Giles Capital Weekly - Week 12
Welcome to another edition of Giles Capital Weekly. Markets have been hitting turbulence lately, with the S&P 500 and Nasdaq both experiencing significant pullbacks, officially entering a market correction at more than 10% from February highs. The Federal Reserve held steady on interest rates but raised its inflation forecast, citing "uncertainty over tariffs" as officials dim their economic outlook. Treasury Secretary Scott Bessent's comments that "corrections are healthy" suggests the administration won't rush to prop up falling stocks.
My top picks for this week highlight two companies with exceptional potential. From Rijnberk InvestInsights, The Trade Desk (TTD) stands out in digital advertising despite a 55% YTD drop. With projected 21% revenue and 24% EPS growth rates and a strong 28% ROIC, TTD trades at 30x earnings - a 60% discount to historical averages. Their open internet approach continues gaining market share against walled gardens like Google and Meta. From Value Degen's Substack, Alta Equipment Group (ALTG) offers remarkable value trading at 1x 2025 EBITDA with a market cap of just $174 million. This founder-led equipment dealership benefits from monopolistic regional licensing that generates steady parts and service revenue. With specific price targets of $10.97 by end of 2025 and $14.51 by end of 2026, ALTG presents substantial upside as interest rates decline and manufacturing rebounds.
Americas
Quality Stocks on Alphabet (🇺🇸GOOG US - $1.9 trillion) Trading 20% below its all-time high, Google's parent company presents a compelling opportunity with leadership in search, YouTube, and cloud services, while trading at reasonable forward multiples despite ongoing legal challenges.
Rijnberk InvestInsights on The Trade Desk and Northrop Grumman (🇺🇸TTD US - $75 billion | 🇺🇸NOC US - $96 billion) Analysis of three undervalued opportunities: The Trade Desk trading 52% below highs with 21% revenue CAGR and PEG of 1.3 and Northrop Grumman benefiting from defense spending with 14% FCF CAGR through 2027.
D Invests on Otis Worldwide (🇺🇸OTIS US - $35 billion) Elevator and escalator market leader presents long-term value opportunity with 7.6% industry CAGR through 2032, high-margin service business accounting for 60% of revenue, and strong market share in urbanizing global markets.
Safe Harbor Stocks on Euronet (🇺🇸EEFT US - $4.73 billion) Omnichannel remittance provider with both physical and digital operations trading at just 10x forward P/E with 13.9% FCF yield, positioned as a key player in the $850 billion digital remittance revolution.
Value Don't Lie on Ziff Davis (🇺🇸ZD US - $1.7 billion) Ultra-cheap digital media conglomerate trading at 4x EBITDA and 6x FCF with capital allocation inflection underway through increasing share repurchases and strategic acquisitions.
Catapult on Barnes & Noble Education (🇺🇸BNED US - $299.72 million) College bookstore operator transforming through "Equitable Access" programs that significantly increase sell-through rates, trading at 5x trailing EV/EBITDA with expected EBITDA growth to $160-180 million in 2025.
Value Degen on Alta Equipment Group (🇺🇸ALTG US - $174 million) Construction equipment dealer trading at just 1x 2025 EBITDA guidance with founder-led management owning 17% and positioned to benefit from reshoring and Trump's accelerated depreciation programs.
Wolf Of Oakville on Enterprise Group (🇨🇦E CA - CAD$127 million) Energy services provider downgraded to 3.5 stars after "ass puckering" Q4 results with revenue dropping 18.6% and profitability decreasing 70%, though balance sheet remains strong with $30.7M cash and increased shareholder fees raising questions about capital allocation decisions.
Alpha Ark on Superior Industries (🇺🇸SUP US - $72.50 million) Turnaround play on one of the world's largest aluminium wheel manufacturers, trading at 5.6x 2025 EV/EBITDA with potential 13x upside as cost-cutting and European operations relocation to Poland improves margins.
Wolf of Oakville on Sabio Holdings (🇨🇦SBIO.V CA - CAD$31 million) Connected TV advertising platform with 38% revenue growth and impressive 61.7% gross margins, significantly reducing annual net loss from $4.8M to just $110K and generating $3.8M in operational cash flow.
