Giles Capital Weekly - Week 29
Welcome to another edition of Giles Capital Weekly. Markets grapple with earnings season uncertainties and tariff risks with the S&P 500 eking out just 0.1% gains despite breaking 6,300 for the first time. This week's content reveals compelling opportunities in both AI transformation and classic deep value situations across global markets.
My top picks for this week are both SaaS companies demonstrating different paths to growth: highlights Semrush Holdings (SEMR), the deeply undervalued platform capitalizing on AI search evolution with enterprise transition momentum, while covers Pinewood Technologies (PINE.L), a post-spinoff software company with clear expansion catalysts that could quintuple its customer base within five years.
Before diving into this week's newsletter…
Americas
on Centene Corp (🇺🇸CNC US - US$40 billion) Medicaid health insurer trading at distressed valuations after $1.8B risk adjustment hit, offering 4.7x EV/FCF and 14.2% ROE with strong balance sheet providing downside protection through $34B investment portfolio.
on Robinhood (🇺🇸HOOD US - US$15 billion) Short thesis based on cyclical revenue dependence with options and crypto representing 84% of revenue, trading at 57x P/E with vulnerability to rate cuts and declining retail trading activity.
on AAON (🇺🇸AAON US - US$8 billion) HVAC equipment manufacturer with strong BASX data center segment growing 40% CAGR and $625M backlog (+123% YoY), though trading at elevated 40x P/E with customer concentration concerns.
on Compania Cervecerias Unidas (🇨🇱CCU Santiago - US$3 billion) Chilean beer market leader with 70% domestic market share and Argentine optionality, trading at historical lows while benefiting from copper price tailwinds and 33% Argentine market position.
on Semrush Holdings (🇺🇸SEMR US - US$1.8 billion) SaaS SEO platform leader with 82-83% gross margins transitioning from SMB to enterprise, driving 15x ARPU uplift from $3.6K to $55K per customer as Enterprise SEO reaches $11M ARR with fastest-growing AI product (AIO) in company history.
on Babcock & Wilcox (🇺🇸BW US - US$400 million) Power generation engineering company moving from distressed to solvent with 43% debt reduction and positive cash flow expected, trading at 6.4x EV/EBITDA with improving operational leverage.
on Woodbridge Liquidation Trust (🇺🇸WBQNL US - US$180 million) Liquidation play offering 15% potential return with $3.54 per share value versus $3.07 market price, H1 2026 timeline providing defined catalyst despite legal risk factors.
Europe, Middle East & Africa
on ASML Holding (🇳🇱ASML Amsterdam - €350 billion)
EUV lithography monopoly with zero competition, benefiting from AI chip demand with Q2 revenue growth of 23% YoY and 2030 revenue target of $60B representing 16% annualized returns, though management remains conservative on 2026 outlook.on ASML Holding (🇳🇱ASML Amsterdam - €350 billion)
An additional write-up on the EUV lithography leader highlighting Q2 beat with net bookings doubling versus Q1, 2nd-Gen High-NA EUV machines offering 60% productivity boost, and €1.4B in share buybacks despite geopolitical uncertainties.on Evolution Gaming (🇸🇪EVO Stockholm - €20 billion)
Live casino gaming leader with Q2 revenue beat showing North America acceleration at 22.8% YoY growth, maintaining 65.9% EBITDA margins and 7.9% FCF yield despite facing Europe/Asia headwinds.on Bureau Veritas (🇫🇷BVY Paris - €18 billion)
Testing, inspection & certification leader with regulatory moat benefiting from ESG compliance growth trends, trading at 19x forward P/E with expected 11% returns (8% growth + 3.3% yield) and disciplined capital allocation.on JD Sports Fashion (🇬🇧JD London - £7 billion)
Global sportswear retailer with 6.5% global market share and aggressive expansion strategy, trading at attractive 7.3x forward P/E ahead of FIFA World Cup 2026 catalyst with strong positioning in football merchandise.on Ambu S/A (🇩🇰AMBU-B Copenhagen - DKK 23 billion)
Danish single-use medical devices leader with 12.9% revenue growth and 87% free cash flow improvement, benefiting from post-COVID hygiene trends with 14.4% EBIT margin expansion and 5.75% ROA.on Wise vs Adyen (🇬🇧WISE London - £8 billion | 🇳🇱ADYEN Amsterdam - €40 billion) Fintech comparison with Wise scoring 93.3 Investment Readiness Score versus Adyen's 90.5, highlighting Wise's superior 5.4% FCF yield compared to Adyen's 3.4% in challenging payment processing environment.
