Investments in small-cap companies frequently fail for predictable reasons: paying inflated prices for acquisitions, buying into management’s aspirational growth stories without verifying cash flows, or confusing temporary momentum with a structural competitive moat. When evaluating Tracsis plc, a company with a market capitalization of approximately £100 million, it is critical to strip away management narrative and focus purely on owned assets, historical capital deployment, and the net valuation paid for performance. Tracsis presents a compelling, high-stakes case study because it has recently shifted from a conservative, cash-generative roll-up business to a leveraged enterprise taking a transformational leap into high-margin software.

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What Tracsis Does and Why Ownership Matters

At its core, Tracsis builds and deploys operational technology and niche software for the rail sector. Operating a modern railway requires solving complex logistical puzzles including scheduling train movements, managing driver rosters, tracking real-time delays, monitoring physical track infrastructure, administering passenger ticket sales, and processing delay-repay compensation. Tracsis operates across these critical functions in the UK through its core software suites, and in North America via its RailComm division.

       +-------------------------------------------------------+
       |                  Tracsis Enterprise                   |
       +---------------------------+---------------------------+
                                   |
         +-------------------------+-------------------------+
         |                                                   |
         v                                                   v
+---------------------------------+                 +---------------------------------+
|   Legacy Operations & Services  |                 |    High-Margin Software & SaaS  |
|  * Traffic data collection      |                 |  * Smart ticketing (iBlocks)    |
|  * Consultancy services         |   Transition    |  * Delay compensation           |
|  * Hardware & monitoring        |  =============> |  * US dispatch (RailComm)       |
|  * Divested: Events division    |                 |  * Operations analytics         |
|    (Sold for £7.3m)             |                 |  * Cloud data platforms         |
+---------------------------------+                 |    (Mistral Data acquisition)   |
                                                    +---------------------------------+

The key investment characteristic of Tracsis is software stickiness. Enterprise rail software is not an easily replaceable utility; it is deeply embedded within everyday operational workflows. Once a railway operator embeds a specific scheduling or dispatch tool into its routine, replacing that vendor introduces substantial operational risk, regulatory scrutiny, and administrative expense. Following its recent acquisition of Mistral Data from FirstGroup, Tracsis now serves 22 of the UK’s 24 Train Operating Companies (TOCs), alongside major infrastructure entities like Network Rail and the Department for Transport. This provides the business with an enviable operational footprint across the national rail network.

The Mistral Acquisition: Strategic Upgrade vs. Execution Risk

In July, Tracsis announced the acquisition of Mistral Data for £48 million. In the twelve months to March 2026, Mistral generated approximately £13 million in revenue and £4 million in adjusted EBITDA, with recurring revenue accounting for roughly 85% of total sales. On a standalone basis, paying 12x EBITDA appears elevated relative to Tracsis’s historical trading multiples. However, Mistral is a fundamentally higher-quality asset than Tracsis’s legacy portfolio, boasting ~30% EBITDA margins and a cloud-native software architecture that strengthens Tracsis’s transition toward scalable SaaS-based revenues.

While the strategic rationale is clear, the financial mechanics introduce clear leverage risks. Tracsis transitioned from a net-cash position of £23.4 million in July 2025 to drawing £38.7 million on its £40 million revolving credit facility (RCF) to complete the purchase. Pro-forma net debt to EBITDA is expected to hover around 1.5x. While 1.5x leverage is generally manageable for a recurring software business, it significantly reduces the company’s financial flexibility. The elevated interest expense will directly dilute free cash flow conversion until the debt is systematically paid down, leaving little margin for operational integration blunders.

Capital Allocation Track Record and Executive Incentives

Tracsis has completed 19 acquisitions since 2008, showing a consistent preference for buying niche, domain-specific technologies and cross-selling them across its rail client base. Prior acquisitions, such as iBlocks in 2020 for ticketing automation and RailComm in 2022 for US expansion, demonstrate a clear pattern of targeted M&A. Management has also shown a willingness to prune non-core operations, recently selling its lower-margin Events division for £7.3 million (~3.8x EBITDA) to focus resources exclusively on higher-margin technology platforms.

Historical M&A Playbook:
[Identify Niche Rail Asset] ==> [Acquire at Fair Valuation] ==> [Integrate & Cross-Sell to TOC Footprint]

Executive compensation reflects an aggressive, high-hurdle framework, albeit with limited personal insider ownership. CEO David Frost (appointed August 2025) earns a base salary of £370,000, while CFO Andy Kelly earns £255,000. While open-market share purchases by both executives in August 2026 were tiny (~£7,100 each), their primary financial alignment stems from the LTIP structure. The August 2026 option grants require a minimum 14% EPS CAGR for partial vesting, scaling up to 21% annual adjusted EPS growth through FY2028 alongside top-quartile Total Shareholder Return (TSR) relative to the AIM 100 index. If performance falls below these thresholds, the options expire worthless, as occurred with the 2022 LTIP grant under previous management.

       +--------------------------------------------------------+
       |               FY28 LTIP Vesting Schedule               |
       +--------------------------------------------------------+
       |                                                        |
       |  EPS CAGR < 14% OR TSR < AIM 100 Median               |
       |  ==> ZERO VESTING                                      |
       |                                                        |
       |  EPS CAGR 14% - 21% + Upper Quartile TSR               |
       |  ==> SLIDING SCALE VESTING (100% at 21% CAGR)          |
       |                                                        |
       +--------------------------------------------------------+

Valuation Scenarios and Risk Profiles

Trading around 340–355p with a market capitalization of roughly £100 million, Tracsis appears fairly valued on historical figures but presents asymmetric outcomes based on the successful integration of Mistral Data. Adding Mistral’s £4 million EBITDA to historical figures (and adjusting for the Events divestiture) yields an estimated pro-forma group EBITDA base of approximately £17–18 million.

+--------------------------------------------------------------------------+
|                          Valuation Outcomes (2-Year)                     |
+--------------------------------------------------------------------------+
|  [Bear Case: 250 - 300p]                                                 |
|  * Stagnant organic growth, high interest drag, Mistral integration delays|
|  * Multiple compresses to 5-6x EBITDA                                    |
+--------------------------------------------------------------------------+
|  [Base Case: 450 - 550p]                                                 |
|  * Mistral achieves expected £4-5m EBITDA, cross-selling yields 6-8% growth|
|  * Balance sheet deleverages to <1.0x; multiple stabilizes at 7-8x EBITDA  |
+--------------------------------------------------------------------------+
|  [Bull Case: 650 - 800p]                                                 |
|  * Rapid software cross-selling drives EBITDA to £25m+                    |
|  * Market re-rates business as high-margin SaaS platform at 9-10x EBITDA  |
+--------------------------------------------------------------------------+

• Bear Case (250–300p): Mistral integration encounters headwinds, software cross-selling stalls, and elevated debt service costs erode free cash flow. If market sentiment compresses the valuation multiple to 5–6x EBITDA, equity value could decline toward 250–300p.

• Base Case (450–550p): Mistral performs in line with historical metrics, organic revenue growth trends at 6–8%, and debt is steadily paid down over 24 months. Valued at a standard 7–8x EBITDA on £20 million pro-forma group earnings, the stock re-rates toward 450–550p.

• Bull Case (650–800p): Cross-selling Mistral’s platform into Tracsis’s existing customer base expands margins significantly, pushing group EBITDA toward £25–30 million. As the revenue mix leans heavily toward recurring software, the market re-rates the stock toward 9–10x EBITDA, opening potential target valuations of 650–800p.

Tracsis has shifted from a low-risk, cash-generative consolidator into a leveraged growth play. The primary metrics to track over the next four to eight quarters will be Mistral’s standalone EBITDA progression, net debt reduction velocity, organic SaaS growth rates, and operational cash conversion. The risk profile is noticeably higher than it was six months ago, but so is the potential return on equity if execution matches management’s ambitious LTIP targets.

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Disclosure: The author holds shares in Tracsis plc at the time of publication. This article is provided for informational and educational purposes only and does not constitute financial or investment advice. Estimates, projections, and valuation scenarios are based on independent analysis and subject to market volatility, integration risks, and operational changes.

Few companies listed on the Danish market are both small, profitable, and genuinely useful. Hove A/S is one of them. I bought Hove at DKK 6.25 per share. The stock has since moved higher, and as I write this, it trades around DKK 7.00. That is already a decent result.

But the interesting question is not what I paid. It is whether Hove can still be worth considerably more in one or two years.

After looking at the latest numbers, I think the answer is yes — although the easy money has probably already been made.

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What does Hove actually do?

Hove makes something most people never think about: lubrication equipment for very large machines.

Think about a wind turbine. Inside that turbine are bearings, gears and other moving parts. They need to be lubricated regularly. If they are not, they wear out.

And replacing a major component on a wind turbine is expensive. Hove sells the pumps, lubrication systems, grease cartridges and software that make this maintenance easier and more precise.

The company started with wind turbines, but its technology is increasingly being used in other heavy machinery, including ports and mining.

The basic proposition is very simple: keep expensive machines running, reduce maintenance time, and reduce the chance of something breaking.

That is a pretty good business to be in.

Hove says its systems can reduce manual work, improve lubrication accuracy and extend the useful life of machinery. And importantly, this is not just a story about future technology. Hove has been doing this for more than 20 years.

Do I know this kind of business?

Yes. This is not software. It is not AI. It is not a company promising to revolutionize the world. It makes physical products that solve a fairly boring industrial problem.

I generally like businesses like this. The products may be small, but the machines they protect are not. For a wind farm operator, a lubrication pump is insignificant compared with the cost of turbine downtime.

That creates an interesting dynamic. Hove does not need to be a large part of its customer’s budget. It simply needs to be valuable enough that the customer does not want to take the risk of going without it.

The numbers are getting interesting

Hove had an excellent first half of 2026.

Revenue was DKK 150.1 million, up 39%.

EBITDA was DKK 19.6 million, up 48%.

Net profit was DKK 15.3 million, up 84%.

For comparison, the entire year of 2025 produced:

• Revenue: DKK 209.1m

• EBITDA: DKK 22.6m

• EBIT: DKK 20.5m

• Net profit: DKK 13.6m

So Hove has already earned more profit in six months of 2026 than it did during the whole of 2025.

That is the part that caught my attention. But there is a catch.

The gross margin fell from 35.9% to 32.6% because of changes in the product mix. And cash flow is not as impressive as the income statement.

Operating cash flow was only DKK 5.2m in H1, partly because receivables increased sharply as the company grew. So I don’t want to extrapolate the 39% revenue growth forever. That would be silly.

Management has already raised guidance

Hove now expects 2026 revenue of DKK 230–250 million, compared with its previous guidance of DKK 210–240 million.

EBITDA guidance remains DKK 22–29 million. There is also some caution here. Management explicitly says that part of the exceptionally strong H1 sales could be customers bringing purchases forward.

In other words: don’t assume 39% growth is the new normal.

That is exactly why I prefer to build a range of outcomes rather than a single forecast.

What is the business’s enduring nature?

This is perhaps the most interesting part of Hove. Wind turbines are becoming larger. Larger turbines mean larger mechanical components. Larger components mean that maintenance and downtime become increasingly expensive.

Hove is therefore sitting in a relatively small but important part of the wind turbine ecosystem. And it is trying to expand beyond wind.

Its products are now being used in areas such as ports and mining, while the company is also investing in automated lubrication and its Smart Lube technology.

There is also a nice little catalyst hiding in the latest report. Hove has completed the acquisition of its factory in Holeby and is installing an automated grease-filling production line, with commissioning expected in Q3 2026.

The Indian factory is also expected to begin production in Q3. These investments could increase capacity and make the business more scalable.

What can go wrong?

Quite a lot.

First, Hove is still a very small company. At around DKK 7 per share and roughly 25.3 million shares outstanding, the market value is only around DKK 177 million.

That means the stock can move violently in either direction. Second, wind is still a cyclical industry. If turbine manufacturers reduce investment, Hove will feel it.

Third, margins matter. The current EBITDA margin is good, but it is not enormous. Hove achieved a 13.0% EBITDA margin in H1 2026, compared with 10.8% for FY2025.

Fourth, working capital could become a problem.

Inventory and receivables have grown considerably. At June 2026, Hove had DKK 45.8m of inventory and DKK 53.1m of trade receivables.

Growth is wonderful. Growth that consumes all the cash is less wonderful.

Do I want to be in this kind of business?

Yes. But with an important qualification. I don’t think Hove is a wonderful business because lubrication pumps are exciting.

It is interesting because the product is economically important relative to its cost.

A customer spending a relatively small amount on Hove equipment can potentially protect a very expensive piece of machinery.

That is the kind of industrial niche I like. The company is also still small enough that successful expansion into the US, India, ports and mining could matter materially. The risk is that the market eventually realizes this and the valuation stops being cheap.

Which brings us to the most important question.

Is the share price still reasonable?

At DKK 7, Hove is no longer the same bargain it was at DKK 4–5.

