On March 27, 2020, we initiated a position in Equifax, Inc. The company’s strong fundamentals and the stock’s attractive valuation prompted the purchase.
In our opinion, Equifax is a high-quality business run by a capable management team. The company provides consumer and corporate credit information to potential lenders. This information is vital to the efficient operation of the credit markets as it improves lending decisions and results in lower financing costs for borrowers. Significant entry barriers exist in the credit reporting industry, which is dominated by Equifax and its two primary competitors, Transunion and Experian. We believe Equifax’s strategy of acquiring unique data assets and combining those assets with sophisticated analytics to improve customer decision-making capabilities is a sound one. The company’s business is characterized by strong margins, solid free cash flow and attractive growth prospects.
Long-term Jensen clients might recall that we previously owned Equifax’s stock and liquidated it in August of 2015 for valuation reasons. From the time of sale in 2015 to the date of our recent purchase, the company’s stock underperformed the S&P 500 by 7.59%. Some of this underperformance was due to a data breach suffered by the company in 2017. Criminals hacked into the company’s systems and stole personal information on more than 145 million consumers. In the wake of the breach, Equifax faced numerous regulatory investigations and lawsuits and embarked on an ambitious $1.25 billion expenditure program to upgrade the quality and security of its IT systems. The company settled the vast majority of the investigations and lawsuits in 2019, and we are confident the company’s efforts to improve its IT systems reduce the probability of another data breach.
Given the strength of Equifax’s underlying business model and the attractive valuation on the company’s stock, we were pleased to add the name back our portfolios.
Fund holdings are subject to change and should not be considered recommendations to buy or sell any security. For a listing of the funds current holdings, please click here.