on Synektik (🇵🇱SYN Warsaw - PLN 2 billion) Dual moat business combining exclusive da Vinci surgical robot distribution with proprietary radiopharmaceutical production featuring 110-minute decay window, though facing 90% Poland revenue concentration risk.
on Pinewood Technologies (🇬🇧PINWF US - US$475 million) Post-Pendragon spinoff SaaS dealership management software company targeting $10M breakeven revenue with Lithia Motors US expansion opportunity from 155 to ~800 customers, plus VW Japan 5-year agreement adding 350 dealerships.
on NextEnergy Solar Fund (🇬🇧NESF London - £350 million) UK solar energy REIT offering 11.5% dividend yield while trading at 23% discount to NAV (73.4p vs 95.1p), backed by government net zero policies and recent asset sales above NAV providing validation.
on CakeBox Holdings (🇬🇧CKX AIM - £45 million) UK celebration cake franchise targeting 25 store openings annually post-Ambala Foods acquisition, showing 13% revenue growth with 3.9% like-for-like growth and France expansion opportunity at 14-15x P/E. (Article in Spanish)
on Mobilicom Limited (🇮🇱MOB Nasdaq - $11.5 million) Israeli drone cybersecurity company with US Blue List approval and $8.6M cash position, targeting two major Program of Record wins in H2 2025 with 60-90% gross margins and growing defense market opportunity.
Asia-Pacific
on Taiwan Semiconductor (🇹🇼TSM US - US$1 trillion) World's leading foundry with 90%+ advanced node market share targeting 16% annualized returns, with leading-edge processes representing 74% of revenue and 44% YoY revenue growth driven by AI chip demand acceleration.
on Taiwan Semiconductor (🇹🇼TSM US - US$1 trillion) A complementary analysis reinforcing bullish sentiment through Q2 earnings review showing 30% YoY revenue growth, 3nm technology capturing 24% of sales, and gross margin expansion to 58.6% as AI demand drives premium pricing.
on Taiwan Semiconductor (🇹🇼2330 Taipei - NT$22 trillion) A contrarian perspective highlighting the world's largest foundry with 60% leading-edge market share, Apple as largest customer, and structural competitive advantages in 3nm technology despite geopolitical concerns.
on 360 Capital REIT (🇦🇺TOT ASX - AUD$280 million)
Australian office REIT trading at 30% discount to NAV with 93% occupancy, 7-year weighted average lease expiry, and 83% government/public company tenants offering 13% forward yield amid return-to-office trends.on Ai-Media Technologies (🇦🇺AIM ASX - AUD$180 million)
Live captioning technology leader with 80% US market share in encoders and 55% in iCAP network, transitioning to high-margin AI solutions with 85% SaaS gross margins and 70% hardware margins.on YY Group (🇸🇬YYGH Nasdaq - US$106 million) Platform connecting businesses with workers across Southeast Asia, growing 29% revenue but burning cash in expansion phase, trading at 2.5x P/S versus 6.8x peer multiple.
on Create Medic (🇯🇵5187 Tokyo - ¥6.8 billion) Japanese catheter manufacturer trading as net-net with aging demographics tailwind, targeting overseas expansion to 50% of sales by 2034 while benefiting from government-promoted home medical care expansion.
on Tokyo Automatic Machinery (🇯🇵6360 Tokyo - ¥4 billion) Deep value net-net trading at 0.4x P/B with NCAV+ investments of ¥5,220 vs ¥2,885 share price, management targeting 1x P/B and 30% dividend payout ratio with prime Tokyo real estate worth ¥1.6B.
