Giles Capital Weekly - Week 25
Welcome to another edition of Giles Capital Weekly. Markets absorbed a major geopolitical surprise this weekend as President Trump conducted airstrikes on Iranian nuclear facilities, declaring them "completely and totally obliterated" in what he called "a spectacular military success." Yet investors showed remarkable composure as Israeli stocks hit all-time highs while Gulf markets traded flat to slightly positive, suggesting traders view the decisive action as potentially conflict-ending rather than escalating. Oil remains elevated on supply concerns, but the measured market response reflects growing confidence that swift military action may prevent prolonged regional instability.
My top picks for this week demonstrate how extraordinary opportunities emerge during periods of apparent chaos. analyzes Cronos Group (CRON), a legitimate negative enterprise value play with $840M cash exceeding its $722M market cap—a growing, profitable cannabis leader with 40% Altria ownership that operates independently of geopolitical noise. examines Punch Industry (6165), a classic net-net yielding 5% with defensive mold manufacturing exposure and strategic Misumi alliance, offering stability during volatile periods while positioning for automation-driven growth as global supply chains normalize.
Before diving into this week's newsletter…
Americas
on Toast Inc. (🇺🇸TOST US - US$25 billion) Restaurant software platform with 25% US SMB market share and 36% revenue growth CAGR, generating 80% revenue from payments with expanding AI integration.
on DLocal (🇺🇸DLO US - US$3.0 billion) Payment processor connecting local methods to global merchants with 42% revenue CAGR and 29% ROE, trading at 30% discount despite emerging markets tailwinds.
on Landstar System and Ingles Markets (🇺🇸LSTR US - US$4.8 billion | 🇺🇸IMKTA US - US$1.1 billion) Asset-light freight broker at cyclical lows with 32.9% average ROE plus regional grocer with hidden real estate value across growing Southeast markets.
on Boot Barn Holdings, Vital Farms, and FitLife Brands (🇺🇸BOOT US - US$5.0 billion | 🇺🇸VITL US - US$1.6 billion | 🇺🇸FTLF US - US$130 million) Western workwear retailer with 900-store potential, premium egg producer targeting $1B revenue by 2027, and profitable supplement roll-up with strong online presence.
on Cronos Group (🇺🇸CRON US - US$722 million) Net-net with negative $70M enterprise value and $840M cash versus $722M market cap, growing 28% with FCF positive and 40% Altria ownership.
on Vermilion Energy (🇨🇦VET CN - CAD$500 million) Natural gas E&P with 14.65% production CAGR over 3 years, positioned for AI power demand driving AECO price recovery with recent Westbrick acquisition.
on Oscar Health (🇺🇸OSCR US - US$1.2 billion) ACA health insurer with 2M subscriber growth and AI efficiency gains, trading at 0.4x P/S despite 75.4% MLR and 64% red state membership.
on Lakeland Industries (🇺🇸LAKE US - US$167 million) Safety equipment rollup with proven management showing 34% revenue growth and 0.6x forward P/S versus comparable MSA Safety at 3.5x P/S.
on Simply Solventless Concentrates (🇨🇦HASH.v CN - CAD$50 million) Cannabis roll-up surviving accounting adjustments with 4x EBIT improvement Q4 to Q1, trading at 4-5x P/E with working capital normalization underway.
Europe, Middle East & Africa
on LVMH (🇫🇷MC FP - US$433 billion) Luxury conglomerate with 75 brands trading at P/E 19.3x versus 24.1x historical average, with 18% ROE and Fashion & Leather Goods growing 14.3% CAGR.
on Greggs (🇬🇧GRG LN - £2 billion) UK bakery leader with 9.7% operating margins expanding from 2,600 to 3,500 stores, distributing 60% of earnings as dividends with disciplined capital allocation.
on Forvia (🇫🇷FAURP FP - €1.7 billion) Automotive supplier trading at 2008 crisis levels owning 82% of Hella worth more than total market cap, targeting €500M annual restructuring savings.
on Rockhopper Exploration (🇬🇧RKH LN - US$400 million) O&G growth story trading at 83% discount to $2.3bn NAV with forward P/E 7.3x and 67% expected gross margins, first production H2 2027.
on Elliptic Laboratories (🇳🇴ELABS NO - US$139 million) AI software sensors with 93% revenue growth and first EBITDA profitable year, targeting 50%+ margins with 248 patents and laptop market breakthrough.
on The Works (🇬🇧WRKS LN - £31 million) Retail recovery with £31M market cap on £227M sales (0.14x P/S), 38% activist ownership driving transformation with 98% of stores profitable.
Asia-Pacific
on Alibaba Group (🇨🇳BABA US - US$272 billion) AI cloud play with sum-of-parts NAV $376B versus current market cap, 18% cloud growth acceleration and 11x forward P/E with triple-digit AI growth.
on Reliance Industries (🇮🇳RELIANCE IN - US$200 billion) Diversified conglomerate with succession planning underway, transformed to >50% consumer EBITDA from <10% decade ago with planned Jio and Retail IPOs.
on Endeavour Group (🇦🇺EDV AU - AUD$4.5 billion) Defensive stalwart with 50% Australian alcohol market share trading at P/E 16x versus fair value 19-20x with 5.4% dividend yield.
on Kusurinomadoguchi (🇯🇵5592 JP - ¥34 billion) Healthcare IT with Hikari Tsushin DNA targeting 23%+ revenue CAGR with 37.3% of Japan's pharmacies on platform and margin expansion to 25%.
on Punch Industry (🇯🇵6165 JP - ¥13 billion) Net-net mold manufacturer with 5% dividend yield trading at P/B 0.5x, #1 China position with Misumi alliance and 12% CAGR automation expansion.