Historical valuation data show that Hove has traded at very different EV/EBITDA multiples.

Over 2021–2025, the annual EV/EBITDA multiples were approximately:

14.1x, 8.0x, 7.3x, 5.7x and 5.9x.

The simple historical average is therefore about 8.2x.

Today, depending on which earnings period you use, the company is still trading at roughly 6–7x EBITDA.

That is not expensive.

But it is no longer absurdly cheap either.

And that distinction matters.

What could Hove be worth in 1–2 years?

This is where I ran a Monte Carlo simulation.

Rather than saying:

“I think Hove will grow 15% and deserve 8x EBITDA,”

I allowed the assumptions to move around.

I used:

• 2026 revenue centred around the company’s DKK 230–250m guidance

• roughly 12% average revenue growth in 2027

• roughly 10% average revenue growth in 2028

• EBITDA margins around 12–13%, with meaningful variation

• a valuation range centred around Hove’s current multiple and its historical average

• approximately 25.3m shares

• current net interest-bearing debt of approximately DKK 11.6m

The simulation ran 500,000 possible outcomes.

The result is surprisingly interesting.

These are not price targets.

They are probability ranges generated from the assumptions above.

And I think that is a more honest way of looking at a small company like Hove.

The bear case

In the bad outcomes, growth slows substantially and investors continue valuing Hove at a relatively low multiple.

That produces a two-year value around DKK 6.6.

From today’s DKK 7.00, that is roughly -6%.

From my purchase price of DKK 6.25, it would still represent a small gain.

This is important.

At today’s valuation, I don’t see an enormous margin of safety.

The stock can absolutely go down.

The middle case

The median Monte Carlo outcome is around DKK 10.3 in two years.

That would mean roughly 47% upside from DKK 7.00.

From my DKK 6.25 purchase price, it would be approximately 65% upside.

And that excludes dividends.

Hove paid DKK 0.25 per share for 2025, so there is at least some potential for shareholder distributions as the business grows.

The bull case

If Hove continues growing at a healthy pace, margins hold up, the new production capacity works and the market decides that a company like this deserves something closer to its historical average multiple, the numbers get interesting.

The 95th percentile of the simulation reaches roughly DKK 17.3 per share in two years.

That would be around +147% from today’s price.

And more than +175% from my DKK 6.25 entry price.

That is the upside case.

Not the base case.

So, what is Hove worth?

My rough framework today would be:

Bear: DKK 6–7
Base: DKK 9–11
Bull: DKK 15–17+

I would not pretend that I know which number will occur.

The interesting thing is that the middle of the distribution is still meaningfully above today’s share price.

That is what keeps me interested.

Why does the opportunity exist?

Because Hove is tiny.

It is listed on First North.

It is not followed by dozens of analysts.

It makes lubrication equipment.

There is no exciting AI narrative attached to it.

And its market capitalization is still less than DKK 200 million.

That creates the possibility that the market simply hasn’t spent much time thinking about it.

Meanwhile, the underlying company is growing.

H1 revenue increased 39%.

EBITDA increased 48%.

Net profit increased 84%.

The company has raised its revenue guidance.

It is expanding production.

And it is adding new products and customers.

One of the world’s largest wind turbine OEMs has also selected Hove’s automated lubrication equipment for two production facilities.

That is exactly the sort of customer validation I want to see from a small industrial company.

Do I want to own it at DKK 7?

Yes.

But I liked it more at DKK 6.25.

That is an important distinction.

At DKK 6.25, I was buying a small industrial company with improving earnings at a very modest valuation.

At DKK 7, the market has started to notice.

I still think the company has a credible path toward DKK 10+.

And if management executes exceptionally well, DKK 15+ is not an absurd number.

But the margin of safety has narrowed.

This is no longer a case of:

“Nobody has noticed this company.”

The market has started noticing.

The investment question now is whether earnings can grow faster than the valuation multiple expands.

That is a much more interesting question.

For now, I remain a shareholder.

Not because I expect Hove to become the next great Danish technology company.

But because I think there is something more useful here: a small, profitable industrial company solving a boring problem that customers actually need solved.

And sometimes, boring is exactly where the interesting investments are hiding.

This is not investment advice. I own shares in Hove A/S. Small-cap stocks can be highly illiquid and volatile, and the Monte Carlo analysis above is a scenario exercise rather than a prediction of future returns. The model is particularly sensitive to revenue growth, EBITDA margins, and the valuation multiple investors are willing to pay.

When I wrote about Gullewa in January, I thought I had found one of those small Australian companies where the market had simply stopped paying attention.

A 1% gold royalty. A healthy balance sheet. Property assets approaching completion. A meaningful interest in Central Iron Ore. I calculated roughly 100% upside in my base case and 286% in the more optimistic scenario.

The assets were real. The mistake was elsewhere. I assumed too much of their value would eventually belong to the shareholder.

The recent numbers have been useful in correcting that assumption. Cash has fallen to A$7.65 million, while administration and corporate costs reached A$2.82 million for the year. The Deflector royalty is still doing what it should do, producing A$3.24 million over the last twelve months. But the machinery surrounding that royalty is consuming far too much of the harvest.

At around A$0.09, I still arrive at a value above the market price. My revised conservative estimate is about A$0.155 per share, or 72% upside. In the more favourable case, I get to approximately A$0.233, or 159%.

The numbers still look cheap.

But cheap is not the same thing as attractive.

I sold my position at a profit. That is worth mentioning, because investing is not an exercise in proving that the original thesis was right. The thesis changed. So did my position.

There are three things I take away from Gullewa.

First, an asset is not the same thing as an investment.

I spent too much time valuing the assets and too little time thinking about the mechanism through which that value would reach me.

This is where Munger’s biases become relevant. Anchoring is subtle. Once you have arrived at an attractive number, every subsequent piece of information has a tendency to become evidence supporting that number.

The spreadsheet can become an accomplice.

Second, incentives deserve more attention than I gave them.

The A$409,000 of related-party payments in the quarter should have made me pause much earlier.

A wonderful asset under indifferent incentives is not necessarily a wonderful investment. Munger understood this well: people generally do what they are rewarded to do.

The ownership structure matters. The compensation matters. The behaviour of management matters. All of it matters more than a beautifully constructed SOTP.

Third, complexity is often sold to us as optionality.

I viewed the royalty, the property development and the mining interests as separate pockets of upside.

I now see some of it differently: Every additional business brings another layer of administration, another set of decisions, another place for capital to disappear. What looks like optionality on a valuation table can look rather different on a cash-flow statement.

Gullewa may still be worth more than the market price. But the question I should have asked at the beginning was not: What are these assets worth? It was: How much of that value will actually reach the shareholder?

A much less exciting question. Usually, the important questions are.

What Annie Duke and professional poker players taught me about managing a Serial Acquirer portfolio, and why “quitting” is my most profitable strategy.

Annie Duke, the former professional poker player turned author, wrote a brilliant book called Quit: Knowing When to Walk Away. In it, she points out a stark contrast between pros and amateurs: professional poker players fold roughly 80% of their hands before the flop. Amateurs? They play their starting cards more than half the time.

In poker, as in investing, we are often “in love” with our starting hand. But the math is clear: the secret to winning isn’t necessarily having the best cards; it’s the discipline to walk away from the mediocre ones.

This philosophy has been the backbone of my recent investment experiment. For the intellectual thrill of it, I’ve been testing whether a concentrated list of serial acquirers—curated from my database—can consistently outpace the broader index.

The early results are in, and the “poker logic” is working.

The Strategy: Avoiding the Valuation Trap

Serial acquirers are fantastic businesses, but they often trade at a significant premium. This makes them prone to “valuation compression”—where the business performs fine, but the stock price collapses because the multiple was too high.

To combat this, I’ve narrowed my focus to three specific pillars:

1. Valuation: Buying when the entry price actually makes sense.

2. Insiders: Looking for significant skin in the game (insider buying).

3. Technical Triggers: Using price action to confirm momentum before committing capital.

The Scorecard: 15.3% YTD

So far, the experiment has yielded 13.5% in January and 15.3% year-to-date. For context, the S&P 500 is sitting at roughly 5.2% over the same period.

The heavy lifting was done by IMCD in January, followed by breakout moves in Hexatronic and Tasmea.

Hexatronic is a perfect example of the “insider + technical” combo. After breaking its long-term falling channel, it began testing immediate resistance at the SEK 24.00 level. But the real confidence came from the C-suite: Chairman Magnus Nicolin and CFO Pernilla Lindén both made significant purchases in late 2025. When the price triggered, the insiders had already told us where the floor was.

The Math of the “Fold”

What I find most interesting isn’t the winners, but the “Batting Average.” My success rate on the trigger list was only 57%. In many circles, that’s barely better than a coin flip.

However, my Profit Factor is where the alpha lives. Because I used strict stop-losses, effectively “folding” the hands that didn’t develop, my average winner (weighted at +32.9%) was nearly 3x larger than my average loser (-10.6%).

This is the Annie Duke school of investing. You don’t need to be right every time; you just need to quit the losing hands early enough to let the winners pay for the house.

What’s Next?

I’m continuing to track the database for the next round of triggers. In this space, valuation is often the “anchor,” but momentum is the “engine.”

If you want to stay updated on the next batch of setups and follow along with the experiment, let me know in the comments.

Legal Disclaimer: Nothing contained herein constitutes tax, legal, or investment advice. Past performance is not a guarantee of future results, and the market analysis provided is based on data believed to be reliable but not guaranteed for accuracy. By reading this, you acknowledge that you bear full responsibility for your own investment research and decisions.

Full Disclosure: I practice what I preach. As the trigger prices are reached, I will hold long positions in the aforementioned companies. These holdings reflect my conviction in their serial acquisition models, though I reserve the right to buy or sell any security mentioned in this article without notice.

The first quarter of 2026 has been a masterclass in why a “Clean Slate” approach is necessary. Between geopolitical tensions and a shifting interest rate landscape, the broad markets haven’t exactly been a friendly place for passive investors. However, the results of the “AI-augmented” strategy are finally in, and they tell a fascinating story about the power of algorithmic filtering in a volatile market.

Q1 2026 Review: The Results are In

When I started this experiment, the goal was a 25% annual return. While we are only one quarter in, the divergence between our LLM-selected portfolios and the broader market is already striking.

1. The Benchmark Battle

The S&P 500 has had a rocky start to the year. Opening at roughly 6,858 on January 2nd and closing today around 6,576, the index has slid -4.11% for the quarter. In an environment where the “default” was to lose money, both LLM strategies showed significant defensive strength.

2. LLM Head-to-Head: Gemini vs. Copilot

While both models managed to crush the S&P 500 benchmark, one clearly had a better “eye” for technical breakouts.

Portfolio Q1 2026 Performance vs. S&P 500

Gemini emerged as the winner this quarter, finishing nearly at break-even despite a sea of red in the global markets. This outperformance was driven by a few massive “alpha” picks that offset the broader market drag:

• The Standouts: M.P. Evans Group PLC (+21.77%) and Nicolás Correa, S.A. (+8.95%) were the absolute anchors of the Gemini portfolio. These were exactly the kind of “boring” quality companies the Buffett/Greenblatt screens were meant to find.

• The Drags: It wasn’t all sunshine. SIGMAXYZ Holdings (-23.89%) and Tsuburaya Fields Holdings (-19.94%) reminded us that technical breakouts can often turn into “fake-outs” when macro sentiment shifts.

Copilot, meanwhile, suffered from its heavier concentration in names like Soop Co (-14.80%), which Gemini avoided in its Top-10. While Copilot’s “Expected Return” projections were aggressive (8.9%–16%), the reality of the market dictated a much more defensive outcome.

The Q2 2026 “Clean Slate” Refresh

Following the Steinhardt rule, I am once again “selling everything” (figuratively, within this model) to re-allocate based on fresh data. The technical charts that looked like breakouts in January have now matured, and new leaders are emerging from the Q1 wreckage.

I have just run the multi-stage gauntlet again: the Buffett Quality Screen, the Tony Deden enduring portfolio, and the Greenblatt Yield Filter, and a final LLM Momentum Overlay.

The New Q2 Positions

Following the Steinhardt rule, I am once again “selling everything” to re-allocate based on fresh data. The technical charts that looked like breakouts in January have matured, and new leaders are emerging from the Q1 wreckage.

For this quarter, I have expanded the list from 10 to 15 positions per model to capture a broader range of the “Quality + Momentum” factor. Interestingly, we are seeing significant overlap in Caledonia Mining, Sipef NV, and Tsugami Corp, suggesting a strong consensus on commodities and industrial precision.

Read more

The five enterprises observed in this note are:

1. Daiichi Jitsugyo Co., Ltd. (8059.T)

2. Densan System Holdings (3640.T)

3. UPCON CORPORATION (5075.NG)

4. Kawasaki Setsubi Kogyo Co., Ltd. (1777.NG)

5. Ascentech K.K. (3565.T)

Each is covered briefly and plainly. I’ve included only the essential markers: what the business does, why it might matter now, and who owns it. No macro speculation. No euphoric forecasts. Just the kind of work that deserves its place, and may reward the investor willing to think with a longer calendar.

