Giles Capital Weekly - Week 16
Welcome to another edition of Giles Capital Weekly. The markets staged a remarkable recovery this week with Wall Street notching a three-day winning streak as global trade tensions showed signs of easing. China's leadership announced plans to support businesses facing "increased external shocks" while reportedly considering suspending some of their 125% retaliatory tariffs. Meanwhile, the U.S. is advancing targeted trade negotiations with India and South Korea as the Trump administration appears to be softening its tariff rhetoric. The IMF has downgraded Asia's growth forecast to 3.9% for 2025, citing trade uncertainty as a major headwind. Beyond these macro developments, our newsletter features several outstanding company analyses, including a fascinating deep dive on commercial kitchen equipment dominance and valuable insights on dividend investing strategies for the current environment.
My top picks for this week showcase two exceptional companies with compelling valuation opportunities. From Undervalued and Undercovered, Catana Group (CATG) stands out in the global catamaran market with 20% annual revenue growth over the past decade through its innovative BALI brand. Trading at less than 3.5x earnings with robust 32.5% ROIC and a 4.6% dividend yield, Catana offers remarkable value as the yacht market recovers. From Compound & Fire, Topicus Inc. (TOI.V) emerges as a European software compounder implementing Constellation Software's proven playbook with remarkable precision. Their capital-light model and vertical market software strategy creates significant switching costs, while their clear runway for 15% annual FCF growth and value-accretive acquisition strategy positions them for long-term compounding.
Americas
The Finance Corner on Kraft Heinz (🇺🇸KHC US - $34.4 billion) Analysis of this Warren Buffett-backed company trading at 9x P/E with $3 billion annual free cash flow and 2% revenue growth potential, having reduced debt by $10 billion since 2016.
Stock Picker's Corner on CBOE Global Markets (🇺🇸CBOE US - $22.82 billion) Exchange operator benefiting from increased market volatility with record options trading volumes (10.2 billion contracts in 2024). Trading as "the most defensive stock in the S&P 500" with Bank of America raising price target to $260, representing 20% upside from current levels.
Max Dividends on Genuine Parts Co (🇺🇸GPC US - $19.8 billion) Highlights the auto parts giant's recession-resistant business model, 3.48% current yield, and impressive Financial Score of 98/99.
Compound & Fire on Topicus Inc. (🇨🇦TOI CA - CA$13 billion) This Canadian-based serial acquirer of European vertical market software businesses boasts a 32.5% ROIC and capital-light model with projected 15% FCF growth, potentially delivering a 10.2% annual return over 10 years.
Elliot's Musings on Braze Inc (🇺🇸BRZE US - $3.1 billion) Highlights its real-time streaming architecture as a key competitive advantage, while trading at a reasonable 4x forward sales despite 16% projected growth.
Wolf of Oakville on Well Health Technologies (🇨🇦WELL CA - CA$988 million) Health technology company with aggressive acquisition strategy growing revenue to $919.7M (18.5% YoY) but suffering from revenue recognition issues and weak profitability. Currently trading at 0.7x sales with $1.4B revenue guidance for 2025, representing potential value despite complex business structure amid Healwell AI spinoff plans.
Value Degen on Heartland Express (🇺🇸HTLD US - $469 million) Trucking firm emerging from a three-year freight recession with CEO noting market conditions are "the best that trucking has felt in three years." Trading at just 0.63x sales versus historical 2.0x+ multiple, offering potential 4x return with profitability returning in Q2 2025.
Value Degen on PubMatic (🇺🇸PUBM US - $402 million) Ad-tech firm with 9% revenue growth and 32% EBITDA margins, achieving the "Rule of 40" benchmark while trading at just 1.38x sales. With an 18.25% free cash flow yield and management guiding for 15% revenue growth in 2025, the stock trades significantly below its historical 8.5x sales multiple.
