Giles Capital Weekly - Week 17
Welcome to another edition of Giles Capital Weekly. As April 2025 comes to a close, let’s have a quick recap: Trump's tariff saga has created volatility across global markets, with the administration's recent "pause" on most tariffs, excluding China, where they remain at a punishing 145%. While major indices initially took a beating, they've shown remarkable resilience since the initial shock. Amid this macro disruption, China's economic resurgence is showing surprising strength with Q1 GDP growth hitting 5.4%, well ahead of expectations. The landscape feels increasingly divided: some businesses are thriving while others face existential pressure, creating precisely the kind of mispricing opportunities investors can capitalize on.
My top picks showcase two exceptional market leaders with extraordinary margins and lasting competitive advantages. From Favona Hathaway Substack, Kweichow Moutai dominates China's spirits market with remarkable 67.3% EBIT margins and 33.9% ROIC. Their centuries-old distillation process creates an inimitable product commanding unmatched brand power and pricing strength. With near-zero debt and consistent 18.4% revenue growth, Moutai outperforms virtually all global spirits competitors. From Rijnberk InvestInsights, L'Oréal offers a "sleep well at night" investment combining stability with growth. Their 40+ brand portfolio spans mass market to luxury across 150 countries, delivering 10% EPS growth CAGR while achieving record 74.2% gross margins. Their geographic diversification, AA-rated balance sheet, and consistent market share gains position them perfectly to capture the beauty industry's projected 6% annual growth.
Americas
Valuology on Nvidia (🇺🇸NVDA US - $2.66 trillion) Investment thesis on Nvidia trading at 24x earnings versus its 5-year average of 58x despite 91% annualized EPS growth over the last five years, with significant tailwinds from AI adoption. (7 min read)
Elliot’s Musings on Alphabet (🇺🇸GOOG US - $2 trillion) Core Google search business shows no signs of AI disruption with 10% revenue growth, while YouTube subscriptions now generate more revenue than ads, all while trading at a reasonable 16x 2026 EPS despite ongoing $75B capex investment.
Quality Stocks on UnitedHealth (🇺🇸UNH US - $381.06 billion) After a 20% stock price decline on April 17th due to lowered guidance, UnitedHealth now trades at PE of 17x with management still confident in long-term 13-15% EPS growth despite current headwinds from heightened Medicare Advantage care costs.
Best Anchor Stocks on Danaher (🇺🇸DHR US - $141.09 billion) Life sciences leader showing strong Q1 performance with bioprocessing business finally emerging from destocking cycle, demonstrating pricing power and resilience to tariffs while returning capital through strategic buybacks at 3.8x TTM operating income.
StockOpine's Newsletter on PayPal (🇺🇸PYPL US - $64.05 billion) Critical analysis of PayPal's executive compensation structure, arguing the company's performance targets are too soft with transaction margin growth targets set at just 2% for 100% payout and 5% for maximum bonus payout. (11 min read)
Compound & Fire on Kinsale Capital Group (🇺🇸KNSL US - $10.13 billion) Analysis of Kinsale's Q1 2025 results, highlighting its 22.5% operating ROE and disciplined underwriting approach despite slowing premium growth to 7.9%, with shares down 16% presenting a buying opportunity for this specialty insurer. (8 min read)
The Finance Corner on Crocs (🇺🇸CROX US - $5.5 billion) Analysis of this polarizing footwear brand with 31% gross margins, highlighting the company's personalization strategy and impressive 46% CAGR in operating profit over the last decade despite concerns about being a "fashion fad." (23 min read)
Value Degen’s Substack on Oil States International (🇺🇸OIS US - $216 million) Analysis of this oilfield services parts manufacturer trading at 0.31x sales with minimal debt ($45M net), generating $45M in operating cash flow in 2024 and potential for a 390% return by 2028 if offshore and onshore activity recovers. (9 min read)
Toni's Substack on Source Rock Royalties (🇨🇦SRR CA - CA$38.46 million) Analysis of this Canadian oil royalty company trading at just 4.4x EV/Royalty Revenue with a 9% dividend yield, offering exposure to Saskatchewan light oil and Clearwater heavy oil with 21% production growth in 2024. (9 min read)
Europe, Middle East & Africa
Rijnberk InvestInsights on L'Oréal (🇫🇷OR FR - €203.44 billion) Deep dive into this French beauty giant, highlighting its 15.3% CAGR over the last decade, 74.2% gross margins, and projected 5-7% annual sales growth with forward P/E of 28x versus its historical average of 35x. (27 min read)
LongTermValue Research on Rheinmetall (🇩🇪RHM DE - €65.5 billion) German defense leader poised to benefit from European rearmament trends with expected sales growth to €40 billion by 2030 (from €12.6B in 2025), offering potential for 120% upside at a 20x P/E multiple as NATO defense spending potentially increases to 3% of GDP.
