During the June quarter the Polen Capital Global Growth Fund added two new holdings to the portfolio, Workday which was quickly built-up to a full-sized holding and a smaller position in Globant.
Workday is a leading provider of enterprise cloud applications for human capital management (HCM) and finance, targeting globally scaled enterprises and, increasingly, small and medium businesses. With over 10,000 businesses as customers, nearly half use core HCM or finance products. Workday has consistently delivered strong results year after year since going public in 2012. We attribute this consistency to two primary dynamics:
We did not own Workday in the past due to valuation and/or uncertainty around product or geographic expansion, but neither of those are issues today. As a percentage of total revenue, the Financials segment expanded from 7 per cent in 2015 to nearly 25 per cent in 2022, broadening its product diversification and adding a proven growth driver beyond HCM. Revenues generated outside the U.S., as a percentage of total revenues, have expanded from 16 per cent in 2015 to nearly 25 per cent in 2022, broadening its global reach. With shares trading for less than 30 times free cash flow, which we expect to grow at a 20 percent plus rate for many years, we also think the valuation is attractive.
We also added a small new position in Globant, a cloud-native information technology (IT) company specializing in digital and cognitive technology. We have been following this business for years and believe it is trading for a fair price at roughly 27 times earnings per share (EPS). One of its main points of differentiation is being a digitally native IT services firm that helps enterprises with their digital transformations. Globant specializes in AI, software development, cybersecurity, and blockchain. As long owners of Accenture, we understand the power of being a trusted provider of these services. Globant benefits from having no legacy businesses in secular decline. Their entire enterprise is serving what Accenture calls “The New.” Globant describes its relationships with clients as a “digital journey” and positions itself as a true partner, not a one-time project consultant. Globant has worked with its largest client, Disney, for more than a decade. The business exceeds all our investment guardrails and participates in one of the largest total addressable markets. We expect Globant to deliver 20 per cent plus EPS growth in the coming years.
If you would like to learn more about the Polen Capital Global Growth Fund, please visit the fund’s web page to learn more: Polen Capital Global Growth Fund
The Polen Capital Global Growth Fund own shares in Workday and Globant. This article was prepared 15 August 2023 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade these companies you should seek financial advice.