- Warren Buffett Goes Back to School Complete 1993 Columbia lecture transcript covering investment philosophy, business evaluation methods, and management quality assessment from Buffett. (25 min read)
- Is Now the Right Time to Reinvest in Luxury Stocks? Sector analysis examining luxury correction drivers with 58M global millionaires supporting gradual position building in quality names. (12 min read)
- Transport Infrastructure: Final Reflections Infrastructure investment framework covering airports, railroads, ports with 10 company recommendations emphasizing emerging markets opportunities. (18 min read)
- 3 stocks in a deep drawdown Contrarian framework applied to ASML, Merck, and Google examining rebound catalysts in quality companies facing temporary headwinds. (15 min read)
- Hedge Funds' Secret Weapon IPO analysis methodology revealing level playing field opportunities, targeting companies with stigma where institutional avoidance creates pricing inefficiencies. (14 min read)
- Better Than Bloomberg: The 15 Investment Tools Curated toolkit of Bloomberg alternatives highlighting Stock Analysis, Koyfin, and Finchat for independent investor research platforms. (11 min read)
- The Pope Hat Paradox Decision-making framework distinguishing breakthrough opportunities from delusions using historical examples to recognize contrarian genius in investing. (16 min read)
- Discipline Over Drama: Slow, Messy, And Outperforming Investment philosophy emphasizing systematic process over emotional reactions, advocating selling into strength rather than timing market tops. (17 min read)
The first half of 2025 presented significant volatility as managers navigated tariff uncertainties, AI developments, and monetary policy shifts. Despite the S&P 500's 21% drawdown, several funds demonstrated resilience through concentrated positioning and disciplined value approaches. Performance varied widely, highlighting the importance of manager skill in navigating challenging market conditions.
Argosy Investors: Small-cap value manager maintaining conservative stance amid AI enthusiasm and tariff concerns. No longer reporting performance publicly due to North Carolina regulations. Portfolio focused on industrial automation and digital transformation themes. Letter discusses:
Allient (🇺🇸ALNT US) - New Position: 15%+ FCF yield with ongoing plant consolidation efforts expected to drive higher margins
CSW Industrials (🇺🇸CSWI US) - Existing Position: Trimmed due to 40-50x valuation concerns despite strong capital allocation track record
Topicus.com (🇨🇦TOITF CN) - Existing Position: Reduced exposure due to extended 40-50x valuation range
Endava (🇺🇸DAVA US) - Existing Position: Trimmed reflecting growing AI threats to coding and marketing functions
CDW Corporation (🇺🇸CDW US) - New Position: IT distributor trading at 21x cash flow with mid-single digit revenue growth
Silver Beech Capital: Concentrated portfolio achieving 20.3% annualized returns since inception with Q1 2025 outperformance of -2.8% versus S&P 500's -4.3%. Portfolio trades at attractive 1.4x P/B and 12.2x P/E versus S&P 500's 4.8x and 20.9x respectively. Letter discusses:
Brookfield Corporation (🇨🇦BN CN/US) - Existing Position: Exited with ~52% gross IRR and ~71% total return on asset management thesis
First Industrial Realty Trust (🇺🇸FR US) - New Position: Logistics REIT at 6.5% cap rate targeting 15% IRR with 424 properties totaling 70 million square feet
Voss Value Fund: Long/short equity strategy with 70.4% net exposure posting Q1 -7.3% return versus Russell 2000's -9.5%. Manager sees compelling opportunity set amid record small-cap outflows and dispersion between mega-cap euphoria and small-cap despair. Letter discusses:
Flywire (🇺🇸FLYW US) - New Position: ~5% position in cross-border payments platform trading under 2x NTM sales despite 20%+ historical growth
SharkNinja (🇬🇧SN LN) - Existing Position: Significantly upsized consumer appliance innovator with 25 new products launching 2025 and 90% US production outside China by Q2
Quercus Fund: Global value strategy delivering 12.2% annualized returns with portfolio valued at approximately 4x current prices per manager assessment. Halyk Bank emerged as second-largest position with exceptional ROE profile. Letter discusses:
First Pacific (ðŸ‡ðŸ‡°FPC HK) - Existing Position: Philippine conglomerate with 11% core income growth in 2024 and 5% dividend yield
Sanjiang Fine Chemicals (🇨🇳SFC CN) - Existing Position: 10.3% EBITDA margin in 2H24 with two VLECs planned for 2027 ethane transport
Compagnie de l'Odet (🇫🇷ODET FR) - Existing Position: Holding company owning 70% of Bolloré with Universal Music Group growing EBITDA 12%
Halyk Bank (🇰🇿HSBK KZ) - Existing Position: Kazakhstan market leader with 20-40% market share targeting 30-33% ROE guidance
Thornburg International Equity Fund: International equity strategy delivering 9.92% Q1 return versus 5.23% MSCI ACWI ex-US. Strong stock selection in Germany and Netherlands with overweights in industrials and consumer discretionary. Letter discusses:
Mitsubishi UFJ Financial Group (🇯🇵MUFG JP) - Existing Position: Japan's largest bank with 3.2% portfolio weight benefiting from normalized interest rates
TotalEnergies (🇫🇷TTE FR) - Existing Position: Integrated energy major with 3.1% allocation and strong cash generation profile
Linde (🇮🇪LIN IE) - Existing Position: Industrial gases leader with 3.0% weight and defensive growth characteristics
Sony Group (🇯🇵SONY JP) - Existing Position: Technology conglomerate with 3.0% allocation across entertainment and semiconductor segments
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.
Thanks for the mention. Great compilation!
Thanks for the feature :)