Giles Capital Weekly - Week 8
Welcome to another edition of Giles Capital Weekly. The market took quite a beating last Friday as investors digested major shifts in the global investment landscape. Trump's tariff proposals are sending ripples through international markets, with potential 25% duties on autos, pharmaceuticals, and semiconductors beginning in April. Meanwhile, China has quietly reduced its US Treasury holdings to the lowest level since 2009. Companies reporting even modestly positive earnings faced steep selloffs as inflation and employment data convinced investors the Fed has paused rate cuts.
My top picks this week feature two exceptional capital allocators: Boston Omaha (BOC) trades at 87% of book value despite strong fundamentals across multiple segments, including a cash-generating billboard business, high-margin broadband operations, valuable SkyHarbour holdings worth $153.5M, and rapidly growing insurance division—making this $458M market cap company a solid value play, Meanwhile Shift4 (FOUR) stands out despite a 25% pullback following their $2.5B Global Blue acquisition, which accelerates global expansion with premium retail merchants like Hermés and LVMH, complementing their impressive 26% organic growth, strong cross-selling capabilities, and proven ability to generate $590M incremental EBITDA from $2.7B invested capital, presenting a compelling opportunity at 25x NOPAT even with CEO Jared Isaacman's NASA departure.
Americas
Schwar Capital on Nu Holdings (🇺🇸NU US - $27 billion) Leading digital financial services platform serving Brazil, Mexico, and Colombia with asymmetric investment opportunity despite recent 15% drop, featuring 30-35% annual earnings growth projections and strong unit economics in Latin America's highly concentrated banking sector.
The Finance Corner on Warner Bros. Discovery (🇺🇸WBD US - $27 billion) Media conglomerate with significant streaming and studio assets facing high debt load, but generating roughly $5B in free cash flow annually, trading at 13x forward earnings when accounting for acquisition-related intangible amortization.
Rijnberk InvestInsights on DraftKings (🇺🇸DKNG US - $22.06 billion) Online gambling and sports betting platform showing impressive growth with 31% market share, projecting mid-to-high teens CAGR through decade-end and rapidly improving profitability with EBITDA margin expanding to 14.6% in 2025.
D Invests on West Pharmaceutical Services (🇺🇸WST US - $15.82 billion) Leading manufacturer of injectable drug packaging components with 70% market share, benefiting from growing biologics market (up from 22% to 39% of sales) and generating 25% ROIC with high switching costs creating customer lock-in.
The Outsiders' Corner on Shift4 (🇺🇸FOUR US - $8.60 billion) Payment processor with unique acquisition-led growth strategy acquiring Global Blue for $2.5B, demonstrating 16% FCF yield on invested capital and continued 25%+ organic growth into complex merchant payment solutions.
Quality Stocks on 9 Under-the-Radar Stocks (🇺🇸Various - US$0.7-7.1 billion) Analysis of nine high-growth companies with projected 25%+ annual EPS growth, highlighting three compelling opportunities:
Halozyme: Biotech company with innovative drug delivery technologies trading at 13.1x 2025 P/E with 7.75% FCF yield
Tidewater: Offshore marine services leader at 9.1x 2025 P/E with impressive 15% FCF yield
Shelly Group: Smart home automation firm with 40% revenue growth trading at 21x 2025 P/E
Pillars And Profits on Boston Omaha (🇺🇸BOC US - $458.37 million) Berkshire-like holding company trading at 87% of book value with growing billboard business generating ~$140M in value, broadband business worth ~$137M, and investments worth ~$187M when adjusted for market value.
Newell Street Journal on Dine Brands (🇺🇸DIN US - $400 million) Franchisor of Applebee's and IHOP trading at just 5x earnings with stable $80M annual owner earnings and potential for margin improvement through multi-brand restaurant efficiencies, creating compelling value despite challenging restaurant environment.
Leahi Capital on Transcontinental Realty Investors (🇺🇸TCI US - $249 million) Bearish analysis on this real estate company trading at 0.3x book value, citing concerns about asset values, receivables from related parties, and corporate governance.
Europe, Middle East & Africa
Kroker Equity Research on Pandora A/S (🇩🇰PNDORA DC - 114.80B DKK) Danish jeweller with strong financial metrics showing 454% stock growth over five years, trading at 3.5x forward revenue with 30% gross margin and dominant position in personalized affordable jewelry market.
InvestingWithWes on Teleperformance (🇫🇷TEP FP - €6.06 billion) Global leader in customer experience management with intrinsic value of €191.93 versus the current price of €102.50, supported by strong margins and growing digital capabilities.
TQI Capital on Ashtead Group (🇬🇧AHT LN - £20 billion) Despite recent underperformance versus United Rentals, Ashtead's "clustering" strategy creates local economies of scale with 36% higher EBITDA margins in mature clusters. Specialty equipment segment presents $10B revenue potential at mature rental penetration versus current $17B total fleet size.
