Automatic Data Processing, Inc.

“ADP is among the most structurally advantaged businesses in enterprise software: 92%+ client retention, 40-50% ROIC, $4B+ annual FCF, and a regulatory-complexity moat that strengthens with each passing year. At 18.5x forward earnings — a 30-35% discount to its historical 25-28x average following a market-wide de-rating — investors are buying a near-monopoly compounder at a fair-to-attractive price. The primary risks are earnings cyclicality from float income and slow-burn AI disruption of compliance complexity, neither of which constitutes a credible permanent impairment risk on a 5-10 year view. Sized in 1-2 tranches with capital reserved for further weakness, ADP offers 10-12% CAGR with genuinely low downside risk.”