Hey folks,

Three takeover offers, an ugly first quarter, a sharp comeback—and one options assignment that went from margin problem to the portfolio’s biggest winner of the year.

That was H1 2026.

The portfolio finished Q1 down 6.1%, then recovered strongly in Q2 to reach roughly 10.6% year to date. Along the way, Titanium, ISC and Nagarro all received takeover offers. The Nagarro deal was particularly absurd: I was assigned shares after the price collapsed, prepared myself for an uncomfortable position, and less than a week later a takeover offer sent the stock into the high €70s. Sometimes analysis matters. Sometimes the market simply hands you a ridiculous story.

There was also another comeback happening. Spain became world champions again. I watched most of the tournament from the fan zone in the Swiss village where I live, surrounded by an international crowd that changed flags and allegiances with every match. It was a great month—and at least partially explains why this H1 update is arriving in late July.

The portfolio had its own tournament: a poor start, a strong recovery and considerably more drama than expected.

What’s inside

• Performance

• Portfolio snapshot

• Portfolio changes

• Exits

• New positions

• Adjustments

• Closing thoughts

Performance

Q1 finished at -6.1%. Q2 delivered +17.8%, taking the portfolio to roughly +10.6% year to date. A proper comeback—like Argentina, but without the referee help. Just kidding. Mostly.

The recovery was strong, although the portfolio still trails the MSCI World in euros for the first half. I am not going to celebrate relative underperformance, but I am also not going to complain about a double-digit six-month return. The objective remains the same: compound at a good rate over a long period without taking risks that can permanently damage the portfolio.

Portfolio snapshot as of 30 June 2026

Here is the portfolio as of 30 June 2026. It remains diversified but understandable, with enough concentration for the winners to matter and enough diversification to survive being wrong.

Portfolio changes

There was more activity than usual in H1. Eleven positions left the portfolio, eight new ones were added, and three of the exits followed takeover offers. The volatility created opportunities, but it also forced me to reassess a few assumptions—particularly around consulting services, AI and semiconductor valuations.

Exits

Three takeovers: Titanium, ISC and Nagarro

Private equity and strategic buyers were busy. Titanium Transportation Group ($TTNM.TO) agreed to a take-private transaction at C$2.22 per share, a 41% premium. Information Services Corporation ($ISC.TO) agreed to an all-cash acquisition at C$51 per share, a 55% premium to the share price before ISC announced its strategic review. Then came Nagarro ($NA9), with an €81 cash offer representing roughly a 140% premium to the undisturbed closing price.

Three takeover events in six months is unusual. It also says something about the gap that opened between public-market prices and what strategic or private buyers were willing to pay. I still own other companies surrounded by occasional deal rumours—PayPal, Gamma Communications and MTY Food among them—but rumours are not an investment thesis. I will take the optionality, not pay for it.

Semiconductors: STM, KLA and Lam Research

I exited STMicroelectronics ($STMPA), KLA Corporation ($KLAC) and Lam Research ($LRCX). The common reason was valuation, although the journey was different in each case.

STM had been in the portfolio since 2021, and I adjusted the position several times along the way. Like the rest of the semiconductor sector, it rallied strongly, moving from below €15 last year to above €70 this year. Given how cyclical the business is, I decided to take the profit and exit.

Lam Research was a much shorter adventure. The company is a key supplier of wafer-fabrication equipment, with strong exposure to memory investment. I bought it when the valuation still looked reasonable relative to the improving cycle. Then the share price almost doubled in a few weeks. The thesis may still be right, but the price stopped offering the same margin of safety. I sold.

KLA went for the same broad reason. These are excellent companies, but excellent companies can still become poor investments when expectations run too far ahead of fundamentals. I may own semiconductors again. I simply do not need to own them at every price.

Kontron: too much accounting archaeology

I also sold Kontron ($KTN.DE). I have followed the company for years and, broadly speaking, management delivered much of the transformation it promised. The old business was reshaped, the portfolio improved and the group became more focused.

The main issue for me was the development of the Katek acquisition. Kontron presented the transaction as an important step towards building a much larger group, but the company has not yet reached the scale that management previously indicated. At the same time, parts of the acquired business have been closed, restructured or written off.

What made the investment more difficult to follow was the communication around growth. Management continued to highlight very strong organic growth while parts of the business were being removed from the perimeter or written down. The figures may have been technically correct, but they did not always make it easy to understand how the group was progressing as a whole.

The changing business perimeter and restructuring effects forced me to rebuild the model several times last years, which I simply disliked. The €23.50 mandatory offer was only a secondary consideration; the main issue was that the Katek integration had become more complex and the path towards the scale previously communicated was taking longer.

I still think Kontron can perform well over the coming years. The company owns attractive businesses, and management has created substantial value in the past. I simply found other opportunities where the investment case was easier to follow and where I saw a better risk-reward.

Nomad Foods: cheap for a reason

I bought Nomad Foods ($NOMD) in Q4 2025 because the valuation looked extremely low. Then the operating results were weaker than i expected and the guidance was worse. Suddenly it was not so cheap.

The thesis depended on resilient brands, stable frozen-food demand and the ability to convert cash despite a slow-growth environment. The latest evidence weakened that case. A low multiple is useful only when earnings are reasonably dependable. When the “E” starts moving down, the “P/E” can lie to you. I sold in Q1 rather than defend the original purchase price.

Sword Group and Wavestone: reassessing AI deflation

The most important change in my thinking during H1 concerns IT services and consulting. I underestimated how quickly AI could become deflationary for some parts of the sector. The risk is not that clients stop spending on technology. They may spend more. The risk is that the same work requires fewer billable hours, that pricing becomes harder, and that traditional headcount-based growth loses some value.

I sold Sword Group ($SWP). Sword has a distinctive model for rewarding the managers of its subsidiaries. That structure has helped the group grow faster than many peers because local managers retain strong incentives and entrepreneurial autonomy. It is one of the reasons the company has performed well for so long.

But the model is also difficult for outside investors to understand. In a weaker growth environment, the same structure could become a source of uncertainty. If growth slows while a large share of free cash flow is absorbed by management buyouts and incentive arrangements, what does the steady-state economics look like? I could not answer that question with enough confidence. That does not make Sword a bad company. It made it the wrong company for me at this point in the cycle.

I recycled part of the capital into Neurones ($NRO), a company I have owned before. Neurones is more conservative, easier to read and also very well managed. It may not have Sword’s aggressive growth profile, but right now I value transparency and balance-sheet discipline more highly.

I also completed the sale of Wavestone ($WAVE). I first trimmed after a gain of roughly 50% in a few months. Later, I sold the remaining position as my view of AI’s deflationary impact on consulting became more cautious. I published a separate note explaining the decision in more detail. The short version is that the valuation recovered faster than my confidence in the medium-term economics.

Nestlé: sold for liquidity, not because the chocolate changed

Nestlé ($NESN) was a different type of sale. I hold it in a smaller, short-term portfolio where liquidity is limited and I occasionally use margin. Over the last few years, I have bought Nestlé around CHF 70-75 and reduced it closer to CHF 85–90. The dividend yield has usually been comfortably above the interest rate on my Swiss-franc margin borrowing, and the underlying business is defensive enough for that trade to make sense—within limits.

In June, those limits arrived. I had sold puts on several volatile companies, expecting most to expire worthless and generate a premium. Instead, I was assigned on a meaningful number of contracts, which pushed margin usage too high. Before receiving an unpleasant call from the broker, I sold Nestlé to create liquidity.

That decision leads to the most absurd—and profitable—story of H1.

The Nagarro put assignment: from margin problem to biggest winner

I had sold several Nagarro puts with €44 and €41 strikes, expiring on 19 June. I had used this strategy several times because Nagarro’s volatility produced very high option premiums—sometimes more than 50% annualised on the capital at risk. The strikes were close to what had previously looked like a historical floor, and the valuation was already extremely depressed.

This time, the floor disappeared. Nagarro fell to around €33 and I was assigned. I sold Nestlé to reduce margin and prepared to live with a very concentrated, very uncomfortable IT-services position. That was not the plan.

Less than a week after the option expiry, the takeover was announced. The share price jumped from the low €30s to close to €80, and I sold the full position. For a few hours, it became the largest position in the portfolio. The trade became the largest contributor to my 2026 performance.

I would love to present this as a masterclass in options and fundamental analysis. It was not. The original strike selection was based on valuation, but the timing of the offer was pure luck. The useful lesson is not “sell more puts.” The useful lesson is that short puts can turn a small premium strategy into a large equity position at exactly the wrong moment. This one ended beautifully. It could easily have ended very differently.

New positions

The first half introduced several new names, plus a few familiar faces. The takeovers left me with a meaningful amount of cash, but I did not have enough time to replace every position with a newly researched small cap. Instead, I used part of that liquidity to buy companies that had already been on my watchlist for years.

Rockwool ($ROCK-B): Rockwool is a Danish manufacturer and the global leader in stone-wool insulation. Its products are used in buildings and industrial applications for thermal insulation, fire protection, acoustic performance and durability. Stone wool is not irreplaceable, but few alternatives offer the same combination of properties, particularly in more demanding applications.

The business is relatively defensive, the balance sheet is strong, and management has a solid record of returning capital through dividends and buybacks. The Russian factories have now been fully impaired and deconsolidated, and Rockwool has already reported its first results without them.

With the main accounting impact therefore recognised, I decided to open a position. I may increase it after the next results if the underlying business continues to perform well and the valuation remains attractive.

McDonald’s ($MCD), Booking Holdings ($BKNG) and Uber Technologies ($UBER): These three belong to a list of high-quality companies that I follow regularly but rarely find cheap enough to buy. At different points during H1, each traded near the lower end of the valuation range I had seen over the previous years. With cash arriving from the takeover offers and limited time to dig into new small caps, I used the opportunity to open positions.

Stadler Rail ($SRAIL): I bought Stadler in the smaller portfolio after selling Nestlé, using margin again. It is a different risk profile: less defensive and more dependent on project execution, but the valuation looked more attractive and the order book provides good visibility. The position remains modest because margin is involved.

Neurones ($NRO): A familiar French IT-services company returning to the portfolio. It is conservatively managed, net cash, consistently profitable and less promotional than many peers. AI still creates sector risk, but Neurones gives me exposure through a cleaner and more defensive structure.

Adobe ($ADBE): A high-quality software franchise facing one of the market’s biggest AI debates. Generative tools could disrupt parts of the creative workflow, but Adobe also owns the installed base, distribution and professional ecosystem needed to monetise those tools. The valuation became difficult to ignore, although I have opened only a small position for now.

The Cigna Group ($CI): I added Cigna as a second way to gain exposure to a US healthcare sector that has been heavily punished. The business is complex and politically sensitive, but it generates substantial cash flow and trades at a valuation that already discounts a fair amount of bad news.

Lam Research ($LRCX): This was both a new position and an H1 exit. I bought during the memory-capex recovery while the valuation still looked reasonable, then sold after an exceptionally fast re-rating.

Adjustments

Increased

Microsoft ($MSFT): I added during the Q2 weakness. We don’t see Microsoft at these multiples since 2016.

UnitedHealth Group ($UNH): I talked about it last year, when I reopened a small position. I have continued adding during 2026 below the $300.

PayPal leveraged position ($3PYP): I continue to add and trim this small leveraged position. It is extremely volatile, so position sizing matters more than conviction speeches. PayPal remains cheap, but cheap companies can stay cheap for years when growth is modest and competition is intense. PayPal has also received a $60.50-per-share takeover offer from Stripe and Advent, which the board rejected as too low. I think there is a reasonable chance that they return with a materially improved proposal, perhaps in the high $70s or low $80s, although this remains speculation rather than part of my core thesis.

goeasy ($GSY): I had already sold half of my position above C$200 Q3 last year, which fortunately left it at a relatively small weight when the problems in the LendCare portfolio were disclosed.

In hindsight, the best decision would probably have been to sell immediately. I did not have enough time to assess the announcement properly, while the shares fell from around C$50 on the first day to C$40 on the second and C$35 on the third. By then, the position had become so small that I decided to wait for the next results rather than sell after most of the damage had already occurred.

The Q1 results were poor, but not catastrophic. Credit losses remained very high, originations declined and profitability was under pressure, but the amended financing arrangements and covenant waivers reduced the immediate liquidity and default risk. When the shares continued falling below C$30 after the results, I thought the market had gone too far and increased the position.

The shares have recovered strongly in recent weeks, reducing the risk-reward that originally justified the purchase. This is no longer the straightforward compounder I initially owned, but a turnaround that may require considerable time to rebuild credibility.

The main indicators I am watching are whether charge-offs continue to fall, whether provisions have peaked, whether the company returns to profitability, and whether liquidity and covenant compliance remain under control. I have not yet decided whether to keep the position or sell it completely. I may make a decision after the Q2 results are published in a couple of weeks.

Trimmed

Alphabet ($GOOGL): The reduction was around 1%, which barely qualifies as a trim. I do not remember the exact reason, so I will not invent one after the fact.

Closing thoughts

H1 was mainly about collecting the harvest. Three takeover offers released a lot of cash, and the Nagarro assignment turned into an outcome that was much better than I had any right to expect. I also changed my mind on part of the consulting sector, where AI may put more pressure on billable hours and pricing than I previously assumed.

I still have little time to search properly for new small caps. Work is busy, and outside work I have been spending more time learning programming and experimenting with AI tools. So I did not force new ideas. I placed part of the cash in high-quality companies already on my watchlist and kept the rest of the process simple.

There will be time to sow again. For now, the portfolio is invested, diversified and easier to follow. That is enough.

Until next time—stay invested, stay sane, and do not confuse a lucky cannon shot with perfect navigation :).

Fair winds,

Guybrush 🏴‍☠️

2025 has been another year of navigating the markets while balancing a demanding professional project, family life, and a portfolio that has grown materially in scale. As the stakes increase, so does the weight of the decisions. Add to that a backdrop of persistent political and geopolitical uncertainty, and it naturally influences how risk is perceived and managed.

As a result, I’ve leaned toward a more measured approach—not as a sudden shift, but as a gradual evolution. This review looks at how the ship performed over the last twelve months, the lessons drawn from both the winners and the mea culpas, and how I’m positioning the sails for the journey ahead.

Contents

1. Performance

2. Portfolio Analysis (as of 31/12/2025)

3. What Worked (Top Performers)

4. What Didn’t Work (Laggards)

5. Portfolio Changes in Q4

   1. Gamma Communications ($GAMA): A Software ‘Utility’ at Depressed Valuation Levels

   2. Nomad Foods ($NOMD): Re-entering a Defensive Powerhouse

   3. Cashing Out on KLA ($KLAC): Stepping Aside on Valuation

   4. Portfolio Adjustments

   5. Options Activity

6. The big picture: Other Assets & Risk Positioning

7. Looking Ahead to 2026

1. Performance

Let’s start with the numbers and get them out of the way. My portfolio delivered +6.9% in Q4, pushing the full-year performance to +9.3%. Since inception, the CAGR stands at 15.2%.

In EUR terms, 2025 returns for the main benchmarks were:

• S&P 500 (EUR): +3.9%

• MSCI World (EUR): +6.77%

• MSCI World Small Cap (EUR): +6.19%

Against this backdrop, the portfolio outperformed all three indices over the year. While 2025 was less generous than some previous years, a high single-digit return remains satisfactory at this stage, especially given the size the portfolio has reached.

Performance by Year (Historical):

2. Portfolio Analysis (31/12/2025)

During the year, I sold 5 positions and added 9 new ones (highlighted in yellow in the table).

The portfolio now holds 34 positions, again, much above my ideal range of 20–25. Despite this, it remains focused, with the top 10 positions accounting for 55% of the portfolio and the top 20 making up >80%.

The average holding period is 3.6 years.

Economic exposure

From an economic engine perspective, the portfolio continues to be tilted toward asset-light, high-ROIC business models, with a strong emphasis on software, platforms, and payment-related infrastructures.

Market capitalization

The portfolio retains a clear small- and mid-cap bias, reflecting where I continue to find the most valuation inefficiencies.

Geographic exposure

Geographically, the portfolio remains heavily exposed to Europe, which represents around 55% of total invested capital at year-end. Compared to last year, approximately 6% of the portfolio shifted from U.S. stocks to European stocks.

The portfolio is fully invested in developed markets.

3. What Worked (Top Performers)

FlatexDEGIRO ($FTK, +149%)

FlatexDEGIRO makes the list for the third year in a row. From the €5–7 range where it could be accumulated for months in 2022–2023, the stock is now roughly a 6-bagger. At the time, sentiment was extremely negative. I clearly remember the usual comments about “falling knives” and “structural problems”, while in reality we were buying a fast-growing broker with solid margins at around 6-7× earnings (sounds familiar?).

Most of the issues were regulatory, not structural. After the DEGIRO acquisition, the group had to deal with shortcomings flagged by the German regulator BaFin, mainly related to internal controls and IT processes. These problems are now resolved, capital requirements are no longer a concern, and the company has moved past that phase.

Under the new management team, execution has clearly improved. The focus is back on the core business, costs are under control, and product innovation is coming back, after being largely frozen during the regulatory clean-up.

On a personal note, I use both FlatexDEGIRO and Interactive Brokers. After testing several platforms, these two remain, in my view, the best options for individual investors in Europe. FlatexDEGIRO still has room to improve, especially on the options side, which management has been talking about for several years — and which I hope to see delivered.

KLA Corp ($KLAC, +93%)

KLA performed very well in 2025, supported by its unique position in process control and yield management. As semiconductor manufacturing becomes more complex, this part of the value chain becomes increasingly critical, even in uneven industry cycles.

The company continued to deliver high margins and strong free cash flow, which led to a clear re-rating during the year.

I first bought KLA in 2020 at around €150 and have been in and out of the position several times since then. Taken together, KLA has been close to a 10× investment for me over time.

I exited the position again in December, as the stock was trading at around 40-45× earnings at some point. It remains a high-quality business, and I would be happy to re-enter at a lower valuation in the future.

Information Services Corp ($ISC, +78%)

Information Services Corp had a strong year after trading at very low valuations for a long time. The business itself is stable, based on regulated registry activities, recurring revenues, and high cash conversion.

The main driver in 2025 was the announcement of a strategic review. Following this, the stock re-rated, with reported takeover interest around CAD 58 per share.

Performance was driven by valuation adjustment, not by a material change in the underlying business.

Alphabet ($GOOGL, +65%)

Alphabet performed well in 2025 as advertising proved more resilient than expected and concerns around AI monetization gradually eased. Beyond core Search, YouTube continued to compound steadily, while optionality around Gemini and Waymo helped remind the market of the depth of the asset base. I generally do not comment much on large caps; Alphabet remains in the portfolio as a high-quality compounder held at a reasonable valuation.

Sesa ($SES, +44%)

SESA is one of those “compounding machines” that looks unexciting at first glance because the consolidated margins are dragged down by its distribution arm (Computer Gross) — but that’s precisely where the misunderstanding comes from. The group is essentially two businesses: (1) IT hardware distribution (large revenues, low headline margins, but very solid cash generation) and (2) higher-margin IT services/software/engineering (mainly VAR Group, plus the smaller but faster-growing digital/business services activities). In 2024 the stock was hit by the usual European small/mid-cap derating and, in Italy, sentiment also turned toxic after the Digital Value scandal, even though SESA was not involved — the market didn’t discriminate. In 2025 the stock did better mainly because fundamentals kept compounding while the multiple stopped compressing: investors started to look again at the segment mix, the fact that distribution is not “bad business” but a cash engine that funds growth, and the long track record of ~20% EPS growth and >20% ROE driven by steady execution and small bolt-on acquisitions.

4. What Didn’t Work (Laggards)

As usual, some of the weakest YTD performers in the portfolio are recent additions. In those cases, reported YTD performance does not reflect my actual entry points, as positions were initiated after significant price declines. Gamma Communications and UnitedHealth fall into this category and are therefore not discussed as laggards.

Endava ($DAVA, −80%)

Endava is the second year in a row as the worst performer in the portfolio, and it is clearly my biggest mistake. In hindsight, I should probably have sold earlier.

What caught me on the wrong side was the relative resilience in 2023. While most IT services peers were issuing profit warnings and resetting expectations, Endava looked “fine”. Growth held up, margins were resilient, and management messaging suggested the company was navigating the slowdown better than the rest of the sector. That was the trap.

As the cycle turned, it became clearer that part of the 2023 resilience came from price increases more than volume, and from client budgets that were slow to adjust. Then the slowdown eventually hit where Endava is exposed — especially payments/fintech — and projects started to get postponed or cancelled. The pattern became ugly: guidance went from “still compounding” to declining revenues, and each update seemed to revise expectations down again.

Communication hasn’t helped. It has been poor throughout: limited visibility, reactive updates, and no clear narrative on what management is doing differently. On top of that, one structural issue became impossible to ignore: stock-based compensation is too high. A big part of free cash flow goes to offset dilution (buybacks to pay employees), not to truly return capital to shareholders. That’s a real problem for an owner.

That said, at today’s price I am not selling. The stock trades at roughly 0.6× sales, and expectations are already crushed. Even if Endava never goes back to 20% growth, a normalization of demand plus a credible fix to SBC/dilution could easily translate into a 2×–3× outcome from here.

To put valuation into perspective: the market cap is around $350M, while Endava paid $400M for GalaxE in 2024 — a fast-growing IT engineering firm (~1,600 employees, ~1,200 engineers in India), with roughly $150–200M of revenue and heavy exposure to U.S. healthcare. I’m not saying the current valuation is “wrong” or that the problems are trivial — but it highlights how little improvement is required for the stock to re-rate violently. Small changes (especially around dilution and credibility) can be meaningful catalysts when a company is priced for disappointment.

Titanium Transportation Group (TTNM, −32%)

Titanium Transportation operated in one of the toughest environments in recent memory for trucking and logistics. The downturn has been severe, with many carriers going bankrupt, yet TTNM remained resilient. The company’s ability to navigate the cycle comes largely from the mix of its two segments and disciplined management, which helped absorb the shock better than more leveraged or narrowly focused peers. Part of the share price weakness also reflected macro and political noise, particularly around Canada–U.S. trade and tariff rhetoric, which weighed more on sentiment than on the underlying business. Toward year-end, conditions started to look less negative, and a cyclical recovery appeared closer than before.

This was shaping up as one of my main bets for 2026 and I increased my holdings by around 40% during the year. Shortly after year-end, in early January 2026, the company announced an agreement to take the business private, subject to shareholder approval, at a 41% premium to the prior share price. In my view, the offer price is too low relative to normalized earnings power, but given that the transaction is backed by the main shareholder, it will very likely succeed. As a result, the upside will probably be capped earlier than initially expected.

PayPal (PYPL, −32%)

PayPal is a good reminder that the market’s mood can change faster than the fundamentals. After being a top performer last year, the stock gave back a lot of those gains in 2025, even though the company largely executed on what it said it would do and results were generally better than feared. I don’t have a clean explanation for why sentiment was supportive in 2024 and negative again in 2025 — but what is clear is that the market kept focusing on the same two issues: lack of visible growth and the feeling that the core business is permanently under pressure (competition, pricing, product relevance). This is not specific to PayPal either: the whole payments space has been depressed, and many names have derated despite decent execution.

5. Portfolio Changes in Q4

The 2025 new additions are marked in yellow in the table above and have been commented on in previous quarterly updates. This section will focus on changes specifically related to Q4:

Gamma Communications ($GAMA): A Software ‘Utility’ at Depressed Valuation Levels

Gamma Communications is the silent leader behind the mission-critical connectivity of thousands of SMEs in the UK and, increasingly, across Europe. Their business model revolves around selling “technological peace of mind”: cloud communications (UCaaS) and connectivity that businesses simply cannot afford to switch off. With 90% recurring revenue and gross margins consistently above 50%, Gamma has historically been a high-quality cash cow. However, the stock has undergone a brutal multiple compression, falling over 50% from its peaks. The market is currently double-punishing the company: first, for a slowdown in organic growth to 1% in the UK due to macroeconomic caution, and second, for the perceived threat of Microsoft Teams cannibalizing their space. In my view, this pessimism is overdone. At a 9x P/E ratio (vs. a historical average of 20-25x), the market is pricing Gamma like a business in terminal decline, ignoring the fact that it still grows at double digits through strategic acquisitions.

I have opened a small position because I see a clear valuation asymmetry. Following the recent acquisition of Starface in Germany, Gamma now possesses a European scale that the market has yet to price in. Furthermore, unlike other “cheap” stocks, management is acting with conviction: they recently announced a massive £85 million share buyback program for 2026-2027 (nearly 10% of its market cap). I am closely monitoring the upcoming Q1 results to confirm that the German integration is maintaining margins and that the UK stagnation is purely cyclical rather than structural. If organic growth shows signs of life or if free cash flow continues to deleverage the balance sheet as aggressively as expected, I will not hesitate to increase the position.

