Giles Capital Weekly - Week 45
Welcome to another edition of Giles Capital Weekly. What a week. Trump's victory in the presidential election sent shockwaves through the markets. Remember last week's discussion of potential systematic polling errors? While Ann Selzer's highly-respected Iowa poll showed Harris ahead by 3 points, AtlasIntel's contrarian swing state surveys proved more accurate. Our analysis of Nate Silver's historical tendency to underestimate Trump's performance both in 2016 and 2020 suggested this pattern would likely repeat with unchanged polling methodologies. And repeat it did. The Fed's quarter-point rate cut, announced just 48 hours after Trump's victory, has created an especially dynamic market environment. In spite of this we're seeing some intriguing opportunities emerge in the wake of these events.
My top picks this week come from Best Anchor Stocks' analysis of Amazon and Rijnberk InvestInsights' deep dive into MercadoLibre. Amazon's Q3 demonstrated strong margin expansion, reaching nearly 19%, while committing significant capital to AI infrastructure for 2024. Meanwhile, MercadoLibre's recent selloff looks overblown given the company's record quarterly user growth, while its fintech segment grew over 20% year-over-year in a region where e-commerce penetration remains at just one-third of U.S. levels.
Americas
Best Anchor Stocks on Amazon’s Q3 2024 (🇺🇸AMZN US - $1.54 trillion) E-commerce giant growing GMV at double digits with margin expansion story intact, reinvesting heavily in AI infrastructure with $75 billion planned capex for 2024.
Rijnberk InvestInsights on MercadoLibre (🇺🇸MELI US - $107 billion) Latin American e-commerce leader trading at 40x forward earnings with robust growth prospects in both commerce and fintech.
Value Don't Lie on Curbline Properties (🇺🇸CURB US - US$2.3 billion) Recently spun off from REIT Site Centers, Curbline offers a differentiated real estate portfolio with $800M in cash and zero debt. Trading at 0.23x sales with significant acquisition capacity ahead.
Value Degen on The ONE Group (🇺🇸STKS US - US$106 million) Luxury restaurant group trading at less than 1x EBITDA following transformational acquisition of Benihana. Revenue run rate approaching $1 billion with significant margin expansion potential.
StockOpine on PayPal (🇺🇸PYPL US - US$65.6 billion) Fintech giant showing improving transaction margins despite top-line pressure. Trading at historically low multiples with significant potential from Braintree's turnaround.
Excelsior Capital on Global Payments (🇺🇸GPN US - $106 billion) Payments processor trading at 11.5x earnings with 42% EPS growth projected for FY25, benefiting from margin improvement initiatives.
Value Zoomer on Grindr (🇺🇸GRND US - US$2.85 billion) Dating app powerhouse with 35% annual revenue growth and 40% ROIC. Network effects and strong moat in targeted demographic suggest premium valuation is justified.
Value Degen on EZCORP (🇺🇸EZPW US - US$632 million) Pawnbroker with significant Latin American expansion opportunity trading at 0.86x sales. Rising gold prices provide unexpected tailwind to inventory value.
Stock Picker's Corner on Iridium (🇺🇸IRDM US - $4.8 billion) From their latest Weekender edition: Satellite communications leader with compelling risk/reward profile, featuring 140% projected five-year earnings growth and expanding tech partnerships.
Rijnberk InvestInsights on Starbucks (🇺🇸SBUX US - $107 billion) The coffee giant trading at 32.5x earnings with new CEO Brian Niccol leading turnaround efforts focused on operational efficiency and customer experience.
Wolf's Substack on KITS Eyecare (🇨🇦KITS CN - US$300 million) E-commerce eyewear retailer showing 34% Q3 revenue growth. Margins under pressure but strong revenue trajectory continues.
Wolf's Substack on Enterprise Group (🇨🇦E CA - C$96 million) Energy services provider trading at 3x TTM revenues with 17% net income margins despite recent quarterly disappointment.
Koneko Research on Dream Office (🇨🇦D.UN CN - C$620 million) First-hand property tour reveals significant progress on Bay Street Collection improvements, trading at substantial discount to NAV.
Europe, Middle East & Africa
Sweet Stocks on Campari (🇮🇹CPR MI - US$8.1 billion) Despite recent profit warning and CEO departure, Campari maintains strong fundamentals with key brands showing resilience. Trading at <20x forward P/E, below historical averages.
Superfluous Value on S4 Capital (🇬🇧SFOR LN - US$230 million) Digital advertising firm trading at 0.23x 2023 sales with improving operational metrics. Recent selloff provides attractive entry point despite leverage concerns.
