Giles Capital Weekly - Week 2
Welcome to another edition of Giles Capital Weekly. The investment landscape is offering fascinating contrasts as we begin 2025. Terry Smith's annual Fundsmith letter provides valuable perspective on distinguishing temporary setbacks from structural challenges, while regional opportunities are emerging across multiple sectors - from Evolution AB's dominance in online gaming to compelling valuations in European markets. Meta's content moderation changes signal potential shifts in big tech governance, while value opportunities surface in unexpected places, particularly among high-dividend Hong Kong stocks and Taiwan's evolving economy. Most notably, the financial sector is drawing renewed attention as regional banks show early signs of benefiting from anticipated Fed rate cuts, though quality stocks remain expensive globally.
My top picks for this week highlight two transformative industry leaders gaining momentum in their respective markets. From Daan Rijnberk's RijnberkInvestInsights, Thermo Fisher Scientific (TMO) stands as a dominant force in life sciences, featuring an impressive 80%+ recurring revenue model and consistent double-digit growth, while their expansion into emerging markets signals sustained growth ahead. From Jimmy's Journal and René Sellmann's Quality Investing, Uber (UBER) emerges as a compelling transformation story, evolving into a cash-generating powerhouse with robust unit economics and a path to 25% EBITDA margins. Their massive network of 31 million daily trips and expanding advertising business demonstrate their potential in the evolving mobility landscape.
Americas
Jimmy's Journal on Uber (🇺🇸UBER US - US$140 billion) Thoughtful analysis of Uber trading at 18x 2024 P/E with expected EBITDA margin expansion to 24% and multiple growth catalysts including advertising revenue.
René Sellmann on Uber (🇺🇸UBER US - $140 billion) Complementary analysis examining competitive positioning and AV transition risks, with a base case DCF valuation of $99/share and $4B in annual FCF showing 25% projected growth.
Waterboy Investing on Elevance Health (🇺🇸ELV US - US$89 billion) Dominant health insurer trading at 11.5x trailing earnings with strong market positions and consistent capital return program, including 53.6% share count reduction since 2008.
Kairos Research on UL Solutions (🇺🇸ULS US - US$108 billion) Recently IPO'd testing and certification leader with 6.02x EV/EBITDA, targeting EBITDA margin expansion to 24% and benefiting from increased safety testing demand.
The Finance Corner on Abercrombie & Fitch (🇺🇸ANF US - US$13.2B) The company has successfully transformed from a controversial retailer to a thriving business under CEO Fran Horowitz, with operating margins expanding to 14% and revenue growing impressively. Currently trading at a P/E of around 20x with strong momentum in its core business.
Value Don't Lie on Liberty Global and Sunrise Communications (🇺🇸LBTYA US - $4.7B | 🇺🇸SNRE US - $4.1B) Post-spinoff analysis of both RemainCo trading at significant NAV discount (portfolio worth $40.55/share vs $13 price) and SpinCo at 8.4x EBITDA with planned 8.6% yield.
Wolf's Substack on Aritzia Inc (🇨🇦ATZ CN - $5.9 billion) Canadian fashion retailer demonstrating strong execution with Q3 gross margins improving 430 basis points to 45.8% and impressive YTD EBITDA performance. E-commerce segment showing double-digit growth despite broader retail challenges.
WinterGems on HIFS (🇺🇸HIFS US - US$486M) Regional bank positioned to benefit from improving Net Interest Margin following three Fed rate cuts. Currently lending at 6.9% and attracting deposits at 4.2%, with projected 20% sequential improvement in interest income for Q4.
Value Degen on Manpower, GEE Group, and ZipRecruiter (🇺🇸MAN US - $3.5B | 🇺🇸JOB US - $25M | 🇺🇸ZIP US - $6.8B) Analysis of staffing companies positioned to benefit from improving small business sentiment post-Trump victory. Manpower trading at 0.14x P/S with CFO buying, GEE Group showing strong insider purchases, and ZipRecruiter projected to reach $47 by 2027 from current $6.81.
Value Degen on LSB Industries (🇺🇸LXU US - US$548 million) Nitrogen fertilizer manufacturer trading at attractive valuations with pathway to $200 million EBITDA and multiple potential catalysts including industrial pivot and share buybacks.
Undervalued and Undercovered on Alico (🇺🇸ALCO US - US$85 million) Strategic pivot from citrus operations to real estate development could unlock significant value, with land holdings valued between $650-750 million.
Wolf's Substack on Covalon Technologies (🇨🇦COV.V - US$85 million) Strong balance sheet with 7.4x current ratio and 30% revenue growth, trading at 18x annualized earnings from last three quarters.