Nomad Foods ($NOMD): Re-entering a Defensive Powerhouse

Nomad Foods is the undisputed king of European frozen food, owning iconic brands like Birds Eye, Findus, and Iglo. Built on the strategic foundation laid by founder Sir Martin E. Franklin—a master of capital allocation—this is a classic “moat” business that has recently faced a “cost-of-living” stress test. The primary headwind hasn’t been a change in appetite, but rather inflation-weary consumers trading down to cheaper private labels. This shift has pressured Nomad’s volumes as the price gap between premium brands and supermarket “white labels” widened to uncomfortable levels. However, at a forward P/E of just 9x, the market is pricing in a permanent loss of market share that I believe is transitory.

After being out of the name for a few years, I’ve decided to move back into Nomad. At these levels, the valuation has become too attractive to ignore, especially as the ‘price vs. volume’ dynamics begin to stabilize. As input costs stabilize, Nomad has the marketing muscle and brand equity to win back price-sensitive customers. With a double-digit Free Cash Flow yield and a management team—still operating under the Franklin legacy of shareholder-friendly moves—that is aggressively buying back shares, I see a rare opportunity to own a high-quality staple at a “generic” price. I am watching for volume recovery in the coming quarters to confirm the bottom.

For those looking for an even deeper dive into the current headwinds and the private-label dynamics, I recommend reading this thesis: Nomad Foods: Frozen food has a cold by Scolopax.

Scolopax

Nomad Foods : frozen food has a cold

Nomad Foods is Europe’s leading frozen food company, owning around 40% of its core categories through brands like Birds Eye, Iglo, and Findus. Founded as a SPAC by Martin Franklin (Jarden) and Noam Gottesman (GLG Partners) in 2014, the company began operations in 2015 with the acquisition of Iglo and Findus. Since then, it has grown through a mix of org…

Read more

10 months ago · 13 likes · 2 comments · Scolopax

Cashing Out on KLA ($KLAC): Stepping Aside on Valuation

Finally, I have decided to close my position in KLA Corporation (KLAC). KLA is a phenomenal business—a near-monopoly in the semiconductor inspection and metrology space—and it has been one of the strongest performers in my portfolio. However, the stock has reached a valuation that is simply hard to justify, even with the AI tailwinds. With the stock hitting all-time highs and trading at a forward P/E of nearly 45x—well above its historical average of 20-25x—I believe the market has priced in a “perfect” multi-year cycle. While the long-term thesis for AI remains intact, the sheer speed of the recent rally has created a disconnect between the stock price and the underlying earnings growth, which is forecast to be in the low double digits.

Beyond valuation, I am also mindful of the cyclical risks and geopolitical headwinds. KLA remains highly exposed to China, where export controls are becoming a permanent structural drag, and several insiders—including the CEO and CFO—have recently been reducing their stakes. Selling KLAC isn’t a bet against the company’s quality; it’s a disciplined decision to lock in substantial gains after a 100%+ run over the last year. I’d rather step aside now and watch the upcoming results from the sidelines than risk holding a “priced-for-perfection” stock in a sector that is notorious for its sudden corrections.

Portfolio Adjustments

Beyond the deep dives into the winners and losers of the year, I have made some adjustments to keep the portfolio balanced. These moves are a disciplined effort to rotate capital away from “priced-for-perfection” winners and into opportunities where the market has, in my view, lost some sense of value.

Increasing the Stakes: I have increased my positions in Brenntag ($BNR) and Nagarro ($NA9), and more substantially in Endava ($DAVA). As I detailed earlier, Endava remains a significant “mea culpa,” but at current levels, I believe the risk of selling outweighs the potential for a violent re-rating as demand normalizes. Similarly, Nagarro and Brenntag remain out of favor due to macro-cautiousness, but their underlying cash-generation machines remain intact, providing a compelling risk-reward at current levels.

Trimming the Winners: On the other side of these trades, I have decided to take some profits in Alphabet ($GOOGL) and FlatexDEGIRO ($FTK).

• Alphabet: After a historic run and surpassing the $4 trillion milestone, it felt prudent to harvest some profits as the valuation multiple began to stretch.

• FlatexDEGIRO: As noted in my “Best Performers” summary, $FTK has been a spectacular 6-bagger. Following such a vertical move, I’ve decided to reduce the position size to manage risk while still keeping a significant stake in the long-term story.

Options Activity

My Short Puts (S-PUTs) on Nagarro ($NA9) and Teleperformance ($TEP) recently expired, allowing me to pocket the full premium as both stocks held above their strike prices. Given the attractive valuations, I have rolled these positions into new S-PUTs for both names, continuing to generate income while being happy to be “put” the shares if they dip. Additionally, I’ve opened a new CALL on Teleperformance ($TEP); with the stock trading at a historically low P/E, this provides leveraged exposure to a potential recovery as the market realizes the business is far more resilient than current sentiment suggests.

6. The big picture: Other Assets & Risk Positioning

As my equity portfolio has grown to represent the majority of my net worth, my priority is gradually shifting from aggressive growth to capital preservation. This explains my recent lean toward global leaders and defensive sectors—the upside may be capped, but the risk profile is far more predictable. While I still strive for a concentrated portfolio of 20–25 names, I often end up over 30. This reflects a more cautious approach to position sizing as the portfolio grows.

Beyond Stocks: Hedge Funds & Pensions

The changes in my non-equity allocation this year were driven by market movement rather than active reshuffling. While the current weights are shown in the chart, these were the net returns for 2025:

• Hedge Funds (+21% return): An excellent year, fueled by the performance of Independance Expansion Europe (+48%) and Independance Expansion France (+23%).

• Bitcoin (-20% return): Bitcoin was a significant drag on the overall numbers this year.

• Pensions (~+7% return): I continue to maximize equity exposure in these accounts.

A note for Swiss residents: My VIAC (3rd Pillar) delivered a +12.2% return in 2025, and continues to rank among the best-performing Swiss pension solutions over time. It allows near-100% equity exposure and a small Bitcoin allocation. I highly recommend it.

7. Looking Ahead to 2026

My professional life remains extremely demanding, so I will stick to the quarterly rhythm established last year, with occasional deeper dives when time allows. Strategically, I continue to find the best opportunities in Europe, specifically in niche businesses that offer structural moats and valuations that provide a real margin of safety. I am less interested in forecasting macro outcomes and more focused on identifying resilient companies that can thrive regardless of the economic cycle.

Regarding my total net worth, I intend to gradually balance my allocation by directing new capital toward other asset buckets. The goal isn’t to divest from my equity portfolio, but rather to allow other areas to catch up through fresh contributions while the stock portion grows more organically.

As always, this portfolio is not managed with the objective of being right every year, but of staying consistent enough for good decisions to compound over time.

Investing is often described as a battle against the market, but as the years pass, I’m convinced it is more a battle against one’s own impatience. In 2026, my goal isn’t to find the ‘next big thing’, but to remain a disciplined steward of the capital I’ve worked hard to build. Some years the wind is at our backs, and some years we have to tack against it; the important thing is to keep the ship sound and the destination clear.

I look forward to sharing the next leg of this journey with you every three months. Thank you for reading, for the comments, and for being part of this process.

Fair winds, mates!

Guybrush

Disclaimer: Please note that the information presented here is for informational purposes only and should not be considered financial advice. Always consult with a financial professional before making investment decisions.

If this deep dive looks suspiciously structured, you’d be right! My treasury of notes has been lately just fleet maneuvers, but with all the recent movements and acquisitions at Wavestone, I had to update my thesis anyway. Since I had the time, I decided to structure my notes into a full analysis. I plan to interlace more of these deep dives with the usual portfolio updates in the future, and I hope you enjoy the change of pace!

Wavestone is one of those rare European ships that combines steady growth, high returns, and a clean hull (accounting) without raising a single fanfare. A true bounty. Born in France, it has quietly built a €1 billion business through disciplined execution, an asset-light model, and selective M&A. Its transparency, resilience, and profitability set it apart from larger global peers.

Below are my structured notes — covering its history, strategy, management, financials, and valuation — to understand why Wavestone deserves a closer look.

Contents

1. Company Overview

2. History and Strategic Vision

3. Market and Competitive Landscape

4. Recent Acquisitions / M&A Activity

   1. Q _PERIOR (2023 – 2024)

   2. Aspirant Consulting (2023 – 2024)

   3. Wivoo (2024 – 2025)

5. Management and Ownership

6. Business Quality and Competitive Advantages

7. Financial Profile

   1. Latest results

   2. Outlook 2025/26

8. Valuation and Investment Case

9. Catalysts

10. Risks

11. Documents and References

1. Company Overview

Wavestone is a French-listed management and digital transformation consultancy. It combines strategic advisory, business process optimisation, and IT implementation support, positioning itself between large system integrators and niche digital boutiques. The firm advises both private and public organisations on digitalisation, cybersecurity, ESG transformation, and operational excellence.

After acquiring Germany-based Q _PERIOR in 2023–24, Wavestone became one of Europe’s largest independent consulting firms, aiming to build a pan-European “consulting champion.” Its model is asset-light and based primarily on time-and-materials billing. The integration of acquisitions has temporarily diluted margins but created critical scale and diversification across industries and geographies.

The CEO describes Wavestone as one of the few independent European consulting houses combining management and technology expertise without running or implementing the systems it recommends – a “pure-consulting” model that preserves client independence (CEO interview, 10:46-12:13). The firm’s European identity and mid-cap agility allow it to serve both blue-chip groups and mid-sized corporates often overlooked by the global majors.

Key facts

• Ticker: WAVE (FR0013357621, Euronext Paris)

• Headquarters: Paris, France

• Employees: ≈ 6 000

• FY 2024/25 revenue: €944 m (+35 %, stable organic)

• Recurring EBIT margin: 12.6 % (target 15 %)

• ROE: ~17 %

• Net debt/EBITDA: ~ 0x

• Geographic mix: France ≈ 50 %, DACH ≈ 25 %, Switzerland ≈ 10 %, US ≈ 10 %

• Business model: ≈ Consulting, 90 % time-and-materials projects; utilisation ≈ 72–73 %

• Market cap (Oct 2025): ~€1.3 bn

2. History and Strategic Vision

Wavestone’s origins trace back to 1990, when Pascal Imbert co-founded Solucom, a French consulting boutique specialised in telecoms and network technologies. Through the 1990s and 2000s, Solucom evolved into a multidisciplinary consultancy, expanding from IT infrastructure into management and digital transformation for France’s largest corporates.
This long operational history shaped Wavestone’s current culture—technical, execution-focused, and entrepreneurially run.

In 2016, Solucom merged with Kurt Salmon Europe (excluding its U.S. activities), creating Wavestone. The merger combined Solucom’s technology and operational depth with Kurt Salmon’s strategic-consulting expertise, forming one of the few European-born alternatives to the large Anglo-Saxon firms. The company’s founding ambition was clear: to build a European consulting champion—large enough to compete globally, yet agile enough to deliver tailored, high-value projects.

Since then, Wavestone has pursued a balanced growth model mixing organic and inorganic expansion:

• Organic growth driven by service diversification (digital, cybersecurity, ESG, and operational excellence) and improved consultant utilisation and pricing discipline.

• Inorganic growth through targeted acquisitions that add scale, local presence, or niche expertise.

The 2023–24 acquisition of Q _PERIOR marked a structural step-up, expanding Wavestone’s footprint across Germany, Switzerland, and Austria and creating one of the most integrated mid-cap consulting platforms in Europe. The smaller 2024 purchase of Aspirant Consulting in the United States established a North-American foothold. Integration of both entities is largely complete, allowing management to refocus on organic performance and margin recovery.

Management identifies three structural differentiators that define Wavestone’s DNA:

1. European roots, bringing a long-term, pragmatic consulting style (“consulting à l’européenne”).

2. Independence from system-integration or outsourcing activities, ensuring unbiased advice.

3. Deep technological culture, described by CEO Pascal Imbert as “probably the most tech-oriented of management consultancies.”

Today, Wavestone operates with about 6 000 consultants across five priority markets—France (~50 %), Germany (~25 %), Switzerland, the UK, and the US—with North America and the UK targeted as next-phase growth engines (CEO interview 12:48–13:22).

Long-term objectives defined by management:

• Achieve ≈ 15 % EBIT margin over the cycle

• Deliver ≈ 15 % annual revenue growth combining organic (8–10 %) and targeted acquisitions (5–7 %).

• Strengthen international exposure for a balanced geographic mix between France, DACH, and English-speaking markets.

• Maintain a solid balance sheet and > 90 % cash-conversion rate to self-finance growth.

Execution of these goals relies on a disciplined cost structure, high client satisfaction (tracked through NPS), and selective, low-risk M&A rather than transformational bets.

3. Market and Competitive Landscape

The consulting sector serving digital transformation and IT modernisation continues to expand steadily worldwide. Multiple independent reports (Market US, Grand View Research, Gartner, IDC) estimate the global digital-transformation consulting market will grow at a 6–8 % CAGR between 2024 and 2034, reaching roughly USD 450–480 billion by the end of the decade.
Within this, software-consulting and IT-advisory sub-segments—especially in North America—are expected to rise faster, at 9–11 % CAGR (2022–2030), driven by enterprise-software implementation, cybersecurity, and AI adoption.

Growth drivers remain structural:

• Continued migration to cloud and hybrid infrastructures.

• Data, AI and automation integrated into every corporate process.

• Escalating cybersecurity and regulatory-compliance needs.

• Sustainability and ESG reporting embedded in enterprise systems.

• Talent shortages pushing firms to external consultants.

These trends underpin a long-term expansion cycle that supports utilisation, pricing power, and recurring demand for consultancies capable of combining strategy, technology and execution—precisely Wavestone’s position.

Competitive Environment

Wavestone operates in a fragmented European consulting landscape comprising four main categories of competitors (Wavestone URD 2024/25):

• Consulting “Big Five” – Accenture, EY, Deloitte, KPMG, PwC.

• IT champions – Capgemini Consulting, IBM, Sopra Steria, Talan, adesso, etc.

• Independent management consultancies – BearingPoint, SiaPartners, Onepoint, etc.

• Niche specialists (sector/function/region-focused) – Argon & Co, Capco, LHH, zeb, MHP Management- und IT-Beratung in German-speaking countries.

Wavestone competes mainly on implementation and transformation programs, not pure strategy. Global strategy firms such as McKinsey, BCG, Bain, Roland Berger and Oliver Wyman are frequently partners rather than rivals, combining their strategic design with Wavestone’s operational delivery.

This positioning reflects what management calls “consulting à l’européenne” – long-term, pragmatic, and execution-oriented. Unlike Accenture or the Big Four, Wavestone delivers advice only; however, the lines are blurring as IT champions invest heavily in high-margin consulting and strategy boutiques build out implementation arms (e.g., BCG Platinion, McKinsey Digital). Wavestone’s dual ability to serve large enterprises and agile mid-caps differentiates it within the fragmented European market, positioning it as an independent implementation partner. (CEO interview 10:17-11:32 and 12:46-13:05).

4. Acquisitions / M&A Activity

External growth is one of Wavestone’s key strategic levers.
Management uses acquisitions to expand geographic reach, deepen sector expertise, and accelerate growth in targeted markets while maintaining a conservative balance sheet.
Transactions are generally financed through a mix of share issuance and cash, keeping leverage low and aligning new partners with existing shareholders.

4.1. Q _PERIOR (2023 – 2024)

Transaction summary
Q _PERIOR was a transformational acquisition that positioned Wavestone as a European-scale consulting leader. The two firms had already cooperated on projects since 2019; integration therefore focused on speed and cultural alignment rather than a full merger redesign.

Company profile before acquisition
Q _PERIOR, headquartered in Munich, employed about 1 400 consultants with offices in Austria, Switzerland, Germany, the UK and the US. 2022 revenue was €285 m with an 8.1 % EBIT margin, which improved to €333 m and 9.5 % EBIT margin in 2023/24.
The firm’s revenue mix was well-diversified: Banking 21 %, Insurance 18 %, Energy 14 %, Automotive & Industry 13 %, Transportation/Travel/Logistics 13 %, Public Sector 10 %, Consumer Goods and Luxury 6 %.

Deal terms

• Enterprise value: €330 m (Equity €321.9 m + Net debt €8.1 m).

• Earn-out: Up to €35 m linked to FY 2024 EBIT.

• Financing: ≈ 79 % share-based (4.71 m new shares @ €54) + €67.6 m cash; earn-out cash-funded.

• Effective date: H1 2024 (Wavestone FY 2023/24).

• Q _PERIOR shareholders became Wavestone shareholders, aligning interests.

Deal rationale

• Created immediate European scale (~€940 m revenue, 6 000 employees).

• Balanced geographic exposure — France 52 %, Germany 23 %, Switzerland 11 %, UK 5 %, US 5 %.

• Added depth in banking, insurance, and manufacturing.

• Provided platform for UK/US expansion while consolidating Asia.

• Management jointly set a €1 bn revenue target and ~15 % EBIT margin goal by 2025.

Integration status
Integration teams merged support functions (HR, Finance, IT) by mid-2024. Cross-selling initiatives began immediately across large clients such as BMW, Crédit Agricole, Société Générale and LVMH. Early reports show operational synergies mainly in delivery and commercial reach.

Key metrics (post-integration)

• Combined pro-forma revenue FY 2023/24: €818 m (EBIT 12.4 %).

• Target FY 2025: ~€1 bn revenue, €130 m EBIT (+70 % vs pre-deal).

• Long-term: ~15 % annual growth, 15 % EBIT margin.

…

4.2: Aspirant Consulting (2023 – 2024)

Transaction summary
In 2024 Wavestone acquired Aspirant Consulting, a US-based management consultancy headquartered in Pittsburgh. The deal provided a local platform in North America, one of Wavestone’s stated priority regions.

Company profile before acquisition
Aspirant generated roughly €26 m revenue with an adjusted EBITDA margin above 10 %. The company specialises in organisational transformation and digital enablement for clients in healthcare, manufacturing and consumer goods.

Deal terms

• Enterprise value: €21.9 m + earn-out up to €9.1 m contingent on performance.

• Financing: 100 % cash from Wavestone’s own resources.

• Effective date: H2 2024 (Wavestone FY 2024/25).

Deal rationale

• First direct foothold in the US consulting market.

• Expands relationships with global clients operating on both sides of the Atlantic.

• Adds delivery capacity in digital and change management.

• Supports long-term goal of a balanced geographic footprint (France/DACH ≈ 70 %, English-speaking markets ≈ 30 %).

Integration status
Aspirant retains its brand short-term, gradually aligning back-office systems and reporting. Cultural integration was simplified by shared values around consulting excellence and ESG. The management team remains in place to drive local growth.

Key metrics (initial contribution)

• FY 2024 revenue €26 m; Adj. EBITDA > 10 %.

• Expected accretion to group EBIT margin ~+0.2 pp in FY 2025/26.

• Strengthens North-American sales pipeline (~5 % of group revenue).

4.3 Wivoo (2024 – 2025)

Overview
In June 2025, Wavestone acquired Wivoo, a French consulting firm specialised in digital-product and AI-driven design. The deal reinforces Wavestone’s leadership in the French digital-innovation market and complements its consulting offer in data, agile, and product management.

Company profile before acquisition
Founded in 2019 by Thibaut Desreumaux, Julien Davignon and Marine Bonlieu, Wivoo quickly became a recognised reference in Product Management consulting. It supports the digital and e-commerce departments of large companies in designing, building, and improving digital, data, and AI products.
The firm has completed over 600 projects and employs around 100 consultants, with €11.5 m revenue in 2024 and an adjusted EBITDA margin of 7 %.

Deal terms

• Enterprise value: €11.5 m + earn-out up to €4.5 m based on FY 2026–27 performance.

• Structure: 100 % share acquisition; fully cash-funded.

• Consolidation: effective June 1, 2025.

• Co-founders’ commitment: minimum two years post-closing.

• Brand: continues as “Wivoo, a Wavestone company.”

Deal rationale

• Expands Wavestone’s capabilities in digital-product management and AI/Design consulting.

• Strengthens the firm’s presence in France’s digital ecosystem.

• Enables cross-selling of Wavestone’s transformation expertise to Wivoo’s client base.

• Positions the group as a key partner for large corporates’ digital departments.

Integration status
Integration is led by Wavestone’s Strategic Development Director, Reza Maghsoudnia. Wivoo retains operational autonomy to preserve its culture and innovation focus, while gaining access to Wavestone’s client network and delivery infrastructure.

Key facts

• Revenue (2024): €11.5 m EBITDA margin: 7 %

• Employees: ≈ 100

• EV: €11.5 m + €4.5 m earn-out

• Funding: 100 % cash

• Added capabilities: digital-product design, AI and data-driven consulting

• Strategic impact: consolidates Wavestone’s leadership in the French digital ecosystem

5. Management and Ownership

Leadership Overview

Wavestone is led by a stable management team with a strong consulting background and long tenure.
Founder and current CEO Pascal Imbert has guided the company since its creation (Solucom → Wavestone) and remains a key strategic figure.
A formal succession plan was approved by the Board on June 2, 2025, ensuring continuity and alignment with shareholders.

Succession Plan (2026 AGM)

• Effective date: July 2026, after the Annual General Meeting.

• New structure:
   • Karsten Höppner, Chief Executive Officer (currently Deputy CEO; former CEO of Q _PERIOR).
   • Benoît Darde, Deputy Chief Executive Officer (currently Executive Committee member).

• Pascal Imbert will remain Chairman of the Board and support the transition until end-2026.

• Rationale: gradual hand-over, clear separation of Chairman / CEO roles, continuity of culture and strategy.

• Governance support: no change in capital structure; the controlling shareholder block has committed to retain its shares until December 2027; shareholders’ agreement extended to 2033.

Profiles

Karsten Höppner (CEO-designate)

• Born 1967 (Germany). Engineering degree (Berlin) + MBA (Pennsylvania State University).

• Began career at Andersen Consulting (Accenture) in 1992.

• Co-founded ESPRiT Consulting AG (1995) → merged to form Q _PERIOR (2011).

• Led Q _PERIOR to €330 m revenue in 2023 through organic growth and targeted M&A.

• Joined Wavestone as Deputy CEO in 2023; divides time between Munich and Paris.

Benoît Darde (Deputy CEO-designate)

• Born 1972 (France). Graduate of ESIEA. Joined Wavestone in 1999.

• Early career in IT infrastructure and telecom; later led large-scale digital and financial-services transformations.

• Member of Executive Committee since 2012; supervises Financial Services and Swiss/UK operations.

• Represents Wavestone within Numeum, the French professional union for digital industries.

Governance Highlights

• CEO remuneration (2024): ≈ €270 k total (≈ 78 % fixed / 22 % variable); performance KPIs linked to profitability and growth targets (URD 2024/25).

• Employee shareholding: ≈ 10 %, promoting alignment and retention.

• Board composition: balanced between executive and independent members; succession approved unanimously.

Salaries

Key facts

• Succession plan approved June 2025 → effective July 2026.

• Karsten Höppner (CEO) and Benoît Darde (Deputy CEO) to lead the next phase.

• Pascal Imbert remains Chairman to ensure continuity.

• Governance transition fully planned and capital structure unchanged.

• Strong insider alignment: founding family, managers and employees collectively hold ≈ 70 % of shares.

• Executive pay levels modest for a company of this size; fixed salaries remain conservative.

• Variable compensation tightly linked to achievement of recurring operating profit (ROP) targets, through a collective performance indicator (CPI).

6. Business Quality and Competitive Advantages

Wavestone runs an asset-light consulting model with minimal capital needs and strong free-cash generation. Returns on equity stay high (15–20 %) and cash-conversion exceeds 90 %. Management has maintained a disciplined M&A record and a conservative balance sheet.

The company’s reputation and independence are core assets. It is one of the few pure European consulting groups of scale, providing unbiased advice without implementing or operating the systems it recommends. This independence gives credibility with major clients and avoids conflicts of interest common in IT integration firms.

Wavestone serves many blue-chip corporates in France and the DACH region but also supports mid-sized enterprises that are often too small for the Big Five. Client satisfaction is exceptional: the NPS 77 in FY 2024/25 exceeds the typical 50–60 sector range. Stable utilisation (~73 %) reflects the company’s structural staffing model.

These characteristics – asset-light operations, high client loyalty, disciplined capital use, and European identity – explain Wavestone’s resilience and consistent profitability across cycles.

7. Financial Profile

Wavestone’s financial statements are straightforward and conservative. The company reports under IFRS and avoids extensive non-GAAP adjustments, making its books unusually transparent for the consulting sector. The only alternative measure highlighted is recurring operating profit (ROP)—equivalent to EBIT before non-recurring items—used as the main profitability KPI. Balance-sheet discipline and cash visibility remain central to the group’s management style.

Since its listing in 2000, Wavestone has recorded only one year of revenue contraction (–1 % in 2020), a remarkable record in a cyclical industry. Management attributes this resilience to sector diversification, a strong commercial organisation, and counter-cyclical service lines such as cybersecurity and operational-efficiency consulting.

