, the value of what XPO Logistics is building and will become more apparent over time and continue to attract potential suitors. Yet, the independent company has a clear path to triple its market capitalization in the next five years through acquisitions and organic growth.
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About the instructor:
Amil A. Bera is the Founder and Chief Investment Officer of Advaya. Amil’s prior experience includes several investment roles for High Net Worth clients. He served as Vice President and Senior Investment Research Analyst for Wells Fargo Wealth Management in San Francisco. Prior to that, he served as Relative Value Strategies Analyst for SAIL Advisors, a Hong Kong-based Fund of Hedge Funds. Previously in New York, he served as the sole Investment Analyst for a large Family Office with capital allocations to private equity, venture capital, hedge funds, real estate, and opportunistic investments. Amil also worked as a Management Associate for the New York-based Equities Trading business of Banc of America Securities. Before graduate school, he was an Analyst at Cornerstone Research in New York, an economics and financial consulting firm where he focused on securities litigation cases. Amil has also worked in Mauritius as a Consultant for the International Monetary Fund and in New Delhi, India as an Economics Intern for the United States Department of State. Amil holds a Masters in Public Policy from Harvard University’s Kennedy School of Government. He is a Phi Beta Kappa graduate of the University of California at Berkeley, where he attained a Bachelor of Arts in Political Economies of Industrial Societies with High Honors and a Departmental Citation. In his free time, Amil enjoys travel, yoga, volleyball, performing arts, dance, and good food.