Asymmetric Ventures on Antin Infrastructure Partners (🇫🇷AIP FR - €1.7 billion) Private equity firm currently trading at 10x earnings with substantial upside potential as the industry recovers from fundraising and deal-making headwinds, supported by a 7% dividend yield and significant carried interest potential.
Quality Investing with René Sellmann on Brockhaus Technologies (🇩🇪BKHT DE - €152.97 million) This German small-cap holding company trades at an implied 11.2x free cash flow multiple with two high-quality subsidiaries: Bikeleasing (92% gross margins in B2B bike leasing) and IHSE (mission-critical secure tech infrastructure with 70%+ gross margins).
Waterboy's Substack on Jarvis Securities (🇬🇧JIM GB - £8.65 million) Analysis of a potential arbitrage opportunity with Jarvis Securities, which has agreed to sell its brokerage businesses to Interactive Investor for £14.6 million (£11.93 million initial payment) despite a current market cap of only £8.65 million.
Sempiterno Investments on Addtech AB (🇸🇪ADD-B SE - SEK82.14 billion) Analysis of this Swedish serial acquirer written in Spanish, detailing how the company has delivered 26% CAGR since 2001 by purchasing small industrial companies at 6-9x EBITA, generating 15-20% returns on acquisitions with continued ROIC above 20%. (45 min read)
Asia-Pacific
Dungeon Investing on TV Asahi (🇯🇵9409 JP - ¥268 billion) Japanese broadcasting company with book value (¥446B) far exceeding market cap, substantial holdings in Toei Animation and Toei Company worth ¥206B, and a new Tokyo Dream Park events center that could boost revenue significantly by 2026.
Favona Hathaway Substack on Kweichow Moutai (🇨🇳600519 CN - CN¥1.95 trillion) China's prestigious baijiu producer trading at 20.9x forward earnings, a 25.8% discount to its 10-year average multiple, with extraordinary financial metrics including 91.9% gross margins, 67.3% EBIT margins, and 33.9% ROIC with almost no debt.
Cristian's Substack on Daido Signal (🇯🇵6743 JP - ¥9.15 billion) Japanese railway systems provider trading at extreme value metrics: 3.8x earnings, 34% of book value, and 48% of NCAV, with management repurchasing 11% of shares and taking steps to improve capital allocation and target 8% ROE.
Researching Global Stocks on Dong'e Ejiao (🇨🇳000423 CN - CN¥34.77 billion) The traditional Chinese medicine company is executing an innovative retail expansion with both "Jinshanghua" nourishing tea stores and a modern flagship store in Guangdong, creating new distribution channels for its core Ejiao products through experiential retail concepts. Note: This company report is written in Spanish.