Raging Bull Investments on Cipher Pharmaceuticals, Reading International, Organigram, and Enzo Biochem (🇨🇦CPH CA - CA$302.50 million | 🇺🇸RDI US - $43 million | 🇨🇦OGI CA - CA$195.32 million | 🇺🇸ENZ US - $17 million) Analysis of four deeply undervalued companies: Cipher's Epuris growing 16% YoY with 48% market share and strong cash flow to pay off acquisition debt, Reading International deleveraging through property sales with improving theater business, Organigram generating $400M revenue despite depressed cannabis sector, and Enzo trading at just $0.32/share with $1.75/share in estimated asset value.
Saadiyat Capital on Care Cloud (🇺🇸CCLD US - $169 million) Healthcare technology company providing Revenue Cycle Management services trading at a 36% free cash flow yield. Improving capital allocation with recent conversion of preferred shares and potential for further restructuring, while positioned to benefit from structural growth in healthcare IT spending.
Value Degen on Total Site Solutions (🇺🇸TSSI US - $164 million) Company procuring and integrating modular AI data center clusters, benefiting from explosive growth in data center construction spending (from $10B in 2021 to $120B in 2024). Trading at just 1.1x sales with 50%+ EBITDA growth projected for 2025.
Wolf of Oakville on Biorem Inc. (🇨🇦BRM CA - CA$31.63 million) Analysis of this environmental technology company with 49% year-over-year revenue growth, 40% profit growth, and trading at just 9x P/E despite concerning Q4 margin compression to 17%.
Value Don't Lie on Amrize (🇺🇸AMRZ US - Private) Upcoming spin-off of Holcim's North American cement, aggregates, and building supplies business with impressive financials (27% EBITDA margins, >50% FCF conversion). Growing at 5-8% revenue CAGR and 8-11% EBITDA CAGR through 2028, positioned to benefit from infrastructure spending and potential rerating from cement multiples (7-7.5x EBITDA) to aggregates multiples (13x EBITDA).
Europe, Middle East & Africa
Best Anchor Stocks on ASML (🇳🇱ASML NA - €229.40 billion) ASML's Q1 orders came in below expectations at €3.9 billion versus €4.5 billion forecasted, but management reiterated both 2025 and 2030 guidance with 100% of EUV 2025 revenue already locked in backlog and DUV orders 90% secured.
Quality Investing with René Sellmann on Novo Nordisk (🇩🇰NOVOB DK - DKK1.43 trillion) Deep dive into this pharmaceutical giant following its 58% stock crash, now trading at 14x forward earnings with robust GLP-1 market position and 16-24% projected annual sales growth.
InvestingWithWes Newsletter on FDJ United (🇫🇷FDJU FR - €6 billion) Highlights its monopoly position in French lottery and sports betting, strong Financial Score of 98/99, and recent acquisition of Kindred Group to expand international reach.
Kroker Equity Research on Kri-Kri Milk Industry S.A. (🇬🇷KRI GR - €499.66 million) Greek dairy company delivered strong 18.5% revenue growth to €256.4 million in FY 2024, with yogurt exports surging 32.5% and management targeting €300 million in sales for 2025 (~17% growth) with an EBIT margin of 14-15%.
Undervalued and Undercovered on Catana Group (🇫🇷CATG FR - €97.68 million) European catamaran manufacturer growing revenue from €34M to €229M over past decade (>20% CAGR) while maintaining strong profitability. Trading at less than 3.5x earnings and under 2.5x EBITDA despite 20%+ ROIC and expanding into higher-margin models and new motorboat segment.
Emerging Value on Boreo (🇫🇮BOREO FI - €40.21 million) Finnish serial acquirer has fallen from 2020-2022 hype valuation due to cyclical exposure, with sales down 17% and EBIT down 28%, while high debt burden (5x leverage including hybrid bonds) and thin profit margins make the 15 euro share price unattractive despite the 10x P/E.