Structure and Accounting Quality

Revenue recognition is simple: consulting services are billed mainly on a time-and-materials basis, representing about 90 % of total activity. Costs are predominantly staff-related, and capital intensity is minimal. Depreciation and amortisation account for less than 2 % of sales, confirming an asset-light model.

Wavestone’s cash conversion routinely exceeds 90 %, supported by short receivable cycles and low capex (< 1 % of sales). The company carries limited goodwill-impairment risk, as acquisitions are small and progressively integrated. Net debt remains close to zero, with predictable dividend payments (≈ 30 % payout).

The firm consistently achieves a mid-teens ROE (15–20 %) and > 90 % cash-flow conversion, translating into strong free-cash-flow yield and self-financed growth. Capex remains below €10 million per year, mainly for IT tools and office equipment. Working-capital movements are modest and predictable.

Wavestone’s clean reporting allows straightforward reconciliation between accounting profit and cash generation—uncommon among digital-service peers that often rely on adjustments or capitalised costs.

Latest Results

FY 2024/25 was the first full year consolidating Q _PERIOR and Aspirant Consulting. Revenue reached €944 million, up 35 % reported and stable organically. The recurring EBIT margin stood at 12.6 %, below the long-term 15 % target but consistent with integration effects and a utilisation rate around 73 %.
Net income totalled €75.9 million (8 % net margin). Operating cash flow was €89 million, and net debt/EBITDA near 0. The balance sheet remains unlevered, preserving full flexibility for selective M&A.
Reference: H1 2025/26 update – stable revenue, limited visibility, improving momentum

Outlook 2025/26

The start of FY 2025/26 remains challenging. Demand is soft in banking, industry, retail, and luxury; several projects have been delayed or cancelled amid global uncertainty. Conversely, energy, life sciences, insurance, cybersecurity, cloud, SAP and AI remain resilient, with North America showing renewed momentum since late 2024.

Operational priorities are:
• Improve profitability by increasing internal delivery share and controlling overheads.
• Maintain selective hiring and utilisation discipline.
• Accelerate commercial focus on high-growth areas, notably AI-driven transformation.

Management guides for positive organic growth and a recurring operating margin > 13 % in FY 2025/26, with gradual recovery expected into 2026.

Key Figures

8. Valuation and Investment Case

Wavestone’s valuation has historically ranged between a P/E of 15–25× and an EV/EBIT multiple of 10–14×, reflecting its consistent profitability and balance-sheet quality.
As of late 2025, it trades near the lower end of this range—around 10× EV/EBIT and ≈ 13× P/E—despite clean accounting, strong cash generation, and a margin structure in line with or above peers.

Valuation Framework

The company’s business model is asset-light and cyclical but exhibits limited downside volatility thanks to diversification and recurring client demand. Its intrinsic value depends mainly on two operating levers:

1. Revenue growth rate (market growth ≈ 8–10 %).

2. Recurring EBIT margin (target 15 %).

Under the base case, fair value converges toward the historical median valuation range, implying around +20 % upside from current trading levels without any multiple expansion.

In a bullish scenario, assuming 15 % revenue growth and margins above 15 %, upside exceeds +30 %, while even in a conservative case (5 % growth, 13 % margin), the model still points to a positive total return, thanks to consistent cash generation and balance-sheet safety.

For transparency, I initiated a position in late 2024 around €40 per share, but I still consider the current valuation range attractive for long-term investors.

Peer Comparison

No direct peer matches Wavestone’s size, focus, and independence.

The most relevant comparator in Europe is Sopra Steria, while a few U.S. mid-cap consultancies (FTI Consulting, ICF International, Huron Consulting) provide reference points for valuation and returns.

Wavestone trades at a structural discount to both European and U.S. peers despite superior margins, returns, and balance-sheet quality.
If the firm maintains its trajectory—organic growth near 10 %, margin normalization to 15 %, and continued small acquisitions—it should revert to the middle of its historical valuation range. A stronger macro environment or U.S./index exposure could push valuation toward the upper band.

9. Catalysts

• Full integration of Q _PERIOR and recovery toward historical EBIT margin (> 15 %).

• Resumption of organic growth as consulting budgets recover in France and the DACH region.

• Additional bolt-on acquisitions in the US and UK (Aspirant model) expanding geographic reach and client base.

• Improved visibility and liquidity through broader analyst coverage and potential inclusion in a European mid-cap index.

• Continued disciplined M&A execution, using strong cash generation and a debt-free balance sheet.

10. Risks

• Cyclicality: short order book (~3–4 months) limits forward visibility and amplifies demand shocks.

• Integration: Q _PERIOR remains the largest acquisition in company history; cultural and process alignment still ongoing.

• Talent pressure: consultant retention and wage inflation could weigh on utilisation and margins.

• Competition: large global players (Accenture, Capgemini) and niche digital specialists constrain pricing power.

11. Documents and References

Primary sources: Wavestone Inverstors Relations
Secondary: TIKR

A few links

• FY 2024/25 Annual Report (URD)

• FY 2023/24 Annual Report (URD)

• Q _PERIOR Acquisition Release

• Aspirant Acquisition Release

• Les secrets d’une performance à 2 chiffres I PDG de Wavestone, Pascal Imbert - Youssef Harrabi / Nicolas Chéron

This post covers a lot of ground — from the Q _PERIOR integration to the 15 % margin target — and represents many hours of reading, modeling, and synthesis. My motivation for shaping these notes into a full article is simple: I enjoy sharing ideas openly and exchanging views with other investors who bring their own angles or experience. Different perspectives always help refine the picture.

If you’ve read this far, thank you for joining the voyage. If you found value in it, a simple like or comment goes a long way — it tells me these deep dives are worth continuing. And as always, feel free to share your perspective below, whether you agree, disagree, or see things from another deck.

Fair winds,

Guybrush 🏴‍☠️

Disclosure: I have sailed this ship for some time and currently hold shares of Wavestone ($WAVE). My compass is pointed at this bounty, but this log remains personal—it’s not investment advice for your fleet.

Back with the Q3 update — late as usual recently, and not much to report this time around either.

The year kicked off rough. Q1 was a mess. strong rebound in Q2, hit all-time highs. Q3? Flat seas. A few waves here and there, but by quarter-end… dead neutral.

Due to new professional commitments, I didn’t have time to dive into new stock ideas. That said, I still added two positions: one old flame, and one unloved market leader you’ll meet below.

⚙️ What’s Inside

• Performance

• Market Thoughts

• Portfolio Changes

  • Sells

  • New Positions

  • Adjustments

• Best & Worst Performers

• Portfolio Snapshot

• Closing Thoughts

Performance

• Q3 return: -0,2%

• Year-to-date: +2,2%.

Not amazing, but still floating above water.

Historical Performance:

I usually compare my performance with MSCI World and MSCI Small Cap indexes. The fit isn’t perfect but it helps to track relative performance. This quarter they left me behind:

• MSCI World (EUR): Q3 +6,7%; YTD 2,4%

• MSCI World Small Cap (EUR): Q3 +8,5%; YTD +3,1%

• MSCI Europe Small Cap (EUR): Q3 +0,9%; YTD +13%

Actually, only 5 holdings beat those indexes this quarter: Alphabet, FlatexDegiro, ISC, Kontron, and KLA. Meanwhile, two-thirds of the portfolio was in the red !

🤔 Why the underperformance?

A few reasons:

• Europe lagged globally — especially small and mid caps

• Many of my holdings were hit by macro and FX headwinds.
  (S&P 500 is up ~13% in USD, but in EUR it was slightly negative over the first 9 months)

• B2B service companies like Wavestone, Endava, Nagarro, and Teleperformance were heavily sold off, despite stable fundamentals

• And unlike in the US, there was no AI hype wave lifting all boats indiscriminately

It’s not just the market, I’ve been less hands-on, and it shows. Over-diversification only works if you’re actively managing. Right now, I’m not.

🔄 PORTFOLIO CHANGES:

Not much action this quarter, just a few small adjustments and two new positions.

New Positions:

One new name and one familiar face joined again:

• Nestle ($NESN):

  Back in the pantry. I’ve traded Nestlé earlier this year, bought at ~70 CHF, sold around 90 CHF.
  Same setup this time:

  • Bought near 70, funded again with margin (~1.6%)

  • Dividend yield near 5%

  I see this as a low-risk carry trade while waiting for price recovery. Already back at 85 CHF, might flip again soon.

• Brenntag ($BNR):

  If you work in chemicals or pharma, you probably know this name. Brenntag is a global leader in chemical and specialty chemical distribution, via its Essentials and Specialties divisions.

  

  I’ve always liked the distribution business:

  • It connects thousands of suppliers with hundreds of thousands of clients

  • Scale matters, being the biggest gives you pricing power and reach

  • Sticky relationships, mission-critical supply chain role

  Why I bought:

  • Distribution is growing faster than chemical production — outsourcing trend

  • High barriers to entry: logistics, regulation, customer trust

  • Market is highly fragmented and Brenntag is the consolidator: Over 100 acquisitions since 2010 and 400+ targets in the pipeline

  • Business is recession-resistant

  • ROE around 15–20%

  The stock is down ~50% from post-COVID highs due to a weak industry cycle. It trades near 2015 levels, which is also the COVID bottom. I believe 2025–2026 will mark a recovery in the chemicals cycle.
  Base case: Mid-20s IRR
  Downside: Low, given today’s valuation

Sells

• Novo Nordisk ($NOVO-B):

  This was a speculative entry, I opened a tiny position last quarter without doing my usual homework, simply because the stock was beaten down and it’s a high-quality market leader. I mentioned this approach in my last post.

  Then came the mistake: When it dipped under 300 DKK, I got trigger-happy and quadrupled the position, still without a proper analysis. It bounced quickly and I sold near 400 DKK for a ~30% gain in one quarter. Lucky outcome, not good process.

  Once the position got larger, I finally did a deeper dive (or at least as deep as I can go, despite working in the pharma industry, I find it too complex to analyze with conviction).

  Why I exited:

  • It went from small bet to big exposure without the due diligence

  • After studying it properly, I wasn’t confident they could maintain their current margins over the long run

  • The bear case isn’t negligible (competition, pricing pressure, pipeline risk)

  • If I don’t know the waters, I don’t sail the ship 🏴‍☠️

• Volkswagen ($VOW3):

  One of my oldest holdings, sold after 5 years with just +30% return.
  The thesis was classic:

  • Love the brands — I drive Audi, my wife drives VW. We’ve always had them — great value, ultra-reliable

  • Dirt-cheap stock, with hidden assets

  • Attractive parts sum if you dig deep

  But reality kicked in …

  • The capital structure is a mess

  • Governance is opaque and politicized

  • Capital allocation is poor

  • China’s cheap EVs are everywhere now. Spent summer in Spain and found that taxis don’t drive Skodas anymore but BYDs!

  Time to move on.

• Disney ($DIS):

  Another old-timer, sold around $120.

  • Parks recovery has been sluggish

  • Disney+ still clunky in Switzerland (and very annoying)

  • Stock trapped between $80–$120 for years

  Let me be clear: I’m not bearish on Disney long-term. But I prefer to sell when I see better opportunities elsewhere. And I try to provide honest reasons for exiting, even if they aren’t all fundamental.

  Will re-enter if it dips back again.

⚖️ Adjustments

📈 Increased:

• Teleperformance ($TEP): Bought the dip. Results met guidance, but weak FX and disappointing capital allocation (acquisitions > buybacks) are frustrating.

• Endava ($DAVA): Down 40% this quarter. Growth is still there, but macro delays + FX hurt. Valuation is silly at 0.7x sales. SBC should come down though.

• Nagarro ($NA9): Also beat down. Less ugly than Endava, same logic — cheap and unfairly punished.

📉 Trimmed:

• GoEasy ($GSY): Great fundamentals. But highly volatile, tends to top at 3x book. Doubled position in Q1 at ~$150 CAD, sold near $210.
  Luckily, I exited just before a short report hit in early Q4. If it drops further, I’ll consider jumping back in.

Options

Still holding some long-dated calls on Teleperformance and Nagarro, nothing too aggressive, just some cheap optionality on beaten-down names.

During volatility spikes this quarter, I also sold puts on both:

• TEP: ~21% annualized yield

• NA9: ~16% annualized yield

The logic? I’m happy to own more at lower prices — so I collect a solid premium, and if the stocks fall enough to trigger the assignment, I increase my position at a better entry point.
If not, I just pocket the premium. Simple as that.

🏆 Best & Worst Performers

🚀 Best:

• Alphabet (+38%): Solid quarter. Strong cloud growth, stable advertising, and showing some AI leverage.

• KLA Corp (+32%): Benefiting from the AI wave.

• FlatexDegiro (+17%): Strong volume recovery, results well above guidance.

🫠 Worst:

• Endava (-40%): Revenue’s still growing, but deals aren’t closing. Clients remain cautious, FX is a headwind, and management flagged slower pipeline conversion for the rest of the year. Sentiment remains weak, and the market is pricing in more pain.

• Teleperformance (-23%): No love from the market. Still waiting for the story to turn.

• Bastide Le Confort (-20%): The stock had doubled over the last 12 months, so expectations were high. Then in July, Bastide announced the sale of its UK respiratory care division (a segment that had been growing strongly and made up about 10% of revenue). The move was aimed at reducing debt, but it caught the market by surprise, especially since this was one of their stronger-performing branches. Not much detail has been disclosed yet, and I’m looking forward to seeing more on the rationale.
  Outside of that, the business looks solid — FY 2024/25 results are strong (8% organic growth, margin improvement), and the outlook for next year is positive. The annual report is expected this week, let’s see if it calms the waters.

• Wavestone (-18%): Q1 showed a slight organic revenue decline (-1%) and market remains tough, especially in Europe, with clients delaying projects. Guidance was reaffirmed, but momentum is lacking and the market didn’t like it.

Portfolio

Here’s how my portfolio was allocated as of September 30th, 2025:

🧘 Closing Thoughts

Truth is, I’m not really “in the game” the way I used to be.

I’m more diversified than ever, which only works well if you’re actively following each position and adjusting accordingly. Lately, with less time to dedicate, I just haven’t been doing that.

And if I’m not fully engaged, I probably won’t beat the indexes. That’s the reality.
But that’s also life — for now.

Still, I’m staying invested, keeping risk in check, and holding on to quality names with long-term potential. At some point, the cycle will turn, and I’ll be ready to step back in more actively.

Until then — slow sailing, but steady.

Fair winds,
Guybrush 🏴‍☠️

Back with my Q2 update—yes, late again —but at least there wasn’t much to report. Between a packed work schedule and personal life, markets ran on autopilot. No fancy trades, no overthinking. Just stayed the course.

Ironically, that might’ve been the best move. After a rocky Q1 and all the noise I ranted about last time (remember the orange guy?), markets snapped back sharply. I wasn’t expecting a V-shaped recovery—but that’s exactly what happened. And without lifting a finger, I closed the quarter at all-time highs.

Let’s break it down.

⚙️ What’s Inside

• Performance

• Market Thoughts

• Portfolio Changes

  • Sells

  • New Positions

  • Adjustments

• Best & Worst Performers

• Portfolio Snapshot

Performance

Q2 performance: +6.6%

That brings my year-to-date performance to +2.4%, despite a rough Q1.

No big moves, no hero trades. Just stayed invested. Sometimes the best trade is doing nothing.

Thoughts on the Market

Last quarter I said chaos was a ladder. This quarter, chaos just… disappeared. Volatility collapsed, markets bounced hard, and despite all the reasons to panic (politics, rates, wars—you name it), indexes had other plans.

The wild part? The rebound came without any major catalyst—just a relief rally, softer inflation prints, and maybe a general sense that the worst was behind us. Earnings weren’t even that exciting.

Maybe it’s just FOMO. Maybe we’re entering the “just accept it” phase—where nobody cares about macro anymore and everyone’s just chasing charts.

Either way, I stayed put. No leverage, no stress.

PORTFOLIO CHANGES:

Let’s review my movements:

New Positions:

Two new names and one familiar face joined the crew:

• Sword Group ($SWP): French IT services company focused on digital transformation, mainly for government and large corporates. They also have a cybersecurity and GRC consulting arm, but it’s a smaller part of the business. The business is highly recurring, delivers ROEs above 20%, and has grown steadily through small, bolt-on acquisitions.

  It’s capital-light, buying back shares, and still trades at modest multiples. I bought around €30—below its 2017 price, even though the business has tripled in size since. Not much visibility in the market, but it keeps compounding quietly.

• Novo Nordisk ($NOVO-B): Ozempic/Wegovy madness continues. I opened a small position—I work in healthcare, though this space is complex even for me. Novo leads the GLP-1 market, and these drugs are changing the game in diabetes, obesity, and beyond.

  The recent drop likely reflects stretched valuations, supply bottlenecks, and U.S. pricing fears. But here’s the thing: long-term demand isn’t going away. And unlike most biopharma names, Novo actually:

  • Prints cash

  • Has pricing power outside the US

  • Pays a dividend

  • Isn’t reliant on M&A to grow

• UnitedHealth ($UNH): Still getting punished—and not without reason. They pulled full-year guidance after rising medical costs (Medicare/Medicaid), regulatory probes into billing practices, and a surprise CEO exit mid-crisis.

  The market hates opacity, and UNH started looking like a black box. When the industry leader hides the ball, the whole sector takes a hit.

  I’ve reopened a very small position. I know the business reasonably well—bought it around $200 during COVID, sold near $500 in 2022. Could be early this time, but the long-term thesis still holds. Let’s see if lightning strikes twice. 😄

Sells

None this quarter.
Just trims and adds within existing positions.

⚖️ Adjustments

📈 Increased:

• Alphabet ($GOOGL) – steady compounder, no drama

• STMicroelectronics ($STMPA): bought more around €17 after an oversold dip, and it bounced hard (+70% from lows).

• Paypal ($3PYP): Back in after trimming last quarter; still trading at a depressed multiple

• LDC Group ($LOUP): Quiet food business, still underfollowed

📉 Trimmed:

• Disney ($DIS): After a strong rally (+26%), rebalanced

• Euronext ($ENX): Took partial profits after big rally (+150% since first entry), specially last year. Needed resizing

• Volkswagen ($VOW3): Execution and China concerns remain. Reduced sightly around 100€.

Special Situations

None. Didn’t do any short-term trades or arbitrage this time.

Options

Opened call options on Nagarro shortly after the company announced a delay in publishing its annual report due to an auditor change. The stock sold off hard on the news, but I viewed it as an overreaction—not a fundamental issue.

The calls rebounded quickly once the report was finally released and the numbers came in solid. Closed the position with nearly a +200% gain.

Since then, Nagarro has corrected again, so I reopened long-dated calls (exp. 2026)—same idea: asymmetric upside if sentiment turns.

I also opened similar calls on Teleperformance, which is still trading well below historical multiples.

🏆 Best & Worst Performers

🚀 Best:

• Microsoft (+33%) – Strong earnings, early AI monetization, and a flight to quality.

• KLA Corp (+32%) – Rode the AI/semiconductor rebound, with strong margins and front-loaded demand from China.

• SESA (+30%) – Quiet compounder in Italian IT services. Still growing steadily with solid cash flow and recurring business.

• ISC.to (+29%) – Not just fundamentals: activist investor Plantro Ltd. is pushing for board changes, cost cuts, and more capital return. Could get noisy in Q3.

• STMicro (+27%) – Benefited from the semi rebound.

• Disney (+26%) – Solid comeback, trimmed a bit into strength.

Worst:

• UnitedHealth (-38%) – Still under pressure. Despite the ugly chart, I’m around breakeven on my entry.

• Endava (-21%) – Revenue growth continues, but big deals aren’t closing. Macro caution is delaying client budgets, and FX headwinds aren’t helping. Management cut guidance and now assumes no new pipeline conversion for the rest of the year. Until that changes, it stays in the penalty box.

• Nagarro (-19%) – Delayed annual report (auditor change) crushed sentiment. Results and guidance were solid, but the stock didn’t bounce. Still waiting for confidence to return.

Portfolio

Here's how my portfolio was allocated as of June 30th, 2025:

Closing Thoughts

This quarter was a good reminder: you don’t need to act all the time. Just staying put while others fidget can be an edge.

I didn’t expect a V-shaped bounce. I didn’t chase it either. Didn’t need to. The portfolio did its job. I just stayed invested.

I try to keep things simple: own good businesses bought at reasonable prices, with solid fundamentals—recurring revenues, low debt, aligned management.

Until next time—stay invested, stay sane, and don’t let boredom trick you into action.

Fair winds,
Guybrush 🏴‍☠️

Back with my quarterly check-in—just a bit late this time. As I mentioned in the yearly wrap-up, I’ve paused the monthly updates for now. I’ve started a new professional project that’s taking up way more time than I expected, so I’ve had to cut back on other activities. Still, I want to keep this space alive, so here’s the Q1 update—and as usual, the Watchlist’s at the end.

What’s Inside

• Performance

• Thoughts on the Market

• Portfolio Changes

  • Sells

  • New Positions

  • Special Situations

  • Portfolio Adjustments

• Best & Worst Performers

• Portfolio Snapshot

• Watchlist Update

Performance

Honestly, numbers don’t say much this quarter—markets were all over the place, with major indexes swinging ±10% in a single day, making any snapshot feel outdated fast. That said, for the record: I was up +6% in January, down -4% in February, and -5% in March, closing Q1 at -4%.

Thoughts on the Market

Not gonna dive deep into politics, but in short—I think this mess is self-inflicted. I’m not sure if the orange man is pretending to be a fool or just is one, but I trust there are people in the background who’ll stop things from spiraling. That’s why I’ve stayed fully invested, even if I’ve dialed down my margin use and stepped away from trading options. Less stress, fewer moving parts.

That said, this situation’s been hard to watch. Not because of market swings (I actually like volatility—chaos is a ladder, right?), but because it’s becoming more obvious we’ve got actual psychos running the show. They’ve stopped even pretending. It just reinforces my belief in reducing state and political power to the bare minimum—classic liberalism.

We’re watching governments flail with short-term, populist policies—tariffs, regulatory whiplash, election-driven nonsense. Leaders seem more focused on theatrics than substance, and the result is volatility that’s mostly self-inflicted. It’s a storm of their own making.

But in every storm, someone’s climbing 🏴‍☠️. While most cling to comforting narratives (“this will pass,” “the Fed will fix it,” “go to cash,” “the art of the deal,” “Trump’s put”…), I try to stay alert to dislocations—trim when things overheat, buy when panic sets in, and keep my head when others lose theirs.

I would’ve loved to be more active trading during this phase, but time wasn’t on my side this quarter.

🎧 Mood for the quarter

Portfolio Changes

Let’s review my movements:

Sells:

Starting with the exits, as they often explain the entries.

• SS&C Technologies ($SSNC): Sold at $89, almost a double since 2023. Much less upside left, so I moved on. It’s still on my watchlist—especially after its sharp drop to $70 on Black Monday (of course I was out of cash that day 😅). Proceeds went into Euronet ($EEFT), another financial services play.

• Verallia ($VRLA): Sold due to a takeover bid by Brazil’s Moreira Salles family. The offer price was a joke, and this situation could drag out. Used the funds to start a position in Savencia ($SAVE).

New Positions:

Euronet ($EEFT)

Started building the position at $96, just before Q4 earnings. Results were solid—stock popped +10%—but it’s now back around my entry point.

Euronet runs three core businesses:

• EFT Processing – A large independent ATM network across international markets, especially where cash usage is still strong (airports, tourist areas, emerging markets). They don’t just run ATMs—they add value through DCC, mobile top-ups, bill pay, and more. Many banks, especially smaller ones, now outsource ATM operations to Euronet, who provides full-stack management without needing the bank to own hardware. They also boost efficiency by relocating or seasonally deactivating low-traffic machines.

• epay – A global platform for distributing prepaid digital content through 770,000+ POS terminals in 360,000 retail locations. Started with mobile top-ups, but now most of the revenue and margin comes from digital gift cards, gaming, software, and other value-added content. Key partners include iTunes, Google Play, Sony, Xbox, and more. The shift away from airtime has improved profitability and made the business more resilient.

• Money Transfer – Operates under Ria, Xe, and Dandelion. Ria handles global consumer-to-consumer remittances through 600,000+ locations in 196 countries, mostly via local store partnerships—an asset-light model that scales faster than traditional players like Western Union. Xe is not only the Google of currency 😄, but also provides account-to-account payments and FX services for individuals and small businesses. Dandelion is their B2B API platform powering real-time cross-border payments for banks, fintechs, and big tech platforms.

What I like: >10% EPS growth over time, insiders aligned, strong capital allocation. Since COVID, the stock has traded well below historical multiples despite buying back nearly 20% of shares. At a P/E of ~8x, it’s cheap, overlooked, and still compounding.

