Giles Capital Weekly - Week 26
Welcome to another edition of Giles Capital Weekly. While the S&P 500's 24% surge to all-time highs dominates headlines, marking the best quarter since December 2023, this week's analysis reveals compelling value opportunities hiding in plain sight. As Treasury strength and dollar weakness signal potential Fed rate cuts, the market's growth obsession has created fascinating mispricing in defensive, cash-generative businesses across unglamorous sectors like construction equipment and specialty agriculture.
My top picks for this week exemplify this dynamic perfectly. covers multiple Japanese opportunities, with Komatsu (6301.T) emerging as the clear favorite: a global duopoly partner trading at just 9.3x P/E with a 4.3% dividend yield despite infrastructure tailwinds. highlights Atlas Pearls (ATP.AX), an extraordinary turnaround at P/E 4.67x and P/FCF 3.8x, benefiting from Chinese demand driving pearl prices up 200-300% in a social media-driven renaissance.
Before diving into this week's newsletter…
Americas
on Copart (🇺🇸CPRT US - US$50 billion) Global leader in online vehicle auctions with monopolistic position and anti-cyclical business model. Trading at 31x P/E vs 5-year avg 35x with pristine balance sheet and 65% market share creating formidable network effects moat.
on Computer Modelling Group (🇨🇦CMG CN - CAD$581 million) Quality compounding opportunity in niche reservoir simulation software with 98%+ customer renewal rate and 34% EBITDA margin. Investment Readiness Score of 86.3 with DCF suggesting 62% undervaluation under new M&A growth strategy.
on Visa and Mastercard (🇺🇸V US and MA US - Combined $1 trillion) Quality thesis comparing payment network leaders, with Mastercard IRS Score 86.8 vs Visa 83.5, highlighting Mastercard's superior efficiency and 19.8% vs 18.1% CAGR performance over 10 years.
on Fortive and Ralliant Spin-off (🇺🇸FTV US - US$24 billion) Spin-off opportunity with RemainCo trading at discount despite quality Danaher heritage business fundamentals, 17x FCF with expected 23.5% EBITDA margins post standalone costs.
Europe, Middle East & Africa
on ASML Holding (🇳🇱ASML US - US$250 billion) Only supplier of EUV lithography machines essential for advanced semiconductors, 100% monopoly trading at 33x P/E vs 5-year avg 39x with €9B net cash despite China restrictions.
on Ashtead Group (🇬🇧AHT L - £15 billion) Counter-cyclical cash flow machine in equipment rental with record $1.79B free cash flow, 46.5% EBITDA margin, and $1.5B buyback program providing 4.7% yield at current prices.
on Faes Farma (🇪🇸FAE ES - €1.4 billion) Spanish pharmaceutical company with ambitious 2030 growth plan targeting €1B revenue from current €510M, 25% EBITDA margin with net cash position and strategic M&A execution track record.
on Card Factory (🇬🇧CARD L - £350 million) UK greeting card leader expanding into broader gifts market under new management, 99% store profitability with <2 year payback and TAM expansion from £1.4B to £13.4B.
Asia-Pacific
on TSMC (🇹🇼2330 TW - US$500 billion) Compelling monopoly position in advanced semiconductors with AI-driven demand supporting 20% CAGR growth through 2029, trading at mid-teens P/E with 67% logic foundry market share despite Intel competition concerns.
on Komatsu, Daifuku, Itochu, Nidec, and Kikkoman (🇯🇵Various JP - ¥1.78T to ¥350B) Systematic analysis of Japanese value opportunities highlighting five quality companies passing strict quantitative filters. Highlights include:
Komatsu: Construction equipment duopoly at 9.3x P/E with 4.3% dividend yield
Daifuku: World's #1 material handling automation with 8.7% revenue growth
Itochu: Buffett-backed trading house at 11.8x P/E with diversified global portfolio
Nidec: Electric motor leader at 19.6x P/E positioned for EV transition
Kikkoman: Global soy sauce leader at 20.1x P/E with 300-year brand moat
on Atlas Pearls (🇦🇺ATP AX - AUD$70 million) Deep value turnaround story in pearl farming benefiting from Chinese demand surge driven by social media influencer Ni Ni. Trading at P/E 4.67x and P/FCF 3.8x with 50% revenue growth and first dividend in 10 years at ~10% yield.