- How It's Done Pentagon's strategic $400 million investment in MP Materials rare earth processing capabilities, analyzing the intersection of national security and critical mineral supply chains. (20 min read)
- The AI & Healthcare Opportunity Comprehensive analysis of AI's potential $1 trillion administrative opportunity in healthcare, highlighting specific company examples and transformation pathways from claims processing to clinical documentation. (45 min read)
- Betting on GLP-1 Deep dive into the GLP-1 market opportunity with 12-stock portfolio construction methodology, projecting $130 billion market by 2030 across obesity, diabetes, and emerging therapeutic applications. (28 min read)
- Decoding the Restaurant Tech Stack Comprehensive restaurant technology ecosystem analysis covering POS systems, delivery platforms, labor management, and emerging AI applications reshaping the $900 billion industry. (35 min read)
- Large Cap Tech AI Strategies in Flux In-depth analysis of Microsoft-OpenAI partnership tensions and Meta's aggressive $14 billion Scale.AI acquisition strategy, highlighting shifting competitive dynamics in enterprise AI. (25 min read)
- The Forgotten Genius Von Neumann's mathematical principles applied to investing strategy, covering minimax optimization, Monte Carlo simulation, and self-improving systems with practical portfolio construction insights. (22 min read)
- The Taxi Cab Theory of Venture Capital Thoughtful analysis of venture capital incentive misalignment and the difference between consensus-driven versus conviction-based investing, with implications for startup ecosystem health. (25 min read)
- Interview with Myles Kuah Survivor winner shares investment insights and small-cap strategies, offering personal perspective on navigating markets and identifying opportunities in overlooked segments. (7 min read)
- On a Review of H1 2025 Professional fund manager's candid H1 2025 performance review with individual position updates, market outlook, and lessons learned from both successful and unsuccessful investments. (25 min read)
Q2 2025 saw volatile markets driven by Trump's Liberation Day tariff policy and mixed macro signals. Despite initial uncertainty, most funds delivered solid performance through AI themes and defensive positioning. Common concerns included market concentration risks and opportunities in dividend stocks.
Madison Dividend Income Fund: Dividend strategy returned +1.1% in Q2 and +4.3% YTD. Fund maintains 2.6% yield with 87% of holdings rated A- or better. Management sees dividend stocks trading at attractive valuations with relative yield at 2.1x S&P 500. Letter discusses:
CME Group Inc (🇺🇸CME US - US$35 billion) - Existing Position: Derivatives exchange benefiting from market volatility and clearing services
Automatic Data Processing (🇺🇸ADP US - US$110 billion) - Existing Position: Payroll services leader with recurring revenue model
Blackrock Inc (🇺🇸BLK US - US$105 billion) - Existing Position: Asset management giant benefiting from ETF growth trends
Morgan Stanley (🇺🇸MS US - US$180 billion) - Existing Position: Investment bank with strong wealth management division
Honeywell International Inc (🇺🇸HON US - US$145 billion) - Existing Position: Industrial conglomerate with aerospace and automation exposure
Madison Mid Cap Fund: Mid-cap strategy returned +5.2% in Q2 versus Russell Midcap +8.5%. Technology holdings drove outperformance with strong AI-related semiconductor results. Added Medpace Holdings CRO investment. Portfolio turnover 16%. Letter discusses:
Amphenol Corp (🇺🇸APH US - US$65 billion) - Existing Position: Connector manufacturer benefiting from 33% organic revenue growth in AI datacenters
Microchip Technology (🇺🇸MCHP US - US$45 billion) - Existing Position: Semiconductor company positioned for cycle recovery with CEO predicting bottom
Arista Networks (🇺🇸ANET US - US$85 billion) - Existing Position: Networking equipment leader for AI infrastructure with strong profitability growth
MKS Instruments (🇺🇸MKSI US - US$8 billion) - Existing Position: Semiconductor equipment supplier showing signs of end market pickup