Cockney Rebel on UK Small Cap Investment Opportunities (🇬🇧Various UK - £76-96 million) Analysis of undervalued UK small caps with growth potential, highlighting four opportunistic investments:
Anpario: Animal feed additives company with record earnings, strong management ownership, and 24.6p EPS forecast
Wynnstay: Agricultural supplies trading at PE under 14 with new CEO implementing three-year improvement plan
AudioBoom: Podcasting platform up 65% YTD with triple-digit revenue growth potential
Jet2: Travel company positioned for recovery despite current industry headwinds
Asia-Pacific
Moatless Musings on Fenjiu (🇨🇳600809 CH - ¥209.83 billion) Leading Chinese premium baijiu producer specializing in light-aroma spirits, with superior brand positioning, 75% gross margins, and unique growth opportunity through consumption upgrading with both high-end (Qinghua) and mass market (BoFen) product lines.
Dragon Invest on Chinese Real Estate Sector Analysis (ðŸ‡ðŸ‡°ðŸ‡¨ðŸ‡³Various CN/HK - HK$16 billion-245 billion) Analysis of multiple Chinese companies positioned to benefit from real estate recovery, highlighting three compelling opportunities:
China Overseas Property Holdings: Leading property management firm with 9% revenue growth and 10.2x P/E ratio
China Resources Mixc: High-quality commercial property manager with 17.1% revenue growth and 36% net profit margin
Haier SmartHome: Appliance manufacturer trading at 11.7x P/E with 18% profit growth and strong expansion in Europe
The Magic Bakery on Porters (🇯🇵5126 JP - ¥3.03 billion) Japanese software company serving staffing and recruitment industries with exceptional SaaS metrics, trading at 10x trailing earnings and 2x revenue with runway to grow customer base 4-7x in highly profitable market segment.
Compound & Fire on ZIGExN (🇯🇵TYO:3679 - ¥51.38 billion) Japanese HR technology company with strong fundamentals despite downward revised forecast, growing revenues 9.6% YoY with improving EBITDA and attractive valuation implying zero growth for the next decade despite being a serial acquirer with no debt.
The International Investor - Week 8, 2025: Tariffs, China's Bond Moves, and the Global Economic Fallout Detailed breakdown of Trump's proposed 25% tariffs on key industries and China's strategic reduction of US Treasury holdings, examining potential impacts on consumer prices, supply chains, and global market dynamics. Essential reading for understanding how geopolitics shapes investment opportunities. (10 min read)
Value Degen's Substack - Bloody Friday and 2024 Q4 Earnings Update Part II Insightful analysis of Friday's market selloff and commodity opportunities in Hudbay Minerals, Warrior Met Coal, Peabody Energy, JAKKS Pacific, and Materialise. Particularly strong on why commodity markets don't look forward like stock markets do. (8 min read)
KonichiValue Japan - How I donated to a Japanese charity and got it tax deducted Practical guide to navigating Japanese charitable giving with valuable insights into the country's growing social needs. (8 min read)
Philoinvestor - Europe's Stockholm Syndrome Sharp analysis of European political dynamics and their market implications amid changing US-EU relations. (5 min read)
Asia Decoded - Charting India's path in an evolving world Insightful interview with Niranjan Rajadhyaksha exploring India's economic future, covering consumption slowdown, fiscal consolidation, export-led manufacturing challenges, and climate impacts. Particularly valuable for investors looking beyond traditional Western markets. (20 min read)
The International Investor - Navigating Southeast Asia's Food Delivery Boom Thorough examination of the region's food delivery market dynamics, focusing on Grab's 55% market share and potential consolidation with GoTo. (10 min read)
Generative Value - OpenAI, Part 3: The (Probabilistic) Future of OpenAI Fascinating analysis of OpenAI's future prospects through a probability-weighted lens, examining key variables including vertical integration, business model, market size, and product evolution. A sophisticated framework for thinking about the AI industry's future that avoids simplistic predictions. (10 min read)
Noahpinion - Only fools think Elon is incompetent Noah Smith offers a compelling argument against the tendency to dismiss Elon Musk's capabilities based on his Twitter behavior, highlighting his unmatched industrial achievements through SpaceX and Tesla. A thoughtful perspective on distinguishing between personality quirks and organizational talent. (17 min read)
Stock Picker's Corner - SPC Weekender: Satellites, Engineered Cures, and Gaming to Win Intriguing overview of three emerging investment themes: AI-driven drug discovery through Project Stargate, growth opportunities in satellite connectivity markets, and the gaming industry's potential with Take-Two's upcoming GTA 6 release. A concise snapshot of cutting-edge investment trends. (9 min read)
Capitalist Letters - Invest In Builders Over Optimizers Evidence-based analysis showing founder-led companies return three times as much as other S&P 500 companies, with compelling case studies. (10 min read)
Northwest Frontier Capital - Thoughts from the Pershing Square Holdings Annual Investor Meeting Detailed analysis of Ackman's investment strategy, portfolio holdings, and execution concerns around strategic initiatives. (15 min read)
Behind the Balance Sheet - From Boom to Bust: A Hedge Fund's Rise and Fall Revealing case study of a once-successful hedge fund's rise, internal partner split, and eventual closure, providing rare insight into the economics and challenges of running a hedge fund in today's environment. An educational look at the realities behind the hedge fund mystique. (15 min read)
Finbite Insights - Berkshire Hoards $331B in Cash—Don't Read Too Much Into It Thoughtful pushback against the common narrative that Buffett's cash pile signals market pessimism, highlighting that Berkshire still heavily favors equities and continues making selective investments. A valuable perspective that cuts through simplistic interpretations of Buffett's moves. (10 min read)
A Letter a Day - [RP] Letter #4: Steve Jurvetson (2010) Retrospective on Steve Jurvetson's 2010 St. Mark's School commencement speech highlighting his advice on embracing child-like curiosity, learning from failure, and recognizing the importance of disruptive innovation. Timeless wisdom from a legendary venture capitalist that remains relevant in today's market. (17 min read)
Special Situation Investing - Bitcoin Vs Gold Thought-provoking comparison of Bitcoin and gold as stores of value, making the case that Bitcoin's superior scarcity, divisibility, and potential yield generation could drive its market cap to match gold's $19.8 trillion valuation over time. A balanced perspective that acknowledges the strengths and limitations of both assets. (20 min read)
A review of year-end fund letters reveals several common themes: post-election market dynamics, Federal Reserve policy shifts, geopolitical tensions, and China's economic measures. The letters demonstrate varied approaches to navigating market uncertainty while maintaining long-term investment discipline.