Savencia ($SAVE)

A global dairy company focused on cheese and specialty products, Savencia ranks among the top five cheese producers worldwide. It’s family-controlled, with nearly 70 years of history, yet still flies under the radar for most investors.

They own some of the most iconic cheese brands in the world, including Caprice des Dieux, Saint Agur, Rochebaron, and Saint Albray—staples across European households and supermarket shelves. Margins are naturally thin for the sector but stable, and currently recovering post-inflation.

The business is well-diversified: 30% of sales in France, 40% across Europe, 30% rest of world. Growth has been steady, both organically and through small acquisitions (like Burgo de Arias in Spain).

🎥 There’s a solid 2018 thesis in English by Iván Martín (Magallanes Value Investors) on Rankia that still holds up. Since then, Savencia has doubled its size, nearly tripled earnings, and yet still trades at historical low valuations.

Why I like it: strong brands, global footprint, insider alignment. Boring, essential, and undervalued—just how I like it.

LDC Groupe ($LOUP)
Just a toe-dip for now. Famous French food group in the poultry industry—defensive, high ROE, and family-backed. Still doing my homework, so will not comment further for the time being.

Special Situations

Three positions I opened and closed during the quarter:

• WEX ($WEX)
  Participated in a tender offer to repurchase 12% of outstanding shares, with a price range between $148–170. I bought at $150, tendered at $151, and the final payout came in at $154. Modest gain. I’ve known the business for a while, but I’m not a big fan of companies where adjusted earnings are always double GAAP. Still, the pricing was fair for a quick trade.

• Nestlé ($NESN) and Swiss Re ($SREN)
  Quick round-trip trades. Bought Nestlé at CHF 74 using cheap CHF debt (~1.6%) with a ~5% dividend yield as a buffer. Sold at CHF 90 to reduce overall leverage when volatility spiked.
  Same logic with Swiss Re—entered around CHF 130, sold at CHF 150. Wasn’t planning to flip either, but the market got shaky, and I wanted more flexibility.

Portfolio Adjustments:

I’ve increased my stakes in:
Alphabet ($GOOGL), Nagarro ($NA9), Titanium Transportation ($TTNM), Goeasy ($GSY), STEF ($STF), Paypal ($3PYP), and ST Microelectronics ($STMPA).

On the flip side, I’ve trimmed positions in:
Teleperformance ($TEP), FlatexDegiro ($FTK), WaveStone ($WAVE), and Paypal ($3PYP).

Rationale Highlights:

• Alphabet, Goeasy, Paypal
  I had reduced my holdings last year at higher valuations. Now they’re back at bargain levels:

  • $GOOGL: Near historical lows, trading around P/E 15x

  • $GSY: At P/E 6x—only cheaper during COVID

  • $PYPL: Was trimming at P/E 20x, also at the beginning of Q1, now added again at P/E 12x

• Titanium Transportation ($TTNM)
  Down 70% from ATH, trading below tangible book. Canada-US cross-border trucking (30% of business) could be heavily impacted by tariffs, but margins are stable and variable-cost based. Dividend temporarily suspended to reduce debt. The CEO tends to thrive in downturns—snapping up assets and competitors at discount.

• Teleperformance ($TEP)
  Strong rally this quarter made it my largest position. Trimmed around €105 to rebalance.

• FlatexDegiro ($FTK)
  Doubled over the past twelve months. Took profits and reallocated to higher-conviction ideas.

Best Performers

This quarter, a few stocks stood out:

Not surprisingly, some of the best performers were the ones I ended up trimming. It’s becoming a tradition 😅

Worst Performers

A few names didn’t fare so well:

Also not surprising… a few of these I held onto or even added to.

Portfolio

Here's how my portfolio was allocated as of March 31st, 2025:

Watchlist Update

Just like I used to do in the monthly updates, I’m anchoring this post with a fresh look at my Watchlist.

Thanks for reading this update! I always appreciate your thoughts, questions, and the occasional friendly disagreement.

This quarter was a reminder that while markets move fast, life moves faster. Between a new professional project, less time to follow markets closely, and a world that feels increasingly off balance, I’m leaning even more on simplicity: stay invested, ignore the noise, and act when the odds are in your favor.

Volatility doesn’t bother me—in fact, I welcome it. What worries me more is how normalized chaos has become in politics and global decision-making. But if we stick to rational thinking while the world spins in circles, we’ve already got an edge. Chaos is a ladder—as long as you know where you’re stepping.

Until next time—keep your head clear, your portfolio aligned, and your sleep intact.

Fair winds and safe waters,
Guybrush 🏴‍☠️

The Rise of a Modern Bully

America has always wielded immense economic and military power, and many have looked to it—rightly or wrongly—for leadership. But now it feels like that leadership has twisted into something menacing. By pushing draconian tariffs onto its closest neighbors, the U.S. has become not just a nation with formidable influence, but a country that many around the world are beginning to fear—and even hate.

Canada, long considered a peaceful and cooperative ally, suddenly faces crippling trade barriers. Mexico, too, is reeling from the same tariff sledgehammer. Both countries rely heavily on access to U.S. markets to keep their economies afloat. And now, seemingly overnight, that lifeline is strangled by an administration willing to drop the hammer on anyone who disagrees or dares to step out of line.

Coercion in Ukraine

But perhaps the most distressing of all is what’s happening in Ukraine. In a time when it needs allies and support, Ukraine instead finds itself pressured to hand over its rare earth minerals—vital resources for modern technology—in exchange for continued military aid. That’s not partnership; it’s extortion. Gone are the days of championing freedom or defending smaller nations purely on the basis of shared democratic ideals. Instead, these acts paint a picture of a superpower that demands tribute in the form of precious resources, leveraging warfare and desperation as bargaining chips.

What’s worse is the public humiliation that accompanied these demands—an unsettling display of arrogance. Instead of dialogue among equals, we’re seeing intimidation, belittling words, and condescending gestures. Imagine the message this sends to other countries who once trusted the United States for support or cooperation: “We will help you, but only if you bow down completely to our demands.”

Could We Be Next?

Seeing the U.S. target Canada, Mexico, and Ukraine is a stark reminder that no nation is truly safe. Today’s news tells us one story: If the most trusted neighbors and partners can suffer this fate, tomorrow it could be anyone. Even those of us who live in countries with strong economies and stable governments aren’t immune if world powers decide we’re standing in the way—or have something they want.

Every major empire in history has tried to bend smaller nations to its will. But it’s chilling to witness this so openly in the modern era, under the glare of 24/7 media and social platforms. The world sees it happening, and the question on everyone’s lips is: who will stand up to a superpower?

A Darker World

In many ways, the world feels darker today. Our social media feeds buzz with anger and frustration. People are calling the United States reckless, unethical—even dangerous. Comparisons to other feared or ostracized nations are becoming frighteningly common. Where there once was a promise of cooperation and shared values, distrust and resentment have taken root.

We’re left asking ourselves: are these the leaders we want guiding global policy? Individuals so ready to antagonize, to strike without warning, to crush alliances in favor of dominance? If powerful governments can coerce at will—economically, politically, even militarily—how long before every relationship becomes transactional, each country fearing betrayal or exploitation?

Sick Minds in High Places

It’s tragic to think that the fate of millions—if not billions—can rest on the decisions of a few leaders driven by ambition, insecurity, or personal gain. We see egos clashing on the world stage, as if the planet were a chessboard and entire populations mere pawns. The very notion of diplomacy or compassion feels lost in the din of threats, accusations, and ultimatums.

Some might shrug and say, “It’s just realpolitik—this is how the world works.” But must it be? Do we resign ourselves to leaders who openly sow discord and harbor contempt for the very nations they claim to help?

Hope in Unity

Despite the grim outlook, history has shown us that no tyranny lasts forever. People speak out, alliances shift, and over time the world has a remarkable way of rallying behind principles of decency and mutual respect. We’ve seen it happen before, even if it never occurs overnight. With enough cooperation—through economic partnerships, diplomatic efforts, or collective action—other nations can still remind any superpower that unchecked aggression has serious consequences. At the same time, protests, open letters, and social media movements can carry the voice of dissent across borders, creating domestic and international pressure that politicians eventually have to heed. Even in this charged and unsettling moment, there is a glimmer of hope that solidarity can prevail over fear.

A Collective Reckoning

The lessons here are harsh. What is happening to Ukraine and Canada today could easily happen to the rest of us if we don’t question and challenge the unchecked aggression and deal-making that define this new reality. Leaders who once championed democracy might bend toward coercion if it suits their goals, and no amount of political correctness or comforting rhetoric will protect us from the ramifications. For those who believe in the possibility of a fairer world, now is the time to pay attention and to speak out. A superpower’s wrath is not bound by geography or friendship; it’s bound only by the resistance it encounters from those willing to say “enough.”

I fear we’re living in an era of intimidation and extortion masquerading as diplomacy. Each passing day reveals just how fragile international alliances can be, and how quickly the promise of cooperation can sour into resentment and fear. We must not forget that behind every national statistic or policy decision are real people whose lives and futures are on the line. It’s easy to feel helpless, but acknowledging the danger is the first step. The more we recognize what’s happening, the more we can muster the collective will to stand against it. If our leaders won’t sound the alarm, it falls upon us—everyday citizens—to do it for them. Let us hope it’s not already too late.

Turning Fear into Opportunity

As bleak as these global shifts may seem, it’s worth remembering that markets often respond to chaos by opening unexpected opportunities. Even amid unsettling news—tariffs rocking once-stable trading relationships, nations caught in coercive demands, and an atmosphere charged with mistrust—there can be moments of real promise for those who keep a clear head and remain focused on the fundamentals.

I’ll be the first to admit that watching portfolio values whipsaw from day to day can test anyone’s resolve. Yet history shows that disciplined, patient investors frequently turn crises into catalysts for long-term gains. Sometimes, it’s precisely when the headlines look most dire that the best chances emerge to buy solid companies at discounted prices, or to double down on positions whose core strengths remain intact despite the market’s temporary panic.

In my own holdings, for instance, only one stock—ticker TTNM, which is roughly two percent of my overall portfolio—stands out as especially exposed to current geopolitical upheavals. That knowledge helps keep things in perspective: I can absorb a bit of disruption, even as I rebalance or look for strategic opportunities elsewhere. It doesn’t mean I’m blind to the real-world consequences of these conflicts or the moral questions raised by global bullying. Rather, I recognize that, from an investing standpoint, tumult can create openings to strengthen a portfolio—provided we have the composure to act rationally when many others are in a rush to retreat.

Yes, the world feels darker at this moment, and it’s troubling to see alliances deteriorate, with smaller nations seemingly at the mercy of bigger ones. But as investors, we need not surrender to despair. We can stay vigilant—both morally and financially—and remember that volatility, while unsettling, can also be a ladder to new opportunities. When fear abounds, thoughtful and deliberate moves often yield the greatest rewards. If we keep our eyes on the fundamentals and maintain a measure of patience, we can position ourselves to emerge stronger once the dust settles and the markets, as they usually do, regain some semblance of equilibrium.

Alright, fellow adventurers, that’s the lay of the land as I see it. Heavy stuff, I know—but sometimes it helps to say it out loud. Even when the seas of global politics look stormy, there’s still treasure to be found for those who keep their wits about them. Sure, the world might feel darker, but pirates don’t scare easily—we chart our course, keep a watchful eye on the horizon, and know that every raging tempest can bring hidden opportunities. Thanks for joining me on this voyage; may your next port of call be calm, prosperous, and free from unwanted tariffs. Stay sharp, stay true—and never forget to look for the silver linings in the storm.

As we close the books on 2024, it’s time to weigh anchor and take stock of how our treasure chest (a.k.a. investment portfolio) held up amidst the year’s market waves—both the storms and the calm seas.

Here’s what we’ll cover in this review:

• Portfolio Composition & Performance

  • Portfolio Composition as of December 31, 2024

  • Compounding

  • Geographical Allocation

  • Key Learnings and Adjustments in 2024

  • Top performers of 2024

  • Underperformers of 2024

  • Q4 Portfolio Changes

    • New Additions

      • Wavestone $WAVE

    • Sells

    • Portfolio Adjustments

    • Options

• Watchlist 2025

• The big picture

  • Stock-Picking Portfolio

  • Private Pension Plans (2nd & 3rd Pillar)

  • Real Estate

  • Hedge Funds Picking Portfolio

  • Cash & Short-Term Monetary Funds

  • Bitcoin

• Looking Ahead to 2025

Portfolio Composition & Performance

Portfolio Composition as of December 31, 2024

The portfolio now holds 30 positions, slightly above my ideal range of 20–25. Despite this, it remains focused, with the top 10 positions accounting for 52% of the portfolio and the top 20 making up 81%.

During the year, I sold 7 positions and added 6 new ones (highlighted in yellow in the table). The average holding period is now 3.3 years.

Compounding

My portfolio delivered 7.1% in Q4, pushing the full year performance to 12,9%. While this year’s gains lagged major indexes like the MSCI World (+19%), Nasdaq 100 (+25%), and S&P 500 (+23%), a 13% annual return is solid. More importantly, the five-year CAGR stands at 16.4%, well above my double-digit target.

Performance by Quarter (2024):

Performance by Year (Historical):

Geographical Allocation

The portfolio’s geographical split shows a heavy European bias (49%), with 40% in the US and 11% in Canada.

• US Stocks: +30% average performance.

• Non-US Stocks: -6% average performance.

This divergence reflects broader trends. Major indexes were driven by the “Magnificent Seven”, while European markets, particularly small caps (60% of my portfolio), underperformed.

• MSCI World Ex-US: +5%

• MSCI Europe: +2%

• MSCI Europe Small Cap: +6%

The following graphics illustrate key dynamics:

The S&P 500 “Magnificent Seven” returned 31% during the first 6 months, while the remaining S&P 493 gained just 7%.

The weight of the “Magnificent Seven” in the S&P 500 grew from 1% to 34% over the last 30 years.

I’m not trying to justify my performance here, nor do I believe there’s necessarily a bubble in the top 7 US stocks—I even hold a few myself. However, I do think the current price/performance divergence between these giants and the rest of the market will eventually normalize. This belief underpins my preference for staying diversified, rather than chasing concentrated gains.

At the same time, I hold a strong conviction that Europe offers significant opportunities, even amid challenging economic conditions. It’s remarkably easy to find highly undervalued companies whose stock prices don’t yet reflect their underlying performance. Here are a few examples from my biggest European holdings, which illustrate this disconnect:

The only one with positive performance in 2024 was Euronext, which delivered an impressive +40%. Yet, even with that strong result, it remains highly undervalued compared to its peers. For context, I was able to buy Euronext in 2023 at just 10x PE—a clear bargain.

If we evaluate these holdings purely by stock price performance, they didn’t shine in 2024. However, I remain confident in them, as each has strong fundamentals and clear catalysts that could unlock their value in 2025. It’s no coincidence that 5 out of the 6 stocks I added in 2024 are from Europe, where I continue to see deeply undervalued opportunities.

Key Learnings and Adjustments in 2024

This year, I’ve made a conscious effort to give more weight to momentum and avoid the classic value investor trap of adding to a position as it continues to decline. While the logic says a lower price makes a fundamentally strong company more attractive, the reality is that persistent price drops without news often precede negative developments. This is especially true for stocks with informed shareholder bases or insider activity, where the market might already sense upcoming challenges.

That said, I don’t avoid buying declining stocks altogether. Instead, I’ve started obliging myself to sell some underperformers at regular intervals, and it’s paid off. Of the 7 positions I sold this year, 6 are now trading below my selling price.

Another adjustment I refined in 2024 was a clear separation between long-term and short-term portfolios, something I started in 2023. I now use two brokers:

• Long-term holdings: The core portfolio.

• Short-term/speculative trades: This portfolio represents roughly 5–10% of total portfolio weight. I limit it to no more than 4–5 positions at a time, including options, and frequently use margin.

The short-term portfolio outperformed significantly this year, delivering 33% returns versus 10% for the long-term portfolio. I took advantage of high volatility within my long-term positions, using a mix of tactical buying/selling and options strategies (mainly call options and selling puts). These options strategies alone added 1.4% to overall portfolio performance.

This year, I’ve made a point to focus more on understanding a company’s moat—how strong and durable it really is. It’s not that I wasn’t looking at moats before, but in the past, I relied on a checklist with questions that gave the company a score. While helpful, I didn’t spend much time digging deeper, and sometimes the score wasn’t really relevant.

I’ve passed on many high-growth companies with seemingly innovative products because I wasn’t convinced their advantages would last. Some of those stocks have done well, others not, but I’ve stayed disciplined about sticking to businesses with clear, defensible edges.

Top performers of 2024

Paypal $PYP

Under CEO Alex Chriss, who took over in late 2023, PayPal has shifted focus to profitable growth and innovation. Key initiatives included launching “Fastlane”, a one-click guest checkout feature designed to improve user experience and boost transaction success rates. The company also ramped up its share buybacks, retiring about 10% of its shares between 2023 and 2024, while reining in stock-based compensation.

PayPal’s stock gained 38% in 2024, but my investment in $3PYP, a leveraged ETF, delivered a 92% return. A few readers have asked why I chose $3PYP instead of the stock. Here's why: I used to hold PayPal in my long-term portfolio, but by mid-2023, when the stock hit $50 (below 10x PE, compared to its historical range of 20–30x), I saw an opportunity for a speculative position. Instead of call options, I opted for $3PYP, which offers less upside but more flexibility to adjust the weight of the position as needed. Its volatility has worked in my favor, and overall, I’ve gained ~150% on this trade—though it remains a very dynamic position.

Newlat Food

The acquisition of Princess and the formation of the new group New Princess was a game-changer. The market quickly recognized how undervalued Newlat had been, which drove the stock up. After the acquisition, I decided to sell my entire position, preferring to wait and see how the integration of Princess plays out before re-entering.

Euronext $ENX

Nothing particularly groundbreaking happened this year—it was simply a case of valuation catching up with reality. In 2023, Euronext was trading at a historical low PE of 10x, a bargain for such a dominant player in its space. This year’s performance reflects that undervaluation being corrected.

FlatexDegiro $FTK

FlatexDegiro had an impressive year, with sales growing by nearly 20%, improved profitability, and continued strong growth in new customer accounts. Additionally, regulatory concerns eased significantly after BaFin closed its file on the company, following the resolution of deficiencies flagged in 2022.

Underperformers of 2024

Most of these have already been discussed in previous updates, but here’s a summary:

Solutions 30 $S30: I commented here. I sold during summer, limiting my exposure to about half of the decline. If the company gets back on track to meet its 3–5 year outlook, it would be trading at less than 1x EBITDA, making it worth watching for a potential rebound.

Digital Value $DGV: This position was hit hard by a corruption investigation related to public procurement contracts and the resignation of its Chairman, CEO, and major shareholder, Massimo Rossi. I sold shortly after the news broke and commented further here.

Endava $DAVA: Endava caught me off guard. At the end of 2023, it was the best performer in its sector, outperforming peers who were posting profit warnings. But in early 2024, Endava saw a sharp decline, effectively catching up to what its competitors had suffered over the past two years. The worst seems to be over now, though, and the stock has started to rebound slowly.

Euroapi $EAPI: This was a win in disguise—I sold in January, avoiding the decline. Euroapi, spun off from Sanofi, came with ambitious plans in its IPO prospectus. However, as the pharma CDMO market normalizes post-COVID, Euroapi has struggled. It’s now undergoing a restructuring program that should have been addressed before its IPO. Well played, Sanofi!

ST Microelectronics $STMPA: Down nearly 50% this year, though it’s still trading only slightly below my average purchase price. I probably should have sold earlier. STM is heavily exposed to the industrial and automotive sectors, both highly cyclical industries. However, even at the low point of the cycle, the company manages to keep growing and maintains decent margins. Between 2018 and 2023, STM had an impressive 500% rally, peaking in 2021-2022 during the post-COVID chip crisis and supply chain disruptions. Interestingly, its U.S. peer, Texas Instruments ($TXN), despite facing similar pressures—like price declines and cyclical headwinds—didn’t suffer such a sharp decline of price.

Teleperformance $TEP: I wrote an article about it (link) and wouldn’t change a single word. Despite opening a position in 2023, the stock is trading just slightly below my average purchase price, thanks to options strategies and weight adjustments. This year, I’ve sold puts and bought calls when the stock traded between €80–90, while trimming my position at €100–120. Teleperformance has been extremely volatile, but this has made the option premiums very attractive.

It’s astounding that the stock is still down 80% from its all-time high, now trading at just 5x PE. While its performance hasn’t turned around yet, I remain cautiously optimistic. See for yourself.

Q4 Portfolio Changes:

The 2024 new additions are marked in yellow in the table above and have been commented on in previous quarterly updates. This section will focus on changes specifically related to Q4:

New Additions:

Sesa $SES, Eli Lily $ELY and Stef $STF were commented in October update (link).

There is a lot of negativity surrounding Sesa ($SES), with the stock down nearly 70% from its all-time high. The decline appears to stem from multiple factors: a previous higher valuation, combined with a price rally that attracted weak hands, higher interest rates reducing profitability, a weakened Italian IT market over the past two years, and the Digital Value scandal in Q4, which further impacted sentiment. At current prices, I see a great opportunity and have been increasing my position.

Wavestone $WAVE

In December, I added Wavestone ($WAVE) to my portfolio. Briefly, Wavestone is a management consulting firm focused on business transformation, helping organizations improve operational efficiency, manage digital transformation, strengthen cybersecurity, and navigate regulatory environments. The company operates across industries such as financial services, energy, industrial or public sector, with a strong European presence and growing international reach.

Wavestone is a high-growth company, historically growing at an average rate of 15%-20% per year through a mix of organic expansion and strategic acquisitions, while avoiding dilution. The company maintains a ~20% ROE, and its margins have improved steadily over time. In 2023/24, Wavestone made a significant acquisition that slightly compressed margins, though this is likely temporary as the integration progresses.

The founding family remains actively involved, holding a significant ownership stake, which aligns their interests with shareholders.

Despite its strong fundamentals, Wavestone is currently trading at a historical low valuation of P/E 10x. Over the last four years, the stock has been stagnant, even though the company has more than doubled in size, making it significantly undervalued compared to peers in the consulting sector.

Sells:

Digital Value $DGV, I commented in October update as well.

Berry Global ($BERY) and Magnera ($MAGN)

I decided to sell Berry Global ($BERY) after the announcement of its merger (or acquisition) by Amcor. I had held $BERY since late 2021 and achieved a total return of +46% (CAGR 14%), making it a solid investment overall. From the outside, the move looks like a great deal for Amcor shareholders, but less so for Berry.

I considered buying Amcor, but this is a massive merger, and as the Einstein and Marilyn story goes, it’s not guaranteed the strengths of both will shine through. Plus, with so many opportunities in the market right now, I decided to stay out.

As for Magnera $MAGN, I received it as a spin-off dividend from Berry shortly before Amcor’s announcement—likely part of a pre-arranged plan.

Learning Technologies Group ($LTG):

Over the last three months, I’ve traded in and out of $LTG three times, taking advantage of its high volatility. The stock fluctuated between 87 and 96 pence after news of a potential takeover bid surfaced. When the offer was confirmed at 100 pence, the stock briefly rallied.

Recently, the price has been drifting lower, likely due to concerns that General Atlantic, the private equity firm behind the bid, might face challenges securing the necessary agreements to complete the deal.

Portfolio Adjustments:

I reduced my position in GoEasy ($GSY), not due to any fundamental issues—the company is performing exceptionally well, like a Swiss watch. It continues to grow 20% annually, with EPS growth exceeding 30%, even during crises. However, the stock remains extremely volatile.

This year, I reduced my position in Q1, Q2, and early Q4, selling between 180–190 CAD. While I believe GoEasy should trade at 400 CAD, it consistently trades within a range of 2–3x book value (with occasional lows near 1x). In 2020, the stock dropped >50%, allowing me to buy at 30 CAD. It then rallied to 210 CAD before falling again in 2022 to 90–100 CAD, where I doubled my holdings. By 2024, it surged back to 200 CAD, prompting me to trim my position.

Paypal $3PYP: after this year’s rally, I’ve reduced my position as I see less upside.

Options:

Some of my Sesa $SES contracts were executed last month, adding the stock to my portfolio. After further studying the company, I decided to increase my position in December.

I also have short put options open on Teleperformance $TEP at €80–82, expiring in less than a month.

Watchlist 2025

Here’s my watchlist for 2025, where I track stocks that could be worth adding to the portfolio. Each is ranked based on valuation, potential returns, and my screening criteria. It’s a simple way to keep tabs on potential opportunities.

The Big Picture

While the stock-picking portfolio remains the cornerstone of my investments, it’s just one piece of a larger puzzle. Here’s how my assets are distributed, how they performed in 2024, and what changes I’ve made to ensure a balanced and resilient portfolio moving forward:

Stock-Picking Portfolio:

The largest chunk of my portfolio at 57%, this delivered a 13% return, making it again the strongest-performing category among my assets this year.