A single chart—EBIT (¥ million) development over the past three years and a projection for 2025—will accompany them. That will suffice.

Daiichi Jitsugyo Co., Ltd. (8059.T)

• Last 3-Yr Rev. CAGR: 21,6%

• Last 3-Yr EBITDA CAGR: 45,0%

• Last 3-Yr EPS CAGR: 18,6%

• Market cap: $714.98M

• LTM EV/EBIT: 4.83 (median 3-year 4.15)

• LTM ROIC: 14,3%

Daiichi Jitsugyo is a global machinery trading and engineering firm providing industrial solutions across the automotive, pharmaceutical, and energy sectors. The company is capitalizing on the market opportunity of global digital transformation (DX) and green energy transitions, specifically through its 48.2% overseas revenue exposure and recent expansions into India via a joint venture with Nittoku SG. Its share structure is characterized by a market capitalization of approximately ¥106 billion on the Tokyo Stock Exchange Prime Market. Key competition includes Seika Corp and Espec Corp. Led by CEO Ichiro Uno, the company maintains robust financials with a trailing twelve-month (TTM) revenue of ¥221.3 billion and net income of ¥9.9 billion. Financing risk is remarkably low, with a total debt-to-capital ratio of just 0.067. Catalysts include its proprietary solar panel patents and the recovery of cyclical industrial demand. With a current P/E of 10.8x (well below the peer average of 24x) and a P/B of 1.2, future expectations anticipate a stabilization of quarterly EPS at around ¥100 as industrial orders normalize. Our 1-year price target is ¥7,530 (+125%), assuming a dual-leverage effect where 45% EBITDA growth meets a conservative multiple expansion toward 7.5x.

The Buy Entry Point is at the current market level or on any slight dip toward 3,100 JPY, as the RSI is at a healthy 65.00, indicating strength without being excessively overbought. Set a Stop-Loss at 2,750 JPY to account for a potential break below the recent consolidation floor and the 50-week MA. For your Profit-Taking Exit Strategy, target an initial exit at 3,600 JPY to lock in gains at the next psychological resistance, while trailing your stop upward to capture further upside toward 4,000 JPY if the MACD signal line maintains its bullish trajectory.

Densan System Holdings (3640.T)

• Last 3-Yr Rev. CAGR: 2,7%

• Last 3-Yr EBITDA CAGR: 18,5%

• Last 3-Yr EPS CAGR: 22,5%

• Market cap: $131.02M

• LTM EV/EBIT: 3.63 (median 3-year 6.96)

• LTM ROIC: 33,0%

Densan System Holdings provides comprehensive IT services, specializing in public sector digital transformation and payment processing solutions. The market opportunity lies in the aggressive push by Japanese local governments to modernize administrative systems and the shift toward cashless payments. The share structure involves a market cap of roughly ¥40 billion, with significant holdings among institutional investors. Its primary competition comes from local system integrators like TKC Corp and broader SIs. Under the leadership of President Ryoji Kobayashi, the company delivers strong financials, including an ROE of 31% and a net margin of 15.1%. Financing risk is minimal, evidenced by a quick ratio of 1.53. Recent catalysts include a 157% jump in annual earnings driven by massive DX contracts. The current valuation is an exceptional EV/EBIT of 3.63, nearly half its 3-year median. Even with future expectations of more modest sales growth in 2026, the recurring payment revenue provides a safety net. Our 1-year price target is ¥7,273 (+97%), predicated on the stock returning to its peer group multiple as the market recalibrates for its recurring revenue stability.

Your Buy Entry Point is between 3,580 and 3,630 JPY, representing a tactical “buy the flip” as previous resistance at the 52-week high converts into solid support. Put your Stop-Loss to 3,380 JPY to protect against a breakdown below the midpoint of the recent high-volume breakout candle. For your Profit-Taking Exit Strategy, use the primary target at 4,130 JPY to capture the initial fair value realization, and set an extended secondary target at 4,850 JPY, which aligns with a conservative P/E expansion to 7.5x as the market continues to recalibrate for the stock’s triple-digit earnings growth and expanding margins.

UPCON CORPORATION (5075.NG)

• Last 3-Yr Rev. CAGR: 21,1%

• Last 3-Yr EBITDA CAGR: 75,0%

• Last 3-Yr EPS CAGR: 82,7%

• Market cap: $31.85M

• LTM EV/EBIT: 7.45 (median 3-year 6.10)

• LTM ROIC: 33%

UPCON is a specialized construction firm using proprietary polyurethane resin technology to correct floor settlement and repair infrastructure. The primary market opportunity is the aging infrastructure in Japan, specifically the need for non-disruptive, rapid repair methods for agricultural tunnels and factory floors. The share structure is that of a micro-cap (¥5 billion), with President Nobukazu Matsudo maintaining a central leadership role. It competes with firms like Tanaken and Kozo Keikaku Engineering in specialized civil engineering. Financials show revenue of ¥1.45 billion and net income of ¥346 million, boasting a high net profit margin of nearly 24%. Financing risk is virtually non-existent with 0% debt. Catalysts include ongoing R&D into soil amendment technologies (”Naterun”). Its current valuation sits at a P/E of 14.5x. Future expectations center on the “restoration of function” contracts for irrigation systems, which are high-margin and recurring. Our 1-year price target is ¥2,770 (+135%), driven by continued 75% EBITDA velocity and a shift toward a 10x EV/EBIT target.

The ideal Buy Entry Point is at 1,150 JPY, which aligns with the stock’s estimated fair value and recent support levels. Set a Stop-Loss at 975 JPY to guard against a break below the psychological 1,000 JPY barrier and previous long-term support. For your Profit-Taking Exit Strategy, target an initial exit at 1,450 JPY to capture gains before reaching historical resistance, and a secondary exit at 1,600 JPY to capitalize on a potential retest of its record peak.

Kawasaki Setsubi Kogyo Co., Ltd. (1777.NG)

• Last 3-Yr Rev. CAGR: 7,3%

• Last 3-Yr EBITDA CAGR: 26,6%

• Last 3-Yr EPS CAGR: 32,1%

• Market cap: $203.55M

• LTM EV/EBIT: 5.32 (median 3-year 4.22)

• LTM ROIC: 26.2%

Kawasaki Setsubi Kogyo designs and installs air conditioning, plumbing, and disaster prevention systems. Its core market opportunity is the renovation of commercial and industrial facilities to meet new energy-efficiency and carbon-neutral standards. The share structure sees a market cap of ¥20.5 billion, with Kandenko and Kawasaki Heavy Industries as major shareholders. Competition includes regional facility contractors like Kawagishi Bridge. President Katsushi Hiroe leads the firm, which reported financials including a 258% jump in earnings to ¥3.95 billion on ¥38.6 billion in revenue. Financing risk is low, supported by a recent 66% dividend hike which reflects strong liquidity. Catalysts include the record-high order backlog in its energy-saving HVAC division. The current valuation at 8.6x P/E is significantly discounted compared to the construction sector’s 15x. Future expectations anticipate net margins holding steady above 10%. Our 1-year price target is ¥3,235 (+90%), reflecting the closing of the micro-cap discount as net margins hold steady above 10%.

The ideal Buy Entry Point is a decisive break above the recent 52-week high of 3,115 JPY, which would signal a continuation of the parabolic trend. Set a Stop-Loss at 2,440 JPY, aligning with the 50-day moving average and previous consolidation support, to protect against a trend reversal. For your Profit-Taking Exit Strategy, target an initial exit at 3,800 JPY, which represents a standard extension of the current momentum, and a secondary exit at 4,200 JPY if the company continues to beat its revised upward earnings forecasts.

Ascentech K.K. (3565.T)

• Last 3-Yr Rev. CAGR: 29,0%

• Last 3-Yr EBIT CAGR: 5,0%

• Last 3-Yr EPS CAGR: 18,6%

• Market cap: $131.82M

• LTM EV/EBIT: 4.68 (median 3-year 10.19)

• LTM ROIC: 45,4%

Ascentech is a leader in Virtual Desktop Infrastructure (VDI) and cloud security solutions in Japan. Its market opportunity is driven by the rise of “Zero Trust” security and hybrid work environments. The share structure (~¥23 billion cap) features heavy ownership by CEO Takashi Matsuura and Chairman Sato. Competition includes NCD and Nippon Information Development. The company’s financials are strong, with TTM revenue of ¥19.4 billion and net income of ¥1.96 billion. Financing risk is 0% as the company operates debt-free. Catalysts include a strategic pivot toward high-margin subscription models for its “Resalio” brand products. The current valuation is a P/E of 11.4x, which is low given its 188% earnings growth over the last year. Future expectations include double-digit growth in its cloud-native security segment. Our 1-year price target is ¥1,445 (+124%), assuming a mean reversion toward a 10x multiple as subscription revenue begins to dominate the mix.

The ideal Buy Entry Point is a confirmed daily close above 1,650 JPY, which would clear the resistance of accumulated volume and signal a return to its primary bullish trend. To manage risk, set a Stop-Loss at 1,340 JPY to protect against a break below the major support zone. For your Profit-Taking Exit Strategy, target an initial exit at 1,950 JPY to capture gains near the psychological 2,000 JPY barrier, and a secondary exit at 2,400 JPY if the company’s high-growth earnings trajectory continues to attract institutional interest.

These five companies share no common industry. One trades complex machinery for global factories, another digitizes the administrative pulse of local towns, another repairs the literal foundations of infrastructure with expanding resins, another engineers the essential air and water systems of modern buildings, and another shields the virtual desktop from an evolving world of threats.

As ever, I offer no advice, only observations. My own task is simply to search for what may endure.

If these businesses held your interest, you may find value in my earlier notes on Densan (3640) - The Most One-Sided Risk/Reward in Japan Right Now. By subscribing, you’ll be among the first to read about the next set of Japanese enterprises I’m studying.

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After months of refining what has become the most comprehensive Serial Acquirer Database on the market, I’m excited to share our latest intelligence. While our paid community gets the first look at the raw data and deep dives, today I’m opening the curtain on five new additions to our watchlist.

Special thanks to one of our paid subscribers, a sharp-eyed investor in our community, for flagging the intriguing leadership shift at AGES Industri. It’s exactly this kind of collaborative “boots on the ground” research that keeps our database ahead of the curve.

5 New Additions to the 2026 Watchlist

We’ve added five distinct names to the 2026 watchlist, each representing a different flavor of the serial acquisition model:

• Cicor Technologies (SWX: CICN): A rising star in European EMS (Electronic Manufacturing Services). Cicor is consolidating a highly fragmented market, currently trading at a compelling Forward P/E of ~23x with high double-digit earnings growth targets.

• Stille AB (STO: STIL): A specialized Swedish medtech acquirer. Unlike the broader conglomerates, Stille focuses on premium surgical instruments and procedure rooms. Their 2025 acquisition of PFE Medical has integrated beautifully, driving higher margins through specialized distribution.

• Ages Industri (STO: AGES-B): A micro-cap industrial firm hires a new CEO from ABB, a renowned serial acquirer, effective Feb ‘26. They focus on precision-engineered components and have maintained a resilient dividend yield of ~2.8% while seeking bolt-on manufacturing acquisitions.

• Bufab (STO: BUFAB): Known for its “C-Parts” (fasteners and small components) supply chain, Bufab hit record-high operating margins in late 2025. They are targeting an EBITA margin of 14% by the end of 2026 through a mix of organic efficiency and strategic European acquisitions.

• Rollins (NYSE: ROL): The “Gold Standard” of pest control roll-ups. With a Return on Equity (ROE) near 38% and consistent 7-8% organic growth, Rollins is the quintessential “buy and forget” compounder.

🔓 Access the Full Serial Acquirer Database

The five names above are just the tip of the iceberg. Our full database tracks every major (and minor) serial acquirer globally, providing you with the valuation metrics and qualitative insights needed to find the next 100-bagger.

Get the Edge: Subscribers get real-time alerts when we add new companies to the list and exclusive access to our “Deep Dive” reports.

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I am excited to announce that the ultimate Serial Acquirer Database for 2026 is now complete. We have expanded our coverage with five new high-conviction names, bringing our total universe of compounders to over 200 global firms. The full updated sheet will be released to paid subscribers in the next 24 hours.

Performance Review: January’s Technical Breakouts

Last month (Jan 11), we shared a specific “Technical Alert List” with our paid community. We focused exclusively on the most bullish setups—companies that had either cleared multi-month resistance or established strong rising trend channels.