Doomberg - Let Ed Run It Masterful analysis of Britain's dying steel industry, highlighting how the nation's self-defeating energy policy has crippled manufacturing while politicians like Ed Miliband push counterproductive "net zero" policies that benefit China. Essential reading on industrial policy failure. (8 min read)
Behind the Balance Sheet on How This Value Investor Beats the Market with Low Risk Profile of Summit Street Capital's Jennifer Wallace, who has achieved 7.8x returns since inception by focusing on companies with net cash positions, 30%+ ROE, and 10% free cash flow yields. (5 min read)
Silver Bulletin - Defending democracy is easier when you listen to voters Nate Silver argues that public opinion remains the most effective constraint on Trump's excesses, with tariffs proving deeply unpopular while immigration still polls as a Republican strength – essential reading for understanding political strategy in our polarized landscape. (17 min read)
Sinocism - April Politburo Study Session on AI is bad news for Nvidia Bill Bishop analyzes China's April Politburo meeting on artificial intelligence, highlighting Xi Jinping's emphasis on building "independent, controllable" AI hardware and software systems - a clear signal that China is accelerating efforts to reduce reliance on foreign technology like Nvidia chips amid deepening US-China tech bifurcation. (8 min read)
Panda Perspectives - China's Property Market 2025: Recovery, Risk & What's Next Comprehensive analysis of China's stabilizing property market with signs of a gradual recovery as major developers have reduced debt-to-equity ratios to approximately 150% (down from over 200% in 2022) and tier-1 cities are showing 0.5-1.0% year-over-year price growth. Their regional breakdown of market dynamics across city tiers provides essential context for understanding this critical sector. (25 min read)
Made in Japan - My discussion on Japan with Leandro from Best Anchor Stocks Illuminating conversation about Japan's market inefficiencies, corporate governance reforms, and unique investment opportunities, particularly in Japanese SaaS companies trading at 1-2x sales with 17.7% operating margins and growing at 18.6%. Perfect primer for those interested in Japan's transformation. (10 min read)
Al Proem - The Future of SaaS is a Hybrid of Agent & Platform + Vertical AI Innovation Thoughtful exploration of Microsoft CEO Satya Nadella's vision for AI in enterprise software, arguing that AI won't replace SaaS but transform it, with vertical AI applications creating unique opportunities in specific industries. Essential perspective on the AI transition in business software. (13 min read)
Carbon Rank - Zero US LNG Offtake Deals Signed So Far in 2025 Surprising analysis of the complete halt in long-term LNG sales agreements from US pre-FID projects despite supportive political signals. Offers contrarian insight into how market fundamentals are overriding policy when it comes to multi-billion dollar energy investments. (5 min read)
Kroker Equity Research - #91 Hims & Hers - A reality check Thorough analysis of whether this telehealth platform represents genuine disruption or just hype, balancing its spectacular 69% revenue growth against regulatory risks and a recent FDA ruling affecting its weight-loss business – exactly the nuanced take needed on high-growth healthcare stocks. (21 min read)
Max Dividends - The AI-Productivity Gap: Biggest factor limiting global GDP Growth Guest post by Guillermo Flor examining the growing disconnect between AI technology acceleration and human adaptation. His thesis that talent shortages, not capital constraints, are limiting AI implementation offers valuable insight for technology investors. (5 min read)
Quality Investing with René Sellmann - Thinking in Bets: What Poker and Horse Racing Teach Us About Markets Brilliant examination of probabilistic thinking and its application to investment decisions, drawing unexpected parallels between poker, horse betting, and stock selection. The discussion of variance and sample size has changed how I evaluate my own investment outcomes. (25 min read)
Kingswell - .220 Hitters & Aging Racehorses Rediscovered Warren Buffett speech from 1990 at Emory Business School with timeless wisdom on inversion, independent thinking, and using track records to evaluate managers. His baseball and racehorse analogies brilliantly illustrate the importance of historical performance in predicting future success. (6 min read)
Jimmy’s Journal - Net Income Doesn't Matter. Look for Free Cash Flow (FCF) Clear, compelling case for prioritizing free cash flow over net income when evaluating investments, using practical examples that demonstrate how accounting metrics can mislead while FCF reveals true economic reality. Perfect refresher on a fundamental investing principle. (10 min read)
