Ticker: LNSR

Price: USD 8.27

Shares Outstanding: 12.28m (fully diluted 27.35m)

Market Cap: $101.55m (fully diluted $226.16m)

Enterprise Value: $191.1m

Here is what I wrote about LENSAR (kept anonymous at the time) in my last quarterly update. As you're reading this now, those assumptions have been confirmed.

I'll keep this pitch as concise as possible. Both the upside and specific risks seem pretty clear at this point, and I just wanted to see the upside confirmed, which yesterday's results did.

The Company

LENSAR developes cataract laser systems and has officially two system types in the field, LENSAR Laser System LLS and Robotic Cataract Laser System ALLY.

ALLY is the next-generation successor to LLS. While LENSAR continues to support the legacy LLS installed base, ALLY is the primary system driving their commercial strategy, which has proven highly successful:1

Since the launch in August of 2022, we grew our installed base to approximately 200 ALLY systems and grew our procedure volume, gaining market share from 14% procedure share in the U.S. to 23.4% as of the end of 2025. I want to say we gained almost 9.5% of market share points in 3.5 years.

Nicholas Curtis, Earnings call Q4 20252

CEO Nicholas Curtis also mentioned the reason for that during the earnings call:

These market share gains come from 3 specific areas. First, it comes from competitive accounts, replacing first-generation lasers with our ALLY Robotic Laser Cataract System accounts for the largest gain in share.

Second, the gain in share is demonstrated by what happens after we replace a competitive system. LENSAR on average performs 27% more procedures annually than the national average per laser, providing evidence that we are growing the overall market for robotic laser cataract procedures. Third, nearly 50% of our systems in Q4 2025 were from Femto-naive surgeons, further expanding the market for laser cataract-assisted surgery. The data provides evidence LENSAR is addressing the shortcomings of the first-generation laser-assisted cataract surgical lasers by delivering the most technologically advanced next-generation robotic laser for cataract surgery in multiple ways.

Nicholas Curtis, Earnings call Q4 2025

The success they had with ALLY is clear if you look at system placements and backlog leading up to Q1 2025:

There’s a specific reason I mention Q1. It explains the subsequent drop in stock price, placements, and backlog, but it’s also the exact reason this setup has become interesting again.

The Investment Case

So what went wrong here? From the perspective of a Q1 2025 shareholder back then, everything was going right. Alcon had agreed to acquire LENSAR for total consideration of up to $430M, which represented an 8x multiple on LENSAR's revenue at the time.3

I don’t follow too many rules when it comes to investing, but one rule that sticks with me is: If an acquisition is announced, sell immediately. So many things can go wrong along the way, especially when a company holds relevant market share. Here, the drama started early with the FTC signaling opposition,4 since Alcon is a major competitor5 and combining them would create a dominant player in the FLACS market (femtosecond laser-assisted cataract surgery).

As it became increasingly clear that the FTC might block the deal, both sides agreed to terminate the merger agreement.6

The termination of the acquisition agreement was a mutual pragmatic decision made after a year of focused effort and considerable expense from both sides. While this acquisition was approved overwhelmingly by our stockholders, ultimately, we made the decision to terminate because the Federal Trade Commission would seek to enjoin the merger. While both parties work towards offering acceptable accommodation to allow it to close, it became clear the FTC was not open to changing their position.

Nicholas Curtis, Earnings call Q4 2025

LENSAR’s stock price tanked on the news, dropping well below pre-deal levels. What looked like an overreaction at first makes complete sense when you look at the table above and see how backlog and placements fell off a cliff right after the merger announcement. So what actually caused that operational drop?

The earnings call following the merger termination provided at least part of the explanation:

The uncertainty over the post-acquisition ALLY distribution landscape had a greater impact on our outside United States distributors than our U.S. customers, and that uncertainty caused a meaningful slowdown in our international business expansion over the last year.

[…]
So the business outside U.S. is different in a lot of cases, particularly in a few of the countries where you don't have as many private practice and, let's say, ambulatory surgery center owners where they can make the decision or a private equity group that makes the decision, for example, in Germany, where we have a large private equity group, and we are one of the primary suppliers there. And so in some of the -- particularly Southeast Asia, some of these go on tenders. And given the uncertainty, they were hesitant to engage in a tender because they’re over an extended period of time.

So for example, they’ll start reengaging in these tenders and those tenders take time. And quite frankly, we may have lost a few renewals in the short term from some of these deals, not our deals where they had our systems, but where we had an opportunity to, let’s say, quickly replace a competitive system. And so I just expect that it’s going to take us several quarters to really reinvigorate, get out and assess where some of those tenders are, where we have opportunities and begin to do that as well as participating in some of the various conferences like we do here.

And so I just caution to say that -- because we had this massive quick start when we got the ALLY approved 2 years later, now essentially, there’s been 0 activity for the last 9 months and so there’ll be some restart-up. And it’s not like there’s a backlog sitting there because essentially, these distributors didn’t -- again, we’re planning for life without LENSAR that they didn’t expect to be distributing on a going-forward basis

Nicholas Curtis, Earnings call Q4 2025

To me, the order slowdown makes complete sense. ALLY was a direct competitor to Alcon’s legacy platforms, and the plan was to merge sales channels. From a customer or distributor standpoint, why submit a tender for a platform when the future owner, sales support, and long-term product roadmap are all up in the air? It's worth noting that this dynamic mainly applies to international markets, as LENSAR relies on a direct sales force in the US.

7

So there is zero doubt among management about their mission following the failed merger:

Now that we and our distributors have clarity, I'm confident we can rebuild the strong international presence over time.

Nicholas Curtis, Earnings call Q1 20268

Yesterday’s call showed that this remains a work in progress. To be fair, the CEO was always clear that rebuilding those distribution connections would take a few quarters, as they essentially have to run through the same sales cycles as before. Europe will apparently be one of their key target markets.

So why invest now when we still don’t know if this is going to work out? Because yesterday's results prove that the business, even in its current state, is strong enough to make a compelling case.

A large chunk of their revenue is recurring, primarily from procedure licenses and consumables used in each procedure.9 Even if you ignore the YoY growth in procedures and recurring revenue, Q2 puts them at an annualized recurring revenue run-rate of roughly $55M, though keep in mind there is seasonality here, with Q3 typically being the weakest quarter due to summer holidays.

It is worth noting that the plug was pulled on their growth engine while it was running at full steam, leading to significantly lower placements. Current procedure growth from systems in the field shows what is possible if they recover even a fraction of their pre merger placement momentum. ALLY was essentially still in its early stages of market adoption.

What is also impressive is that they managed to operate near EBITDA breakeven while scaling rapidly. The latest quarter gives us a glimpse of what underlying run-rate profitability could look like, though keep in mind that gross margin and Adjusted EBITDA were boosted by a one-time $1.1M tariff refund. Excluding that benefit, gross margin was a healthy 52% with normalized Adjusted EBITDA around $2.5M.10

Valuation

Be aware that while LENSAR is cheap if growth continues, it’s not quite as cheap as the basic market cap on certain financial trackers might suggest. At a stock price around $8.27, a significant number of outstanding warrants and options are in the money, so you need to look at the fully diluted share count to get the true valuation.

So you are looking at approximately 2.9x EV/Revenue run-rate. If you are new to medtech, that isn’t nearly as expensive as it might sound, especially considering Alcon agreed to pay 8x revenue. Of course, LENSAR was a fast-growing competitor taking market share at the time, but even now, you don’t need much imagination around ongoing system sales and procedure growth to see a compelling setup. I wouldn’t be surprised if we are looking at an $80M+ run-rate business by the end of the year. Even without international distributors coming back immediately.

Risks and things that haven't been mentioned yet

There are a few additional risk factors you should be aware of if you are considering an investment:

• The warrants and preferred shares are both held by North Run Capital. They hold two board seats and approximately 45.4% of the total voting power, giving them primary control over major corporate decisions.

• If international distributor re-engagement fails or lags significantly, a meaningful portion of the expected growth upside could be lost.

• Future acquirers might hesitate to approach LENSAR after seeing the FTC-driven deal termination with Alcon, particularly if they already hold a competing cataract product line.

• Don’t treat the recent normalized Adjusted EBITDA baseline of $2.5M as a fixed quarterly floor. Management has already indicated that OpEx will rise to support higher placement velocity going forward. A trade-off shareholders should welcome as long as it drives long-term system expansion.

• Q3 combines a seasonally weak quarter with higher OpEx, so yesterday’s buyers might lose confidence if numbers dip. For the same reason, placements and backlog might need to hold at least current levels to maintain momentum.

• Include all standard industry risks covering reimbursement policies, competitive landscape, and regulatory considerations.

Conclusion

Given how long I’ve been watching this from the sidelines, I’m glad a window has finally opened where I can confidently become a shareholder. I’ve repeatedly pointed to LENSAR as one of the highest-quality medtech businesses in the micro-cap space.

Valuation might look high on paper, but we already have third-party validation from a strategic buyer that it was worth a much higher multiple on its original trajectory. At current levels, not everything even needs to go right immediately to justify the price, given how strong that high-margin recurring revenue base is.

Ticker: AVG.L

Price: GPB 7.15

Shares Outstanding: 36.93 million

Market Cap: GBP 264.05 million

Enterprise Value: GBP 256.89 million (based on the latest interim results, including placement)

The nuclear renaissance is an obvious macro theme, as reflected in the rich multiples assigned to pure-play fuel suppliers and SMR developers. Finding an attractive risk-reward profile is increasingly difficult because remaining supply-chain plays are often too niche or granular to drive meaningful returns. It is also next to impossible to find a microcap with true meaningful nuclear exposure as this is obviously a highly regulated industry which is dominated by very large players. Avingtrans offers a rare middle ground: enough nuclear scale to impact company performance materially, paired with call-option-like upside across its Medtech portfolio.

Pairing these macro tailwinds with a management team whose DNA is rooted in realizing value as growth materializes and returning capital to shareholders creates a compelling case.

The Company

Avingtrans describes itself as a company with a buy-and-build approach in niche markets and currently operates through two main divisions: Advanced Engineering Systems, which designs and manufactures a portfolio of solutions for energy systems, including motors, pressure vessels, heat exchangers, blast doors, and pumps, and Medical & Industrial Imaging, which produces Magnetic Resonance Imaging (MRI) and 3D X-ray systems.

As the Medical division is still in its early stages from a revenue perspective, the initial focus naturally falls on the AES division

Advanced Engineering Systems

AES currently consists of seven different business units,1 all with different products and drivers. On the one hand, it would be arduous to list all of them, as we want to keep this concise, but on the other hand, management leaves no doubt where the current focus lies:

Avingtrans’ primary focus in Energy is the nuclear sector - harvesting opportunities in decommissioning, life extension and next generation nuclear markets. We are also engaged with a variety of niches in the renewable energy sector. The management will also continue to build on our footprint in the wider power and energy sectors.

Interim Results - Released 25 February 2026

While many companies claim to be aiming for market share in the expanding nuclear market without offering products that truly move the needle for the overall group, Avingtrans already has a strong foothold across several stages of the nuclear power generation lifecycle through its business units.

1. Hayward Tyler: Produces pump and motor solutions for safety- and non-safety-related applications in the nuclear industry. The unit holds several key nuclear certifications, including ASME N, ASME NPT, and ASME NS.23 Operates from UK, USA, China & India.

2. Energy Steel: Describes itself as a dedicated nuclear sourcing specialist that has provided fabrication and supply services to the nuclear industry since 1982. The company offers a wide range of storage tanks, heat exchangers, and structural supports, all backed by the relevant ASME stamps.4 Its case studies show a primary focus on replacement work for existing plants (addressing legacy components and OEM part obsolescence).56 Now, it is also starting to secure new build work with major players across the nuclear industry.7 Based in the US, the business was merged into Hayward Tyler in January.8

3. Metalcraft: Offers engineering and manufacturing services across many different industries, as well as safety-critical equipment for the nuclear sector, spanning decommissioning support and new-build. The products that have made headlines recently are the nuclear waste storage boxes, but the company also offers pressure vessels, tanks and heat exchangers for new nuclear power plants and defence nuclear.9 Operates from UK & China.

4. Booth Industries: Engineers and produces high-performance steel doors, for example fire, tunnel, ballistic and blast doors,10 and has over 50 years experience in bespoke and pre-engineered doorsets and protection systems for nuclear facilities across the UK and Europe, engineered to Nuclear & Seismic Safety Cases for radiation shielding, blast, fire and thermal protection.11 Operates from UK.

If it's not already obvious at this point, let us say that we deliberately concentrated on the nuclear side of their business, as that's where ongoing order intake could lead to further margin improvement and a multiple expansion. That doesn't mean the rest of their end markets are irrelevant, as Booth Industries' recent £7.5m order for HS2's Old Oak Common station proves.12

Maybe it’s a bit of a stretch to say Avingtrans can guide a nuclear plant from cradle to grave, but it should be pretty clear by now that the group is involved at various stages of a plant’s lifecycle, from design and new build through life extension to decommissioning, and that it already holds the gatekeeping certifications for the US market.

The following table (note that it spans two pages) illustrates the foothold Avingtrans has established across its business units in both the civil and defense nuclear markets.

Please keep in mind that this primarily reflects order intake from the last few years. Because these subsidiaries all have a rich history in nuclear engineering, this should not be viewed as a comprehensive overview. Instead, it highlights forward looking opportunities based on recent contract wins, LOIs, and announced programs that remain in their early stages.

It is important to note that Stainless Metalcraft has not yet been awarded the £900m order. However, as the incumbent on the previous contract, expecting them to win this deal is reasonable. A multi decade order of this magnitude would drive meaningful long term revenue and margin expansion while producing a great headline.

As the order intake shows, nuclear exposure is not speculative. It is real, and management is moving to prepare for higher order volumes. They raised £21m a month ago at 630p. The placing was significantly oversubscribed, and non executive chairman Roger McDowell participated with an aggregate amount of £0.8m.13 What is far more interesting is what the proceeds will be used for:

The net proceeds of the Placing will be deployed principally to expand its nuclear capacity by building out its facility in Michigan, including acquisition of manufacturing equipment and expansion of its workforce, so as to be able to accommodate expanded demand from both existing client orders and prospective new projects;

The expansion of this facility will enable the growth of the Company's nuclear revenues from circa currently £35m to circa £90m from already known business from its existing customers over the next 5 years14

It is worth highlighting that the company plans to expand its nuclear business capacity by 2.5x based on 'known business'. This is not a speculative capacity increase, but a necessary step to fulfill orders that are already visible. Avingtrans Group revenues stood at £156m for the full year 2025.15 If they reach that level of nuclear order revenue, the company will get even more attention than it already has. And again, this is known business. The nuclear renaissance is still in its early stages with respect to concrete orders.

The following table, based on World Nuclear Association data,16 provides an overview of current worldwide nuclear projects:

It's worth noting that nuclear projects were in a steady decline, especially when you take China out of the equation.

The following trends can be recognised when looking at the constantly changing global reactor landscape: Most new reactor units are being built in Asia, whereas most of the reactors being dismantled are located in Western Europe and North America.

GRS17

This trend appears to be shifting now, particularly regarding SMRs. However, having executed nuclear orders in the past does not necessarily mean a firm can meet the demands of new projects. The key question is who will benefit from the nuclear renaissance, to what extent, and in which markets. It is therefore promising that Avingtrans has already disclosed connections to several major players.

So, based on all available evidence, Avingtrans will be one of the companies that benefits from both new large reactors and SMRs, and it will likely generate a lot of eye catching headlines and press releases about order intake. We do not see that fully reflected in the share price.

And that is only one part of the company that could be at an inflection point.

Medical & Industrial Imaging (MII) Division

The MII Division comprises four business units: Adaptix, Magnetica, Scientific Magnetics, and Tecmag.

MII product overview

1. Adaptix: 1. Ortho350 — Orthopaedic 3D X-ray System 2. VetSA3D — Veterinary 3D X-ray System 3. NDT3D — Non-Destructive Testing / Evaluation System 4. Security Applications (3D X-ray for Baggage/Package Screening)

2. Magnetica: 1. Compact 3 Tesla Orthopaedic MRI System (Helium-Free) 2. ViewRay® New Product Concept (MR-guided radiotherapy) 3. Dedicated Extremity MRI System Variants

3. Scientific Magnetics: Superconducting magnet systems, cryogenics, NMR instrument services

4. Tecmag: Part of the Magnetica structure but is an established instrumentation business. It produces MRI consoles (Redstone, Apollo, Discovery), system upgrades, probes (Eagle), portable NMR (LapNMR) and OEM embedded systems.

While Tecmag and Scientific Magnetics are mature businesses Adaptix and Magnetica are working on next generation medical and industrial imaging. The Ortho350 3D X-ray product from Adaptix received FDA clearance in November 2025 and just recently in May also received CE certification in Europe.1819

The Adaptix Ortho350 is a state-of-the-art, portable digital tomosynthesis (DT) system designed for high-resolution, low-radiation-dose 3D imaging in musculoskeletal diagnostics. The system overcomes the limitations of conventional 2D X-ray imaging while offering a more cost-effective alternative to full CT scans.

Avingtrans already sold a few Ortho350 units and is currently still expanding their distribution partnerships. Just in the second half of July they partnered with two new US medical equipment distribution companies. On July 20th they announced a partnership with Spartan Medical to expand federal access to its Orthopedic 3D Imaging System and on July 27th they announced a distribution partnership with Mobile C-Arm Services.2021 While the first partnership seems to be aimed at federal buyers like the Veterans Administration and the Department of Defense, the second partnership adds a local partner in Texas. Besides these two very recent partnerships, Adaptix already signed with four more US partners. So far they also have two distribution partnerships in the UK and one in Switzerland. The partnerships were all established in recent months and it looks like they will be able to build a vast distribution network. Although it will take some time until these partnerships lead to meaningful revenues, we consider the pace of distribution signings in itself a nice signal, as these companies obviously see a large enough market potential to be a worthwhile addition to their catalog.

Adaptix also developed a non-destructive testing (NDT) solution by leveraging their medical product. It provides a next-generation NDT solution for industries such as composite manufacturing, 3D metal printing, metal casting, and other fields where non-destructive testing (NDT) is primarily performed using ultrasonics due to its advantages in terms of speed, cost, and mobility.

AdaptixNDT’s NDT systems bridge gaps in the NDT process during the development of new products for the aerospace and automotive industries, providing 3D visualization of internal structures as early as the diagnostic stage in the initial manufacturing phase and throughout the entire product lifecycle, with consistent digital results. In October 2024 Adaptix was awarded the Innovation Award for the most exciting emerging technology at the Aerospace Technology and Innovation awards, which is presented by the Aerospace Technology Institute (ATI).22 At the beginning of 2026 the company signed its first material inspection contract. The company believes that the Adaptix NDT solution has a “potentially groundbreaking impact within the NDT inspection market”, especially in the aerospace, defense and specialist automotive markets.23

Magneticas 3T MR system is a compact MR system that has been designed and optimised specifically for musculoskeletal extremity imaging applications. Magnetica has already successfully built and tested the system. It delivers clinical-quality images, as confirmed by consistently positive feedback from potential customers and key opinion leaders. During demonstrations of the prototype, including at the Radiological Society of North America (RSNA) conference in late 2025, prospective customers were very impressed by the high image quality and the user interface.24

Currently, the MRI system does not yet have FDA approval for sale on the U.S. market. The submission of the 510(k) clearance application to the U.S. Food and Drug Administration (FDA) has been delayed several times. The main reason for these delays is the FDA’s significantly increased and highly complex requirements regarding the cybersecurity of medical imaging systems. The group is currently working constructively with the FDA, and the technical documentation and validation work are progressing in accordance with regulatory requirements. The submission of the approval application is now expected in the second half of calendar year 2026.

Magnetica is also collaborating with ViewRay on a new product concept and announced in their interim results on February 26th the completion of a design intended to be integrated directly into ViewRay’s MRI-guided radiation therapy systems.25 Avingtrans stated in the past that “This partnership has the potential to be an important new business stream for Magnetica in the coming years.”26

Beyond traditional healthcare, the MII division is seeing immense promise in adjacent high-tech industries. Scientific Magnetics is successfully selling an increasing number of superconducting magnet and cryogenic systems used to develop quantum computers and plasma containment for fusion reactors. This profitable, cash-generating arm is benefiting indirectly from the global AI boom.

MII remains largely a pre-commercial, early-stage division. Revenue is still very small (~£5m) vs Group’s £156m+ topline. At the current stage the AES division still has to subsidize the MII divisions operations, but the MII division seems to be at an inflection point and adds a lot of optionality which in our oppinion is currently not reflected in the share price.

The company spoke on several occassions about a potential monetization of the MII segment. In a 2025 interview the management team mentioned an IPO as the main goal, although it remains to be seen whether the companies in the division (such as Adaptix and Magnetica) will go public together or separately. Management also does not completely rule out a strategic sale to a larger company should a suitable offer arise at the right time; however, it is still too early for that and they don’t expect to sell the segment before FY 2028.27

Valuation

We have not touched on valuation so far. On the surface, it does not look compelling with an annualized P/E of 34 based on interim results. However, given management's statement that revenue and EBITDA are split 45/55 between H1 and H2,28 and with adjusted EBITDA at 9.6m for H1, we arrive at a full year adjusted EBITDA of 21.3m. D&A currently sits at 7.1m, but keep in mind that the company is capitalizing significant development costs, especially for the MII segment (8.4m annualized), and a capacity expansion has already been decided. Consequently, actual CapEx/R&D spend is much higher and D&A will rise correspondingly in the near future. Based on management's 45/55 comment, one arrives at these multiples, raise proceeds and dilution included.

One should be aware that this is a very conservative assumption and FY26 results will very likely look better than that, as Avingtrans already confirmed that profit will be in line with market expectations.29 That would be 31.7p in adjusted earnings, which translates into a 22x P/E.30 Our assumptions are overly conservative regarding taxes and non controlling interest, and we evaluated the figures from a post placement perspective. For context, Cavendish forecasts 45.3p EPS for FY28, which implies a forward P/E of 15.8x.

Still, it does not look particularly compelling at this point, but there are several things to keep in mind here. First and most important are management's expectations with respect to the EBITDA coming from the Hayward Tyler expansion. Management stated this in the placing RNS.31

Management's illustrative projections indicate that Hayward Tyler should be able to generate further revenue from this Nuclear investment of between £27m-£45m (subject to a number of assumptions) which, at its typical margin, could achieve additional EBITDA of between £9.6m-£17m in FY31, on the basis that the investment and Hayward Tyler continuing to grow its nuclear business in line with existing client opportunities and pipeline.

That is not formal guidance, but it tells us a lot about HT. The ‘typical margin’ is apparently between 35.6% and 37.8% EBITDA. That is an incredibly strong margin and shows the advantages of having strong nuclear market exposure. If we add those numbers to our EBITDA line, that changes the picture massively. Still, keep in mind that it will take time and we have not discounted the cash flows or adjusted D&A etc.

Again, that is only incremental EBITDA from HT, and the company indicated that the company's nuclear revenues could reach 90m by 2031. That leaves an additional 10m in nuclear orders coming from other business units, but as we have no indicator for the margin here, it would be pure speculation to assume a similar margin.

However, given management's comments with respect to HT, one could make the case that it could cover most of the group's valuation. While we normally criticize assumptions like these, in this case we think it is fair, as management has stated several times that they buy, build, and sell units.

The current EBITDA we assumed here is based on FY2017, when HT was still a public company,32 the statement that the Peter Brotherhood segment was operating at a loss at that time,33 a 15% EBITDA margin for HT (which looks conservative given that current HT revenue is already a blend of standard industrial and nuclear equipment), and a 5% growth rate in EBITDA since then.

So, the potential discounted HT value at 12x EBITDA already covers 80.7% of today’s valuation. This relies on a blend of conservative and bullish assumptions, so it is not even the brightest picture one could paint.

This is just one business unit out of four or five exposed to nuclear markets, depending on whether Scientific Magnetics is included.

The 30.4m to 37.8m EBITDA assumption for the Group also includes only the HT growth, and it is worth emphasizing that this covers only nuclear growth. It leaves out growth from data center exposure34 or any additional revenues from the medical segment.

It is worth noting that Cavendish assumes 45.3p in EPS for FY2028, which would translate into a 15.8x P/E.35

While we would not feel confident quantifying 2031 financials at the group level or even near term numbers, and fatigue could set in along the way, we believe current evidence makes a strong case for Avingtrans. The thesis relies not on today’s financials, but on ongoing catalyst flow surrounding SMR deployment and the nuclear renaissance.

Conclusion

This is not a two or three quarter thesis. It is much more likely a case where operational results come in slowly but steadily, tied to nuclear projects.

Although today's multiple already seems rich, we expect it to hold steady, given our belief that a) nuclear momentum has not peaked, b) many investors were unaware of the significance of Avingtrans's exposure to the nuclear market, and c) the medical segment has the potential to show stronger near term results and be monetized in the long run. Short term exaggerations in the stock price are very much possible, depending on the overall status of the nuclear market and concrete orders for Avingtrans.

Investors should remain aware that the road may be bumpy until additional nuclear revenues hit the top line.

Assume that I am actively trading or hold a position in all of the mentioned stocks. Nothing I say or write should be construed as investment advice.

• Performance YTD - 2026: 31,2%

• IRR since 01.01.2017: 34,43%

• TTWROR since 01.01.2017: 886,67%

Stocks in my portfolio

Below are my current portfolio positions, in descending order of size. To ensure updates remain concise and meaningful, I will only mention positions representing more than 2% of the total allocation.

First five positions are nearly identical in size, so don't read too much into the order.

Cash

After selling one bigger position and acting carefully with respect to adding new positions, I currently have 25% cash, despite being fully invested at the beginning of June.

$IMB.AX Intelligent Monitoring Group

I know what I said. IMB will never become my biggest position again and it wasn’t a deliberate decision. Through selling my bigger positions, adding a bit at the low and the slight rise in stock price it’s currently again my biggest position. Still, my conviction hasn’t changed, meaning I still think it’s too cheap, but anything but a bet the farm investment. At least until we really see that pipeline build turns into real revenues within the 12 month time frame Dennison Hambling mentioned.

Even if it takes longer, apparently it paid off to achieve that level of operational coverage in Australasia, as they are getting a lot of commercial orders. And that’s the story here going forward: commercial work.

An area of concern, or at least doubt, remains the residential side of the business. That consists primarily of contracts based on technology from the past, which will turn into an elevated level of churn in the future. At least, that’s what I’d expect.

Video guarding arguably has an edge over simple DIY camera solutions since a person is actively watching over your house while you are on vacation or sleeping, but they still have to prove that this is really something people are asking for. Again, I’m talking about the residential side of the business. For the commercial side, it makes total sense when combined with access controls and all the other technology they are selling. Dennison apparently sees a much bigger TAM here than before, as he views them competing with physical guards. His argumentation makes sense to me, and the number of lines is apparently accelerating, given that they had 850 lines at the end of March and he was talking about more than 1,000 lines in this podcast

In the quarter, they also completed the acquisition of Wormald NZ and Red Wolf, which adds fire protection to their business along with a high portion of recurring revenues and very sticky contracts. It also opens a lot of doors for cross-selling security solutions to commercial customers in NZ.

Current guidance is 0.062 to 0.07 pro forma EPS, which translates into an 8 to 9x P/E ratio. This would be very cheap IF they prove they are capable of converting the commercial pipeline into ongoing revenues and successfully growing it. Q4 is usually a very strong quarter for them. Dennison has often described the first three quarters as being about building the book and Q4 as turning it into revenues, so I think the EPS guidance is achievable. However, the market clearly still has a relatable trust issue with them based on past experiences. For me personally, it is absolutely vital to see them deliver on at least the lower range of the EPS guidance. If they start to show some sort of continuity with respect to commercial work, the stock will likely see a significant rise, and the market will finally see the seasonality for what it is.

I added to my position.

Radcom Ltd.

I strongly recommend reading the pitch by my friend Sven to get a better understanding of the case.

An Exploration of Microcapland

Radcom Ltd.

Price: USD 12.00/share…

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5 months ago · 46 likes · 5 comments · Financial Skeptic

When I wrote at the beginning that I was acting opportunistically, I was partially referring to RDCM. A stock market guru with hundreds of thousands of followers pitched the idea to his audience and took more or less half of the potential upside off the table. I sold two-thirds of my position because it was pretty clear to me what would happen next: fatigue would set in and people would sell since they didn’t really know what they had bought. It got even funnier than that. Less than two months later, the same guru told his followers that he had sold his position (at least partially, I'm not sure about his current allocation), leading to a massive stock drop that I again used opportunistically. I was at a friend's place when this happened, getting a lot of DMs. It was actually another German investor who figured out what caused it: the guru selling. So it went completely the other way around. First, the stock rose significantly on no fundamental news, prompting me to sell given the expected timeline for the case to materialize. Then, the stock dropped on no fundamental news, allowing me to rebuild my full position. A network really pays off.

That aside, so far everything has gone according to plan. The board was replaced, the insider activists won, and now the next logical step would be a strategic review.

On a net basis, I reduced my position.

$SEN.AX

Another pitch from my friend Sven, and again, I strongly recommend reading it. My current impression is that people totally underestimate what kind of perfect storm this could become for such a small company. The advantage here is that they have already chosen the easy path by cooperating with a much bigger player like Thales, thus essentially outsourcing SG&A and very likely benefiting from massive operating leverage.

An Exploration of Microcapland

A Small, Light Boat in a Rising Tide

Price: AUD 3.13/share…

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3 months ago · 20 likes · 2 comments · Financial Skeptic

Iridex

I told you in the last update I’d act opportunistically, and I did. Essentially irrelevant news pushed the IRIX stock price significantly higher on high volume after hours, likely due to algo trading, and I took the chance to sell half of my position, which I partially bought back the day after.

Then, it was just like many times before with IRIX. Results came out and I totally disagreed with the overall market view. In my opinion, they showed they are completely on track, beating all my assumptions for Q1 with higher revenue, a higher GPM, and a higher adjusted EBITDA than expected.

