Bretton Fund / Bretton Capital Management, LLC on SAP SE
Thesis
Bretton believes fears that AI will broadly displace enterprise software have created an attractive entry point in SAP. SAP's software is deeply embedded in complex, mission-critical corporate operations, making replacement by homegrown AI-built systems risky and operationally difficult. The company can also benefit from AI by producing code more efficiently while its cloud transition and cost reductions support margin expansion. Bretton bought the shares at about 16 times estimated 2027 earnings, a material discount to the broader market.
“We paid about 16 times the 2027 estimated earnings for these shares, a material discount to the rest of the market.”
Key risks
- AI-enabled competitors or customer-built software displace parts of SAP's installed base
- The cloud transition and cost reductions fail to deliver the expected margin expansion