Europe, Middle East & Africa
Rijnberk InvestInsights on LVMH (🇫🇷MC FR - €300 billion) The luxury goods conglomerate has seen shares drop 29% despite strong fundamentals, presenting a value opportunity at 22x forward earnings with 11.4% projected EPS growth, supported by its powerful portfolio of 75 prestigious brands. This analysis comes from the same research piece that covered The Trade Desk and Northrop Grumman above.
Coughlin Capital on British American Tobacco (🇬🇧BTI GB - £69.94 billion) Tobacco giant with 82% profit margins trading at just 7.3x free cash flow while pivoting toward smoke-free alternatives with VELO nicotine pouches experiencing phenomenal growth globally.
Safe Harbor Stocks on Wise (🇬🇧WIZEY GB - £9.69 billion) Leading digital-first remittance platform with transparent pricing and low-cost model (0.4-0.6% per transaction), highlighted in the same analysis as Euronet as a pure-play disruptor in the cross-border payments space.
InvestingWithWes on Trigano (🇫🇷TRI FR - €2.39 billion) French recreational vehicle manufacturer with defensive business model and strong margins, trading below intrinsic value with buyable price of €128.93 compared to current €127.30.
Northwest Frontier Capital on Trainline (🇬🇧TRN GB - £1.2 billion) Leading rail ticket platform demonstrating fundamental strength with high app usage compared to OTAs (73% vs. 36-42%), trading at 7.7x EV/EBITDA despite market misinterpreting shifts in growth composition as structural weakness.
Hidden Market Gems on MPC Container Ships (🇳🇴MPZZF NO - $709.92 million) Norwegian container shipping leader with robust 55.7% adjusted EBITDA margin despite revenue contraction, investing in eco-design vessels and digital fleet management as global container shipping grows at 3.4% CAGR.
DuckPond on Dowlais (🇬🇧DWL GB - £600 million) Global automotive components leader trading 45% below spin-off price despite having twice the market share of competitors in sideshafts, with a potential acquisition by American Axle creating the sixth-largest auto supplier in North America.
Asia-Pacific
Emerging Value on Indofood (🇮🇩INDF ID - IDR 61.24 trillion) Indonesian food conglomerate with strong moat in instant noodles, flour, and palm oil, trading at PE of 8 with dividend yield of 4.18% and conservative management.
8% ValueInvesthink on Bandai Namco and Nippon TV (🇯🇵7832 JP - $22 billion | 🇯🇵9404 JP - $4.8 billion) Analysis of two undervalued Japanese media companies: Bandai Namco offering 4.5% dividend yield with 5.7% FCF yield and $2.5B net cash plus valuable anime franchises, while Nippon TV trades below book value with 5.5% FCF yield, $1B net cash, and ownership of Studio Ghibli making it a potential activism target.
Noahpinion - Dems need to moderate and fight Noah Smith offers a compelling analysis of the Democrats' positioning dilemma, arguing they must balance centrism on cultural issues with aggressive opposition to Trump on economic policies—a strategy he calls "combative centrism" that could win back voters across demographic groups. (15 min read)
The Coal Trader - China Unveils Comprehensive Plan to Boost Domestic Consumption Detailed breakdown of China's new consumption-boosting plan and its impact on steel demand through real estate support, infrastructure investments, and energy expansion, offering a balanced view of how this might stabilize rather than dramatically stimulate markets. (6 min read)
Panda Perspectives - Marco Minute: NPC Take 2 Detailed analysis of China's National People's Congress and the recently released "Action Plan to Revitalise Consumption," outlining specific policy measures to boost household income, increase consumption, and stimulate economic growth. (10 min read)
Panda Perspectives - China Weekly Wrap Detailed review of Chinese equity markets showing broad weakness across major indices, with HSCEI ETF falling 1.52%, while policy announcements on employment subsidies and monetary tools signal government efforts to stabilize growth. (15 min read)
Investment Ideas by Antonio - Duolingo: Netflix/Spotify 10 Years Ago An analysis of how Duolingo is following a strategic path similar to Spotify and Netflix a decade ago, leveraging generative AI to dramatically accelerate content creation and launch new verticals. Worth reading for insights into how AI is transforming Duolingo's business model and user experience. (7 min read)