The results speak for themselves. Every single company on that watch list hit its trigger price and delivered immediate momentum:

• IMCD: Triggered @ €74.00 $ — Now €94.96 (+28.32%) — sold and moved to Azelis

• Hexatronic Group: Triggered @ SEK 24.00 — Now SEK 27.85 (+16.0%)

• Aalberts NV: Triggered @ €31.50 — Now €35.20 (+11.75%)

• Elis SA: Triggered @ €24.98 — Now €26.84 (+7.45%)

• Azelis: Triggered @ €9.40 — Now €9.77 (+3.9%)

Average One-Month Return: +13.5%

While the broader market remains volatile, our focus on technical triggers in the “Serial Acquirer” niche continues to find the pocket of strength.

February’s Top 10 Technical Setups

With several of January’s winners now reaching overbought territory, we are rotating our focus. Based on the new 2026 database, I have identified 10 new technical setups that are currently coiling for a breakout.

This new list includes specific entry triggers, profit targets (PT1 & PT2), and hard stop losses to protect your capital. Notably, Asseco Poland (ACP.WA) has just entered the Top 5 after reclaiming a major trendline.

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I. Deep dive into 2025 Year-End Report

The fourth quarter was a demonstration of the operating leverage we have been waiting for, but it wasn’t without its blemishes.

The Good: Operating Leverage & Cash Generation

• The “Double”: EBITA didn’t just grow; it doubled to SEK 28.2 million (14.1). This drove the full-year EBITA to a record SEK 100 million.

• Margin Discipline: The Group EBITA margin hit 10.7% in the quarter (up from 5.7%), confirming that the >9% target is sustainable.

• Deleveraging: The company voluntarily amortized SEK 20 million in loans, pushing Net Debt/EBITDA down to a rock-bottom 0.4x. This is a fortress balance sheet.

• Shareholder Yield: The Board proposed a 32% dividend increase to SEK 1.25 per share. While I generally prefer capital reinvestment, this payout ratio signals supreme confidence in their cash conversion capabilities.

The “Flag”: Weakness in Technology & Distribution

• Top-Line Softness: While the Energy & Environment segment is booming (sales up nearly 20%), the Technology & Distribution (T&D) segment struggled. Net sales for T&D fell 8.8% to SEK 113.1 million.

• Organic Decline: The Group’s organic growth was negative (-1.9%) in the quarter, dragged down by T&D’s exposure to a “hesitant” market.

• Working Capital: Working capital increased by SEK 23.2m for the full year, a slight drag on conversion.

• Management’s Comment: CEO Reuterskiöld noted that while T&D faced a slower market, they offset the volume drop with “stronger gross margins and lower costs”. Profitability held up even as volumes dipped, proving the resilience of their new cost structure.

II. The “Locked-In” 2026 Starting Point

To reach an accurate 2026 valuation, we must layer in the Typhonix acquisition (finalized January 9, 2026) and a realistic organic growth projection. Before spending any of the “dry powder,” the 2026 base is already significantly higher than the reported 2025 result:

• 2025 Reported EBITA: SEK 100.2 million.

• Typhonix Contribution: Acquired at ~4.6x EBIT, adding roughly SEK 11 million in EBIT. This is now “locked in” for the 2026 fiscal year.

• Organic Tailwinds: Management reported a 12.9% increase in full-year order intake (SEK 1,066 million). Even with a “hesitant” T&D market, a conservative 4% organic growth on the pro-forma revenue base would likely add SEK 5 million to EBITA through operating leverage.

Revised 2026 Base EBITA (Pre-M&A): ~SEK 116 million.

III. Calculating the M&A “War Chest”

The Board has replaced the “Equity/Asset ratio” target with a Net Debt/EBITDA cap of < 2.5x, effectively giving a green light to lever up for growth.

The Math of the “War Chest”

• Current EBITDA (LTM): ~SEK 138 million.

• Max Debt Capacity (2.5x): SEK 345 million.

• Current Net Debt: SEK 100.1 million.

• “Dry Powder” (Debt Headroom): ~SEK 245 million.

If Berner deploys this SEK 245 million at their historical multiple of ~6x EBITA:

• Acquired EBITA Potential: SEK 41 million.

• Pro-Forma Group EBITA: SEK 116m (Base) + SEK 41m (New M&A) = SEK 157 million.

IV. Implied Share Price: Target SEK 146+

If the market values this larger entity at a 20x multiple (still a discount to peers like Lagercrantz at >25x):

• Enterprise Value: $157 * 20 = SEK 3.14 billion.

• Less Pro-Forma Net Debt: ~SEK 345 million.

• Equity Value: ~SEK 2.79 billion.

• Price Per Share: ~SEK 146.50 (based on ~19.07m shares).

This confirms that my previous target of SEK 119 was conservative. The balance sheet allows a path toward SEK 146+ purely through disciplined capital deployment. Applying a 25x multiple yields a price of approximately SEK 188, which aligns with my previous post regarding the potential for the share price to double.

V. The Q1 2026 “Catalyst”

Q1 2026 (reporting April 28) will reveal a “step-change” in earnings as we see the combined impact of Autofric and Typhonix consolidated for the first time.

• Q1 2025 Base EBITA: SEK 18.3 million.

• The Inorganic Boost: Autofric (est. SEK 2.3m/quarter) and Typhonix (est. SEK 2.75m/quarter) create a ~27% tailwind to EBITA before any organic growth is factored in.

• EPS Implication: Q1 2026 EPS could land in the SEK 0.85–0.90 range. Annualizing this puts us on a path to SEK 3.60+ EPS.

At a 30x P/E (standard for high-quality compounders), the stock should move rapidly toward SEK 108–115 in the short term, validating the breakout.

VI. Trading Strategy

Following the breakout on February 6, Berner is in a high-momentum phase, closing at SEK 103.50.

• Entry: Limit Buy at SEK 100.20 (retest of psychological resistance).

• Stop Loss: Hard Stop at SEK 91.50 (below the gap-up floor).

• Targets: Secure 50% gain at SEK 118.00; let the remainder run toward the long-term target of SEK 146.50.

Conclusion: 2025 was about building the engine; 2026 is when they fire it.

Disclaimer: I bought my first position in Berner Industrier at 33.7 SEK. My most recent addition was just before Q4’25 earnings, as shared on X. This is not investment advice.

If you are interested in understanding the full Berner Industrier thesis:

• https://substack.com/home/post/p-160181272 (Mar 30, 2025)

• https://substack.com/home/post/p-165427073 (Aug 02, 2025)

• https://substack.com/home/post/p-182251510 (Dec 27, 2025)

About Densan

• Last 3-Yr Rev. CAGR 2.7%

• Last 3-Yr EBITDA CAGR 18.5%

• Last 3-Yr EPS CAGR 22.8%

• Market cap: $133.81

• LTM EV/EBIT: 3.71 (median 3-year 6.03)

Densan Co., Ltd. (3640) is a Japanese information services provider established in March 1966 and headquartered in Nagano City. The company specializes in systems integration, software development, and data processing, primarily serving local governments (Public Sector) and private enterprises or medical institutions (Industrial Sector). As of late 2024, the company's largest shareholder is Shin-etsu Broadcasting Co., Ltd., which holds approximately 36.9% of the outstanding shares, followed by TOPPAN Holdings Inc. with a roughly 15.9% stake. Densan is currently a key player in Japan's national initiative to standardize municipal IT systems, a project that has significantly boosted its recent financial performance and strategic shift toward cloud-based services.

1. Executive Summary: The “Digital Cliff” is a Bridge, Not a Drop

Densan presents a classic market inefficiency where investors have priced in a “revenue cliff” following a government-mandated transition, while completely overlooking a structural transformation in profitability. As the company migrates Japanese municipalities to standardized cloud systems, it is shedding low-margin legacy hardware costs in exchange for high-margin recurring software revenue.

Recommendation: STRONG BUY Price Target: ¥4,900 (+60%) Current Valuation: ~3.8x FY2026E P/E (A “distress-level” multiple for a profitable software leader).

2. The Q4 “Coiled Spring”: Quantifying the Migration Surge

The market is bracing for a post-2026 slowdown, but the immediate term contains a guaranteed revenue explosion. Japan’s mandate to standardize municipal systems by March 2026 has created a massive backlog.

• The Migration Gap: Out of 350 client municipalities, only 139 had migrated as of late January 2026.

• The Q4 Catalyst: This leaves ~211 bodies according to my calculations (60% of the base) scheduled to go live in a single quarter (Jan–Mar 2026).

• Proof in Inventory: Work-in-process (WIP) inventory has surged from ¥353M to over ¥1.3B. This represents massive labor costs already “paid for” that will unlock as pure profit once these 211 projects go live in Q4.

3. Management & Capital Allocation: The Shareholder Yield Story

Densan’s management is using its windfall to reward patient shareholders rather than pursuing “empire building.”

• Aggressive Buybacks: The company executed ¥841 million in treasury stock repurchases, signaling management’s belief that the shares are significantly undervalued.

• Dividend Windfall: A newly announced ¥140 dividend (including a ¥60 commemorative payout) offers a 4.5% yield, supported by a robust cash position of ¥2.97 billion.

• Strategic Discipline: Management has successfully managed the surge in workload without taking on excessive debt, maintaining a clean balance sheet that provides a massive margin of safety.

4. Structural Margin Metamorphosis

The most critical part of the thesis is that Densan is not just getting busier; it is getting better.

Period | Gross Margin | Operating Margin | Context:

• FY21–FY24 (Legacy) | ~30% | ~6% | On-premise hardware & heavy maintenance.

• Q3 FY2026 (Modern) | 39.4% | 20.0% | Cloud-based standardized “Reams” system.

Why this is “Sticky”: Cloud maintenance requires significantly less manual intervention and hardware support than legacy systems. Even when the “implementation” revenue fades in FY2027, the maintenance revenue will stay at these new 40% gross margins.

5. Valuation: Pricing for Catastrophe, Delivering Growth

Densan currently trades at a forward EV/EBIT of ~2.0x. In the software world, a company with 40% gross margins and a captured government client base typically trades at 12x–15x EBIT.

The “Normalized” 2027 Outlook:

We model a conservative “Base Case” where revenue drops 25% after the migration peak. However, due to the structural margin shift to 15% operating margins, the company remains far more profitable than its historical average.

• Normalized EPS Estimate: ¥380

• Applied P/E Multiple: 13x (Still conservative for Japanese SaaS)

• Target Price: ¥4,940

Conclusion: The Market is Wrong About the “Cliff”

The market views FY2026 as a one-off peak. I view it as the launchpad for a higher-margin, cloud-centric business model. With 60% of the backlog hitting in the current quarter and ¥2,500 per share in Book Value protecting the downside, Densan is a rare “Heads I win, tails I don’t lose much” setup.

The Verdict: BUY.

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Nothing in this article constitutes investment advice. All views expressed are for informational and educational purposes only, and readers should conduct their own research or consult a professional before making any investment decisions. The author may hold positions in the securities mentioned and may buy or sell at any time without notice.

The average return of the three companies is:

• LSI Software (LSI): 105.7%

• Excellence SA (EXC): 88.9%

• Seko SA (SEK): 11.4%

What I like about these “basket” plays is that you don’t need to have that much luck. You just find a basket of the cheapest value and let time do the rest. Now, I have found five new companies on the Polish stock exchange that have my interest:

1. Madkom

2. Votum

3. Balticon

4. Ailleron S.A.

5. Quantum Software

Each company is presented in a brief, straightforward manner. A single chart (in million Polish zloty) of gross profit or operating income over the past years, with a prediction for Q4’25 and 2026, and one year forward accompanies each company profile. On average, I think this basket could return +27% in a base case and +150% in its best-case scenario.

Madkom

• Market cap: $3.78M

• LTM EV/EBIT: 5.52

• Last 3-Yr Rev. CAGR: 23.1%

• Last 3-Yr EPS CAGR: 179.2%

• LTM ROIC: 17.4%

Madkom operates in the niche GovTech sector, providing software solutions for public administration and local governments in Poland. This is a sticky business; once a municipality integrates Madkom’s systems for document management or citizen services, switching costs are prohibitively high. The company recently saw its valuation compress significantly despite improving EBITDA margins. Unlike volatile SaaS peers, Madkom’s client base generates predictable, recurring government-backed revenue streams. The market has punished the stock recently, pushing multiples to historic lows, ignoring the defensive nature of its public-sector contracts. Theoretical Return Potential: +10% (max. +150%)

Votum S.A.

• Market cap: $163.31M

• LTM EV/EBIT: 2.39

• Last 3-Yr Rev. CAGR: 27.7%

• Last 3-Yr EBITDA CAGR: 89.3%

• LTM ROIC: 39.2%

Votum is a legal and financial claims aggregator, currently acting as the primary beneficiary of the massive litigation wave regarding Swiss Franc (CHF) mortgage loans in Poland. It is an event-driven cash machine that the market has prematurely discounted as a “value trap,” fearing an eventual earnings cliff. However, the volume of cases and the backlog suggest the earnings peak is likely a plateau that will last for years, not months. The company is trading at single-digit earnings multiples typical of a declining business, whereas it is actually flushing with cash and initiating significant dividend payouts. Theoretical Return Potential: +35% (max. +80%).