For me, the thesis is straightforward. They have a genuine chance to emerge from this year as a profitable medtech company, currently valued at less than 0.5x EV/Revenue. Furthermore, the underlying profitability in Q4 will likely be significantly higher than what the full year run-rate suggests.

My calculation utilizes the company’s own full year revenue guidance of 51 to 53 million. I assumed a gross profit margin of 37% to 43%, keeping in mind that the 37% margin reported two quarters ago was negatively impacted by one-time inventory write-downs. For expenses, I used the full year operating expense guidance of 19 to 19.5 million, which excludes D&A and stock-based compensation.

Because this calculation combines expected short-term gross margins with guided full year operating expenses, the actual year-end financials will differ. However, I believe this remains a conservative baseline, especially since management has multiple initiatives underway to expand margins, such as contract manufacturing.

The reason they can finally achieve what seemed impossible for decades is equally clear: a newly favorable reimbursement environment, strong clinical data, and a management team that is actively moving past legacy constraints.

I’d like to add that the earnings call was great. They essentially reminded listeners of every ongoing effect and planned improvement, making it much better than previous calls.

To my German readers, I can also recommend listening to the episode where I recently discussed the IRIX results with Sven.

I increased my position.

$MCB.TO McCoy Global

After fully exiting the position last quarter in expectation of a dilutive capital raise, I reentered it once it was clear that they weren't raising capital, but had closed a new revolving credit facility instead.

In hindsight, it wasn't the right time to get back in, as the market surprised me with its apparent expectations. Revenue came in 0.4m higher than I expected, and yet the stock dropped massively. I don't know what kind of miracle the shareholders were hoping for, but I guess it is fair to say that this could have been expected with two thirds of their backlog tied to the Middle East.

What is poisonous to the stock is the remaining uncertainty in the region, as it is still not clear if the Iran war is over. Order intake will likely be affected by it, and there are probably stocks where money can be made more easily, but in the long term I still see them as the technological leader in this space, and that is why I am invested.

I bought the majority of my position after the new facility was announced and the remainder after the quarterly results came out.

Sanara MedTech

I have more Medtech companies on my watchlist and in my portfolio than ever before, but currently, only IRIX and SMTI qualify as full positions. This is because many names in the sector are in an operational downward spiral, and one of the biggest mistakes an investor can make is buying in too early. While one could argue that applies to these two as well, both have shown signs of breaking out of the spiral and getting back on the right path.

SMTI is, of course, different from IRIX. We saw a classic good company and bad company setup here, with management finally sunsetting the underperforming side of the business. This past quarter was actually the first period where they could focus entirely on their surgical products.

Q1 showed strong revenue growth, and management noted that March was their highest sales month in history. Even though they guided for 10 to 14 percent revenue growth in Q2, I was not alone in sensing they are trying to establish an underpromise and overdeliver culture. If that is the case, they will eventually raise their annual guidance, which should help the stock finally escape its downward trend. Overall, the tone of the call was highly promising.

In general, there are many signs that YoY revenue will show continued improvement, given the larger scale of the sales team and distributor network.

An obvious catalyst on the horizon would be a debt refinancing.

Sabre Corporation

Results were quite convincing, and guidance adjustments were modest considering the ongoing Iran conflict. I expect another case of underpromise and overdeliver. While it made sense to adjust certain guidance metrics as the conflict began, they kept bottom line expectations steady. FCF guidance for FY2026 remains negative, but that should turn around in FY2027.

hat I didn't like was the new exchangeable notes, because they potentially result in 100% higher dilution and a lower conversion price than the ones they paid off with them. They could also create an overhang for the stock price. However, it is worth noting that while the conversion price is 2.24 dollars, it will not be triggered until the stock trades above 2.91 dollars. Even if that happens, management could still decide to buy them back if they can source cash from elsewhere. So, yes, it's a topic I'll monitor, but nothing that concerns me at this point, as the trigger for the event requires a much higher stock price that would likely be fueled by operational performance.

$ACP.WA Asseco Poland

From an operational perspective, everything went well here and exactly as I originally expected, so I bought back some of my shares. Based on annualized net income to shareholders, the company is currently trading around a 15x P/E. I expect margins to improve further over time, so it already offers a 6-7% yield that is growing. Still, I was aware that we have a bumpy road ahead, which is why I didn't have the confidence to make this a larger position. If operational results follow a similar path to those of Sygnity SA, the stock is obviously too cheap.

$MDI.JO Master Drilling Group

I bought the stock based on the pitch of a German friend. Downside protection stems from the current valuation combined with a much bigger pipeline, although I think the gold price needs to hold a certain level since a significant portion of their pipeline is dependent on gold prospecting.

The main reason I bought the stock is the potential upside from proprietary technologies the company developed, which have the potential to completely disrupt the mining services market. However, this will likely take time and require significant capital, so consider this an investment that extends beyond my typical 3-to-4-quarter timeframe.

Andre73

Master Drilling

Disclaimer: I am invested in $MDI.JO. Nothing i write should be considered investment advice. I bought my shares for USD 1,06/ EUR 0,91…

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2 months ago · 9 likes · Andre73

Travelstock

I bought some shares, but I won't disclose the position until the next results confirm the thesis.

$FOTB First Ottawa Bancshares

Results were in line with my expectations and apparently also with the market's expectations. This is another stock I would place in the medium to long term basket.

Medtech Company 1

Consider this a hated stock, and no, it is not SNWV. I have already spoken with management, and if they deliver in Q2, I will likely make this a much larger position, given the company's balance sheet and new operational environment.

Defense stock

Got it from Sebastians substack.

$NOW.V NowVertical

Bear with me if I say less than there likely is to say. To start with the hot take: results were not as bad as people apparently think.

Still, I get why the stock has more than halved since my last update. You cannot consistently talk about much faster growth and then deliver a YoY revenue decrease alongside mediocre overall results. Trust is gone, and a lot of shareholders feel misled by the bullish comments and press releases. The only tangible silver lining is that they generated strong positive cash flow for the first time, which will likely continue.

Given the lost trust in management’s statements, it wasn’t a surprise that the board replaced the CEO. Still, the PR did not look good, as it was obvious there was an internal dispute. There was no thank you from the company to Sandeep, and no farewell from Sandeep to the company. At this point, we can only speculate about the nature of the dispute, and I will not take part in that.

Given the current EV/FCF multiple, I didn’t sell my shares, but I can relate to everyone who did. This case obviously hasn’t worked out, and I won’t set expectations for the next quarter.

Tech Company

I had a tracking position in this stock for a very long time and increased my position as soon as there were obvious signs of improvement, combined with lower political risks than before. If the next results confirm the trend, I will buy much more, as they have a fortress balance sheet and two products in development that could significantly expand their TAM and margin potential.

Medtech Company 2

This is one of the most promising medtech stocks out there, and compared to other companies in the sector, you cannot blame management for their current situation. I have been following it since 2024 and even planned to pitch it in the Micro Cap Club. If the next quarter shows the signs of improvement management is hinting at, I will revisit the idea and also pitch it on my Substack.

Stocks I sold

AstroNova Inc.

A warm thank you to Sebastian, whose pitch on his Substack introduced me to this stock. It was one of those ideas where I wasn’t 100% convinced at the beginning, but after conducting two days of independent research, I made it my largest position. This happens so rarely, which is why I am incredibly thankful for the investors I share ideas with. It might sound sentimental, but it is absolutely true: I wouldn’t be where I am today without the network around me. So again, thank you Sebastian.

$SUP.L Supreme PLC

Over the last few days, I have frequently been asked for my thoughts on why I sold Supreme. I might have to disappoint you, as I do not have a lot to say. The results were constantly below my expectations, meaning this was a tracking position in the truest sense of the word. My main reason for selling is simply that the overall DNA of the company has changed. This is not with respect to their core operations, acquiring and integrating companies while adding products to their offerings, but rather their balance sheet.

This is no longer an asset light company, and I frequently felt they could face an operational overstretch given that they acquired so many different companies across various verticals. It is already difficult to excel in a single vertical, but it is much harder to maintain control over several distinct ones, especially since the acquisition of Clearly Drinks brought very little shared overhead. Nobody ever claimed Supreme was a brand incubator, so my criticism does not contradict that, but the results are well below what you would expect considering where they started, how much they spent on M&A, and where performance stands today. While revenues increased significantly, EBIT and EPS are down significantly. There are many reasons for this, and it is unclear what the long term outlook holds, but the P&L already shows that the new asset base is weighing on results.

Some investors might argue that because they spent heavily on capex over the last 12 months, D&A is a backward looking metric. I agree, but for me, that capital intensity alters the risk profile going forward. Ultimately, I can no longer anticipate what happens next with the stock, and an inability to predict the forward path is usually why I exit a position. Take that as my primary argument.

With results coming out tomorrow, I have the rare opportunity to be proven wrong within 24 hours.

Energous Corporation

This was one of the biggest contributors to my performance in both the first and second quarters, and it likely deserves more than the few words I will write here. I understood the hype potential from the very first moment Neil Cataldi pitched it in the Micro Cap Club. Neil is one of the few investors whose ideas I read without exception. A company that delivers energy over the air sounds amazing.

When I first invested, the stock was actually cheap on an EV-to-expected-revenue basis. The shock came when the FY25 results were released. I knew they would use their ATM facility, but the dilution was so insane that I sold immediately because the upside math had completely changed for me.

The stock did not drop as much as expected despite the heavy dilution. This served as a litmus test for me regarding the shareholder base. Following a bullish PR I got back in and sold as soon as the momentum stalled. I entered a third time with less capital and less conviction, and that trade obviously did not go well.

Now, I am certain this is no longer my type of stock. If you search for the ticker on X, you will likely see a specific type of investor who is willing to pay an astronomical multiple for anticipated hyper-growth. I simply do not have the confidence to underwrite that outcome with a high enough probability. Still, I am incredibly grateful to Neil for sharing the idea with us.

Overall reflections

This was a real comeback quarter for me, primarily due to a combination of AP, WATT, and ALOT. One of these stocks was an idea I wrote up myself, while the other two came from fellow investors. If things continue like this moving forward, I will be very happy. When I call it a comeback quarter, do not think I actually felt under pressure after Q1. Focusing on YTD or full-year performance is completely artificial, and that is exactly how we should view it. In reality, I felt a sense of relief after Q1, during which I sold six of my ten largest positions and essentially did nothing for a while. I went on two vacations and only conducted research sporadically.

After that, I genuinely felt ready to dive back into research, which resulted in the largest net additions to my watchlist ever. CYQ2 results will likely be the most interesting quarter I have ever seen in terms of prospects potentially turning into actual investment cases, and I am really glad to look at it that way. Five years ago, I likely would have just invested immediately, lacking the patience to wait and see if upcoming results actually validated my thesis.

What is also interesting is how much one can benefit from what I call a mental stock library. I receive about 15 to 20 alerts via Tracktacle every day, and depending on the filing type, I read every single one of them. There were several occasions where I read a press release or filing and not only knew if it was bullish or bearish, which is relatively easy, but also figured out exactly how it would alter the company’s earnings power and valuation multiple. This is a level you can likely only reach after years of extensive research. I don’t think it is primarily a function of age, but rather discipline; I have two investors in mind who are much younger than I am but possess a similarly inquisitory mind.

This kind of library, which is built not just from filings and PRs but also from commentary on the MCC, Twitter, HotCopper etc. allows you to act quickly. You can buy or sell while others are still trying to interpret what they are looking at or waiting to see which way the stock moves. Especially when you are active before the market opens, it really pays off to move fast and factor the existing shareholder base’s expectations into your decisions. WYY was a perfect example of a short-term overreaction, but it was highly predictable because I knew everyone positioned in the stock was waiting for that exact event.

Consider this the Tracktacle marketing section of my reflection, but I am incredibly grateful for the support and trust we have received.

When AI hype reached new highs, one might have expected interest in traditional research and alert tools to disappear. Instead, because we took a proactive approach by integrating AI features directly into the platform, it actually served as a major accelerator over the course of June. Given how helpful and valuable this combination has proven for my own research process, that momentum makes perfect sense to me.

We are still only at the beginning. We are currently running an extensive beta test for a special situations monitor that is already functional enough to launch, though we are still busy filtering out false positives. Initial results are very promising.

Overall, this was an incredible quarter for me. The percentage you see at the top of this update looks nice, but it means much more to someone like me, who started his first business at the age of 22 in his parents basement, using only savings from a bank apprenticeship and a few months of work. Guess why I decided to live rent-free in that basement while studying and launching my first venture. And of course, as the capital base grows, a 30% annual return becomes significantly more meaningful in absolute financial terms. When I realize that a single quarter like this can essentially cover multiple years of my annual spending, it feels surreal, and I am deeply grateful.

I don’t want to kill the vibe, but last year a specific thought began weighing on me more heavily than before. I had the feeling that by focusing so intensely on investing, I was on the verge of becoming self-centered. When I first started my business career, I did almost as much voluntary work for local associations as I did paid work. I steadily reduced those commitments as self-employment began consuming all my time and energy. It took me years to truly realize that I was down a path that made me unhappy and increasingly self-absorbed. Last year, I finally hit the brakes. I recognized that from a material perspective, I already had everything I had ever dreamed of: a house, a garden, and a nice car. None of these are extreme luxury items. It is a 200-square-meter prefabricated house, a 900-square-meter garden, and a used 2023 EQE, all located in the village where I grew up and always wanted to return to.

At that point, I realized I was at a fork in the road. I could have chosen to fill the apparent void in my life with luxury goods, feeling good for a few weeks or months before falling right back into the same pit, or I could choose to do something that actually matters to me. I chose the latter. I ran for the local municipal council and was elected once again, just like when I was 24. I stepped up my voluntary work, including leading a free German language course for migrants alongside a few others, and it has been incredibly rewarding to see how grateful they are. Don’t get me wrong: I am not trying to advocate for a completely frugal life or suggest that investing is inherently selfish. Quite the opposite: investing early instead of spending excessively on consumer goods is exactly what allows me now to live what I consider a more meaningful life.
For anyone reading this who may have felt a similar void, I hope this encourages you to look closely at how you allocate your time. No matter how much you love investing (and man, I really love the thrill and still get those butterflies in my stomach when I think I have found a compelling case), if you feel a sense of internal dissonance, do not ignore it.

Assume that I am actively trading or hold a position in all of the mentioned stocks. Nothing I say or write should be construed as investment advice.

• Performance Q1 - 2026: 0,6%

• IRR since 01.01.2017: 31,94%

• TTWROR since 01.01.2017: 656,24%

Stocks in my portfolio

Below are my current portfolio positions, in descending order of size. To ensure updates remain concise and meaningful, I will stop mentioning tracking positions, which I define as < 2% size in my portfolio.

First six positions are nearly identical in size, so don't read too much into the order.

Cash

It grew not because I deliberately chose to build it up, but because so many of my cases fell short of my expectations, forcing me to sell them partially or entirely. I’m currently looking cautiously for new stocks where I can allocate my cash. In the past, I had poor experiences with holding much cash and being tempted by investment cases that did not meet my usual criteria.

Stock with recurring revenues

Got if from Sebastian’s Substack.

Oil Basket

Thanks to Sebastian Krog, I had the opportunity to look at several oil companies that could benefit from high oil prices without facing an imminent or immanent Iran war risk. He did a great job, and I view this basket as two things. First, it serves as a hedge for my portfolio, as several of my holdings would be negatively affected by supply chain disruptions. Second, it offers significant upside if oil prices remain elevated. Current prices still reflect market expectations that the conflict will end soon and that producers will not fully capitalize on higher prices.

$NOW.V Now Vertical

Not much I can share yet as we’re still waiting for the financial results. I expect a large part of the so-called legacy shareholder base was wiped out with the last results. Consequently, most current shareholders likely just want to see that the company is on track regarding Integration, Strategic Account and Google Cloud revenues. To attract incremental buyers, whether we like it or not, we need YoY growth headlines and positive operating cash flow.

It was interesting that Stifel halved their price target for NOW and essentially called it an “AI show-me” stock. The company just needs to prove they won’t be disrupted, but will instead benefit from the technology. Given their press releases, it’s obvious how they see themselves, and it makes sense to me that they are a beneficiary. Based on what I hear, it’s rare for a company to simply tell employees to “integrate AI” and see immediate results. Most will likely treat this as an outsourced project initially, similar to how small or medium-sized companies don’t just tell employees to implement an ERP like SAP internally. While some try in-house projects, they often end up being more costly, less sophisticated and lose traction over time. The recently announced contract expansion supports this.

Position remains unchanged.

Ampco-Pittsburgh

When I think about the fact that I pitched this stock at $4.65 only three months ago, I should feel very happy and I do. However, I was both expecting and surprised by the market reaction following the quarterly results, which is why I sold less of my position than I normally would.

Although the adjusted EBITDA came in below my expectations due to the mix in the ALP segment and tariff uncertainty in FCEP, it was absolutely clear that Q4 would be a transition quarter. There is a good reason they announced the order intake for both January and February. It was to ensure this doesn’t become a high-volatility stock and to give the market certainty that the strategy is translating into real order intake and a rising backlog for the ALP segment, which was the core expectation of my pitch.

Given that both the US and the EU, as recently stated by Ursula von der Leyen, are pursuing a nuclear renaissance, there is significant potential for upcoming orders. This is especially true since the company clarified in the call that they are currently benefiting from SMRs and the restart of older plants. As I mentioned previously, they provide the cooling coils for the Westinghouse AP1000 pumps. This state of the art reactor is currently planned for construction in Canada and several Eastern European countries.

The advantage is that even if individual SMR projects finally fail, AP could still benefit from the SMR mania already materializing for other stocks. By July, we will likely have a better understanding of how economically viable the first SMR projects truly are. If they reach criticality and provide a pathway toward cost-effective and rapid power generation without decades of planning, it would represent a massive opportunity for AP, given that they supply over 90% of nuclear power providers in the US.

Given the market reaction following the quarterly results, I want to emphasize again that we will not see the real earnings power of AP before Q3. Until that point, the Swedish roll plant still needs to ramp up, and the new machinery for Buffalo pumps will not be fully available for production before Q2. We also do not yet know how quickly the backlog will translate into revenue.

Finally, I want you to keep two things in mind. First, although AP could be both a short term and long term beneficiary of the current political situation, ongoing supply chain disruptions will hurt their customers and, eventually, the company itself mid term. High gas prices could also become a direct issue for plants that do not use induction heating. Second, the management team members are anything but storytellers. Beyond official press releases, do not expect them to push a specific narrative during calls. This is why actual results must prove that the thesis is more than just a story and reflects economic reality. Buckle up for a potentially bumpy ride until Q3, though I expect they will issue more press releases if they have something to communicate. Nobody benefits from more volatility than is necessary.

My position is currently the same size as it was during my initial write-up. I increased my position by 40% when the order intake was announced, then sold those shares once the stock's momentum began to stall.

Special Situation

Sven Klass recently wrote this up in a forum and also plans to publish the write up publicly.

$IMB.AX Intelligent Monitoring Group

There are two stocks in my portfolio where this sentence keeps echoing in my head: "There is nothing an investor regrets more in hindsight than reading lines that testified to how he stuck to a stock and a narrative, even though deep inside he already knew the reality had changed." IMB is one of them.

It is not that I am 100% sure this is the case for IMB, but there is one critical aspect I either ignored or failed to ask the right questions about previously. There is a "bad business" element within the company that management has not framed this way before. However, if you listen carefully, the signs were there, both in their communication and from a purely logical perspective. To gain a better understanding of what I mean, watch three minutes from MCC business breakdown of IMB:

What his analogy essentially means is that legacy alarm system customers will fade away and will have two options: adopt Video Guarding from IMB or simply install their own cameras and manage them via an app. Once someone moves to a new home, they likely will not use a legacy monitoring system, even if one is already installed. It is no surprise that IMB prefers to discuss the potential of Video Guarding. This service has an obvious advantage over self-monitoring because it is watched 24/7, including while the resident sleeps, is on a vacation etc., which allows IMB to focus on value rather than emphasizing the threat from DIY solutions.

It isn’t that I failed to figure that out before, but I was surprised they did not even consider acquiring those lines at, say, 0.3x EBITDA. They must have visibility into accelerated churn. Now, the question is how fast they can scale Video Guarding to keep the residential segment meaningful.

One should also remember that the commercial side is the larger part of the IMB story. They made it clear on the call that their pipeline represents the work they expect to deliver over the next 12 months, which will subsequently lead to recurring service and maintenance revenues.

I sold a third of my position after the BB, and once again, it was discussions with other investors that led me to that decision. It is unlikely to become a large position again, given that it no longer fits into the catalyst basket or the “low stress, low volatility” compounder category. I never want to be the investor who regrets rereading his own lines in hindsight. Still, if this sounds like it won't work regardless of the circumstances, that is not my intention. I simply want to emphasize that there could be an ongoing drag on the narrative, although it likely won't outweigh the commercial pipeline opportunity.

Iridex

Let me start with a quote from my initial write-up:”It’s always the same with cases like this: you look like a genius if it works, and like a fool if it doesn’t. It’s a bit like Schrödinger’s cat, I’m both a fool and a genius at the same time, and we won’t know which until management lets us look inside the box.”

Given that this was at the end of July and I initially expected it to take three quarters to result in a win or loss, now might be the time to admit being a fool. Although I am now 100% certain it will take more than those three quarters, I would still say this is not necessarily the end of the case. Several factors explain the market reaction following the quarterly results.

First, gross margins came in lower than I and likely other investors expected. Given the ongoing step-by-step transition from in-house to contract manufacturing, this isn’t a surprise. However, it is difficult to determine how much of this is structural or what mid-term margins will look like. Management has stated repeatedly that they expect a gross margin improvement from the switch to contract manufacturing.

Also, as part of our continuing efforts to reduce our cost structure, we are in active discussions with contract manufacturers as part of a multiyear initiative to transition production away from our Mountain View facilities and toward lower-cost third-party manufacturing. We expect to begin meaningful transfers in 2026, which will incrementally lower our cost of goods as the year progresses.

Patrick Mercer, CEO

This improvement is likely, as manufacturing overhead should decrease, thereby boosting gross profit. It makes sense that GPM is currently suppressed, as they are still carrying expensive lease costs that are partially embedded in the cost of revenues. Tariffs will, of course, be an ongoing question.

One issue is that management isn’t explaining things in a way that allows investors to easily anticipate margins. Therefore, much of what is discussed remains interpretation. However, if we assume the GPM they hinted at a few months ago, combined with SG&A costs of $19M to $19.5M, there is a strong likelihood they could significantly improve EBITDA YoY. I see a path for $3M in adjusted EBITDA this year, at least on a run-rate basis. This aligns with their guidance for positive cash flow in 2026, and based on my calculations, adjusted net income is also very likely, provided they reach those targets.

I want to ensure everyone is aware of one particular point: I wondered why they issued guidance, especially since it seemed unnecessary and inconsistent with their comments to breakout investors. The answer likely lies in the fact that Q1 revenue will probably look poor.

Overall, I want to emphasize that this case can work well even without growth, given that they have cut OpEx and hinted at higher YoY probe sales, which carry an approximate 80% gross margin.

This is a company that has never truly shown a profit or positive cash flow, and I believe they are doing a great job changing the potential for both. Compared to LNSR, a former high-flyer in the sector that is now suffering from a terminated merger, I suspect IRIX has actually more potential to reach a sustainable financial level.

I increased my position compared to the last update, but I will likely keep it at its current percentage and act opportunistically.

$FOTB First Ottawa Bancshares

I read Harris Perlman’s pitch and spent some time on it afterward. I consider this my first step into the field after observing several banc cases from the sidelines where investing would have paid off.

Stocks I sold

This is the first time that an update has the potential to be more about the stocks I sold than those I kept in my portfolio.

United Homes Group

I will start with the stock where it is simplest to explain what happened and why I sold. As you know, I was invested previously but sold after the strategic review ended differently than planned, without the acquisition of UHG. After that, the plot thickened that it would still happen and it actually did, but unfortunately via a take-under. I have no regrets, even though it cost me around 1.5 percentage points this quarter. It was good to see that it didn’t even take me a day to move on mentally.

$ACP.WA Asseco Poland

I wrote this up last year and although I would argue that nothing so far contradicts what I wrote then, something has changed and is now even more obvious than it was in January. The overall market perception of software companies has shifted. January was filled with articles about AI disruption and investor inquiries. Perhaps it was like that before, but it was the first time the reality truly resonated with me.

When I cannot immediately determine a course of action, I do what I always do: I discuss it with other investors. Although the conversation began with AI disruption potential and long term moats, a single sentence from led me to my current conclusion: it will have an impact on multiples. It was so simple and accurate that it had an almost cathartic effect on me.

Not every software company will be affected equally, especially regarding terminal value. However, one specific moat, the time required to develop a tool, is now arguably significantly smaller. If that development time is what keeps your business model ahead of others, you will likely be hurt by AI. One could argue this is not primarily the case for most of Asseco’s solutions, but I cannot be certain. Given my approach of catalyst investing and my focus on market dynamics as a primary layer for evaluation, I concluded that this environment is no longer favorable for cases depending primarily on multiple expansion.

I want to emphasize that my sale was not the result of a complex model or a deep internal look at the company, but rather the concept of humility I described previously. I would never be able to analyze the competitive advantages of every single Asseco solution well enough to make better decisions about holding or increasing my position. There is a good reason I originally described it as a low IQ bet. When I cannot anticipate what happens next and the market signals that it no longer favors a certain sector, I will accept that for the time being.

As I mentioned, this had a cathartic effect on me. There is a quote from Lucretius that has guided me since I was a teenager. Translated directly, it sounds harsh and provocative, given what I just said:

It is pleasant, when on the great sea the winds trouble the waters, to gaze from shore upon another's great tribulation.

Let me clarify that I do not feel joy when looking at the suffering of others, nor did Lucretius mean it that way. Its meaning is more self centered. It suggests that you feel relief when you realize you have moved on from something that was too large for you to handle. You can then view the ongoing discussions among sector experts regarding whether or how much AI disrupts software with the necessary distance, especially since you cannot participate in those discussions in the way you are accustomed to.

I want to emphasize that this is not about a circle of competence. I would buy software companies again and already have a larger position in my portfolio, but Asseco is a behemoth when it comes to analysis. It was simple when I bought it based on my assumptions, it is now complex based on the assumptions of the market. I highly recommend Sebastian’s article, which sums up my thinking perfectly.

Treasure Hunting

Do You Want to Be Right or Do You Want to Make Money?

The reason I’m writing this article is because I wanted to be right more than I wanted to make money. At least that’s what caused my 2025 to suck. And frankly, I think I’m not the only one who subconsciously prioritizes being right over making money…

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7 months ago · 38 likes · 5 comments · Sebastian

Ascent Industries

One of the incidents I did not expect. The results were not even close to my expectations regarding revenue and gross margin, which was simply the reason I sold the majority of my position before listening to the earnings call. A few days after the call, I sold the remainder. As I stated before, the CEO and CFO contradicted themselves within a few minutes during the call:

Importantly, we did not chase volume to protect optics. We protected margin integrity. We are reshaping our book of business towards higher margin, lower volatility revenue.

J. Kitchen - ACNT - Earnings call Q4 2025

For some of our newer customers we were aware that there was a volume aspect that we were willing to trade for margin.

Ryan Kavalauskas - ACNT - Earnings call Q4 2025

And when I compared the statements to those from the previous call, it made me wonder if there is something missing from the story as we know it so far.

Gross profit rose 20% to $5.8 million, lifting margins 400 basis points to 30%. Adjusted EBITDA improved by more than $1.7 million quarter-over-quarter, swinging from a modest loss to a 7% positive margin. As a subsequent event to this quarter, these gains aren't episodic. They're structural.

J. Kitchen - ACNT - Earnings call Q3 2025

In other words, while demand softness weighed on shipped pounds, pricing discipline and ongoing portfolio upgrading helped cushion the impact, reinforcing that the earnings profile of the business continues to strengthen even in a softer volume environment. [...] For those tracking our progression, Q1 gross margin was 17.2%, Q2 was 26.1% and Q3 is now 29.7%. We have said publicly that 30% was our gross margin target. As utilization improves across our network and we layer operating leverage rebuilt earnings base, we now believe meaningful upside above 30% is achievable on a sustained basis with the right execution.

Ryan Kavalauskas - ACNT - Earnings call Q3 2025

I think you can relate to why I felt completely unprepared for what was coming. I also was unaware of the strong seasonality stemming from agricultural customers, which was added to the language in the 10-K.

Let me add a final aspect before I reach my conclusion. When they announced the share buyback at $15, they stated the following:

Now, consider this specific comment from the Q4 call:

Yes. I mean for the first thing we focused on is reinvestments in the assets. As Bryan mentioned, some of that can be capacity capability enhancements, process improvements, first time in spec, things like that, we're able to streamline and be more efficient. So we'll always allocate dollars to that first. When we looked at share buybacks, the stock was trading sub-15, we thought there was a really good opportunity from where we felt we could be in a few years and then the stock did run a little bit up. So it kind of came out of our buy box for a little bit. So we'll still have that in our quiver, but it was much more attractive in the places where we were quite a bit more active.

Ryan Kavalauskas - ACNT - Earnings call Q4 2025

Announcing a buyback at $15 while stating that the stock’s current valuation doesn’t reflect its earnings power, only to say in the next call that the valuation was too high to execute it, is a bit strange, right? Furthermore, their comments on the buybacks fueled the stock’s rise.

I know some of these points might sound overly critical, but I do not consider these inconsistencies to be irrelevant. I assess management teams primarily on one thing: consistency. I am still lacking a solid explanation for why the results look worse year over year in certain areas, which cannot be attributed to seasonality.

Only recently I asked myself what I am looking at with respect to ACNT when I leave management and its statements out of the equation. The answer is an underutilized specialty chemical company with margins that are still negative. Going forward, I will always perform this kind of experiment.

