Zeno Equity Partners: The Bull Thesis for This Underappreciated Semis Giant [In-Depth]

With chipmakers like NVIDIA and Broadcom capturing the lion’s share of the attention in the semiconductor space, some top and dominant companies in the space get swept under the rug. However, one hedge fund  prefers this company to those much-lauded names.

Bullish on ....

Zeno Equity Partners went long this stock in January 2024 (although they pitched the stock even before that date - see article below for details), seeing it as an example of the type of company they can own for many years - even though the company addresses one of the world’s most “cyclical and volatile industries.” The Zeno team doesn’t believe cyclicality should prevent robust returns and earnings growth over the long term if the “right strategy and culture” are employed.

In their second-quarter letter to investors, which was obtained by Hedge Fund Alpha, the Zeno team noted that the semiconductor industry has grown at about 8% annually over the last 40 years, describing it as “an extraordinary sector.” They noted that continuing innovation and the critical role chips play in all of our daily devices have driven forward this growth.

According to the description on the fund's website "Zeno Equity Partners is a London-based, partner-owned investment firm founded in 2005, focusing on a low-turnover equity portfolio of up to 20 companies, primarily in the Americas and Europe. The firm arose from the 2005 management buy-out of Dynamo Capital and invests for the long term, prioritizing capital preservation and growth through ownership of businesses with robust models and delighted customers. Key team members include Theo Messa, Giovanni Rivano, and Lucas Berner."

Also see Zeno Equity Partners: What Sets Amazon Apart From The Rest Of The Mag 7

However, the Zeno Equity team added that not all parts of the semiconductor industry are equal. In fact, many former leaders in the industry, like Motorola, Fairchild and Philips, are out of business. Those giants previously targeted digital or logic chips, which essentially were the brains of electronic devices.