Balticon S.A.

• Market cap: $21.94M

• LTM EV/EBIT: 5.69

• Last 3-Yr Rev. CAGR: 13.5%

• Last 3-Yr EBITDA CAGR: 7.8%

• LTM ROIC: 18.9%

Balticon is a logistics operator focused on container depots and transport. It is a cyclical business tied to global trade volumes. The company is currently emerging from a down-cycle with a valuation that essentially treats it as a liquidation play (trading near book value). As trade flows normalize and depot utilization rates improve, operating leverage will likely drive a disproportionate increase in net income. It is a classic deep-value recovery play, unloved by a market focused on tech and AI. Theoretical Return Potential: +20% (max. +100%)

Ailleron S.A.

• Market cap: $55.52M

• LTM EV/EBIT: 10.19

• Last 3-Yr Rev. CAGR: 22.6%

• Last 3-Yr EPS CAGR: 42.6%

• LTM ROIC: 9.7%

Ailleron is an IT software house exporting financial technology (FinTech) solutions globally. It has successfully pivoted from general outsourcing to high-margin specialized products (LiveBank). Recent results show an impressive surge in EBIT (up ~75%), yet the stock price has lagged behind this fundamental improvement. It trades at roughly 1.1x EV/Revenue, which is low for a profitable software company growing at this pace. The market still views it as a low-margin contractor rather than a product company, offering an arbitrage opportunity. Theoretical Return Potential: +25% (max. +90%).

Quatum Software

• Market cap: $15.1M

• LTM EV/EBIT: 6.90

• Last 3-Yr Rev. CAGR: 11.3%

• Last 3-Yr EBITDA CAGR: 7.3%

• LTM ROIC: 31.2%

Quantum specializes in logistics and supply chain management software. This sector is becoming increasingly critical as global supply chains grow more complex. The company has a clean balance sheet and a long history of profitability. While it lacks the explosive growth of AI-focused tech startups, it offers stability and high dividend yields. The market currently values it at a moderate multiple, seemingly overlooking the efficiency gains its software provides to a logistics sector under pressure to digitize. It is a classic “quality at a reasonable price” play. Theoretical Return Potential: +45% (max. +320%)

If these businesses held your interest, you may find value in my earlier notes on Japan, each chosen with the same attention to durability and utility. By subscribing, you’ll be among the first to read about the next set of enterprises I’m studying.

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None of the suggestions in this article above should be considered investment advice.

That is why Part 2 is my favorite update yet.

We are going dumpster diving. I am pulling back the curtain on the second half of the world’s largest serial acquirer database, featuring companies trading at single-digit multiples (often below 8x EV/EBIT) that the mainstream “compounder community” is completely ignoring.

Below, I outline the global strategy for these deep-value acquirers and reveal the most aggressive chart setup I’ve found in this forgotten corner of the market. The average implied upside of the Top 10 names shared today is 67%.

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Earlier I shared my views that gold is not an investment. It’s not even a hedge. It’s money. The only real money. And in a world where money has been transformed into a policy tool, I want something that stands outside the system.

For years, I never sold an ounce. Not because I’m dogmatic, but because gold isn’t a trade for me. It’s a mindset. However, this week, for the first time since 2021, I hit the sell button.

Why? Because protecting your principal is part of the “real money” philosophy. Gold is currently at $4,933. While the “bulls” were screaming for $10,000, my paid subscribers received an explicit roadmap to exit gold and silver before the cliff.

Here is what I told my paid members before the drop (25-Jan):

On silver: “I recommend taking partial profits at $99.50—just ahead of the $100 psychological wall—with a final exit targeted near $120.00, where the parabolic extension will likely meet extreme exhaustion.”

On gold: “Scale out aggressively: sell 40% at 5,250, sell another 40% at 5,750, and hold the remaining 20% with a tight trailing stop-loss.”

Gold is currently at $4,933 and silver at $74 (USD). If you followed the plan, you aren’t mourning a loss; you’re sitting on a pile of dry powder, waiting to buy the blood. Actionable timing that protects your principal.

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The Paradox of Monument Mining ($MMY.V)

Despite the volatility, my conviction in gold and silver in the long-term remains unshaken. I expect new all-time highs this year. But you shouldn’t just buy “gold” or “silver”. You should buy the specific vehicles that the market has fundamentally mispriced.

Monument Mining ($MMY.V) is my largest position, and I have written about the company and other miners before. recently highlighted a “paradox” in Monument that every value investor needs to hear:

“Investors may instinctively fear a stock that has risen 600%... In the case of Monument, we believe this is a mistake. Today, after the stock has appreciated by 600%, we are still only paying ~1.25x operating cash flow for a fully operational mine... We are effectively buying a de-risked asset today for the same ‘distress’ multiple paid before.”

In other words, the price went up, but the value stayed the same because the business got better and the gold price rose. You are getting a “free” upgrade from a risky explorer to a cash-generating machine.

The Investor’s Manual: $MMY.V (CAD)

Knowing directionally what to buy at this gold price is easy: profitable miners that are increasing production. Knowing when is where the wealth is created (or lost). Here is your tactical guide for Monument Mining, currently trading at $1.28 CAD at the time of writing.

When to Strike

• Accumulate if the price drifts to $1.15–$1.20 CAD on thin, anemic volume. This is the signal that sellers are exhausted.

• Historically, when the daily RSI dips below 45, this stock is in a high-probability “coiling” phase.

• If you see the C-Suite buying their own shares at these levels, stop thinking and follow the smart money.

When to Stay Away

• If it’s up 15% in a morning and the RSI is over 75, do not chase. You are buying the “top of the candle.”

• If we break $1.05 CAD on massive volume, the “Double Bottom” has failed. Step aside.

• If gold breaks its major support at $3,200 (USD), $MMY.V will follow it down regardless of the fundamentals.

The Cheat Sheet: 2026 Trading Ranges

It is currently trading at (CAD) $1.28

• The “Gift” Zone | $1.10 – $1.15 | Aggressive accumulation.

• The Support Zone | $1.16 – $1.25 | Core position building.

• The No-Man’s Land | $1.26 – $1.45 | Hold and wait for the breakout.

• The Exit/Trim Zone | $1.50 – $1.65 | Sell half and let the rest run to $2.00.

• The Panic Button | Below $1.05 | Close the position and re-evaluate.

Don’t Miss the Next Call

The market is shifting faster than most can react. If you had been a paid subscriber, you would have locked in silver profits at $99.50 and gold at $5,250.

In my next article, I’m revealing the three commodities I am buying right now to front-run the next leg of this bull market.

Nothing in this article constitutes investment advice. All views expressed are for informational and educational purposes only, and readers should conduct their own research or consult a professional before making any investment decisions. The author may hold positions in the securities mentioned and may buy or sell at any time without notice.

In this article, I take a diverse set of companies and commodities and ask Gemini, Google’s AI assistant, to analyze them purely through their 1-year and 5-year price charts.

The goal is simple: compare various assets based only on technical structure and see what it recommends. I will revisit the outcome in 12 months.

I looked across serial acquirers, agricultural and fertilizer companies, popular Canadian mid- and large-caps, and a range of commodities, with particular focus on precious metals, which I believe are becoming stretched in the near term.

Looking only at risk/reward, one company stands out clearly: Nutrien. To my surprise, the AI advises to stay on the sidelines for Constellation Software, despite the -40% drawdown. On the commodity side, soybeans, nickel, and sugar show the most compelling setups.

Paid readers get the full breakdown: upside and downside levels for every asset analyzed, a clear price entry, and profit-taking strategy.

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When I started building the “World’s Most Exhaustive Serial Acquirer Database” last week, I thought I’d stop around 140. I was wrong. The more I ventured beyond the familiar territory of established Nordic and US compounders, the more quality I discovered hiding in truly obscure corners of the market.

The database has now officially expanded to 200+ companies.

Because 200 names are a lot of data to digest at once, I am splitting the release. Today, I am dropping the first 100 names for paid subscribers. The remaining 100, along with my specific conviction ratings and “best-of-breed” picks, will follow in early February.

The “Jan 11” Scorecard: Did the Triggers Fire?

In last week’s post, I gave you specific “Triggers” for the stocks showing the most bullish setups. In my world, we don’t buy because we like the story; we buy because the price confirms the story.

Two stocks from our watchlist triggered a breakout over the last 7 days:

• Hexatronic ($HTRO) > SEK 24.00 | ✅Hit SEK 24.40 on Jan 14.

• IMCD N.V. ($IMCD) > €78.42 | ✅ Broke out to €80.88 on Jan 15.

Tactical Notes on the Breakouts

Hexatronic: We got our signal on Tuesday/Wednesday when it cleared 24.00. It reached as high as 24.40 before the broader market softened. This is classic behavior—a retest of the breakout line. I am watching for 24.00 to now act as support. If it holds, the momentum remains intact.

IMCD: This was our “Inverse Head & Shoulders” play. It blasted through the 78.42 trigger level with significant volume, hitting nearly 81.00 before a sharp Friday pullback. For a serial acquirer of this quality, these dips are usually where the “smart money” adds.

Azelis: This is why we wait for triggers. Despite the RSI showing a potential bounce last week, the stock failed to reclaim €9.40 and collapsed to a new low of €8.49. This is still a “Falling Knife.”

🔓 Access the First 100 Names

The list below includes the first 100 names in the universe, sorted by region and NTM EV/EBIT valuation.

Note: Not every name on this list qualifies for the ‘Bargain Bin.’ However, the history of high-quality serial acquirers shows that their compounding runways often last far longer than the market initially prices in.

Download/View the Serial Acquirer Database: Part 1 (Excel/CSV)

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They announced a position in Berner Industrier after meeting management in June. If you’ve been reading my work, you know I already met with management in May. I published my thesis on Berner back in Mar’25 (it was my biggest position for the year) and have held it since December ’24. I’ve done this before with Bergman & Beving and Momentum Group (the B&B spin-off), recycling that capital into Berner and Karnell.

Here’s the thing: I love the serial acquirer business model. It usually works. However, I cannot get comfortable paying 25 times forward EV/EBIT. That’s asking for trouble. If we hit a (deflationary) bust H2’26, those multiples will contract violently, and you’ll be left holding the bag.

My strategy is different. I shop in the bargain bin. I want the serial acquirers that are being ignored. The ones trading below 15x EV/EBIT (ideally below 10x) where insiders are actually buying shares on the open market with their own money.

I’ve spent the last few days building a master list of 140+ publicly listed serial acquirers with the purpose of finding the best ones to buy now.

🔓 Behind the Paywall: The Full Serial Acquirer Universe

Stop guessing which compounders are overextended and which are primed for a breakout. Upgrade to a paid subscription today to secure your copy of the Full 140+ Serial Acquirer Database, launching this February. Members behind the paywall gain immediate access to my tactical playbooks, where I pinpoint management ‘insider’ buying, identify high-probability oversold recoveries, and flag the valuation traps you must avoid.

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Gullewa Limited engages in the exploration, evaluation, and mining of mineral properties in Australia.

It is one of the world’s most profitable royalty corporations that I have come across, with operations concentrated in the Gullewa Project area.

The company’s asset portfolio includes a 1% royalty in the Deflector Gold-Copper Project, a 58% stake in Central Iron Ore (British King mine), and 69% of the Hunter Valley property development joint venture that develops 39 residential lots in Aberglasslyn - a rapidly expanding suburb of Maitland.

Here is the pitch: Gullewa is a high-margin royalty corporation that has maintained a “rolling mine life” for a decade, successfully replacing its ~100k oz annual depletion (see Fig. 1). At a ~A$7,000/oz gold spot price, the royalty is forecast to generate ~A$2.7M in FY26 cash flow. With an Enterprise Value of only ~$11M, the market is offering this tier-1 royalty asset for an implied 25% free cash flow yield. Beyond the royalty, you get the “hidden” upside of a 57.6% stake in the high-grade British King mine and $2.3M cash in FY27+ from a likely sale of remaining residential lots. Despite trading like a distressed junior producer, Gullewa is an elite cash generator that returned 78.6% of its payout ratio to shareholders last year.

Gullewa’s royalty business should command a mid-cycle EBITDA multiple of 10x, a standard benchmark for high-margin, low-overhead gold royalty streams. The stock offers roughly 100% upside under a conservative sum-of-the-parts (SOTP) approach. However, by factoring in a market re-rating of the royalty multiple alongside a production-based valuation for the de-risked British King satellite mine, the total upside expands to 286%.

Four Major Catalysts to Unlock Value

The primary driver is the Unhedged Gold Exposure (Fig. 2), ensuring every ounce mined captures the full market premium. This is amplified by the Production Recovery in FY27 (Fig. 3), as the operator transitions from a "bridge year" to high-grade zones like Spanish Galleon. Next, I estimate that once the British King project is operational (FY27+), Gullewa's estimated diluted 27.6% stake (57.8% now) provides significant non-royalty upside. Finally, meaningful cash generation is expected by the Hunter Valley JV in later years (FY27+) from the remaining 26 lots in Stage 5.