Europe, Middle East & Africa
From $100K to $1M on Evolution AB (🇸🇪EVO SS - US$22 billion) Leading B2B provider of live casino solutions with 66% EBITDA margin and strong market position in growing online gaming sector.
Quality Stocks on Evolution AB (🇸🇪EVO SS - $15.4 billion) Building on the growth story, highlighting recent 30% stock decline as opportunity given 14.7% revenue growth and strong advertising segment performance.
Saadiyat Capital on NEXT PLC (🇬🇧NXT LN - $12.5 billion) UK retail giant successfully implementing innovative strategies to offset National Living Wage increases through operational efficiencies and pricing adjustments, demonstrating strong management execution in challenging retail environment.
Kroker Equity Research on Jumbo SA (🇬🇷BELA GA - US$4.7 billion) Greek retail leader trading at 23x forward PE with strong market position, high margins, and potential for significant expansion in Romania.
Rock & Turner on Vistry Group (🇬🇧VTY LN - US$2.4 billion) UK homebuilder trading at significant discount to NAV with strategic shift to partnership model, potential for 23% upside based on DCF analysis.
The Superinvestors of Augustusville on European Portfolio Holdings (🇪🇺Various EU - US$100-800 million) Highlights three compelling European value plays:
Thermador: French distribution compounder achieving 20%+ ROIC with 11% operating margins
Supreme PLC: UK consumer goods distributor trading at 9x forward earnings with 5% yield
Funkwerk AG: German rail communications leader at 6x EBIT with 18% ROCE
Modern Value Investing on Global Champions from Europe (🇪🇺Various EU $1.9B - $15.4B) Comprehensive analysis of five European global champions, highlighting IWG (trading at 5x EV/EBITDA), HelloFresh (targeting €300M FCF by 2027), and Evolution Gaming (12.3x forward earnings with $664M net cash) among others. Deep dive into competitive positions, growth trajectories, and valuation opportunities in European markets.
Asia-Pacific
Jam_invest on Hong Kong High Dividend Portfolio (ðŸ‡ðŸ‡°Various HK - US$2-29 billion) Analysis of 11 Hong Kong-listed high-dividend stocks, highlighting three compelling opportunities:
Hang Lung Properties: Premium commercial property portfolio yielding 6.4% with 10% dividend growth
Topsports International: Leading sports retailer trading at 8x forward earnings with 7% yield
Greentown Management: Asset-light real estate pioneer at 10x P/E with 50%+ market share
The International Investor on Solusi Kemasan Digital (🇮🇩PACK IJ - $150 million) Indonesian flexible packaging products provider showing impressive 58.8% share price growth in Week 2, with market expecting 11.9% annual shareholder return over next five years.
Stock Picker's Corner - Forecast 2025: Substackers Share Their Top Stocks for the New Year Comprehensive collection of investment ideas including your favorite Substack authors and yours truly making the case for Stellantis at an attractive 12% yield with strong cash flow generation. (20 min)
Finbite Insights - 5 Charts That Reveal Whether US Stocks Are Still Worth It in 2025 Thoughtful analysis of market conditions after consecutive 20%+ years, examining historical patterns and current valuations. Particularly interesting take on the bond yield impact on equity valuations. (15 min read)
TQI Capital - Fundsmith 2024 Annual Letter Analysis Insightful breakdown of Terry Smith's investment philosophy and recent decisions, focusing on the critical distinction between temporary and structural challenges. Valuable perspective on long-term quality investing. (15 min read)
Stock Picker's Corner - A Substack "Water Cooler" Chat: The Magnificent 7 in 2025 Engaging discussion about tech valuations and market leadership, with particular focus on opportunities in AI and cloud computing. (15 min)
Macro Mornings - Are You Ready for the $3.5 Trillion AI Revolution? Insightful analysis of how AI infrastructure and low-carbon initiatives could drive massive investment opportunities this decade. (10 min)
Generative Value - The Unstructured Data Landscape Comprehensive overview of unstructured data infrastructure and its role in AI applications, with insights into where value may accrue in the ecosystem. Essential reading for anyone interested in data infrastructure investments. (20 min read)
High Growth Investing - What do Nvidia and Flying Taxis have to do with Uber's Stock Price? Detailed analysis of Uber's recent partnerships and strategic positioning in the autonomous vehicle space, with interesting insights on potential growth vectors. (12 min read)
Jimmy's Journal - Metaverse is Not Dead. It's Thriving Thoughtful analysis of Meta's continued investment in the metaverse, with detailed coverage of their AR/VR developments, AI integration, and strategic initiatives. (15 min read)