Private Pension Plans (2nd & 3rd Pillar):

These represent 15% of my assets, delivering a 7% return in 2024.

Real Estate:

In 2024, I purchased my first property in Switzerland, which now represents 14% of my assets. I wrote a detailed article about the experience for my Swiss readers, though it’s not publicly available.

Hedge Funds Picking Portfolio:

Representing 7% of my assets, down from 13% last year, as I used part of these funds to help finance the Swiss property purchase. These funds delivered a 6% return overall, with Numantia Patrimonio standing out with a stellar 28% return.

Cash & Short-Term Monetary Funds:

Currently 4% of my assets, down from 17% last year. The main reason for this reduction is a real estate investment in Switzerland, funded largely by these monetary funds. This year, they delivered a 2.8% return, though this figure is skewed by timing, as a large portion of dividends was received at the year’s end, based on the average portfolio value.

Bitcoin:

Now 3% of my portfolio (up from 1.6% last year), Bitcoin had an extraordinary year, delivering more than 130% return.

Over the last few years, the stock-picking portfolio has grown to dominate my overall allocation, now representing 57% of my assets. While it’s been the strongest performer, this level of concentration increases risk. My goal for 2025 is to gradually rebalance the portfolio, not by selling existing positions, but by allocating new savings to other areas like real estate, pension plans, and hedge funds.

This shift will help create a more balanced and resilient portfolio, allowing me to diversify further while continuing to pursue long-term growth opportunities.

Looking Ahead to 2025

As we enter 2025, I want to take a moment to thank all of you—longtime readers, new subscribers, and especially those I’ve had the pleasure of connecting with through this blog. This marks the end of my second year writing Guyquity, and I couldn’t be more grateful for the conversations, feedback, and support from this amazing community.

This year, life’s currents will leave me with less time to write, but that doesn’t mean I’m abandoning ship! My plan for 2025 is to scale back slightly:

• I’ll share one post every three months, combining portfolio and watchlist updates.

• When time permits, I’ll also dive deeper into individual companies, short investment theses, or updates triggered by specific events—just like my recent post on Teleperformance.

I’m excited to continue sharing insights and learning together with all of you. Thank you for being part of this journey, and here’s to navigating the markets and uncovering opportunities together in 2025. Wishing you fair winds and plenty of prosperity ahead!

Disclaimer: Please note that the information presented here is for informational purposes only and should not be considered financial advice. Always consult with a financial professional before making investment decisions.

Here’s my latest update covering recent portfolio moves, new watchlist highlights, and key developments that have caught my eye.

Index:

Portfolio Overview & Adjustments

• Increased Investments

• Reduced Investments

• New Positions

• Sold Positions

• Options Strategy

Significant Developments

Watchlist

PORTFOLIO OVERVIEW & ADJUSTMENTS

For the month, my portfolio stayed mostly flat, ending slightly in the red. Most holdings held steady, with one major exception: Digital Value ($DGV), which dropped 80%, taking a 2% hit on my overall portfolio. I’ll dig into the details on that one further down.

NEW POSITIONS:

STEF SA ($STF)

This month, I initiated a position in STEF SA at €131, at an LTM price-to-earnings ratio (PER) of 9x. STEF is a French leader in temperature-controlled logistics, with over a century of experience. Specializing in managing the cold chain, STEF ensures safe storage, handling, and transportation of perishable goods—primarily food—across Europe. Here’s why STEF stood out as a compelling addition:

Essential Infrastructure with Consistent Demand: STEF serves primarily the food industry, a sector with stable, essential demand, making it more resilient during economic downturns. The company’s extensive real estate holdings, including 283 cold storage facilities, anchor its role in Europe’s food supply chain.

Dominant Market Presence and Network Effects: As a leader in temperature-controlled logistics across France, Italy, Spain, and Portugal, STEF benefits from network effects that drive efficiency and cost-effectiveness. Its established infrastructure also positions it well for growth in high-demand areas like fast food logistics.

Consistent Financial Strength and Strategic Focus: STEF shows strong financial resilience with steady growth, high ROE, expanding margins, and prudent debt management, even through various crises. Their recent divestment of the maritime segment allows for a streamlined focus on core food logistics, enhancing profitability.

Aligned Leadership with High Insider Ownership: CEO Stanislas Lemor, along with the Lemor family (who led STEF’s 1987 buyout) and employees, hold over 70% of STEF’s shares, aligning management closely with shareholders and supporting the company’s long-term commitment to sustainable growth.

Sustainability Initiatives: STEF prioritizes sustainability through “Blue Enerfreeze,” its green energy division, and proprietary software that optimizes logistics efficiency. These investments aim to lower environmental impact and operating costs while strengthening the cold-chain network.

Long-Term Growth Outlook: STEF’s growth prospects are strong, fueled by organic expansion and acquisitions in a fragmented European market. Its vital infrastructure role should support further valuation growth as market recognition of STEF’s essential services increases.

Why the Opportunity Exists: STEF’s unique position, blending logistics and infrastructure, might leave some investors unsure of its value, resulting in a discounted valuation. I view this as an opportune entry point for a quality company with a defensive business model and stable revenue streams.

This new position aligns with my strategy of investing in high-quality companies with defensible market positions. I’ll be closely watching their international expansion efforts and client acquisitions to see how they further leverage their infrastructure for growth.

Credit where it’s due: This idea came from Louis de Fels, General Manager of Gay-Lussac Gestion (Twitter link / YouTube Interview), and a comprehensive deep dive published by the blog Value and Opportunity, which provided valuable information on STEF’s unique strengths.

Eli Lilly $LLY

I won’t go into much depth on Eli Lilly, as it's already extensively covered by analysts, and my blog usually focuses on smaller, lesser-known companies. I entered around $780 during the dip following their latest earnings release, which briefly dropped the stock nearly 15%.

There’s a solid product-driven catalyst: Eli Lilly’s new diabetes and obesity drug, Mounjaro (tirzepatide), has now FDA approval for both diabetes and obesity. This dual approval sets it up to capture a massive market, especially with the surging demand for obesity treatments. Novo Nordisk’s Ozempic and Wegovy have already proven how strong this market is, and Mounjaro has strong potential to boost Lilly’s revenue for years to come.

On a personal note, my sister (an endocrinologist) has been urging me to invest in Lilly—especially after I ignored her advice on Novo Nordisk a few years back! So I’m finally in, though only with a small position, as this is a bit outside my usual circle of competence.

Learning Technologies Group $LTG

Don’t worry, I haven’t turned into a trader! If you’ve been following my updates, you know I sold my position in $LTG one month ago, right after the takeover bid was announced. This month, $LTG has been relatively volatile, trading well below the offer price—between 90 and 94 pence, and even dipping below 88 at times, versus the 100-pence offer. I also noticed some of the main shareholders were actively buying and selling on the same day.

With the deadline to submit the offer set for October 25, I decided to re-enter the position the day before at around 91-92 pence. However, on the 25th, they announced an extension for the offer by one month. I placed a sell order a few pence higher, which was executed the next day.

I believe $LTG is worth significantly more than 100 pence. There’s a strong chance that General Atlantic could raise their bid to 110 or even 120 pence, which would likely partially satisfy most shareholders. That said, there’s still a possibility they’ll withdraw the offer, which could send the stock down to 70 pence again. However, given the regulatory issues announced over the summer in the U.S., it makes sense that a U.S.-based firm would be interested in taking ownership sooner than later.

SOLD POSITIONS:

Digital Value $DGV

In early October, Digital Value faced intense scrutiny as Italian authorities launched an investigation into the company’s CEO, Massimo Rossi, over alleged corruption related to public procurement contracts. As part of the probe, Italian tax police reportedly searched the offices of Digital Value and other firms. The investigation centers on alleged bribes to officials at Italy’s state-owned IT company, SOGEI, intended to secure lucrative public contracts. This news hit Digital Value particularly hard, as public sector contracts account for over a third of its revenue.

Following the announcement, Digital Value’s stock took a sharp hit. Trading was briefly suspended after an initial 10% drop, only to plummet by as much as 80% when trading resumed. In response, the company launched its own internal investigation and quickly restructured leadership by separating the CEO and Chairman roles, both previously held by Rossi (who is also the main shareholder!), and assigning these roles to other executives to steady operations.

The next few months are critical. Even if Digital Value is legally cleared, the reputational damage could impact its ability to secure future public contracts. On the other hand, if deeper issues come to light, the company may face operational disruptions, potential contract cancellations, and financial penalties.

For now, Digital Value has been releasing limited weekly updates, all in Italian, which has left international investors with little insight and no conference calls or English reports to clarify the situation. The most recent update announced a temporary suspension of its planned acquisition of Italtel S.p.A., a key component of its growth strategy.

At first, I thought I’d let this position sit and ride out the storm—after all, with an 80% drop, it was down to just 0.2% of my portfolio. But with the ongoing lack of transparency and the seriousness of the situation, I decided to exit entirely and realize the losses.

INCREASE INVESTMENTS:

MTY Food Group $MTY

The stock is currently trading at a historically low valuation of 7x P/FCF—levels we haven’t seen since a few months in 2020 during COVID, which is when I first bought in (at around CAD 20). I haven’t discussed MTY in a while, so here’s a deeper dive into the company’s position and my reasons for adding to my stake.

For those unfamiliar, MTY Food Group is a Canadian restaurant franchisor and operator founded in 1979 by Stanley Ma. Known for its inorganic growth, MTY operates around 90 brands, largely through franchise agreements. MTY gained broader attention back in 2015 when Chris Mayer’s book 100-Baggers was published, as the success story of MTY Foods was featured in it. Link to case study of Chip Maloney.

In recent years, MTY’s acquisitions have focused more on the U.S., with about two-thirds of its system sales now coming from that market. The management team is stable, with CEO Eric Lefebvre having 15 years in executive roles, and Stanley, who owns 13% of the company, adding significant skin in the game. The CFO, who leads MTY’s acquisitions, has also been actively involved. Yet, despite this, the stock is trading at a historically low valuation. Key factors include a slowdown in acquisitions, higher leverage, and investor concerns about rising corporate store revenue and weaker consumer demand in North America. Critics argue that MTY may struggle to replicate its Canadian growth in the U.S., with high interest rates and inflation weighing on restaurant demand.

Why Is MTY Trading “Cheap”?

At first glance, MTY’s top-line revenue has grown significantly, but there’s a sense the business model has weakened. Over the last decade, revenue has increased tenfold, but margins have declined. EBITDA margins, for example, have dropped from 40% to 20%, while net margins have fallen from 25% to 8%. The shift in revenue composition also stands out, with corporate-owned sales now representing a larger portion (42% vs. 34% for franchise operations, while some years back was 10% vs. 50%).

This shift is primarily due to recent acquisitions like Barbecue Holdings and Wetzel’s Pretzels, which included a number of corporate-owned locations. While corporate stores now represent a higher percentage of revenue, they account for only about 3% of MTY’s total locations (around 220 out of 7,100 stores), and their impact on FCF remains limited. Despite the lower EBITDA margin from corporate stores, MTY’s FCF conversion rate is still high—around 80% of EBITDA—as the franchise model remains the backbone of their cash flow. Notably, franchise margins are not only stable but have actually improved, with recent reports showing margins well above 50%.

Franchise Model Remains Core

MTY is not moving away from its franchise-heavy model. The recent increase in corporate store revenue is largely due to acquisitions, not a strategic shift. In fact, the CEO has reiterated the company’s commitment to franchising, with plans to selectively divest corporate stores without drastically changing the portfolio. Management has been clear that franchising is still at the heart of MTY’s strategy, and they continue to focus on supporting franchisees and improving existing locations. Here are a few supporting quotes:

FY2023 Conference Call (2024-02-15):

“The impact of these transactions delivered revenue growth for corporate restaurants and franchise operations of 50% and 18%, respectively, in the U.S. and International segment.”

“The 79% conversion rate of EBITDA into free cash flow is sequentially better than in recent quarters and is reflective of our efforts to maximize cash flows and optimize our asset-light model.”

Q2 2024 Earnings Call, Jul 11, 2024:

Eric Lefebvre emphasizes MTY's strong franchise focus: "We're still a franchisor at heart, and that's important for us."

He also mentions plans to sell corporate stores in the near future, but without making any large shifts:

"We will have a few corporate stores being sold in Q3. We don't want to... shift the portfolio dramatically."

"We will sell some corporate stores. We'll be opportunistic about that. So we will see a few sales in Q3, probably in Q4 as well."

Investment Thesis and Catalysts

From my perspective, MTY remains a strong investment at current levels. With a solid entry point around CAD 40-45, the valuation is appealing at an historical low of 7x P/FCF. While MTY may not grow as rapidly as it did in the past, it’s still relatively small in a fragmented market, leaving room for growth through disciplined acquisitions.

Key catalysts include:

• Interest Rate Reductions: Lower rates would boost FCF and reduce the cost of debt.

• Rebound in Restaurant Demand: As consumer spending normalizes, revenue growth could pick up.

• Corporate Store Divestitures: Selling corporate-owned stores would lower revenue but free up cash and improve margins, further supporting FCF.

• Expansion Potential: With cash from divestitures, MTY could fund new acquisitions and maintain its asset-light model.

In short, rather than focusing on traditional margin metrics—which might suggest the business is deteriorating—MTY’s emphasis on free cash flow gives a more accurate picture of its strength. While revenue is growing significantly, the recent shift in revenue mix toward corporate stores has temporarily compressed margins, potentially giving the wrong impression. In reality, MTY is still generating strong cash flows thanks to its franchise-heavy model, and its FCF conversion rate remains robust. With plans to gradually reduce corporate stores, margins should improve over time.

Options Strategy

My sold PUTs on Teleperformance ($TEP) expired unexercised, adding 0.3% to my portfolio (annualized 3.6%).

This month, I sold some PUTs expiring in one month on Eurofins ($ERF) at €46-48 and Sesa SpA ($SES) at €80-82. If these options expire unexercised, the premiums will add about 0.25% (annualized 3%) to my portfolio. If exercised, I’ll be glad to add both stocks to my holdings.

Sesa SpA isn’t currently in my portfolio or watchlist, but I’ll be adding it soon (at least to the Watchlist :D).

This company is Italy’s market leader in IT hardware distribution, holding around 50% market share. While it started as a distributor, it has since expanded into three segments, adding more balance to the business:

• Computer Gross (VAS): The distribution arm brings in €2.4 billion annually, with about 5% growth and a 5% EBITDA margin—pretty high for a distribution business. It’s nearly half the Italian market, way ahead of competitors like Tech Data (Synnex), which Warren Buffett actually bid on but missed out on buying for $5 billion at PE 15x YouTube Link.

• VAR Group (Software & System Integration): This division generates €800 million in sales, growing at 20% with a 12% EBITDA margin. It focuses on IT engineering services, tapping into the rising demand for digital transformation across Italy.

• Base Digitale Group (Business Services): Although smaller at €120 million in revenue, it’s the fastest-growing segment, with 30% growth and a 15% EBITDA margin. This arm provides digital services for financial firms, a high-margin, high-demand space.

When you first look at Computer Gross, it might not seem exciting, given its low margins, as with most typical distribution businesses. But there’s more under the surface. The distribution sector is essential in industries with many suppliers and small clients, acting as a bridge by managing warehousing, inventory, and logistics. This means Computer Gross plays a critical role as the single point of contact for both sides.

Despite its appearance as a low-margin operation, it’s actually a spread-based model similar to banking, where the bulk of costs are variable and directly tied to sales volume. This setup allows for stability and scalability despite tight headline margins. By stripping out variable costs and looking at free cash flow versus EBITDA, the FCF conversion rate exceeds 40-60%. This high FCF conversion rate offers a more accurate picture of the company’s efficiency and cash generation.

Currently, the stock is trading at a historical low valuation, much like other small caps in Europe. As an Italian company, it took an additional hit after the Digital Value scandal, though it isn’t involved. Altogether, Sesa presents an opportunity to acquire a leading player in Italian IT at a discount, combining stable revenue with strong growth potential.

SIGNIFICANT DEVELOPMENTS

I’ll keep this brief since the post is already running long.

Smart Pay $SMP.AX: This Australia and New Zealand-based payment processing stock saw sharp declines (over 40%) after the Australian government announced plans to ban debit card surcharges by 2026—a regulation the EU implemented years ago. It wasn’t in my portfolio, but I’d been following it. Given the increased uncertainty and risk, I’ve decided to remove it from the watchlist. Smart Pay had been growing quickly by charging 0 fees directly to its primary customers—retail shops—that pass these fees on to their own customers at checkout. This potential regulation could seriously impact Smart Pay’s business model.

Nagarro $NA9: Revised down their 2024 guidance and announced they’re in talks regarding a potential public tender offer.

Flatex Degiro $FTK: Reported strong results and announced that revenue is expected to come in slightly above guidance (+15%).

Dye & Durham $DND: Announced they’re exploring a sale after receiving takeover interest.

WATCHLIST UPDATE

And as always, I anchor this post with an update on my Watchlist.

Thanks for reading this update! I value your feedback and look forward to hearing your thoughts and diving into some good discussions.

Safe waters,

Guybrush

As every three months, I’m back with a quick update on my portfolio movements and performance over the past quarter.

Let’s start with the numbers: my portfolio delivered nearly 4% this quarter, pushing the year-to-date (YTD) performance to 5.7%. While it’s still trailing the major indexes this year, I’m content with the steady progress.

As I mentioned in my last update, for several months, mega-cap stocks had been the primary drivers of my portfolio’s performance, while the rest of the portfolio lagged. However, this trend seems to have slightly reversed during Q3.

At the end of Q2 and into the start of Q3, I made significant moves to reduce my exposure to large mega caps and shift more capital into value and small caps. Additionally, I’ve started trimming the “tail” of my portfolio—closing positions in companies where I no longer have high conviction. This will allow me to concentrate my portfolio more effectively and free up time to research new opportunities.  

PORTFOLIO CHANGES:

New Additions: Aubay $AUB.

If you’ve been following my blog, you’re likely familiar with Aubay. It’s a French IT services company specializing in application development and digital transformation. They offer a wide range of services, from consulting to software design, development, and maintenance. Aubay is conservatively managed, with the founding family still involved. This isn’t the first time I’ve held it in my portfolio, and I decided to re-enter when the price dropped between €35-38 in August.

Sells: Dye & Durham $DND, Learning Technologies Group $LTG, Solutions 30 $S30

Regarding Learning Technologies Group $LTG, they received a takeover bid at 100 pence from the U.S. equity firm General Atlantic, and the board unanimously recommended accepting the offer. If this price holds, it’ll be a bargain. The company previously traded at 4x sales and 20-25x P/FCF and is now being sold at just 12x.

In normal circumstances, I might have waited to sell, but there are too many opportunities right now. Plus, with the board's endorsement and the regulatory issues in the U.S. announced over the summer, It makes sense for a U.S.-based firm to take ownership. If you’ve followed my monthly screener, you’ll know I had set a fair value of 99 pence, but that was based on my most conservative assumptions. While I think there’s room for the price to increase, I’ve noticed that some large shareholders, like Liontrust and Octopus Investments, have started selling off slowly. This could signal that they either expect the bid to be withdrawn, which might drive prices down again—or maybe they’re just taking profits early. Who knows?

In any case, I chose to sell on the same day the takeover was announced, taking advantage of the ~30% surge and exiting at around 96-97 pence. That said, I’ll keep an eye on it and may re-enter depending on how the situation evolves.

Solutions 30 $S30 was already discussed in my last post.

As for Dye & Durham $DND, it’s been a rocky ride since its IPO, and I’ve held the stock almost from the beginning. While the stock saw an initial surge, it has since faced significant challenges:

• Failed CEO Takeover: Shortly after the IPO, the CEO attempted a buyout, which failed and raised concerns about the leadership and overall stability.

• Excessive Debt and Dilution: The company pursued an overly ambitious M&A strategy, racking up significant debt. When the stock price dropped, they tried to repurchase shares aggressively, only to later dilute shares at a lower price to manage their debt load. This raised red flags about management's financial judgment.

• Activist Investor Influence: Activist investors stepped in, attempting to push management to improve performance. Despite their efforts, the stock’s downward trend continued.

• Operational Challenges: Dye & Durham also struggled to integrate its acquisitions, failing to realize the synergies it had promised.

Like Solutions 30, I’ve decided to cut this “tail” from my portfolio. I exited completely at $16, which is roughly my average cost, meaning I didn’t lose much financially—just nearly four years of waiting… ☹

Portfolio Adjustments:

I’ve increased my stakes in Verallia $VRLA, Volkswagen $VOW3, Titanium Transportation Group $TTNM, Kontron $KTN, ST Microelectronics $STMPA, Teleperformance $TEP, Paypal $3PYP, and Endava $DAVA.

On the flip side, I’ve reduced my holdings in Alphabet $GOOGL, KLA Corporation $KLAC, Microsoft $MSFT, Amazon $AMZN, Euronext $ENX, and SS&C Technologies $SSNC.

I’ve already discussed some of these increases in my monthly updates, so I’ll focus here on the September moves:

Volkswagen: I’m well aware of the challenges facing the European automotive industry, as well as the pressure they’re under in China. However, I believe much of this is already priced in. After reducing my position in Q1 at around €125, I’ve become increasingly interested in Volkswagen whenever it falls below €90. At that level, it’s trading at a P/E of 2-3x, with a dividend yield close to 10%.

Kontron: The stock dropped below pre-Katek acquisition levels, though there hasn’t been any negative news. In August, they presented their H1 results with a few months of Katek consolidated, and the integration appears on track. The only concern is that the photovoltaic sector may contribute less to growth than initially expected, as that market is under pressure and shrinking. Despite this, I still project over 60% growth from 2023 to 2025 (down from >80% initially expected), and it's trading at a 2025 PE of 7x. Their CEO, Mr. Niederhauser, has also been buying shares over the summer, which is reassuring.

Teleperformance: I’ve mentioned Teleperformance several times before. Along with slightly increasing my position during Q3 whenever the price dipped, I also sold puts when the share price was relatively low. Currently, I have a few contracts expiring in October, with strike prices between €92 and €94, contributing around 4% to my annualized performance.

Position reductions: Most of these reductions were made in early July, which I’ve already discussed. The main reason for the sales was to fund the purchase of a property in Switzerland, which I finalized in September. Now that the purchase is complete, I’ll share more details in an upcoming article. While I’m still bullish on these positions, I had anticipated a correction in tech and semiconductors, which played out, though we’ve also seen a quick recovery.

Best Performers:

This quarter, a few stocks stood out in my portfolio:

• Paypal ($PYP): Strong H1 results, with FY guidance raised for free cash flow and share repurchases (from $5B to $6B), along with higher EPS and improved transaction margins. The >100% return comes from Paypal Levshares 3X ETP.

• Dye & Durham ($DND): Solid results, benefiting from interest rate cuts and debt repayment.

• Eurofins ($ERF): Recovered after a dip in June due to a weak short report, which the market has since shrugged off.

• Berry Global ($BERY): Delivered solid Q3 results and remains undervalued.

• Nagarro ($NA9): Strong H1 performance, outpacing competitors while trading at a lower valuation. Also benefited from positive sector momentum following Accenture’s solid results.

Worst Performers:

A few positions underperformed this quarter:

ST Microelectronics ($STMPA): Heavily exposed to the industrial and automotive sectors, issued its second profit warning of the year.

Verallia ($VRLA): Published a profit warning, with the glass market under pressure due to destocking.

Kontron ($KTN): No significant news as mentioned above.

Portfolio

Here's how my portfolio was allocated as of September 31st, 2024:

Before I wrap up, I want to share some great news. If you’ve been following my posts, you’ll know that about a year ago, I faced a frustrating situation with my private pension fund blocked in France. Thanks to your incredible support—whether it was sharing, retweeting, or just sending positive messages—someone from their management team finally reached out to help, and the issue has now been fully resolved!

This outcome means a lot to me, and I’m really thankful to all of you. The support from the private investing community made a huge difference and shows how powerful we can be when we come together.

Thanks for reading this update. I value your feedback and look forward to hearing your thoughts and having good discussions.

Best,

Guybrush

I didn’t post any updates over the summer, so this one will cover the last two months, highlighting key movements on my portfolio and some significant developments for companies on my watchlist.

As you know, this blog is a hobby. I usually write at night when the little ones are asleep. But with the school holidays, things got a bit tricky. The kids stayed up later, and we had plenty of family trips around Switzerland, Italy, and Spain. I was able to almost completely disconnect from the markets during the summer, feeling comfortable and well-diversified enough to do so. It was a time to truly savor the warmth of family and the joys of summer. I hope you too were able to chart a similar course and enjoy these moments to the fullest.

