Mexican Investor's avatar

$16.5M follower assets

I'm a small cap mexican investor. 23 years old.

Searching for quality growth in UK, Canada, USA.
Medpace and the development of new drugs
This is one of my favorite ideas, not only because the numbers are good, but also because it is one of those companies that does a good for humanity. This company helps in the developing of new pharmaceuticals and has special expertise in cancer treatment.

Founded in 1992 and having a Market Cap of nearly $5B USD, Medpace is a Contract Research Organization (CRO). CROs provide outsourced clinical development services for the biotech, pharmaceutical and medical device industries.

Why would that be necessary?

New drugs must undergo extensive preclinical and clinical testing and regulatory review to verify safety and efficacy. As you can guess, this is not cheap at all, in fact, it is estimated that the cost to get a new drug approved is around $2.5 billion dollars and takes about 10 years on average.

This is challenging for small companies that want to test their pharma products, and that is where companies like Medpace come in, which can do this work more efficiently, to successfully pass the development process from Phase I to Phase IV. This is mainly due to two factors: Medpace's existing professional infrastructure and the know-how to perform these therapeutic tests.

Revenues are generated through fees for the provision of these services detailed in contracts. The duration of the contract can range in length from a few months to several years and the price are generally based on a fixed fee. Stable and predictable income.

Market Overview

The CRO industry remains highly fragmented, with several smaller providers and a small number of full-service firms with global capabilities, like Laboratory Corporation of America, Syneos Health or IQVIA Holdings.

This is because there are significant barriers to entry, including the cost and expertise required to develop therapeutic areas, the infrastructure to support large global programs, or the expertise required to prepare regulatory filings in numerous jurisdictions.

Oncology - An opportunity

30% of revenues came from oncology tests. This is a large market, since 6,504 (29%) of the 22,684 drugs in process during 2020 are focused on treating cancer and it is expected that by 2026 more than $300B dollars will be allocated to Oncology (the study and treatment of tumors), maintaining double-digit growth only in this segment.

Key Ratios

  • 32% CAGR growth in revenues and 30% FCF growth
  • High Gross Margins of 61%
  • FCF ROCE of 21% and solid FCF margins of 20%
  • CapEx represents only 2.5% of Sales
  • Net Debt/EBITDA of almost 0

An Asset Light company with no debt, growing both revs and FCF while generates high returns on investments.


August James Troendle is the founder and is still in the company as CEO. He has extensive knowledge of the CRO and biopharmaceutical industries. He still owns 21% of the company, which is more than 1,500 times his annual salary. Skin in the game.
Also insiders have been buying stock in the last 6 months.

Capital allocation is focused on continuing to grow the business organically, since they don't pay dividends and do not make acquisitions. That's how they got able to get that 20% Returns on Capital Employed.
Also, they bought back -3.5% in outstanding shares during this YTD.


Okay, business seems good BUT: Is it cheap?
Well, in my base case scenario, revenue will grow by a modest 15% CAGR over the next 5 years, maintaining FCF margins of 22%.

That's a FCF per share of almost $18 in 2027. With a multiple of 20x EV/FCF would result in a target price of $360 USD. A CAGR return of 19% from current prices ($150 USD).

Final Thoughts

There are more details to mention, but there's a word count limit and I think you can already get an idea of ​​why $MEDP is one of my highest-conviction ideas.

Feel free to leave in the comments your thoughts about the company!
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A baby Autozone
I'm a big fan of AutoZone and O'Reilly's business model, however they are both quite mature companies. Luckily there's a Polish company with a similar business model, but growing at a 25% rate. The name? Auto Partner APR

Business Model

Auto Partner is an auto part distributor based in Poland.. The company offers suspension and steering systems, brake systems, an assortment of motorcycles, workshop equipment, timing gears and cooling and air conditioning systems, among others.
The following image shows the logistics process.

🡲 They have suppliers of different premium brands, including their own brand MaXgear. The offer includes more than 250,000 products.
🡲 The customer contacts Auto Partner, mainly online (about 62% of orders are in this format) and places his order.
🡲 Once the order is placed, Auto Partner has a well-developed infrastructure, both in the form of warehouses and branches, as well as transportation, which allows auto parts storage services to be outsourced while allowing speedy deliveries directly to customers.

Market Overview

This market is usually quite anti-crisis, since generally when there is a recession or there is greater uncertainty in the income of families, it is preferred to repair the used car that is already available than to buy a new car. But even when the economy is doing well, spare parts are still necessary, so we are facing a totally defensive sector.
Clearly, this is a fairly mature sector, so a large global market growth is not expected, barely 3% annualized by 2025. However, in the case of Poland, the expected growth is more than 7%, being a fairly fragmented where there are many small competitors that do not have a large market share.


The founder, and chairman of the board of directors, has been in the company for more than 15 years and has more than 22% of the shares of Auto Partner, which represent close to $100M dollars.

Katarzyna Gorecka, a member of the supervisory board, is the majority shareholder and owns almost 27% of the company's shares. More than $119M dollars in shares.

Here's the link to my full analysis, but spoiler alert: I bought some shares today and now represents around 10% of my portfolio

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Wondering if they could be a good company to be acquired by $LKQ 🤔
Converge Technology - A Canadian Growth Machine
Converge $CTS is a software provider that specializes in helping its clients develop their Information Technology infrastructure, specializing mainly in the migration of physical servers to cloud-focused environments. CTS's main strategy is to acquire smaller regional IT providers, expand their margins through cost synergies and improve customer penetration through cross-selling of products and services, but they have solid organic growth too.

Converge has four main business verticals: Advanced Analytics, Cloud, Cyber Security and Digital Infrastructure.

