Giles Capital Weekly - Week 1
Welcome to the first Giles Capital Weekly of this year. The first week of 2025 brings a mix of reflection and forward looking analysis. Donald Trump's anticipated return to the White House is already influencing market sentiment, with expectations of a more hands-off approach to antitrust enforcement potentially catalyzing M&A activity. Meanwhile, China continues its strategic accumulation of critical minerals, investing $16 billion in overseas mines last year - a clear sign of their long-term economic planning.
I'm excited to announce we're expanding our coverage to include detailed analysis of fund letters, replacing our short-lived podcasts section. From reviewing Q3 2024 letters, key themes emerge: market rotation away from mega-cap tech, anticipation of Fed rate cuts, improved performance from small caps, and a shift in AI sentiment from euphoria to more measured expectations.
My top picks for this week highlight two exceptional companies redefining excellence in their markets. From Emerging Value's guest analysis by Javen Turner, Nordrest Holdings emerges as an innovative force in institutional food services, transforming the industry through cultural adaptation and technology. Their expanding Nordic presence and strategic NATO program creates multiple growth vectors in their €115B potential addressable market. From Rijnberk InvestInsights' deep-dive, Mastercard continues to dominate global payments with its network of 3.4 billion cards and rapidly growing value-added services segment (38% of revenue), while their AI-driven innovation in payment security further cements their market leadership position.
Americas
Rijnberk InvestInsights on Mastercard (🇺🇸MA US - US$521 billion) - Trading at 33x earnings with consistent double-digit growth and expanding margins, Mastercard's duopoly position and value-added services growth provide compelling long-term value creation potential.
Capitalist Letters on AMD (🇺🇸AMD US - US$260 billion) AMD's chiplet architecture and TSMC partnership give it a technological edge over Intel in server CPUs while positioning it to gain share from Nvidia in AI inference. Trading at 21x forward earnings despite strong execution and market share gains.
Rock & Turner on Kinsale Capital (🇺🇸KNSL US - US$120 billion) - Founder-led insurance company focused on the excess and surplus sector, delivering superior returns through disciplined underwriting and technological advantages. Trading at attractive multiples given its consistent growth and 46.8% ROCE.
Kroker Equity Research on Realty Income (🇺🇸O US - US$80 billion) Leading net lease REIT trading at 12.34x forward AFFO with a compelling 6.09% dividend yield, well-positioned for international expansion and growth in emerging sectors like data centers and gaming.
The Finance Corner on Snap (🇺🇸SNAP US - US$20 billion) Despite strong user growth and innovation in AR, Snap struggles with monetization and profitability. Trading at fair value around $11/share with significant execution risks.
Value Degen on Teledoc Health (🇺🇸TDOC US - US$15.3 billion) - Trading at 0.59x sales versus a historical average of 19x, TDOC offers an opportunity in digital healthcare with 93.9 million members and growing cross-selling potential. Their proprietary data and technology platform provides significant competitive advantages.
Value Degen on Cleveland Cliffs (🇺🇸CLF US - US$4.67 billion) Trading at just 0.23x price-to-sales with potential to reach $40-56 by 2027-2028. Vertically integrated steel producer with strong management and insider buying, positioned to benefit from infrastructure spending and auto industry recovery.
Europe, Middle East & Africa
Emerging Value on Nordrest Holdings AB (🇸🇪NREST STO - SEK1.36 billion) - Swedish food service provider trading at attractive multiples with 10% guided annual growth. Company differentiates through tailored food offerings and strong B2B relationships, with expanding NATO contracts providing additional growth catalyst.
WinterGems on Wise plc (🇬🇧WISE LN - £11.59B) Trading at 16x EV/EBIT with strong moat in international money transfer, growing 20% in volume while market grows at 10%. Platform approach and direct banking connections create competitive advantages.
MORAM Capital on Alantra (🇪🇸ALNT.MC - €306 million)
Compelling analysis of this Spanish financial services firm trading at 8-year lows with over half its market cap in net cash and investments. Well-positioned to benefit from an expected recovery in M&A activity, particularly in the mid-market segment.
Asia-Pacific
A quiet start to 2025 for this region in terms of company write-ups, with limited reports this week.