Index:

• Portfolio Overview & Adjustments

  • Increased Investments

  • Reduced Investments

  • New Positions

  • Sold Positions

  • Options Portfolio

• Significant Developments

  • ST Microelectronics $STM

  • Eurofins $ERF

  • Digital Value $DGV

  • Verallia $VRLA

• Watchlist Update

• Personal Request: AG2R La Mondiale

PORTFOLIO OVERVIEW & ADJUSTMENTS

My portfolio experienced some modest swings, gaining 2% in July and giving back 2% in August. As I mentioned in my previous update, I’m in the process of buying a property in Switzerland, so I was a forced net seller, needing to pay about 20-25% of the property value in cash. Fortunately, it was finally less than expected, as I was able to reduce the upfront payment by providing some guarantees to the bank, securing a larger loan. However, I still had to liquidate part of my portfolio to cover the remaining amount. I’ll write an article about this soon, as promised.

• Increased Investments: Verallia $VRLA, Kontron $SANT, Titanium Transportation Group $TTNM, Endava $DAVA, Paypal $3PYP, ST Microelectronics $STM

• Reduced Investments: KLA Corporation $KLA, Alphabet $GOOGL, Microsoft $MSFT, Amazon $AMZN, SS&C Technologies $SSNC

• New Positions: Aubay $AUB

• Sold: Solutions30 $S30

As I mentioned in my June update (→link), I’m still very bullish on the companies I’m reducing position. However, there’s a big gap in valuations between large caps and small caps, so I have been shifting more of my portfolio toward the latter.

For example, regarding Alphabet $GOOGL, it’s still my largest holding, but instead of 11% as it was in Q2, it’s now around 6-8%. I doubled my position when it was trading between 85-95$ at the end of 2022 - beginning of 2023. I have reduced 25% of my stake between June and July, at around 185-190$.

Regarding Solutions30 $S30, a long-standing part of my portfolio, I’ve finally decided to sell. Last year, I shared an interview with William Higgons, where he mentioned that, despite being value investors, they believe in Momentum. Every six months, they make it a rule to sell the worst-performing stock. You can find the interview and his reasoning here, which I found intriguing.

I recently came across a letter from Giverny Capital (2024Q1, I copy some fragments herebelow), which resonated with my thoughts on my portfolio. I have a few companies where I’ve held small positions for a long time, believing they are highly undervalued, yet they’ve contributed little to my portfolio’s performance. Don’t be surprised if I start trimming the tail of my portfolio as well.

Looking at Solutions30’s numbers, they’ve managed to multiply their revenue tenfold over the last 10 years (thirtyfold over the last 15!). They’ve grown every single year, even during the 2008 crisis and COVID, all without diluting shareholders—growing solely through their generated cash flows. However, they’re likely operating in a challenging market that’s constantly shifting, with new issues cropping up, whether political or with telecom companies. While they used to deal with these challenges primarily in France, they now face them in Spain, Italy, Belgium, and beyond.

I’ve developed a lot of respect for their founder and CEO, Mr. Fortis, who not only draws a modest salary but also owns 17% of the company. I think he’s doing an excellent job of maintaining profitable growth. But for me, it’s becoming increasingly draining to keep up with the company. I’ve decided to take Mr. Higgons’ advice and start cutting my losses. Like Mr. Rochon, I’ll be working on reducing the tail of my portfolio. This semester, that means letting go of Solutions30. The funds will be redirected to companies where I’m more bullish.

• OPTIONS: Some of you have asked about my options portfolio privately, so I’ll start including updates on that as well.

Right now, I am only holding short-term PUT options. To give you an idea of my exposure, if these puts expire without being exercised, the premiums collected will add about 2-3% annualized yield to my total portfolio performance. If the puts are exercised, I’ll be happy to add more of these companies to my portfolio at those prices. The underlying value of these contracts is approximately 7%-10% of my total portfolio.

In July, I sold puts on Nagarro at €70 with an expiration on August 16th. The contracts weren’t exercised, so I collected the premiums—equivalent to approximately 0.2% of my total portfolio value (annualized 2.4%).

In August, I sold puts on Nagarro again, this time at €69 with an expiration on September 20th. I also sold puts on Teleperformance at €97, expiring on September 20th. If neither is exercised, the premiums will contribute 0.26% to my portfolio performance (annualized 3.12%).

SIGNIFICANT DEVELOPTMENTS.

ST Microelectronics $STM

ST Microelectronics published their Q2 results along with a FY2024 profit warning—their second one this year! While they were expecting a recovery in the second half, they don't see it coming yet.

The reasons for this decline have been laid out—the company is heavily exposed to the industrial and automotive sectors, where we’ve been seeing the bullwhip effect in demand in full force since COVID.

ST Microelectronics has a certain cyclicality, and we might be seeing the bottom of the cycle now or soon… The current valuation is even lower than during the COVID bottom. Naturally, investors weren’t thrilled to update their models after two profit warnings in just three months. They were guiding for FY2024 revenue of $16B to $17B with further margin improvements, but now it's been revised down to $13.2B to $13.7B.

However, even with this cyclicality and a >20% sales decline this year, they’ve still managed to steadily increase sales by 8% annually over the last 10 years and grow EPS at a ~30% CAGR. The company was repurchasing shares but have strongly intensified after the price dropped, averaging >10m€ per week.

I believe it’s significantly undervalued, especially compared to its American peer, Texas Instruments $TXN, which had very similar results but is trading at all-time highs. I’ve slightly increased my position and am looking forward to the Capital Markets Day on November 20 to gain more clarity.

Eurofins $ERF

Eurofins came under attack in a short-seller report at the end of June, causing its price to drop nearly 20%. This came after a challenging period in which Eurofins dealt with global pricing pressure on its core diagnostic testing services. The short-seller report raised some valid points: Eurofins has long had numerous transactions with its founder and CEO, Dr. Gilles Martin, who personally owns some laboratory facilities and leases them to the company. These transactions, including the rent levels paid to Dr. Martin, are disclosed and are not new. For 25 years, these relationships haven’t stopped Eurofins from being one of the best-performing stocks in Europe.

That said, I found the report generally weak and filled with questionable claims, such as their misunderstanding of Eurofins’ business model. Among other things, the short sellers mistook Eurofins for an inspection and certification business rather than a laboratory testing company. As a result, they questioned the company’s productivity metrics, comparing it to the wrong peer group.

The stock was extremely volatile for a few weeks, with pessimists pointing out that if it remained at those levels in September, it could be removed from the CAC40, which could push the stock further down. I took advantage of this opportunity to increase my position by 25% at around €40.

Meanwhile, Eurofins announced its second-quarter results in late July and published the H1 report. The results were exceptional—record-breaking as expected, well above their 2021 figures when they benefited from COVID contracts. The company reported healthy testing volumes, stronger margins, and a sizable stock buyback (nearly a million shares during H1). They also reconfirmed the guidance given at the beginning of the year and their midterm objectives.

The stock is now more or less back to the level it was at before the short report was published.

Digital Value $DGV

Digital Value reported preliminary H1-24 figures showing 8.3% revenue growth and strong cash flow generation. Management expects to return to double-digit organic growth in the second half.

Total revenues came in at €450 million, once again outperforming the reference market, which is expected to grow by 5-6%.

In terms of business lines, the Data Centre division continued to drive sales growth, now accounting for 55% of the total. Digital Business Transformation was also up thanks to Cloud solutions and software platforms, as well as system integration activities and cybersecurity services. Smart Workplace Transformation remained steady year-over-year at €80 million.

So far, nothing surprising. The big news came in June when they announced two acquisitions: Italtel and Infordata. Here are some key figures for each transaction:

Infordata's acquisition was in line with previous ones, but I was surprised by how much they paid for Italtel. DGV is currently trading at 5x EV/EBITDA, yet they paid more than 10x for Italtel, a company with much lower margins that has just gone through restructuring to be sold.

However, they claim that Italtel will grow more than 10% this year, pushing revenue over €300 million, and that the ongoing turnaround process will lead Italtel to an EBITDA margin of 7-8% before integration synergies with Digital Value (compared to the current 4%). This could reduce the acquisition multiple to around 6x EV/EBITDA pre-synergies.

Even if the acquisition doesn’t go as smoothly as expected, I still see DGV as significantly undervalued. We’re yet to see when these companies will be fully consolidated, and for simplicity, I’ve assumed a mid-year consolidation in the table below, which isn’t realistic. However, 2025 should give us a clearer picture of what the new DGV will look like, even with very conservative estimates for organic growth and potential synergies.

Lastly, the CFO resigned to pursue new challenges. No further comments on that.

Verallia $VRLA

Verallia issued a profit warning alongside their H1 results, and the stock took a hit, dropping over 20% since. The glass market has been under pressure since 2023 due to destocking and supply chain disruptions, but the company pointed out that the recovery is slower than expected. As a result, they've adjusted their 2024 guidance, now anticipating flat to slightly down volumes for the year and an EBITDA similar to 2022 levels, with a revenue decline of around 10%.

The company expects demand to gradually pick up as destocking winds down, though the exact timing remains uncertain. They remain optimistic that the trend toward premium products will continue, potentially driving future growth.

While it’s still early to determine the dividend policy for next year, Verallia hinted at the possibility of maintaining a stable dividend, which should be reassuring for income-focused investors.

I took advantage of this price drop to slightly increase my position.

WATCHLIST UPDATE

And as always, I anchor this post with an update on my Watchlist.

Personal Request: AG2R La Mondiale

Last but not least, a small favor—this isn’t related to investing, but I could use your support. I worked for a French company for nearly 15 years, and during that time, I contributed to a retirement scheme called PERE (Plan Épargne Retraite Entreprise) managed by AG2R La Mondiale. I was satisfied with the management of this scheme; it functioned like a typical robo-advisor. However, after I left France two years ago and settled in Switzerland, I stopped the contributions.

About a year ago, without any notice, AG2R transferred and froze my entire pension fund into their own monetary funds, with expected annual returns between -1% and 1%. If my pension stays there until retirement, I stand to lose it entirely. Normally, I could transfer this fund to a similar scheme in another company, but as a foreigner, I’m not allowed to open a new one while living abroad, and they don’t accept transfers to foreign schemes either.

I contacted the European Commission, which informed me that this practice is indeed illegal, but since I reside in Switzerland, they’re unable to intervene. My only option now seems to be finding a lawyer.

To put some pressure on AG2R through social networks, I’ve created the account @AG2R_OuEstMonAr. If you don’t mind, please help by retweeting the thread pinned to my profile. I’ve noticed their Press Manager is already following the account, so I know they’re paying attention. And hey, if you’ve made it to the bottom of this post, you deserve a hearty thanks—your support keeps me motivated to keep writing.

AG2R, you can’t rob a pirate and get away with it! ⚓️

Thanks,

Guybrush

Here’s a quick update on my portfolio's performance over the last quarter.

My portfolio remained flat this quarter, with a year-to-date (YTD) increase of about 1.5%, still underperforming the indexes this year.

Check out this graphic I found in twitter illustrating the performance by company size:

Or this one shared by @CharlieBilello: S&P500 vs S&P Small Caps

While mega-cap stocks have been the best performers in my portfolio for several months, the rest have shown the opposite trend.

As I’ve mentioned before, I don't usually focus on monthly or quarterly returns. However, I’m slightly reducing my exposure to large mega caps and increasing my exposure to value and small caps. In Q1, I had already slightly reduced my Amazon position, and in Q2, I did the same with Alphabet, a trend that will continue this quarter.

PORTFOLIO CHANGES:

New Additions: None.

However, I anticipate I have already added again Aubay $AUB in Q3.

Sells: Newlat Food $NWL

I decided to sell Newlat completely following the acquisition of Princess. The company experienced an impressive rally of +100% since the announcement, but I only capitalized on part of it as I opted to sell relatively soon after the acquisition was announced. As I mentioned in my previous post, if the acquisition unfolds as management and the published analyst reports (paid by NewLat BTW) suggest, investors will be quite pleased.

However, my experience working in a chemical company that grows through acquisitions has given me some insights. While I'm not directly involved in acquisitions, I do play a role in realizing the "synergies." I've seen firsthand that a lot can go wrong in these integrations, both as a corporate engineer and as an investor. Models that work well in one company might not be valid for another.

Newlat has successfully integrated smaller acquisitions in Italy worth €50-200 million, but integrating a company more than three times its size, with much lower margins and adding 31 new sites to their existing 15, is a different challenge altogether. Princess is a UK-based company, whereas Newlat is Italian, with a lot of family involvement in management and completely different culture. Many mergers and acquisitions (M&A) do not go as smoothly as management wishes, and the complexities only increase with the size of the acquisition.

Newlat’s management has made promises in the past that they didn’t fulfill, and frankly, this latest one seems particularly ambitious: They have paid 7x EV/EBITDA, which they claim will reduce to 5.2x with immediate synergies—that's €180 million in synergies just like that. In addition, the current debt levels should be between 4-5x Net Debt/EBITDA, yet they plan to be at 2.5x EBITDA in just six months. This means they expect to reduce their debt by more than €300 million in only half a year, which, from my point of view, seems pretty unrealistic for a company with such low margins.

Furthermore, I've recently observed that the company is being aggressively promoted by certain accounts, including the company itself, which announced a “conservative scenario” of €5 billion in revenue and a 10% EBITDA margin by 2030. The CFO has already announced plans for new M&A targets (with this level of debt?), and they didn’t stop buying back shares after the adquisition. This kind of hype raises red flags for me. While I hope I am wrong, I probably was by selling so early, I believe it's wise to remain cautious, especially for those who are entering the stock recently.

Portfolio Adjustments:

I've strongly increased my stake in Teleperformance $TEP. I also increased my stakes in Titanium Transportation Group $TTNM, Endava $DAVA, Eurofins $ERF, and Solutions 30 $S30.

I've discussed Teleperformance $TEP, Titanium Transportation Group $TTNM, and Endava $DAVA multiple times, and I still believe they are highly undervalued.

Eurofins $ERF was targeted by a weak short report from Muddy Waters, which I saw as a buying opportunity at around €40.

Despite solid results, Solutions 30 $S30 was hit hard after being expelled from the SBF120 index and the general downturn in the French market. I increased my stake at the level of €1.4-1.5, at 2x EV/EBITDA.

I slightly reduced my stakes in Alphabet $GOOGL and Goeasy $GSY. There were no specific reasons for these reductions; I simply chose to reallocate funds to opportunities with higher potential right now. These stocks have had significant rallies in recent months and remain among my largest holdings. I reduced my position in Alphabet further this week (in Q3).

I anticipate a few more sales or position reductions next quarter as I’m buying my first property in Switzerland. I'll try to publish the tale of my first property investment in Switzerland soon!  

Best Performers:

This quarter, a few stocks stood out in my portfolio:

• Newlat Food $NWL: Acquisition of Princess.

• Bastide Le Confort $BLC: Solid Q1 results. Benefited from interest rate cuts.

• Flatexdegiro $FTK: Strong Q1 results and above-expectation guidance.

• GoEasy $GSY: Continued strong performance and record Q1 results.

Worst Performers:

A few positions have underperformed this quarter:

• Paypal $3PYP: This is actually the Paypal Levshares 3X ETP, which is extremely volatile. Paypal itself was down “only” 11%.

• Solutions 30 $S30: Despite good results, the stock was hit hard by the expulsion from the SBF120 index and the overall downturn in the French market.

• Endava $DAVA: No significant news.

• Dye & Durham $DND: Extremely volatile, recently targeted by activist investor Engine Capital, which holds about 6% of the company. They are pushing for better capital allocation and board inclusion. However, DND's response was very disappointing. This topic could fill a book.

• Eurofins $ERF: Targeted by a short report from Muddy Waters.

Portfolio

Here's how my portfolio was allocated as of June 30, 2024:

Thank you for taking the time to read through my Q2 2024 portfolio update. I value your interest in my investment journey. If you have questions or need more insights, don't hesitate to reach out. Until next time!

Warm regards,

Guybrush

In this update, I'll share my latest portfolio adjustments and cover some significant developments in my watchlist from the past two months (since I didn't publish in April).

PORTFOLIO ADJUSTMENTS

Increased Investments: Solutions 30 ($S30), Teleperformance ($TEP), Titanium Transportation Group ($TTNM), Endava ($DAVA)

For Teleperformance, I executed my first package of CALL options at €92, which I bought in March and were expiring in June, just before the ex-dividend date in May. This move yielded a 140% return in just two months, making it a very satisfying operation :D.

Reduced Investments: Alphabet ($GOOGL)

I slightly reduced my position, which remains my largest holding. This adjustment was to reallocate funds to companies with higher potential at the moment.

New Positions: None

Sold: Newlat Food ($NWL)

I decided to sell Newlat end of May following the rally after the announcement of the acquisition of Princess to form a new group: New Princess. I had held it for approximately one year and obtained aproximately 50% return, and I still see a high potential. So… why did I decided to sell?

• Newlat was trading at 4x EV/EBITDA with annual revenues of €800m and an EBITDA margin of 9% at the time of the acquisition. Princess is being acquired at 7x EV/EBITDA, with €2 billion in annual revenues in 2023 and an EBITDA margin of 5.8%.

• They claim this will be 5.2x EV/EBITDA after synergies. However, management has made unfulfilled promises in the past and despite their good track record integrating acquisitions: this acquisition involves a company 2.5 times bigger than Newlat and adding 31 production sites to their existing 15.

• The acquisition will be paid mostly with their funds (£700 million in cash + new issued debt) and £50 million in shares, which will be blocked for the next year, giving Mitsubishi Corporation 21% ownership of the group.

• They stated that their Net Debt/EBITDA ratio would be below 2.5x by the end of the fiscal year. However, my model suggests a much higher number, and this isn't the first-time management's projections have been off during my short time as shareholder.

• Additionally, Newlat had two weak quarters, which were not well explained. The results were poor, and their explanations were lacking.

For all these reasons, despite recognising a very high potential, I didn’t see this acquisition as value accretive, from a valuation perspective pre-synergies, while I do see significant risks. I prefer to monitor from the sidelines for now and will be ready to reinvest after observing the evolution of those synergies and debt levels.

SIGNIFICANT DEVELOPMENTS

Verallia $VRLA

Verallia published their Q1 results, which were in line with the guidance announced during the FY 2023 results. There was a 20% drop in sales, and the EBITDA margin was significantly compressed. However, this comparison basis was exceptional due to the price spread, especially in H1 of 2023.

Key takeaways include:

• They saw volume improvement through the quarter.

• They reconfirmed their €1 billion EBITDA guidance for 2024.

• The acquisition of Vidrala’s Italian glass business is on track, with expected news during the H1 results. This acquisition should not significantly impact the results.

The company was trading when writing this post 5x EV/EBITDA.

I learned this month that @foso_defensivo and @val_carreres, two investors I highly admire, have both invested in Verallia during Q1.

ST Microelectronics $STM

STM published their Q1 results, which fell below expectations, along with a profit warning for their FY2024 guidance, given just three months prior. Compared to January expectations, the market environment has deteriorated further. There's a stronger inventory correction in the Industrial sector, slowing expected growth in the second half of the year, and the Automotive sector is entering a deceleration phase, with demand slowing down.

They have revised their FY24 revenue plan to a range of $14B to $15B, representing a decline of about 19% to 13% compared to 2023. In the conference call, they mentioned that they believe Q2 will be the bottom point within the indicated range. They expect growth in H2, which should enable ST to return to the 2023 revenue run rate between Q4 2024 and Q1 2025.

They were also asked about their mid-term target of $20B revenue, 50% gross margin, and 30% operating margin by 2025-2027 but did not provide a clear response. More details will be offered at the next Capital Markets Day in November.

Despite being a semiconductor player, ST Microelectronics cannot be compared to NVIDIA, AMD, and similar companies at all-time highs. STM is an integrated semiconductor manufacturer, highly exposed to industrial and automotive sectors, which account for more than 70% of their revenues, explaining its cyclicality. The most comparable company is Texas Instruments (TI), and they both show similar trends. While TI is slightly bigger and has better margins, ST Microelectronics is growing much more.

Notably, TI mentioned in their 2023 annual report that they are intentionally increasing their exposure to industrial and automotive markets to over 75%, as they believe these sectors have the potential to grow faster than the overall semiconductor market in the coming years. However, while Texas Instruments is trading at all-time highs (11x sales, 25x EV/EBITDA), ST Microelectronics is trading at 2x sales and 6x EV/EBITDA. TI is a better company, but... but.

I have conservatively updated my model again, including their new FY2024 guidance and considering they will continue to grow at 6% later on. Margins will slightly improve, but I am considering that they will not be able to deliver their midterm targets (2025-27) in terms of revenue growth and margins. Using an 8x EV/EBITDA multiple, this gives an expected CAGR of 20%.

Learning Technologies Group $LTG

LTG published their annual report, and the stock price initially dropped by more than 15%, though it has quickly recovered since then. The results were in line with expectations, as the company had updated several times during the year, so there were no surprises. However, they acknowledged for the first time that they would not meet their mid-term targets of achieving GBP 850 million in revenue and >20% EBIT margin by 2025. This shortfall was attributed to the temporary pause on bolt-on acquisitions in FY22 that continued into FY23, their focus on the transformation of GP Strategies, and de-leveraging in a subdued macroeconomic environment.

Key takeaways from the results and the conference call:

• Revenues down 5% (or 2% at constant currency)

• Continuous improvement of operating margins: 17.5% vs. 15% in H1. For context, operating margins were around 30% before the GP Strategies acquisition. After the acquisition, the company nearly doubled its revenues, but margins were significantly impacted since GP Strategies' margins were much lower, around 5%. However, they announced an exit rate of 17% at the end of 2023 for the GP Strategies segment alone. GP Strategies' net profit has more than doubled since the acquisition. Given these results, I believe the operating margins for 2024 should be above 20%.

  

• Continued deleveraging: significantly reduced net debt from GBP 141 million to 78 million, leaving net debt at only 0.7x EBITDA. They have sufficient firepower for new acquisitions.

• Strategic disposals and integrations: selling Lorien and TTi direct staffing businesses, deemed non-core, and focusing on further integrations. This rationalization aims to enhance operational efficiency and simplify the company’s structure.

• Focus on AI and innovation: CAPEX spending in 2024 should be slightly higher, around 2.5% of revenues. They are integrating generative AI technologies into their tools for content development and other applications. The company aims to leverage AI to provide personalized learning experiences and sees this as a major future differentiator.

• Dividend increased by 5%

Regarding the 2024 outlook, they remain prudent, expecting results to be in line with 2023 (excluding acquisitions) with further improvement in margins. This outlook is supported by an expectation of returning to organic growth as the economy improves.

LTG plans to return to strategic acquisitions in 2024, focusing on software and platforms to enhance its product offerings and market position. The company has strengthened its M&A team with new leadership.

OTHERS

Information Service Corporation $ISV: Q1 results were completely in line with guidance. I believe the company is performing well and remains significantly undervalued. I'm very optimistic about its future.

Solutions30 $S30: The audited report for FY2023 was published in April. In May, they published Q1 results in line with guidance and confirmed the FY2024 outlook. They announced more visibility and less impact than initially forecasted in Benelux and Italy. As mentioned above, I decided to slightly increase my position.

Kontron $KTN: Announced the successful completion of the Katek delisting tender offer and very promising 2024 first quarter results. I will try to update the company soon.

WATCHLIST UPDATE

And as always, I anchor this post with an update on my Watchlist.

On a different note, I will be attending Achema 2024 in Frankfurt. If you'll be there, feel free to reach out. It would be great to grab a coffee and chat.

Thank you for taking the time to read through this update. I value your feedback as it sharpens our investment strategies. I'm eager to hear your thoughts and engage in fruitful discussions.

Best,

Guybrush

The numbers are in: my portfolio is up 1.4%, which feels quite modest, especially when you look at how the broader indexes performed— MSCI World surged 11.4% and MSCI World Small Cap by 4.5%.

I typically don't sweat the monthly or quarterly fluctuations too much, focusing more on individual contributors. This quarter’s underperformance can largely be traced back to a couple of companies that took significant hits, accounting for nearly 5% of the drag on performance. The rest of the portfolio performed in line with the broader markets.

PORTFOLIO CHANGES:

New Additions:

Bastide Le Confort Médical $BLC. I began building a position in January, as detailed in this post: Guyquity January Update. I continued to buy shares throughout the quarter resulting in an average price of 18-19€, which is 25% above its current price. Despite being down nearly 75% from its all-time high due to debt concerns, Bastide keeps delivering record results quarter after quarter. I'm not worried about the debt and am pleased with this acquisition. I funded these purchases by selling EuroApi at 6.5€, which ended the month at 2.6€—a bullet dodged!

Sells:

EuroApi $EAPI was sold in January, thankfully, as it’s now trading 60% below my selling price. As previously discussed, the company has been releasing a steady stream of troubling news. Sometimes companies spin off their problematic assets, and EuroApi seems to be a textbook case.

Portfolio Adjustments:

I increased my stakes in Teleperformance $TEP, Titanium Transportation Group $TTNM, Eurofins Scientific $ERF, and Endava $DAVA.