Yesterday, the company filed a shelf offering, which made me even more skeptical. One could argue that they only renewed the old shelf offering, but at this point, I expected a different behavior. They have a significant cash balance and stated previously that they are planning to pursue M&A. The liquidity available under their 30m facility is de facto much lower than that, currently 11.4m. Given that the covenants are tied to a positive adjusted EBITDA and they currently show a negative EBITDA, it is more of a theoretical liquidity than a de facto one. I would not fully rule out them using additional proceeds from a raise to acquire something. Based on my rather pessimistic assumptions, they could currently use 40m of their cash balance for an acquisition.

Of course, whether it is a good idea to dilute depends on the acquisition and the corresponding opportunity, but I do not want to experience that firsthand as an investor. That is why I am on the sidelines for the time being. Based on the way I have experienced the management so far, I would expect them to describe any potential opportunity in the best possible light. I would at least recommend being skeptical.

Today they also announced that they will add two additional board members, and if you read between the lines, an acquisition seems imminent. Seeing an underutilized company pursue an acquisition potentially involving dilution, where we do not know the scale, would require a level of trust that I currently cannot provide.

$BLM.TO BluMetric Environmental

There are several things I did not like here. Again, results were significantly below my expectations, so I sold my whole position immediately at market open. Simply by looking at this table, you will likely get what I mean.

What we see here is revenues growing significantly, while gross margin erodes and OpEx more than doubles. All that while heavily diluting shareholders and still not being profitable. Sometimes it is as simple as that to make a decision, but there were two additional aspects.

First, I do not know, and I do not want to find out, if this kind of absorption is ongoing.

Second, management decided to let 1.26m of the recent 15m raise flow into their own pockets.

This was not mentioned in the PR that announced the raise. Honestly, I have never experienced something like that with one of my portfolio companies. We pay management a salary to perform these duties. I don’t want to pay them directly for heavily diluting us. This seems like a material conflict of interest. Management and shareholders only sit in the same boat when management deliberately chooses to do so. This management seems to see it differently, going so far as to take money raised from shareholders without informing them properly. I likely will not buy the stock ever again.

$KLNG Koil Energy

I will keep it simple with this one. The valuation was rich for an approach like mine, 2024 was likely a year of overearning, and recent results have essentially proved that. I still think this could get interesting again as they plan to gain more market share, and so far, I have seen nothing that makes me materially doubt their capabilities.

$MCB.TO McCoy Global

I made one big mistake this year, and that is McCoy. In principle, everything that happened was easy to anticipate; my friend even gave me a heads-up in advance and described almost 100% accurately what was going to happen. I do not know why, but I essentially ignored it. I argued that he might be correct regarding delays, but that terminal value would not change for the company. If you are scratching your head now, I would understand that. It was the same for me in hindsight. While it may be technically correct for the entity-level terminal value, it is a totally different story at the shareholder level if they have to raise capital again. The balance sheet is anything but a fortress, so a raise is far from ruled out, given that two-thirds of their backlog is from the Middle East. Operationally, I am even more convinced than before, given their recent success in orders for subsea equipment. But first, I have to get the feeling that the situation in Iran is no longer directly hurting them and that they are able to secure orders from other regions to replace the delayed ones.

Sanuwave

This is a stock where my conviction was never high enough to make it a large positions, as it carried a material risk with only one reimbursement code. I didn’t like the management's communication then, and I still don’t. Furthermore, there was uncertainty regarding how much they would be affected by the skin substitute wipe-out. The latter has now translated into a bitter reality: they were affected massively, as several of their customers went out of business.

According to the last call, new players are emerging who see the current reimbursement environment as an opportunity. Given my recent experience with this management, specifically how slowly they informed us of developments while customers stopped ordering consumables for months, I am not inclined to give them the benefit of the doubt. I also find it odd that the CEO (or rather, his investment company) sold $5m worth of shares at $31 during this period, while being aware of this disruption. While there are many reasons one might sell, and I have heard an explanation, it still doesn't look good, especially given my prior issues with their communication. I’ll stay on the sidelines and wait to see how the new “baby elephants” evolve.

Overall reflections

Although one could argue that my results are looking good, given that essentially everything wen’t different than planned, I can understand that, but this quarter was mentally challenging. Essentially it was more about dodging bullets than finding new cases and when you sell 6 out of your 10 biggest positions you started the quarter with, you inevitably ask yourself if you failed from an analyst perspective. I also asked two other investors that exact same question. They both said no and currently I’d agree given that I reacted to information that was not anticipateable, with McCoy as an exemption. What saved me several times was setting expectations based on what I know in advance and reacting when they were not met, like with ACNT and BLM.TO.

Two new stocks I bought within the quarter, but sold recently, also saved my performance. I don’t want to mention them here as I’m not sure if I will invest in them again, but many of you likely know at least the one that was specifically ‘energizing’ this quarter.

Overall, my portfolio now consists of almost 40% cash and has essentially been wiped clean, though not in a painful way. It feels like the city was conquered but not sacked by the barbarians (and yes, I know my ancestors were the barbarians), as I made it out with most of my goods. Having a few high-conviction names provides mental stability. The issue now is that my pipeline is essentially empty, which hasn't happened in a long time. I’m now trying to adapt slowly to this new environment. I have ten days of vacation starting Friday. Although I originally planned to read, I will likely spend that time searching for new cases.

• Performance 2025: 24.8%

• IRR since 01.01.2017: 32.76%

• TTWROR since 01.01.2017: 651.62%

  

Stocks in my portfolio

Below are my current portfolio positions, in descending order of size.

$ACP.WA Asseco Poland

One of the biggest contributors to my performance this year, and yet conceptually very simple from the initial case perspective, both then and still today.

Approval for the acquisition of the treasury shares through Topicus was finally granted. After the short term stock price decline linked to broader AI skepticism toward software companies, the subsequent earnings beat once again led to a rebound close to prior levels.

I continue to believe that the most meaningful margin expansion is still ahead. The most recent quarter was exceptionally strong. All operating segments delivered double digit growth, while Non IFRS profit and net income attributable to shareholders increased by an even more significant margin.

My main concern at this point relates to dividends. From a tax perspective, a meaningful dividend would be unfavorable for me personally, as roughly two thirds of my position is already held through my LLC account.

I increased my position significantly.

$IMB.AX Intelligent Monitoring Group

There is hardly a quarter at Intelligent Monitoring Group without a meaningful development in some area of the business. I began my last update by pointing out that the company could not utilize its NOLs. After consulting with one of the Big Four firms, management is now once again optimistic on this front. If this optimism ultimately proves justified, I would expect a modest positive reaction in the share price, though likely nothing more than that.

In my view, the prior share price decline was less about the technical implications of the NOLs and more a reflection of lingering distrust following the AGM 2024 capital raise. The market still appears highly skeptical, and so far every rally has been sold off at the first sign that execution might not be proceeding perfectly.

This skepticism was evident again after the recently announced, highly earnings accretive acquisition completed at an attractive price, which materially increased recurring revenues. Despite the strong economics of the deal, the share price declined a few days later at market open, as some investors were reminded of the AGM capital raise. While I initially shared this concern in the first minutes after the announcement, the final terms ultimately painted a more favorable picture once fully disclosed.

There are several things to take into consideration. The most important aspect is that they really wanted to complete this acquisition, and a window opened up through JCI’s strategic review to acquire the asset at roughly 4x EBITDA.

The company states that the capital was raised for working capital purposes. Some argue that this is a cheap trick, funding the acquisition with debt and cash flow only to raise equity immediately afterwards. However, they could not have achieved the same outcome by raising equity in advance. The facility is an acquisition facility and cannot simply be used for general purposes. If you want to complete the acquisition and also ensure sufficient working capital, especially given that part of the cash balance was used to fund the acquisition, this structure was effectively the only viable option. The facility is now fully drawn, and the company still holds cash on the balance sheet for working capital or any opportunistic acquisition that may arise.

Second, the raise represents less than 10 percent of the outstanding share count (34.5 million shares). That is very reasonable in my view. It was done at 0.58, which is a premium to pre acquisition levels and only about a 10 percent discount to the last closing price. This is clearly not the dilution event many feared when the equity raise was first mentioned.

Do I like the way it was handled? That depends. From a shareholder perspective, this is arguably the best possible outcome if you believe management can allocate capital well. At the same time, it is obvious that they do not share all of their plans in advance. I therefore would not be surprised if they already have another target in mind, as 20 million feels higher than what would normally be required purely for working capital. Dennison has often alluded in our meetings to becoming international, and I suspect it could be the US. He sees IMB as a first mover with respect to the use of AI in video guarding. Whether I like that depends on the size of the acquisition and the multiple they pay, but so far I have nothing to criticize with respect to capital allocation.

Overall, it is pretty obvious that the feelings of minority shareholders are not the primary consideration compared to executing their plans. Still, given the very large stake held by Peter Kennan, I would expect them to remain cautious with respect to the use of capital and future raises.

In my opinion, the current 52 week high in the stock price reflects both successful capital allocation and the fact that management did not mess things up again with unusual circumstances around another raise. As you know, I was once concerned they might turn into a roll up. Now that I have seen they are able to allocate capital at high returns, I actually hope they will be viewed as one, because that would justify much higher multiples, less dilutive raises, and far more opportunities in what is still a fragmented market.

I Increased my position.

Ascent Industries

The quarter once again delivered strong gross margin improvement, and during the call management made it clear that they had potential M&A targets on their plate but deliberately decided against pursuing them. This is another indicator that they care about IRR and not about doing M&A for the sake of doing something. Instead, they now seem to be allocating capital in two ways. Internally, through increased R&D spending to accelerate product and process development, and externally, through a very large buyback covering more than 21 percent of the shares.

Of course, it will be interesting to see how aggressively they actually use the authorization, but directionally this is clearly the right approach. The increased internal efforts also seem to be paying off, as evidenced by several new contracts.

I still see significant upside here, driven by additional contract wins and a potentially improving environment.

I slightly increased my position.

$NOW.V Now Vertical

Given what I told you about this stock in my last update, it might surprise you that it ranks this high in my portfolio. I called it my only big mistake in 2025, and I know it sounds odd when I partially have to say that I was wrong about being wrong.

Where I clearly should have acted differently was position sizing after the stock ran up. It was no longer cheap for a turnaround, and people started asking me many very detailed questions about the financials. That is always a sign that there is now a lot of room for disappointment.

What I see differently today is the communication aspect. I criticized the company quite harshly for press releases that hinted at growth in strategic accounts, only to be followed by a very ugly quarter at the surface. But with NOW.V, you really have to look under the hood. Otherwise, you will not understand what is actually going on.

I will not explain the distortion in their financials caused by hyperinflation accounting again. I covered this in detail with Sven on my German podcast. The transcript is available if you want to translate it. To put it simply, I believe the adjustments in their presentation related to hyperinflation accounting are fair.

While it does pay off to understand the details, there is a point where things become too detailed and the overall picture actually gets muddier again. Not because the company does this on purpose, but because the math is complex and you do not have all the necessary inputs. This may remain an ongoing issue for the case, especially now that distrust exists among shareholders.

And that is the point where I was wrong. I still believe they could have emphasized the implications of reselling contracts, the concentration on strategic accounts, and hyperinflation accounting more often. However, I no longer see their communication as inconsistent. They consistently highlighted growth in strategic accounts, stronger integration revenue, and leads from the Google partnership because this is their long term growth strategy.

What we were not fully aware of, or what was not explained clearly enough, is that the focus on strategic accounts comes with the termination of contracts with smaller and mid sized accounts. This leads to lower reported revenue and margin pressure, especially in quarters with low reselling revenue, which normally carries exceptionally high gross margins.

They shared many metrics related to partnerships, integration revenue, and strategic accounts. These are the metrics I will continue to focus on and where I will actively look for inconsistencies in the coming quarters. If those do not occur, everything should be fine over the mid to long term.

In my opinion, the current distrust mainly stems from NOW.V not being cash flow positive. There were many posts on Twitter highlighting this issue. The reason they are not cash flow positive is, in my view, quite simple. They had to pay off a large number of legacy balance sheet items, which caused significant cash outflows. If you adjust for these items, the underlying cash flow would look very strong relative to the current enterprise value. At some point, those legacy items will be gone, and I believe this is likely to happen this year.

And for those who say, this company never really generated cash flow, so what is different now, I would simply suggest comparing the cash flow statements then and now.

I doubled my position

$KLNG Koil Energy

I think trading a stock has never worked as well for me as it did with KLNG. The market reacted exactly as expected once the tougher year over year comparisons showed up in the quarterly results, and at one point in Q3 I even completely sold the position because of a massive increase in buying activity ahead of the earnings release. That is one of the advantages of still having a relatively small portfolio compared to the bigger players out there.

Let’s switch gears to the operational side of the story. When the company released its quarterly results, I was initially surprised by the unusually low EBITDA margin of minus 3 percent despite generating $6.4 million in revenue. However, it is important to note that they did not adjust for a $569k written down receivable. If you treat this as a one off, which I do, the company would have reported positive EBITDA.

At first, I still considered selling a significant portion of my position. However, the comments around order intake, both in the quarterly results and during the earnings call, were so bullish that I actually increased my position afterward.

This was driven by an exceptional order intake over the past four months.

Services have expanded into renewables with a significant contract handling the spooling of subsea power cables for an offshore wind farm project. KOIL recognizes its service team for successfully winning this project and receiving excellent client feedback throughout the project’s execution.

KOIL Energy has been awarded the first contracts in Brazil. These are not significant in value and have therefore not been announced earlier. This includes a maintenance survey on a production vessel off the coast of Brazil and a rental equipment agreement for three subsea deployment frames. These are currently being fabricated in country. KOIL recognizes its team in Brazil and those that are supporting this initiative from Houston. This is a big step forward in our growth strategy.

KOIL Energy Reports Third Quarter 2025 Results

Thanks to these successes, we now have a record high backlog, which bodes well for the future quarters. Furthermore, the bidding activities have continued to increase, leading to a historic value of submitted quotation during the third quarter.

Erik Wiik KOIL Energy Reports Third Quarter 2025 Earnings Call

Seeing them expand into renewable energy and announce their first contract in Brazil, although still insubstantial, were exactly the signs I was hoping for. Koil continues to increase its market share, and although the stock may not look cheap from a current multiple perspective, I still see significant room for further upside as long as order intake remains strong.

I slightly increased my position.

$BLM.V BluMetric Environmental

The raise that accompanied the acquisition of DC Consultants was, at first glance, highly dilutive and larger than I had expected. However, if they reach the EBITDA targets mentioned in the press release, there is little to complain about. Raising EBITDA at a high multiple while acquiring at a low multiple is exactly how capital allocation should be handled, and that is precisely what they did.

Scott and John bought heavily in November at prices not far from the current level. Beyond that, it was reassuring to see that they did not just announce new contracts, but also demonstrated progress in the recurring portion of the business.

I increased my position.

Iridex

I recently did a write up on the stock, and so far I would say the thesis is neither confirmed nor contradicted from an IRR perspective. What is clearly confirmed, however, is that Patrick and Romeo are extremely serious about the turnaround efforts.

I’ll leave my summary of a recent interview below, which explains why I think this way.

“If you have not watched the recent interview with Iridex management yet, I strongly recommend doing so. Below is a summary of the points I found most noteworthy.

• Q4 is expected to show higher revenues than Q3, and management reiterated their goal of achieving positive cash flow. I would not expect too much from this, as it is likely to be largely working capital driven.

• My interpretation for Q4 adjusted EBITDA is that it should improve versus Q3 due to higher revenues and the fact that Q4 is typically a strong probe sales quarter. Probe gross margins are in the 80 percent range

• Patrick highlighted that not only Glaucoma remains strong, but Retina (Pascal systems) as well. They expect Retina to grow year over year next year. Probe sales are expected to grow further in 2026. Revenue growth in 2026 should be comparable to what we will see in Q4 2025. For full year 2025, management expects to be both EBIT and cash flow positive. Cash balance will be higher this time, next year. If achieved, this would be a significant milestone.

• Several operational measures were mentioned that most well informed investors are already aware of. Employees in higher cost regions are being replaced with staff in less expensive zip codes. The company will leave its expensive facility at the end of 2026, which should reduce costs by roughly 270 to 300 k per quarter. There will be a temporary period of doubled costs during the transition, but these measures alone should enable a structurally profitable and cash flow positive business even without additional growth.

• Recent clinical studies are helping to attract new customers. Most customers are now also well informed about the current regulatory environment and the changes to reimbursement codes. The increased focus of sales team has already led to higher probe sales, in the range of roughly 8 to 12 percent.

Overall, the comments were very bullish, although I personally would have preferred a slightly more cautious tone. That said, there is nothing to criticise at this stage. Management appears serious about the turnaround, and it is clear that there are no sacred cows anymore. Contract manufacturing and the end of the current lease alone should lead to a meaningful increase in gross margins and a reduction in operating expenses.”

So overall, I think there is a clear path for them to become not only adjusted EBITDA positive, but also cash flow positive. What people tend to forget is that medical device companies that begin to show real profitability or cash flow are often valued on an EV to sales basis rather than EV to EBITDA, as that is typically how an acquirer would look at them.

We also saw insider purchases totaling $120k by Romeo and William.

That said, I significantly reduced my position after the quarterly results release, as I had expected something very different with respect to adjusted EBITDA, given the large backlog they had for probes. You know how I think about this: if you panic, panic first. Over the following weeks, I bought back shares after they gave two interesting interviews and after a meeting with management, which led me to the conclusion that the foundation of the company is strengthening and that they are close to showing a profit. The measures described above, all else being equal, should be sufficient to reach that goal.

My position now stands at roughly two thirds of its previous size, although it is worth noting that it was probably somewhat inflated before, given that this is still a turnaround situation.

$MCB.TO McCoy Global

Not much to add here. Although the numbers once again looked mediocre at first glance, the stock price held up relatively well in the weeks that followed. I follow their LinkedIn account very regularly, and from that I have formed the impression that they are currently very active and shipping a significant amount of product, especially on the SmarTR side of the business.

My position remains unchanged.

$SNWV Sanuwave Health

I sold my position completely after they announced the guidance cut because I wanted to watch things from the sidelines. I really did not like how they informed us, or rather did not inform us, and I see some similarities to the IMB 2024 AGM guidance issue.

They issued guidance on August 8 that could be considered bullish at the time. Then, on October 6, they lowered guidance and talked about a slow start to the quarter, which effectively means a slow start to the second quarter, but a strong September. So when they issued guidance, things were actually looking very bad, and September somewhat saved them. I consider this misleading and I have not yet heard any argument that convinced me otherwise. It looks like they gambled on a strong September, with shareholders money and trust as the stake. One could argue it went better than one might have feared when the guidance was issued, but that does not change my view.

From my perspective, the right approach would have been to say already in August that they were facing issues related to the CMS changes regarding skin substitutes. I would expect them to handle similar topics the same way in the future, so proactively informing shareholders about problems does not seem to be a top priority. From that standpoint, management is not a positive checkmark on my list. Quite the opposite. I do not like their communication. Call me conservative, but you should not put phrasing like this into a press release:

I can somewhat understand if you think this is an overly critical take, but it is just one of several examples where I do not like the conversational tone. Combined with not being informed about emerging issues, this eroded trust for me.

Nonetheless, after the earnings release, I bought back all my shares and added even more. When the issue with skin substitutes arose, I had no doubt that this could turn into a long term positive for SNWV, but market dynamics can be harsh, and they were. That is why I sold. I bought back after hearing no additional negative commentary on the call, aside from narrowing the guidance range at the upper end.

You might conclude that I am skeptical about this stock, and that is correct. The position sizing reflects that. I will be completely honest with you: I keep this stock primarily because I expect market dynamics to work in their favor. Medtech is considered hot by many investors, and strong growth medtech even more so. So far, it felt like some shareholders largely ignored the negative aspects I described above. At the same time, I do see the business case here, which is another reason I continue to hold the position. Partnerships like the recently announced one help confirm that, or at least provide additional optionality.

I increased my position compared to the previous update.

Ampco-Pittsburgh

I recently published a write-up, so there is nothing more to add here, except that you now know what I meant when I said that ‘I sized this position with political risk, a lengthy validation checklist, and the inherent unpredictability of political decision makers firmly in mind’. I should add, though, that the position is actually as large as $IRIX, $MCB.TO, and $SNWV. We are really talking about nuances in sizing here.

Still, I would like to see them checking the boxes I outlined in my write up, as this remains a rather complex situation, as you may have already inferred from the length of the write-up. It essentially took my entire six day vacation to fully understand the company.

Undisclosed Oil company

“I decided to stop labeling undisclosed positions as ‘undisclosed 1, 2, 3’, as this was confusing for both myself and others. Please note that the names I chose could, in hindsight, be considered misleading if I ever disclose the actual company.

I came across this idea through Sebastian’s paid Substack, and the prospects currently look favorable to me. I added to my position.

Undisclosed Software company

I have now invested in and exited this company for the third time. Based on what I know, my overall ‘feeling’ is positive. That said, I still cannot fully grasp the key drivers of the business. I am therefore waiting either for a blowout quarter or for the stock price to come down.

$SUP.L Supreme PLC

Not much to add here. I liked the acquisition of SlimFast and expect adjusted EBITDA to improve in the second half, as their operational efforts are more second half skewed in terms of revenue generation. Overall, this is one of the stocks I do not expect to double within a year.

Undisclosed Health company

Very illiquid, but I have made a lot of money with it so far. I am still undecided whether it is a low quality company or one of the best setups I have ever come across. Significant catalyst ahead.

Undisclosed Industrial company

Can be considered a tracking position. Potential good business bad business setup.

Undisclosed German company

Waiting for a blowout quarter.

Stocks I Sold

$DSW.L DSW Capital PLC

Finally. Now it is clear why the stock price was under so much pressure over the last few months. I decided to lower my ask price, as I was in urgent need of capital for other ideas. I will likely never invest in AIM again unless they change this very flawed system.

United Homes Group

Things really went sideways here. Not only did they fail to sell the company, but essentially the entire board resigned. What saved me from a steep loss were two things. First, results that came in below my expectations, which led me to sell the larger part of my position, as I believed this reduced the likelihood of a sale. Second, a real time alert when the news about the conclusion of the strategic review was released. I would do this again, but as usual only with a small portion of my portfolio.

$LEAT Leatt Corp

Seeing it here does not mean much. I still think this could offer an attractive opportunity. At the time, I felt I had better visibility on the prospects of other stocks, and the share price was not running away, given that the company does not communicate much between quarterly results.

To add at least one operational comment, as expected they did not buy back a meaningful amount of shares, and the earnings call made the results look better than they initially appeared. I strongly recommend reading the transcript.

$DBO.TO D-Box Technologies Inc.

Sometimes one might think, how can it be that this guy sells almost everything before it implodes or buys back shares before the stock explodes. I wish that were the case. Unfortunately, it is not. This was one of the biggest and costliest errors of omission in my career.

I first became aware of it through a pitch at the MCC, which I read but did not properly research. Later, Sebastian Krog pitched it, and I understood it better, though still not well enough to fully grasp how interesting the business model actually is. At the time, I had too much on my plate and allocated my time poorly.

To show how costly this mistake was, I am sharing my buying and selling activity.

Overall Reflections

If I had to sum up my 2025, I would say it was more about dodging bullets and executing smaller successful trades than about finding big winners. That was very different from 2024. IVFH clearly falls into the first category, and what saved me here was defining my expectations upfront and maintaining a general skepticism toward management teams. I do not want to go into that again in detail, as I have discussed it often enough on other occasions.

Recently, a friend told me that I am probably only a good analyst, but a very good portfolio manager. As much as I dislike bragging, I tend to agree, at least for the sake of making a point here.

What has saved me several times over the past years is coming to terms with the fact that management teams and I are not friends. That may sound banal, but it really is not. It is still difficult to walk out of a meeting with management and not feel excited. While not every manager is the same, most are very good at framing everything positively and making you feel like you are their most important investor. I think one cannot stress enough how important it is to avoid this kind of dynamic in a business context.

That is probably why I always see myself as a passenger in a stock, even if the CEO is sympathetic. I strictly separate private life from business life. That is likely also why my portfolio turnover looks the way it does…

…while my private turnover is essentially zero. I still regularly see the friends I went to kindergarten with and have only added eight to ten people since then whom I would ‘really’ consider friends.

I recently wrote that my preliminary view is that a strong asset base, a solid business model, and clear catalysts outweigh the importance of the management team, especially since I find it incredibly difficult to assess a manager’s true capabilities. As you may have noticed from my latest write up, this view has evolved beyond preliminary.

Do not get me wrong. Management matters. Capital allocation matters. However, I now assess management primarily based on consistency rather than on résumés, appearances, or storytelling. Taking management’s statements and fact checking them at least once every quarter has saved me a significant amount of money on several occasions.

That aside, this was the first full year in which I set clear expectations before every quarterly results release and then went through an internal review after each one. This discipline also saved me money, as the example of UHG shows. I am convinced that every investor who invests in individual stocks should practice some form of journaling, or at least engage in an internal dialogue before making or avoiding investment decisions. And when I say journaling, this can be as simple as an Excel list with financial expectations and a few sentences explaining why you expect them.

What turned out to be even more important than that was collaboration. Exchanging ideas with others can more than compensate for your own weaknesses, as those people often have different strengths, see different things, and may simply be better analysts in certain areas. Working together on a case really paid off, and I never want to be a lone wolf.

So thanks to Sven, Sebastian, Paul, and also David, who showed me with my last write up that he was actively fact checking what I had written and even found a mistake. For me, that is very valuable.

Looking ahead, I have reviewed all of my positions, and with one exception I am optimistic at this point. Not because I am completely certain that everything will play out positively, but because I have done the necessary work to recognize when that is no longer the case for me personally and to make the corresponding decisions.

Ticker: AP

Price: USD 4.65

Shares Outstanding: 20.23 million

Market Cap: USD 94.53 million

Enterprise Value: USD 253.72 million

The potential improvements from exiting both a larger and a smaller underperforming business are easy to understand, but there are additional catalysts ahead for Ampco-Pittsburgh that are not yet visible in the current financials and are somewhat more complex in nature.

The Company

Ampco-Pittsburgh operates in two major segments that serve customers across several different verticals, each with its own distinct drivers. Although one segment may initially appear to lag behind the other in terms of quality, the current environment could actually be working in its favor, which I will come back to later. I go into more detail than usual when describing the business, as this is essential for understanding the potential catalysts ahead.

Forged and cast-engineered products (FCEP)

The FCEP segment produces forged hardened forged rolls, cast rolls, cast engineered products and forged engineered products. It operates manufacturing facilities in the United States, Sweden, and Slovenia, and holds equity interests in three joint venture companies in China.

The most important products in the portfolio are forged and cast rolls, which are used in hot and cold rolling mills for steel and aluminum production. A substantial majority of global flat steel and aluminum products rely on these rolls, making them a mission-critical consumable in metal processing.

Ampco-Pittsburgh’s roll business manufactures forged and cast mill rolls for these applications. Demand is driven by recurring replacement rather than new capacity additions, resulting in a structurally resilient revenue profile. Switching costs are high due to long qualification cycles and the direct impact of roll performance on mill yield, surface quality, and downtime. As a result, metallurgical expertise and process control are key competitive differentiators. At normalized utilization, the business benefits from strong operating leverage and has historically generated double-digit EBITDA margins, making it the company’s core value driver.

The Cast Engineered Products business manufactures custom steel castings for industrial equipment and infrastructure applications. These components are engineered for specific strength, wear, or corrosion requirements and are used in power generation, mining, fluid handling, and industrial processing. The business relies on metallurgical customization and complex geometries rather than scale, resulting in lower cyclicality than forging but less structural defensibility than the company’s roll operations.

The Forged Engineered Products business manufactures large, custom forged steel components for industrial and energy applications. These products are engineered to order and valued for their strength, toughness, and fatigue resistance, but demand is project driven and highly sensitive to utilization. Unlike the company’s roll operations, Forged Engineered Products lack recurring replacement demand and pricing power, which has ‘historically’ made this category the weakest part of the FCEP portfolio.

Air and Liquid Processing (ALP)

The ALP segment includes Aerofin, Buffalo Air Handling, and Buffalo Pumps, all divisions of Air and Liquid Systems Corporation, a wholly owned subsidiary of the company. The segment operates manufacturing facilities in Virginia and New York, with headquarters in Carnegie, Pennsylvania.

Aerofin produces custom engineered finned tube heat exchange coils and related heat transfer products for a broad range of end markets, including original equipment manufacturers, commercial and industrial customers, and nuclear power generation.

Buffalo Air Handling designs and manufactures large custom air handling systems for institutional markets such as hospitals and universities, as well as pharmaceutical and general industrial facilities.

Buffalo Pumps manufactures centrifugal pumps serving the fossil fueled power generation, marine defense, and industrial refrigeration industries.

The Investment Case

The company makes no secret of its current strategic plan. On the surface, it sounds very simple: ‘Eliminate unprofitable assets, benefit from general opportunities in the A&L segment, and increase asset utilization through the UK exit as well as changes in the competitive and regulatory environment.’ To truly understand the current opportunity from a shareholder perspective, taking a look under the hood can pay off.

The most important aspect is that the company exited a loss making UK business, which it expects will have a positive impact of $7 to $8 million on EBITDA in 2026 compared to the full year 2025. Given that the standalone financials of this subsidiary showed an operating loss of £6 million in 2023 this appears to be a fair assumption.

Just after the quarter closed, in October, we accelerated the exit from our U.K. facility. We are also nearing completion of our exit from a small steel distribution business, AUP. The impact from our U.K. exit alone is expected to improve full year adjusted EBITDA by $7 million to $8 million. These two actions remove our most significant operational drag and positions us for dramatically improved profitability as we move forward.

Brett McBrayer - Third Quarter 2025 Earnings Results Conference Call

Before going deeper into the details, it is worth noting that this is not the first strategic plan, and the previous one could be viewed as a failure from a pessimistic perspective. When Brett McBrayer was appointed CEO in 2018, the strategy already focused on exiting what were then considered non core assets and right sizing the company, with a stronger emphasis on profitability through higher productivity.

As part of this plan, the company exited a specialized parts and service provider to North American rolling mills, a Canadian specialty steel operation, and a North American cast roll operation. In my view, these steps can be interpreted as a clear move away from empire building and from specialized operations with limited operational advantages, which historically contributed to higher operational and earnings volatility compared to the forged and cast roll business.

