📈 Inflation surprise

Restoration Hardware (RH) is undergoing a major brand "relaunch" with an 80% refresh of its product lines, introducing new styles and collections that are expected to drive growth and enhance same-store sales. Despite a 19% year-over-year revenue decline, RH is optimistic about its future, marked by a significant share buyback of 17% last quarter, indicating confidence in future earnings. CEO Gary Friedman has underscored the company's opportunistic approach to buybacks, similar to Warren Buffett's strategy. The relaunch includes high-quality European and American materials, with improvements in both product availability and delivery times, signaling a strengthened supply chain. The company has invested $1.2 billion in its stock, betting on the relaunch's success, with expectations for an earnings inflection in the second half of the year and peak in the first half of 2024. RH's strategic moves, including international expansion and gallery growth, aim to capitalize on the relaunch, with the stock's future earnings potential deemed attractive. RH evenre purchased 17% of its shares last quarter at an average repurchase price of $295 showing their confidence in the business.

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Grab, a leading Southeast Asian company specializing in mobility, delivery, and financial services, posted strong third-quarter results, with revenue of $615 million exceeding estimates. The operating loss margin improved to 10.7%, and the company raised its full-year revenue guidance to $2.32 billion. Analyst Kai Wang maintains a fair value estimate of $4.40 for Grab, citing a 34% upside potential based on its dominant market position and growth catalysts like advertising and delivery services. Grab expects double-digit growth in its gross transactional value (GTV) for 2024, with its delivery GTV projected to grow in low double digits annually over the next three years, and mobility GTV to decelerate slightly. Grab's growth is driven by its strategic focus on mobility and delivery services in Southeast Asia, with its mobility segment being the most profitable, generating an 11.5% adjusted EBITDA margin. The company faces competition in the delivery segment and is incurring losses in its financial services business, which includes fintech payments and loans. Despite these challenges, Grab is positioned for robust growth in the long term, with its financial services business expected to break even by 2026. The company's ride-sharing business is considered to have at least a narrow economic moat, though overall Grab is assigned a no-moat rating due to uncertainties in profitability and competition in its core businesses. Grab’s capital allocation is rated as Standard, with the potential for adjustment based on the profitability roadmap of its financial services business. The company's overall uncertainty rating is Very High, primarily due to uncertainties in its financial services sector.

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Pro-Dex Inc. (PDEX), a small-scale contract manufacturer specializing in medical devices, offers a standout investment opportunity due to its proprietary handheld surgical drivers, which deliver precise torque for implant procedures. Key client relationships, including with Stryker, underscore its niche in product development alongside its in-house engineering expertise. The company's compelling appeal is bolstered by a management team, including Chairman Nick Swenson and Board member Ray Cabillot, who significantly own about 40% of PDEX and influence value-focused capital allocation. A recent expansion has doubled their manufacturing space in Irvine, CA, a strategic move that, despite delays from COVID-19 and operational growing pains, positions them for increased production capacity. Complementing this potential, PDEX's backlog has also doubled to $41M, pointing to a potentially high-growth fiscal year 2024.

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