Asia-Pacific
Kairos Research on Double Down Interactive (🇰🇷DDI US - $490 million) South Korean social casino and gaming developer with $380 million net cash position (78% of market cap) trades at just 4x P/E and 3x FCF, delivering 18.5% revenue growth despite declining monthly active users as it monetizes gamers more effectively.
Hidden Market Gems on Hoshizaki Corporation (🇯🇵6465 JP - ¥1.6 trillion) Reveals Hoshizaki's dominant global position in ice machines with 20% market share, robust 19.3% YoY revenue growth, and strong margins (37.4% gross, 11.6% operating).
Altay Capital on Tigers Polymers (🇯🇵4231 JP - ¥13.2 billion) Reveals an extremely cheap valuation at 0.3x price-to-tangible-book value and 7.5x P/E, with 71% of profits coming from US manufacturing operations that could benefit from tariff environment.
Investment Talk - Return is the ONLY Measure of Success A thoughtful reflection on how we measure investment success, using Arny Trezzi's 403% return tweet as a starting point. What makes this piece exceptional is its nuanced take on time horizons and how success metrics vary throughout an investor's journey. (10 min read)
Kingswell - The Berkshire Beat: April 18, 2025 A comprehensive update on Berkshire Hathaway and its major holdings, focusing on Apple's continued dominance in the smartphone market with 19% global share in Q1 2025 and #1 position among American teenagers, alongside insights into Tim Cook's "hell bent" focus on creating AR glasses and potential foldable iPhone development. (6 min read)
Stock Picker's Corner - American Trade Wars: Touring U.S. Trade Spats From Tea Party to Trump Fascinating historical tour through America's major trade conflicts from the Boston Tea Party to the present day, offering valuable context for understanding the potential impacts of current tariff escalations. (5 min read)
Rock & Turner - 8 US Companies caught in the Cross-Fire Analysis of specific American companies with significant Chinese exposure now threatened by escalating trade tensions. Detailed breakdown of revenue dependencies and production reliance makes the abstract trade war suddenly tangible through corporate examples. (8 min read)
Citrini Research - A Tale of Two Tariffs A fascinating deep dive into the historical impact of U.S. tariffs, examining how the 1922 Fordney-McCumber and 1930 Smoot-Hawley tariffs affected the economy differently and what that might tell us about Trump's recent moves. The piece brilliantly frames today's trade wars through a historical lens. (44 min read)
Noahpinion - What would a real anti-China trade strategy look like? Sharp critique of Trump's haphazard tariff policy, offering a thoughtful alternative approach that would better contain Chinese power through strategic partnerships and targeted industrial policy. Essential reading for understanding the economic consequences of current trade tensions. (10 min read)
Elliot's Musings - TSMC Earnings Recap: Strong Fundamentals, One Big Risk A concise analysis of TSMC's solid Q1 results with revenue beating expectations despite typical smartphone seasonality, offset by strong AI chip demand, with excellent insights on both financial metrics and geopolitical risks facing the semiconductor giant. (4 min read)
OPTO - Ready to Ride the Robotaxi Theme? A comprehensive look at the emerging robotaxi sector, highlighting six key players including Tesla, Uber, Baidu, Pony AI, Luminar, and Mobileye, with analysis of their strategies, partnerships, and market potential in a space that could reduce ride costs to $0.25 per mile by 2035. (19 min read)
Finbite Insights - Banks, Semiconductors, and Netflix Beat Expectations — CEOs Unfazed by Tariff Risks A sharp breakdown of Q1 earnings surprises across sectors, showing banks riding high on trading boom (JPM equities trading up 48%), chip makers still benefiting from AI demand despite export restrictions, and streaming services continuing to grow despite macro concerns. (6 min read)