At the time, the company postponed the irreversible exit from certain operations. Its most problematic assets were deeply intertwined with otherwise profitable businesses, most notably the loss making UK facility, which shared customers, engineering resources, and production know how with the core roll business. Exiting this operation required years of contract renegotiations and volume reallocation, a process management initially delayed in the hope of a cyclical recovery. These expectations ultimately did not materialize, and additional issues emerged over time.

The U.K. operations have been impacted by unpredictable and high energy costs compared to its foreign competitors, lower demand for its products manufactured in the U.K., and increased imports of rolls and flat rolled steel into Europe from low-cost countries.

Form 10-Q for Ampco Pittsburgh Corp - Q3 - 2025

Based on comments from the most recent earnings call, management has now been able to reallocate part of the volume to the Sweden plant. The remaining volume that cannot be produced in Sweden, likely cast rolls, is expected to be converted into forged rolls. Overall, this should materially increase plant utilization and, in turn, improve profitability. Overall, the company shut down a loss making operation while reallocating and increasing volumes at another facility.

John Bair
And then following up on that then my understanding is that you'd be supplying or hoping to supply existing customers that have been served by that facility from your other European operations. Is that right?

Sam Lyon
A portion of it, John, this is Sam again. The work rolls we will maximize the Sweden plant. So, the utilization there will definitely increase significantly. And then there was one type of roll that cannot be made in Sweden, some of them will be converted to forged rolls. There's very limited supply in the marketplace. So, we'll see some of that come to the U.S. But there will be an overall slight reduction in revenue, but obviously a big gain in profitability.

Third Quarter 2025 Earnings Results Conference Call

What is also notable is that management expects to realize a meaningful amount of proceeds from the liquidation of the UK subsidiary.

And so, the liquidation proceeds would first go and be remitted to the bank group who would then reduce our outstanding asset-based loan balance, which is our revolving credit facility. So, yes, we do expect. We had some projections from the administrator and we've analyzed those and 9 Ampco-Pittsburgh Corporation Thursday, November 13, 2025, 10:30 AM ET we've included those in our assessment of the net charge we will record in Q4 and we'll net that charge down by an estimated proceeds amount, which is $8 million to $9 million expected in net proceeds through that process.

Mike McAuley - Third Quarter 2025 Earnings Results Conference Call

The cessation of the UK business alone would already be meaningful, as it materially increases adjusted EBITDA, likely reduces net debt, and therefore significantly lowers leverage. However, this is not the only factor supporting the attractiveness of this segment.

In response to ongoing European deindustrialization, the European Union is likely to introduce new measures to protect the domestic steel industry. The current steel safeguard framework is set to expire on June 30, 2026 and will be replaced by a new regime, potentially earlier depending on the legislative process.

The proposed changes materially tighten the trade environment through two key mechanisms:

1. First, a reduction in import quotas, limiting tariff free steel imports to 18.3 million tonnes per year. This represents a reduction of approximately 47 percent compared to the 2024 quota levels.

2. Second, a doubling of the out of quota duty to 50 percent, up from 25 percent under the current safeguard measures.

In addition, the new framework introduces more restrictive flexibility within the quota system and closes several loopholes related to traceability, which had previously allowed certain imports to bypass effective enforcement. These adjustments further limit the ability to circumvent the safeguards. Taken together, the proposed changes would substantially raise the barriers for steel imports into Europe and could materially improve the competitive positioning of European producers.

Through the new rules, the European steel industry should benefit from higher utilization and improved profitability, supporting long term capacity retention. Importers face the risk that quotas may be unexpectedly exhausted mid quarter, which would immediately trigger a 50 percent tariff and result in a sharp and unpredictable price increase. This, in turn, should translate into sustained and structurally higher demand for domestically produced rolls, as higher production volumes increase the need for ongoing roll replacement.

Another aspect not mentioned by the company, but which should also support its European business, is the Carbon Border Adjustment Mechanism introduced by the European Union. CBAM imposes a carbon cost on imports of carbon intensive products to align them with the costs EU producers face under the EU Emissions Trading System.

In its current scope, CBAM directly covers iron and steel as well as certain semi finished and finished steel products. Importers are required to declare the embedded emissions of these products and, over time, purchase CBAM certificates that reflect prevailing EU carbon prices.

Many low cost steel producers outside the EU benefit from coal heavy energy mixes and weak or non existent carbon pricing. CBAM partially neutralizes this advantage by internalizing carbon costs at the border. This improves the relative competitiveness of EU based steel production and helps stabilize demand for EU supplied consumables such as rolls.

From January 1, 2026 onward, importers will be required to purchase CBAM certificates. The associated costs will ramp up gradually, with the mechanism becoming fully effective by 2034.

So far, the discussion has focused on the European steel business, but the US business may also benefit from the current political environment, while the European facilities could see catch up effects as US customers rebuild inventories.

The company believes that customers in the US postponed roll purchases and are therefore currently operating with low inventory levels.

Looking at the roll market in North America, some customers temporarily postponed roll purchases due to tariff uncertainty and, as a result, have lowered their existing roll inventory. This supports our view that a return to more normal roll ordering patterns is approaching as inventory levels deplete. Overall, tariffs are expected to have a neutral impact on roll demand in North America, as our U.S. customers will benefit. Conversely, tariffs will negatively affect our Canadian and Mexican customers as their imports into the U.S. are affected.

To date, we've passed all tariffs on to our customers. The tariff environment for our European imports remains a key focus. Our imports to the U.S. from Sweden now face tariffs between 15% and 27%, and products from Slovenia faced rates as high as 50%. The cast roll market in North America continues to exceed domestic capacity, so long-term demand for our European cast rolls should not be affected by these tariffs.

We expect that the roll tariff effect will be temporary. In addition, our European customers have lean inventory. Any uptick in demand will require additional roll orders.

Sam Lyon - Third Quarter 2025 Earnings Results Conference Call

To wrap it up, the tariffs have not had a lasting negative impact on the company’s European subsidiaries and are instead likely to result in a catch up effect.

As mentioned earlier, the company’s steel business consists of three parts. The FEP business is also benefiting from the current tariff environment, which is likely to remain supportive for the foreseeable future.

Year-to-date, FEP revenue increased approximately 40% to $14.4 million compared to $10.2 million last year. We continue to raise prices on this product, improving margins as import barriers have increased.

Sam Lyon - Third Quarter 2025 Earnings Results Conference Call

It is fair to say that the steel segment benefits from the current environment and has several potential catalysts ahead. That said, it represents only part of the business and, arguably, the lower quality segment, although this distinction may be less relevant in the current situation.

The Air and Liquid Processing segment is driven by different factors, several of which are likely to strengthen further over the course of the next year. The segment has grown from 84.7 million dollars in 2021 to 131.7 million dollars in 2024. Year to date, it has again shown solid growth, and management expects further expansion of 8 to 10 percent, driven by the growth outlook of the niche markets it serves.

At present, the ALP segment’s portfolio is relatively balanced from a revenue perspective, although some end markets are likely to benefit more than others.

Let’s start with Aerofin. Heat exchangers are a critical component in nuclear power plants, and nuclear power generation is expected to grow meaningfully over the coming years. Based on management’s statements, Aerofin is the leading supplier in the North American market.

While the US has seen few, if any, large scale nuclear projects over the past decade, the small modular reactor market is expected to expand significantly. As of mid 2025, the global SMR project pipeline totaled roughly 47 gigawatts, with the US accounting for about 53 percent of that capacity.

We continue to see positive activity in the nuclear market for our heat-exchange product line. Orders and shipments have already exceeded any prior full year. From restarting legacy plants to the new small modular reactors, nuclear power appears to be at the beginning of significant long-term market growth. Our engineering and manufacturing capabilities position us well as this market continues to grow.

David Anderson - Third Quarter 2025 Earnings Results Conference Call

In March, we received our first order for a small modular reactor or SMR project. There’s a great deal of activity in the new SMR market, and we have started working with several companies that are developing these new products.

David Anderson - First Quarter 2025 Earnings Results Conference Call

Another important aspect is timing. Heat exchangers are required relatively early in the construction process of a new reactor, as they are considered long lead procurement items. If the anticipated increase in nuclear construction materializes, Aerofin should therefore be an early and disproportionate beneficiary of this trend.

Buffalo Pumps could benefit from several tailwinds, but the most important is likely the significant expansion of the United States Navy outlined in its 2025 plan. Centrifugal pumps are used in a wide range of shipboard systems, such as cooling circuits and propulsion related applications.

The Navy’s 2025 plan would cost 46 percent more annually in real terms (that is, adjusted to remove the effects of inflation) than the average amount appropriated over the past 5 years. CBO estimates that total shipbuilding costs would average $40 billion (in 2024 dollars) over the next 30 years, which is about 17 percent more than the Navy estimates. CBO’s estimates for the 2025 plan range from 8 percent to 16 percent higher in real terms than its estimates for the three alternatives in the Navy’s 2024 plan. Including the costs of operating and maintaining those ships, buying new aircraft and weapons, and funding the Marine Corps, the Navy’s total budget would need to increase from $255 billion today to $340 billion (in 2024 dollars) in 2054 to implement the 2025 plan.

Congressional budget office - An Analysis of the Navy’s 2025 Shipbuilding Plan

There is little doubt that Buffalo Pumps is positioned to benefit from this increase in spending, given that the Navy has awarded the company approximately 9 million dollars in funding to expand and modernize the capacity of its pump production facility between 2024 and 2026.

Given this overall setup, it is not surprising that several insiders have recently been buying shares. In addition, a well known activist investor has taken a position, advocating for measures aimed at increasing shareholder value, including typical options such as a sale or a merger.

The Financials

I’ll be completely honest. Modeling Ampco Pittsburgh’s future financials is highly complex, and it took me days to fully understand what might be driving certain outcomes and margin dynamics. The conclusions I’ve drawn represent the best explanation I could arrive at, based on management’s comments, the financial statements, and relevant specialist literature. I also think that, at this stage, it is less important to model numbers that are close to a precise potential reality, given that utilization is likely to increase regardless.

When looking at the table, the first thing to note is that EBITDA generated by the ALP segment converts into EBIT much more efficiently than EBITDA from the FCEP segment. To put numbers behind this, depreciation and amortization in 2024 amounted to $17.6 million for FCEP, compared to just $1 million for ALP. This highlights that ALP is arguably the higher quality segment, as it delivers strong EBIT performance despite the absence of strong regulatory protection.

Another aspect to note is that the company unfortunately only began disclosing detailed utilization figures for forged roll and cast roll facilities in its 2023 10 K. Had this level of disclosure been provided earlier, the historical picture would be significantly clearer.

In 2023 and 2024, the high utilization of forged rolls appears to have been a key driver of the improved performance in the FCEP segment. While this observation is factually correct, it is important to note that cast rolls are very likely the structurally higher margin products. Industry literature, including the ASM Handbook and established rolling mill technology texts, consistently describes centrifugally cast rolls as premium products used in finishing and other high performance applications, where superior wear behavior and surface quality are critical. These rolls typically command higher purchase prices as a result. Although manufacturers do not disclose profitability by roll type, this positioning strongly suggests that cast rolls carry structurally higher margins than forged rolls, which are generally more standardized and more price sensitive.

While Ampco does not disclose product mix by facility, risk disclosures at the UK entity level explicitly reference demand for cast steel rolls, suggesting that cast roll production represented a meaningful portion of the UK operation.

This is notable in light of management’s later comments that at least one customer was transitioned from cast to forged rolls following the UK exit, implying that cast capacity was reduced and selectively substituted where feasible. It is important to note that management also stated that this specific type of cast roll could not be produced in Sweden, meaning this does not reflect a structural limitation of cast roll production more broadly.

In addition, the risks highlighted in the standalone accounts of the UK subsidiary were likely UK specific. The Sweden and Slovenia operations appeared structurally sound throughout the period. Taken together, this suggests that the UK exit should lead to higher utilization of the remaining cast roll capacity, and that the UK facility was likely less focused on centrifugally cast rolls and more exposed to static cast rolls, which appear to have suffered disproportionately under the prevailing economic conditions compared with the other plants.

Although our US forged roll business performed well and our Air & Liquid Processing segment saw record backlog, record sales, and adjusted operating income during the year, excess plant capacity coupled with high energy costs in our European cast roll businesses weighed heavily on our 2023 results.

Brett McBrayer - Fourth Quarter 2023 Earnings Results

More broadly, I would expect materially higher profitability as both cast and forged roll operations approach full utilization of what can be considered normal capacity.

Just to keep this in mind when evaluating segment margins: FEP saw a significant uptick and management has already alluded to further price increases. Although these products still represent a relatively small share of total sales, their EBITDA margins are likely currently significantly elevated and should continue to have a meaningful impact on overall margins.

Let’s move to the ALP segment. What stands out is that, despite higher revenue and utilization, margins initially eroded. This cannot be fully explained by the revenue mix across different parts of the portfolio, which likely have materially different margin profiles given their respective market positions.

What may seem counterintuitive at first actually makes sense. In industrial businesses, costs are often front-loaded during periods of capacity expansion. Investments in new production equipment or modernization typically come with downtime, while the ramp-up of new manufacturing locations or the expansion of sales and production teams takes time to normalize. As a result, margins are temporarily pressured until utilization and efficiency catch up.

All parts of the ALP portfolio were affected by at least one of these measures. Importantly, the nine months ended 2025 show that margins are now moving in the right direction. Segment adjusted EBITDA in the third quarter amounted to $4.4 million, corresponding to an EBITDA margin of approximately 12%.

Air & Liquid began our strategic growth plan in 2022. The first year of the plan saw our backlog grow substantially as our expanded sales force made an immediate impact on incoming orders. In 2023, we saw those orders turn into shipments as sales surged by more than 30%. We also increased our manufacturing capacity by adding an additional manufacturing location in Virginia and expanding our production workforce.

David Anderson - Fourth Quarter 2023 Earnings Results

The Valuation

This will be one of my more detailed valuations as there are several thing you should take into account.

Let me start with the EV. Most important aspect to mention here is the asbestos liability. The asbestos liability does not stem from Ampco Pittsburgh’s current operations. It originates from legacy products manufactured decades ago by predecessor companies of its Air & Liquid segment.

Ampco Pittsburgh records asbestos related litigation liabilities only when losses are considered probable and can be reasonably estimated. To do so, the company relies on external asbestos liability and insurance experts to estimate future claim volumes, settlement and defense costs, and expected insurance recoveries, all of which are based on assumptions that are regularly reviewed and updated. Because asbestos litigation outcomes, insurance recoverability, and legal reforms are inherently uncertain, actual costs or recoveries may differ materially from current estimates, and future adjustments could have a significant impact on earnings, liquidity, and financial position.

To keep this from being more detailed than necessary, I would recommend adjusting the liability each quarter in your calculations and being aware that significant changes can occur at any time, as they did in 2024.

I included the lower end of the mentioned range for the liquidation proceeds, as well as $68.34m of federal operating losses that can be carried forward indefinitely.

Regarding the EBITDA projections, I want to clarify that I do not believe the upper end is exaggerated. It is entirely possible that the opposite is true, given the potential operating leverage in the steel segment and the steadily improving margins in the ALP segment.

I used the ‘current’ view of the EBITDA to FCF conversion to illustrate how the company might appear to someone who only spends a few minutes on initial research and looks on adj. EBITDA TTM. Due to the UK exit, the company recorded accelerated depreciation. Normalized D&A is closer to $18.5m, but a portion of that was attributable to the UK subsidiary, so I deducted the GBP depreciation from 2023 from the D&A figure in my calculation.

One should be aware that this level of depreciation is likely above the actual CapEx the company will report for the time being. In 2024, they recorded $12.2m in actual CapEx, and if you annualize the 2025 nine months ended figure, you arrive at $8.84m. So why is that?

One might assume that the company is underspending on maintenance, but that is very unlikely. They have recently completed both an expansion and a modernization in the ALP segment, as well as a significant long term investment in the modernization of their North American steel assets. In contrast, the UK operations, based on management’s responses, saw virtually no maintenance spending, which further supports the view that management had been considering an exit from this business for some time.

To emphasize this point, the assumed D&A as a proxy for maintenance CapEx is likely a very conservative assumption. A large portion of total CapEx could reasonably be classified as growth CapEx anyway, but I am sure you are already aware of that.

That is why I added the ‘Growth 20% + 10m MCX’ calculation to the table, to illustrate how the company might look from the outside. One should keep in mind, however, that the company is likely to pay significantly less tax than this, given its NOLs, which I already included in EV.

For the sake of simplification, I assumed a 21% corporate tax rate across all income, as neither Slovenia nor Sweden has a materially different corporate tax rate.

I assumed lower interest payments, as most of the company’s interest expense is linked to SOFR, which has declined significantly. However, this will not be fully reflected in Q4. I also assumed that the $8m in liquidation proceeds will be used for debt repayment, as management has already stated.

I deducted $2.5m from FCF in the final figure as a more conservative approach, rather than adding minority interests, which stem from the company’s joint ventures in China, to EV. One should be aware that net income in the prior two years was lower and closer to $2m, and there are clear reasons why this could change in the near term. That said, I do not want to make this more complex than necessary at this stage, as the impact is not material.

Finally, let me note that the ‘UK Exit’ scenario will materialize over time. Management stated that its impact should start to become visible from Q4, but they clarified to me that the $7–8m EBITDA improvement associated with the UK exit should be viewed as a full-year 2025 effect plus incremental improvements. That is how I derived the adjusted EBITDA figure. Management was careful not to provide anything that could be interpreted as formal guidance.

Given that the UK subsidiary reported an operating loss of approximately £6m in 2023, it appears reasonable to interpret the $7–8m EBITDA improvement primarily as the removal of these losses, rather than as evidence of incremental operating leverage from higher utilization. This, however, remains an interpretation rather than a statement made by management.

Let me also reiterate that a 20% growth assumption does not seem overly optimistic. The steel industry is well known for generating significant basis-point increases in EBITDA and EBIT while utilization rises only modestly. Given the number of moving parts, I still believe it is appropriate not to assume more than this at this stage, as many fact-check boxes will need to be ticked over time.

So what multiple would be reasonable for a company like this when assessing valuation? I believe it is appropriate to assume an EBITDA multiple of 10–15x for the ALP segment, with the upper end of that range arguably justified given its market positioning in several niche markets, strong conversion from EBITDA to free cash flow, and favorable growth prospects. Applying such a multiple to the annualized adjusted EBITDA of the ALP segment already brings you close to the company’s current enterprise value.

The steel business, by contrast, typically trades at an average of roughly 6–7x EBITDA. While it is fair to argue that certain parts of this segment may be of higher quality, this cannot be stated with certainty, as management has not explicitly segmented or disclosed this in detail.

Further Considerations

Let me add a few points that I have not discussed yet but that are still worth considering.

First, we have not addressed capital allocation. Given the equity to debt composition of the enterprise value, there is meaningful potential for attractive IRRs simply from debt repayment and the resulting increase in equity value as reflected in market capitalization. With maintenance CapEx likely running well below depreciation, the company should be able to generate meaningful free cash flow in the near term. Management has already stated that the proceeds from the UK liquidation will be used to pay down debt, and I do not expect a return to value destructive, empire building M&A.

From a shareholder perspective, the asbestos liability has one somewhat counterintuitive benefit in that it effectively functions as a cash flow sweep and enforces financial discipline. This view only holds, of course, if one treats the asbestos liability as debt like in nature, which I do.

Another aspect to consider is the potential for asset sales. Since the current CEO took over, management has already divested meaningful parts of the business. Given the earnings volatility of the steel segment, a period of higher utilization driven by the new EU steel safeguard measures could open a window to divest parts of the steel business.

Such a step could lead the remaining group being viewed and valued more like an ALP focused business, rather than a combined steel and ALP entity. This would be particularly relevant given the limited operational synergies between the EU steel segment and the remainder of the group. The company would still retain its U.S. facilities, and the overall business mix could therefore shift toward a higher quality, less volatile earnings profile.

That said, executing such a strategy would require a management team that is highly focused on IRR and shareholder value. Another point to consider in this respect is that at least three of the larger shareholders could be characterized as activist oriented, although only one might reasonably be described as an outright activist.

Conclusion

I want to conclude by noting that this case could be viewed as a ‘soufflé’ type investment. Parts of the business are highly cyclical and benefit more from political than purely operational tailwinds. That said, these tailwinds are meaningful and likely to materialize in the near term. At some point, however, the upside will likely find a natural ceiling, and the stock price could plateau or retrace if management does not prioritize IRR and consider divesting parts of the business. Until that point, I am willing to participate in the upside as long as the momentum holds.

I see current market dynamics as supportive for AP, given the range of opportunities across its segments and the visible year over year improvements in the financials that accompany them.

In my view, this is primarily a shorter term investment. At this stage, I would not consider a company that is still largely driven by steel industry dynamics to be a long term holding. That said, in practice, realizing the full benefit of the identified catalysts may require a longer holding period.

I rarely discuss position sizing explicitly in a write up, but I will say that I sized this position with political risk, a lengthy validation checklist, and the inherent unpredictability of political decision makers firmly in mind.

• Performance 2025 YTD: 16.7%

• IRR since 01.01.2017: 32.86%

• TTWROR since 01.01.2017: 602.82%

  

Stocks in my portfolio

Below are my current portfolio positions, in descending order of size.

$IMB.AX Intelligent Monitoring Group

I recently wrote a detailed update on IMB, so here I’ll focus only on what has changed since then.

The most important aspect is that they released their audited results today and can’t use their NOLs. As a result, net liabilities increased by $8m compared to the preliminary report. That’s unfortunate, but it’s still a one-off and doesn’t change my long-term view of the company. I just don’t like these kinds of surprises and apparently, the market feels the same way.

They also released a new presentation recently. Based on the forecast and the implied EV/EBITDA multiple, it looks like they are targeting around $46m in EBITDA for FY26. Formal guidance will be provided at the AGM, so it will be interesting to see whether this figure changes by then. That’s actually the midpoint of my own assumptions and would translate into a normalized P/E of around 7–8, excluding any benefit from NOLs since it’s now clear that they can’t use them. Don’t get any misconceptions: the stock will likely drop again today, but operationally the company seems out of the woods and is trading at a P/E of 7–8, assuming it pays the statutory tax rate for all future gains, while still growing organically and acquiring other companies at much lower multiples.

I increased my position significantly.

$ACP.WA Asseco Poland

I did a write-up about Asseco earlier this year, and so far things seem to be moving in the right direction and according to plan.

During the last call, they mentioned that 10 out of 15 approvals for the acquisition of treasury shares by Topicus had been granted. The CEO emphasized that he has no doubt they will receive the remaining approvals, although it might take longer than expected. I think November of this year is a realistic timeframe.

Recently, Constellation Software also held a lengthy call about the potential implications of AI for their business. I recommend listening to it, although I didn’t really learn anything that was new to me.

I slightly increased my position.

Cash

I currently have a lot of cash, but not enough high-conviction names in my portfolio. I’m actively searching for new stocks right now.

$KLNG Koil Energy Solutions

This is one of the stocks that has been a kind of long-term guest in my portfolio and like a guest, it has sometimes left my house and come back again. I think trading a stock on a quarterly basis has rarely worked as well for me as it has with KLNG, and maybe also with SNWV.

It was only a very small position for me until they published their financial results. Immediately after that, I significantly increased my position. I hadn’t done so earlier because I was surprised they hadn’t announced any new contracts. In the results, however, they mentioned three new contracts, one of them very large. Based on the language in the press release, it’s likely worth more than $4 million, which is the size of their largest contracts since 2015.

I can also highly recommend the recent interview Sebastian Krog did with the CEO of KLNG, which was very insightful regarding the company’s growth opportunities:

Treasure Hunting

A conversation with Erik Wiik — CEO of Koil Energy (KLNG)

Disclaimer: This is not investment advice and meant for entertainment purposes only, I hold a position in the discussed company and therefore may be biased in my opinion. Be aware that this is an illiquid microcap, please only trade with a limit-order…

Listen now

a year ago · 9 likes · 4 comments · Sebastian

I significantly increased my position.

IRIDEX

I recently published a write-up about IRIDEX, so let me add what has happened since then.

The market was not pleased with the financials and I’m sure most investors didn’t like the fact that adjusted EBITDA was barely positive. During the call, management provided what I consider a reasonable explanation for this: they experienced a supply issue with the probes needed for the treatments.

Based on my back-of-the-envelope calculations, they likely would have reported around 0.4 to 0.5 million in positive adjusted EBITDA if this hadn’t occurred, which the market would probably have interpreted as being on track and that’s how I currently view them. At least until the next quarter, which should show an uptick in adjusted EBITDA as they’ve started shipping against the backlog in Q3. So we shouldn’t expect anything that sounds surprising.

$ACNT Ascent Industries (Undisclosed position 1 from theprevious update)

First of all, thanks to Sebastian Krog for bringing this to my attention. I can highly recommend his pitch in Las Vegas as well as the recent business breakdown in the MicroCap Club, both of which are very helpful for understanding the case, especially since the financials are still somewhat distorted.

I see this as an investment that will likely take much longer than the usual 3–4 quarters I typically aim for, but I actually like that here, as the downside seems rather limited given their current cash position. So far, management has made all the right moves by selling off the underperforming business and buying back stock aggressively.

$MCB.TO McCoy Global Inc

There’s not much new I can tell you. We saw a rather mediocre quarter, which I had more or less factored into my short-term assumptions, but it doesn’t substantially change the long-term outlook for this company. I was aware from the beginning that I’d have to stay invested here a bit longer than my typical three to four quarters.

I think it’s fair to say that the macro oil environment isn’t booming right now, but it has found a healthy plateau, so there’s no real warning sign from my perspective. The company is growing its SmartProduct revenue, which I expect to perform well even when conditions in the oil sector are no longer in favor of McCoy’s competitors.

SANUWAVE Health Inc

Again, I was trading this position quite a lot, and it’s anything but a high-conviction investment for me, as the picture is still a bit unclear with respect to the clinical studies. So I don’t want to add much beyond noting that the recent refinancing was very much in the company’s favor.

$NOW.V NowVertical Group

You might remember that this was the largest position in my portfolio when I published my last quarterly update. Obviously, this has changed dramatically, but let me start with the positive side first. I recently met with some other investors in Munich, and during that weekend, one of my German investor friends started a discussion with me about NOW.V. Essentially, he told me that I’m accepting a lot of things with this company that I normally wouldn’t accept. Although I was somewhat aware of this already, that conversation tipped the scale, because I realized I couldn’t really argue against his points. It shows how important it is as an investor to have friends who are very open with their criticism.

After that conversation, I started selling. Unfortunately, I was too greedy and sold only a small portion of my shares before the financials were published.

Now, let’s pivot to the negative aspects. Although I was sure this quarter would be challenging, I wasn’t expecting that they wouldn’t grow in their core business QoQ and when I say ‘core,’ I mean revenue excluding reselling.

I wasn’t expecting that, as it didn’t really make sense to me from a purely operational perspective. On top of that, they had issued some shiny press releases that kind of alluded to growth in their core business.

Now, we could discuss what ‘core business’ actually means in the context of NOW.V, as they were highlighting growth through their strategic discounts, but that would be a stretch.

They already knew at that point how this quarter might turn out, and they must have realized that this kind of press release could be considered misleading. They really need to move away from this style of communication. If they stick with it, they will lose even more trust, because none of the investors I spoke with felt prepared for financials like these.

So why wasn’t their core business growing QoQ? Overall revenue didn’t increase because they didn’t land a major new reselling contract, which in previous quarters had also positively impacted adjusted EBITDA.

That’s something many were aware of, but the core business is a different story. If you ask management, they would likely tell you that by focusing on strategic accounts, they deliberately decided to exit some smaller contracts that didn’t seem worthwhile and that kind of makes sense. Still, I wasn’t really aware of this, and I think they could have spent more time explaining those aspects on the call.

Overall, we should conclude that they are still partially in the woods from a turnaround perspective, but a lot has changed for the better. Especially the refinancing will give them plenty of room to grow organically and through tuck-in M&A, at least that’s what I hope. No big acquisitions though, because otherwise I would expect the market to become even more skeptical.

NowVertical will likely never become a major position for me again, as I really care about management communication and consistency.

As I mentioned before, I reduced my position and the fact that I didn’t do so more aggressively earlier, even though my conviction was already fading, is what I would consider my first and hopefully last major mistake of the year.

$BLM.V Bluemetric Environmental (Undisclosed position from the previous update 5)

Again, thanks to Sebastian Krog for bringing this to my attention. I was somewhat skeptical about this one for a while and reduced my position significantly in the middle of the year. What ultimately tipped the scale was a combination of the declining stock price, driven by what looked like mediocre financials at first glance in the last quarter, an insightful earnings call, and an even more insightful business breakdown.

One important aspect from the call that stood out to me was the increase in unbilled revenue during the quarter, which made the reported revenue and EBITDA look worse than they actually were.

Jordan Grant

Nice to hear your presentation. I just -- on the same point, I just want to hammer it home for the sake of other listeners. It’s sort of a little accounting quirk here in that those salaries and benefits when the people are out billing, it flips up to cost of sales.

And when they’re unutilized, it’s flipping down to overhead costs. And it’s -- so it’s definitely not a permanent increase in overheads. It’s just because of that little accounting quirk. And could you just repeat again, please? You mentioned what that dollar figure was of unbilled revenue compared with the previous period -- comparative period.

John Hilton

$900,000 is what we carried in the quarter.

Jordan Grant

Yes. So it’s very -- and what was it in comparison with the previous period, though?

John Hilton

Yes. So normally, we carry about $1.5 million in unutilized labor per quarter. And so this was up at $2.4 million for the quarter.

Jordan Grant

Okay. So $900,000 was the increase. So that’s very significant because just having been that -- had that been normal, then the bottom line would have gone up by that much. [indiscernible] your revenue would have been higher as well and your gross margin. So -- not the gross margin, but the gross revenue.

