Giles Capital Weekly - Week 22
Welcome to another edition of Giles Capital Weekly. Following the S&P 500's strongest May performance since 1990, markets enter June facing historical seasonal weakness and ongoing trade policy uncertainty (again). With the dollar posting its fifth consecutive monthly decline (the longest slide since 2020) and Treasuries experiencing their first monthly drop this year, intelligent investors can look beyond the headlines and look towards specialized business models and international markets.
My top picks for this week exemplify how specialized businesses can succeed regardless of macro turbulence. Cluseau Research puts the spotlight on Chain Bridge Bancorp (CBNA), a Republican political banking specialist with 70% of campaign financing and zero-cost deposits, trading at just 11.2x 2025 earnings despite 95%+ historical success probability. Meanwhile, Central Tendency highlights Staffline (STAF.L), a UK temporary staffing leader is systematically gaining market share from struggling competitors while generating 11.5% free cash flow yields and executing aggressive share buybacks at sub-3x EBITDA valuations.
Before diving into this week's newsletter…
Americas
Business Model Mastery on West Pharmaceutical Services (🇺🇸WST US - US$31 billion) Mission-critical pharmaceutical containment systems with 74.7% proprietary products revenue and 2-3 year regulatory switching barriers, creating unbreakable customer lock-in through embedded drug delivery protocols.
Business Model Mastery on SLB (🇺🇸SLB US - US$78 billion) Global energy technology platform with 33.2% digital margins and 98-year subsurface data moat, leveraging AI-powered DELFI platform and 81% international operations for unbreakable digital lock-in.
Kroker Equity Research on BRP Inc. (🇨🇦DOO CN - CAD$3.4 billion) Cyclical powersports manufacturer with strong brands navigating industry downturn while maintaining 6.8% free cash flow yield and disciplined capital allocation through share buybacks and R&D investment.
TSOH Investment Research on Scotts Miracle-Gro (🇺🇸SMG US - US$3.2 billion) Lawn and garden franchise recovering from Hawthorne cannabis disaster with 12x forward EV/EBIT and declining 4.4x net leverage, returning focus to core profitable consumer business.
Cluseau Research on Chain Bridge Bancorp (🇺🇸CBNA US - US$174 million) Republican political banking specialist with 70.6% US campaign financing penetration and zero-cost political deposits, positioned for growth through Trump administration tailwinds and unique competitive moat.
Value Don't Lie on Monro Muffler (🇺🇸MNRO US - US$390 million) Auto repair turnaround opportunity with new CEO, approximately 2x leverage, and recession-resistant business model providing defensive characteristics during economic uncertainty.
Europe, Middle East & Africa
Cayucos Capital on Rightmove (🇬🇧RMV.L UK - £6.7 billion) UK property portal monopoly with 85% market share delivering 100% gross margins and 460% ROIC, representing one of the best business models ever conceived with unmatched network effects.
Undervalued and undercovered on International Workplace Group (🇬🇧IWG UK - £1.2 billion) Global flexible workspace leader transitioning to capital-light managed partnerships model with 20% growth guidance and 6x EV/EBITDA valuation amid post-pandemic workspace transformation.
Central Tendency on Staffline (🇬🇧STAF.L UK - £55 million) UK temporary staffing leader with 10% market share gaining contracts from competitors while trading at sub-3x EBITDA despite 11.5% FCF yield and 20% share repurchase program.
Iggy on Investing on Anexo Group (🇬🇧ANX.L UK - £70 million) UK credit hire legal firm trading at 0.3x book value and 3x earnings with 10-year 15% book value CAGR, facing takeover attempt that has galvanized minority shareholder resistance.
Rustum on Rosetti Marino (🇮🇹0I8A.MI Italy - €150 million) European marine engineering firm with net cash position trading at 5.8x P/E and 0.7x EV/Sales, providing specialized shipyard capabilities and family ownership creating conservative management approach.
Overlooked and Undervalued on Diales (🇬🇧DIAL.L UK - £12 million) Global dispute resolution consultancy completing successful turnaround with 7% dividend yield and £4M net cash position, offering specialized expertise in commercial arbitration and expert witness services.
