Last week, we attended Tyler Technologies’ (TYL) annual user conference in Indianapolis, which was attended by over 5,000 of their customers. Tyler Technologies is a current holding in our Concentrated Equity Alpha (CEA) portfolio. Tyler sells software to municipal governments to manage processes such as revenue management, tax billing, and electronic document filing solutions for courts.

The night before the conference, a crowded Marriott hotel bar provided an excellent opportunity to gain further insight into Tyler’s business from its most important stakeholders: its customers. The horseshoe bar was crowded with IT managers from towns and counties across the country. The two things these folks had in common were khaki pants and a fond appreciation for Tyler Technologies and its software. We were looking for unvarnished commentary, but we were blown away by the overwhelmingly positive remarks that we received from the company’s customers.

The conference also allowed us to see product demos from Tyler’s sales teams, interact with its customer support staff, and have lunch with its senior management team. We left each interaction with a deeper understanding of the company’s competitive advantages and future growth opportunities.

Finding great assets with sustainable advantages is at the core of what we do. Sometimes this can be done from our desks—but often, it is best to hit the road and converse with the people creating and consuming our portfolio companies’ products.

Memorial Day set another record for U.S. air travel. The TSA screened 13.5 million people over the holiday weekend—8% above 2023 levels and 11% above the pre-pandemic levels of 2019. Despite gas prices being considerably higher than their long-term average, AAA estimated that 38.4 million people traveled more than 50 miles on the road during the weekend—also greater than 2019 levels.

From a 70% drop in air travel in 2020 to the “revenge travel” recovery that started in 2021, the last few years have been anything but normal in the travel industry. As we return to normalized levels, travel remains a long-term secular growth story. In fact, the World Travel & Tourism Council forecasts spending on travel will grow at nearly twice the rate of the overall economy over the next decade. Memorial Day figures reinforce this trend, so we wanted to highlight two portfolio holdings exposed to travel as you think about planning that summer getaway: Booking Holdings (BKNG) and GE Aerospace (GE).

Booking is a leading online travel agency with numerous websites that you are likely familiar with, including Booking.com, OpenTable, and Priceline. The company continues to gain share as an online travel agent by offering the most comprehensive selection of hotels and alternative accommodations worldwide. Furthermore, we love its management team and its continual focus on returning capital to shareholders.

GE Aerospace is the largest jet engine maker in the world. Incredibly, 75% of commercial flights are powered by GE engines. At any given moment, approximately 900,000 people are in the air on a GE-powered plane. GE Aerospace will benefit from growing its highly profitable aftermarket maintenance service on its engines.

Best Regards,
The Sandhill Research Team

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