Giles Capital Weekly - Week 49

A Takigami Steel Construction Bridge in Japan

Welcome to another edition of Giles Capital Weekly. There has been an interesting contrast between surging AI enthusiasm and overlooked value opportunities in traditional industries. The AI revolution continues to reshape traditional businesses, with enterprise software valuations surging as companies race to integrate autonomous agents and machine learning capabilities. Meanwhile, Noah Smith's analysis highlights China's unprecedented 45% share of global manufacturing - a level of dominance seen only twice before in history. Against this backdrop of technological disruption and shifting global production patterns, we're also seeing fascinating developments in the luxury segment, suggesting continued resilience in high-end consumer spending despite broader macro uncertainties.

Turning to individual opportunities, my top picks this week come from two compelling companies trading at significant discounts to intrinsic value. Altay Capital's analysis of Takigami Steel Construction reveals an overlooked Japanese company trading at just one-third of its intrinsic value, with a portfolio of public securities and rental real estate worth ¥40.6 billion against a market cap of only ¥13.3 billion, while an activist investor holding 17.4% provides a clear catalyst. Meanwhile, Capitalist Letters presents SanLorenzo, a premium yacht manufacturer that has built an exceptional moat through decades of artisan supplier relationships, leveraging its position at the top of the luxury pyramid and €130 million cash position to potentially double shareholder value over the next five years as the ultra-high-net-worth population continues to expand.

Americas

• Excelsior Capital on Five Below (🇺🇸FIVE US - $10.2 billion) Unique retail concept with treasure hunt experience and expansion potential to 3,500 stores. Trading at 23.3x TTM P/E with strong unit economics and defensible moat against e-commerce.

• Rijnberk InvestInsights on Salesforce (🇺🇸CRM US - $346 billion) Leading enterprise AI provider with promising Agentforce platform and improving margins. Trading at 33x forward earnings with potential AI-driven growth acceleration.

• Elliot's Musings on Atkore (🇺🇸ATKR US - US$3.11 billion) - A short update on the leading electrical solutions provider facing near-term headwinds but trading at attractive 7.2x FY25 EV/EBITDA with potential for margin improvement above 17%.

• Value Don't Lie on Boeing (🇺🇸BA US - $116B) Industrial giant trading at 11x pre-COVID earnings with turnaround potential, though facing near-term headwinds from safety issues and labor challenges.

• Kairos Research on both Nubank and Dream Finders Homes (🇺🇸NU US - US$57.33 billion | 🇺🇸DFH US - US$2.85 billion) - Detailed examination of two growth stories: Brazil's leading fintech showing strong customer quality improvement alongside a rapidly growing homebuilder with impressive order book growth despite housing market headwinds.

• Stock Picker's Corner on both Dutch Bros and Hallador Energy (🇺🇸BROS US - $2.4B | 🇺🇸HNRG US - $220M) Fast-growing drive-thru coffee chain BROS with 60% gain in 10 weeks, and utility-in-making HNRG with planned power business transformation. Both showing special situation characteristics with BROS recently pulling back from growth concerns while HNRG is benefiting from operational improvements.

• Value Degen on both LendingTree and Mr. Cooper (🇺🇸TREE US - $550M | 🇺🇸COOP US - $3.7B) Mortgage-related plays positioned to benefit from potential rate cuts, with COOP trading at 11x P/E with strong servicing revenue and TREE offering torque to rate-cut scenario.

• Investment Ideas by Antonio on Netflix (🇺🇸NFLX US - US$399.56 billion) - Streaming giant demonstrates superior operational excellence with 24% trailing twelve-month net income margin and continued international growth opportunities.

Europe, Middle East & Africa

• Capitalist Letters on SanLorenzo (🇮🇹SL IM - €1.1 billion) Premium yacht manufacturer with exceptional pricing power and growing ultra-high-net-worth customer base. Trading at 15x earnings with potential to double in 5 years.

• Bill Huang's Stonks on Watches of Switzerland (🇬🇧WOSG LN - £2.1 billion) H1 2025 earnings update shows strong Q2 performance with 24% growth and new Rolex flagship stores opening in H2. Trading at 11x forward EV/FCF with significant expansion opportunities.