Eagle Point Capital - Resilience Matt Franz offers a thoughtful examination of what makes businesses truly resilient, arguing that redundancy, optionality, and decentralized decision-making are crucial characteristics that often appear inefficient until crisis strikes – a timely reminder in our era of frequent "hundred-year floods." (7 min read)
Cockney Rebel - Weekend Rebel Review, 26th April, 2025 Insightful analysis of UK retail opportunities, including Hollywood Bowl's solid half-year trading update with strong director buying, attractive 12x PE, and 4.5% yield. Covers how lower shipping costs and currency strength might offset rising labor costs for UK consumer businesses. (8 min read)
Javen's Substack - Portfolio Summary - All My Current Holdings Detailed breakdown of a focused portfolio including Churchill China PLC, the British manufacturer of hospitality crockery trading at significant discount to historical averages with high-quality management and potential to gain market share as competitors face greater tariff impacts. (7 min read)
Broyhill Asset Management: Focused on value opportunities outside technology. Portfolio demonstrated strong defensive positioning during volatility surrounding AI-related news, gaining 2% when the S&P 500 fell 6% and the Magnificent Seven stocks dropped 13%. YTD portfolio has protected capital despite broader market losses. Letter discusses:
Healthcare and Consumer Staples (Various) - Existing Positions: Approximately half the portfolio is allocated to these sectors, which management views as undervalued compared to tech stocks
Special Situations (Various) - Existing Positions: Remainder of portfolio invested in unique opportunities outside popular tech narratives
Doubleline Capital: Fixed income specialist emphasizing yield curve steepening and inflation expectations. Notes the U.S. Treasury curve steepened significantly in March with 2-year yields dropping 11 bps while 30-year yields rose 8 bps. Management highlights that global equities, particularly European markets, outperformed U.S. stocks with the STOXX Europe 600 up 10.68% for Q1 versus S&P 500 down 4.27%. Letter discusses:
Agency MBS (Various) - Existing Positions: Returned 3.06% in Q1, outperforming Treasury, Agency CMBS and Credit indices
Euro Sovereign Debt (Various) - Investment Theme: Management notes European fiscal policy pivot with increased military spending, particularly from Germany
GMO (Jeremy Grantham Viewpoints): Long-term focused investment letter highlighting significant concerns about toxic chemicals' impact on fertility, health, and environment. Management warns that ongoing decline in sperm count and testosterone (over 2% per annum) could lead to widespread infertility within 20-30 years. Letter discusses:
Chemical Companies (Various) - Avoid: Companies making toxic substances facing significant lawsuit risks, citing Bayer's 75% stock decline after Monsanto acquisition
High Quality Stocks (Various) - Investment Theme: Recommendation to emphasize companies with high margins and low financial leverage to withstand increasing economic shocks
Oaktree Capital Management: Credit-focused firm highlighting opportunities across various lending segments. Management sees distressed opportunities emerging amid $3 trillion of sub-investment grade public credit and $1.5 trillion of private debt outstanding. Letter discusses:
Mezzanine Finance (Various) - Investment Theme: Rising demand for junior capital with $2.5 trillion in private equity dry powder creating an estimated $0.89 trillion financing gap
Life Sciences Lending (Various) - Investment Theme: Specialized lending opportunity as biotech firms experiencing funding paradox with 69% of new drugs in 2022 launched by emerging biopharmas despite capital constraints
St. James Investment Company: Value-oriented firm skeptical of speculative market narratives. Management draws parallels between current AI enthusiasm and past market manias, noting retailer investors pumped nearly $70 billion into U.S. stocks YTD while institutional investors reduced exposure. Letter discusses:
Midstream Energy Companies (Various) - Existing Positions: Highlighted for reliable cash flows through "take-or-pay" contracts, often with inflation-linked escalators
Nvidia (🇺🇸NVDA - $2.71 trillion) - Avoid: Comparing its 5.6% S&P 500 weighting against the entire energy sector's 3.7% weighting as evidence of market imbalance
Thanks to Buy Side Digest (buysidedigest.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.