Giles Capital Weekly - Week 51
Welcome to another edition of Giles Capital Weekly. As 2024 draws to a close, we're seeing remarkable market dynamics: the S&P 500 has reached record highs and Bitcoin has surged past $96,000. Against this backdrop, Berkshire Hathaway maintains its largest cash position since 2005, holding $325 billion (25% of assets). Though the markets celebrated the 0.25% rate cut, Fed officials have expressed more caution about future reductions than investors anticipated. My reading this week points to a potential shift away from the ultra-low rate environment that characterized the past decade. In the tech sector, Broadcom's latest earnings showcase AI's growing enterprise impact, with AI-related revenue soaring 150% year-over-year to $3.7 billion. Additionally, Google's recent Gemini demonstrations reveal not only their AI prowess but also the fundamental challenges facing their core search business.
My top picks for this week showcase two innovative companies transforming their respective industries. From Rock & Turner Investment Analysis, Haivision (HAI CN) stands as a leader in mission-critical video streaming with impressive 73.5% gross margins and proven 19.3% revenue CAGR. Their strong IP portfolio and government/defense relationships create significant barriers to entry, while expansion into cloud services points to even higher margins ahead. From Double Alpha Factory, GBank (GBFH) emerges as a compelling convergence of traditional banking (ROE ~20%) and fintech innovation, with their patented casino payment solutions and Konami partnership positioning them to capture a significant share of the $40B+ casino cash management market.
Americas
Long-term Investing on Broadcom (🇺🇸AVGO US - US$1 trillion) Detailed analysis of Broadcom's strong Q4 results with 150% YoY AI revenue growth to $3.7B, with a particular focus on their growing AI accelerator business.
Rijnberk InvestInsights on Broadcom (🇺🇸AVGO US - US$1 trillion)
An additional write-up on Broadcom highlighting its strong AI networking position and successful VMware integration driving growth. Trading at 34x forward earnings with management projecting AI revenue to double within two years.Schwar Capital on Uber Technologies (🇺🇸UBER US - $128 billion) Demonstrating impressive growth across metrics while improving profitability, with Q3 2024 free cash flow up 133% year-over-year to $2.1 billion. Strong network effects and operational expertise provide competitive advantages.
Kroker Equity Research on Uber Technologies (🇺🇸UBER US - US$128 billion) An additional write up on Uber, highlighting the platform business model showing strong network effects and improving unit economics. DCF analysis suggests fair value of $74/share versus current $61, with upside potential in bull case scenario.
The Net Worth Club on Take-Two Interactive (🇺🇸TTWO US - $32 billion) Gaming powerhouse with major catalysts including GTA 6 release and potential acquisition target, trading at favorable valuations compared to recent gaming M&A deals.
The Finance Corner on Enphase (🇺🇸ENPH US - US$9.7 billion) Trading at 7-8x EBITDA with strong microinverter market leadership. Valuation range suggests $45-100 per share depending on growth execution.
Unconventional Value on Crocs (🇺🇸CROX US - US$5.8 billion)
Market underestimates brand staying power and Hey Dude potential. Consistent mid-20% operating margins and international growth opportunities at attractive valuation.Value Degen on Navios Maritime Partners (🇺🇸NMM US - $1.3 billion) Shipping company trading at 3.4x earnings with significant insider ownership and potential catalyst from fiber network monetization.
Catapult's Newsletter on Magnera (🇺🇸MAGN US - US$629.07 million) Newly formed company from merger of Glatfelter and Berry Global's non-woven division, trading at attractive free cash flow yield of ~20% in a challenging industry environment.
Value Investing by Double Alpha Factory on GBank (🇺🇸GBFH US - $454 million) High-quality bank with 20% ROE and unique gaming FinTech opportunities, trading at compelling valuations with potential 5-10x upside from their proprietary technology.
Value Degen on Sportsman's Warehouse (🇺🇸SPWH US - $100 million) A retail turnaround play with strong insider buying and minimal China tariff exposure trading at 0.4x book value. Management's pivot to e-commerce and cost optimization could drive significant upside.
