Giles Capital Weekly - Week 19
Welcome to another edition of Giles Capital Weekly. In a dramatic turn that sent global markets soaring, the US and China agreed today to significant temporary tariff cuts, providing a 90-day cooling-off period for negotiations. US levies on Chinese imports will drop from 145% to 30% by May 14, while China's 125% duties on US goods will fall to just 10%. Treasury Secretary Scott Bessent called it "substantial progress" after weekend talks in Geneva, with both sides agreeing they don't want economic decoupling. Chinese stocks surged 3% in Hong Kong, while global markets celebrated what many see as the first concrete step toward resolving the trade standoff.
My top picks this week combine defensive characteristics with structural advantages positioned to benefit from improving trade relations. Steven Madden (SHOO US), featured by Waterboy's Substack, leads my selection - representing exceptional value at just 8.9x earnings with industry-leading operational efficiency, currently trading at a significant discount due to tariff concerns that may soon dissipate. Wavelock (7940 JP), highlighted by NetNetHunter Japan, rounds out my picks of the week - a Japanese automotive technology company trading at just 8x forward P/E with 5.3% dividend yield, perfectly positioned to benefit from any trade stabilization given its exposure to global auto markets. I also enjoyed Dungeon Investing's analysis of the Polish gaming specialist PlayWay and its unique low-risk development model generating strong cash flows.
Before diving into this week's newsletter…
Americas
Quality Stocks on Amazon (🇺🇸AMZN US - US$1.65 trillion)
E-commerce and cloud computing giant generating $41.2B in free cash flow with 13% revenue growth, positioning it well with diverse revenue streams across retail, AWS, advertising, and new AI initiatives.StockOpine on AMD (🇺🇸AMD US - US$217 billion)
Semiconductor leader reporting 11% year-over-year growth despite China restrictions, with 51% gross margins and strengthening data center segment driven by MI300 accelerator adoption and AI-related demand.Rijnberk InvestInsights on Uber (🇺🇸UBER US - US$176 billion)
Mobility and delivery platform delivering 18% YoY gross bookings growth with 14% user growth to 170 million monthly active users, demonstrating impressive unit economics with expanding EBITDA margins of 16.5% and $2.3B quarterly free cash flow, still seen as undervalued with 17% potential CAGR.Capitalist Letters on Uber (🇺🇸UBER US - US$176 billion)
A complementary analysis reinforcing bullish sentiment through network effects theory, arguing Uber's distribution moat will strengthen rather than weaken with autonomous vehicles—positioning the company as the "Amazon of mobility" with a calculated fair value of $142 versus current levels.Waterboy's Substack on Steven Madden (🇺🇸SHOO US - US$1.66 billion)
Footwear company trading at just 8.9x earnings with a 3.5% dividend yield despite consistent high returns on capital (15%+), industry-leading inventory turns of 5.5x, and a recently acquired UK handbag company at an attractive 8x earnings multiple.Coughlin Capital on Burford Capital (🇺🇸BUR US - US$3.2 billion)
Leading litigation finance firm managing a $7.2 billion portfolio with completed cases averaging 87% return on invested capital and 26% IRR, including a potential $1.5 billion recovery from a single mega-case against Argentina currently under appeal.