Scott MacFabe

Jordan, I really appreciate you pointing this out because in many ways, these are the hard decisions that we have to make for the long game. And if we become -- we start making knee-jerk reactions like the amateurs might, then we’re going to pay for it for the long term. Our reputation is going to be tarnished and the kind of people we need to have here and bring to the organization that are going to produce the future for us are just not going to come or stay.

And so it’s a tough one. But you’re absolutely right. When we see things moving to the side or to the right and we know that contracts are being canceled and we just have to bite the bullet, I am completely confident that we made the right decision, even though making that kind of a decision does mask in many ways the results from other aspects of the operations that are doing very, very well.

BluMetric Environmental Inc., Q3 2025 Earnings Call, Aug 28, 2025

Whenever I discussed BLM.V with other investors besides Sebastian, they would tell me that the business comes across as pretty lumpy. While that’s partially correct, I got the impression that most investors were not aware of the recurring side of the business. So once again, I can highly recommend watching the MCC BB to get a better feel for that part of their operations.

$DSW.L DSW Capital PLC

As you can see, I was able to reduce my position, although it’s still of a relevant size since it remains essentially impossible for mainland European investors to sell AIM stocks.

Nothing has changed fundamentally regarding my view of the company, but there was at least one piece of positive news that Tristan pointed out: DR Solicitors has increased its number of consultants by eight since the acquisition, which speaks strongly in favor of the business. Still, I don’t have the confidence that this stock will help me reach my hurdle rate, given that they haven’t announced many new deals recently.

I reduced my position significantly.

United Homes Group

It’s an acquisition play, and if you look up the ticker on Twitter, you’ll likely get a sense of the case right away. Since my confidence here is second-hand, coming from a thread on a certain forum, I’ll leave it at that. Feel free to investigate further.

I completely sold my position after an early run-up following the presentation of the case, which felt like it had already priced in much of the potential IRR at the time. I then bought back in as the stock price declined in the subsequent weeks.

Undisclosed position 1

I got it from Sebastian’s paid Substack. A reader recently pointed out that it would be nice to at least share the name of the Substack when I don’t disclose a position.

Leatt Corp

I have nothing to add. Everything is going according to plan, and although the stock is no longer cheap based on my usual multiples, I believe it still has room to grow from here.

Undisclosed position 2

Another stock I discovered through Sebastian’s paid Substack. I increased my position.

Undisclosed position 3 (Undisclosed position 3 from the previous update)

I sold immediately after the financials were released, as they postponed some of their plans to early 2026 due to tariff issues. Surprisingly, the market showed a lot of liquidity, and I was able to sell four-fifths of my shares at very good prices. After that, the price declined over the following weeks, and I bought back in. There’s one aspect that isn’t as promising as before, so we’ll have to wait until March to see whether it actually materializes. The stock is still completely undiscovered and quite difficult to understand, so I decided to wait and see how it develops operationally.

I significantly reduced my position.

$SUP.L Supreme PLC

It will likely surprise you that the stock is ranked so low in my portfolio, and I can fully understand that. Although I had already reduced my position in the last update, after the MicroCapClub BB I felt things were moving in the right direction and that might still be the case, but I didn’t like the last trading update.

I understand that they want to take a conservative approach to guidance early in the fiscal year, especially with factors like the disposable vape ban and similar uncertainties. However, once again saying that they are trading in line with the analyst’s expectations and then seeing that the analyst has actually lowered those expectations with the fiscal year already halfway through, is a bit too little for my taste.

The tone of their communication has also shifted since the last update: from describing the first half as a ‘positive start’ to now calling it merely a ‘solid start’.

I know that might sound overly critical, but I tend to always pick up on these small nuances in communication, even though it might be true that, especially in the case of small-cap companies, they don’t think much about how this might come across in an investor’s mind.

I recently discussed SUP.L with some investors, and I tend to agree that the company still looks cheap based on EV/EBITDA and also on EV/FCF. However, I’m not 100% sure how much cash flow we’ll actually see now with the new asset structure. It’s pretty clear that they are less asset-light than before, and that negatively affects the EBITDA-to-cash-flow conversion. In other words, we’re looking at less cash flow than before, even though EBITDA remains the same.

You would also expect them to achieve a higher EBITDA in FY26, all else being equal, given that they completed two acquisitions they described as earnings-accretive. At the moment, I don’t like the potential implications of the lowered analyst expectations and the company’s seemingly more cautious tone in its communication.

For the time being, I’ve decided to watch from the sidelines and wait either for the company to publish formal guidance itself or for more visibility into the factors that could help me anticipate the next few quarters. I have therefore significantly reduced my position.

Stocks I Sold

$IVFH Innovative Food Holdings

I was already very critical of this stock in my last update and had reduced my position significantly, and things have only gotten worse since then. I was genuinely surprised that they exited the cheese business after saying the following during the Q1 earnings call in May:

So first off, from Ian Cassel. I have a question about the cheese retail business. Can you become profitable at the current scale? Or do you have to grow it significantly to get to breakeven?

So, we do think that we can get to profitability at the current scale. It’s hard, I know for investors to only get a quarterly snapshot of our financials. But I’d encourage you to just remember that we only finished the ramp-up of this retail business in January with that additional rollout that we had announced at that point. And so really, we only had a partial quarter of this business at full scale, and we continue to learn every single day on how to be more efficient with the process.

We’re already getting improved costs that haven’t yet showed up in the financials. I actually just visited the Pennsylvania facility this week and witnessed some new processes they have in place that are reducing labor by upwards of 30% per unit. We continue to find efficiencies in our shipping capabilities and contracts. So, all of those things we continue to push on and expect that we can get to profitability within our current scale. But that said, like Brady mentioned, we also continue to chase additional top line opportunities. And just having these capabilities in place opens up so many doors that we just didn’t have access to before. So hopefully, that answers your question.

William Bennet - Innovative Food Holdings, Inc., Q1 2025 Earnings Call, May 15, 2025

In my opinion, that’s a completely different tone from the language in the press release announcing their exit from the cheese business. They announced this just two and a half months after the Q1 call, which makes you wonder what they were thinking when making those comments during the call. Were they already in negotiations to sell the asset while talking about reaching profitability in the retail business? Two and a half months is not a long time for a transaction like this. After they issued the press release about exiting the cheese business, I sold immediately because it felt anything but consistent with their previous communication.

And there are some additional issues from my perspective. First of all, we now know for sure what ‘continued softness in our business with our largest drop-ship customer’ actually meant.

It simply meant that competitors had begun to take market share from IVFH at US Foods.

These growth initiatives were offset by continued softness in our largest customer, U.S. Foods, driven by continued increased competition within their marketplace. Returning this business to growth through significant catalog expansion remains a key initiative for the entire management team.

William Bennett - Innovative Food Holdings, Inc., Q2 2025 Earnings Call, Aug 13, 2025

I was already somewhat suspicious earlier this year that this might be the case, and now we know for sure. I honestly find it rather odd that a company refers to this as ‘softness’ when, in reality, it was competitors gaining traction while IVFH was falling behind. That’s information worth sharing, and I can understand why some people believe they deliberately chose not to disclose it.

There’s another aspect that makes this stock uninteresting for me, even if they manage to turn around the drop-shipping business. I was willing to accept a higher multiple for this stock at the end of last year because I believed in the flywheel they had communicated. To put it simply: M&A drives catalog growth, which in turn drives drop-shipping growth and gives the food distribution side of the business access to a larger catalog to distribute.

If I look at the comments from the Q2 call this now seems to be off the table or at least in question.

So the jury is still out on whether if those acquisitions can meet the synergies and the goals that we had when we went out to make them, then there may be opportunity to make further acquisitions. If we don’t get to where we want to, as we sell all along, we bought them for such a good price that doesn’t create any financial headwinds for us going forward, but it will definitely shape how we think about M&A in the future beyond that. So a lot of question mark still on that business.

William Bennett - Innovative Food Holdings, Inc., Q2 2025 Earnings Call, Aug 13, 2025

Based on the comments from the Q2 call, this now appears to be off the table or at least uncertain. As a result, a major part of my original investment case is no longer intact. They neither have a promising M&A strategy nor a real moat when it comes to their catalog. It now looks more like a first-mover advantage, and it’s still unclear to me whether their AI tool is actually working as intended. After the last call, I already felt that the picture was a bit muddy regarding the tool’s status, and that impression was reinforced when I read a new write-up in which the author linked the addition of 400 new SKUs to the AI tool, even though Bill Bennett had stated that this was solely due to adding more headcount and not related to the tool.

So with this kind of first batch of vendors that we brought through with the latest acceleration that I’m mentioning, again, this is not even with the AI yet, right, because we’re -- it’s just through the added headcount that we put in place, but that probably took us about 6 or 8 weeks to get them through the process and that we expect that to just accelerate as we get the AI platform launched and rolled out to added vendors as we move forward.

William Bennett - Innovative Food Holdings, Inc., Q2 2025 Earnings Call, Aug 13, 2025

So we don’t know if it in the end really works the way they want it to, although I’m not to skeptical about that, just skeptical.

And there’s another aspect I’m skeptical about, and that’s the sale of the warehouse. It’s probably nothing, but the fact that the buyer extended the inspection period is at least not a good sign, right? As I’m writing this, we’re already one day past that period, so we’ll likely hear something about it soon.

How I wrap this up after being so critical might surprise you, but let me say that I would invest in this kind of setup again anytime. It was one of the most promising situations I’ve seen, with the classic good business/bad business dynamic I’m always looking for. My key takeaway for the future is to accept even fewer blank spots in the research process and to be even more skeptical about the nuances in press releases.

$KINO.L Kinovo PLC

The remaining position was completely cleared from my portfolio once the acquisition was finalized.

Undisclosed position 2 from the previous update

It was an acquisition play and it went wrong. I sold it at a loss.

$PCHM PharmChem (Undisclosed position 4 from the previous update)

The company was acquired, though not at a premium to the stock price at the time, which is still acceptable. I made a small profit after fees, but nothing worth bragging about.

Overall Reflections

First and foremost, I’m 100% sure that I will no longer invest in AIM stocks, at least not unless someone points me to a 10x no-brainer within a few weeks. It’s really a pain in the ass, and I don’t even know why the system is designed like that.

It’s almost impossible for me to sell a stock like DSW.L, no matter the price. If you’re not aware of the issue, let me tell you it’s not primarily about illiquidity, but rather a significant disadvantage for non-UK residents. While those island Europeans can trade a stock pretty normally, we’re basically victims of the so-called ‘auctions’, which essentially means we’re not allowed to sell our shares.

I’ve known about this for the past five years, but this is the first time it has really hurt. I’ve been trying to sell a position for the last four months because I wanted to buy something else, and I was barely able to sell half of it, even though I was significantly below the highest bid price.

Consider this an old-man-yelling-at-the-clouds moment, but still, you should be aware of the potential implications if something really goes sideways and you want to exit a stock.

That aside, the NOW situation really annoyed me. I had the advantage of talking to a smart investor friend who knows how to criticize, I came to the right conclusion and still acted like an idiot. Still, I think experiences like this shape the future version of me as an investor, and this lesson might end up being worth more than the gains I lost.

Okay, no, honestly, I’d still rather have the money back.

Lately, I’ve been thinking a lot about how much I have to or ‘should’ tolerate when it comes to odd moves by management. And this isn’t even specifically about NOW.V. I think in the microcap world, you have to accept a certain amount of strange behavior, simply because many management teams are not fully aware of the implications that come with running a public company.

My current conclusion is that assets or a real competitive advantage ultimately matter more than management, at least as long as they don’t deliberately decide to rip you off. That’s why this is the most important aspect of my research, and only after I’m convinced about the assets do I reach out to management. I wouldn’t say that the reverse approach, starting with conversations and then concluding the team is outstanding, doesn’t work, but even the best management team cannot overcome certain external conditions that impact the business.

That’s kind of my preliminary takeaway, and still one of the hardest lessons for me: not to think of the management team as people sitting in the same boat as you. They’re not. You’ll never truly be on the same side, and it’s easy for them to go radio silent when something goes wrong.

IMB is currently my largest position, and there have been obvious flaws in communication and behavior. But in my view, the assets are still significantly undervalued, and Dennison still seems to be doing a great job as both a manager and a leader. That aside, I’m still not 100% sure who was responsible for the communication issues. We’ll likely find out together whether the strength of the assets can outweigh those flaws, as this is a long-term investment for me with what appears to be limited downside.

Feel free to reach out to me if you currently have a really interesting name that you think I might be interested in and that won’t waste my time. As you know, I value collaboration.

The long-expected clean quarter finally arrived, and the market initially reacted with a sharp share price increase. But once the results were presented, the stock quickly dropped again. There are at least two things the market may have disliked. In this update, I want to assess how significant these issues really are and what they tell us about the company.

The Financials

Let’s start with the bad part: They didn’t deliver on their guidance. Originally, they said they planned to achieve >$38m adj. EBITDA before acquisitions and >$40m after including acquisitions. In the end, they came in at $38.4m. Dennison explained this by pointing to the timing of several large service contracts, which are now expected in early FY26. Decide for yourself whether you find this explanation convincing. In general, I believe guidance should always be structured in a way that can be upheld, even if certain things go ‘wrong’.

When we talk about adj. EBITDA, we also need to look closely at the adjustments. I really like how they structure their slides now. Compared to a few years ago, it’s much easier to understand what adjustments were made and to decide for yourself whether to accept them or adjust them back.

I’m completely fine with the impairment of assets (already explained in detail after FYH1) and with business acquisition costs. Adjusting for SBC is also standard.

What might raise questions, though, is the impairment of receivables. Unfortunately, they only explained this in detail on the call. Apparently, it’s due to aligning the receivables of acquired businesses with their own receivable policies.

If you check the receivables in their annual report, you might conclude that, based on the days overdue, it’s unlikely they’ll ever collect the full amount. If that’s the case, we should recognize this as part of the effective purchase multiple they paid for the company, since it seems to be an ongoing effect.

It’s always the same with adjustments: are they really one-offs, or just a way to buy time and keep shareholders from walking away, while the effects are actually ongoing? In this case, the receivables are the only point I could potentially criticize. The remainder of the one-offs appear to have been just that: genuine one-offs.

At least that’s the conclusion we can draw from the last quarterly report. I’ve often said that Q4 would be a quarter without any potential excuses, and that’s exactly what we got. There were essentially no adjustments to operating cash flow, which makes perfect sense now that both the transition and the refinancing are complete.

I’ve seen several times that people asked whether this kind of cash flow is the new normal for IMB’s quarterly results. The answer is most definitely no. Q3 was negatively impacted by several working capital effects, while this quarter benefited from them. These included inventory reduction, higher accounts payable, and lower accounts receivable due to an advance payment from a government contractor. All of this influenced the reported cash flow, and Dennison mentioned some of these factors on the earnings call.

I do think management should explain changes in working capital in more detail to the market. That said, it seems no Australian company provides this level of detail, as it’s neither part of the quarterly cash flow statements nor the annual reports.

I just want to make sure you’re aware of these aspects. Adjusting for working capital effects, the ‘real’ cash flow is likely slightly below $10M, which is still quite strong. In my view, it makes sense for investors to use adjusted EBITDA as a starting point and then derive the underlying operating cash flow, ensuring that working capital effects are excluded. I’ll come back to this point later.

Based on the balance sheet, the company is currently in a stable position. They still have plenty of cash on hand and $40M of unused credit facilities that could potentially be used for acquisitions. In addition, interest expenses were cut in half through the refinancing.

‘Preliminary’ & Warrants

There are two possible explanations for why the stock dropped after the presentation. Initially, some people, myself included, thought the market was worried about the additional liquidity from the TOR warrants. At first glance, 19M additional shares in an illiquid stock, held by a shareholder unlikely to stay long term, can look threatening. However, it was already well known that at some point the warrants would be converted into shares (I even mentioned this in my initial write-up). So I consider this a non-event as it was always part of the fully diluted share count in my valuation.

Beyond that, I think it’s very unlikely they will be sold on the open market. A more realistic scenario is a transfer to another institutional investor, such as MAF, which has been consistently adding to its position.

The second explanation relates to a topic that also bothered me. IMB’s financials are not fully audited at this point. CFO Jason Biddell himself admitted that the tax advisory services they had received were of poor quality, and it is now uncertain whether they can actually use the NOLs to offset their operating gains.

And therefore, we've moved to new tax advisory with Grant Thornton and Grant Thornton's initial review of our tax position from previous years is that we need to do some more work on business continuity or same business test and the change of ownership that the business had in previous years, I don't remember the exact year, apologies, has caused us to now no longer potentially rely on prior year losses.

Now this is obviously a big thing. So we are making sure that we are getting the best advice we can from Grant Thornton, and that has delayed the audited results and is the reason why the tax note in the preliminary report when you get a chance to read it today, is very short and certainly non-informative. But we are working with Grant Thornton to get the best advice we can. There are some benefits coming through in early conversations and early modeling, but the total tax position today is not clear.

Jason Biddell - Intelligent Monitoring Group Limited, 2025 Earnings Call, Aug 26, 2025

I could go into detail about why this surprises me, since my understanding was that it’s generally possible to use NOLs from an acquired company as long as you own company is in the same industry (to put it simply). But as they mentioned they expect to have a result before the end of September, let’s just wait for that.

It’s also been a while since they last disclosed the losses they could potentially use to offset future gains. At that time, the amount ($23.4M) was significantly below the accumulated losses shown on the balance sheet. Applying the 30% Australian tax rate translates into an effective $7M one-off expense. However, I don’t know how much might have already been utilized before the auditor informed them that they didn’t pass the COT and/or SBT test. I also don’t know how much has been added during this year and neither does the company at this point.

To take a conservative approach, we should simply assume they will have to pay taxes going forward and adjust our valuation accordingly.

I understand why the market is upset, since this is yet another unexpected negative surprise and raises questions about how much control they really have over these matters. Still, this isn’t a thesis breaker in my view, since the company has executed well on all other important fronts. On the positive side, they have now switched to Grant Thornton as their tax advisor.

Outlook

First of all, no formal guidance has been issued. The company plans to provide this at the AGM in October. Still, there were some clear indicators of where they see the business heading and what they aim to achieve long term.

The broader electronic security market in Australasia is expanding, supported by urbanisation and large infrastructure projects. Businesses are increasingly replacing legacy systems with cloud-based surveillance for greater flexibility and integration. At the same time, labour shortages and the need for 24/7 security are driving demand for remote monitoring. The rise of AI and video analytics is also reshaping the industry, moving surveillance from a passive function to a more proactive one. On top of that, small businesses and regional areas remain underserved, creating opportunities.

So why should IMB be able to benefit more than others as they aim to lift their market share from around 4.5% to at least 25%? A key factor is the series of acquisitions that have given them national coverage, which is particularly attractive to enterprise customers looking to work with a single provider. Their network also offers redundancy, ensuring monitoring services continue even if one center goes offline.

On the technology side, IMB appears well positioned. They have already demonstrated practical applications of AI that directly support their business. During the call, Dennison highlighted ongoing discussions with childcare centers to use AI and cameras to track children and flag behaviors that could indicate potential danger. Goodstart Early Learning, one of the largest players with 650 childcare centers, is already a customer of IMB. While they are unlikely to be the only company pursuing this kind of application, IMB has been proactive in showing how AI can be integrated into their services in ways that could positively influence both revenue and margins.

They also shared their commercial pipeline for the first time, which can serve as an indicator for the underlying growth in this segment, but they also issued a kind of guidance for it: 14% YoY growth in Australia in and 19% in New Zealand in FY26.

It’s worth noting that these commercial contracts often develop into long-term relationships of 7 to 15 years, providing recurring revenue through maintenance and services. This also explains why the company places particular emphasis on growth in this segment.

That aside, they didn’t provide much detail on the residential side of the business, which raises some questions about its current performance. This is particularly relevant when considering the overall 8.2% underlying earnings growth in FY25. It seems reasonable to expect stronger growth in FY26. Dennison has repeatedly stated that he anticipates an acceleration, and in July he explicitly noted that larger growth is likely in this fiscal year. It’s also worth remembering that the transition from 3G to 4G occupied a significant portion of the sales team’s capacity last year. With that process now complete, staff can focus on generating new contracts rather than migrating existing ones.

It’s also interesting what Dennsion said about the current run rate:

So essentially looking for sort of a guide on run rate EBITDA. It's fair to say that if you take that second half EBITDA, which Jason presented and has called out in the presentation, we would be -- you would absolutely want to double that. And then in terms of the flow through, there's probably about $1 million of incremental pickup from acquisitions made in the past that have to roll forward. So I'm not here and don't want to give guidance today.

What we're looking to do is make sure we build our plans around growing the business and also reinvesting in the business, and we are working hard on our planning this year and want to really do that on the 4th of November. But essentially, I say to people, we are or should be a sort of mid-40s EBITDA business sitting here today.

Dennison Hambling - Intelligent Monitoring Group Limited, 2025 Earnings Call, Aug 26, 2025

Given that adjusted EBITDA in H2 was $21m, and adding the $1m incremental pickup, the current run rate is around $43m. This represents a ‘run rate’ only, with no growth assumed. It’s also worth keeping in mind that FYQ2 (CYQ4) is typically a quiet period for their business, so don’t be surprised if EBITDA run rate for that month comes in below the guidance that will be issued in October.

There are also signs that margins could expand faster than revenues, driven by the rollout of video guarding. In FYQ3 they had around 80 sites using this service, and that number has already grown to 300. Importantly, the unit economics of video guarding are much stronger than those of a standard residential customer:

• Standard: 2,500 AUD installation + 40 AUD/month for monitoring

• Video guarding: 4,000 AUD installation + 120 AUD/month for monitoring

• Cost base: 18 AUD (standard) vs. 25 AUD (video guarding)

This is definitely a metric worth keeping an eye on.

Additional observations

A lot of people, including myself, were happy about them finally announcing a buyback, but also made clear that they likely only use it opportunistically when the share price should drop significantly. I appreciated that they were open about what to expect in this regard. It felt honest rather than misleading.

They also made clear that dividends are the least best way to use capital, so what’s likely for the future is further M&A. The fact that they also announced a new acquisiton during the presentation underlines that.

According to Dennison’s comments, the strategic rationale is that IMB gains access to the Oil & Gas sector, which alongside mining is a key industry in Australia with large enterprise customers.

‘Real’ CapEx in FY25 was $10.4m, largely driven by the 3G to 4G transition. For FY26 it will likely be slightly lower, though not significantly, and should trend toward the underlying business depreciation rate by year-end. Based on their comments I would expect CapEx in the range of $8–10m this year.

Valuation

For the current valuation, I will, as previously mentioned, assume that IMB can no longer utilize its NOLs and will pay 30% tax on earnings. Note that $38m of revenue was generated in New Zealand, where the tax rate is only 28%. For simplicity, however, I applied the Australian tax rate to all earnings. The remaining Customer Contracts & Brand still serve as a tax shield, which is why I multiplied that amount by the 30% tax rate.

Regarding earnings, I treated the EBITDA run rate Dennison mentioned as the absolute minimum guidance. For the base case, I assumed 8% underlying growth, in line with FY25. For the bull case, I assumed 14% growth, reflecting the rate mentioned for the Australian commercial segment. This looks ambitious given the current $55m commercial revenue and the lack of detail on the residential business. Still, Dennison emphasized that growth is expected to accelerate and that margins could improve further with video guarding. We should also keep in mind that they typically acquire businesses at 3–4x EBITDA, while currently trading at a significantly higher multiple.

I calculated maintenance CapEx using $0.7m of business depreciation, $3.4m of lease depreciation, and $1.44m of depreciation on ADT Care assets in New Zealand. You may have noticed that the depreciation line for subscriber assets in their slides is well above this figure, but that’s mainly due to the pre-contracted ADT sales, which are now being fully expensed. This results in a total maintenance CapEx of $5.44m.

Following the refinancing, interest is no longer a matter of speculation, as the company now pays roughly 7% on outstanding borrowings

That leaves us with a P/E of 8.5–10x and an adjusted P/E of 6.9–8.2x. If we assume the NOLs can be utilized, the multiple likely drops further to around 5–6x P/E for the next two to three years.

In my opinion, that’s cheap for an organically growing business that acquires at half its own EBITDA multiple, with 50% recurring and 17% reoccurring revenues.

Conclution

I wasn’t considering selling my shares, even though the tax issue was frustrating. That aside, the business is now in a stable position, and video guarding appears to be gaining traction, as does their commercial pipeline. The current multiple looks far too cheap, especially since the half-year report demonstrated their ability to integrate acquisitions and benefit from their national scale.

Ticker: IRIX

Price: USD 1.35

Shares Outstanding: 16.79 million

Fully diluted: 22.75 million

Market Cap: USD 22.66 million

Market Cap fully diluted: USD 30.71 million

Enterprise Value: USD 24.60 million

Just to be clear, this is a turnaround play. I have no idea how things will look long term, and honestly, I don’t really care currently. Right now, the downside seems pretty limited, and there are a bunch of opportunities that could lead to better margins.

This is a simple, no-frills pitch covering the key points. Feel free to explore further.

The Company

Iridex operates three types of laser consoles used to treat sight-threatening eye conditions, including glaucoma and retinal diseases.

They got the following product lines:

• Glaucoma: The primary system for treating glaucoma is the Cyclo G6® laser console with MicroPulse® technology. This product line could be considered a rising star, despite having faced a period of challenging market conditions.

• Medical Retina: This line includess IQ 532, IQ 577, and PASCAL systems, all equipped with MicroPulse technology. These versatile lasers also support glaucoma treatments like trabeculoplasty, iridotomy, iridectomy, and PSLT.

• Surgical Retina: Their surgical retina line includes OcuLight TX and SLx (with MicroPulse), commonly used in vitrectomy procedures for conditions like diabetic retinopathy, macular holes, and retinal tears or detachments

They follow a razor-blade model, generating recurring revenue from probe sales in their glaucoma and surgical retina segments.

They sell primarily through a direct sales force in the US and Germany, and via distributors elsewhere. Revenue remains largely US-driven.

The Financials

Iridex has a long history of operating losses and has never truly been cash-flow positive (excluding working capital changes). There are signs this could improve, but for now, let’s stick to the current financials.

A long history of negative cash flows inevitably led to a declining cash position, prompting an agreement with Topcon on March 2, 2021. Iridex acquired assets from a Topcon subsidiary, including rights to the PASCAL product, while granting Topcon distribution rights for Iridex’s glaucoma and retina products in select markets outside the U.S. As part of the deal, Iridex also raised USD 10 million by selling 1.62 million shares to Topcon. The net proceeds to Iridex of these transactions was USD 19.5 million.

What initially seemed like a solid deal and healthy cash cushion proved to be just a short-term relief, as the cash position quickly shrank again.

The uptick in the cash position at the end of Q1 wasn’t driven by operating cash flow or working capital changes, but once again by a deal with a strategic investor.

Following a strategic review and CEO change, Iridex secured USD 10 million in fresh capital from Novel Inspiration: USD 6 million in preferred stock and USD 4 million in convertible notes, effectively priced at USD 2 per share if converted. The notes carry a 12% interest rate, paid quarterly in common stock.

Some of the proceeds were used to retire existing convertible notes.

As part of the deal, Novel gained the right to appoint two board members, one of whom was former CEO William Moore, reportedly the one who brought Novel to the table. Additionally, Romeo Dizon, who previously held the CFO role and worked for the company from 2008 to 2020, was reappointed CFO.

USD 10 million in convertible preferred stock and notes, with interest payable in common stock, initially sounds highly dilutive, and I believe both will likely be converted over time. That’s why I included the full potential dilution in my fully diluted share count when calculating enterprise value, rather than treating the notes or prefs as debt. If fully converted to common stock, both instruments would add 5 million shares.

The options are deeply out of the money, so I didn’t include them in the share count or the cash position.

I included the outstanding RSUs and the annual interest payment on the convertible notes, calculated in common stock at the current share price, resulting in a fully diluted share count of 22.75 million.

You should be aware that Novel has the right to purchase additional convertible promissory notes with a total principal amount of up to $10,000,000. These 'Growth Notes' may be issued in three installments, with one-third becoming issuable on each annual anniversary of March 19, 2025.

The Investment Case

Although the company originally initiated a strategic review with potential plans to sell parts or all of the business, that path now seems either abandoned or deprioritized.

I mean we're not in the same place we were back in Q4 where we were low on cash. We're in a much better cash position now, but of course, any offer that was brought before the company if it made sense for the shareholders, the Board of Directors would consider it.

Patrick Mercer, CEO - Special Call

Now the opposite seems the case. The company wants to keep all their product lines and plans to acquire a complementary product or company. William Moore brought Novel in as a strategic investor to pursue this goal.

We are -- one of the reasons we came to -- one of the things we liked about working with Novel on the transaction is they had a shared strategy. And one of those strategies where we were open to folding other companies into IRIDEX, bringing those assets in-house.

Patrick Mercer, CEO - Special Call

The special call also provided some insight into potential acquisition targets.

We expect this effort will involve pursuing some small accretive acquisitions, and this thinking is the rationale for Novel having negotiated the ability to invest an additional $10 million in the company.

The first $10 million is intended to be more than sufficient for the company's normal operations given its new financial discipline.

William M. Moore, Director - Special Call

Now, some of you might think I’ve lost my mind and wonder what happened to the overly skeptical investor who usually questions any M&A deal valued at half the company’s current market cap. Rest assured, that skeptic is still very much here. There’s a reason I began the 'Investment Case' section with the M&A aspect: it’s the part I’m most skeptical about and, in my view, the only meaningful argument against the case, at least in the short term. I just wanted to make sure everyone is fully aware of that. I’ll come back to that later.

Let’s now look at the aspects that, from my perspective, point toward a successful turnaround.

The evidence is simple: take a look at Q4 2024…

…and Q1 2025.

Two consecutive quarters of positive adjusted EBITDA after years of losses could be an early sign of a successful turnaround. From here, it’s our job to evaluate whether this momentum is sustainable, whether it signals the start of a broader initiative, and whether it comes at the expense of the company’s core operations. So, what changed?

Since the second half of 2024, the company has taken meaningful steps toward cost-cutting.