Rock & Turner on Haivision (🇨🇦HAI CN - CAD$145 million) Video streaming technology provider trading at 1.07x EV/Sales with 73.5% gross margins and strong recurring revenue growth potential in mission-critical applications.
Koneko Research on Dream Impact Trust (🇨🇦MPCT.UN - CAD$68.2 million) Analysis suggests the trust's 49 Ontario Street project may be significantly overvalued, with government incentives barely supporting its current $140mm carrying value. Conservative estimates point to a potential value of $50-70mm.
Wolf's Substack on Gatekeeper Systems (🇨🇦GSI.V - CAD$51.5 million)
Despite 36% revenue growth, facing margin pressure and rising costs. Trading at 15.3x normalized earnings with near-term headwinds.Wolf's Substack on Red Light Holland (🇨🇦TRIP.CN - CAD$16 million) Despite strong balance sheet with 3.9x current ratio, facing significant cash burn. Management concerns and unclear path to profitability warrant caution.
Europe, Middle East & Africa
InvestingWithWes on Greggs PLC (🇬🇧GRG LN - £2.77 billion) UK's leading bakery chain trades at 21x earnings with strong expansion potential, though current valuation appears stretched relative to historical averages.
The European Investor on CVS Group (🇬🇧CVS LN - £600 million) Leading UK veterinary services provider trading at discount due to CMA investigation. Current valuation implies minimal downside even in worst-case regulatory scenario, with significant upside potential.
ToffCap on Lightspeed Commerce, Zedge, and Havas (🇨🇦LSPD CN - CAD$3.4 billion | 🇺🇸ZDGE US - $27 million | 🇳🇱HAVAS Netherlands - €1.5 billion) Analysis of three beaten-down stocks: Lightspeed's SaaS transition with $1bn revenue run rate and improving margins, Zedge's mobile personalization platform trading below cash, and Havas's post-spinoff opportunity at 3.4x earnings.
Asia-Pacific
Dungeon Investing on Square Enix - Part 2 (🇯🇵9684 JP - ¥752.39 billion) Second part of analysis focusing on Square Enix's gaming division, highlighting strong JRPG franchises and MMO success with Final Fantasy XIV, though facing challenges in HD gaming profitability.
Investment Ideas by Antonio - Palantir and Tesla: Redefining the Economy Ambitious (perhaps overly so) analysis suggesting these companies could reshape the global economy. While the thesis is bold, the piece offers interesting perspectives on AI and automation's potential impact. (15 min read)
Silver Bulletin - Save Daylight Savings Time A data-driven examination of why eliminating Daylight Savings Time would be a significant economic mistake, with compelling analysis of productivity and safety implications. (20 min read)
Panda Perspectives - Transforming China's Pension System for Sustainable Growth Deep dive into China's ambitious pension reforms and their implications for global markets. Excellent overview of a crucial structural change in the world's second-largest economy. (12 min read)
The Great Wall Street - Brief Interlude: The Shifting Battle for Speed in Chinese E-Commerce An insightful analysis of how ultra-fast delivery is reshaping Chinese retail, with implications for traditional e-commerce players. Particularly strong on operational details and competitive dynamics. (10 min read)
KonichiValue Japan - Japan's Climate Bonds: A Way to Invest in Preventing Climate Disaster? Critical examination of Japan's new climate transition bonds and their potential impact on the country's environmental goals. Helpful analysis for understanding Japan's green finance initiatives. (10 min read)
Undervalued and undercovered - PGMs in the Spotlight: Platinum's Path Amid Geopolitical Uncertainty A deep dive into platinum group metals with excellent analysis of supply-demand dynamics and the impact of geopolitical tensions. Essential reading for commodity investors. (25 min read)
Generative Value - A Primer on EDA: Software for Semiconductors Excellent overview of the Electronic Design Automation industry and its crucial role in semiconductor development. Essential reading for understanding this critical but often overlooked sector. (25 min read)
Emerging Value - Christmas special: A genomics portfolio Detailed analysis of the genomics sector with specific company recommendations. Interesting perspective on this growing healthcare subsector. (20 min read)
Kingswell - Another Munger Masterclass: The 1991 Wesco Financial AGM Fascinating historical perspective from Charlie Munger on leverage, consumer credit, and Benjamin Graham's investment philosophy. Essential reading for value investors. (10 min read)
