Giles Capital Weekly - Week 20
Welcome to another edition of Giles Capital Weekly. Markets have navigated a volatile path in recent weeks, with the S&P 500 recovering from April's tariff-induced selloff to erase its 2025 losses by mid-May. While US technology giants continue their remarkable run amid ongoing AI optimism, we're finding compelling opportunities in overlooked corners of global markets – particularly in Japan, where select industrial companies offer exceptional balance sheet strength and attractive valuations. This geographic diversification becomes increasingly valuable as investors assess the potential impacts of ever evolving trade policies and seek companies with pricing power to weather inflationary pressure.
My top picks for this week include Net-Net-Hunter Japan on Nagoya Electric Works (🇯🇵6797 JP - ¥14.4 billion), a Japanese manufacturer of industrial electrical and traffic control equipment trading at a compelling 5.7x P/E with no debt and a 4.1% dividend yield. The analysis highlights the company's strong balance sheet, stable operating performance, and significant margin of safety at current prices. For investors seeking exceptional quality, Quality Investing with René Sellmann on Novo Nordisk (🇩🇰NOVO B DC - $281 billion) stands out with extraordinary metrics – 47% ROIC and 88% ROE – while dominating the growing diabetes and obesity treatment markets. The research reveals the hidden cash flow economics behind this Danish healthcare giant's sustainable competitive advantages and market leadership.
Before diving into this week's newsletter…
Americas
TSOH Investment Research on Microsoft (🇺🇸MSFT US - US$3.1 trillion) Analysis of Microsoft's competitive positioning in cloud, AI, and enterprise software, highlighting its dominant market position and growth drivers in rapidly evolving technology sectors.
Rijnberk InvestInsights on MercadoLibre (🇺🇸MELI US - US$122 billion) Latin American e-commerce and fintech leader showing exceptional operational performance but trading at premium valuation. Strong market leadership with network effects creates substantial competitive moat despite author's valuation concerns.
Best Anchor Stocks on Constellation Software (🇨🇦CSU CN - CAD$107 billion) Leading acquirer of vertical market software businesses with exceptional capital allocation track record. Portfolio of over 1,000 software businesses across 150 vertical markets with decentralized management model and focus on mission-critical applications.
Kroker Equity Research on Cisco Systems (🇺🇸CSCO US - US$195 billion) Comprehensive analysis of networking giant's strategy, financial performance, and competitive position. Focus on Cisco's transition to software and subscription services amid changing enterprise technology landscape.
Compound & Fire on Medpace (🇺🇸MEDP US - US$10.5 billion) Scientifically-driven clinical CRO with strong earnings momentum in biopharmaceutical services. Recent 19.94% earnings surprise with $3.67 EPS demonstrates exceptional execution in growing healthcare research market.
Compound & Fire on Brown & Brown and Arthur J. Gallagher (🇺🇸BRO US - US$25 billion | 🇺🇸AJG US - US$45 billion) Comparative analysis of two leading insurance brokerages evaluating quality metrics, competitive advantages, and growth trajectories. Assessment of which company offers superior long-term investment potential in the resilient insurance intermediary market.
Northwest Frontier Capital's Research on Cloudflare (🇺🇸NET US - US$22 billion) Analysis of Cloudflare's Q1 performance highlighting enterprise momentum and revenue growth drivers. Focus on the company's expanding product suite and enterprise customer adoption in the competitive web security and performance market.
Quality Stocks on Transmedics (🇺🇸TMDX US - US$3.8 billion) Revolutionary organ transplant technology company with proprietary Organ Care System creating substantial first-mover advantage. Analysis cuts through market controversy to highlight long-term growth potential in transforming organ preservation and transport.
Value Don't Lie on Air Lease (🇺🇸AL US - US$5.2 billion) Quick but substantive analysis of aircraft leasing company highlighting valuation metrics and industry positioning. Focuses on Air Lease's fleet composition, customer relationships, and cash flow generation capabilities in the recovering aviation sector.