The most apparent cost-cutting so far has occurred in Sales & Marketing expenses, which dropped from $16.2 million in 2023 to $12.6 million in 2024. The most significant driver of this reduction was a cut in headcount. Naturally, one should remain skeptical when a company trims its sales force to improve adjusted EBITDA such moves can backfire if they hurt long-term growth. However, we’ve seen similar actions work elsewhere, like at $COV.V, where the CEO built a more effective team by removing underperformers. In Iridex’s case specifically, there are good reasons why the company ramped up its sales force in the past and why scaling it back now may be the right move.

…we made a bet on our glaucoma business last year and earlier. And in '23, we hired a bunch of salespeople. We went and tried to grow that business, and we weren't successful. We didn't have some of our ducks in a row as far as what setting should be used and we had to take another look at that. We've improved that.

Patrick Mercer, CEO - Special Call

One of my investor friends is always skeptical when a company increases its sales force and I never really understood why. More salespeople should mean more sales and more profit, right? But after seeing so many cases where expanding the sales team actually hurt profitability, not just in the short term, I now understand his point much better. In Iridex’s case, there was also a specific reason why it wasn’t the right time to aggressively push the glaucoma business. That situation has changed, but for now, let’s stay focused on the cost-cutting efforts.

In the Q4 2024 earnings call, Patrick Mercer stated that the focus for 2025 is on reducing manufacturing costs and increasing product supply capacity. In my view, there are some obvious low-hanging fruits here. The company is still manufacturing lasers in Mountain View, California, arguably one of the most expensive places to produce what are essentially commodity products. It’s likely that the new management team will address and change this.

And the other part is we're on a path to move the company up substantially in revenue, not just a slow growth, but what will happen in the first phases that we're dealing with is Patrick will work with getting this outsourcing done.

William M. Moore, Director - Special Call

Another area of cost-cutting has been R&D. While this could potentially impact the company in the long term, financial discipline appears to be the current priority. For now, it's likely that R&D efforts will focus only on products that are close to market or backed by external funding, with little appetite for entirely new initiatives.

So cost-cutting is one thing, but Moore also spoke about increasing revenue. After years of essentially flat performance, once you average out a few temporary spikes, what actually supports that claim?

In 2023, Medicare contractors proposed limiting reimbursement for key glaucoma procedures. Initially, it was unclear whether Iridex’s Cyclo G6 MicroPulse treatment, a form of transscleral cyclophotocoagulation, would be affected. In November 2023, Iridex announced it had successfully appealed the proposed restrictive LCDs, and in December 2023, all five Medicare Administrative Contractors (MACs) retired the draft policies before they could take effect, thereby retaining full patient access to MicroPulse TLT. Given the uncertainty surrounding reimbursement, it’s likely that Cyclo G6 system and probe sales were negatively impacted. After several years of year-over-year growth, Cyclo G6 revenues declined from $14.7 million to $13.5 million.

In November 2024, Iridex confirmed that the new LCD had gone into effect. Given the reimbursement limitations placed on Micro-Invasive Glaucoma Surgery (MIGS) procedures, this will very likely strengthen the relative position of their MicroPulse TLT treatment.

The Company has previously reported that it believes the reimbursement limitations created by the new LCD has potential to significantly increase physician interest in and use of Iridex’s advanced laser-based treatments for glaucoma.

The new LCD clarifies that treatments performed using Iridex’s laser consoles and probes are not MIGS procedures, and thus, Iridex’s Cyclo G6^® product family is unaffected by the new reimbursement limitations. Iridex’s proprietary MicroPulse^® and Continuous Wave laser therapies for glaucoma have been adopted by physicians around the globe as effective tools for managing and slowing the progression of glaucoma.

[…]

“In addition to creating some reimbursement advantages for Iridex’s glaucoma treatments in the United States, the LCD creates opportunity to capture more physician attention to the significant clinical benefits of our products, particularly MicroPulse Transscleral Laser Therapy (MPTLT),” said Kevin LaMarche, Iridex’s Senior Director of Clinical Affairs. “Our laser procedures are noninvasive, repeatable, and can be utilized to treat patients across a far broader range of glaucoma’s progression, whether before, after, or even coincident to MIGS procedures.”

GlobeNewswire - Iridex Comments on Changing Glaucoma Reimbursement Landscape

The company recently announced the publication of a peer-reviewed study supporting its claims about the effectiveness of MicroPulse TLT.

It’s also worth noting that Patrick Mercer, the new CEO and former COO, pointed to another factor that may have impacted the performance of the Cyclo G6

We didn't have some of our ducks in a row as far as what setting should be used and we had to take another look at that. We've improved that.

We now have settings that work and show efficacy in the marketplace. And we have -- with the new LCD and our new focus on looking at the post-MIGS category and being used earlier in the continuum of care for glaucoma, we really do believe that's the growth side of our business, and we should see that growth continue.

Patrick Mercer, CEO - Special Call

It’s too early to tell whether he’s right about the growth trajectory. Sales cycles are long, but the company did report growth in both system and probe sales in Q1. Given the improved reimbursement environment, it would be surprising if they weren’t able to benefit from it.

Given all the ongoing cost-cutting measures and the potential for increased revenue, I was somewhat surprised by the 2025 guidance. Adjusting for working capital, Q1 was essentially cash flow breakeven, and adjusted EBITDA has been positive for two consecutive quarters. I see little reason why that should reverse. Revenue should also trend upward, as Cyclo G6 sales are expected to recover, and management has guided for growth in retina revenues, even though Q1 was slightly down.

The Company plans to achieve cash flow breakeven and positive adjusted EBITDA in 2025 on revenue generation consistent with 2024.

GlobeNewswire - Iridex Reports First Quarter 2025 Financial Results

The guidance doesn’t make much sense to me, based on what I know about the company and its current competitive environment. With a new CEO and CFO in place, both emphasizing financial discipline, it seems likely they’re trying to establish a culture of underpromising and overdelivering. We’ll find out soon enough when the Q2 results are released. I expect another quarter of positive adjusted EBITDA and revenues at least in line with the same period last year.

Now that we’re talking about the ‘new’ management, let me highlight a few points I’m still skeptical about. One concern is that the new CEO was promoted from within, he previously served as COO, so one could argue he was part of the problems created by the prior leadership. That said, I haven’t seen anything so far that warrants criticism.

Another concern is whether it was wise to lay off a significant portion of the sales team just as the reimbursement environment has turned favorable for the glaucoma portfolio, especially given that management repeatedly emphasizes the need to educate customers on the value of their products.

An equally important focus is ensuring we fully capitalize on the opportunities created by the LCD implemented in November 2024, which has significantly altered the landscape for physicians by limiting the use cases for MIGS devices. While we won't return to the aggressive spending patterns of recent years, that's not my approach, I believe the LCD itself offers far greater value in terms of driving opportunity for IRIDEX than any market spin could, and we are starting to see utilization increase as a result.

Patrick Mercer, CEO - Q4 2024 Earnings Call

And finally, let’s return to the M&A topic. Management stated they’re looking for targets that can be easily integrated and offer synergies with their existing customer base. So I’d be surprised if they acquired an early-stage startup lacking regulatory approvals. William Moore mentioned the possibility of an acquisition at 1x revenue, but I doubt that was a serious remark. In reality, it might be challenging to find a medtech company available at that valuation, especially with only $10 million in additional financing. A capital raise is definitely not off the table, but I’d be surprised if they pursued one before the share price climbs back above $2, the level at which Novel made its initial $10 million investment.

Valuation

It would be easy to throw shiny revenue-multiple-based price targets on the two segments, one operating in a mature market (retina), and the other with potential to become a rising star (glaucoma). But honestly, that’s not what this story is about right now. And when I say 'now,' I’m referring to the next two to three quarters. The company first needs to prove it can generate positive cash flow and deliver consistent revenue growth. Only then will the market start to trust the turnaround and allow them to raise capital at a more attractive valuation.

That said, the sector is known for high acquisition multiples. Lensar, a company developing laser treatments for cataracts, so within the same industry, was recently acquired at 8x revenue, despite being only marginally adjusted EBITDA profitable. However, that company was growing much faster, so I wouldn’t expect Iridex to command a multiple anywhere near that level. In any case, I don’t see EV/EBITDA as the right metric to value Iridex, since a strategic acquirer would likely cut a significant portion of operating expenses from day one.

Management has hinted at ongoing consolidation in the industry during recent calls, but for now, there’s no indication that they’re actively pursuing a sale. The near-term focus should be clear: complete the turnaround and rebuild shareholder trust.

Conclusion

It’s always the same with cases like this: you look like a genius if it works, and like a fool if it doesn’t. It’s a bit like Schrödinger’s cat, I’m both a fool and a genius at the same time, and we won’t know which until management lets us look inside the box.

For the past few years, I’ve focused on opportunities with limited downside and meaningful short-term optionality and at its current valuation, Iridex fits that profile for me, given the visibility around cost-cutting measures and the favorable competitive environment.

• Performance 2025 YTD: 16,3%

• IRR since 01.01.2017: 33,84%

• TTWROR since 01.01.2017: 600,65%

  

Stocks in my portfolio

Below are my current portfolio positions, in descending order of size.

$NOW.V NowVertical Group

Once again, a lot has happened since the last quarter, some of which has helped remove risks that certain shareholders were still concerned about.

One notable development was the refinancing of debt that was due this year. NOW.V successfully secured new terms, which I would consider quite attractive. Additionally, the management team addressed the recent increase in unbilled receivables. These were attributed to longer-term reselling subscriptions, which, under IFRS, must be recognized as revenue on day one. The explanation is reasonable, and while I don’t find it particularly concerning, it does make revenue and EBITDA appear stronger than they would be on a stand-still basis, though such a static scenario is unlikely in practice. Still, it’s something to monitor, especially as we wait for evidence of strong, positive cash flow.

There has also been some insider buying, although in my view, it could and perhaps should be more.

I’ve slightly increased my position

$ACP.WA Asseco Poland

Things have been running so smoothly so far that I’m starting to get the gut feeling the only major near-term risk, which is regulators not approving the acquisition, is unlikely to materialize. I think we will have more clarity after the next quarter. The recent financials were promising.

My position remains unchanged.

$KINO.L Kinovo PLC

I was thinking about just writing 'Kinovo got acquired, guys. Let’s leave it at that.' But still, the circumstances around the acquisition felt a bit odd. Announcing a takeover without giving shareholders a chance to review the financials, especially at a time when the overall market environment had clearly turned in the company’s favor and the legacy liabilities were finally resolved, doesn’t sit well with me. I don’t even want to bring up the other aspects that might raise further questions.

To be honest, I’m just glad this story is coming to an end.

I sold a portion of my shares after the stock traded above 86 GBX.

$SUP.L Supreme PLC

I'm being honest with you. Before the trading update, I was buying heavily. After the update, I started reducing my position. I really didn’t like how they handled the guidance. Simply stating they would trade in line with broker expectations, which implies a drop in EBITDA, wasn’t a shock, but it definitely didn’t match my expectations.

The picture improved after the CEO appeared as a guest on the Micro Cap Club's Business Breakdowns.

Here is a summary I wrote after the interview:

• The disposable ban has had no impact on their business so far

• Typhoo Tea is already generating £3M in profits, meaning they effectively paid 3–4x P/E — if you exclude the working capital that was part of the deal. Including that, the valuation drops to just 1x P/E. Additionally, they now own a production facility with significant capacity for potential private label production

• 20 to 30 new drink concepts are in the pipeline, including a licensing deal for a Lamborghini Energy Drink aimed at European and international markets

• The joint venture in Spain is operating at a revenue run-rate of £10–12M

• A similar JV has also been established in Romania

• They’ve hired the former head of sales from Elf Bar and Lost Mary, who is now exploring JV opportunities, including in India (not related to vaping)

• M&A pipeline remains active, with many NDAs still being signed

• FY26 guidance was set two years ago and has not been updated since. It reflected initial uncertainty around the disposable ban and the performance of new products. Management plans to provide an update at the full-year results

In general, I’d say we should put Sandy in front of as many cameras as possible. He just needs a two-minute warm-up, and after that he’s on fire and able to really convince people of his vision. I received a few messages after the interview from people saying things like, 'Now I get what you like about him.'

Since my last update, I’ve slightly reduced my position.

$MCB.TO McCoy Global Inc

I first heard about this stock in March, when two other German investors were discussing it. Saying I was immediately hooked would be a blatant lie. Back then, it was still trading below 3 CAD, but my main question was whether the SmarTR would also perform well during a recession or in a period of reduced drilling activity. Given their broad range of products and services, I thought they might have a competitive edge.

After their presentation in Vegas and a long conversation with a fellow German investor, that question seemed answered for me. I highly recommend watching the video:

$DSW.L DSW Capital PLC

I have to admit, I’m a bit unhappy with this one — especially because it has grown into a substantial portfolio position without me actually planning it that way.

Even though their trading update was above market expectations, the stock couldn’t break out of its previous range. I think that’s partially understandable, as the stock still doesn’t look incredibly cheap on the surface and also benefited from some M&A being pulled forward due to tax changes in the UK.

Still, after the acquisition, their revenue profile has changed significantly for the better. In FY 2026, only about a third of revenue is expected to depend on M&A. A large portion of the remaining revenue should be recurring or at least reoccurring. I recently got in touch with management and suggested they communicate this more clearly in their presentations.

I increased my position at 45 GBX and will wait at least until the FY25 presentation before making any substantial changes, as I’m currently going through a phase where compelling new ideas are hard to find.

$IMB.AX Intelligent Monitoring Group

The quarterly report came in at the lower end of my expectations, but it was still within the range, and I want to emphasize that. Initially, there was some discussion around the refinancing costs, which were higher than many, including myself, had expected. However, let me clarify this: most of it could have been anticipated.

The calculation is as follows:

$6M PIK + ~$0.5M accrued between December and refinancing

$1.5M accrued interest

~$2M in fees (as previously flagged)

That leaves us with ~$2M as the "surprise," which was apparently the repayment of the payment plans. I'm fine with that, as these are mostly not cash burn expenses but rather a reduction in liabilities already reflected on the balance sheet.

What surprised me is that this filing apparently caught the market off guard. We’ve known since November that the shares would be released from voluntary escrow. The share price drop on high volume right after the filing was too obvious to be called a coincidence, and it can't be related to the shareholders of those released shares, since the release was scheduled for June 30 while the drop happened many days earlier.

For a long time, I’ve had the feeling that we’re seeing a lot of uninformed trading in the stock. This is partly the fault of management, as they damaged shareholder trust with the way they handled the capital raise. A strong Q4 with solid real cash flow could finally provide the long-awaited turnaround.

Let me also add that I strongly recommend David’s interview with Dennison. It included a lot of valuable information:

Although I’m still bullish on Q4, I reduced my position after the last cash flow report. You know how much I care about market dynamics, and based on the comments in several forums and on Twitter, I was expecting a large drop. That hasn’t materialized, even though the stock is now trading well below the level where I sold.

Still, I currently have a lot of dry powder and will wait for the full-year report before increasing my position, if it’s justified.

Undisclosed position 1

Since I got this idea from a paid Substack, I won’t mention it here.

SANUWAVE Health Inc

I don’t have anything to add beyond what I shared recently about the stock. For more insights, I recommend following Ian and Sebastian.

I traded this name quite a bit, and I have to say it worked out better than ever before. My position remains relatively unchanged.

Undisclosed position 2

A German special situation. I’ll likely never talk about it.

Undisclosed position 3

An interesting, though illiquid, stock that doesn’t seem like a compelling idea at first glance. But the deeper you dig, the more it feels like this could easily become a multibagger in a very short time frame. I discovered it in the middle of the quarter and have been buying consistently since then. There are no write-ups and no threads on Twitter. It could become a future write-up once I’ve finished building my position.

$IVFH Innovative Food Holdings

I’m sharing a text I originally posted in a closed forum and will add a few additional points at the end.

An investor can be patient until a stock drops to zero (which I don’t believe will happen with IVFH). I wouldn’t call it impatience. Not everything is going according to plan.

The catalogue is in decline, and so is their high-margin legacy dropshipping business. They lost 1,000 SKUs last year and added 700. As Bill said himself, that SKU count ultimately drives revenue and profitability for the dropshipping segment.

Here’s what Bill said about the retail business in Q3: '...we anticipate the business will begin delivering profit early next year.'

Well, it’s May now and it’s still not profitable. I wouldn’t even call that a major flaw, but that’s the issue with providing any kind of guidance: you set expectations and create room for disappointment. We expected a profitable business by now. And while management still sounds confident, one has to ask: how much will we really get out of it once it’s fully ramped? I originally estimated a 5% EBITDA margin, but that now seems a bit optimistic.

As for the acquisitions, management said during the call that integration wasn’t plug-and-play. Of course, integration is never easy, but they made it clear it’s been more challenging than expected.
Bill also mentioned that they had to exit legacy customers who didn’t meet their profitability or credit standards. The first issue is just a revenue hit. But the second could directly impact the adj. EBITDA that we assumed when they first announced the acquisitions. It makes you wonder, was this known during due diligence, or did they overlook something?

Now, you could argue they addressed all of these points and I’d agree. But if those measures are working, we’ll only know once the results prove it. I actually believe them when they say they’ve learned a lot, especially about acquisitions, and that future deals will go more smoothly.

I still think we have an outstanding management team. But I always look for consistency, and this was the first quarter where I felt truly unprepared for what was coming and where results didn’t match their own expectations.

And let’s not forget: Q2 is the tariff quarter. A large portion of their SKUs are imports. Bill said they’ve mitigated tariff pressure, but that basically means we’ll still see it in the margins.

Sure, that's a short-term issue, but ut investor patience isn’t infinite. Especially for this company, it’s critical to keep the shareholder base well-informed, as the goal is to earn a valuation premium. After all, they ultimately aim to become a serial acquirer, and if you’ve read Pappas’ letter, it’s clear that they primarily intend to use equity to fund those acquisitions.

Now to the points I want to add. First of all, I’m not blaming management for anything. I don’t see any wrongdoing on their part.

I recently discussed in our podcast that the AI tool meant to fix the catalog issue is a double-edged sword. Of course, it could speed up the onboarding process for new SKUs. But if it really works as quickly as they expect, it would also mean that their moat in this area becomes smaller, making it easier for competitors to enter the sector. The long onboarding time is currently what keeps new players from entering this business. At this point, it’s just speculation, but I don’t think their competitive advantage will last forever.

For the next quarter, I expect a slightly positive cheese business, based on the comments from the earnings call. That’s all I can say for now.

I’ve significantly reduced my position and will wait until they prove they can return to growth in their high-margin segment.

$KLNG Koil Energy Solutions

Although I was buying heavily after the FY 2024 results were released, I exited my entire position before the quarterly results came out. There were two reasons for this. First, I was fairly certain we would see a rather mediocre quarter at first glance. Second, there was a large buyer just before the numbers were published, and I was able to sell my full position above USD 2.

After the drop, I bought back in, but I remain cautious. Q2 will face tough year-over-year comparisons, and so far, only one new contract has been announced.

That said, there are several developments that could lead to additional and significant contracts in the near future. One example is the collaboration with PRIO.

Overall, the tone in their filings remains bullish.

I have increased my position compared to my last update.

Leatt Corp

For my German-speaking followers, I recommend listening to our podcast episode about Leatt. For everyone else: I’ve been following the stock from its highs to its lows without ever being invested. I was waiting for a strong turnaround signal, and the recent update looked like just that. The overall tone in the press releases and the earnings call has shifted to clearly optimistic.

Based on my calculations, the stock is currently trading at roughly 10 times cash adjusted earnings. If they manage to return to sustainable growth, it looks far too cheap in my opinion. However, judging by the size of my position, you can probably tell that this is more of a low-conviction bet — but also one with limited downside.

Undisclosed position 4

Low conviction acquisition play

Undisclosed position 5

Got it from a paid substack

Stocks I Sold

$SBBC.V Simply Better Brands

I’ll make this as easy as possible for myself and just share a text I posted in a closed forum a few weeks ago after the company released its financials. My view on this remains unchanged, although I have to say they are still gaining traction on Amazon, which is promising.

I want to add a few points to my previous criticism to explain why I might come across as the “glass half empty” kind of investor.

First of all, I was surprised that vendor discounts increased, even though wholesale revenue was down significantly.

I asked about this during the Q&A, not as a provocation, but because I genuinely wanted to understand the reason. Once again, though, my question wasn’t read out, and IR hasn’t responded to my emails.

That leaves me speculating. I’ve asked myself several times why we keep hearing about all these new retail partnerships (at the end of Q1, they were in 15,000 stores), yet we don’t see a corresponding uptick in revenue. Retail revenue was $1.5 million, which equates to just $33 per store per month. So this impressive-sounding store count seems more quantitative than qualitative.

After discussing this with other investors from the MCC, we considered whether the increase in vendor discounts could be due to listing fees paid to retailers. Their financials don’t explicitly include listing fees under vendor discounts, but then I remembered what Kingsley said during the Q4 call:

Look, folks, if you simply look at $100 of sales, we're averaging right now, trade spend around $20. And that's discounting, that's listing fees, that's couponing, right?

That makes me think listing fees might be significant essentially functioning as retail subsidies, just like coupons in wholesale. So seeing retail revenue “gain traction” while wholesale shrinks might not be as positive as it looks on the surface. Again, I don’t know how big of an issue this is. Maybe someone with a stronger relationship to management can get a clear answer. Perhaps I can’t hide my “Herman-the-German” DNA as well as I thought, and my questions come across as too blunt, which could explain the silence.

Overall, this could still work. The brand seems to be gaining awareness, you can see that in Google Trends and Amazon sales.

But we should monitor vendor discounts closely, simply because they’re crucial for the exit multiple.

Someone on Twitter recently asked why I care so much about margins and vendor discounts, when revenue ultimately drives valuation in an EV/revenue sale. The “revenue-multiple exit” storyline has become a central theme, reiterated on every earnings call and explicitly shown with a 2.9x to 5.0x range in their slides.

But in my view, how you generate that revenue matters, especially if you want to hit even the lower end of that range. Last year, 80% of revenue came from Costco. This year, they aim to reduce that to 60%. Even if they succeed, it’s important to ask how they got there. If retail listings are subsidized through aggressive discounting or large listing fees, the revenue mix improvement isn’t as impressive as it looks.

Another thing I’ve watched for a while is how Erica interacts with investors on the calls. To be honest, I don’t see any progress. She often seems unaware of which slides are being shown and struggles to answer even basic questions with any added context. Initially, I thought it might be nerves, maybe she didn’t expect to become the CEO of a public company, but at this point, it’s clear she’s not adding the strategic insight you’d expect from a CEO.

For example, when an investor asks about gross margins, you’d expect a CEO to explain the underlying drivers and offer some color — not just read the number aloud.

Pardeep Sangha

Thank you very much, Noel. We have some questions coming in from the listeners on the today. A couple of questions around gross margins. If you can just comment on gross margins?

Erica Groussman

Yes. So our gross margins are roughly 30%. They vary by where we're selling it, but they are roughly around 30% right now. We're working -- we're actively working on getting those better just buying forward and locking in better contracts and

Pardeep Sangha

And then a follow-on on the gross margin question is whether or not you feel comfortable going forward if this is a low end mark? Is it going to get higher any sort of guidance on increasing in the future?

Erica Groussman

Yes. So we plan on getting that to 35% and then getting it to 40% and so on. So yes, that is one of our main drivers right now we're working on.

That said, their board does seem exceptional, so maybe that balances things out.

We should also acknowledge the inconsistency in their communication. They originally guided for $45–50M in Trubar brand revenue for 2024, then quietly reduced it to $45M, and ultimately delivered $43.6M. Back in November, they still claimed they were growing at “historical levels,” which would have meant around 82–102% YoY growth. By April, this had been downgraded to “strong growth,” which — based on their revised guidance — means 49–61%, and that’s from a lower base. That shift in trajectory meaningfully changed my IRR expectations and was part of the reason I sold.

So no, I wouldn’t check the “quality management” box here, and that’s not even addressing the oddity that Clarus, where Trubar’s Chair also happens to be Chair, “guessed” Q1 revenue exactly right. I also wasn’t a fan of the back and forth regarding their strategy, even if the apparent outcome ultimately aligns with what I initially expected from them.

All of this, taken together, is a bit too much for me, even though, honestly, I still think this could work out well.

Overall Reflections

I’ve seen many people with much better performances, but personally I’m really happy with mine this year. I’m significantly ahead of the MSCI World, and the gap has continued to widen since I started tracking my performance. Throughout the year, I felt like I always knew exactly what I was doing.

It will be interesting to see how often I can pull off a move like I did with , where my side project, TrackTacle, once again contributed nicely to my results. Getting all relevant news in real time allowed me to process information quickly and act accordingly.

I also want to say thank you for all the DMs with feature requests for our app. I think we’ve already implemented many of them, and we’ll be announcing even more improvements in the next few days. I usually hesitate to do this kind of marketing, even for my own product, but I can genuinely recommend it. I use it every day, and it’s been a game changer for my personal workflow.

At the moment, I’m struggling to find any truly compelling ideas, even though I’m constantly searching. Maybe it’s the overall market, or maybe it’s just me. We’ll probably find out soon. Once the acquisition of Kinovo is complete, I’ll have a lot of cash to allocate again.

• Performance 2025 YTD: 1,2%

• IRR since 01.01.2017: 32,83%

• TTWROR since 01.01.2017: 509,86%

  

Stocks in my portfolio

Below are my current portfolio positions, in descending order of size.

Cash

Cash is a rare guest in my portfolio, but after exiting several smaller positions and trimming one of my larger holdings, that has changed. I'm currently actively looking for new investment ideas.

The first seven positions are relatively similar in size, so don’t read too much into the order.

$IVFH Innovative Food Holdings

I've significantly reduced my position, simply because the stock no longer appears cheap based on 2025 estimates, and there are no obvious or major near-term catalysts—especially since management has indicated they'll focus on integrating acquisitions in 2025 and won't pursue additional deals.

That said, we've been surprised before—particularly with the announcement of the cheese business—and I think it's entirely possible that further surprises could occur. Margins will continue to be impacted until the ramp-up is complete, after which I expect improvement. Still, it's a low-margin business and unlikely to materially affect EBITDA at the current scale. However, if they announce new deals or enter additional categories, that could quickly change.

Regardless, IVFH will remain a significant position for me going forward, as I'm convinced this management team is exceptional and will continue finding new ways to leverage their assets, vendor relationships, and enhance their existing businesses.

$NOW.V NowVertical Group

A lot has happened since my last quarterly update, although the full-year numbers have not yet been released. They are scheduled for April 2nd.

It seems clear that management prefers equity over cash, as evidenced by their recent decision to settle company debt through the issuance of shares, their purchase of 1M shares on the open market, and their choice to receive bonuses in shares rather than cash. However, from a shareholder perspective, I would prefer that management communicate these actions in a less bullish manner, as their current style comes across as somewhat promotional.

That aside, I highly recommend David's interview with Sandeep, the CEO of NOW.V. Based on his comments, he seems very confident in achieving the guidance of $50M in revenue and a 20% EBITDA margin.

ValueHunt

Sandeep Mendiratta: Now Vertical Group $NOW.V, Turnaround, AI, and Growth Plans | ValueHunt #40

Check out Sven’s deep dive on $NOW.V…

Listen now

a year ago · 8 likes · 1 comment · ValueHunt

I’ve slightly increased my position.

$IMB.AX Intelligent Monitoring Group

There’s not much I can add beyond my latest blog article. We saw significant insider buying during the quarter, including from one of their largest shareholders. That aside, the company and management seem to be on track now. It’s pretty clear that the market wants to see them generate real, unadjusted cash flow. At this point, I’d be surprised if they don’t manage to demonstrate that in the second half. Through the refinancing, their cash flow and net income will increase significantly.

Since the last update, I’ve significantly increased my position.

$KINO.L Kinovo PLC

Not much has happened on the surface this quarter, apart from a German investor acquiring a 3% stake.

My fellow German investor, Cyrill, rightly pointed out that many of Kinovo’s customers received funding under the Warm Homes programme, which is very likely to result in future contracts for Kinovo. That’s the positive takeaway.

On the downside, the deadline for new energy efficiency regulations—which would have had a major impact on the housing sector—has been postponed. While landlords still feel some pressure, the absence of a looming fine may reduce their motivation to actually invest in improving the energy efficiency of their properties.

Regardless, I’m convinced we’ll soon see an uptick in announced contracts.

I made a minor reduction to my position at the time to free up funds for another investment.

$SUP.L Supreme PLC

I have significantly increased my position. Nothing has really changed, and I can only speculate as to why the stock price dropped this much. There was another vaping 'study' that was not published (check Google Scholar yourself), and although it was also not peer-reviewed, some UK newspapers shared the results with their readers.

Based on the latest meta-analysis I found on Google Scholar, the risk of vaping is still significantly lower than that of smoking.

Regardless, the diversification efforts are ongoing, and the market will recognize that at some point.

$ACP.WA Asseco Poland

I recently made a write-up about the stock and haven’t changed my position since then.

The FY2024 results looked good on the surface, and the market seems to agree, as the stock is still significantly up year-to-date. The most important takeaway was that the approval process for the acquisition of shares through Topicus is indeed complex and might take until September.

Also helpful were these two slides from the presentation, which show the proportional recognition of revenue, EBITDA, and assets.

SANUWAVE Health Inc (Undisclosed position from my last update)

Ian Cassel was the one who first brought this stock to my attention.

It took me a few weeks to finally buy a position, as I initially thought it wasn’t cheap—especially considering the multiples I usually invest at. I bought my first shares at $20. What helped me decide was a conversation with Sebastian Krog, who recently pitched the stock during a Twitter Space.

Their latest numbers were impressive, and the guidance indicates that this will continue for a while.

$SBBC.V Simply Better Brands

I’ve net-decreased my position. A lot has happened since my last update: new retailers were announced, they completed an OTC uplisting, promising new executives joined the team, and—just as expected—their Amazon sales showed solid progress.

Here’s what I didn’t like: in their latest investor presentation, they showed $45M in sales for 2024, while they had previously guided for $45–50M. That seems disappointing at first glance, but we should wait for their commentary. In the past, a larger order was occasionally pushed back by a few days and ended up in the next quarter.