Asia-Pacific
Saadiyat Capital on Sea Limited (🇸🇬SE US - US$92 billion) Southeast Asian super-app with improving profitability across gaming (+51% bookings), e-commerce (28.3% Shopee growth), and fintech (57.6% growth), demonstrating platform ecosystem monetization success.
Panda Perspectives on SenseTime (🇨🇳0020.HK Hong Kong - HKD 24 billion) China's leading GenAI platform with 103% revenue growth and 23,000 PFLOPS compute capacity, transitioning from legacy computer vision to comprehensive AI infrastructure and ecosystem strategy.
The Great Wall Street on Pinduoduo (🇨🇳PDD US - US$130 billion) Chinese e-commerce platform facing margin pressure with 10% revenue growth slowdown and operating margin compression, though maintaining strong cash position and long-term market opportunity.
Altay Capital on Nippon Pigment (🇯🇵4119.T Japan - ¥3.1 billion) Deep value pigments manufacturer trading at 0.25x book value with NCAV+investments of ¥8,522 versus ¥3,110 share price, benefiting from massive bargain purchase gain on recent acquisition.
Cristian's Substack on Micron Machinery (🇯🇵6159.T Japan - ¥2.8 billion) Net-net grinding machinery manufacturer trading at 68% of NCAV with cash exceeding 100% of market cap and aggressive 21% share buyback program demonstrating exceptional capital allocation.
Jimmy's Journal - The 15 Books That Will Make You a Better Investor Comprehensive guide to essential investment literature spanning value investing classics, behavioral psychology, and market history, offering curated wisdom from Buffett to Kahneman for building superior investment judgment. (15 min read)
Favona Hathaway Substack - What Howard Marks Taught Me Over a Bowl of Carbonara Personal insights from dining with Oaktree Capital's founder, revealing practical investment philosophy lessons about contrarian thinking, risk assessment, and the importance of understanding market cycles rather than predicting them. (12 min read)
Rock & Turner - Part 1: The Capital Cycle To Boost Returns Deep dive into capital cycle investing framework showing how understanding supply-demand dynamics and capacity additions can drive superior long-term returns across commodity and cyclical sectors. (18 min read)
Rustum - What the West Still Gets Wrong About The Big Short Contrarian analysis challenging conventional narratives about the 2008 financial crisis, arguing for gold's monetary role and questioning mainstream economic assumptions about debt, inflation, and financial system stability. (14 min read)
The Great Wall Street - Why Xiaohongshu (RedNote) Became China's Default Search Engine for Daily Life Analysis of how China's lifestyle platform evolved beyond social media to become the go-to discovery engine for everything from restaurants to travel, offering insights into Chinese consumer behavior and platform economics. (16 min read)
Quality Investing with René Sellmann - Investment Philosophy Interview: Building Long-Term Wealth Comprehensive discussion of quality investing principles, portfolio construction methodologies, and European market opportunities, providing frameworks for identifying compounding businesses and managing concentration risk. (22 min read)
AI Proem - BEYOND Expo 2025: Robotics Trends and China's AI Global Ambitions Conference insights into embodied AI development, technical bottlenecks in robotics deployment, and China's strategic positioning in global AI competition, with implications for technology investment themes. (20 min read)
Capitalist Letters - Growth Company Valuation Methodology with Practical Application Practical framework for valuing high-growth companies using discounted cash flow models, scenario analysis, and sensitivity testing, with real-world examples demonstrating methodology application across sectors. (17 min read)
Long-term Investing - Google's AI Search Transformation and Competitive Threats Strategic analysis of how artificial intelligence is reshaping search dynamics, examining Google's defensive positioning versus emerging AI-native competitors and implications for technology investment. (19 min read)
Schwar Capital - The Hidden Power of Doing Nothing (and Being Ready for Everything) Investment philosophy piece exploring the value of optionality, cash positioning, and patience in portfolio management, with frameworks for maintaining flexibility during market uncertainty. (10 min read)
Value strategies dominated Q1 2025 with their strongest outperformance versus growth since the early 2000s amid tariff uncertainties and AI disruption concerns. International equities showed particular strength while small-cap managers emphasized quality positioning during broad market volatility.
