A new chapter for Giles Capital: reflecting and looking ahead

I've decided to take a significant step: I'm moving into full-time Substack authorship. It's a decision that's been brewing for a while, and I'm excited to share what this means for this Substack.

Reflecting on my investment Journey

I've often grappled with how to add unique value in this space. Many times, I've found promising ideas already covered by other Substack newsletters. After much thought, I've realised that Giles Capital's strength lies in distinctive analysis and ongoing analysis of other Substack ideas. There's value in rare ideas, seeing fresh perspectives, and synthesising insights from various sources.

I've come to see my role not just as an idea generator, but as a curator and analyst of the best ideas in the investment community. This approach has led to both wins and valuable lessons. Let's take an honest look at our performance.

Performance so far

I introduced a confidence score system for all my posts, believing that not all investment ideas are created equal. If one had invested proportionally to these scores, the portfolio would have returned approximately 58% since 2021, significantly outperforming a simple equal-weighted approach. This success has inspired me to explore more data-driven methods to enhance future stock analysis and idea generation.

Winners that paid off:

1. Spotify Technology SA (+223.30%): One of the highest confidence scores and it certainly delivered. Spotify's dominance in audio streaming and its moves into podcasting paid off handsomely.

2. Bijou Brigitte (+36.00%): The German fashion jewellery retailer was a solid performer. The thesis on its undervaluation and recovery potential played out well, and its 10% dividend yield keeps us holding it.

3. Rolls-Royce Holdings PLC ADR (+269.82%): Rolls-Royce was the stock that made me start writing on Substack and was my most successful pitch. The pandemic created a perfect storm of undervaluation, and Rolls-Royce's recovery surpassed even my optimistic outlook.

4. Hanesbrands Inc (+57.53%): Another win in the retail space. A contrarian view on this beaten-down stock paid off as the company's turnaround efforts gained traction.

Our toughest losses:

1. ASOS plc (-83.60%): This did not work out as expected. I saw potential in ASOS's digital-first approach and international expansion plans. I underestimated the challenges of increased competition, supply chain disruptions, and changing consumer behaviours post-pandemic. It's a stark reminder of the risks in the fast-moving fashion retail sector.

2. Magna International Inc (-58.43%): I was bullish on Magna's position in the auto parts industry and its potential in the EV space. However, I didn't fully account for the ongoing chip shortage and the slower than expected EV transition. It's taught me to be more cautious about industry-wide challenges. In the end the Apple Car seems to be on hold and traditional car companies slowing their move into EVs.

3. Food & Life Companies Ltd (-48.12%): My thesis on the expansion of sushi restaurants didn't play out as expected. I may have underestimated changing post-pandemic dining habits, and Kura Sushi seems to have beaten Sushiro to the US market.

4. Ferrexpo PLC (-14.08%): I gave this a cautious confidence score and while the loss so far is little, it shows how a more careful stance on this position has helped mitigate potential downsides. The ongoing war adds an extra layer of uncertainty, but I still think there's a play here when it's over.
   

Learning and evolution

These winners and losers have been invaluable teachers. The success with Rolls-Royce and Spotify reinforced the importance of identifying companies with strong recovery potential or having growth potential. Bijou Brigitte showed me the value of finding hidden gems in traditional retail. On the flip side, ASOS and Magna International has reminded me to stay vigilant about changing market dynamics and company-specific risks.

The confidence-weighted approach has inspired me to explore other sentiment models and scoring systems based on fundamentals. I'm particularly intrigued by applying these models to ideas from other investment Substacks, sparking a quest for a more robust, data-driven approach to complement my analysis.

What's next for Giles Capital?

Moving forward, I am looking to make a few changes to Giles Capital:

An enhanced analytical approach: Inspired by the confidence score system, I'm developing a new methodology that leverages article data to analyse investment ideas. This approach will identify high-potential opportunities based on performance metrics and sentiment analysis, helping us uncover promising ideas more efficiently.

Weekly updates: Inspired by Michael Fritzell's Monday Morning Links, I’ll launching a weekly update with links to write-ups on stocks from across the world. This will be available later today.

A new look: A new name and brand will better align with this enhanced approach, focusing on curating quality investment writing and applying rigorous performance metrics. It's still in the works, but I can't wait to share more details soon.

These changes stem directly from the lessons learned through our successes and failures. By combining our curation of quality writing with data analysis, I am aiming to create a more robust and insightful investment approach.

A heartfelt thank you

Your input is crucial as I shape the future of this substack. What would you like to see more (or less) of in our new format? Feel free to leave a comment. I’m excited about the road ahead and can't wait to share it with you - may it be our most insightful and rewarding yet!

Stay invested,
Giles Capital

Header photo by Vincentiu Solomon on Unsplash.