Quality Investing with René Sellmann - The S&P 500: Not As Overvalued As You Might Think? Fresh perspective on S&P 500 valuation focusing on structural changes in business models and free cash flow margins. Challenges conventional wisdom about market overvaluation. (15 min read)
The Journal of a Value Investor - 2024 Year-End Portfolio Review - Thoughtful reflection on portfolio performance with 27.6% returns, featuring detailed analyses of Hagerty, Texas Pacific Land, and Tidewater. Valuable insights on position sizing and risk management. (20 min read)
Sinocism - Xi in Qiushi - Comprehensive Analysis - Essential deep dive into Xi's vision for Chinese modernization and economic strategy. Critical reading for understanding China's evolving economic landscape. (25 min)
Panda Perspectives - China Weekly Wrap - Comprehensive analysis of China's currency dynamics and market trends, with valuable insights on policy shifts and market implications. (15 min read)
Hundred Year Lens - 2025: The Year We Relearn How to Learn With AI Thought-provoking analysis of how AI is reshaping education and learning, with important implications for investors and business leaders. (10 mins)
Generative Value - SpaceX: The Story of Space Disruption A detailed analysis of SpaceX's $350B valuation, business model, and future prospects. Particularly relevant given the company's dominance in space launch and Starlink's growth. (25 min read)
High Growth Investing - Looking Back At Tech Stocks In 2024 Thoughtful analysis of tech sector performance and portfolio positioning for 2025, with particular focus on second-tier stocks. Excellent perspective on market dynamics beyond the Magnificent 7. (15 min read)
Dirtcheapstocks - Citizens Bancshares Deep Drive Fascinating case study looking back at how the bank holding company received $91 million in essentially free capital, creating an asymmetric opportunity with the stock trading at just 3-4x earnings. Excellent breakdown of the regulatory advantages and potential catalysts. (20 min read)
Kingswell - The Berkshire Beat: January 3, 2025 Fascinating insights into Charlie Munger through Li Lu's remembrances, plus updates on Berkshire's performance and recent moves. Essential reading for value investors. (15 mins read))
Excelsior Capital - What Constitutes an Economic Moat? - Excellent analysis of Mauboussin's framework for identifying and evaluating competitive advantages. Practical applications for value investors. (15 min read))
Elliot's Musings - 2025: Quality Small-Caps Emerge as the Prime Hunting Ground Compelling case for small cap opportunities in 2025 as large cap valuations stretch and monetary policy shifts. Well-reasoned analysis of market dynamics. (20 min read)
Invariant - The Nicotine Basket Fascinating analysis of the global nicotine industry's transformation and the benefits of a basket approach to investing in the sector. Novel perspective on a controversial but profitable industry. (15 min read)
180 Degree Capital: Small cap focused fund struggling with market dynamics. Management emphasizes extreme valuation disparity versus large caps, noting Russell Microcap Index doubled SPX 500 performance since Fed's mid-September rate cut. After strong first 5 years and challenging last 3 years, focus remains on constructive activism in small caps while maintaining lean operations with 75% reduction in expenses. Letter discusses:
Charles Schwab (🇺🇸SCHW - $17B) - Existing Position: Deposit stabilization expected to drive improving spread income
Marathon Digital (🇺🇸MARA - $4B) - Existing Position: Bitcoin miner benefiting from operational efficiency improvements
Kinsman Oak Equity Fund: Highlights significant bifurcation in consumer spending patterns, with Dollar General customers struggling while luxury brands thrive. Fund notes concerning US debt levels reaching $35.8T with interest payments consuming 20% of tax receipts. Takes opportunistic position in uranium given increased nuclear power interest from tech companies including Google, Amazon and Microsoft. Letter discusses:
Ferrari (🇮🇹RACE - $67B) - Existing Position: Order book extends into 2026, showing luxury segment resilience
Dollar General (🇺🇸DG - $31B) - Existing Position: Core customer base showing stress with 30% reaching credit card limits
Hermes (🇫🇷RMS - €207B) - Existing Position: US market showing 13% growth despite high comparables
Baron FinTech Fund: Fund has benefited particularly from strong performance in Information Services and E-Commerce segments. Management sees continued opportunity in payment processing and financial software sectors. Letter discusses:
Fair Isaac Corporation (🇺🇸FICO - $48B) - Existing Position: Benefiting from higher mortgage credit score pricing and rate cut optimism
MercadoLibre (🇺🇸MELI - $104B) - Existing Position: Revenue doubled in constant currency, fintech revenue grew 92% with 52M monthly active users
TransUnion (🇺🇸TRU - $11B) - Existing Position: Consumer credit bureau seeing strength from potential rate cuts stimulating lending
NZS Growth Equity Strategy: Portfolio maintains significant technology exposure but navigated sector rotation by diversifying AI exposure in resilient sleeve. Management remains bullish on long-term AI implications while acknowledging near-term concerns about investment returns. Letter discusses:
Progressive Insurance (🇺🇸PGR - $149B) - Existing Position: Market share gains through telematics data advantage, now second largest auto insurer
American Tower (🇺🇸AMT - $98B) - New Position: Added for resilient infrastructure exposure
Roper Technologies (🇺🇸ROP - $54B) - Position Upgrade: Vertical market software provider promoted to resilient category
Netflix (🇺🇸NFLX - $187B) - Sold Position: Complete exit from streaming platform
RiverPark Large Growth Fund: Fund navigated market volatility by focusing on companies with strong competitive positions and expanding free cash flow. Management remains optimistic about portfolio growth prospects despite macro uncertainties. Letter discusses:
Meta Platforms (🇺🇸META - $931B) - Existing Position: Revenue up 22% YoY with Reels and WhatsApp driving growth
Shopify (🇺🇸SHOP - $71B) - Existing Position: GMV growth of 22% with improving margins and FCF of $333M
Blackstone (🇺🇸BX - $71B) - Existing Position: Expects material Q4 FRE improvement driven by PE and Energy flagships
RiverPark Long/Short Opportunity Fund: Management focuses short book on companies losing market share or facing cyclical headwinds. Letter discusses:
Meta Platforms (🇺🇸META - $931B) - Existing Position (Long): 81% gross margin with $44B FCF in 2023
Alphabet (🇺🇸GOOGL - $1.7T) - Existing Position (Long): Search revenue up 14%, Cloud revenue up 29%
SPDR S&P Homebuilders ETF (🇺🇸XHB) - New (Short): Expects inventory surge and price pressure as rates stabilize
DoorDash (🇺🇸DASH - $37B) - Existing (Short): Challenging unit economics in food delivery
Currently, I’m only featuring free content. If you're a writer producing free, insightful investment analysis and would like to be considered for inclusion, feel free to reach out. What would you like to see in future editions? Let me know in the comments.
Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice. All opinions expressed are those of the quoted authors and do not necessarily reflect the views of the newsletter creator. Always do your own research before making investment decisions.