TQI capital - Lessons from Li Lu on Charlie Munger's Wisdom and Legacy Insightful reflection on Munger's investment philosophy through the lens of his close friend and mentee Li Lu. Valuable perspective on rationality and long-term thinking in investing. (10 min read)
Rock & Turner - Investing, Theology & Paradoxical Thinking A thought-provoking exploration of how religious beliefs intersect with investment philosophy, using Rockefeller as a case study. Particularly interesting for those interested in behavioral finance. (12 min read)
The Pareto Investor - Investment Outlook for 2025 Concise overview of key investment themes for 2025, focusing on semiconductors, mega-cap tech, and digital assets. Good framework for thinking about the year ahead. (8 min read)
Acquired - Mars Inc. (the chocolate story) An in-depth exploration of Mars Inc.'s evolution from a regional candy maker to a $50B+ global powerhouse. The episode traces the company's growth through multiple generations, highlighting the importance of long-term thinking and private ownership. Key focus on Forrest Mars Sr.'s strategic brilliance in expanding internationally and diversifying into pet care. Notable discussion of Mars's unique corporate culture centered around five principles: quality, responsibility, mutuality, efficiency, and freedom. The story provides valuable lessons about the benefits of private ownership in enabling long-term focus and the importance of maintaining high standards while expanding globally. (Listening time: 170 minutes)
We Study Billionaires - Current Market Conditions & Poor Charlie's Almanack w/ Stig Brodersen & Clay Finck Analysis of current market conditions and Charlie Munger's wisdom through Poor Charlie's Almanack. Discussion covers the S&P 500's performance, Bitcoin's role in portfolios, and psychological biases in investing. Key focus on portfolio construction and the importance of inverting problems for better decision-making. (Listening time: 93 minutes)
The Value Perspective - The Value Perspective with Stacy Havener 2.0 Explores branding in asset management through the "Four A's" framework: Authenticity, Authority, Audience, and Alignment. Discusses the growing importance of personal brand in financial services. (Listening time: 49 minutes)
The Meb Faber Show - Fran Kinniry on The Past, Present & Future of Vanguard Overview of Vanguard's evolution, including expansion into private equity and active management. Discussion of investor behavior and the company's approach to democratizing sophisticated investment strategies. (Listening time: 50 minute)
In Good Company - Nasdaq CEO: Tech Innovation, Leadership and Fighting Financial Crime Discussion with Nasdaq CEO about the exchange's evolution to technology provider and efforts to combat financial crime. Explores leadership principles and importance of market integrity. (Listening time: 45 minutes)
Barron's Streetwise - Quantum Computing Stocks Are Going Nuts Examines the quantum computing sector's recent stock surge, focusing on Google's Willow chip breakthrough and whether the sector is experiencing a speculative bubble. (Listening time: 30 minutes)
Sharp Tech with Ben Thompson - Holiday Mailbag: The Next Intel, Google's AI Revival, Modern Sportswriting, TSMC Mugs, Tutoring Takes, and Lots More A wide-ranging discussion covering Google's AI progress with Gemini, the challenges facing Apple's iOS 18, and the evolution of tech companies' business models. Key insights around Google's potential disruption from ChatGPT despite their technical advantages. Thompson argues that while Google is shipping impressive AI products, they face a fundamental business challenge as ChatGPT potentially cannibalizes their core search revenue. Notable discussion about the importance of user experience in driving platform adoption, with practical insights about AI integration into daily workflows. (Listening time: 100 minutes)
We Study Billionaires - TIP685 Top Takeaways From 2024 w Kyle Grieve
A comprehensive review of key investing insights from 2024, focusing on the challenges of stock picking and the importance of seeking disconfirming evidence. Notable discussion of Bessembinder's research showing only 4% of stocks drive all market wealth creation. Emphasizes the value of maintaining conviction in high-quality businesses while remaining open to contrary evidence. (Listening time: 83 minutes)
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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.