The London Company Small Cap: Small-cap strategy delivered -6.9% in Q1 2025 versus Russell 2000's -9.5% decline, with inception-to-date returns of 12.0% versus 7.7% for benchmark. Portfolio benefited from quality factor exposure and defensive positioning during market volatility. Letter discusses:
ACI Worldwide (🇺🇸ACIW US - US$3 billion) - Existing Position: Resilient business with 12-month revenue visibility and high recurring revenue rates
Hanover Insurance Group (🇺🇸THG US - US$6 billion) - Existing Position: Strong Q4 2024 earnings trending toward high-teens ROE margins
DoubleVerify Holdings (🇺🇸DV US - US$2 billion) - Existing Position: Customer-specific issues impacting budget and near-term growth stabilization
The London Company Income Equity: Income strategy returned 4.6% in Q1 2025 versus Russell 1000 Value's 2.1% gain, with inception-to-date returns of 9.2% versus 7.4% since December 1999. Portfolio benefited from sector allocation and security selection across Consumer Staples and Communication Services. Letter discusses:
Philip Morris International (🇺🇸PM US - US$140 billion) - Existing Position: Strong execution on smoke-free products with sustained IQOS and ZYN momentum
Progressive Corporation (🇺🇸PGR US - US$95 billion) - Existing Position: Improved margins and faster growth with superior underwriting risk segmentation
Nintendo (🇯🇵NTDOY US - US$55 billion) - Existing Position: Switch 2 launch excitement with management expressing optimism about demand
Aristotle/Saul Global Equity Fund: Global strategy returned 1.20% in Q1 2025 versus MSCI ACWI's -1.32% decline through allocation effects and security selection. Portfolio benefited from overweight in Europe and underweight in information technology during market volatility. Letter discusses:
Munich Reinsurance (🇩🇪MUV2 GR - €35 billion) - Existing Position: Strong results despite €1.2 billion California wildfire claims with 30%+ dividend increase
Sony Group Corporation (🇯🇵6758 JP - ¥15 trillion) - Existing Position: Record 129 million monthly active gaming users with 20% PlayStation Plus revenue growth
Cameco Corporation (🇨🇦CCO CN - CAD$25 billion) - Existing Position: Tariff concerns overstated given inelastic uranium demand and lack of substitutes
Hotchkis & Wiley Small Cap Value Fund: Small-cap value strategy returned -6.79% in Q1 2025 versus Russell 2000 Value's -7.74% decline, with since-inception returns of 10.87% since September 1985. Technology sector selection provided largest positive contribution during quarter marked by widespread small-cap weakness. Letter discusses:
Technology sector selection as largest positive contributor to relative performance
Russell 2000 Index down 17% from post-election highs suggesting recession concerns factored into valuations
Portfolio emphasis on strong balance sheets and attractive valuations during fundamental-driven environment
Hotchkis & Wiley Global Value Fund: Global value strategy returned 5.96% in Q1 2025 versus MSCI World Value's 4.81% gain, with since-inception returns of 9.58% versus 8.18% since December 2012. Portfolio trades at 9x price-to-normal-earnings versus 15x for value index, positioning for continued outperformance. Letter discusses:
CVS Health Corporation (🇺🇸CVS US - US$85 billion) - Existing Position: Improved earnings and forward guidance on sustainable profitability path
Babcock International (🇬🇧BAB LN - £2 billion) - Existing Position: UK defense contractor with 60% Ministry of Defense revenue guiding higher growth
Siemens (🇩🇪SIE GR - €140 billion) - Existing Position: Global electrical engineering leader with earnings exceeding expectations despite complexity discount
Harris Associates International Equity Strategy: International equity strategy delivered strong 7.86% return versus MSCI World ex USA's 6.20% gain through security selection and allocation effects. Portfolio benefited from overweight in Europe and security selection in Japan, while showing resilience despite macro uncertainties. Strategy initiated several new positions at attractive valuations during market volatility. Management emphasizes bottom-up fundamental analysis over macro timing. Letter discusses:
BNP Paribas (🇫🇷BNP FP - €75 billion) - Existing Position: Strong FY 2024 results driven by Corporate Banking and Personal Finance segments
Alibaba Group (🇨🇳BABA US - US$220 billion) - Existing Position: Strong Q3 2024 results with accelerating E-commerce and Cloud growth from new monetization tools
Asahi Group Holdings (🇯🇵2502 JP - ¥2.5 trillion) - New Position: Japan's largest beer company positioned for liquor tax reform and price increase tailwinds
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.
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