The Outsiders Corner - The Outsiders - Owner Operators Insightful exploration of owner-operated businesses with analysis of several companies including Norbit, a Norwegian technology producer delivering impressive 27-29% ROCE while reinvesting over 100% of cash flow between capex, acquisitions, and working capital. (5 min read)
A Letter a Day - Letter #278: Stephanie Vardheim (2024) A fascinating transcript of Stephanie Vardheim's presentation detailing her work as a portfolio manager at Norway's $2 trillion sovereign wealth fund. Her insights into real-time data usage and investment simulation provide a rare glimpse into the decision-making processes of one of the world's largest institutional investors. (12 min read)
Favona Hathaway - Chris Hohn: A Case Study An insightful analysis of billionaire investor Chris Hohn's TCI Fund Management portfolio, examining his investments in quality businesses like Moody's, Visa, and the Canadian railways, purchased at fair multiples (averaging 25-30x P/E) with an emphasis on moats, high returns on capital, and pricing power. (20 min read)
Rock & Turner - Alternative Investing - Part 1 of 3 Comprehensive examination of alternative asset managers and their growing importance in the financial landscape. Explains how firms like Blackstone, Apollo, and Brookfield are transforming markets through their access to permanent capital and innovative investment strategies. (18 min read)
This analysis examines three distinct investment letters from Alpine Investment Management, LVS Advisory, and Protean Funds, covering Q1/Q2 2025. Each offers unique perspectives on the post-Trump tariff environment, active vs. passive investment strategies, and risk management approaches during heightened market volatility.
Alpinum Investment Management: Quarterly letter highlighting global market reactions to Trump administration's aggressive tariff policies. Notes significant S&P 500 decline (-2.3%) amid European outperformance (+11% Euro Stoxx). Management maintains positive bias on risky assets despite volatility, favoring credit investments offering 7-9% yields. Letter discusses:
US Economy (🇺🇸) - Existing View: Exhibiting resilience with 2.8% GDP growth for 2024 despite tariff challenges
European Markets (🇪🇺) - Upgraded View: Outperforming with STOXX Europe 600 advancing 8.3% YTD, trading at forward P/E of 14x versus 22x for US stocks
China (🇨🇳) - Monitored Position: GDP surpassed 130 trillion yuan ($17.82 trillion) growing at targeted 5% despite manufacturing contraction
LVS Advisory: Event-driven and growth portfolio focused on risk management through strategic selling decisions. YTD 2025 returns of 0.8% for Event-Driven and 0.3% for Growth portfolios, compared to S&P 500 decline of 4.3%. Since inception returns of 57.8% and 77.1% respectively. Letter discusses:
Howard Hughes (🇺🇸HHH - $3.31 billion) - Sold Position: Real estate holding company exited at $76.80 after Bill Ackman's concerning management takeover plans
Icon Plc (🇺🇸ICLR - $11.85 billion) - Sold Position: Contract research organization divested at $334.53 after discovering M&A integration issues; stock subsequently declined 40%
Medpace (🇺🇸MEDP - $8.96 billion) - Existing Position: Doubled down on investment after determining small biotech-focused CRO model superior to Icon's approach
Protean Funds: Highlights performance across three funds with detailed market assessment of geopolitical risks. Small Cap fund declined 6.1% in March but outperformed benchmark by 0.1%, maintaining 37.1% gain since June 2023 launch. Select hedge fund returned -1.2% in March with 27.6% return since inception. Letter discusses:
Arjo (🇸🇪ARJO-B - SEK8.40 billion) - New Position: Swedish medtech company with compelling risk/reward after SEM scanner product cancellation and CEO replacement
Kojamo (🇫🇮KOJAMO - €2.36 billion) - New Position: Finnish landlord trading at all-time lows despite "safe haven" status; vacancy rates expected to improve in 2025
Geopolitics (Global) - Strategic View: Warns of potential stagflation indicators including USD weakness during risk-off periods and inflationary tariff impacts
Thanks to Buy Side Digest (buysidedigest.com) for compiling investment letters, which is where I sourced these letters.
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.