Undervalued and Undercovered on Titan Cement (🇬🇷TITK GA - US$3.1 billion) Cement producer planning US assets listing worth €3.36 billion, exceeding current enterprise value. European operations effectively free at current valuation.
Invariant on Haypp Group (🇸🇪HAYP SS - SEK 4.5 billion) Leading European nicotine products retailer trading at 11x EV/EBITDA with significant growth potential despite temporary US market challenges.
Rock & Turner on Nexus Infrastructure (🇬🇧NEXS LN - £12.2 million) Infrastructure services provider with 50% upside potential following US asset listing and European growth opportunities.
Northwest Frontier Capital on YouGov (🇬🇧YOU LN - £1.3 billion) Market research leader trading at 11.5x with clear visibility into FY25 estimates driven by CPS acquisition synergies.
Bos Invest on Ebro Foods (🇪🇸EBRO SM - €13.5 billion) World's largest rice producer trading at 13.5x earnings benefiting from lower commodity prices and margin expansion.
Asia-Pacific
Weighted Capital on Lever Style (ðŸ‡ðŸ‡°1346.HK - HK$0.3 billion) Platform connecting brands to Asian garment factories, benefiting from Trump tariffs and shift to high-mix low-volume manufacturing. Company targets doubling revenue every 3 years.
Silver Bulletin - The model exactly predicted the most likely election map Fascinating breakdown of how Nate Silver's model nailed the electoral outcomes, with important lessons about polling error correlation. (15 min)
Silver Bulletin - The story of Trump's win was foretold in New York City Sharp analysis of voting patterns in NYC and their broader implications for economic policy. (12 min)
Noahpinion - Americans hate inflation more than they hate unemployment Noah Smith delivers a compelling analysis of why inflation remains such a powerful political force. (12 min)
Finbite Insights - What's Next After Trump's Victory? Key Insights for Investors Clear-eyed analysis of potential policy impacts on markets, rates, and international trade following the election results. (15 min)
The Net Worth Club - What a Trump Victory Means for Commodities Thoughtful analysis of gold, oil, and copper prospects under the new administration. (8 min)
The International Investor - Southeast Asia Poised for New Gains and Risks Under Trump's Trade Agenda Detailed analysis of how Southeast Asian economies might navigate and potentially benefit from Trump's trade policies. (20 min)
Panda Perspectives - The Trump Effect Compelling analysis of how Trump's return could lead to a potential grand U.S.-China deal, with implications for currency markets and trade. (15 min)
Leonid Mironov - China and the British Disease Insightful perspective on China's cautious approach to stimulus and the historical parallels with Britain's economic evolution. Essential context for China investors. (12 min)
Moatless Capital - China: Government Fiscal Operations 101 A refreshingly clear explanation of Chinese fiscal policy mechanisms, perfect timing given the upcoming NPC meeting announcements. (10 min)
The Great Wall Street - There's No Free Lunch—Some People Even Pay Twice Sharp analysis of behavioral biases in investing, with particular focus on China-related misconceptions. (8 min)
Generative Value - The AI Semiconductor Landscape Comprehensive overview of the AI chip market's competitive dynamics, with detailed analysis of training vs. inference opportunities. Required reading for anyone investing in the semiconductor space. (25 min)
Generative Value - Q3 '24 Hyperscaler Update: CapEx Growth Continues Deep dive into cloud infrastructure spending trends. Crucial for understanding tech sector dynamics. (15 min)
Quality Stocks - Healthcare: the Next Frontier in Powering AI Fascinating exploration of AI's impact on healthcare, focusing on bioprocessing tools and fill & finish companies as asymmetric opportunities. (20 min)
Quality Investing with René Sellmann - The Bubble Quietly Forming in Quality Stocks! Important warning signs about valuation excesses in quality names. Must-read for value investors. (10 min)
Kingswell - More Than Meets The Eye: Berkshire Hathaway's Q3 2024 Earnings Report Thoughtful analysis beyond the headlines, particularly regarding Berkshire's growing cash position and strategic rationale for continued Apple sales. (18 min)
Quality Stocks - Valuation Ratios and the Overlooked Role of Margin Evolution Original analysis of how margin trends influence valuations across different sectors, with practical implications for investment decision-making. (15 min)
Excelsior Capital - A Deep Dive Into Earnings Quality Fascinating exploration of Professor Doron Nissim's research on earnings sustainability and its implications for valuation. Particularly relevant in today's environment of aggressive accounting adjustments. (20 min)
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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.