What I also didn’t like is the type of brands they’re looking to acquire. Targets with $10–30M in sales would likely be fairly expensive, especially since they’re apparently not planning to buy a company out of administration. What I’m wondering is when they actually plan to pursue the acquisition—and more specifically, whether they intend to sell Trubar first. I'm trying to anticipate how the market will react once it happens.
Even if they do sell Trubar first, the stock will very likely trade at a discount to its value. The CEO has made it clear multiple times that they intend to return the majority of the proceeds to shareholders via a special dividend. Personally, I’d prefer to see them sell the whole company, but it is what it is.

$DSW.L DSW Capital PLC

Nothing has changed—nor has my position.

Undisclosed position 1

Since I got this idea from a paid Substack, I won’t mention it here.

$KLNG Koil Energy Solutions

I significantly reduced my position, as I’m expecting a quarter that might be perceived as neutral—or at least not particularly bullish. The earnings call, originally scheduled for today, was recently moved to a new date. That said, the company still appears to be on track in all the areas they’ve recently communicated.

Undisclosed Position 2

Opened a very small new position.

Stocks I Sold

$DR.TO Medical Facilities Corp

I sold all my remaining shares at prices around CAD 16.50. The reason is simple: I had assumed a certain time frame and the potential sale of the remaining hospitals. Based on that, I concluded that this investment would only meet my hurdle rate under very favorable conditions. Aside from that, the stock is no longer cheap from a purely operational perspective.

$ZOMD.V Zoomd Technologies

As I made clear from the beginning, I never intended to hold this long term—so take everything I say about my reasons for selling with that in mind. I know that most investors who comment on this stock publicly see things differently than I do. My reasons for selling are personal, and I’m not claiming to be right about any operational aspects beyond that.

I sold all my shares immediately after they accidentally published their financial statement a day ahead of the earnings call and open market. There were two reasons for this: although Q3 was affected by one-off factors related to Euro 2024, I had expected them to grow quarter-over-quarter—especially since Q4 is typically their strongest quarter. Both their own commentary and that of competitors had been bullish going into Q4.

I often read that investors like me—those who focus on QoQ rather than YoY—are looking at the wrong numbers. But honestly, I don't think that's the case. Adtech is different, and I've experienced that firsthand several times early in my investing career. The entire industry is known for abrupt shifts in operations. Just to mention a few aspects:

1. Market Sensitivity

• Ad budgets are usually the first to be cut during economic downturns and the last to recover. And there are already signs that this might be happening now:

• Ad Forecaster Reduces Growth Prediction for 2025, Citing Poor Economic Visibility, Low Consumer Confidence

• Trump’s tariffs will hurt advertising, Sir Martin Sorrell warns

• Advertisers expect ad spend slowdown amid tariff uncertainty

2. Auction Dynamics

• Programmatic advertising works through real-time bidding. Small changes in competition, demand, or user behavior can greatly impact revenue or margins. One could debate the extent to which this applies specifically to Zoomd, but in general, this risk is relevant for them as well

3. Client Concentration

• Some companies rely on a few big clients. If one pulls out or reduces spend, it hits the numbers hard.

To elaborate on the last point: their client concentration has actually increased significantly YoY—from 47% to 63%.

What doesn't help is that their largest client is Shein. I consider this a real risk, as there are growing signs that Western countries are placing the company under increased scrutiny:

• Shein poised to slash valuation in London IPO after Trump ends trade loophole: report

• EU to tighten checks on goods sold by sites such as Shein and Temu

• Trump administration weigh adding Temu, Shein to forced labor list after imposing China tariffs

• EU probes Shein over consumer protection

• UK lawmakers slam Shein for refusing to answer questions on its cotton supply

I wouldn’t be surprised if we soon see even more significant actions taken against Shein. That risk alone should warrant a discount on the stock. The chairman did mention customer concentration during the call—which, by the way, was still one of the worst I’ve experienced—but rather than offering any concrete strategies to mitigate the risk, he simply acknowledged it. He also brought up a new large client, but a large client doesn’t necessarily mean a large budget. Big brands often split their budgets across multiple partners.

Again, I’ve always had a short-term orientation, and it was never a large position for me—so feel free to see things differently if you're planning to hold the stock long-term. Personally, there are several aspects that keep me from doing so. One example is a chairman who openly claims the stock is undervalued during an earnings call.

I also held a position in one of their competitors, which I’ve since sold.

Undisclosed position 3 from my latest update

Since my biggest concern was the management—and I feel validated in that regard—I exited my position entirely, taking a 30% loss.

Overall Reflections

I’m very happy with my performance. Since shifting more and more toward catalyst investing in 2022, I’ve often asked myself how robust my approach would be in situations like this. Although my portfolio also experienced a downturn, imminent catalysts seem to carry more weight. At the moment, my portfolio is performing well above the MSCI World, which I’ll always consider my benchmark, as it represents the only real alternative to my current investing style.

The fact that I'm holding this much cash is also due to not being able to dedicate as much time to stock picking as before, mainly because of the previously mentioned side hustle, which was very time-consuming. Still, I have over a hundred stocks on my watchlist from the U.S., Canada, the UK, and Australia—some of which are starting to show early signs that they could soon turn into solid investment opportunities.

Paul Tschischik brought this stock to my attention, and I would also call him an expert on CSU-related topics, whose knowledge has been very helpful. Make sure to give him a follow.

Ticker: ACP.WA

Price: PLN 125,40

Shares Outstanding: 80.51 million

Fully diluted: 80.51 million

Market Cap: PLN 10.09 billion (USD 2.52 billion)

Adj. Market Cap: PLN 6.84 billion (USD 1.71 billion)

Enterprise Value: PLN 9.38 billion (USD 2.35 billion)

If you can’t imagine what a low IQ case is, you’ll probably understand by the end of this write-up. After following the cases of Bravura Solutions ($BVS.AX) and Sygnity SA ($SGN.WA) entirely from the sidelines, and missing out on most of the price action of Trubridge Inc. ($TBRG), I finally decided to build a full position in a stock that will likely benefit from the typical Constellation Software ($CSU.TO) playbook.

The Company

If you visit Asseco’s website, you might notice some similarities with CSU. The company describes itself as a federation of IT companies and highlights its M&A strategy right on the homepage. It also has a dedicated subpage aimed at attracting software business owners to sell their companies to them.

Talking too much about what the company does seems like a waste of time to me, as the investment case is structured much more simply than usual, and it is also almost impossible to get a comprehensive overview of the company's operations.

To give you a feel for the complexity of Asseco:

You should also know that the different entities themselves have many subsidiaries. If you want to dig deeper, take a look at the latest financial report.

They categorize their various entities into six different groups, each with clear differences in margin profile.

What's also interesting to note is that Asseco Poland (ACP) has a strong relationship with the Polish government, primarily through its work on public sector projects. It develops specialized solutions for central administration, including:

• Integrated Administration and Control System (IACS) for the Agency for Restructuring and Modernization of Agriculture.

• Central Register of Drivers and Vehicles for the Ministry of the Interior and Administration.

• Collaborations with the Supreme Chamber of Control, the Central Statistical Office, the Ministry of National Education, and the Agency for Agricultural Market

I'll leave it at that regarding their operations.

The Financials

First, let me say that Asseco's current financials are, on one hand, rather irrelevant to the case, and on the other hand, quite complex due to the many non-controlling interests. I would even go so far as to say that it's nearly impossible to calculate normalized earnings for a company with such a federal structure.

Some of you might remember that it took me days to calculate the EBITDA for $DR.TO, which only had 5 hospitals with NCIs. This one is far more complex. So, I will only provide you with a view on the key metrics you should focus on, along with my assumption for the current adjusted market cap and EV.

To give you a sense of the enterprise value, as well as debt and cash, that truly belongs to the company and not to the NCIs, I have attempted to approximate these figures based on the ownership stakes in the various entities. The company does not disclose debt for these entities separately (you may want to check the individual financial statements if you need an exact calculation, though I wouldn’t recommend it). Therefore, I have assumed that the debt in Asseco’s balance sheet is evenly distributed across all entities with one exemption as ASEE is a public company.

Keep in mind that they hold several stakes in other companies that are not fully consolidated. Again, this is complex.

The cash positions of the different entities are mentioned in their financial statements. If you multiply Asseco's ownership stake by these figures and include the cash from the sale of treasury shares (which I’ll discuss in a moment), you arrive at this EV:

The usual next step would be to look at revenue, EBITDA, earnings, etc., to compare them to the EV, but in Asseco's case, that won't work for obvious reasons. If you look at their income statement, your first thought might be, '9 months ended with 12.5B in revenue and 1.2B in EBT? Where can I sign?' However, since Asseco fully consolidates companies without owning 100% of them, a portion of the earnings actually belongs to the non-controlling interests. On a 9-month basis, out of 960M in net profits, only 370M is attributable to the company, while 590M belongs to the NCIs.

Since net income attributable to shareholders is relatively stable on a quarterly basis, annualizing the 9-month figure can be reasonable. This results in an ANI of 492M, translating to a 20.5x P/E and a 14x adjusted P/E. However, one should keep in mind that a large portion of finance expenses and income is included in net income. A comprehensive normalized earnings calculation seems impossible to me, especially since they constantly change their equity stakes in entities.

14 P/E is not expensive for a software company, but also not incredibly cheap. So why did I invest? Because focusing on the current P/E is like focusing on the trees instead of the forest.

The Investment Case

Topicus.com, a spin-out of Constellation Software and essentially a miniature Constellation, acquired a 9.99% stake in Asseco at the end of January and then subsequently has signed an agreement to buy 12.3 million treasury shares that Asseco had repurchased in 2023. Upon completion, Topicus will own 24.84% of Asseco. Basically, that’s the investment case.

In general, Constellation has the nimbus of being the best software operator in the world. If you're as uninformed about the Constellation Software cosmos as I was three years ago, I'll provide some information to help you understand the typical playbook of CSU/TOI.V.

These are the key aspects of how Constellation operates:

• Acquisition-Focused Growth
  CSU consistently expands by purchasing small to mid-sized software companies, particularly those that serve niche markets. They prefer businesses with strong customer relationships and stable revenue but that may not be growing rapidly on their own.

• Decentralized Operations
  Instead of fully integrating acquisitions, CSU allows them to function independently. Leadership teams remain in place, and decision-making is left to the acquired companies, fostering an entrepreneurial culture.

• Prioritization of Recurring Revenue
  The company targets businesses with revenue streams that are predictable and contract-based, such as subscription models or long-term service agreements, ensuring steady cash flow.

• Optimizing Business Performance
  After acquiring a company, CSU identifies areas for operational improvement, whether through cost reductions, restructuring, price increases, efficiency gains, or leveraging synergies across its portfolio. In some cases, it also finds ways to introduce additional products or services to existing customers. All of these efforts aim to improve ROI.

• Long-Term Perspective
  Unlike private equity firms that often flip companies for quick returns, CSU takes a patient, long-term approach, focusing on sustainable value creation rather than short-term profitability.

• Financial Discipline
  The company is known for its conservative approach to financial management. They avoid overpaying for acquisitions, maintain strong cash flow, and prefer companies with reliable earnings rather than speculative growth potential.

• Reinvesting for Continuous Expansion
  Instead of distributing excess cash, CSU reinvests its profits into acquiring new businesses. This cycle of reinvesting and compounding returns has been a key driver of its growth over the years.

I want to emphasize the financial discipline aspect. From the face value financials of Asseco, one wouldn't think that this is a key aspect of CSU, but I recently spoke with two investors who are very familiar with the CSU playbook, or even worked for them. They are targeting a 20% IRR based on earnings, so they don’t include multiple expansion in this calculation. So what does this mean effectively? It means that, the moment they acquired the shares, they likely already had their sights set on a 5x P/E company after implementing their measures.

To emphasize this point, let me quote Mark Leonard, the CEO of CSU:

One of our directors has been calling me irresponsible for years. His thesis goes like this: CSI can invest capital more effectively than the vast majority of CSI's shareholders, hence we should stop paying dividends and invest all of the cash that we produce, even if it means lowering our hurdle rates.

I used to argue that we needed to maintain our hurdle rates because dropping them for a few marginal capital deployments would cause the returns on our entire portfolio to drop. The evidence supported my contention, so we kept the rates high for small and mid-sized vertical market software ("VMS") acquisitions and made very few exceptions for large VMS acquisitions. The by-product of that discipline has been a perennial inability to invest all of the cash that we generate.

Constellation Software Inc. 2021 President's Letter

So what does that mean from our perspective, if we believe that they acquired the shares at a 5x underlying P/E? They paid 85 PLN per share, and the stock price is currently at 125.4 PLN, which translates into a 7.4x P/E.

This would obviously be cheap for a company with mission-critical software. If CSU's measures are successful, we’ll likely see a multiple expansion.

The press release also outlined the specific measures that Topicus plans to implement:

One might argue that this sounds rather vague, but every time I’ve observed a case like this, the outcome has been the same.

Let me show you the three examples I followed closely but missed out on.

Since Pinetree Capital, whose CEO is Damien Leonard, Mark Leonard's son, acquired a stake in Bravura in March 2023, the stock has become an eight-bagger

Trubridge, which I actually pitched on a German YouTube channel, but without building up a large position. Since Pinetree acquired a stake in June 2024, the stock has risen 180%.

Since Topicus announced a public tender and subsequently acquired a 72.68% stake in Sygnity in March 2022, the stock has become a six-bagger.

And just to be clear, the rise in stock price was directly related to the involvement of Pinetree and Topicus, partly due to the impact of their measures and partly through anticipation of them. The increase in Asseco's stock price shows that the market is anticipating this again. Feel free to dig deeper into the three cases mentioned. I’ll only go into a bit more detail on one of them: Sygnity.

In the FY 2023 letter from the management board they explained the measures they implemented and their key areas of focus. Let me remind you that FY 2023 was the first full year since Topicus acquired its stake.

In terms of revenue, the Group focused on maintaining and developing, in consultation with customers, its own product solutions. Consequently, decisions were taken to cease operations and exit areas that were unprofitable, were not strategic from the Group's point of view and, in the opinion of the Management Board, did not show any chance of quickly and sustainably improving performance.

Letter from the Management Board of Sygnity 2023

This led to a write-down on one of the ongoing projects.

The second area of focus for the management team was cost control and optimisation. This was important, as the persistence of double-digit inflation during the reporting period had a direct impact on wage pressure. This issue, if left unaddressed, could lead to the loss of key Company employees and margin erosion. During this period, the Group implemented a number of measures to improve the productivity of all execution teams.

The third key area of focus for the Group in the past financial year was the reinvestment of financial surpluses in the acquisition of shares in product IT companies, in line with the announcements on the search for attractive acquisition targets. During the financial year, the Company made 21 non-binding purchase offers, resulting in two acquisitions after the balance sheet date with a total maximum value of approximately PLN 54.1 million

Letter from the Management Board of Sygnity 2023

This led to an significant increase in profits.

The annual report also included some interesting comments on price negotiations and operating costs, as well as Topicus' role in this regard.

A key factor that allows CSU or Pinetree to implement certain measures is the cooperation of the management teams or a controlling stake. In the case of Trubridge, I had to read between the lines after the announcement of a poison pill when I invested, and the cooperation agreement that was announced recently confirmed my assumption.

In the case of Asseco, there is no need to read between the lines. As Adam Góral, President of the Management Board, was quoted in the press release informing us of the sale of treasury shares to Topicus:

The offer from the Dutch-origin company TSS, operating within the Topicus.com and Constellation Software, was very well received not only by the majority of our investors but also by Asseco’s management and myself.

Adam Góral, CEO of Asseco Poland

The signed shareholder agreement also grants Topicus the right to appoint 3 out of 9 board members.

So, the usual steps to ensure that CSU can execute its playbook already seem to be in place—a stake, along with a cooperative management team and board.

Risks

CSU is arguably the best software operator in the world, but there is still execution risk—that’s what a bet on the jockey is all about: execution.

Another risk that is difficult to quantify is that the sale of treasury shares to Topicus is still subject to regulatory approval, meaning the transaction could still be blocked.

Since Asseco has a strong relationship not only with the Polish government, there could be concerns in this regard, but that’s purely speculative. I size this position accordingly as long as regulatory approval is still pending.

Conclusion

I know I left out many details, but a deep dive into Asseco is particularly difficult, as you may have realized. In the end, it all comes down to a bet on the jockey. Feel free to dig deeper—I’m available to exchange thoughts.

Special thanks to David for providing me with additional information on this case.

• Performance 2024: 88,0%

• IRR since 01.01.2017: 33,79%

• TTWROR since 01.01.2017: 502,35%

Stocks in my portfolio

Below are my current portfolio positions, in descending order of size.

$IVFH Innovative Food Holdings/Harvest Group Holdings

One of the biggest contributors to my performance in 2024, and I have to thank Sebastian Krog for sharing this idea with me. I remember clearly that when he pitched it to me, I was immediately hooked. The combination of a world-class management team, a then-low valuation, an asset-light business model, and low-hanging fruit ahead perfectly matched what I’m always searching for.

Things turned out differently than expected, but the management demonstrated an impressive ability to think outside the box in leveraging their platform. I didn’t anticipate the 'cheese business,' but it has now opened an entirely new business opportunity. This concept can easily be rolled out to more retailers, additional stores with the same retailer, and even new product categories.

The stock is no longer cheap, especially for someone like me who typically buys at a low to mid-single-digit multiple. However, the potential of the cheese business being just the beginning, with more opportunities to come, makes it easier to justify the current EBITDA multiple. That said, it’s important to recognize that this business likely operates with a significantly lower EBITDA margin compared to the dropshipping segment.

Still, we shouldn’t overlook the fact that they’ve also managed to add customers in dropshipping businesses. Additionally, their recent acquisition positions them to further leverage existing vendor relationships while also bringing new vendors onto the platform. Another example that could serve as a role model moving forward.

I increased my position in Q4 and will only sell shares if there’s a significant overvaluation in the stock price or if the stock once again exceeds 20% of my portfolio.

$KINO.L Kinovo PLC

If I had to name one stock that people most often ask me why I’m invested in, it would definitely be Kinovo. I can understand why. It’s not incredibly cheap, and the issues surrounding their former subsidiary, DCB, have been a persistent headache. The company's communication on that matter had its flaws, which was one of the reasons I sold part of my position.

Now that the DCB situation is finally resolved, and with a government likely to provide a tailwind for Kinovo through programs they could benefit from, the company seems poised to secure more contracts.

What I believe people continue to underestimate is Kinovo’s free cash flow (FCF) conversion. The main reason I’m inclined to maintain a larger position in this stock is that I believe it’s now in a relatively stable phase compared to some of the other stocks in my portfolio

I tried to buy more shares at the recent quarterly low, but as most of you know, that’s not really feasible with AIM stocks. However, I managed to increase my position after the results were published. Overall, I’ve slightly reduced my net position.

The next seven positions are very similar in terms of size, so don’t interpret their ranking as a reflection of conviction.

$SBBC.V Simply Better Brands

I recently did a write-up so there isn’t much new to add since then. I’ve been closely monitoring the sales rank on Amazon and haven’t seen anything concerning so far. I initiated my position immediately after the results were published, which made up roughly 5% of my portfolio at the time. With the recent run-up, it has now become my third-largest position.

$SUP.L Supreme PLC

Supreme’s acquisition strategy is performing as I expected. Acquiring brands out of administration and leveraging their distribution and dealer network aligns perfectly with how I’ve always viewed the company. They should be able to replicate this approach across different categories.

Regarding the latest results, I was somewhat surprised that their own vaping products didn’t perform better. However, let’s see how the disposable vape ban impacts this moving forward.

I expect to hold this stock longer than my average holding period, primarily because the company is highly diversified and its acquisition strategy offers low-hanging fruit in terms of integration and synergies.

I haven’t made any changes to my position.

$DSW.L DSW Capital PLC

A lot has changed since my last update. The recent acquisition has significantly transformed the company’s revenue profile—for the better, one could say. They are no longer heavily reliant on M&A, and the deal structure wasn’t excessively dilutive.

Moreover, it’s now clear that the announced deals were signals, not noise, as evidenced by the much higher guidance provided. While significant forward effects came from the new budget, it seems the overall M&A environment has also improved considerably.

I remain bullish on the stock and see a clear path to a higher share price by 2025.

I tried to buy more shares during a temporary dip, but, as is often the case with AIM stocks, it wasn’t easy to do so.

$NOW.V NowVertical Group

Sven Klass did an excellent write-up of this stock, and I’m frequently discussing it with him and other relevant parties. Initially, I was skeptical because of the sector, but as is often the case with my investments, many factors now argue in favor of this one.

The company is at—or has already crossed—its inflection point. I recommend watching Paul Andreola's recent interview with the CEO to better understand the changes the company has made and why the term 'AI' shouldn’t deter you.

$KLNG Koil Energy Solutions

I believe the stock skyrocketed due to a combination of factors: strong results, increased public presentations, macro perspective, new contracts, and more knowledgeable people discussing it.

The offshore oil sector still appears to be on the rise, as evidenced by the results from other companies in the industry. Additionally, the management's strategy seems to be paying off, particularly considering the source of the latest contract.

I sold a third of my position because the stock had grown too large in my portfolio, especially given its cyclical nature. It’s no longer trading at an extremely low multiple and there is some room for disappointment due to the typical revenue recognition ‘challenges’ faced by project-based companies

Undisclosed Position 1

Another investor brought it to my attention. Since I’m unsure whether he plans to do a write-up and I want to see if the company actually delivers, I won’t discuss it further for now.

$IMB.AX Intelligent Monitoring Group

I wrote in detail about what seemingly went wrong here. Although the stock is still significantly up since my initial write-up, it feels like a failure on my part. I sensed it was time to sell a portion of my stake but held on, influenced by the company's comments regarding guidance, selling only 5% at the highs.

It took me a few days to gather enough information to determine whether the situation was as bad as the market seemed to believe. After assessing the situation, I decided to wait for a rebound and ultimately sold more than half of my position.

The recent news flow appears positive, but as I outlined in my update, the market no longer trusts management. This sentiment is also evident in Australian stock market forums. If everything management has recently stated is accurate, the stock is undervalued—but I’m not willing to bet on that. I reiterate my advice from my update: focus on what they actually deliver, not just on what they say, if you choose to remain invested.

Cash

I currently have a large amount of cash, which is rather unusual for me. From past experience, I know that I’ve made poor decisions when trying to reallocate a sudden cash position too quickly. This time, I’m trying to avoid that, even though I have some new ideas. I just want to take more time to evaluate them thoroughly.

Undisclosed Position 2

Since I got this idea from a paid Substack, I won’t mention it here, as it might be perceived as planned frontrunning given how frequently I discuss stocks with the author

$ZOMD.V Zoomd Technologies

In my last update, this company appeared under the section Stocks I Sold. The reason for this was that I had purchased it immediately after very strong quarterly results, without prior familiarity, leaving many of my questions unanswered. On top of that, the earnings call was one of the worst I’ve ever experienced.

However, as has happened before, it was an interview with Andreola that tipped the scale. Although I initially formed a different opinion, the Chair addressed all my open questions in the interview. It became clear that the company was undergoing a familiar transformation: new management focusing on core activities, a strategic shift, and subsequent success.

This prompted me to buy back a position after the interview. I won’t say much more about the stock, other than that I plan to hold it at least until the next quarterly results. I remain cautious, as I still believe this sector is among the most challenging for establishing a durable competitive edge.

$COV.V Covalon Technologies

This was another stock with unanswered questions for a long time, even after multiple investors, including myself, engaged with the management. Sven Klass eventually managed to piece together part of the puzzle. It appeared that the exceptional quarterly results were driven less by Covalon's strength and more by Solventum's weakness at that specific point in time.

After realizing this, I closely monitored Solventum's quarterly results and press releases, as well as those of Paul Hartmann, to identify any indicators suggesting that the apparent weakness might persist. Since Solventum didn’t mention the segment in their latest quarterly results, I concluded that it likely had neither a positive nor a negative impact this time. This could imply that the temporary shift has ended.

Reflecting on the example of Gee Group from earlier this year—where I ignored a changing environment—I decided to significantly reduce my position. "I'll keep the remainder until the quarterly results.

$DR.TO Medical Facilities

This is a stock I wrote about in September 2023, and although I initially thought it might be a relatively boring idea, the performance has far exceeded my hurdle rate. The stock price nearly doubled, and what pleases me even more is that everything played out exactly as planned. The company sold all its smaller hospitals, completed more buybacks, recently sold a larger facility, and is now likely to proceed with a tender buyback.

With the potential upside now relatively limited, considering my hurdle rate, I’ve sold most of my position. I’ll likely sell the remainder if I need cash for a new opportunity.

Undisclosed Position 3

For the same reason as with Undisclosed Position 1 & 2.

Stocks I Sold

Regis Corp

This was my write-up from the beginning of the year, and as most of you know, it initially played out even better than expected. In hindsight, it would have been a smart move to sell once the market had priced in most of the short-term potential. I did start selling early and consistently reduced my position whenever I needed cash or the stock showed temporary strength. However, I kept the majority of my position because I’ve always believed in this management team’s long-term consistency.

While they haven’t been great communicators regarding details, I couldn’t find any flaws in the operational measures they’ve taken. I also think it’s likely they will report same-store sales soon, given all the changes and programs they’ve implemented, along with the early positive signs.

That said, their recent decision to acquire a franchisee, after nearly completing their shift to a franchise-only model, feels inconsistent. In my view, it’s crucial to approach management’s stated rationale for specific steps with a healthy dose of skepticism.

The fact that they might need a testing ground and that their franchisee salons are somewhat unsuitable for their requirements is something they should have anticipated beforehand. This raises the question of whether that was the main reason for acquiring a franchisee.

Based on comments from one of the partners of the Alline Group, it seems they were actively searching for a buyer, and Regis stepped in. In my opinion, this makes it fairly obvious that the acquisition was more tactical than strategic in nature. I would guess it wasn’t easy to find a buyer for this type of asset. Otherwise, they likely would have sold it at a higher multiple to another party.

"Alline had nine partners, including CEO Mike Sarafa. The group was ready to leave the salon business after nearly seven years, Sarafa said. The group had been shopping for a buyer for about six months before Regis stepped in to purchase the salons and back-office operations.

“They were looking to get back into, in a modest way, the corporate operations of salons,” Sarafa said in an interview. “We have the back office set-up, a turnkey operation, ready to go with very good people in place. It will be an easy transition.”

Regis’ largest franchisee wanted out of the business, so the beauty business bought back 314 salons

Story by Patrick Kennedy, Star Tribune

However, I doubt the primary reason was their need for a testing ground, and I suspect the Alline Group initiated contact rather than the other way around. Of course, this is pure speculation and ultimately means very little. Still, let’s not pretend this is a masterpiece of operational strategy—someone wanted out, and Regis simply stepped in.

What I think some people also overlook is that they can’t simply add the EBITDA from the acquisition to their FCF calculation without making adjustments to maintenance CapEx. Regis paid 4.31x TTM EBITDA, but it’s a ‘worse’ EBITDA compared to franchise EBITDA, as maintenance CapEx must be allocated for all the stores.

While reviewing the Annual Reports before they switched to the franchise model, I concluded that they paid between $7,000 and $12,000 per year per store. Don’t quote me on that, as I simply divided the segment D&A by the store count at the end of the year, and the store count was already in decline. I reviewed the numbers prior to 2016, so also keep in mind that the average maintenance CapEx has likely worsened since then.

If we assume this range, then we need to deduct between $2.2 million and $3.7 million in maintenance CapEx from EBITDA. Alline Group had $5.8 million in EBITDA, and Regis is expecting $1 to $1.5 million in synergies by 2026. Let’s assume they achieve the upper end, meaning $7.3 million in EBITDA. Now, let’s deduct the midpoint of the D&A range, which is $2.95 million, and then subtract $2 million in interest on the facility, including the PIK debt, since we’re evaluating how good of a deal this was, and Regis will eventually need to pay the interest. That leaves us with $2.35 million in FCF. You can decide if you also want to normalize this and deduct taxes accordingly. I didn’t. So, essentially, Regis paid 10x FCF. I fail to see how this is a good deal, especially considering that I wasn’t even conservative in my assumptions from an investor’s perspective. If you are overly conservative in your assumptions, you will reach cash flow breakeven.

If you argue that this deal makes sense from a financial perspective, then you would also have to argue that they should buy all their franchisees under these conditions. That's not why I invested in this company. I was buying a company that seemed to have completed its transition to an asset-light, franchise-only model, thereby reducing the capital needed to run the business and, ultimately, lowering the risk after paying down debt. In my opinion, this whole situation makes a re-rating less likely, as the market could be skeptical that this is just the beginning of more franchisees wanting to exit. If their largest franchisee, based on own statements, wanted out, it raises questions about how successful the franchise currently is and whether this trend will continue. Additionally, keep in mind that Alline had nearly 400 stores in August 2020, but now only has 314. I expect this decline to continue, which will likely reduce EBITDA, while they paid for a larger store count.

To conclude, I see this as an inconsistency with the management's previous statements, even though they likely didn’t plan for it and had to react. This is a blow to my thesis that the majority of franchisees see the light at the end of the tunnel through the new POS and other initiatives. I can't say for sure whether it’s a real signal or just noise, but I've decided to accept less inconsistency in my investment cases, as I typically don’t stay invested for more than 3-4 quarters.

What's interesting is that the IR started reaching out to investors to initiate conversations, rather than the other way around. Based on my purely anecdotal evidence, that’s not a good sign. However, you can look at this from two perspectives. Sometimes, I also view it less critically, interpreting it as the start of telling the story and Regis was rather quiet so far

I sold all my shares in Q4 but will likely buy back a position if my concerns about same-store sales prove to be unfounded after the quarterly results.

Mind Technology

As some of you might have expected, I have mixed feelings about the success of MIND. I did a write-up in May, but sold most of my MINDP shares after the first run-up and sold the MIND shares before the stock skyrocketed. However, I can assure you that I'm very happy this case worked out as initially planned, and many people I know benefited from the gains.