- The Rolls-Royce Turnaround Story Comprehensive analysis of Rolls-Royce Holdings' dramatic recovery from near-bankruptcy during COVID to 1,600% gains, highlighting the power of buying quality companies during periods of distress and the Long Term Service Agreement business model transformation. (8 min read)
- TSMC: And Then There Was One Deep technical analysis of TSMC's monopolistic position in advanced semiconductors, explaining why AI CapEx projections are likely too low and why Intel's 18A process is unlikely to meaningfully disrupt TSMC's dominance based on parametric yield analysis. (25 min read)
- OpenAI Has Started to Form a Moat Comprehensive analysis of how OpenAI is developing competitive advantages through rapid user adoption (400M to 800M MAUs), memory/personalization features creating vendor lock-in, and hardware ambitions within the critical 12-month window for AI market positioning. (12 min read)
- The Real Wolf of Wall Street Historical analysis of Stratton Oakmont beyond the Hollywood narrative, detailing the $200M fraud mechanics, boiler room culture, and lasting lessons for modern investors about pump-and-dump schemes and due diligence requirements. (25 min read)
- The Art of Execution Practical portfolio management framework distinguishing between "assassins" and "hunters" for managing losing positions, with specific 30% loss thresholds and Excel template for systematic rebalancing decisions. (12 min read)
- Portfolio Management: Trust the Process Framework for maintaining investment discipline during market volatility, introducing the "Inflection strategy" for identifying companies poised for free cash flow surprises and emphasizing experience over tools. (8 min read)
- Never Sell? Examination of the "never sell" philosophy using statistical evidence that only 4% of stocks create most market value, providing framework for when to sell positions while balancing mathematical benefits of compounding. (14 min read)
- The Dark Side of Stock-Based Compensation Critical analysis of how stock-based compensation has evolved from talent retention tool to shareholder value extraction mechanism, highlighting that software companies average 10% of revenue in SBC expenses. (8 min read)
- The Dawn of the Posthuman Age Analysis of how falling fertility rates globally combined with AI and digital connectivity are fundamentally reshaping human society, linking demographic collapse to economic stagnation and the shift to collective digital existence. (25 min read)
- From Burn Rates to Break-Even: Southeast Asia's $128 Billion Ecommerce Shift Analysis of Southeast Asia's ecommerce maturation from growth-at-all-costs to sustainable profitability, covering platform concentration and AI's projected $131B GMV contribution by 2030. (8 min read)
- What's Worked for Dirt Practitioner's guide to successful value investing with specific case studies including ECIP bank opportunities, Canadian wage subsidy plays, and hidden segment discoveries through "turning every rock" research methodology. (15 min read)
Another set of Q1 2025 letters covered the dramatic shift as Trump's tariff policies triggered widespread volatility. Emerging markets outperformed with China up 15% on DeepSeek AI developments, while the S&P 500 fell 4.3%. Fund managers emphasized stock selection and defensive positioning amid unprecedented trade uncertainty.
Voya MidCap Opportunities Fund: Mid-cap growth strategy underperformed Russell Mid Cap Growth Index in Q1 2025 due to stock selection effects. Real estate, consumer staples, and financials selection contributed while industrials and technology detracted. Letter discusses:
Trade Desk (🇺🇸TTD US - US$8 billion) - Existing Position: E-commerce trajectory concerns despite strong ad revenue growth weighing on Q1 performance
Astera Labs (🇺🇸ALAB US - US$12 billion) - Existing Position: Declined on DeepSeek announcement and tariff concerns affecting tech stocks
Tradeweb Markets (🇺🇸TW US - US$11 billion) - Existing Position: Strong 2024 earnings from share gains and favorable macro environment
Welltower (🇺🇸WELL US - US$31 billion) - New Position: Strong Q4 results driven by organic growth and higher senior housing occupancy
Inari Medical (🇺🇸NARI US - US$2 billion) - New Position: Acquired by Stryker at premium during Q1
Parsons Corp (🇺🇸PSN US - US$4 billion) - Existing Position: Weak Q4 earnings and defense budget cut concerns
Voya Small Company Fund: Small-cap core strategy outperformed Russell 2000 Index in Q1 2025 through stock selection in industrials, healthcare, and financials. Machine learning models actively managed volatility. Letter discusses:
Hims & Hers (🇺🇸HIMS US - US$2 billion) - Existing Position: Macro tailwinds from new administration and Super Bowl advertising success
Mueller Water Products (🇺🇸MWA US - US$6 billion) - Existing Position: Strong Q1 2025 earnings driven by solid operating momentum
ProAssurance (🇺🇸PRA US - US$1 billion) - Existing Position: Acquired by The Doctors Company in March at premium
Cohu (🇺🇸COHU US - US$1 billion) - Existing Position: Semiconductor industry pressure despite strong quality metrics
Steven Madden (🇺🇸SHOO US - US$3 billion) - Existing Position: Tariff headwinds from China/Mexico despite attractive valuation
Corcept Therapeutics (🇺🇸CORT US - US$3 billion) - New Position: Not owned, missed positive phase three ROSELLA results
East Capital: Emerging and frontier markets specialist with emerging markets returning 3% and frontier markets 8% in Q1 2025 versus S&P 500 down 4%. China standout performer up 15% driven by DeepSeek AI breakthrough ranking first globally and BYD's autonomous driving technology. Portfolio rotation from tech into high-quality non-tech names. Eastern Europe gained 31% led by Poland amid Ukraine conflict resolution signs.
Kennedy Capital Management: Mid-cap value composite returned -3.95% gross and -4.04% net in Q1 2025, underperforming Russell Midcap Value Index by 193 basis points net (index -2.11%). Information Technology and Consumer Discretionary sectors added 120 and 34 basis points while Industrials and lack of Utilities exposure detracted 108 and 74 basis points. Emphasizes disciplined valuation framework amid 20-40% small/mid-cap declines.
Focus Wealth Management: Multi-asset wealth management describing Q1 as "The Great American Reckoning" with Focus Fund returning 3.3% in Q1 2025. S&P 500 fell 4.3% and NASDAQ down 8.3% as Trump's tariff policies created uncertainty. Alternative investments providing portfolio ballast as designed with defensive fixed income positioning. Emphasizes bottom-up precision and active management approach.
Thanks to Buy Side Digest (buysidedigest.com) for compiling the investment letters which are featured here.
Currently, I feature free content and collaborate with select paid newsletters. If you're a writer producing insightful investment analysis, whether free or behind a paywall, I'd love to discuss potential features. What would you like to see in future editions? Let me know in the comments.
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 covering my blog again! Nice weekly!!
Thank you for mentioning Atlas Pearls, glad you find it an interesting read!