For Teleperformance, I’ve doubled my position through direct share purchases and call options as discussed here: The End of Teleperformance.

Endava is trading close to its IPO price despite having nearly quadrupled its sales and sextupled its EBITDA in the last five years. It's now priced at 10x EV/EBITDA, far below its historical range of 25-30x. Endava’s 2024 guidance anticipates an 8% revenue drop and margin compression, attributed to headwinds in the financial sector. The stock is more than 80% below its peak, prompting me to allocate 3% of my portfolio at an average purchase price of $44.

Titanium Transportation Group $TTNM and Eurofins Scientific $ERF are both robust companies with steady revenues and stable margins, currently trading at attractive valuations. I have covered them extensively in previous posts.

I slightly reduced my stakes in Amazon $AMZN, GoEasy $GSY, Euronext $ENX, and Volkswagen $VOW3. There weren’t specific reasons for these reductions; these stocks had significant rallies in the last six months (Amazon and GoEasy around 50%, and Euronext around 30%), and I chose to reallocate funds to opportunities with higher potential.

Best Performers:

This quarter, a few stocks stood out in my portfolio:

• Walt Disney: Walt Disney showed very good Q1 results. Bob Iger is realigning the company, slowly shifting public perception towards a focus on quality, entertainment, and storytelling over volume and “messages”. Iger is aiming for sustainable growth, focusing on margin recovery and enhancing shareholder returns through dividends and share buybacks. Last quarter, Disney announced strategic investments in gaming, including EPIC Games (Fortnite), and successfully fended off attempts by a group of activist investors to secure seats on the board.

• Information Service Corp: Strong FY24 and middle term guidances. Despite a price surge last quarter, this company remains significantly undervalued.

• KLA: Dominating its niche with over 50% market share, KLA benefits from favorable trends in the semiconductor sector.

• Amazon: Increased by 19%—a typical performance for such a dynamic company.

Worst Performers:

A few positions have underperformed this quarter:

• Endava: The FY24 guidance was disappointing, largely due to ongoing headwinds in the financial sector.

• Bastide: Despite strong results, high debt levels raise concerns about its ability to manage interest payments effectively.

• Teleperformance: Slowing growth and potential impacts from AI integration have caused some investor concern.

• Solutions 30: Despite record results, the company’s vague FY24 guidance, influenced by uncertainties around the Belgian elections, has been disheartening.

• Newlat Food: Poor Q4 performance and halted acquisition talks with Princes Limited have negatively impacted its stock price.

Portfolio

Here's how my portfolio was allocated as of March 31, 2024:

*The performance figures for new and sold positions reflect their performance during the time they were held in my portfolio during the quarter, and not over the entire quarter.

Thanks for navigating through my Q1 2024 portfolio update with me. Your engagement on this investing voyage is deeply valued. If you have any questions or wish to discuss the charts and currents of the market, feel free to send a message in a bottle my way.

Fair winds and following seas,

Guybrush

In this March update, I'm diving into the latest from several companies, including Information Services Corporation $ISV, Solutions 30 $S30, Bastide $BLC, Titanium Transportation Group $TTNM and STMicroelectronics $STM. I'll also share my recent investment adjustments and update my watchlist with price targets at the end.

PORTFOLIO ADJUSTMENTS

Increased investment in: Bastide $BLC, Teleperformance $TEP

Sold: none

New Positions: none

SIGNIFICANT DEVELOPMENTS

Information Service Corporation $ISV

Information Service Corporation ($ISV) released its annual report, with results aligning with previously communicated expectations. I've detailed these outcomes in past updates, so I'll briefly touch on a significant highlight from the Management’s Discussion and Analysis:

The company has set a bold new business goal:

[…Having doubled the size of ISC on a revenue and adjusted EBITDA basis over the last 10 years, our goal is to again double the company's size, on a similar metrics basis and based on 2023 results, but in half the time (5 years), through a combination of organic growth and M&A…]

This ambition points to an anticipated annual growth rate exceeding 15%.

During the earnings call, analysts probed about the feasibility of this growth, to which management affirmed that a 10% organic growth rate over the next five years is both realistic and attainable, with strategic acquisitions complementing this expansion. The Services segment, in particular, is identified as a critical driver for organic growth.

Solutions 30 $S30

Solutions 30 published their annual report, and as hinted in their January preview, their results have been exceptional, breaking the 1 billion euro revenue mark for the first time and achieving a significant margin recovery.

To recap, before the pandemic, the company enjoyed over 20% annual revenue growth with a stable EBITDA margin of around 10%, without share dilution. Yet, 2022 ushered in a 'perfect storm'. In France, their largest market, core services like fiber and smart meters deployment matured, leading to revenue decline amidst rising costs in an inflationary environment, strongly impacting their margins. However, the company also managed to capitalize on competitors' bankruptcies to acquire parts of their operations. Meanwhile, investments were made to expand fiber deployment in Belgium, anticipating future gains.

2023 marked a turnaround year. The French market stabilized, transitioning fiber and smart meter services from deployment to maintenance, with energy (particularly photovoltaics) emerging as a new growth driver. EBITDA margin rebounded from 1% in H2 2022 to 9.6% in H2 2023. Now, over 60% of their revenue comes from outside France, driven by a 72% growth in the Benelux region and an 11.4% EBITDA margin.

For 2024, they anticipate less growth in Benelux due to the elections, and expect expansion to surge in "other countries" currently representing ~25% of revenue (like Poland, the UK, and Germany) where recent investments and contracts are set to boost their contribution and improve margins (already up to 4.8% in H2).

Looking ahead to 2024, Solutions 30 is set for further expansion but prefers to remain prudent and hasn’t pinned down specific growth figures. They do, however, target an EBITDA margin of 10%-15%. Gianbeppi Fortis, the CEO, stands by the ambitious mid-term aim of hitting 2.5 billion euros in revenue without resorting to share dilution. He specified in the conference call (as highlighted by an analyst's query) that this growth is envisioned within a 4-6 year timeframe, which implies a revenue CAGR exceeding 20%.

The reception to the outlook led to a few analysts lowering their target prices the following day. In my analysis, I've chosen a conservative path, estimating 8-10% annual growth, a more cautious forecast compared to the company’s own ambitious targets. Despite this, I am optimistic about Solutions 30's capacity to return to its historical 10-15% EBITDA margin, even with the moderated growth assumption in my model. Given the past issues with the audit and approval of their report, I am particularly keen on awaiting the audit and approval of this year's report, along with insights from the investors' day in May, before making any decisions.

Bastide $BLC

Bastide released their H1 results through a press statement and published their Half-Yearly Financial Report a few days later. The stock plunged after the press release and slightly recovered after the publication of their report. Here are my takes:

Revenue growth and operating margins met the guidance, which is good. The unwelcome surprise, however, was the significant increase in their cost of debt, alongside their inability to reduce debt during the last semester, even after selling a couple of assets.

The debt cost escalated to 7% from under 5% last year.  While further rate hikes seem unlikely, this level of leverage could put them at the mercy of creditors' goodwill.

Can Bastide default on its interest payments?

I have followed some discussions on Twitter and Boursorama forums and noticed some confusion regarding Bastide's free cash flows. The company reports strong organic growth and hefty CAPEX, which traditionally paints a picture of low free cash flow (FCF). However, a closer look reveals that much of this CAPEX is invested in purchasing new equipment for leasing, rather than simply refreshing stores. This strategy essentially works on a financial spread: borrowing at a lower rate to acquire assets that are leased out at a higher rate. When this leasing strategy is factored in, Bastide is expected to generate over 50 million euros in FCF in 2024, underpinning its impressive organic growth.

If the cost of debt remains at those high levels, they should be able to manage without major problems. But further increases could spell trouble: despite Bastide's leading position in its niche, their pricing flexibility is strongly limited due to sector regulation.

I include a couple of fragments from their financial report:

This indicates that if the 3-month Euribor rate were to increase by 100 basis points (1 percentage point), it would negatively impact the group's debt cost by €1.9 million, which is manageable.

This indicates that the last credit agreement outlines a financial covenant to maintain a leverage ratio (net consolidated financial debts to consolidated EBITDA over the last 12 months) within specific limits: 4.2 until June 30, 2022, and 3.5 from December 31, 2022. Nonetheless, there's room for maneuver in terms of external growth activities; the ratio can surpass 3.5 during test periods ending on December 31, 2022, and/or June 30, 2023, provided it stays below 4. This clause is designed to facilitate significant acquisitions or investments that could temporarily elevate the leverage ratio.

To conclude, Bastide's strict compliance with these financial covenants, combined with the agreement's allowance for growth initiatives, confirms that the current leverage ratios are within the limits sanctioned by the banks. This adherence highlights Bastide's financial prudence and strategic planning in balancing debt management with expansion efforts.

However, despite not foreseeing any challenges in meeting interest obligations, I acknowledge a potential liquidity risk arising from the prevailing credit environment, which could curtail the company's ambitious growth plans.

I've refined my model to reflect the increased debt cost and potential uncertainties. The stock is likely to remain under pressure until we see rate cuts and the next financial report.

For those interested in Bastide, I recommend checking out Olivier's analysis from Emerging Value. I fully concur with his assessment.

From my side, as mentioned above, I made a couple of purchases during the month, at 15.00€ and 14.06€.

Titanium Transportation Group $TTNM

Titanium Transportation Group $TTNM published their Q4 and FY 2023 results, with revenue in line with guidance and an EBITDA margin 1.3% above expectations. The company frequently revises its revenue guidance every quarter, largely due to its sensitivity to fuel costs which significantly impact transportation costs. Despite these quarterly adjustments and the volatile nature of the truck transportation market, the key takeaway is their consistent ability to maintain margins and increase both transportation and trading volumes. And this was achieved while making some opportunistic acquisitions and maintaining a healthy balance sheet.

I've extensively discussed this company in recent months, so I will not dwell further. They've provided an initial outlook for 2024, though it's very likely the company will continue updating it throughout the year—projecting 12%-16% revenue growth with the same level of EBITDA margin. This valuation positions the company at an attractive 4-5x EV/EBITDA for 2024.

During the conference call, they also outlined expectations for CAPEX to remain low for the next two years, thanks to last year's significant fleet renewal (10m expected in 2024 vs 29m in 2023). This strategic move is expected to enhance their free cash flow (FCF) and support growth initiatives.

As a reminder, the company has set an ambitious goal to reach 1 billion in revenue by 2028, implying a CAGR of 18%. In my analysis, I adopted a more conservative stance, anticipating an annual growth rate of about 10% while maintaining current margins and their high level of debt.

STMicroelectronics $STM

Released their Q4 and full-year report, aligning with previous guidance. They've also shared expectations for Q1 and the full year of 2024, predicting a 6% decline in sales and a gross margin reduction from 47% to the low to mid-40s. During the conference call, they clarified that this forecast is driven by inventory adjustments, not pricing issues. Their mid-term goals for 2025-27—to surpass 20 billion euros in sales with gross margins around 50%—stand firm.

I've updated my model to account for these projections, taking a conservative stance. I anticipate they'll only reach their sales targets by 2028 and achieve their margin goals partially.

Newlat Food ($NWL) and Kontron ($KTN) have both released their annual reports. Upon initial review, Kontron's results appear in line with guidance, and its acquisition process seems to be progressing smoothly. Newlat Food, however, experienced a challenging fourth quarter. I plan to delve deeper into these reports and possibly provide more detailed insights next month.

WATCHLIST UPDATE

And as always, I anchor this post with an update on my Watchlist.

Thank you for taking the time to navigate through this update. I treasure your feedback as it sharpens our investment compass. Eager to hear your thoughts and dive into fruitful discussions. Stay tuned—I'll share a portfolio update before the month closes.

Guybrush

After Teleperformance's stock dropped again following their FY 2023 results, I wanted to share my thoughts on the results, the company's current situation, and my recent actions.

1 FY2023 Results

Teleperformance announced revenues of €8.345 billion, a 2.3% increase from 2022. Without the Majorel acquisition, there would have been a 1.8% decrease. The EBITDA margin slightly fell to 21.3% from 21.5% last year. Excluding Majorel, it actually improved to 21.6%. Adjusting for COVID contracts and the impact from currency and inflation, particularly impacting some regions in 2023, they've reported a decent 5.1% increase in like-for-like revenue.

Growth drivers included:

• Core services contributing €207 million (+3.2%)

• Specialized services adding €181 million (+16.1%), notable for their higher margins (EBITA >30% versus 10-15% in core services)

• Acquisitions (two months of Majorel + PSG Global Solutions) bringing in €404 million

Specialized services not only grew the fastest but also generated the highest margins (>30%).

Below are the specialized services, which have experienced robust growth over the last few years, with a CAGR of 15%-20%.

They’re betting big on India, expecting to double revenue there by 2027 (CAGR of 17%).

Net earnings were €602 million, down from €643 million in 2022, primarily due to increased financing costs from acquiring Majorel. Nonetheless, net FCF rose to €812 million from €703 million, driven by stringent cost control and reduced CAPEX.

DEBT, FINANCIAL STRUCTURE AND CAPITAL ALLOCATION

Net debt, excluding leases, stands at a manageable €3.7 billion with an average cost of 3.3% and a maturity of 3.75 years. The acquisition of Majorel was financed with €2 billion in debt and about €1 billion in Teleperformance shares (priced at €217 each), increasing their debt to 2.18 times EBITDA.

In 2023, with more than €800 million in FCF, the majority was allocated to dividends (€227 million) and share repurchases (€366 million). Despite issuing 1 m€ in shares for Majorel, the aggressive share buyback program resulted in 1% fewer shares outstanding by year-end, indicating strong capital management.

2024 OUTLOOK AND CAPITAL ALLOCATION STRATEGY

The 2024 financial outlook is promising and focuses on rewarding shareholders:

• Like-for-like revenue growth projected at 2%-4% (excluding Majorel).

• A slight increase in EBITA margin (0.1-0.2%).

• An increase in net FCF.

• Targeting a 35%-40% dividend payout ratio.

• Continuing share buybacks.

• Allocating up to two-thirds of net FCF to dividends and buybacks.

• Aiming to maintain their investment grade rating by reducing debt to less than 2 times EBITDA and preserving their BBB credit rating.

• They plan disciplined CAPEX and M&A activities, holding off on acquisitions until late 2024.

They’re playing coy on mid-term guidance, just hinting they’ll outgrow the market.

Comparing this outlook with competitors, Teleperformance stands out. For instance, TTEC Holdings anticipates a revenue decline of -4% to -9%, and TaskUs expects no growth in 2024 alongside a decline in EBITDA margin.

2 The End of Teleperformance?

Not by a long shot. Despite two panic-driven sell-offs in a single week—triggered first by Klarna news and then FY2023 results—each plummeting the stock by 25%, and together, slashing its value by about 40%, AI isn’t the end for Teleperformance; it’s a boon. It’s about leveraging AI for cost savings and better customer service, not getting replaced by it. Teleperformance is not new to leveraging AI; its use of chatbots is just the beginning. With a focused strategy on AI, expect even greater efficiencies and service improvements.

Teleperformance believes AI can automate a big portion of their service volume in the next three years. This should cut costs, boost efficiency, and expand margins.

Klarna's recent announcement, while interesting, doesn't fundamentally alter the landscape. It underscores that tech-savvy companies can harness tools like ChatGPT to develop their customer service solutions. However, this raises a critical question: Should companies divert core business resources to develop in-house solutions that lie outside their primary domain? Teleperformance's specialization and expertise in customer service solutions provide a compelling argument against such diversions.

This ties into a broader industry movement towards software development outsourcing. Firms like Endava and Nagarro are thriving as businesses aim to concentrate on their core competencies, relying on external expertise for technological enhancements, including AI. Thus, AI is not reducing Teleperformance's client base but is set to expand it, ushering in new projects and opportunities for innovation in customer service.

The true measure of success in this evolving field will be who can deliver the highest quality product at the best price. Here, Teleperformance distinguishes itself as an industry leader, with a wide client base already benefiting from its services and an expansive market opportunity ahead, thanks to its proactive embrace of AI.

In essence, the emergence of AI is not a death knell but a dawn of growth and innovation for Teleperformance, ensuring its continued leadership in the customer service domain.

3 Adquisition of Majorel

Was the Majorel acquisition a value creator? In my book, yes. Teleperformance offered 30 euros per share, totaling a 3 billion euro deal. They paid a 16x P/E and 8x EV/EBITDA multiple. Payment was in cash and shares, with shareholders able to opt for Teleperformance shares at a swap rate, valuing TEP shares at 217€ each.

They've managed to balance issuing new shares with a hefty share buyback program, effectively avoiding dilution. With the acquisition funded and a significant bond issue oversubscribed, it's clear the bond market isn't sweating over Teleperformance's debt levels. Their current interest rates are at 3.27%, and they're poised to pare down debt in 2024, targeting a leverage ratio of less than 2x.

Expected synergies from Majorel could hit 150 million by 2025. Even with just two months of Majorel in the books for 2023, and despite a slight dip in earnings per share due to debt costs, merging the pro forma accounts of both companies could boost EPS above 15€ in 2024, up from 10-11€ range pre-acquisition.

4 Valuation Model

I've delved into multiple scenarios for Teleperformance, spanning from highly optimistic to deeply pessimistic. Below, I'm sharing a moderate, conservative perspective that finds a middle ground:

• Sales Outlook: Anticipating a minor dip in 2024 sales, slightly off from the company's 2-4% growth expectations. I expect a bounce back to 4% growth thereafter, spurred by organic initiatives and acquisitions.

• Margin Forecast: Predicting a slight squeeze in EBITDA margins without immediate prospects for improvement.

• Valuation Concerns: Given the potential for industry-wide disruptions, Teleperformance may face a period of lower valuation multiples, with P/FCF at 10x or EV/EBITDA at 6x considered.

• Share Buybacks: Current stock prices could allow the company to significantly reduce its share count by more than 5% annually, though my model conservatively estimates only a 1% reduction.

This conservative view is just one piece of a broader analysis that also considers scenarios ranging from stagnation to decline in growth and more pronounced margin pressures. Remarkably, even under conditions where 2024 sees a 5% sales drop with no recovery and significant margin decline, the outlook remains positive.

If the table intrigues you or you're keen to craft your scenarios, don't hesitate to reach out.

5 My Moves Explained

In summary, the results are solid. Growth is slowing due to various factors, but the Majorel acquisition looks like a masterstroke. I'm not overly worried about disruption from generative AI; if anything, Teleperformance is well-positioned to lead the charge. Their sector still promises 6-10% growth in the coming years.

Given these dynamics, I almost doubled down on Teleperformance with February and March purchases, increasing my holdings by 80% between 84€ and 103€ (averaging around 94€). It now represents about 4% of my portfolio. Plus, I've dabbled in some call options.

Closing Thoughts

As we explore the world of investing, keep in mind that I'm just an individual investor sharing my experiences, not an expert. My thoughts on Teleperformance are part of a bigger picture and can change as the situation evolves. I encourage you to do your own research and make informed decisions. My views might shift over time, just like market conditions. I'm always open to hearing different perspectives and learning from them.

Looking forward to our next update. Until then, I wish you steady growth and smooth sailing in your investment endeavors.

Guybrush

Here's the February update. It wasn't the best month for performance; despite most indexes showing positive returns, my portfolio was down by 2%. This was primarily due to the declines in Endava $DAVA, Newlat Food $NWL, Alphabet $GOOG, Teleperformance $TEP and Solutions30 $S30.

RECENT MOVES:

Increased investment in: Teleperformance $TEP, Endava $DAVA, Eurofins $ERF, Titanium Transportation Group $TTNM, Bastide Le Confort Medical $BLC

Slightly reduced exposure to: Amazon $AMZN, Euronext $ENX

Sold: None

New Positions: None

I seized the opportunity to increase my investment in Teleperformance $TEP after its price dropped >30% in a single day. This sharp decline was triggered by news from Klarna, which announced that their new AI assistant had managed two-thirds of customer service chats in its first month. Despite the market's reaction, I believe this development won't significantly impact Teleperformance in the long run, as similar AI technologies have been in use by various companies for years. The details of Klarna's announcement can be found here: Klarna's Announcement.

By the way, Teleperformance presented their results today. I haven't reviewed the results yet but will be tuning into the conference call tomorrow. I'll share my thoughts on Twitter or in a future post

I also bolstered my stakes in Endava and Eurofins and will discuss their results in detail below. Likewise, I found the valuations of Bastide and Titanium still very attractive, leading to increased investments.

Conversely, I opted to slightly reduce my holdings in Amazon and Euronext. This move was made to reallocate those funds into companies I perceive as undervalued.

SIGNIFICANT DEVELOPMENTS

Endava $DAVA

Endava $DAVA released their Q2 2024 results, which fell short of expectations, mainly due to a slowdown in projects within the financial sector. The company has adjusted its FY2024 guidance to anticipate an approximate 8% decline in revenue, alongside a significant reduction in margins. From the conference call, it was implied that the most challenging period is yet to come, expected in Q3.

On a brighter note, Endava announced its largest acquisition to date: GalaxE. Details shared during the conference call revealed the acquisition price of $405 million, roughly 3x GalaxE's sales, with no plans for dilution to finance the purchase. GalaxE, employing about 1600 people—with 1200 based in India—primarily serves the healthcare sector, with the majority of its clients in the US. The company has been experiencing steady growth, with rates between 10-15%.

I've adjusted my model to account for the anticipated decline in margins and revenue for 2024, but I expect a robust recovery following the acquisition of GalaxE. While the acquisition may not have a significant impact in 2024, it is projected to contribute over £100 million GBP in 2025. Despite Endava's stock falling by 40% and the possibility of further lows in the near term, I remain positive about its mid-term prospects. The current downturn seems temporary, prompting me to increase my stake in the range $36-$38. Having slightly reduced my position at the start of the month, I find some consolation in re-entering at these levels —not exactly a chest of gold, but a promising lead amidst the storms :D.

Eurofins Scientific $ERF

Eurofins $ERF shared their FY2023 results, meeting the top end of their guidance and doing better than my model actually. They also gave out FY2024 guidance for the first time, which is also looking slightly better than what I expected. They aim to continue growing sales by more than 10% (6.5% organically and the rest through acquisitions) and to improve margins further.

The stock price dropped on the presentation day, a reaction I deemed overly pessimistic. Seizing this as an opportunity, I increased my position that morning, confident that the market would soon recognize the strength of Eurofins' results. 😄

GoEasy $GSY

GoEasy's recent results surpassed expectations, with sales hitting the upper guidance range (up 23% YoY), margins seeing substantial gains and EPS increasing 23% YoY. They've announced a 22% dividend increase and provided an upbeat three-year forecast. Impressively, this outlook remains strong—projecting over 16% growth and further margin enhancements—even when factoring in potential recession and new legislative impacts.

I've adjusted my model to reflect this positive guidance. Details are summarized in the table at the end of the document.

Newlat Food $NWL

Newlat Food recently announced the cessation of negotiations for the acquisition of Princes Limited and its subsidiaries. The decision came after a thorough strategic review, with current market conditions in the UK—characterized by declining demand and inflation pressures—prompting a reevaluation of their initial offer. Despite a more conservative offer not being accepted by Mitsubishi Corporation, Newlat Food remains open to future opportunities should conditions change.

The company's stock experienced a drop of over 20% following this announcement. However, this development underscores Newlat Food's prudent and conservative approach to acquisitions, an aspect that, in my view, reinforces the company's long-term strategic integrity. Additionally, Newlat Food continues to explore other M&A opportunities, showing they know how to grow the company without taking unnecessary risks.

Nagarro $NA9

Nagarro announced its 2024 guidance, projecting revenue around one billion Euros, an increase of over 9%. They expect a gross margin of 27% and an adjusted EBITDA margin of 14%. These figures closely match my forecasts, which is why I haven't made any changes to the results in the table below.

Considering Endava's acquisition of GalaxE, if Nagarro were valued at similar multiples, it would imply a potential value of 180€ per share for Nagarro. Yet, it's currently trading at 80€, even though it's a company 8 times larger...

EuroApi $EAPI

EuroApi, which I completely sold in January, have finally appointed a new CEO and begun to reveal more about their challenges, akin to opening Pandora's box. After announcing their annual results, the stock price dropped by over 40%. To be honest, the results weren't as bad as I anticipated. Even their outlook for 2024 isn't too bleak, all things considered. The FOCUS 2027 strategy comes across as both plausible and grounded. However, as I've previously mentioned, EuroApi has become a turnaround case, and statistically, these endeavors are fraught with challenges, failing more often than not. The lingering uncertainties from Sanofi's tenure and the need for restructuring post-IPO are considerable red flags. While the market EuroApi operates in is indeed attractive, boasting significant tailwinds, I prefer to remain an observer from the sidelines for now. There are ample other investment opportunities available at more appealing valuations, yet I remain intrigued by EuroApi's potential within its robust market sector.

