Adobe Inc. (ADBE, Financial)
We invested in Adobe after the stock traded near a three-year low in the wake of the announcement that it would acquire Figma, a complementary design software vendor, for $20 billion. Despite the market’s fears related to this transaction, we believe that Adobe is a fast-growing, high-margin business that continues to possess enduring competitive advantages. Its Creative Cloud is the de facto standard for both professionals and students, and its Acrobat products are used to read and create billions of PDF documents every year. After a successful transition from selling licenses to cloud-based subscriptions, Adobe has grown free cash flow per share at an 18% annual rate for the past decade. Adobe trades for approximately the same multiple of next year’s free cash flow as the S&P 500, but we believe it deserves a substantial premium.
From Bill Nygren (Trades, Portfolio)'s Oakmark Fund fourth-quarter 2022 commentary.