Valuation and Multiple Re-rating

While the royalty drives the upside, the downside is protected by a fortress balance sheet relative to the market cap. Gullewa holds approximately A$10.7 million in cash and liquid investments. Additionally, the company holds a secured Hunter Valley property loan valued at A$5.0 million (after a haircut) and a listed stake in Central Iron Ore worth A$2.3 million.

My base-case valuation of Gullewa uses a sum-of-the-parts framework without assuming any re-rating of the royalty or investments:

• Deflector Royalty: Using a 10-year horizon and a 10% discount rate, the PV is ~A$21–22 million.

• Cash & Liquids: ~A$10.7 million.

• Investments: ~A$7.3 million (Hunter Valley Property + Central Iron Ore stake).

Total equity value is estimated at A$39–40 million, implying a fair value for my base-case of A$0.18–0.19 per share based on ~213 million shares outstanding, or roughly 100% upside from today’s price.

My bullish-case valuation of Gullewa assumes a re-rating of the royalty (10X EBITDA) and their investments in CIO, but keeps Hunter Valley consistent:

• Hunter Valley: Recent sales in Aberglasslyn indicate strong residential land prices, with the initial 13 lots in Stage 4 expected to generate approximately A$4.6–5.2 million in gross proceeds. Given Gullewa’s 69.5% ownership, this equates to about A$3.2–3.6 million attributable to Gullewa, largely used to repay project debt, resulting in limited net cash flow in FY26. Meaningful cash generation is expected in later years (FY27+) from the remaining 26 lots in Stage 5. The estimated present value of net cash flows to Gullewa from all 39 lots is approximately A$2.3 million. Since this would be ~A$0.0108 per share, this is not the thesis breaker.

• Central Iron Ore stake: The market is assigning only about A$0.01 per share to the CIO stake. Using spot prices and standard gold-in-ground multiples, I estimate a pre-production value of A$0.04–0.06 per share. If British King reaches production in 2028, Gullewa’s diluted interest would justify a higher 10–15% of spot valuation, implying A$0.06–0.08 per share and material upside not reflected in the current price (see Fig. 4).

Conclusion

At a current price of A$0.09, Gullewa is not just an easy ”double.” If the Deflector royalty continues to benefit from ~A$7,000/oz gold and the British King project reaches production in 2028, the total intrinsic value nears ~A$0.33 per share, representing ~286% upside. Investors are buying a fortress balance sheet and a tier-1 jurisdiction royalty, while getting a future producing junior gold mine essentially for free. In the meantime, you receive an >8% dividend yield to wait for the market to wake up.

While the upside may be enticing, investors must weigh it against at least three red flags: first, a governance and control risk driven by an insider-dominated register (35–40%) that grants management full discretion over capital, leading to a history of shareholder dilution (6% last year) and a potential “diworsification” rather than cosistent cash returns; second, the heavy reliance on their CIO stake which, while profitable in booms, tend to destroy significant value when the market cycle inevitably turns; and finally, a bloated cost structure inconsistent with the royalty model, as cash flows are diverted to fund opaque side projects in the Hunter Valley without a clear strategic roadmap.

Disclaimer: This is not investment advice. Do your own research. I own shares at an average price of 0.88 cents.

In the book, the author discusses Michael Steinhardt’s legendary “nuclear option.” When Steinhardt felt out of sync with the markets or frustrated by his performance, he wouldn’t just trim his positions. Instead, he would order the sale of his entire portfolio. He wanted to start from zero, forcing himself to justify every single new dollar he put to work.

It got me thinking: If I were starting from scratch today, what would I actually buy?

I decided to take the “Clean Slate” approach for one of my accounts. I spent weeks refining a formulaic buying strategy designed to outperform the market while requiring only one day of maintenance per quarter. I’ve combined the DNA of Warren Buffett, Tony Deden, and Joel Greenblatt, combined with technical analysis, to narrow a massive list of global contenders down to just 10 positions.

My goal: A 25% annual return (dividends included).

The “Magic Formula” is set. Behind the paywall, I am revealing the 10 positions selected and the aggressive performance targets set, which project a quarterly return as high as 16%.

Here is the Q1 2026 “Clean Slate” Portfolio.

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In this article, I will try to address the following questions:

1. Is the character of the business maturing as we anticipated?

2. By what means will the company recapitalize its earnings?

3. What vulnerabilities might threaten the permanence of our capital?

The Unfolding of the Thesis

Our participation in Berner was built on three pillars of permanence.

1. The company would continue strengthening its balance sheet: From 2022 to 2024, there were clear improvements in working capital and inventory management. By Q1 2025, net debt to EBITA had dropped to 0.4x, down from 1.1x in 2024 and 2.5x in 2023. In Q2 2025, leverage came in somewhat lower than expected at 1.3x adjusted net debt/EBITDA (or 0.8x lease-adjusted), leaving significant capacity for further M&A. By Q3 2025, Net Debt to EBITA was 0.4x (and 1.5x including Lease Adjustments/IFRS 16). This is based on the net interest-bearing debt, including IFRS 16, of SEK 117.1 million and the R12 EBITA of SEK 86.1 million. This is well within their aspired limit of <2x, especially as I expect her to pay down debt after each acquisition.

Reuterskiöld has indicated that she is willing to take on leverage to execute the company’s growth strategy, but she is expected to pay it down post-acquisition, maintaining balance sheet flexibility.

1. The second part of the thesis focused on Berner Industrier’s ability to acquire niche products without overpaying. After a four-year acquisition hiatus, Berner returned to M&A with a strong balance sheet. On April 10, 2025, the company announced its acquisition of Autofric, a move reminiscent of Lagercrantz’s purchase of PST. In a Q&A with ABG Sundal Collier, management expressed optimism about Autofric’s margin potential, citing a shift toward proprietary products and efficiencies not previously captured due to entrepreneurial accounting practices. Autofric, included in Berner’s accounts from May 2, 2025, under the Energy & Environment segment, generated SEK 60 million in 2024 sales and SEK 9 million in EBIT. The acquisition price was SEK 55 million (cash and debt-free) with an earn-out of up to SEK 20 million. It was funded internally and through an existing credit facility. Given that Lagercrantz typically pays 6–8x EBITA, Berner appears to have acquired Autofric at an attractive multiple of 5.63x–7.68x, depending on the 2028 earn-out. Notably, Autofric posted an EBITA CAGR of 22% from 2017 to 2024. In December 2025, the company acquired the Norwegian water treatment company Typhonix.

   The purchasing price for Typhonix is around 4.6x EBIT if you consider 50,5 NOK payment (24 for 2024 + 1st tranche of earnout for 2025 performance)

2. The third thesis pillar was that Berner would sustain healthy margins in its larger business units, especially within the Teknik & Distribution (T&D) segment. In Q4 2024, the company brought in Mattias Lysebring to lead Christian Berner AB (T&D’s largest unit) —a hire from Profsafe AB, where CEO Caroline had previously served as Chair during its time within Lagercrantz. By Q2 2025, the impact of this leadership change was evident: Christian Berner AB reported double-digit sales growth and robust order intake, largely from recurring, smaller deals that reflect broad customer confidence. The T&D segment showed early signs of operational improvement within Christian Berner AB were materializing faster than expected. In Q3 2025, the Teknik & Distribution (T&D) segment saw its EBITA margin climb to 11.1% (up from 7.3%), driven by a favorable product mix and cost-saving measures. Net sales grew 7.1% to SEK 117.8 million, supported by the full-quarter inclusion of Autofric AB. With order intake rising 17% to SEK 118.8 million, the segment continues to demonstrate structural margin expansion, and the success of the operational refinements led by the new leadership.

The Group's EBITA margin of close to 13 percent in the quarter... clearly shows that the Group target of at least nine percent EBITA over a business cycle is fully achievable.

Recapitalizing Earnings

In August of this year, I wrote: “The balance sheet is no longer the story, but it’s what they choose to do with it.” Or in different words, the roadmap for 2026 depends on continued momentum in M&A, particularly decentralized M&A by the subsidiaries, and going into new verticals. My guess, based on anecdotal evidence of my meeting with the CEO, would still be helium leak detection, which is also an acquisition focus area of Atlas Copco (NOY in 2024), Safe Monitoring Group (CPC in 2025), and Indutrade (Nolek in 2012; Kontrollautomatik in 2016). The Appendix contains three additional examples of the sort of enterprise we find worthy of our interest.

According to my back-of-the-envelope calculations, they could make one larger or two smaller acquisitions, without overleveraging the company (1.7x net debt/EBITA). Given recent prices paid for acquisitions, this would add 19m SEK EBITA to the company, giving it an EBITA profile of 124m SEK. This would be a 44% increase to the rolling 12-month Q3’25 in EBITA. Assuming the market is willing to pay between 20x EBITA for a high-quality serial acquirer in Sweden (27x for Lagercrantz and 28x for Addtech), one would expect a share price of 119 SEK, which represents a return of ~23% at the time of writing (96.6 SEK). I’m discounting Berner Industrier here to Lagercrantz and Addtech because it’s a small-cap; its peers have demonstrated the ability to maintain 15%+ EBITA margins through multiple economic cycles, and they complete 5-10 acquisitions annually, whereas Berner is in the earlier stages of scaling its “serial acquirer” model. One could argue that the valuation of the other serial acquirers is already rich, which is granted.

My median share price prediction for 2026 shared on 30-Mar was 63 SEK (98-127 with re-rating to peers), and my prediction now is 119 SEK, assuming 124m SEK EBITA and re-rating to 20x EBITA. For 2027, I shared on 02-Aug that I assume the share price in 2027 to be 121 SEK +/- 40 SEK, and my prediction for 2027 now is 159 SEK (assuming 152m SEK EBITA and a re-rating to 22x EBITA).

The Mitigation of Fragility

In March, I shared the initial investment risks:

1. Exposure to the residential construction sector through its Technology & Distribution segment

2. Historical operating margin volatility, with margins as low as 0.12% in 2012

3. Acquisition integration risks, which could impact execution

4. Cybersecurity, once listed as a thesis breaker, appears materially de-risked. Caroline outlined contingency protocols from her past experiences, such as maintaining payroll systems offline and reducing centralized dependencies. Meanwhile, exposure to the weak residential building sector is being offset by new contracts like noise suppression systems in a Norwegian tunnel project

In August, following a meeting with management, I reflected on the vulnerabilities that might threaten our capital. What follows is a contemplation of those risks, paired with a brief observation (in Italic) of how the business has fared through the third quarter of this year:

1. Core margin erosion: Partially mitigated through leadership changes and inventory discipline. Gross Margin rose to 42.2 percent from 39.1 percent a year earlier, reflecting strong development in both business areas. The Group's EBITA margin increased to 12.5 percent in Q3 2025, up from 6.8 percent in Q3 2024. Technology & Distribution (T&D): The EBITA margin for this segment climbed to 7.9 percent (up from 2.7 percent in Q3 2024). This improvement was attributed to a favorable business mix in high-margin areas and reduced overhead costs from previously implemented efficiency measures. Energy & Environment (E&E): Although the segment's EBITA margin for the quarter was 12.6 percent (down from 17.1 percent in Q3 2024), the business continued to perform well in high-margin sub-segments through efficient deliveries. The year-to-date (nine-month) margin for E&E actually improved to 16.5 percent from 12.1 percent. While the segment achieved a strong gross margin (44.3% in Q3’25 vs. 42.4% in Q3’24) through efficient project deliveries, these finalized deliveries were accompanied by a temporary increase in overhead costs.

2. Risky acquisitions: Mitigated by continued internal sourcing and Caroline’s strict valuation stance (inspired by Lagercrantz). Berner Industrier has completed two acquisitions in 2025, ranging in valuation from 4.6x EBIT to 7.68x EBITA. Both companies are in the water treatment industry, which is a move that builds upon her existing knowledge from when she was a Member of the Board of Directors of PST (2021-2022), acquired by Lagercrantz in 2012. Both companies were funded via existing financing that was available/ existing credit facility.

3. Key person risk: Softened by open-market buys, warrant programs, and apparent long-term commitment. The key person risk, once a central pillar of the “bear case” for Berner Industrier, has seen significant softening over the course of 2025. This shift is driven not by the removal of talented leadership, but by the deepening of their long-term institutional ties to the firm. CEO Caroline Reuterskiöld has continued to lead by example, both through her active open-market share purchases and her recent exercise of warrants, signaling her personal commitment to the company’s trajectory. Crucially, the “one-woman-show” narrative was dismantled this year. The promotion of Henrik Nordin to Deputy CEO (retaining his CFO role) was framed by Reuterskiöld not as a standard corporate elevation, but as a formal recognition of a partnership where she views him as an “equal.” The structural risk of a leadership vacuum was further mitigated on December 2, 2025, when the company announced the allotment of its long-term incentive program. In a broad-based show of confidence, 19 key employees—including the CEO, CFO, and Managing Directors of subsidiaries—purchased 223,500 warrants on market terms. These warrants carry a strike price of SEK 114.83, a 50% premium over the volume-weighted average price from late October. By setting a hurdle that requires a significant share price increase by late 2028, management has effectively “locked hands” with shareholders, ensuring that the team responsible for the current outperformance is financially tethered to the next three years of growth.