Kingswell on Berkshire Hathaway (🇺🇸BRK/A US - US$900 billion) Detailed examination of Berkshire Hathaway's Q1 2025 financial results and key business segments. Analysis of Warren Buffett's capital allocation decisions, cash position, and operating businesses performance in the diversified conglomerate.
Undiscovered Value & Growth Stocks on Kitchen Innovations Corp (🇺🇸KIC US - US$3.8 billion) Deep dive into a global leader in kitchen technology with exceptional 50%+ ROIC. Analysis highlights competitive advantages, margin profile, and growth runway in specialized industrial niche with attractive return metrics.
Value Investing by Double Alpha Factory on ISSC (🇺🇸ISSC US - US$72 million) Analysis of small-cap technology company after 30% price surge following strong quarterly results. Evaluation of whether investors should take profits or hold for further appreciation based on business momentum and valuation metrics.
Europe, Middle East & Africa
Quality Investing with René Sellmann on Novo Nordisk (🇩🇰NOVO B DC - US$281 billion) Analysis of the hidden economics behind Novo Nordisk's cash flow generation with exceptional quality metrics. Company boasts 47.91% ROIC and 88.12% ROE while dominating diabetes and obesity treatment markets with blockbuster GLP-1 drugs.
Rock & Turner on LVMH, Kering and Hermès (🇫🇷MC FP - US$335B | 🇫🇷KER FP - US$50B | 🇫🇷RMS FP - US$240B) Comparative analysis of three luxury goods titans examining brand strength, pricing power, and growth trajectories. Assessment of which company offers superior investment characteristics based on market positioning and financial performance metrics.
Northwest Frontier Capital's Research on Trainline (🇬🇧TRN LN - £1.8 billion) Analysis of leading online rail and coach ticket platform focusing on competitive moat despite subdued guidance. Exploration of digital business model advantages and long-term growth potential despite near-term conservative outlook.
Toni's Substack on Treatt plc (🇬🇧TET LN - £350 million) Quick review of specialty ingredients company's H1 2025 results with focus on financial performance and business outlook. Analysis of Treatt's position in natural extracts and flavors market with assessment of growth and valuation metrics.
Robin Research on Misitano & Stracuzzi (🇮🇹MS IT - €120 million) Analysis of Italian company with focus on fundamentals, valuation, and competitive positioning. Examination of business model, financial metrics, and growth potential in specialized regional market.
Bargain Stocks Radar on Misitano & Stracuzzi and Alico Inc (🇮🇹MS IT - €120 million | 🇺🇸ALCO US - $233 million) A complementary analysis reinforcing the value proposition of Misitano & Stracuzzi alongside Florida-based agribusiness Alico. Highlights the Sicilian company's fourth-generation family leadership and recent IPO success while comparing to Alico's established citrus operations and land development strategy.
Asia-Pacific
Net-Net-Hunter Japan on Nagoya Electric Works (🇯🇵6797 JP - ¥14.42 billion) FY2024 Q4 earnings update for industrial electrical and traffic control equipment manufacturer trading at compelling 5.7x P/E and 0.57x P/B. Company boasts strong balance sheet with no debt, 4.1% dividend yield, and 7.8% ROE in specialized Japanese industrial niche.
Net-Net-Hunter Japan on UEKI Corporation (🇯🇵1867 JP - ¥10.44 billion) Analysis of construction and real estate company showing solid operating profit up by 10% despite sales down by 9.3%. Trading at attractive 7x forward P/E with 5% dividend yield, offering value exposure to Japanese infrastructure and property markets with expected 18.3% sales growth next year.
