Hi. This is Matt Brundage at Bridgehouse. I recently had an opportunity to speak to Sionna's Co CIO Stephen Jenkins, about Ahold, which is a grocery store retailer that Steven and Sionna considered to be attractive in a top ten waiting in the Sionna Opportunity Fund. Here's what Steven had to say. Yeah. Absolutely. Thank you, Matt. And, it just all point out, you know, I would think Kim's, pick there, Fairfax is still a a very big building and the opportunities
found at that. I think at the moment is our is our top holding. So it's been a very successful one. But switching gears, to your point, a name outside of Canada, a name that's relatively new in terms for this portfolio. We've been building the stake recently, given attractive valuations. The company is Ahold Delhaize. It's, based in the Netherlands.
Certainly not a household name, but, a best in class food retailer, with with roots in the the Dutch and the Belgian grocery markets, in Europe, and they're certainly a leader in, you know, a lot of their core European markets and that kind of Benelux and increasingly in the Eastern European markets. So, certainly a leader in what it does but also interestingly enough.
It's also a leader in the grocery or food retailing space, along the Eastern Seaboard in the the US, about sixty percent of their business is actually in the US. And they've been there for quite some time It's successfully operated banners under the name Food Lion, Stop and Shop, Hanefer another one, and this would date back to the mid seventies. So they've been doing this for quite some time, they've been very successful.
And, the other thing, you know, very kind of, prudently growing the business over there. Excuse me. And, you know, through organic growth, but also through kinda select, acquisitions. Nothing more tuck in style acquisitions, which has really aided the growth over the over the years. So You know, I'd say a real high quality retailer, top tier industry margins, and they've consistently had those kinda talk to your margins over long periods of time.
You know, I'd say thanks to an astute focus on cost management again organic growth and then again selective acquisitions. So, I think if you look over the past, you know, twenty odd years for this business, it's grown, it's earnings, somewhere in the high single digit rate, again, very consistently, a big generator of free cash flows, also again, very consistently. And they've used that cash over the years to, you know, to, to buy back stock. Paying increasing amount in dividends.
I think their yield today is about four point one percent, so just just over four percent very robust yield.
And, and they also use their excess free cash flow to make some astute, tuck in acquisitions, and you know, as I think about the story today and moving forward in the near term, there may be some additional opportunities on that front as there is a very big merger, about to take place in the US grocery space between Kroger and Halbertsons and I suspect there's going to be some assets that fall out of that from a competition perspective, and I I would think, a hold will be, right at the table,
looking for some select acquisitions. But the bottom line is I don't actually see, the blue print changing for this company going forward in terms of its, its ability to deliver consistent earnings and cash flows. Over the coming years. So, you know, why is today there an opportunity? Well, you know, COVID and the, you know, inflation environment we've we've seen recently, certainly, in the grocery space has really worked to to boost sales and margins.
Probably, I'd say, above, long term normalized levels. And I think this has caused some concern, with the robust earnings we've seen in the last couple of years that the market perhaps is worried about that normalizing. And I I would agree that it is going to normalize, but the market has, I think, been overly earned on this front, and that's given us a great opportunity, especially when you look through kind of a a longer term
lens, which we tend to do. And you visualize what normalized earnings will be in the coming years. And, you know, this is what we typically are all about it. So you're only looking to, take advantage of, near term dislocations in in the company or in in the earning streams and buy a business that's cheap based on
a long term normalized or anything. So we're looking at, you know, the long term normalized or is getting back to a a consistent trend and then also, a more of a normalized multiple being accorded to the stock relative to where it is today. Today, it's about ten and a half times earnings. If you look over the past twenty years or so, this is a stock that's traded roughly thirteen,
thirteen and a half times on average. So, you know, we see, close to fifty percent upside in this stock over the coming years as valuations normalize, in addition to the ongoing underlying growth of the business. So that's this there's two tailwinds blowing the stock, and that's what we always look for. We want our businesses to have that valuation tailwind seeing that multiple increase over time back to normalized levels.
But we also want the underlying business to be growing over time certainly, Ahold has delivered that over a long period of time, and we think it's going to continue, in the future. So that's a relatively new holding we've been building, and, we're quite excited about it, as a big holding in the portfolio.