4. Inventories and receivables are trending upward: Certain inventory build-up is strategic, not symptomatic of sales weakness. Inventory has increased to SEK 87.7 million, up from SEK 81.8 million in Q3 2024. However, the Group also saw a 24.5% increase in order intake in Q3 2025. This suggests that the inventory build-up is likely a strategic response to support the strong demand and higher future delivery volumes. To see if it is a bad thing, we can look at the inventory-to-sales ratio, which was 8.89% vs. 8.50%. This indicates that the inventory increase is almost perfectly in line with the growth in sales, suggesting that the build-up is not "dead weight" but rather a necessary component of the scaling business. Receivables have actually decreased from 136m SEK to 121m SEK year-over-year, despite higher sales. Also, the Receivables efficiency (Receivables/Net Sales) has improved from 62.6% to 52.4% - The company is collecting cash faster relative to its sales volume than it was a year ago. Operating cash flow for the first nine months improved to SEK 75.3 million (from SEK 63.0m), further supporting the idea that the working capital management is effective.

5. Free cash flow conversion: Despite the EBITDA expansion, there were concerns about free cash flow conversion. Caroline responded confidently earlier this year: “This is a cashflow machine. Most of our capital needs are temporary pass-throughs.” The Free Cash Flow (FCF) margin has undergone a structural transformation throughout 2025, moving from a volatile industrial profile in 2023 (4.5%) to a steady “cash machine” model. While 2024 saw an outsized FCF margin spike (reaching ~11-12% due to a massive one-time release of inventory/working capital), 2025 has proved that this was not a fluke but an elevation of the company’s floor. Analysts now see the “normalized” FCF margin stabilizing at approximately 8.5% to 9.5% through 2026. This trend is driven by a doubling of EBITA margins (from 6.8% in Q3’24 to 12.5% in Q3’25) and a disciplined CapEx strategy. By converting nearly 100% of its EBITA into free cash, Berner is now operating with the efficiency of “tier-one” serial acquirers, giving it the self-funding capacity to execute bolt-on acquisitions like Typhonix without overextending its credit facilities.

Conclusion: The Long View

With the legacy risks of the past now resolved and the operational engine refined, Berner Industrier has become a resilient cash-generating serial acquirer whose true productive value the market has yet to fully realize.

While a 100% return in one year is mathematically possible through a combination of a large acquisition and a major multiple re-rating, it would be an extreme outlier. A more “realistic” bull case would be a move toward SEK 130–140 (+35-45%) as they continue to execute their current strategy, slightly above my median target of SEK 119.

Consider a simple thought experiment. For the value of our participation to double within 12 months, the market must witness more than just growth: it needs to see an "M&A Sprint." They need to acquire roughly SEK 22m in fresh EBITA while the market simultaneously decides they are no longer an "industrial micro-cap" but a "mini-Lagercrantz." This specific combination of SEK 157m in deployment and multiple expansion to 25x EV/EBITA is the definitive mathematical path to SEK 190.

To support an EV of SEK 3.66bn at a 25x multiple, Berner needs a total Group EBITA of: SEK 3,67 billion / 25 = SEK 146.4 million. At 7x purchase multiple: Berner needs to spend SEK 157 million on acquisitions. This could be achieved via one mid-sized “platform” acquisition (like a larger version of Autofric) or 3–4 “bolt-ons” the size of Typhonix. If Berner spends SEK 157m to buy SEK 22.4m in EBITA:

• New Total EBITA: SEK 146.4m.

• New Total Net Debt: ~SEK 367m (Current debt + the new acquisition cost).

• Resulting Leverage: 2.5x Net Debt/EBITA.

While this path would place the debt slightly above their self-imposed 2.0x limit, it remains well within the boundaries of safety for a business that generates such consistent cash. In truth, the firm’s existing credit lines are more than sufficient; they could fund a SEK 157 million acquisition today without ever needing to ask the banks for further permission. Furthermore, if the stewards of our capital maintain their discipline, perhaps paying 5x earnings rather than 7x, the required outlay drops to SEK 112 million. In this scenario, the balance sheet remains even more resilient, with debt sitting at a very comfortable 1.64x.

Disclosure: I’ve been long Berner Industrier since December 27, 2024, at 33.7 SEK per share. Please note, this is not investment advice.

Potential Acquisition Segments

Under her leadership, Berner seeks companies with a specific “DNA” that mirrors her experience at Lagercrantz:

• Target Size: Revenue typically between SEK 30m and 100m.

• Profitability: A strict requirement for high EBITA margins, ideally exceeding 15%, as evidenced by recent deals like Typhonix (25%) and Autofric (15%).

• Market Position: “Mission-critical” niche products in sustainable technology, focusing on non-discretionary industrial spend where customers value technical expertise over price.

Leveraging her board experience and the Group’s current clusters, potential targets likely fall into three categories:

• Advanced Water Treatment: Seeking firms specialized in industrial wastewater recovery or UV-filtration, building on the momentum of the Typhonix and Autofric water-segment additions.

• Energy Efficiency & Flow Control: Targeting manufacturers of high-efficiency heat exchangers or smart valve actuators (similar to her work with Zander & Ingeström and Swedenborg) that help heavy industry decarbonize.

• Safety & Secure Infrastructure: Identifying niche leaders in industrial fire suppression or secure enclosure solutions for data centers and renewable infrastructure, drawing on her extensive history with Profsafe and Thermod Group.

1. Advanced Water Treatment

• ULTRAAQUA (Denmark): Still appears to be held by its original stewards. It was founded by environmental scientists Ole Grønborg and Jens Skjølstrup, who transitioned their university research into this global enterprise. It remains a prime example of a “scientific house” yet to be consolidated.

• EPSE Oy (Finland): A classic founder-led “Cleantech” house. The Board of Directors and the co-founder, Vesa Rissanen (the inventor of the EPSE™ method), own approximately 40% of the shares, with the remainder held by private partners and management.

• Weeefiner (Finland): This is a young, independent “Greentech” estate. The leadership team, including CEO Mikko Hänninen and CTO Elmeri Lahtinen, are deeply involved in the day-to-day stewardship and ownership of the firm.

2. Energy Efficiency & Flow Control

• Ramén Valves (Sweden): A historic Stockholm house founded in 1945. While it has received some institutional grant funding from the EU, it remains an independent designer and manufacturer, currently led by management rather than a conglomerate.

• BVT Sweden: Founded and currently owned by a group of senior valve engineers (including Peter Kull, Lars Wall, and Sören Viktorsson) who left larger firms to build their own world-leading supplier for critical steam applications. This is exactly the type of “specialist partnership” Berner looks for.

• PHE Nordic (Denmark): Remains a private family-type enterprise. It is currently directed by Peter Rønnehave, who took over leadership in 2017, maintaining its independence in the specialized heat exchanger market.

3. Safety & Secure Infrastructure

• Nordic FPC (Sweden/Estonia): Not to be confused with the public “Fingerprint Cards,” this private group (Nordic FPC Group) is owned by its principal beneficiaries, Meelis Kars and Tina Cecilia Pennanen. It operates as a private holding, focused on specialized fire protection systems.

In the eyes of a true steward, an acquisition is most powerful when it secures the integrity of the house. By moving “up the value chain,” as seen with the integration of Typhonix, which already served as a critical technology provider to Berner’s subsidiary Swedenborg, management is not just buying growth, but reclaiming control over its own destiny. This philosophy suggests that the most logical targets are the “silent partners” currently residing within the supply chains of subsidiaries like Zander & Ingeström or Christian Berner AB. Potential candidates would include niche manufacturers of high-voltage boiler components (e-Boiler), specialized sealing materials for vibration control (Nordic Seal AS), or proprietary pump internal technology (Larsson Sweden) that currently sits on Berner’s shelves as third-party goods. Transitioning these from “suppliers” to “siblings” allows the Group to capture the full margin of the product and, more importantly, ensures that the vital components of our technical solutions are never at the mercy of an outsider’s whim.

When one is entrusted with the care of capital, it is not fashion or momentum that ought to guide our hand, but the search for durability. My task is not to predict the unpredictable, but to discern those rare enterprises whose character, people, and place in the world may stand the test of time.

As I have written before, Japan remains fertile ground for such inquiry. Its soil harbors businesses largely ignored by the modern capital markets, run by management that still thinks in decades, not quarters. Many are conservatively financed, family-influenced, and built around useful products or services that do not depend on the whims of government subsidy or the glamour of technology hype.

In What Japan’s Market Overlooks Part I/Part II, I shared a handful of such companies. They remain attractive, but in the meantime, I have become acquainted with five others. They are not the darlings of the stock market. They are not large. They will not excite those who measure success in terms of next quarter’s earnings per share. But they carry the marks of permanence that I hold in esteem.

1. Toumei Co., Ltd. (4439)

2. Three F Co., Ltd. (7544)

3. NIFTY Lifestyle Co. Ltd (4262)

4. Yokota Manufacturing (6248)

5. Daitron Co., Ltd. (7609)

Each company is presented in a brief, straightforward manner. I focus on the investment essentials: history, business model, recent financials, capital allocation, relative valuation, targets, current opportunity, and key shareholders. A single chart - EBIT (¥ million) over the past three years - accompanies each company profile.

Toumei Co., Ltd. (4439)

• Enterprise Value: $158.91M

• LTM EV/EBIT: 7.56

• Last 3-Yr Rev. CAGR: 23,6%

• Last 3-Yr EPS CAGR: 77,1%

• LTM ROIC: 29,0%

Toumei is an unassuming business. Founded in 1997 to provide communication line services, it now supplies fiber-optic access and electricity to Japan’s smallest enterprises. It is not glamorous. Yet beneath its modest façade lies a record of steady growth, guided by sobriety in both operations and finance. Cash and short-term investments exceed liabilities, and the preponderance of its revenues is recurring in nature.

The company’s business model is straightforward: it offers one-stop solutions for the office. This is organized into three segments. The Office Hikari 119 Business provides fiber-optic Internet service to SMEs. The Office Denki 119 Business provides electricity. The Office Solutions Business, still smaller in contribution, encompasses a variety of services—ranging from information terminal support, web solutions, and insurance, to solar systems and batteries. Each of these areas is designed to remove complexity from the smallest enterprises, those often neglected by larger competitors.

The company’s fiscal third-quarter results illustrate the fruits of such a model. Operating profit increased 52.8% year-over-year. Net income attributable to the parent company grew 102.1%. The largest contributor remains the electricity business, though the Office Solutions segment is growing rapidly too—47.2% year-over-year—and now accounts for roughly 9% of profits.

What is striking is not merely growth, but the manner in which it is financed. The company carries itself conservatively, with liquid assets in excess of all liabilities. Its dividend policy is modest: a payout ratio of at least 10%, currently yielding 1.1%. In March 2024, Toumei made two acquisitions—Kinki Denko and Ecological Electrical Service—each aligned with its core business. It has signaled a willingness to continue such measured expansion.

On a comparative basis, valuation remains unassuming. With a last-twelve-month EV/EBIT of 7.56, Toumei trades at a discount to many listed peers, some commanding multiples as high as 22.83. Its niche is deliberate: it serves the smallest firms, those with fewer than 5–20 employees. Apart from Hikari Tshushin, few competitors focus here, for the perceived potential revenue per client is too small to interest them.

The results of such focus are evident. In 2023, Toumei exceeded forecasts, achieving 121.2% of the target net income to owners of the parent. Its medium-term plan, “NEXT GROWTH 2027,” calls for an ambitious earnings per share growth rate of 28% annually over the next three years, relying on up-selling, new service introductions, and the broadening of its customer base.

The opportunity arises in part from the deregulation of Japan’s energy market, but also from the quality of Toumei’s revenues. Nearly 90% of its sales are recurring, forming a stable foundation for expansion. The fiber-optic business, in particular, has benefited from effective digital marketing and the development of agency channels. Recruitment of over 100 graduates and mid-career professionals further underscores the company’s preparation for continued growth.

Ownership remains anchored by its founder. Chairman Fumihiko Yamamoto retains 35% of the shares, even after transferring a 7.31% stake to Cereso Co., Ltd. Other significant holders include Hikari (7.33%) and FT Group (8.01%), itself majority-owned by Hikari Tshushin. President and CEO Naoto Hibino, who joined the company in 2000 as a branch manager, now leads the enterprise. Two other directors, each having served since the early 2000s, reinforce the sense of continuity and stability at the helm.