Rustum on Japanese Value Opportunities (🇯🇵Various JP - ¥3.8B-24.6B) Analysis of five overlooked Japanese small-caps with exceptional fundamentals and low valuations:
ASO International: Orthodontic products manufacturer with 19.8% ROIC trading at 6.1x EV/EBIT with 13% EPS CAGR
M-mart: B2B food marketplace platform with 28.8% ROIC trading at 7.2x EV/EBIT with 23.8% EPS CAGR
Maezawa Industries: Water infrastructure specialist with 15.4% ROIC trading at 4.5x EV/EBIT with no debt
WDB coco: Pharmaceutical compliance services showing 35.5% ROIC trading at just 3.6x EV/EBIT
Ifuji Sangyo: Leading liquid egg producer with 22.6% ROIC trading at 4.9x EV/EBIT with 28% EPS CAGR
WinterGems on Kikukawa Enterprise (🇯🇵6346 JP - ¥6.87 billion) Analysis of net cash position Japanese company with 2025 year-end results highlighting financial strength. Assessment of business fundamentals, capital allocation, and investment merits in specialized Japanese industrial machinery sector.
The International Investor - Tuk-Tuk to the Future: Riding Southeast Asia's Growth Express
A compelling analysis of investment opportunities in rapidly growing Southeast Asian markets with specific country and sector insights. The author provides actionable intelligence on accessing this dynamic region's growth potential with a nuanced understanding of local market dynamics. (18 min read)Panda Perspectives - China Weekly Wrap: Markets, Macro & Tech – Key Developments This Week
Comprehensive coverage of the latest Chinese market trends, economic indicators, and technology sector developments from an expert perspective. Offers valuable context and investment implications beyond typical Western media coverage of the world's second-largest economy. (15 min read)Rock & Turner - LVMH, Kering or Hermès - What? Why?
Comparative analysis of three luxury goods titans examining brand strength, pricing power, and growth trajectories. Assessment of which company offers superior investment characteristics based on market positioning and financial performance metrics. (16 min read)Excelsior Capital - The Most Important Thing Isn't What You Think It Is: Howard Marks
A brilliant distillation of Howard Marks' investment wisdom with practical applications for portfolio management. The piece expertly weaves together Marks' key insights on risk, market cycles, and investor psychology into an actionable framework for today's market environment. (17 min read)Deep Value Returns - The Most Valuable Investing Lessons Come In Downturns
A powerful reflection on how market downturns create essential learning opportunities that shape superior long-term investing approaches. The author draws from both personal experience and historical case studies to demonstrate why difficult markets ultimately build stronger investors. (20 min read)AI Proem - The Big Four's AI Scorecard: Q1-25 Earnings Reveal Who's Pulling Ahead
A data-driven comparison of AI strategies and execution across major tech companies with insights into emerging competitive dynamics. The comprehensive benchmarking provides investors with a framework for evaluating which companies are translating AI investments into tangible business results. (19 min read)Asymmetric Ventures - WOSG: Part III - Rolex and the Swiss Watch Industry
A detailed analysis of luxury watchmaking economics with fascinating insights into pricing power, distribution strategies, and brand dynamics. The piece deftly explains how Rolex has created extraordinary shareholder value through disciplined business practices that maintain exclusivity and pricing integrity. (24 min read)Quality Stocks - Invest in the Future: 4 Secular Trends and Stocks to Watch
A well-researched examination of major secular trends reshaping industries with specific investment implications and company examples. The author convincingly demonstrates how identifying structural shifts early can lead to outsized returns through careful company selection within emerging thematic areas. (21 min read)Jimmy's Journal - Why Buffett Hates Airlines: A Case Study
An insightful case study of Warren Buffett's evolving views on airline investments with valuable lessons for capital-intensive businesses. The analysis expertly dissects the structural challenges that have made airlines problematic investments despite their essential role in the global economy. (19 min read)Increasing Odds - Exploring AIM: A-Z Part 4
A valuable deep dive into London's Alternative Investment Market with practical guidance for finding quality among smaller companies. The author provides essential context about unique AIM characteristics while highlighting both opportunities and pitfalls in this often overlooked corner of the market. (18 min read)
Market turbulence characterized Q1 as proposed tariffs triggered stagflation concerns. Tech faced pressure with the "Magnificent 7" falling 16%, while value stocks outperformed. European markets showed surprising strength amid regional fiscal stimulus initiatives, particularly in defense and infrastructure sectors.