Europe, Middle East & Africa
René Sellmann on Monday.com (🇮🇱MNDY US - US$12.8 billion)
SaaS platform achieving exceptional 36% revenue growth with 82% gross margins, demonstrating powerful network effects through its modular approach to workflow management and benefiting from increasing enterprise adoption.Compound & Fire on LVMH (🇫🇷MC FP - €360 billion)
Luxury conglomerate with exceptional brand portfolio delivering 12% ROIC and 20% operating margins, benefiting from pricing power across diverse categories and strong positioning in emerging market luxury consumption.Saadiyat Capital on Unilever (🇬🇧UL LN - £101 billion)
Consumer goods giant showing improved execution under new CEO Fernando Fernandez with strategic focus on Beauty and Wellbeing, while navigating challenging conditions in Indonesia and successfully transitioning to more premium product offerings in North America.Assymetric Ventures on CVS Group (🇬🇧CVSG LN - £1.4 billion)
UK's leading veterinary services provider trading at 15.6x P/E and 8.2x EV/EBITDA with a clear catalyst from resolved regulatory concerns, positioning it for continued consolidation in the fragmented vet market with recession-resistant revenue streams.Dungeon Investing on PlayWay (🇵🇱PLW PW - PLN 1.85 billion)
Polish video game developer with zero debt and 7% dividend yield, operating a unique low-risk development model with multiple studios and a strong pipeline of 87 upcoming games at various production stages.Iggy on Investing on Anexo (🇬🇧ANX LN - £115 million)
UK legal services firm trading at just 9.4x P/E with a potential sale catalyst lifting shares 25%, specializing in credit hire and legal claims with substantial embedded value in its legal case portfolio.Value Zoomer on Volvere (🇬🇧VLE LN - £39 million)
UK-based acquisition vehicle trading below NCAV with £4.2M net cash position, led by experienced management with a proven track record of acquiring and turning around distressed businesses at attractive valuations.
Asia-Pacific
NetNetHunter Japan on Wavelock (🇯🇵7940 JP - ¥11.3 billion)
Japanese automotive technology company trading at just 8x forward P/E with 5.3% dividend yield, operating a profitable decorative film business for the automobile industry with operating profit growth of 191% in Advanced Technology segment despite tariff concerns.
Behind the Balance Sheet - 3 ½ days in Omaha
An insightful first-hand account of the 2025 Berkshire Hathaway annual meeting, highlighting Buffett's succession plans and his overlooked comment that balance sheets reveal more than income statements in company analysis. (22 min read)Deep Value Returns - Lessons From Omaha: What Berkshire Still Teaches Me In 2025
A thoughtful reflection on enduring investment lessons from Berkshire's approach, examining how Buffett's focus on business quality and long-term thinking remains relevant in today's rapidly evolving market. (18 min read)Flyover Stocks - Omaha Notes and The Right Amount of Research
A practical guide to balancing thoroughness with efficiency in investment research, drawing on insights from Berkshire's meeting about focusing on what matters most in company analysis. (15 min read)KonichiValue Japan - Mongolia: The Land of Dunes, Diplomacy, and a Fragile Democracy
A fascinating exploration of Mongolia's emerging economy and unique geopolitical position, highlighting investment opportunities in resource development and infrastructure as the country balances relationships with China, Russia, and democratic "third neighbors" like Japan and South Korea. (25 min read)Richard Toad - China in 2025: What It's Like on the Ground Right Now
An insightful on-the-ground report from a recent three-week visit to China, covering everything from real estate struggles and EV dominance to healthcare privatization and consumer trends, offering valuable context for investors interested in Chinese market dynamics and demographic shifts. (20 min read)Raging Bull Investments - The Investment Case for Movie Theatres - Part I
A thorough industry analysis of movie theatres as contrarian investments, examining structural changes, evolving business models, and potential value opportunities in a sector many investors have written off. (23 min read)Generative Value - The Siren Song of Advertising
A compelling analysis of AI companies' monetization strategies through advertising, examining the powerful incentives driving companies from Google to OpenAI toward ad-based models despite initial resistance, with insights into affiliate strategies and e-commerce integration. (20 min read)Excelsior Capital - Rethinking Corporate Lifecycle
A sophisticated framework challenging traditional corporate lifecycle models, offering investors a more nuanced approach to valuing companies at different stages of maturity with practical implications for portfolio construction. (17 min read)Compound & Fire - Timeless Wisdom from François Rochon's Annual Letters
Distills the investment philosophy of renowned value investor François Rochon into actionable principles, highlighting his focus on quality businesses, competitive advantages, and long-term compounding. (14 min read)Quality Stocks - Do Morgan Stanley's Preferred Business Model Stocks Beat the Market?