Noah Smith - The Taiwan Posts Comprehensive analysis of Taiwan's evolution as a civilization, examining its urban development, progressive society, and strategic importance. Essential reading for understanding this critical market. (25 min)
The International Investor - A Visit to Kaohsiung, Taiwan A delightful mix of street-level observations and economic insights into Taiwan's industrial powerhouse. (15 min)
Panda Perspectives - China Weekly Wrap Comprehensive overview of Chinese markets including key policy changes, market movements, and corporate developments. Particularly valuable for its StoneX conference insights. (25 min read)
Silver Bulletin - The rise and fall of "fact-checking" Thoughtful examination of Meta's content moderation changes and their potential impact on social media platforms. Important perspective for tech investors. (15 min)
Noah Smith - Trudeau was a poor steward of Canada's economy Detailed analysis of Canada's economic underperformance and the structural challenges facing its economy. Valuable context for North American investors. (20 min)
Bonhoeffer Fund: Value-oriented strategy focused on consolidation, forced selling of loans, transaction processing and housing construction themes. Portfolio maintains average earnings/FCF yield of 12.5% and EV/EBITDA of 4.6. Letter discusses:
Lotte Chilsung (🇰🇷) - Existing Position: Beverage company trading at 3-6x forward earnings with valuable Gangnam land assets worth ₩1.9-3.8 trillion
North American Construction (🇨🇦NOA) - Existing Position: Dirt moving services provider with 19.1% 5-year trailing ROIIC
Northeast Bank (🇺🇸NBN) - New Position: Banking firm showing 40% annual EPS growth over past decade through orphan loan purchases
FPA Crescent Fund: Diversified value strategy with trailing twelve-month return of 21.27%. Fund's net risk exposure at 68.5% - lowest since Q4 2019. Letter discusses:
Meta Platforms (🇺🇸META) - Added 2.17% to TTM performance with 3.0% average portfolio weight
Holcim (🇨ðŸ‡HOL) - Contributed 1.64% to TTM return with 3.2% average weight
Charter Communications (🇺🇸CHTR) - Largest detractor at -0.59% TTM with 1.3% average position
FPA Queens Road Small Cap Value Fund: Small-cap value strategy focused on quality businesses at reasonable prices. Letter discusses:
Advanced Auto Parts (🇺🇸AAP) - New Position: Auto parts retailer trading at 30% of sales undertaking turnaround under new CEO from HD Supply
Sprouts Farmers Market (🇺🇸SFM) - Existing Position: Best-in-class 36.9% gross margins with accelerating unit growth
Fabrinet (🇺🇸FN) - Existing Position: Strong datacenter/AI-related growth driving performance
FPA Queens Road Value Fund: Large-cap value strategy with trailing twelve-month return of 36.54%. Portfolio benefiting from strong industrials performance while maintaining valuation discipline. Letter discusses:
Trane Technologies (🇺🇸TT) - Top contributor adding 1.35% to TTM return
Intel (🇺🇸INTC) - Largest detractor at -0.42% TTM
Merck (🇺🇸MRK) - Detracted -0.28% from TTM performance
Warden Capital: Real estate focused fund providing detailed analysis across property sectors. Notable strength in mall REITs with Simon posting 5% NOI growth and 100bps occupancy gains. NYC office showing recovery with Vornado securing major NYU lease replacing Meta. Residential markets mixed with strong NYC performance but weakness in sunbelt markets. Letter discusses:
Vornado Realty (🇺🇸VNO) - Existing Position: NYC office landlord securing $700mm upfront payment from NYU lease at 770 Broadway
Vail Resorts (🇺🇸MTN) - New Position: Ski resort operator trading at 8.15% cap rate with $100mm cost savings plan
Sun Communities (🇺🇸SUI) - Existing Position: Mobile home and RV operator showing weakness with 65bps revenue guidance reduction
Goehring & Rozencwajg: Natural resource market commentary providing detailed analysis of energy and mining sectors. Notable research on shale production peaks and divergence between uranium and copper markets. Particularly bullish on uranium given increasing nuclear power demand from data centers, while turning cautious on copper due to renewable energy adoption challenges.
Manole Capital Management: Fintech-focused research highlighting Gen-Z preferences in banking and payments. Notable finding that younger generations prefer traditional banks over online-only options. Analysis of market concentration in mega-cap tech stocks.
Michael Mauboussin: Morgan Stanley research piece analyzing market metrics and trends. Highlights equity market value-to-GDP ratio at 187% in 2023, down from 233% peak in 2021. Notable findings on company life cycles and shifting capital intensity from energy to technology sectors.
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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.
Thanks for the mention of my $EVVTY Evolution AB write up/Podcast