Giles Capital Weekly - Week 47
Welcome to another edition of Giles Capital Weekly. Markets continue their impressive run with the S&P 500 advancing 1.7% this week to bring its year-to-date gains to 25.9%. Software valuations are showing remarkable strength reminiscent of 2021, with companies like Snowflake and Elastic surging over 25% on decent earnings. Meanwhile, Asian markets present a study in contrasts - Prada trades at compelling valuations while Chinese markets show signs of life amid government stimulus measures.
Turning to individual opportunities, my top pick this week is Trinity Bank in Fort Worth, which offers a remarkable track record of conservative excellence, having maintained zero non-performing loans through the 2008 crisis while trading at one of its lowest valuations ever. I also want to reiterate my conviction in MercadoLibre (MELI), which I highlighted two weeks ago. The company continues to stand out as Latin America's dominant e-commerce and fintech platform, successfully replicating Amazon's ecosystem playbook with powerful local advantages in a region where banking and e-commerce penetration remain low.
Americas
Chief's Substack on CBL Properties (🇺🇸CBL US - $839 million) Recently emerged from bankruptcy, CBL trades at just 4.1x FFO versus peers at 12-17x. With occupancy improving and interest costs set to decline from recent Fed cuts, the 17% free cash flow yield looks increasingly attractive.
Capitalist Letters on MercadoLibre (🇺🇸MELI US - $142 billion projected by 2034) Dominant e-commerce and fintech platform in Latin America with strong network effects. Trading at compelling valuation given 20% projected revenue growth through 2034 and 15% net margin potential.
Rijnberk InvestInsights on Mondelez International (🇺🇸MDLZ US - $98 billion) - Global snacks leader trading at 16x EBITDA with potential for margin expansion through pricing power and cost efficiencies. Strong brands and emerging market exposure provide defensive growth.
The Mikro Kap on Trinity Bank (🇺🇸TYBT US - $103 million) - One-branch community bank with industry-leading efficiency ratio and conservative lending practices generating 17% EPS CAGR since inception. Trading at historically low valuation of 1.6x book value despite 11% ROIC.
The Finance Corner on Etsy (🇺🇸ETSY US - US$5.7 billion) Online marketplace facing significant challenges from low-quality dropshippers and declining buyer retention. Author estimates fair value at $3.2 billion based on slowing growth and margin pressure.
Idea Hive on Montero Mining (🇨🇦MON CN - C$18 million) Recent C$38 million settlement with Tanzania provides potential upside of 13%+ with expected capital returns by Q1 2025. Short timeline and sufficient margin of safety make risk/reward attractive.
Europe, Middle East & Africa
The European Investor on EssilorLuxottica (Part IV) (🇫🇷EL FP - €105 billion) - The final installment in an outstanding series analyzing the global eyewear leader. With 35-40% market share and a new Meta partnership for smart glasses, EssilorLuxottica continues to strengthen its dominant position. Despite its market leadership, the company trades at a reasonable 16x EBITDA with 5% projected annual free cash flow growth.
Rock & Turner on Ocado Group (🇬🇧OCDO LN - £3 billion) - Leading e-commerce technology provider transforming retail logistics through robotics and AI. Trading at EV/FCFF of 25-30x with Meta-style partnership potential in automated warehousing solutions.
Asia-Pacific
Asian Century Stocks on Prada (ðŸ‡ðŸ‡°1913 HK - US$18 billion) Trading at 14x EV/pretax profit, Prada offers compelling value with Miu Miu brand seeing 105% YoY growth and Google search trends up 85%.
Idea Hive on Murakami Corp, F.C.C. Co, Human Holdings, and Daiko Denshi (🇯🇵7292 JP - $383M | 🇯🇵7296 JP - $987M | 🇯🇵2415 JP - $95M | 🇯🇵8023 JP - $71M) Portfolio of deeply undervalued Japanese net-nets with significant catalyst potential. All trading below NCAV with substantial net cash positions and improving capital returns through increased buybacks and dividends.
Altay Capital on Mansei Corporation (🇯🇵7565 JP - $39 million) Consistently profitable net-net trading at 8.5x P/E with recent 29% share buyback. Strong balance sheet with 83% of market cap in net cash and proven track record of profitability.
The Great Wall Street on Alibaba (🇨🇳BABA US - US$180 billion) Chinese e-commerce giant showing steady progress in cloud transformation despite revenue growth slowdown. Management focusing on phasing out low-margin contracts to improve profitability.
SILVER BULLETIN - Why targeted tariffs are more effective than broad tariffs - Fascinating analysis of why surgical trade restrictions work better than blanket policies. Essential reading as trade tensions heat up again. (15 min)
Noahpinion - Four years of Noahpinion Thoughtful reflection on major themes of 2024 including Trump's election, AI development, and global liberalism. Offers valuable perspective on macro trends. (15 min)
Macro Mornings - Stagflation - the worst of both worlds Comprehensive overview of stagflation risks and investment implications. (10 min)
Panda Perspectives - The New Leap Forward - Comprehensive analysis of China's economic transformation and investment implications. Valuable macro context for portfolio positioning. (25 min)
Panda Perspectives - China Weekly Wrap - Comprehensive overview of Chinese markets with particular focus on A-share opportunities. Valuable context for understanding Asia's largest market. (20 min)
The International Investor - Blind Boxes and Billion-Dollar Dreams: Labubu Fever in the Lion City - Engaging exploration of the Pop Mart phenomenon and broader luxury retail trends in Asia. Fresh perspective on consumer behavior. (20 min)
UNCOVERALPHA - Nvidia's earnings and the LLM scaling laws slowdown? Must-read analysis of Nvidia's positioning as AI compute demands evolve beyond pre-training. Excellent discussion of competitive dynamics in inference. (30 min)
Tripping Point Profits - Why Nvidia Could Be a Victim of Its Own Success Sharp analysis of Nvidia's growth trajectory and the challenges of maintaining momentum. (15 min)
Rock & Turner - Anthony Deden's Investment Philosophy - Timeless wisdom from a legendary value investor focused on capital preservation and business quality. Required reading for serious investors. (30 min)
Excelsior Capital - The EPV Litmus Test Excellent primer on Earnings Power Value methodology and its applications in today's market. (12 min)
Kingswell - Warren Buffett's Reading List Insightful analysis of Keynes's influence on Buffett's investment philosophy. (15 min)
The Pareto Investor - This Unstoppable Crypto Will Beat Bitcoin Again in 2025 Deep dive into Solana's technological advantages and growth potential in the blockchain space. (15 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.