A rigorous examination of Morgan Stanley's framework for identifying superior business models, testing its real-world performance against market benchmarks and identifying key attributes that drive outperformance. (15 min read)Kroker Equity Research - Investment Compass - Ep. 4 - The 2008 Financial Crisis
A retrospective analysis of the 2008 financial crisis offering valuable context for today's investors, examining the warning signs that preceded the collapse and drawing parallels to current market conditions. (21 min read)
Q1 2025 witnessed significant market volatility driven by Trump administration tariff policies, inflation concerns, and the disruptive DeepSeek AI announcement. Fund managers across styles and regions predominantly positioned defensively with elevated cash levels, though views diverged on technology valuations and regional opportunities.
RF Capital Management: Outperformed major indices with +2.78% FY2024 return versus S&P 500's +1.4% YTD. Maintains concentrated portfolio with top 5 positions accounting for 54% of assets and 14% cash position ready for deployment.
Sprouts Farmers Market (🇺🇸SFM - $4 billion) - Existing Position: Q1 net sales +18.7%, comp sales +11.7%, EPS +61.6% with 35+ new stores planned for 2025
Zengame Technology (ðŸ‡ðŸ‡°2660.HK - $1 billion) - Existing Position: Trading at 2x EV/EBIT with 29-48% pretax ROIC and attractive 6.6% dividend yield
Lowell Capital Value Partners: Reported -2.8% for February versus -1.3% for S&P 500 with defensive 38% cash position. Management sees European equities at 30% discount to US counterparts as particularly attractive.
LSI Industries (🇺🇸LYTS - $1 billion) - Existing Position: LED lighting specialist capturing growth in industrial automation and digital transformation
Leon's Furniture (🇨🇦LNF.TO - $2 billion) - Existing Position: Trading at <5x adjusted EBITDA with double-digit FCF yield and substantial real estate value
Polen U.S. Small Company Growth: Delivered -10.53% gross/-10.82% net, slightly outperforming Russell 2000 Growth Index (-11.12%). Management maintains disciplined approach to quality growth amid tariff uncertainty.
Dutch Bros (🇺🇸BROS - $5 billion) - Existing Position: Accelerating comparable sales through menu innovation despite broader consumer weakness
Globant (🇱🇺GLOB - $8 billion) - Existing Position: IT services facing pressure from weaker enterprise tech spending environment
PGIM Jennison Global Opportunities Fund: Returned -11.07% versus -1.32% for MSCI ACWI Index as technology-heavy portfolio hit by DeepSeek announcement. Rotating toward non-tradable goods with pricing power.
Spotify (🇸🇪SPOT - $79 billion) - Existing Position: Music streaming platform showing robust subscriber growth and margin improvement
Reddit (🇺🇸RDDT - $8 billion) - Existing Position: Recent IPO experiencing volatility despite strong fundamentals and growth prospects
abrdn Emerging Markets Fund: Returned 0.26%, lagging benchmark by 267 basis points due to negative selection in China and Taiwan. Remains positive on domestic Chinese growth despite tariff concerns.
Alibaba (🇨🇳BABA - $197 billion) - Existing Position: Rallied on AI optimism given position as China's largest cloud business provider
Taiwan Semiconductor (🇹🇼TSM - $564 billion) - Existing Position: Pressured by DeepSeek's AI efficiency promises reducing semiconductor demand expectations
abrdn International Small Cap Fund: Underperformed benchmark due to sector allocation and stock selection issues. Management favors quality companies with financial strength and supply chain flexibility.
CTS Eventim (🇩🇪EVD.DE - $7 billion) - Existing Position: European ticketing leader demonstrating business resilience with strong quarterly results
FPT (🇻🇳FPT.VN - $4 billion) - Existing Position: Vietnamese IT services business impacted by higher-than-expected US tariff proposals
Thanks to Buy Side Digest (buysidedigest.com) for compiling the investment letters featured here..
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Disclaimer: This newsletter is for informational purposes only and not investment advice. The intro reflects my views, while investment summaries are my interpretations of original authors' analyses. Information may not be fully verified and is subject to correction. Original authors' complete views may differ. Always do your own research before making investing decisions.