Market Growth

Worldwide spending on IT services is expected to grow by approximately 8% CAGR to 2025.
According to Converge, the potential international market is $3.7 trillion dollars, with up to $1.2 trillion in the United States alone, however Converge is currently focused on working with small and medium-sized companies, which would represent a potential market of $400B.
There are around 80,000 direct competitors of Converge but none has more than 5% of the market share. Is a very fragmented market where CTS's acquisition strategy is highly relevant, since it has a large market to consolidate.

CTS currently has around 2,000 clients, well diversified, both by industry and by weight, since the top 10 clients do not exceed 20% of income and are spread over more than 6 industries.

Key Ratios

  • Revenues have grown at an outrageous 50% CAGR, and in 2021 around 10% of the growth came organically, but they had close to $250M of income that they could not materialize due to problems in the supply chain, in a normalized environment they would expect organic growth to have been close to 20%.
  • Gross Profit grew from 19% to 22% and mgmt expect to continue to rise as sales from Managed Services and other higher margin business lines grow.
  • Net Debt is -$60M.
  • Capex is a 1.5% of sales, so we could consider CTS a Asset Light business.
  • I'll like to add that, dispite making a lot of adquisitions, the Goodwill only represents 10% of the Market Cap, which is a good sign of how they buy companies at a cheap price.

Management Team

The co-founder and current CEO, Shaun Main, has extensive experience in the IT Services industry, since he previously held positions in Pivot Technology Solutions, a Canadian company also focused on offering IT services that was acquired in 2020 by Computacenter.
Shaun has done a great job designing and executing his strategic acquisition plan with Converge and hasn't changed any aspect of the plan since 2017 so he knows what he's doing and trusts that strategy.

Shaun is highly aligned with the shareholders, since he is currently the second largest shareholder in the company, with approximately 4% of Converge's shares, equivalent to almost 70 times his annual salary.

For the last 6 months the management team has been buying shares and they have not made any sales. This is a great sign because when insiders sell shares the reason may be that they want to buy a house, a car or pay for a vacation, but when they buy the reason is only one: They are convinced that they are going to make money with their company.


Considering the past 50% rev growth and 6% EBITDA margins, I estimate a 20% growth for the next 5 years (both organic and inorganic) and an increase in margin to 8% EBITDA

This would represents ~$5.6B of revenues in 2027, and a EBITDA of ~$450M.
Using a conservative 10x EV/EBITDA multiple, the target price for 2027 is around $30 CAD, a 40% annual return or +450% return if buying at actual $5.50 CAD.

If you wanted to make a 15% return the next 5 years (according to my estimates), the target price TODAY would be $14 CAD. More than a 2x of current price.

Final Thoughts

✓ Is a good business model in a fragmented sector with tailwinds that will favor growth, both organic and inorganic.
✓ Opportunity to improve margins and financial ratios that would give a boost to the share price, since the current ratios hide the true potential behind it.
✓ Great management team, fully aligned and that has proven to be faithful to its strategic plan and carry it out optimally.
✓ It is highly undervalued even making a conservative projection.

While this bear market has destroyed the stock price, Converge has been adquiring companies and growing organically because of the strong demand of IT Services, making a time bomb that could explode in any moment.
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Did they write-off any goodwill during the last few years?
P/E in high inflation enviroments
Historically at this level of inflation the S&P500 should have a PER of 10x

We needed that 75-bps hike in interest rates
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Mexican Aiports - Research
Continuing with Mexican airports, I would like to share this short research to introduce the 3 most important in the country and know your thoughts!

Oh this is great! Just what I been looking to read :)
What if?... Reccesion
Right now the Forward P/E of S&P500 is around 18x, and the average has been 16x in last 15 yr. But that would be the case if we consider 251 dollars for 2023 EPS (according to analyst consensus)

Now, if we take into consideration how a recession could affect S&P500 EPS, we could expect at least a 10% declining in earnings, using the median declining of last recessions. Meaning?

  • In the avg 16x Forward P/E that's a S&P500 on around 3600 points (-4%)
  • In the lowest 14x Forward P/E of March 2020 is 3150 points (-16%)
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To me recession is an empty word unless the consumers are actually voting with their 💰 that they are or are not buying
A non-traditional oligopoly
  • 4 airport groups control 98% of the mexican market (GAP, AICM, ASUR, OMA)
  • México is usually in the top 10 most visited countries
  • Because of it's nature, airports tend to have Cost Advantage + Efficient Scale

I've been working on this research, but looks promising
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That does look interesting. What is their ROIC? What is stopping new entrants?
The Terry Smith way
A have high quality sleep since I started investing with Terry Smith's philosophy zzz...
Buy only good companies: With competitive advantages (moat), high gross margin, solid ROIC, low debt.

Don't overpay: Is not about buying extremely cheap, but just pay a reasonable price for a wonderful company.

Do nothing: Even if there's a market crash or a bull rally. The less you move, the better.

What's your investment strategy?
Seems like the best investors all seem to think the same way. Find the best companies at the cheapest prices and hold them, ideally, forever.
Network Effect - The Desired Moat?
The network effect occurs when the value of a company's service increases as more people use the service. For example, millions of buyers and sellers on Mercado Libre give the company an advantage over other online marketplaces. The more sellers there are on $MELI, the more likely buyers are to find what they're looking for at a decent price. The more buyers there are, the easier it is to sell things.

According to a Morningstar Research, Network Effect is the rarest of the moats, but also companies with this moat have registered higher ROIC, ROE and Net Margin over time

Another companies with this moat could be $ABNB $AMZN $FB $V
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Network effect is what makes $BTC.X such a formidable beast that can't be stopped and one of the primary reasons I am bullish (over a 100 year time horizon LOL)
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