SouthernSun Small Cap: Value-oriented strategy underperformed in Q4, returning -7.55% versus Russell 2000's 0.33%. Letter discusses:
Advanced Energy Industries (🇺🇸AEIS - $4.77 billion) - New Position: Power conversion specialist with strong semiconductor market position and diversified end markets
Oxford Industries (🇺🇸OXM - $1.13 billion) - New Position: Portfolio of lifestyle brands including Tommy Bahama and Lilly Pulitzer, trading at attractive valuation with organic growth potential
SouthernSun SMID Cap: Underperformed in Q4, returning -6.13% versus Russell 2500's 0.62%. Letter discusses:
SEI Investments Company (🇺🇸SEIC - $10.34 billion) - Existing Position: Record net sales and strong operational results under new leadership
Armstrong World Industries (🇺🇸AWI - $6.40 billion) - Existing Position: Commercial ceiling tile leader showing double-digit revenue growth with strong pricing power
Cooper Investors Australian Equities Fund: Underperformed in Q4, returning -5.36% vs S&P/ASX 200's -0.80%. Portfolio impacted by underweight position in banks and commodity-related weakness. Letter discusses:
HMC Capital (🇦🇺HMC - $4 billion) - Existing Position: Alternative asset manager with $17.5 billion AUM across real estate, private credit, digital infrastructure, and private equity platforms
DigiCo Infrastructure REIT (🇦🇺DGT) - New Position: Portfolio of data center assets with development opportunities in Australia and US
Cooper Investors Brunswick Fund: Multi-cap strategy focused on Australian and global equities. Returned 1.9% in Q4 versus -0.8% for ASX200. Strong performance from Sigma Healthcare and Newscorp offset by resource sector weakness. YTD return of 24.38%. Letter discusses:
Sigma Healthcare (🇦🇺SIG - AU$4.88 billion) - Existing Position: Approved merger with Chemist Warehouse, strong organic growth potential
Ryman Healthcare (🇳🇿RYM - NZ$3.00 billion) - New Position: Retirement village operator with significant value potential following management overhaul
Cooper Investors Global Equity Fund (Hedged): Generated 3.03% return in Q4 vs benchmark's 1.21%. Full-year return of 11.18%. Letter discusses:
Ryan Specialty Holdings (🇺🇸RYAN - $17.12 billion) - Existing Position: Wholesale insurance broker with double-digit revenue growth since founding, trading at 3.5% free cash flow yield
Third Point Offshore Fund: Multi-strategy approach generated 9.1% return in Q4 and 24.2% for 2024. Strong performance across equities, credit, and private investments. Letter discusses:
Brookfield Corp (🇨🇦BN - $96.88 billion) - New Position: Alternative asset manager trading at 13x earnings versus peers at 20-30x, strong infrastructure and private credit platforms
Live Nation Entertainment (🇺🇸LYV - $34.71 billion) - New Position: Leading concert company with double-digit earnings growth potential through venue expansion
Siemens Energy (🇩🇪ENR - €45.80 billion) - New Position: Gas turbine and grid equipment manufacturer with €123 billion backlog and improving wind business outlook
Baron Asset Fund: Mid-cap growth strategy underperformed in Q4, trailing Russell Midcap Growth Index by 818 basis points. Performance impacted by software stock selection and healthcare sector weakness. YTD return of 10.77% vs benchmark's 22.10%. Letter discusses:
Space Exploration Technologies (Private - $349 billion) - Existing Position: Significant growth in Starlink broadband service, progress on Starship development
X.AI Corp (Private) - New Position: AI model development showing competitive results versus established players, largest coherent training center globally
Thanks to Letters & Reviews (lettersandreviews.blogspot.com) for compiling investment letters, which is where I sourced these letters.
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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.
I found it interesting to read the Shift4 analysis. I too have been researching this company, although I reached different conclusions. I will publish my analysis on Monday 3rd March.