However, just benefiting from an economic recovery is not enough of a reason for us to invest in a company. We look to buy long-duration growth companies that have leading market positions, that have invested throughout the downturn and that have improved their operations. We believe that these types of companies have outstanding potential to grow earnings cycle-to-cycle and that an economic upturn will solidify their strong positioning. These characteristics were what led us to invest in a new portfolio company—Distribuidora Internacional de Alimentación S.A. (XMCE:DIA, Financial).
DIA is Spain’s leading local discount food market (somewhat like a convenience store) that differentiates itself from competitors on proximity and price. The company was listed in 2011 after spinning out from Carrefour‡‡ and has seen the benefits of being independent with an improved corporate culture. Management has sold operations in underperforming countries like France and Turkey and has focused its effort and capital allocation on Spain, Brazil and Argentina. Unlike most other developed markets where three or four major players are dominant, the Spanish supermarket industry is still very fragmented and is in the beginning stages of consolidation. We believe DIA is well-positioned to capitalize on this opportunity.
From the Wasatch International Growth Fund Q2 2015 shareholder letter.