AVI Global Trust: AVI Global Trust's NAV declined -0.9% in April 2025. Toyota Industries was the most significant contributor (+105bps) following Akio Toyoda's announced plans for a $42bn take-private transaction - a development management views as "seismically important" for Japanese corporate governance reform. The fund delivered 15.90% over 5 years. Letter discusses:
Toyota Industries (🇯🇵TYIDF JP - JPY$42 billion) - Existing Position: Potential privatization representing culmination of multi-year governance reforms
Gerresheimer AG (🇩🇪GXI GR - EUR$3.5 billion) - Existing Position: Management maintaining €5 per share 2025 EPS guidance despite KKR withdrawal
D'Ieteren (🇧🇪DIE BB - EUR$7.1 billion) - Existing Position: Top portfolio holding contributing +84bps as discount narrowed
Bailard International Equity Strategy: The fund delivered 8.81% net return in Q1 2025, outperforming the MSCI EAFE Index (+6.86%). European markets led performance, particularly Eurozone countries. Long-term performance shows 21.90% return over 5 years and 18.25% over 10 years. Letter discusses:
Country allocations emphasized Eurozone over Asia, which contributed significantly to performance
Management highlighted improving momentum in European infrastructure and defense spending following policy reforms
Bailard Small Cap Value Strategy: The fund returned -6.98% in Q1 2025, outperforming its Russell 2000 Value Index benchmark (-7.74%). Historically successful alpha characteristics compensated for underperforming micro cap allocations. Long-term performance shows 19.74% return over 5 years. Letter discusses:
Spotify Technology (🇸🇪SPOT US - US$3.7 billion) - Existing Position: Top contributor (+0.5%) amid streaming sector strength
KLA Corporation (🇺🇸KLA US - US$4.1 billion) - Existing Position: Strong semiconductor equipment performer
Pure Storage (🇺🇸PSTG US - US$2.5 billion) - Existing Position: Largest detractor (-0.6%) during tech pullback
Bailard Technology Strategy: The fund posted -9.35% net return in Q1 2025, outperforming both the S&P North American Technology Index (-11.43%) and competitor benchmarks. Semiconductor positioning contributed positively while software positions detracted. Long-term performance shows 21.42% return over 5 years. Letter discusses:
NVIDIA (🇺🇸NVDA US - US$10.8 billion) - Existing Position: Largest detractor (-2.0%) as AI trade unwound
Meta Platforms (🇺🇸META US - US$7.8 billion) - Existing Position: Maintains strong competitive position despite slower growth
Fiserv (🇺🇸FISV US - US$4.0 billion) - Existing Position: Financial technology provider significantly overweight versus peers
Artisan Focus Fund: The fund returned -1.86% in Q1 2025, outperforming the S&P 500 (-4.27%). Management employs a combination of fundamental research and systematic risk management, maintaining optimism while practicing "short-term paranoia." Long-term performance shows 15.60% return over 5 years. Letter discusses:
General Electric (🇺🇸GE US - US$6.9 billion) - Existing Position: Aerospace normalization theme driving positive results
Constellation Energy (🇺🇸CEG US - US$27 billion) - Existing Position: Strategic Calpine acquisition supporting de-globalization theme
Rolls-Royce (🇬🇧RR LN - GBP$4.2 billion) - Existing Position: Positive upward revisions to free cash flow estimates
Auxier Asset Management: The fund gained 4.63% in Q1 2025, significantly outperforming the S&P 500's -4.27% decline. Management emphasizes resilient, high-cash generating business models that can navigate unpredictable market conditions. Long-term performance shows 7.99% return over 1 year and 7.78% annualized since inception in 1999. Letter discusses:
Mastercard (🇺🇸MA US - US$5.6 billion) - Existing Position: Top holding providing stability during volatility
Philip Morris (🇺🇸PM US - US$4.9 billion) - Existing Position: Reduced-risk products driving positive consumption
Microsoft (🇺🇸MSFT US - US$5.3 billion) - Existing Position: Maintains leadership despite tech sector weakness
Thanks to Buy Side Digest (buysidedigest.com) for compiling the investment letters which are 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.