Giles Capital Weekly - Week 38
Welcome to another edition of Giles Capital Weekly. The Fed's 0.5% rate cut has stirred the markets, while Kamala Harris gains ground in post-debate polls. Amidst these macro shifts, I’d like to highlight some intriguing write-ups. Alex Sweet's deep dive into Watches of Switzerland uncovers the potential in this out-of-favour luxury retailer. Meanwhile, Koneko Research makes a compelling case for Melcor Developments, a Canadian real estate firm trading below book value.
My personal favourite this week is Idea Hive's multi-part series on metallurgical coal. They kick things off with a thorough examination of why met coal producers deserve a closer look. From supply constraints to stable demand projections, there's more to this sector than meets the eye.
Americas
Idea Hive on Pioneer Power Solutions and WideOpenWest(🇺🇸PPSI US - US$72 million, 🇺🇸WOW US - US$415 million) Pioneer Power Solutions is trading at 15x P/E despite 50% topline growth in recent years. WideOpenWest, a cable and fiber overbuilder, is currently undergoing a privatization process at a significant discount to NAV. Both companies offer attractive risk-reward profiles in their respective sectors.
Special Situation Investing on Garrett Motion, Mesabi Trust, and FRMO Corp(🇺🇸GTX US - US$1.8 billion, 🇺🇸MSB US - US$282 million, 🇺🇸FRMO US - US$244 million) This trio of special situations offers diverse opportunities: Garrett Motion trades at a 14% free cash flow yield with potential for re-rating as it improves its credit profile; Mesabi Trust recently won a significant lawsuit representing 30% of its market cap; and FRMO Corp provides unique exposure to Texas water rights and Permian Basin land.
Koneko Research on Melcor Developments(🇨🇦MRD CN - US$310 million) Melcor Developments, a Canadian real estate company, is trading at a significant discount to its NAV. With a strong track record of compounding book value and a dividend yield over 3%, the stock offers an attractive opportunity in the Alberta real estate market.
Investment Ideas by Antonio on Netflix(🇺🇸NFLX US - US$177 billion) Netflix's turnaround showcases the power of organizational excellence and customer focus. With operating margins reaching 27.23% in Q2 2024, up from 7% in Q4 2022, the company is trading at an attractive valuation given its growth prospects.
Europe, Middle East & Africa
Sweet Stocks on Watches of Switzerland(🇬🇧WOSG LN - US$1.2 billion) Watches of Switzerland is trading at an undemanding 9.4x P/E despite its strong position in the luxury watch market. With successful US expansion and potential for margin improvement, the stock appears undervalued.
Emerging Value on SDI(🇬🇧SDI LN - US$75 million) SDI, a small-cap serial acquirer in the scientific and sensors industries, is trading at 8-10x stabilized earnings. With a track record of successful acquisitions and organic growth, the company offers an attractive risk-reward profile.
Dungeon Investing on Games Workshop(🇬🇧GAW LN - US$3.1 billion) Games Workshop's strong IP and growing licensing revenue present an attractive investment opportunity. With the success of video game adaptations and potential for mainstream breakthrough, the company's current valuation may underestimate its long-term potential.
InvestingWithWes on Next PLC(🇬🇧NXT LN - US$8.2 billion) Next PLC is trading at a forward P/E of 13.8x with a 2% dividend yield. The company's strong e-commerce presence and resilient business model make it an attractive investment in the UK retail sector.
Robin Research on Nagarro SE(🇩🇪NA9 GR - US$1.5 billion) Nagarro SE, a digital engineering specialist, is trading at 10.5x EV/2024 sales with projected 15% growth. The company's focus on high-growth markets and improving margins make it an attractive investment in the IT services sector.
Asia-Pacific
Investing in China on Baidu(🇭🇰9888 HK - US$34 billion) Baidu is trading at a P/E ratio of 11 with a forward P/E of about 8. Despite concerns about the company's ability to capitalize on new opportunities, its strong position in the Chinese search market and investments in AI present potential upside.
Idea Hive - Exploring The Met Coal Industry: Part 1 A fantastic deep dive into the metallurgical coal industry, exploring supply constraints, demand drivers, and potential investment opportunities. A must-read for anyone interested in commodity investments. (Estimated reading time: 25 minutes)
The International Investor - Asia's Skyrocketing Airport Boom: Shaping the Future of Travel An in-depth analysis of the booming airport industry in Asia, highlighting investment opportunities in airport operators, suppliers, and related sectors. The article provides valuable insights into the long-term growth potential of the Asian travel market. (Estimated reading time: 20 minutes)
Silver Bulletin - Harris is gaining in post-debate polls Nate Silver's analysis of recent polling data shows Kamala Harris gaining ground following the presidential debate. While not directly investment-related, this piece offers valuable insights into the potential political landscape, which could impact various sectors and market sentiment. (Estimated reading time: 12 minutes)
Noahpinion - Harris needs to be Pennsylvania fracking's biggest champion A thought-provoking piece on the political and economic implications of fracking in Pennsylvania. This article offers valuable context for those interested in energy policy and its potential market impacts. (Estimated reading time: 15 minutes)
Flyover Stocks - Economic Moats Explained: What They Are & Why They Matter - Part IV An insightful exploration of economic moats and their importance in value investing. The article provides a framework for assessing a company's competitive advantages and long-term potential. (Estimated reading time: 20 minutes)
Currently, I’m only featuring free content. If you're a writer producing free, insightful investment analysis and would like to be considered for inclusion, feel free to reach out. What would you like to see in future editions? Let me know in the comments.
Disclaimer: This newsletter is for informational purposes only and does not constitute investment advice. All opinions expressed are those of the quoted authors and do not necessarily reflect the views of the newsletter creator. Always do your own research before making investment decisions.
Thank you for including The International Investor! 🙏