Accenture Ltd. (ACN)

Like many consulting companies, ACN has had a rough time because the market thinks AI will wipe them out. AI will effect their business, but ACN will use AI to be more effective. They could perform the same amount of work with fewer people, but ACN is still needed to help bigger corporations. ACN and similar businesses may be stuck--lay off employees or not? These companies continue to do well--their top lines are still growing.

 They report Thursday. Has fallen 36% in a year, because the market perceives a serious threat from AI.

AI narrative has gone too far. Share buybacks and dividend increases. Consulting companies will incorporate AI into their toolkits. Very cheap. Yield is 3.67%.

(Note the shortish timeframe.)  Still likes it. Stock decline has been much worse than actual financial performance. EPS expectations have come down only ~5%, valuation massively re-rated down to ~16x PE from 23x. Fears of AI disruption. Macro economic concerns affected its main consulting business. Evidence that AI is going to eat the consulting model.

Layoffs in face of new realities. Gen AI can actually be a growth engine for them.

Technically challenged. Price is below 200-day MA, which seems to be trending lower. Also below 200-week MA, which is starting to round down -- that's a long-term tough ride.

Be concerned about slowing discretionary IT spending -- is AI taking over some of those needs? An underperformer.

The market sees AI as a threat to ACN's business, but the sell-off has been overdone. ACN has an opportunity to do really well by helping companies deploy AI. He believes ACN will find a way. Fundamentals remain very good. This is an opportunity. Innovation happens all the time, and there's always a need for consulting, even with AI. Plus, ACN has a 30-year track record.

We think of any of the industries that are going to be exposed to AI risks, the consulting space might be one of the more at risk areas. At the margins, clients are likely to increasingly consider whether they can use alternative means to get the type of value that consiltants provide. Obviously this does not mean it will supplant the entire industry but at least in the short-term we think it makes a lot of client rationalize and question their budgets in this area.
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Trades at 18x PE now. He has disliked this before, but is cheap now.

An AI will take over the world story. Is in the same boat as Salesforce and Adobe. There's irrational exuberance over AI. He's staying in it. Wait and see. Will definitely buy more on a sell-off.

Is hitting a 52-week low. It always trades poorly around its earnings report, but usually recovers. But this time, she doesn't see a recovery. They reported soft bookings, -6% YOY. Are now restructuring their services business, which she doesn't understand. Gross margins missed. She will likely trim her holdings.

It went down because of DOGE cuts earlier, but Musk is no back at Tesla. So, now you can buy it. The CEO is very smart.

Increased AI spending will not benefit companies with in-house IT departments where employees are being laid off. Share buybacks plus annual dividend increases. Selloff was chance to buy quality company on sale. Buying for new clients.

Consulting on new technology rollouts globally for small, medium, and large businesses. Companies are going to need a lot of help implementing generative AI processes. This name is in the sweet spot for that revenue. Companies have to do this or be left behind. Yield is 1.9%.

He still likes it, despite fears that the new president will reduce inefficiencies and this will impact ACN. He disagrees. ACN is very well-run. One third of profits pay dividends, another third buys back stock and the rest buys new consulting companies. A good model they execute well.

Went down, came back up, but basically flatlined. He sold in July. Bought 46 companies in the last year to the tune of about $6.6B, but it hasn't ended up on the bottom line. Has 775,000 employees. Client base is very sticky.

Buy in 1/3's here around $353, $335 (his targeted entry point), and $320.