Seraya Investment - The Power of Platforms: Part 1 Masterful explanation of how classified advertising evolved from local newspapers' "rivers of gold" to today's digital marketplaces, with compelling insights into network effects and why market leaders can command outsized pricing power and margins. (12 min read)
Rock & Turner - The Schiehallion Fund, SpaceX and More Fascinating exploration of a unique investment vehicle offering retail investors rare access to late-stage private companies like SpaceX, with balanced analysis of both the fund's potential and Musk's sometimes questionable management decisions. (15 min read)
Compound & Fire - ROIC: My Quality North Star—And Why It's Not One-Size-Fits-All Excellent breakdown of how to properly adjust and interpret Return on Invested Capital for different business models, with specific adaptations for serial acquirers and insurance companies—essential reading for serious fundamental analysts. (8 min read)
Heavy Moat Investments - How to Survive (and Thrive) in a Market Downturn Practical advice on maintaining discipline during turbulent markets by focusing on quality businesses with strong balance sheets and predictable cash flows, with an insightful illustration of Amazon's expected future IRR. (7 min read)
Schwar Capital - The 100X Secret: Why Most Investors Will Never Find Their Best Investment Thought-provoking analysis of what it takes to find and hold 100-bagger investments, highlighting the critical importance of patience and emotional control with concrete screening criteria for identifying potential multi-decade compounders. (8 min read)
Deep Value Returns - Inflection Investing: Outperformance Requires Discipline A thoughtful piece on investing in businesses with dramatically increasing free cash flow that delivers high returns but requires patience and disciplined waiting through market volatility—a refreshing contrast to the constant noise of market commentary. (7 min read)
TQI capital - Time to panic? Refreshing perspective on handling market corrections, emphasizing emotional control as the true edge in investing with compelling insights from Morgan Housel and Bill Miller on the behavioural advantages that separate winning investors from the crowd. (5 min read)
This collection of Q4 2024 investment letters reveals diverse strategies across multiple fund managers. Key themes include AI infrastructure evaluation, positioning within economic cycles, and value discovery in overlooked mid-cap stocks. Most funds reported positive returns for 2024, though with significant variance in performance relative to benchmarks.
Ace River Capital: Concentrated small/micro-cap portfolio focused on companies with unique advantages and tangible assets. Fund returned +8.79% in Q4 2024 and -14.53% for full year 2024, underperforming S&P 500 (+20%). Letter discusses:
RCI Hospitality (🇺🇸RICK - $401.75 million) - Top Position: Owner of adult nightclubs with local monopoly characteristics, launched "Favoritely.com" platform with strong monetization potential
Vox Royalty (🇨🇦VOXR - CAD$199.05 million) - Existing Position: Increased cashflow 55% YoY with first revenues from new gold royalties
Marine Max (🇺🇸HZO - $522.04 million) - Existing Position: Activist pushing for company breakup with management focusing on marina real estate
Atai Capital Management: Small-cap value investor with significant undervaluation focus. Fund returned 3.1% in Q4 and 7.7% for 2024, underperforming major indices. Since inception, the fund has returned 28.4%. Letter discusses:
AstroNova (🇺🇸ALOT - $74.31 million) - Largest Position: Key thesis revolves around return to normalized earnings in test/measurement segments, though MTEX acquisition ($20M) has proven disappointing
Business Valuation: Extensive discussion on valuation methodologies highlighting S&P 500's multiple of 22x earnings and historical correlation between high starting multiples and poor subsequent 10-year returns
Baron FinTech Fund: Specializes in financial technology investments across multiple segments. Fund rose 5.29% in Q4 2024, outperforming benchmark's 4.24%. Since inception (Dec 2019), the fund has compounded at 12.17% annually versus benchmark's 3.93%. Letter discusses:
Interactive Brokers (🇺🇸IBKR - $73.25 billion) - Existing Position: Shares appreciated 26.9% in quarter with 30% account growth and 33% growth in client assets
Robinhood Markets (🇺🇸HOOD - $33 billion) - New Position: Professionalized from "meme stock" origins with annualized net new asset growth of 29% and 95% customer retention rate
ServiceTitan (🇺🇸ST - $9 billion) - New Position: Business management software for field service industry with $685M revenue and strong fundamentals in resilient trades sector
Baron Growth Fund: Long-term small-cap growth investor with 17.5-year weighted average holding period. Fund gained 5.02% in 2024, underperforming Russell 2000 Growth Index (+15.15%). Since inception (1994), the fund has compounded at 12.61% annually versus benchmark's 7.92%. Letter discusses:
IDEXX Laboratories (🇺🇸IDXX - $34 billion) - Existing Position: Leader in veterinary diagnostics experiencing temporary headwinds from pandemic puppy boom slowdown
CoStar Group (🇺🇸CSGP - $29 billion) - Existing Position: Investing $1B annually in residential real estate marketplace (Homes.com) with promising early metrics
Vail Resorts (🇺🇸MTN - $7 billion) - Existing Position: Revenue increased 7% despite poor snow conditions, with healthy fundamentals and 5% dividend yield
Crossroads Capital: Value-oriented fund seeking catalyst-rich investments. Returned -3.5% in Q4 and +5.7% for 2024, slightly underperforming Russell 2000 Value (+7.3%). Since inception, annualized return of 14.8%. Letter discusses:
Vistry Group (🇬🇧VTY - £2.10 billion) - Existing Position: UK homebuilder transitioning to "partnerships" business model faced significant setbacks with £165M in cost overruns, but management believes issues are contained to legacy operations
Calumet Specialty Products (🇺🇸CLMT - $1.09 billion) - Existing Position: Received conditional approval for DOE loan to scale Montana facility from 30M to 300M gallons of SAF annually but management made poor capital allocation decisions immediately after
Nintendo (🇯🇵NTDOY - ¥14.15 trillion) - Existing Position: New Switch 2 console releasing in May 2025 with enhanced hardware enabling third-party AAA game support, company preparing 20M units with $450 price point
RiverPark Large Growth Fund: Focused on high-quality growth companies. Fund returned 5.11% in Q4 and 22.57% for 2024, underperforming Morningstar Large Growth Category (+33.36%). Letter discusses:
Amazon (🇺🇸AMZN - $2.06 trillion) - Top Contributor: Q3 operating income of $17.4B exceeded guidance of $11.5-15B with margin expansion across all segments
Shopify (🇺🇸SHOP - $134.65 billion) - Top Contributor: GMV growth of 24% exceeded estimates with strong free cash flow of $421M
Uber Technologies (🇺🇸UBER - $159.70 billion) - Top Detractor: Despite strong fundamentals with $40.9B in gross bookings (+16% YoY) and $2.1B free cash flow, stock pressured by autonomous vehicle concerns
RiverPark Long/Short Opportunity Fund: Balanced approach with selective shorts. Fund returned 4.32% in Q4 and 16.06% for 2024, outperforming Morningstar L/S Equity Category (+12.01%). Letter discusses:
Amazon (🇺🇸AMZN - $2.06 trillion) - Long Position: Q3 operating income of $17.4B exceeded guidance with margin expansion across all segments
Nvidia (🇺🇸NVDA - $2.88 trillion) - Long Position: Revenue reached $26B (+262% YoY) with EPS of $6.12 (+462% YoY)
Short positions focused on businesses losing market share, flawed business models, or facing cyclical headwinds
SaltLight Capital: Focused on disruptive technologies with emphasis on AI. Fund returned +20.35% in Q4 and +63.24% for 2024. Letter discusses:
AI Technological Epoch: In-depth analysis of AI advancement through Carlota Perez's framework showing we're in the "installation phase" of a multi-decade opportunity
AI Infrastructure: Belief that while valuation risks exist in the near term, AI represents "one of the most significant multi-decade investment opportunities of our lifetime"
AI Agents: Analysis of how "agency" capabilities created through reasoning models and test-time compute are creating enterprise-ready AI systems with significant productivity potential
Thanks to Letters & Reviews (lettersandreviews.blogspot.com) for compiling investment letters, which is where I sourced these letters.
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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.