Medpace Holdings (🇺🇸MEDP US - US$12 billion) - New Position: Contract research organization with 18% founder ownership targeting small biotech
Ariel Global Fund: Global value strategy returned +7.38% in Q2 versus MSCI ACWI +11.53%. Added seven new positions while maintaining contrarian approach. Strong performance from Tesco and SK Hynix offset weakness in JD.com. Letter discusses:
Tesco PLC (🇬🇧TSCO LN - £25 billion) - Existing Position: UK food retailer gaining market share despite pricing competition pressures
SK Hynix Inc (🇰🇷000660 KS - US$85 billion) - Existing Position: Memory semiconductor leader with 2025 HBM supply sold out to Nvidia
Lasertec Corporation (🇯🇵6920 JP - US$15 billion) - New Position: Monopoly provider of EUV inspection systems for semiconductor manufacturing
Walt Disney Company (🇺🇸DIS US - US$175 billion) - New Position: Targeting Disney+ growth and streaming margin expansion
Banco Bilbao Vizcaya Argentaria (🇪🇸BBVA SM - US$45 billion) - New Position: Spanish bank with leading Mexico presence benefiting from nearshoring trends
Hardman Johnston Global Equity: Global equity strategy returned +16.72% net in Q2 versus MSCI AC World +11.53%. Europe was top contributing region with defense and industrial themes performing well. Added Commerzbank, UnitedHealth, Hitachi, and ICICI Bank. Letter discusses:
Howmet Aerospace Inc (🇺🇸HWM US - US$25 billion) - Existing Position: Aerospace components manufacturer with margins exceeding targets and strong aftermarket demand
Rheinmetall AG (🇩🇪RHM GR - US$25 billion) - Existing Position: German defense contractor benefiting from European rearmament with robust order flow
Taiwan Semiconductor (🇹🇼TSM TT - US$650 billion) - Existing Position: Leading foundry with monopoly in advanced nodes and 2Q sales beat expectations
MercadoLibre Inc (🇦🇷MELI US - US$85 billion) - Existing Position: Latin American e-commerce leader with 1Q Argentina recovery offsetting Brazil investments
Prosus NV (🇳🇱PRX NA - US$85 billion) - Existing Position: Investment company achieving first positive free cash flow of $1 billion with margin improvements
ROCKLINC Partners Fund: Canadian-focused strategy returned +12.01% in Q2 versus S&P/TSX +7.78%, driven by precious metals royalty companies. Emphasizes resource boom from AI energy demands and nuclear renaissance. Added Protexxa cybersecurity investment. Letter discusses:
Cameco Corporation (🇨🇦CCO CN - CAD$25 billion) - Existing Position: World's second-largest uranium producer with 17% market share benefiting from nuclear energy revival
Franco-Nevada Corporation (🇨🇦FNV CN - CAD$30 billion) - Existing Position: Gold royalty company up 40.4% YTD benefiting from precious metals price strength
Wheaton Precious Metals (🇨🇦WPM CN - CAD$25 billion) - Existing Position: Silver streaming company gaining 61.0% YTD from metals price appreciation
Trisura Group (🇨🇦TSU CN - CAD$1.5 billion) - Existing Position: Specialty insurance company representing 10.5% of portfolio with strong underwriting metrics
Brookfield Corporation (🇨🇦BN CN - CAD$65 billion) - Existing Position: Alternative asset manager with infrastructure focus representing 8.5% of portfolio
L1 Capital International Fund: Global equity strategy returned +4.5% in Q2 versus benchmark +6.0%. Performance impacted by Liberation Day tariff uncertainties. Emphasizes quality businesses with pricing power while avoiding overvalued AI names. Letter discusses:
AerCap Holdings (🇮🇪AER US - US$12 billion) - Existing Position: Aircraft leasing company benefiting from strong aviation recovery and tight aircraft supply
Booking Holdings (🇺🇸BKNG US - US$130 billion) - Existing Position: Online travel platform with dominant market position in European hotel bookings
Microsoft Corp (🇺🇸MSFT US - US$3.1 trillion) - Existing Position: Maintaining AI leadership despite announcing 4% workforce reduction
Jacobs Solutions (🇺🇸J US - US$15 billion) - New Position: Engineering services provider targeting infrastructure and life sciences with 12.8% EBITDA margins
Mastercard Inc (🇺🇸MA US - US$410 billion) - Existing Position: Benefiting from digital transaction growth and pricing power
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, appreciate it!
Thanks for the mention!