• Value Zoomer on JPEL Private Equity (🇬🇧JPEL L - $0.02B) UK-listed PE fund trading at 0.56x NAV with downside protection from $17.3M in hard assets and a defined timeline for value realization through liquidation.

Asia-Pacific

• Altay Capital on Takigami Steel Construction (🇯🇵5918 JP - ¥13.3 billion) A portfolio of public securities and rental real estate worth 3x market cap, combined with an activist investor holding 17.4%. Trading at 0.67x NAV with multiple catalysts for value realization.

• Sweet Stocks on M3 (🇯🇵2413 T - $6.8B) Digital healthcare platform leader trading at 4.4% FCF yield with strong core Japanese business generating 50% margins and successful global expansion.

• Idea Hive on SUTL Enterprise (🇸🇬BHU SG - S$61 million) - High-quality marina operator trading at 8x P/E with 7% dividend yield, benefiting from strong pricing power and growing demand for luxury yacht services in Asia.

• Macro Mornings - Will the US Economy Continue to Outperform in 2025? - Comprehensive analysis of US economic prospects, examining GDP outlook, trade tensions, and monetary policy shifts. Essential reading for understanding the macro landscape heading into 2025. (15 min read)

• Value Degen - Will Trump Bull-Moose a 5.5% 30-year Mortgage? Provocative analysis of potential housing market implications from a second Trump presidency. Important considerations for real estate-related investments. (20 min read)

• Silver Bulletin - Part I: Democrats' risk-aversion helped to re-elect Trump Fascinating post-mortem on the Harris campaign's strategic missteps and broader Democratic establishment challenges. Essential reading for understanding the political landscape heading into 2025. (25 min read)

• Panda Perspectives - The Death of Mercantilism Thoughtful analysis of how recent geopolitical events signal the end of traditional mercantilist economic models, with implications for global trade and investing. (20 min read)

• Noahpinion - Manufacturing is a war now Compelling analysis of China's manufacturing dominance and its implications for global strategic competition. Key insights on industrial policy and economic security. (20 min read)

• The Great Wall Street - How Is China Doing After the Stimulus? Comprehensive analysis of China's recent stimulus measures through the lens of company statements and economic trends. Valuable insight into the world's second-largest economy. (20 min read)

• Praya's Substack - Secrets of Pinduoduo's success: Letters from the founder Rare English translations of founder letters providing deep insight into one of China's most successful e-commerce companies. Essential reading for understanding Chinese tech. (35 min read)

• MileHighMonk - Trip.com: The winner in Asia's travel market - Excellent deep dive into Trip.com's competitive advantages in the Asian travel market and its expansion strategy. Essential reading for understanding the evolving travel industry dynamics in Asia. (20 min read)

• East Asia Stock Insights - Japan vs Big Tech - Fascinating analysis of Japan's growing digital trade deficit and its implications for national competitiveness. Offers unique insights into the challenges faced by developed economies in maintaining digital sovereignty. (15 min read)

• A Letter a Day - Chris Paik (2024) - Thought-provoking discussion about the future of software development and the potential impact of AI on the tech industry. Offers valuable perspective on technological disruption and career implications. (30 min read)

• Rock & Turner - Domino's & Kroger | Retail Robotics Pt. 2 Fascinating exploration of how traditional retailers are embracing automation and AI to transform their businesses. Important insights on the intersection of tech and retail. (25 min read)

• Space Ambition - Mega Science Projects: Current Funding Issues Deep analysis of large-scale scientific initiatives and their implications for both public funding and private investment opportunities. Essential context for understanding long-term innovation drivers. (30 min read)

• Quipus Capital - A basic framework for growth stocks and industries Excellent deep dive into evaluating growth companies, dealing with uncertainty, and understanding qualitative factors. Essential reading for anyone investing in high-growth sectors. (25 min read)

• Flyover Stocks - Economic Moats Explained: What They Are & Why They Matter Final part of an excellent series on competitive advantages, focusing on management's role in maintaining and widening moats. Highly relevant for long-term investors. (12 min read)

• Generative Value - A Deep Dive on the Power Law Fascinating analysis of how the Power Law affects both venture capital and public market returns, with data spanning decades. Essential reading for understanding return distributions. (15 min read)

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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.