Bastide Le Confort Medical $BLC

Bastide published a trading update in line with the previously given guidance and reconfirmed their full year 2023-24 outlook. First half results coming at the end of the month.

Also worth noting, Indépendance AM has reduced this month its position in Bastide, though they haven't provided any commentary on this move.

Euronext $ENX and SS&C Technologies $SSNC both delivered strong results, in line with what analysts had anticipated. Nothing really special to comment on, they are performing well, so I won't extend on them here. Maybe I'll talk about them another time.

OTHER READS

If you've made it this far through a post from yours truly (a humble nobody in the vast investing universe), why not treat yourself to something genuinely insightful? Check out the latest annual letter from Giverny Capital. We share positions in Alphabet, Eurofins, and SS&C Technologies, though they've recently parted ways with SS&C, citing capital allocation concerns. Curious? Here’s the link for a good read: GIVERNY CAPITAL FY2023 LETTER

WATCHLIST UPDATE

And as always, I anchor this post with an update on my Watchlist.

As we chart the course through these financial waters, your insights are as valuable as a map to hidden treasure. If you've got thoughts or discoveries to share, don't hesitate to send a signal my way. Let's keep our eyes on the horizon and our hands steady on the wheel. Until our next adventure, may your investments catch the wind!

Fair winds,

Guybrush

In this January update, I'm diving into the latest from several companies, including Kontron $KTN.de, Digital Value $DGV, Information Services Corporation $ISV, Learning Technology Group $LTG, and Solutions 30 $S30. I'll also share my recent investment adjustments and update my watchlist with price targets at the end.

RECENT MOVES:

Increased investment in: Teleperformance $TEP, Eurofins $ERF

Sold: EuroApi $EAPI

New Positions: Bastide Le Confort Medical $BLC

After significantly increasing my position in EuroApi during November and December, I trimmed my holdings once Lonza's results pushed the price above €6.5, selling down to my pre-increase levels. However, as it remained a minor position, I chose to exit entirely, though I will continue to monitor it closely.

Why I Sold $EAPI: The decision to sell EuroApi was driven by several factors: despite its low valuation compared to peers, high-value assets, and CDMO services growing at 20% since its spin-off from Sanofi, the withdrawal of its mid-term targets, the departure of its CEO, and the absence of a new strategy raised significant concerns. The bear case is also compelling: lack of competitive edge against Indian and Chinese firms or Swiss counterparts, compromised high CAPEX levels, an inability to boost margins, and negative free cash flow.

Bastide Le Confort $BLC

Why Bastide $BLC? In a nutshell: Bastide is an exceptional company in a resilient, highly fragmented sector, with strong insider alignment, high margins, high ROE, and currently trading at its lowest valuation in two decades.

Bastide's core business is the distribution of medical equipment and provision of home medical services, achieving steady revenue growth of 13%-15% over the last decades through organic growth and acquisitions, significantly expanding its margins.

They divide their activities into two (or four segments):

• Home Medical Assistance – Respiratory Care (32%): This was the first segment of the company, created by the founder. This segment is performing very well both in France and abroad, expanding mainly through the acquisition of small companies.

• Home Medical Assistance – Nutrition, Perfusion, Stomatherapy (25%): The patient's return home after hospitalization sometimes requires continuity of treatment by infusion and/or artificial nutrition.

• Home Care – In stores & online (24%): Selling or leasing medical equipment to individuals through their stores and online. Notably, they are shifting their strategy to accelerate growth by moving to a franchise model.

• Home Care – Healthcare institutions (19%): Selling or leasing medical equipment to medical institutions.

82% of their revenues come from France, but they now have presence in 8 other countries.

The CEO, founder's son, draws a modest salary (200-300k€), with the family retaining over 50% ownership, ensuring aligned interests with shareholders.

Home healthcare market is expected to keep growing strongly 7%-9% over the next decade.

The company is trading at its lowest valuation. Investors might be concerned about their high debt levels, since interest payments increased by 50% in 2023 compared with 2022 due to rising interest rates, yet net profit also grew in 2023. I am not overly concerned about this, as the company still generates strong FCF, and its high debt levels are not unusual for Bastide, which leverages debt for inorganic growth. Additionally, over 70% of its revenues are recurrent, backed by long-term contracts.

Another reason could be that during COVID there was abnormal organic growth of more than 20%, and obviously, it is now normalizing in this post-pandemic time.

Outlook: Bastide expects to continue outperforming the market, primarily through organic growth and opportunistic acquisitions, with a focus on reducing debt amidst high-interest rates. 2024 Q1 results align with guidance.

In my analysis, I conservatively project 6% growth for 2024, accelerating to 9% thereafter, with stable operating margins. Applying a PE of 15x or EV/EBITDA of 6x—favoring PE in this case—suggests a stock potential performance of over 40%, a perspective I'm keen to discuss for any insights I might have overlooked :D.

SIGNIFICANT DEVELOPMENTS

Kontron $KTN.de

Kontron unveiled the last piece of “the new Kontron” following the divesture of the IT services to focus entirely on IoT. Despite previous skepticism, including my own, Kontron has now made it clear that it is not only on track to meet its mid-term revenue guidance of 2 billion euros by 2025 but also to surpass it significantly.

On January 18th, Kontron announced its agreement to acquire approximately 60% of Katek SE, a publicly traded company, from its primary shareholder PRIMEPULSE. This transaction, subject to regulatory approval, is expected to close by March 2024 and includes a subsequent offer to purchase the remaining shares. Valuing Katek at around 217 million euros in equity, this marks Kontron's largest deal to date and is poised to significantly boost its growth and solidify its standing as a leading provider in the IoT space.

Katek, a premier European electronics firm, specializes in high-quality electronics for solar energy and e-mobility, boasting over 3,200 employees and projecting sales exceeding 800 million euros for FY23. With a robust 21% CAGR over the past three years and expectations of continued growth, Katek's integration into Kontron is anticipated to enhance Kontron's product offerings with advanced solutions in renewable energies among other sectors. This acquisition aligns with Kontron's strategy to augment its products with its software and IoT capabilities, aiming for a 5 percentage point gross margin expansion in the medium term.

For the acquisition, Kontron will pay 217 million euros for the shares and an enterprise value (including net debt) of approximately 360 million euros, funding the purchase with its own cash reserves. This decision will also lead to the early termination of its share buyback program. However, the acquisition is viewed as financially sound, with Kontron securing Katek at a more favorable EV/EBITDA multiple (5.5x) compared to its own (8x EV/EBITDA for 2024E). Hence, from a valuation perspective (pre synergies), I see this acquisition as value accretive.

Moreover, the current consensus price target for Katek stands at 26.40 euros, indicating the market perceives intrinsic value well above the acquisition price, highlighting the deal's attractiveness.

Following this acquisition, Kontron has updated its FY24 forecasts, now expecting consolidated sales to reach at least 1.9 billion euros with a net profit of approximately 100 million euros.

As of now, I have not updated my model pending further details on when the acquisition will be fully integrated into Kontron's financials.

DIGITAL VALUE $DGV

Digital Value has been on my watchlist for quite some time, which led me to open a position in October 2023. I shared insights on this decision in a post, which you can find here. The journey since then has been quite impressive, with the stock climbing almost 50% above my entry price.

Value investing often tests one’s conviction, particularly when opting to buy into a stock that’s down 60%. Asserting a 25% margin of safety and estimating the fair value to be 40% higher than its market price highlights the importance of strategic patience and meticulous analysis inherent to value investing.

On January 31st, Digital Value made an announcement that exceeded expectations, reporting a 20% growth for 2023 despite prevailing economic headwinds. This performance is notable, especially with the stock’s price jump, yet it still trades at an attractive 6x EBITDA multiple.

These outcomes have outperformed my initial projections. My model, which took a more conservative stance for both 2023 and 2024, anticipated sales growth of 15% and 8%, respectively. However, I plan to hold off on updating my model until the publication of the final report, which is expected to include further insights into the market outlook for 2024.

Learning Technologies Group's $LTG

Learning Technologies Group ($LTG) released a full-year trading update, which, while at the lower end of their guidance, sparked a 17% jump in its stock price. Analysts, likely bracing for a third profit warning, were pleasantly surprised by the positive news. The update highlighted a margin recovery (depressed since the acquisition of GP Strategies) and stronger-than-expected cash flow generation, leading to significantly lower net debt than anticipated.

Furthermore, LTG also announced during the month the completion of the sale of two non-core business units acquired as part of the GP Strategies deal.

During their conference call, LTG noted the challenging environment within their sector over the past year, with some competitors experiencing revenue declines of up to 20%. In contrast, LTG managed to limit its organic revenue decline to just 2%, showcasing the resilience of its business model amidst industry-wide pressures.

The company has observed signs of a shifting market landscape but plans to withhold its 2024 guidance until the publication of its annual results in April.

Information Service Corp $ISV

Information Service Corp $ISV shared updates regarding its financial performance and future outlook through two press releases.

The first announcement confirmed that the company's full-year results for 2023 are in line with previously issued guidance.

The second release, issued in early February, provided a deeper insight into 2023's outcomes and introduced an initial forecast for 2024. This guidance is notably optimistic, projecting strong revenue growth between 16%-18% and an enhancement in profit margins.

Based on this new information, I have revised my financial model and adjusted my price targets for ISV accordingly. These updates reflect the company's solid performance in 2023 and its promising projections for 2024, indicating a positive trajectory for its business operations and financial health.

SOLUTIONS 30 $S30

Solutions30 closed 2023 with revenues up 16.7% to €1.06 billion, hitting their goal of crossing the billion-euro mark. The big win came from Benelux, where revenues jumped 71.9%, outshining other regions. France dipped slightly, but the overall picture remains strong.

Looking ahead to 2024, Solutions30 is optimistic, forecasting sustained revenue growth and further improvements in profitability. They're targeting double-digit EBITDA margins in each country, supported by strategic initiatives to optimize costs and enhance productivity across its operations. The plan is to keep financing growth internally, staying flexible and debt-smart.

WATCHLIST UPDATE

Thank you for taking the time to read this update. Your feedback is always appreciated as it helps improve our investment insights and decisions. Looking forward to hearing your thoughts and engaging in valuable discussions.

As 2023 comes to an end, it's an opportune moment for a thorough performance review, reflecting on the year's successes and challenges. My portfolio experienced significant growth, achieving a 14% increase in Q4 and a substantial 27% gain annually, culminating in a year-end peak at an all-time high. This outcome is particularly gratifying and aligns well with my investment objectives. The yearly gains since 2020 are:

Portfolio Composition as of December 31, 2023

The portfolio now consists of 31 positions, slightly above my ideal 20-25 range. However, it remains well-focused: the top 10 positions make up 51%, and the top 20 account for 79%. The average holding period is about 2.8 years.

Top performers of 2023

Among the top-performing stocks were four that I had divested. My strategy often involves selling stocks after significant rallies, a practice I'm reconsidering. Notable examples include Coinbase, with a 210% rise, and Facebook, up by 80%. I capitalized on some gains, but retaining these stocks longer could have further enhanced my portfolio's performance.

Underperformers of 2023

EuroApi was the most disappointing, reinforcing my typical reservations towards IPOs. Despite facing challenges such as the withdrawal of midterm guidance, changes in CEO, and industry-wide downgrades, I still regard EuroApi's assets as highly valuable. EuroApi boasts several multipurpose Active Pharmaceutical Ingredient (API) plants across Europe. These facilities, which take nearly a decade from initial studies to full operational status, are a significant asset. The pharmaceutical sector, having benefited from COVID-related contracts, is now normalizing. EuroApi's established infrastructure and experience in this adjusting market underscore its potential for long-term value.

Teleperformance and Learning Technologies Group also saw significant drops, yet I acquired shares in both during 2023. Notably, Teleperformance is now trading 20% above my purchase price.

Nagarro, I initiated a line in 2022, is among this year's worst performers. However, I boosted my stake when it dipped below €70. Now, it's trading above my average buy price, showing the value of strategic investments during low periods, even in underperforming stocks.

Out of the six worst performers, three were new additions to my portfolio…yes, I know what you’re thinking.

Q4 Portfolio Changes

New Additions:

Digital Value $DGV: This Italian small-cap company is making significant strides in the ICT infrastructure sector. It operates in three main areas: Data Centers (50% of business), Digital Business Transformation (30%), and Smart Workplace Transformation. Digital Value's notable growth trajectory significantly surpasses its peers. The company also has over 60% insider ownership, ensuring alignment with shareholder interests. Additionally, its return on equity (ROE) is impressive, over 25%. I acquired the stock at an attractive 5x EV/EBITDA, presenting a strong value proposition.

Amundi $AMUN: Amundi, as Europe's leading asset management firm and a top 10 player globally, especially excels in the ETF market. The firm's revenue primarily comes from annual management fees, accounting for 90% of their income, with additional income from performance fees and a growing technology segment. The asset management market is expected to grow 5-10% annually over the next decade, with the ETF sector, Amundi's forte, predicted to expand even faster at over 15%. Amundi's strategic acquisition of Lyxor in 2022 positions it for further market expansion. Despite a marginal decrease in margins post-acquisition, initiatives are in place to achieve synergies and enhance profitability. The stock was purchased at a PER of 9-10x, favorable compared to higher multiples of its peers.

Eurofins $ESF: Eurofins Scientific has established itself as a world leader in laboratory testing, continually integrating new labs to broaden its global footprint. Its family-owned structure aligns management goals closely with shareholder interests. For the past three decades, Eurofins has shown a consistent ability to deliver steady returns and maintain a high ROE, ranging between 15%-20%.

Sells:

Alibaba $BABA & Tencent $NND: As detailed in my October update, I decided to divest all my Chinese holdings.

SII Group $SII: Sold post-tender offer at €70 per share, securing over 400% gain.

Portfolio Adjustments:

Increased stakes in Titanium Transportation Group $TTNM, PayPal $PYPL, Teleperformance $TEP, Solutions30 $S30, Dye&Durham $DND, and EuroApi $EAPI.

Slightly reduced my position in Euronext after a strong rally, reallocating funds to other stocks.

In closing, it's worth mentioning that I haven't set a specific benchmark for my investments. My approach is to freely invest globally, wherever the best opportunities arise, without limiting myself to small, medium, or large caps. That said, I do keep an eye on the performance of my other assets, constantly reassessing whether to continue managing my investments personally or to consider alternatives like a robo-advisors or a professional hedge funds.

Interestingly, more than 50% of my wealth is now in my stock picking portfolio. This heavy allocation reflects my confidence in my investment strategy and analysis skills.

Here’s how the rest of my assets fared in comparison:

CASH & SHORT-TERM MONETARY FUNDS: Representing 17% of my assets, they provided a modest return of 1.8%. This lower yield is expected, given their nature as safer, more liquid options.

STOCK PICKING PORTFOLIO: The largest chunk of my assets at 54%, and it’s clear why. With a strong performance of 27.4%, it's a testament to the effectiveness of my stock-picking strategy.

HEDGE FUNDS PICKING PORTFOLIO: Comprising 13% of my assets, these funds delivered a solid 13.8% return, reinforcing their role in diversifying and balancing my overall investment strategy.

PRIVATE PENSION PLANS (2nd & 3rd Pillar): Accounting for 15% of my portfolio, these plans only yielded 7.1% return, however, they play an important role in optimizing my tax situation.

CRYPTO ASSETS: Although they constitute only 2% of my portfolio, they showed an extraordinary return of 147.0%.

In closing, this diverse asset allocation not only helps in balancing risks but also in capturing growth from different market segments. It’s a constant learning process, and I’m always evaluating whether my direct involvement in stock picking is yielding sufficient returns compared to other managed or automated options. As of now, the results speak for themselves, affirming the value of an active, hands-on approach in managing the majority of my assets.

Key Takeaways:

• My portfolio showed strong growth in 2023, with a particular success in stock picking.

• Strategic buying in low periods can benefit even underperforming stocks.

• Diverse asset classes, including crypto and hedge funds, played key roles in balancing risk and enhancing returns.

Your Thoughts? I’d love to hear about your investment experiences in 2023. What strategies worked for you? What lessons did you learn? Please share in the comments below.

Looking Ahead: Stay tuned for my next post in January, where I'll be sharing some updates to my watchlist. It’s a new year with new opportunities, and I'm excited to explore what 2024 holds for us as investors.

Disclaimer: Please note that the information presented here is for informational purposes only and should not be considered financial advice. Always consult with a financial professional before making investment decisions.

RECENT MOVES

Increased Investments: GoEasy ($GSY)

Buys: Eurofins Scientific ($ESF)

Sells: none

Eurofins Scientific is a gloal leader in the laboratory testing industry, consolidating its position through years by acquiring and integrating laboratories. As a family-owned business, its management is closely aligned with shareholders. Over the last 30 years, Eurofins has consistently delivered steady returns and high ROE (in the range of 15%-20%). I'll be sharing more about this company in an upcoming post.

SIGNIFICANT DEVELOPMENTS

SII Group $SII

SII published their 2023/24 H1 results, surpassing the previously provided guidance with a notable growth of 12.8%. Operating margins reported were in the lower range at 9.1%. The detailed report, available here, provides a comprehensive overview.

Despite these excellent results, SII acknowledges low visibility in their current business environment. They plan to keep stakeholders informed by regularly updating their guidance quarter by quarter.

Kontron $SANT

Kontron (SANT) reported robust results for the third quarter of 2023, prompting an upward revision of their FY2023 guidance. My main takeaways are:

• The company is already surpassing net income levels, prior excision of their IT business, so that I agree “Kontron’s strategic realignment is a resounding success” quoting M. Niederhauser, CEO of Kontron.

• Strong order intake, exceeding industry peers, with a noteworthy book-to-bill ratio of 1.19. The backlog stands at an impressive 1.7 billion, with particular strength observed in the Software Solutions segment (book-to-bill >2).

• They are actively integrating three recent M&A transactions.

• They still have over 350 million in available liquidity, so that they are well positioned for future M&A initiatives. Apparently, there are on going negotiations and they will soon announce new acquisitions.

• Kontron approved a new share buyback program, allowing for the repurchase of 6.3% of total shares (max 70 million).

They consistently emphasize their goal of reaching $2 billion in sales by 2025. However, I remain conservative in my projections, considering a target attainment by 2027-2028 in my model.

For more detailed information, you can refer to Kontron's official report.

Amiral Gestion reduced its stake from 5% to 4%, yet it remains among the top five positions in their portfolio.

Information Service Corp $ISV

Information Services Corporation (ISV) released their Q3 results, aligning with their guidance.

Despite the challenging business environment, all segments, including Registry, Services, and Technology solutions, continue to experience growth. The company reported a significant 12% year-over-year increase in revenue. However, net margins declined, impacted by higher interest rates and increased debt levels. This dip in net margins can be attributed to the down payment made in July following the extension agreement, securing ISV's exclusive right to manage and operate the Saskatchewan registries.

Titanium Transportation Group $TTNM

Titanium Transportation Group (TTNM) has once again reported a profitable quarter, demonstrating resilience in the face of challenges within the freight market. Notably, they provided additional insights into their latest acquisition, Crane Transport, highlighting its significance for their expansion in the US. Despite experiencing a temporary impact on margins post-acquisition, the company expressed satisfaction with the integration pace.

The current soft market conditions resulted in volume decreases in the Truck Transportation segment and pricing decreases in the Logistics segment:

In the Truck Transportation segment, revenue increased by 13.6% during the quarter compared to the same quarter in 2022. However, over the nine-month period ending September 30, 2023, the growth was 0.2%. The segment faced challenges such as a 6% year-over-year decrease in freight volumes and a decline in fuel surcharge revenue due to the decrease in diesel fuel prices. The recent acquisition of Crane injected $14.4 million, partially offsetting the decrease in revenue.

The Logistics segment experienced a 13.6% decrease in revenue for the three-month period ending September 30, 2023, and a 29.1% decrease for the nine-month period compared to 2022. Despite a 13.4% decrease in pricing year over year, the segment achieved over 6% growth in volume, showcasing the positive impact of the company's strategic investments in new locations.

Amid these market dynamics, Titanium Transportation Group adjusted their revenue guidance from $450-$470 million to $430-$450 million, with an EBITDA margin of 10.5% to 12.5%.

Apologies for delving into these numbers, but what I want to highlight is that despite the current macroeconomic challenges, including lower volume and pricing pressures, the company has weathered the storm. They successfully maintained their margins and sustained both organic and inorganic growth. The anticipated rebound, likely to occur at the second half of 2024 or the beginning of 2025, holds the potential for significant positivity and benefits. I wouldn't be surprised if they announce new acquisitions soon.

For a more detailed review, you can refer to Titanium Transportation Group's official report.

NewLat $NWL

NewLat Food (NWL) presented robust results that align with their performance throughout the year—achieving a commendable growth rate of 15% and witnessing the recovery of margins. Moreover, the company disclosed ongoing discussions about several potential acquisitions.

During the conference call, it was mentioned that out of the 15% growth, 5% could be attributed to volume increases, while the remaining 10% resulted from price hikes.

For a detailed overview, you can refer to NewLat Food's official report.

GoEasy $GSY - Timeless Truth: Another Record Quarter for GoEasy

No matter when you read this, it holds true: GoEasy has achieved a new record quarter. My takes:

• Their commitment to surpassing the guidance for 2023.

• Q3 EPS growth rate of 29%, and 20% for 9M.

• A notable decrease in delinquency rates.

• Expanding margins despite the challenging backdrop of increased interest rates.

Looking forward, they anticipate sustaining a 20% annual growth with a low debt profile. Currently trading at a P/E ratio of 8x for 2024.

Berry Global $BERY

Berry Global presented their Q4 and FY23 results, revealing several noteworthy achievements and strategic moves. Here are my key takeaways:

• Record-Breaking Performance: Despite challenging market conditions marked by lower volumes and price reductions due to the resin market, Berry Global set another record for adjusted earnings per share and surpassed their free cash flow guidance by $100 million.

• Capital Return to Shareholders: Demonstrating a commitment to shareholders, the company returned $728 million of capital. This included $601 million in shares repurchased, equivalent to approximately 8% of the shares outstanding, and dividend payments totaling $127 million.

• Leverage Management: Berry Global ended the period with a leverage of 3.7x, and they plan to proactively address this in FY’24. The company aims to repay debt targeting an ending leverage of 3.5x or lower, aligning with their long-term target of 2.5x-3.5x.

• Pricing and Cost Actions: In response to market challenges, Berry Global took proactive pricing and cost actions, resulting in a positive price/cost of $168 million in FY’23. Moreover, they anticipate a carry-over benefit of $55 million or more in FY’24.

• Dividend Increase: Reflecting confidence in their financial position, Berry Global increased the dividend by 10%, establishing a new annualized rate of $1.10 per share.

• Strategic Investments: The company is strategically investing in the health care, personal care, beauty, and food sectors. These markets offer not only higher margins but also higher growth potential (HSD).

They also provided their guidance for FY2024, which I have already integrated in my model.

Remarkably, despite this strong performance, it's surprising that the company is currently trading at a PE ratio of only 8x.

WATCHLIST UPDATE

OTHER READS

I would like to conclude this post with a small tribute to Charlie Munger. If you're reading this, you're probably aware of his passing and the impact he had in the investing world. Beyond his professional achievements, many might not know that he was also known for his extensive System of Mental Models, which served as a great inspiration for me.

For a deeper understanding of Charlie's Mental Models, I recommend the following playlist curated by @TheSwedishInvestor: Charlie Munger's Mental Models Playlist

Here are a few quotes from Charlie that have left a lasting impression on me:

“Remember that reputation and integrity are your most valuable assets—and can be lost in a heartbeat.”

"The first rule of a happy life is low expectations."

"The big money is not in the buying or selling, but in the waiting."

"It is remarkable how much long-term advantage people like us have gotten by trying to be consistently not stupid, instead of trying to be very intelligent."

“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.”

“We all are learning, modifying, or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side.”

“How to find a good spouse? -the best single way is to deserve a good spouse.”

“We both (Charlie Munger and Warren Buffett) insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think.”

“To get what you want, you have to deserve what you want. The world is not yet a crazy enough place to reward a whole bunch of undeserving people.”

"In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time — none, zero. You’d be amazed at how much Warren reads–and at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”

“Mimicking the herd invites regression to the mean (merely average performance).”

“A lot of people with high IQs are terrible investors because they’ve got terrible temperaments. And that is why we say that having a certain kind of temperament is more important than brains. You need to keep raw irrational emotion under control. You need patience and discipline and an ability to take losses and adversity without going crazy. You need an ability to not be driven crazy by extreme success.”

“If something is too hard, we move on to something else. What could be simpler than that?”

“All I want to know is where I'm going to die so I'll never go there.”

As we mourn the loss of a true icon, let's honor Charlie's memory by embodying the principles he passionately believed in — rational thinking, continuous learning, and a commitment to making the world a better place.

Rest in peace, Charlie Munger. Your legacy will forever inspire us.

Kind regards,

Guybrush