Three F Co., Ltd. (7544)

• Enterprise Value: $6.4M

• LTM EV/EBIT: 0.87

• Last 3-Yr Rev. CAGR: 5,3%

• Last 3-Yr EBITDA CAGR: 56.4%

• ROIC: 25.8%

Three F Co., Ltd. was established in 1981 in Konan Ward, Yokohama, to manage convenience stores and guide franchise operators. As of February 2025, the company manages 332 stores across Tokyo, Kanagawa, Chiba, and Saitama. It is not the largest operator in Japan, nor does it seek to be. Its focus remains more narrow, more deliberate.

At its core, Three F is a convenience store operator. It provides franchisees with support, product supply, and operating guidance. Its product portfolio is distinct, even idiosyncratic, compared to its larger competitors. Chilled bento boxes, Mochi Ponyo, yakitori skewers, and other specialties serve as hallmarks of its offering. It also operates Gooz, a next-generation format that places emphasis on fresh food and a different customer experience. Where the industry’s giants seek ubiquity, Three F looks for distinction.

Recent results underscore the strength of this business model. For the first quarter of the fiscal year ending February 2026, the company reported robust growth. Existing store sales rose 5.0% year-on-year, the 35th consecutive month of positive comparisons. Operating revenue increased 7.0%, operating profit surged 37.7%, and net income attributable to shareholders rose 38.1%. Such performance stems from a strategy that adapts to shifting consumer behavior, notably through the Lawson-Three F alliance and the Gooz concept.

Capital allocation is simple. Dividends are the chosen means of returning cash to shareholders. The company declares an annual dividend of 12 JPY, a yield of 2.28%. There is no emphasis on buybacks or acquisitive expansion. Its manner is conservative and deliberate.

Competition is formidable. Seven & i Holdings (7-Eleven), FamilyMart, and Lawson dominate the landscape. Yet Three F competes well enough: its average daily sales per store exceed those of almost all major chains. More striking is its valuation. While competitors command EV/EBIT multiples near 17, Three F trades at a significant discount, despite its operational progress.

The group has articulated a medium- to long-term plan. By 2027, it aims to achieve operating profit of at least one billion yen and net income of at least 300 million yen. Such targets imply a mere 1.9% CAGR in net income, a pace that, given current momentum, is likely to be surpassed.

The investment case rests less on explosive growth than on recognition. Franchisee revenues are growing, aided by joint promotions with Lawson, the adoption of AI-powered ordering systems, and the expansion of Gooz, a format that bears resemblance to Pret in London in its emphasis on ready-to-eat fresh food. Historically, Three F has demonstrated its capacity to scale if a concept works; between 1992 and 1995, store count doubled from 200 to 400. Furthermore, the cessation of brand-conversion expenses has lifted operating profit, a development the market seems yet to acknowledge.

Ownership, too, speaks to continuity. JMK Mizuho Co., Ltd. holds 35.06%. Hikari Tshushin owns 7.41%. Chairman Junji Kikuchi, in place since 2016, retains 6.31%. None have been sellers. The shareholder base is stable, the stewardship patient.

NIFTY Lifestyle Co. Ltd (4262)

• Enterprise Value: $31.96M

• LTM EV/EBIT: 4.24

• Last 3-Yr Rev. CAGR: 22%

• Last 3-Yr EPS CAGR: (4.4%)

• ROIC: 18.7%

NIFTY Lifestyle Co., Ltd. is a young company by Japanese standards. Founded in 2018 and headquartered in Tokyo, it exists to provide behavioral support services that make life more convenient. It focuses on three areas where technology touches the daily lives of households and small businesses: PropTech, WellnessTech, and CrossTech. Though it operates as a subsidiary of NIFTY Corporation, it has quickly forged its own character.

The company’s offerings fall into two streams. Its platform services provide information search functions for properties, jobs, and even hot spring facilities. Its solution services provide digital transformation support to enterprises, such as optimizing data feeds for web advertisements or automating business processes. What differentiates the firm is the interplay of these domains: consumer-facing platforms that generate data and traffic, combined with B2B solutions that help other firms navigate their own transitions into the digital age.

The fiscal first quarter ending March 2026 marked a new record. Sales increased 27.3% to ¥1,227 million. Operating profit grew 93.3% to ¥226 million. Net income attributable to owners of the parent rose 203.1% to ¥142 million. Such growth was led by the LIFE STYLE business, and especially by “Nifty Real Estate,” whose app saw a rise in downloads and referrals through improved user experience. At the same time, the company is fortifying its WORK STYLE domain, investing in talent and office space for long-term growth. Management has not revised full-year forecasts, preferring, perhaps, to let results speak in time.

Capital allocation is balanced between investment and return. In May 2024, the company merged with Doors Co. for 1.7 billion yen, valued at 1.7x sales or 10x EBIT. In 2023, it acquired GiRAFFE & Co., which had reported sales of ¥222 million. The dividend policy now targets a 50% payout ratio, with an estimated 2026 dividend of ¥54 per share, a yield of 3.5%. Share repurchases, though modest, are also undertaken.

Valuation is not excessive, though it sits in a varied landscape. Competitors in the broader technology and service sector range widely: YRGLM at 38x EV/EBIT, Zappallas at 24x, PR Times at 27x, while smaller peers such as Wantedly and GMO Media trade at 10.9x and 13x, respectively. NIFTY Lifestyle lies somewhere between—neither ignored nor exuberantly valued.

The company looks forward to a mid-term plan titled “XPANSION 2030.” It seeks to broaden its reach beyond LIFE STYLE into WORK STYLE, reflecting Japan’s “100-year life” era, where longevity will require new ways of working and living. Targets include an operating income CAGR of roughly 14.8% through 2030. Such ambition is not empty; the firm has a record of meeting its prior mid-term goals ahead of schedule.

The investment case rests not merely on growth, but on underappreciated qualities. Its LIFE STYLE business—particularly Nifty Real Estate—continues to expand through digital marketing and user referrals. Cross-selling, user engagement, and the shift toward consultation models foster long-term bonds with customers. Cash generation may also exceed reported earnings, suggesting understated profitability.

Ownership is concentrated. Fujitsu Cloud Technologies holds 65.14% of shares. Keiichiro Kinoshita owns 2.98%. Tomohiro Yoshida, who has raised his stake by more than 94% this year, now holds 2.22%. Taichi Yabu holds 0.8%. Such alignment, with insiders steadily increasing their stake, reinforces the sense of continuity.

Yokota Manufacturing (6248)

• Enterprise Value: $8.69M

• LTM EV/EBIT: 2.67

• Last 3-Yr Rev. CAGR: 9.6%

• Last 3-Yr EPS CAGR: 25.5%

• ROIC: 16.9%

Yokota Manufacturing Co., Ltd. was founded in 1953 in Hiroshima. For over seventy years, it has remained dedicated to the craft of fluid control. Its work is not glamorous. It manufactures pumps and valves, provides installation services, and supports industries that demand reliability rather than spectacle.

The company’s expertise lies in specialty pumps and valves designed for difficult applications: self-priming, defoaming, degassing, non-water hammer check valves, and constant flow valves. These are solutions to particular problems. Its differentiation rests on in-house production of metallic materials, such as seawater-resistant stainless steel, which enables the company to build products for demanding environments. Over 200 patents, utility models, and trademarks attest to decades of invention. But the essence is not in patents or models: it is in the ability to serve with durable solutions that endure.

The most recent quarter, April through June 2025, showed improvement in profitability. Sales rose 6.4% year-on-year to ¥371 million. Operating income grew by 64.3% to ¥63 million. By category, pumps accounted for ¥161 million in revenue, valves for ¥70 million, and parts and services for ¥139 million. Pump orders rose 42.9%, while valve sales surged 79.1% despite weaker order inflows. Parts and services declined, but the company’s core, its pump and valve solutions, grew meaningfully.

Capital allocation reflects prudence. The company’s policy is to distribute about half of its earnings as dividends. For fiscal 2025, this meant an annual dividend of ¥30 per share. For fiscal 2026, management forecasts modest sales growth but expects lower profits, citing the variability inherent in its build-to-order business. They refrain from publishing mid-term plans, preferring not to make promises in the face of uncertain demand.

Valuation is modest. With a trailing EV/EBIT of 2.67, Yokota trades at a discount to peers such as Techno Smart (4.75x) and Maezawa Industries (5.24x). Yet its returns are not modest. The company sustains an ROE of 11.4%, a sign of efficiency born not of leverage, but of focus on higher-margin, proprietary solutions.

The investment case lies in what the market overlooks. Demand is rising in government, public works, and chemical industries. More importantly, Yokota is not a commodity manufacturer. It is a water solutions company. Its proprietary alloys, patented technologies, and niche positioning allow it to command margins and serve customers who require reliability over decades. New areas such as geothermal power offer opportunities for the future. Here is permanence in a world addicted to transience.

Stewardship is anchored in family and community. President Yoshiyuki Yokota leads, with Executive Director Hiroshi Watai and four long-serving directors beside him. Ownership remains aligned: the Yokota Association holds 32.67%, employees 6.35%, and Masako Yokota 5.76%. Long-term partners include Hikari Tsushin (7.07%) and Hiroshima Shinkin Bank (6.41%). Continuity of ownership and leadership underscores the firm’s culture of care.

Daitron Co., Ltd. (7609)

• Enterprise Value: $180.8M

• LTM EV/EBIT: 3.68

• Last 3-Yr Rev. CAGR: 6.6%

• Last 3-Yr EPS CAGR: 14.0%

• ROIC: 22%

Daitron Co., Ltd. was founded in 1952 in Osaka. For over seventy years, it has occupied a modest but vital place in Japan’s industrial landscape, manufacturing and selling electronic devices, parts, and equipment. Its business is divided into three segments: domestic sales, domestic manufacturing, and overseas operations.

Daitron is distinctive because it operates as both a manufacturer and a trading company. It distributes electronic parts, semiconductors, embedded systems, power supplies, and imaging equipment. At the same time, it develops and manufactures its own products, including advanced equipment for industries such as semiconductors and flat-panel displays. This dual character allows it to meet customer needs responsively, while building its own technologies and intellectual property.

The company reported strong results for the six months ended June 30, 2025. Net sales rose 9.1% year-on-year to ¥48.9 billion. Operating income surged 40% to ¥3.7 billion, and ordinary income rose 29.2% to ¥3.65 billion. Net income attributable to owners of parent increased 35.6% to ¥2.55 billion, or ¥239.66 per share. Such growth is not a one-off. Over the last five years, earnings per share have compounded at roughly 20% per year.

Capital allocation reflects balance. The dividend payout ratio has been raised from 30% to 40%, with flexibility for share buybacks. The declared annual dividend of ¥90 per share, yielding 3.8%, reflects both growth and restraint. The company retains a significant portion of earnings to invest in its future: ¥1.5 billion for digital transformation initiatives, ¥1 billion for research and development, and ¥3.5 billion for new businesses and production capacity. Over the last decade, dividends have risen steadily, yet never at the expense of reinvestment.

On a valuation basis, Daitron is modestly priced. Its trailing EV/EBIT ratio of 3.68x stands at a discount to many peers in technology distribution and manufacturing, such as Tamura, Koa, Sun-Wa Technos, Kuroda, and Takachicho Koheki. This is despite achieving record-high sales and profits in fiscal 2024.

Management recognizes challenges. Domestic sales and manufacturing have reached a plateau, and overseas expansion has been slower than planned, constrained by supply chain disruptions and geopolitical uncertainty. Such realities may weigh on sentiment. Yet the company continues to build its intellectual capital, expanding its portfolio of patents and developing high-value products. It is investing in digital transformation, new businesses such as green facilities and batteries, and strengthening manufacturing systems across its factories. These are long-term commitments that may depress near-term earnings but sow the seeds of permanence.

The long-term vision (2030 VISION) is to surpass ¥100 billion in consolidated net sales. Such ambitions rest not on financial engineering, but on steady reinvestment in human capital, technology, and productive capacity.

Ownership reflects continuity and alignment. The Daitron Welfare Foundation holds 9.4%. Hikari has increased its stake by 25%, now owning 3.98%. Yasuyuki Omori owns 3.76%, while employees hold 3.18%, though they have reduced their stake somewhat.

These five companies share no common industry. One sells electricity to small offices, another serves late-night customers in Tokyo, another makes pumps for chemical plants, another facilitates real estate transactions, and another trades semiconductors. Yet they are united by qualities rare in today’s capital markets: sobriety of finance, durability of usefulness, continuity of stewardship, and independence of spirit.

They are not for those who seek to speculate. They may not even be for those who demand quick appreciation. But for the steward of capital who seeks permanence in a world built on sand, they represent an echo of older virtues.

As ever, I offer no advice, only observations. My own task is simply to search for what may endure.

If these businesses held your interest, you may find value in my earlier notes on Nulab, Intelligent Wave, and Genova - each chosen with the same attention to durability and utility. By subscribing, you’ll be among the first to read about the next set of Japanese enterprises I’m studying.

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