For me, this has always been a special situation around the preferred shares, as I didn’t have trust in the management that led the company for such a long time without gaining traction. Since I needed cash to purchase another position, I sold all my shares.

That was the main reason I sold, in addition to not expecting the backlog to be replenished, especially since the news flow had dried up. The quarterly results turned out exactly as I calculated them based on the management's comments about revenue recognition and SG&A. I can only guess why the market reacted so positively. Maybe it was simply that no one else did the math (I doubt that), or maybe investors were hoping the backlog would at least remain at the same level. But there’s no need to discuss this further. I wasn’t expecting this, and that’s it. Congrats to all of you who are still invested.

Overall Reflections

When I look back at 2024, several changes stand out.

1. I held significantly more stocks compared to before. In 2023, I maintained a very concentrated portfolio, but the start of this year with $KINO.L and $JOB taught me that I don’t want to be that concentrated again.

This was also my first full year as a full-time investor, which gave me plenty of time to research stocks. As a result, I was able to stay updated on more developments within companies and explore a wider range of new stocks.

I expect to stick with this approach in 2025, and it will likely take time before any single stock becomes a large part of my portfolio.

2. I had a very high portfolio turnover this year. One reason for this was that I frequently traded premarket to capitalize on news flow. Regis was a prime example—I sold all the positions I could premarket when news of the refinancing broke and then bought Regis. That alone significantly contributed to the high turnover.

   

In general, I tried to anticipate stock price movements for several stocks I never mentioned here, as I felt they were not, and likely never would be, worth discussing. On average, this approach worked well. However, my last trade went wrong and resulted in a 10% loss.

As a result, I’ve decided to use this approach more selectively in the future, focusing only on anticipating movements in stocks I already know well and that meet certain quality criteria.

3. As this was my first full year as a full-time investor, I found myself facing challenges similar to those that investment funds encounter. Specifically, I had to allocate funds from my portfolio to cover certain private expenses and to fund new investment ideas. This is a dynamic you can only fully understand when you're in the situation yourself.

It didn’t feel bad, but it did make me scrutinize every position more closely, knowing that my capital is finite. That said, this didn’t lead me to cut back on personal spending. In fact, the opposite was true—I bought a new car, had my house painted, and installed solar panels on the roof.

I should note that I’ve always been mindful of private spending, and I still am. However, it took me a long time to reach a point where I felt confident that I had enough capital and knowledge to pursue this full-time. During that process, one could argue that I underspent in certain areas of my life.

And yet, I felt the urge to start something new in addition. A friend of mine once said that once the 'self-employment virus' takes hold of you, it’s impossible to shake off (I’m not sure if this phrase works as well in English as it does in German, but that’s what he said! 😄).

With that in mind, I decided to start another venture, but in a sector that aligns closely with my investments. It’s likely you’ll hear more from me about this soon, as it’s deeply connected to the way I invest and conduct research.

In general, I want to say that this year was outstanding in terms of performance and how I refined my investment process. A large part of that improvement is thanks to the discussions I’ve had with my friends Sebastian, Sven, and Paul. I’m 100% certain my performance would have been significantly worse without the extensive conversations we’ve had about stocks and your investment cases in general.

I truly hope to begin 2025—and every year that follows—with more humility than I did in 2024, as I believe humility is a quality often underestimated in investors. It allows you to embrace uncertainty, avoid overconfidence, remain open to learning, appreciate collaboration, and keep your ego in check.

Some of you might be surprised that I waited this long to provide an update on this investment thesis. However, given the significant volume of news, I wanted to ensure that we had a comprehensive view of what did and didn't happen.

Currently, there are three issues I see with the stock, and I want to be as transparent as possible about my thoughts. Be sure to read until the end to get the full picture.

1. Inconsistency regarding guidance

In my previous update, I mentioned two potential catalysts for the stock price: the refinancing and the FY25 guidance at the AGM. To the surprise of all shareholders, they didn't even mention the guidance at the AGM. What followed was a falling stock price, a trading halt, and an equity raise. All of this happened while the majority of shareholders still had no idea what the guidance might look like.

On November 7th, they finally released the guidance, which came in below the previous pro forma EBITDA level of $40.2 million, at just over $38 million. In the equity raise presentation, they explained that FY24 benefited from a one-off impact due to 3G conversions. But what does that actually mean?

When IMB acquired ADT, the previous owner had already committed to upgrading alarm systems from 3G to 4G at price points IMB typically wouldn’t have agreed to. When IMB took over, they priced the new systems to be cash-neutral but were still obligated to deliver the pre-committed upgrades. This resulted in $16.3M in CapEx and a $3M cash loss.

ADT had previously capitalized such costs and amortized them over five years, and IMB initially applied the same approach for the pre-committed systems. However, IMB no longer uses this method for new systems and has transitioned to handing over the pre-committed systems to customers, thereby ending this practice. Spreading costs over five years while recognizing revenue immediately boosts EBITDA, even though it has a negative cash impact in this case. Last year, the positive impact on the P&L was $7.9M.

The transition is now mostly complete, with only 3,000 out of 50,000 customers still on 3G. These customers either didn’t respond to outreach or don’t mind, as 3G is still operational. Essentially, their entire staff was focused on the transition during the last fiscal year. According to the company, they are now fully committed to lead conversion, aiming to generate actual cash flow and profit. So now, without the one-off effect from the transition, they are starting from a lower EBITDA base but anticipate growth from this point forward.

So, that’s the company’s explanation, and I have to admit it makes sense from an accounting perspective. But that’s not the issue here—at least from my point of view. The real problem was their communication. If you look at their results release from August 30th, there was one specific bullet point that made me very bullish about FY2025 and the guidance at the AGM.

I don’t know if it’s just me, but would you have expected lower guidance after such optimistic-sounding comments? They literally mentioned that they’re trading above the upgraded pro forma level of $40.2M.

I don’t want to make unfounded allegations, but one might assume they realized late that the method of expensing costs would have a negative optical impact on their EBITDA. Some believe they withheld guidance as long as possible to keep the stock price stable enough to complete the raise.

This is precisely the kind of behavior I aim to avoid when investing in a stock controlled by a larger investor. It seems as though they deliberately withheld information from us while discussing the raise with larger institutional investors and disclosing the guidance in the term sheet.

They could have easily explained the EBITDA issue beforehand. Yes, it’s possible the stock price might have dropped as a result, but the current price reflects their inconsistent behavior and a loss of trust, which, in my opinion, carries far greater weight.

2. Apparent change in strategy

When I first invested in IMB, it was because management stated they wouldn’t become a ‘typical’ roll-up (Although I initially referred to it as a roll-up in my write-up). Initially, the plan was to grow organically, take an opportunistic approach to acquisitions, reduce debt, and eventually return capital through dividends or buybacks. However, with the equity raise, another acquisition, and a pipeline of five more, the strategy now seems to have shifted toward empire building.

Sure, they never ruled out further acquisitions, but it was never clear to me that they would pursue them at this scale. I recently asked Dennison Hambling a question about the apparent strategy shift during a Q&A, and his response sounded different from before. Technically, he didn’t push back on the claim but instead emphasized that they wouldn’t fail like ‘other’ roll-ups. To me, that wasn’t particularly convincing.

Of course, I understand the rationale behind the acquisitions. Australia is vast, and if you want national coverage to attract enterprise customers, acquisitions act like a fast-forward button.

However, when they talked about bringing this segment back to $130+ million in revenue, I expected most of that growth to come organically. That’s not to say they aren’t growing organically—recently, they mentioned a new contract with a major customer and others in the pipeline.

Roll-ups are always risky. Too often, companies struggle with integration, and it can take years before failures become evident, even as issues grow silently in the background. Dennison might argue that they were indeed successful in achieving this integration. Merging systems and control rooms is a complex task, as it involves integrating technological infrastructure and workflows. For example, they apparently successfully integrated the ADT residential customer base into Signature Security. However, merging people and contracts tends to be comparatively easier to manage. This approach aligns well with their most recent acquisitions and the current pipeline, which seem to reflect this strategy effectively.

From a shareholder perspective, roll-ups come with another risk: the perpetual promise of a bigger company with synergies on the horizon, while management keeps presenting one one-off expense after another. Whether these companies will ultimately achieve profitability remains uncertain.

3 Market dynamics matter

I don’t usually stay invested in a stock for long. I look for stocks that are on the verge of an inflection point and poised for multiple expansion. IMB was in a positive loop, but that’s clearly been broken now.

If you read the comments in various forums, Twitter etc. it’s evident that investors no longer trust the management, and that’s a significant issue for a stock. Without trust, it’s unlikely we’ll see a similar multiple expansion anytime soon.

So why do I stay invested?

To put it simply, because I believe in the company’s assets. This is the first time since they acquired ADT that they have the staff available to actually do lead conversion and show real growth and cash flow, as the transition to 4G is essentially completed.

I could show you again how undervalued this company appears based on adjusted EV/EBITDA, EV/FCF, or P/E multiples, but that only holds if they actually meet their guidance—a reliability I wouldn’t count on anymore. From now on, I’ll would focus less on what management says or how reasonable their adjustments seem, and more on what the financials actually show. You can decide for yourself whether to take their words at face value. It all sounds appealing (growth in Residential, growth in Commercial), but I believe the market now wants to see tangible results in their books.

This means delivering real EBITDA, cash flow, and organic growth.

Aside from the acquisition costs for DVL, there shouldn’t be any significant additional one-offs, so this time, they should at least present a larger operating cash flow compared to the previous quarter.

They’ve already communicated the need to allocate $5M in CapEx for the 3G transition in New Zealand, which was outlined from the beginning, so it would be surprising to see real FCF this time. Management has also indicated that profitability and cash flow will be weighted towards the second half of the fiscal year, which might come across as moving the goalposts.

Another point to note is that Q2 will likely show lower revenue, as Q1 still benefited from transition-related one-off effects. This doesn’t necessarily have to be a significant blow to the investment case because it aligns with what they’ve stated. They mentioned that one-off revenues were tied to the transition, which is now largely complete, making it reasonable to anticipate lower revenue in Q2. I just want to clarify what to expect in the next quarter, leaving it up to you to assess how the market might interpret those results.

Does Black Crane no longer have confidence in the stock?

Obviously, we can't say for sure, but based on comments I read after the equity raise, many people were concerned about BC losing confidence, selling more stock, and thus putting pressure on the stock price. Let's evaluate how strong this argument is using the current public information.

BC sold 11% of its position, equivalent to 15 million shares. They still own 37% of IMB and have committed not to sell any additional stock in the next six months.

It’s fairly obvious they intended to sell at the higher prices seen before the AGM. So, I wouldn’t argue that selling at 48 cents signals a lack of confidence. They likely ‘had’ to sell at these levels because they were trapped as the market drove the stock price lower, and their brokers pressured them to complete the raise. I want to emphasize that this is purely my perspective. Since we don’t have any official statements from BC, it’s reasonable to fill the gaps with plausible assumptions.

So, why did they likely sell? It’s important to remember that BC is a fund, not a family office. Funds sometimes need to demonstrate liquidity to their clients. Additionally, the investment in IMB has already exceeded BC's typical timeframe and represents an unusually large position for them.

Again, this is purely my perspective, but given that they still own 37% of the company, I don’t think it would be wise to signal a lack of confidence while selling only 11% of their position without a clear plan. BC can’t easily exit this stock—that much is certain. I’m not entirely convinced by the ‘We want to get into the ASX 300’ narrative, but if that’s accurate, BC would need to sell more shares. However, it seems unlikely they would sell on the open market, as any change in control exceeding one percentage point would require disclosure and could take considerable time, likely exerting negative pressure on the stock price. Perhaps we should instead consider how they sold the 15 million shares this time.

If they truly intend to reduce their position after the six-month period—which seems likely given their stated goal of entering the ASX 300—they would likely follow the same approach as they did this time.

They sold their shares to new and existing institutional investors, which at least demonstrates confidence from the other large existing shareholders. We can’t be certain if MAF and AG purchased shares directly from BC or simply participated in the raise, but MAF increased their position from 5.11% to 7.54%, and AG from 9.58% to 13.22%. Clearly, IMB has the support of its other large shareholders. Those who assume BC lost confidence based on selling stock would need to reach the opposite conclusion regarding MAF and AG.

One factor that could have an impact—at least in the short term—is the share purchase plan, which allows AZ and AU residents to buy stock at a discount to the current market price until November 29. As a result, I assume smaller shareholders participating in the plan are unlikely to purchase shares on the open market before this date.

Conclusion

I believe I’ve been very open about the issues here, and while I want to emphasize that I can’t offer advice, I want to stress again that it’s now about what they can actually demonstrate in their books. That’s why I didn’t include a calculation based on adjustments this time, as they’ve shown themselves to be a company that needs to prove they can deliver.

I asked myself if I made any mistakes at the beginning, and yes, I did. I made this a 9% position from the start, which I usually avoid because I prefer to see a company deliver first to build confidence. I saw some significant catalysts ahead, and the management’s bullish communication fooled me.

That said, I’d still buy into this kind of setup again at any time. Given that the stock is still up 57% since my initial buy at the end of May, one can’t say I was completely wrong with my assumptions regarding the setup—although we don’t know what surprises lie ahead, in one way or another.

I’ll ignore both extremes—the ones calling me naive for buying a company that doesn’t show a profit according to accounting standards, and those putting me in the 'weak hands' basket for selling what they perceive as a temporary blip.

It’s also wrong to say 'everything is as before,' because it isn’t. I based my calculation on EBITDA guidance that no longer applies, and my calculation of maintenance capex seemed—and still seems—to be correct. From my perspective, the stock is more expensive than it was before, at least based on the stock price at the time of my last update. The other key factor here is trust in management. I’ll repeat myself: They have to show they can actually deliver

A warm thank you to @CuriosityInves, who was a tremendous help and contributed valuable context and insights to this thesis.

Ticker: SBBC.V

Price: USD 0,5546

Shares Outstanding: 93,77 million

Fully diluted: 120,7 million

Implied Market Cap: USD $67 million

Enterprise Value: USD $59 million

I’m sure you’ve come across countless pitches that name-dropped Celsius in the headline, promising that a particular brand could mirror its success—only for the stock to reveal itself as a disappointment a few quarters later. I’ve seen that happen many times myself. That said, here’s my perspective: while it’s entirely possible or even likely this could follow a similar path, I believe the odds are rather in our favor at this specific moment.

Today, I’m proving to myself that I can keep a write-up short and live with not including every piece of information—so don’t be surprised.

The Company

I first came across the stock in April while manually reviewing SEDAR filings. At first glance, the stock checked many of the boxes I consider essential for building a solid investment case.

I’ll keep this short and simple. It’s up to you if you want to dig deeper:

1. Management and board changes led to a board composed of seasoned industry veterans who had experience working for much larger companies.

2. A strong segment with steady growth, overshadowed by several underperforming ones

3. Numerous impairments and one-offs that skewed the financials

4. A completed strategic review that led to the underperforming segment being sent into insolvency

I particularly liked this because the management change served as a clear signal, and the outcome of the strategic review proved it wasn’t just noise. It resulted in a tangible outcome and removed $10.4 million in debt from the balance sheet.

The standout segment, both then and now, is the Trubar plant-based protein bar—soy-free, whey-free, and GMO-free—primarily targeting women, which just reported a 156% increase in revenue for the third quarter.

Although I didn’t invest back in April, I’ve followed every update since then. What particularly surprised me was the number of selling points they’ve secured. They’ve partnered with all the major retailers—Walmart, GNC, Costco, CVS, Whole Foods—and many more. They’re projecting 15,000 distribution points by the end of the year. While they’re currently only selling in North America, they’re also expanding into Mexico, the UK, and Australia.

I won’t talk about the other segments. The cannabis business divestiture is planned, and the other segment is very small. The CEO himself essentially calls it irrelevant.

The Financials

When reviewing SBBC's past financials, there’s a lot to consider. Particularly through the divestiture of PureKana, it seems like revenue was consistently dropping, even though TRUBAR performed very well, as shown by the LTM revenue in the corresponding quarters. What we see with TRUBAR’s revenues is a certain lumpiness. Q4 2023, in particular, stands out and was actually the reason I passed on the stock initially.

At that time, they explained that 3 million in orders were pushed to Q1 2024 due to a shipping delay. I wouldn’t say I didn’t believe them, but the revenue drop was massive, and even with the 3 million in deferred orders, it still wouldn’t have been as convincing as previous numbers. I underestimated how their customers build up inventories and order in bulk, and I also overlooked some other changes I’ll discuss later.

Regarding profitability, it makes sense to focus on adjusted EBITDA, particularly for the last three quarters, as the previous ones were distorted by several impairments and the performance of the other segments.

What immediately stands out is how asset-light the company is. They don’t own any PPE (relying on third-party manufacturers) and have very limited operating expenses, apart from marketing, thanks to their broker-based sales network. This structure could lead to improving operating leverage as they scale—something reminiscent of Celsius.

You can review most of the balance sheet items yourself, but I’ll highlight the most important ones here.

The notes were primarily issued to the company’s CEO, TRUBAR’s CEO, and a shareholder, carrying an interest rate of 15%

The stock has experienced dilution in the past and is expected to face more in the future. Warrants, options, and RSUs combined are set to add approximately 24.5 million shares to the current 93.77 million outstanding shares. At least, that’s what I found while reviewing their Q3 financial statements. In the Q2 presentation, they reported fully diluted shares of 120.7 million, but it’s possible they confused the shares outstanding as of June 30 with the shares outstanding at the presentation date. It’s not a significant difference, so I don’t consider it important.

Working capital shouldn’t be an issue moving forward, as they have a $10 million USD credit facility.

The Investment Case

Further growth seems likely, at least based on the management's comments. They reiterated their full-year TRUBAR guidance of $45–50 million in revenue. Year-to-date, TRUBAR has generated $30.9 million, leaving $14.1–19.1 million for Q4, which, as shown in my table, is traditionally weaker compared to other quarters.

Management states that we can expect TRUBAR to grow at historical rates—147% from 2022 to 2023 and 100% from 2023 to 2024 if they reach the upper end of their guidance. They explicitly mentioned in the last call that their next goal is to reach $100 million in revenue. So, where is the growth coming from? I think it’s a good sign that there’s more than one answer.

What’s very obvious is the store expansion. They massively grew their network in 2024, and it seems like this will continue to some degree, although they couldn’t answer the question during the call about what specific market penetration they are currently targeting. Based on the management's comments, they grew their revenue with the stores they already had before 2024, while also gaining market share.

I wouldn’t say that their Amazon sales convinced me even more, but I really like that they’re performing extraordinarily well there, as we can track their success ourselves. They’ve seen massive growth here. Starting with just $50,000 in revenue in January, they are now, according to comments in the call, at $600,000 in monthly revenue. They’re aiming for a run rate of $10 million by January. One has to note that this isn’t a perfect indicator of organic demand, as they also use sponsored advertising. However, I’ve experienced firsthand that it’s not a no-brainer—you need to have a convincing product.

When I looked at the stock in April, this listing was ranked #53 in the category. Now it’s at #16, which particularly reminded me of Celsius, which at one point reached #1 in the energy drink category.

What also now speaks in favor of TRUBAR is that, allegedly, the previous CEO deliberately allocated marketing dollars to PureKana while essentially starving TRUBAR of resources. Based on comments from SBBC CEO Ward and TRUBAR CEO Groussman, her spending was described as 'excessive,' whereas the spending on TRUBAR was very low. The new management, however, sees TRUBAR as the true standout in the portfolio and allocates marketing dollars accordingly.

And as many might still have the shock of $SOWG in mind, especially since $SBBC was compared to it, let me point out the key difference here. $SOWG essentially created a new category, or at least was one of the first movers, but now it seems like that category is losing relevance (Don't quote me on that). Celsius and TRUBAR have something in common: they didn’t create a new category. Neither energy drinks, protein bars, nor plant-based protein bars are new categories. However, Celsius was able to gain market share from its competitors, and it seems TRUBAR is doing the same. That's what I find particularly convincing: TRUBAR's success isn't driven by a potentially short-lived trend but by its ability to gain market share in a category that has been steadily growing for years

As we’re discussing $SOWG and how most investors blame the management team for the recent disaster, it’s worth taking a look at $SBBC’s board. Many of you might recall that one of the initial points of attention for $SOWG was their seasoned management team and board members, who had experience working for much larger companies. So, I won’t use this as a strong argument in favor of $SBBC, there’s undoubtedly a significant difference here.

While $SOWG lacked significant experience in consumer packaged goods, the new management team at $SBBC has brought in new board members and industry veterans.

Paul Norman, who worked for Kellogg for 30 years and most recently served as President of North America, joined the team.

St. John is a seasoned marketing expert with decades of leadership experience. As former CEO of BBDO Americas and a member of Omnicom's European Board, he oversaw top agencies and global client relationships, including Mars Inc. He pioneered initiatives like Omnicom's e-commerce practice and BBDO's social platform agency.

Additionally, Richard Kellam, who became a board member in 2023, spent 14 years at Mars, where he served as Global Chief Customer Officer for nearly six years, overseeing sales and marketing for various brands. All of this somewhat reminded me of the situation at $IVFH.

What I also want to see from management is consistency, and that's been the case for the very short period we're evaluating. They outlined a strategy during their special call that sounded optimistic and have actually overdelivered.

CEO and Chairman Kingsley Ward also brings at least 30 years of experience in founding, monetizing, and selling startups. I’ve been hesitant to hint at a potential acquisition, but in this case, I think it’s fair, as the management themselves mention it in their presentations and have plans to sell the company in the future. Fun fact: Board member Paul Norman was responsible for overseeing the RXBAR acquisition during his tenure at Kellogg.

What also struck me when I looked at Celsius in 2019 was the engagement rate on their Instagram account and the steady growth in followers. As far as I know, Celsius is still the GOAT with respect to engagement.

TRUBAR also has a steadily growing follower base, but it’s far below the rate of Celsius back then, with an engagement rate of 0.25%, while Celsius had over 3%.

I don’t consider this to be a massive issue, but there is definitely a difference in brand awareness, where TRUBAR could improve. So, it makes sense that they are now collaborating with Dobbino/BBDO, where board member St. John previously served as CEO.

Valuation

A lot of things to mention here.

Although I calculated a lower number of shares, I am using the count from their presentation, as I likely overlooked something. Based on the U.S. listing’s closing price of $0.55, we get an implied market cap of $67M. After deducting cash, amortizations from brand, customer contracts, etc., and the NOLs, multiplied by the corresponding tax rate, I get an adjusted market cap of $53M and an EV of $59M.

Feel free to readjust the NOLs, as this topic is always a bit tricky. I used the numbers from the Annual Report (AR), as they don't mention them in the quarterly statements. If they can really use the NOLs, that is questionable and something management can answer better. I just didn’t want to completely ignore them.

The CFO mentioned in the last earnings call that they will likely achieve a 9% EBITDA margin in FY2025 and in the 20s if they achieve more scale, so I used those numbers to calculate the multiples at the end of FY2024 and based on their near-term growth target. 'If'—and that's something I still consider optimistic— they achieve this level of revenue and profitability, the stock wouldn't be expensive.

Based on their presentation, the company considers a revenue multiple more relevant for valuation, as they aim to sell the business. For an asset-light company like this, it makes sense to focus on revenue since an acquiring company would likely eliminate corporate expenses entirely on day one.

Conclusion

Although I might sound convinced, this is a rather small position in my portfolio. While I like what I see, I’ve experienced too often what happens with these kinds of success stories. I think I’ve explained at length what speaks in favor of $SBBC not landing in this graveyard of stocks, but I currently don’t have the conviction to make it a bigger position.

The management and board appear to have taken all the right steps, leveraging their sector expertise and demonstrating remarkable consistency and success in a short time. Given this track record, I believe there’s a strong likelihood that this time, it truly is different.

• Performance YTD: 65,0%

• IRR since 01.01.2017: 32,75%

• TTWROR since 01.01.2017: 428,85%
  
  
  

  

  
  

Stocks in my portfolio

Below are my current portfolio positions, in descending order of size.

Intelligent Monitoring Group $IMB.AX

The stock that generated the most performance in the past quarter. My write-up on the stock can be read here, the latest update here. I increased my position by approx. 20% during the quarter

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Despite the doubling of the share price, I am convinced that there are two major catalysts ahead of us that could lead to a significantly higher share price. The first is the publication of the new guidance at the AGM in October and the announcement of the refinancing by February at the latest.

The guidance should be significantly higher simply due to the stronger focus on business customers, which will drive organic growth in the medium term. According to the press release on the annual report, there are relevant discussions with larger customers. In terms of refinancing, I consider the interest rate to be almost halved according to all known parameters.

Regis Corp

Regis also made a very positive contribution to my performance in the second quarter.

Although the stock is still my second-largest position, I have reduced it significantly on a net basis for two reasons. On the one hand, I wanted to free up capital for other stocks and, on the other, I still don't consider the stock to be risk-free. I explained the reasons for this in detail in my update.

However, the risk is considerably lower than before the refinancing and, in my opinion, the management is taking all the right steps to strengthen the brands in the Group again and return to growth in the medium term. The textbook-like testing of measures in a small number of stores and the subsequent implementation on a broad scale alone gives me confidence that the management is acting in a strictly data-driven manner and is not impulsively implementing measures to return to growth.

Kinovo PLC $KINO.L

I have also reduced Kinovo slightly. However, I still hold the majority of my position.

I don't have much new to say about the stock. I still have a problem with the management's communication from time to time. I particularly needed clarification on the most recently announced award. Apparently they had included an award that had not yet been formally granted in the visible revenues, which according to my previous understanding should be ruled out. I wasn't the only one who felt this way, and I generally consider this to be a bad signal. Kinovo has a trust problem due to its DCB history. Whether this is deserved or not. I therefore believe it is necessary to cause the expected irritation among investors as rarely as possible.

Innovative Food Holdings $IVFH

True to the motto “If you panic, panic first”, I sold off part of my position immediately after the press release for Q2.

For me, the success of the 'new' management's initiatives is still open-ended and as the company does not publish any guidance, I am very sensitive to signals that the management 'apparently' sends us. After I was able to clarify the sentence below with the management, I increased my position to the former level.

What I really like at the moment is how broadly the management is thinking about the approaches they want to use to generate revenue from their platform. The recently announced portioning of cheese for retailers does not have the same margin profile as dropshipping, but should at least enable a significant jump in revenue with a positive contribution margin. If this approach is successful, I assume that we will see more initiatives of this kind. If it does not deliver the expected returns, I expect the current management to have the courage to admit this and pull the plug. After all, the previous management also tried to leverage the existing platform with their e-commerce business, but didn't admit the mistake and burned money for years.

As the new contract will only make a significant contribution in Q4, I still see room for disappointment in Q3, which I will use opportunistically if possible

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Covalon Technologies $COV.V (Undisclosed position from my previous update)

One positive quarter can be anything, two is already a trend. True to this motto, I increased my position in Covalon after the latest report.

In his write-up, my friend Sven Klass has finally shed some light on how the growth with existing customers can be explained. In a recent presentation, the management confirmed his assumptions. Covalon's strength is currently primarily due to the weakness of its competitors. This may change in the medium term, but it doesn't have to. For the time being, I remain invested, as I do not yet see any indicators that anything should change on the current path.

Supreme PLC $SUP.L

My assumption that the share price would trend higher in the long term after the UK election did not materialize. Although the vape flavor ban issue has been mentioned before as a possible consequence of regulatory efforts, the topic has recently been widely discussed. In my view, the concern about this is not unfounded, although it may be necessary to look at the actual implementation in order to assess the real impact.

The diversification efforts are still clearly visible, but I suspect that the regulation issue will continue to put pressure on the stock price. As I have seen a similar upside in other stocks without this immanent risk, I have reallocated part of my position. Should the share price fall back into irrational regions, I would add to it again.

DSW Capital PLC $DSW.L

As I have already mentioned, DSW should be viewed critically in terms of its communication with shareholders, as in the past there have been a few articles on the company website that conveyed a different image of the company than the guidance cut then actually presented.

Once again, there are many reports that would normally be described as bullish. Insider purchases by the CEO, many announced deals in the past quarter and the continuous announcement of the expansion of individual teams.

A negative indicator at the half-year mark was that DSW no longer appeared in the ranking of the most active financial advisers, but H1 was undoubtedly not a good one for the company and many deals were only closed in Q3.

I have reduced my position by around 10% to free up capital for other stocks.

Medical Facilities Corp $DR.TO

In the past quarter, I again significantly reduced Medical Facilities in order to free up capital for ideas with higher upside. At the moment I still have around 50% of my original position. The reason for this is quite simple: the low hanging fruits have been reached and the sale or partial sale scenario of the company is questionable.

Nevertheless, apart from this scenario, the company does not seem like a bad investment to me. It will soon be debt-free, buybacks will continue and dividends will be increased further. If this trend continues, it is not unlikely that the company will once again be perceived as a reliable dividend payer and attract a corresponding audience.

Koil Energy Solutions $KLNG (Undisclosed position from my previous update)

I have been following the company since January of this year. Through my investment in it, I looked at the other positions of another Regis investor and $KLNG was one of them. However, I could only understand the reasons for his investment from a macro perspective (offshore oil on the upswing), whereas until then the company was more of a reliable guarantee for burning money.

That seemed to come to an end with Q1 2024. However, since the information available was sparse and I didn’t feel confident enough to reliably predict the next few quarters, I acted in acted line with 'One good quarter could mean anything, two make a trend.' Unfortunately, this was particularly painful in this case, as the stock price more than doubled before I could bring myself to decide to increase my position. Nevertheless, I remain convinced that I will fare better in the long run with this approach when the open questions outweigh the answers already received

There are many things I like about the company. Beyond the fact that the entire industry is currently on the rise, Koil Energy seems to be benefiting disproportionately. Depending on how conservative you are with assumptions for the coming quarters, the stock is trading at a P/E ratio of 4 to 8. Calculating this can be somewhat difficult, as Koil often works on a project basis and doesn’t publish a backlog. However, operational developments, such as reducing operating costs and securing new orders, appear to be sustainable.

Apart from that, it is obvious that the company wants to communicate more with the market. Attendance at conferences and presentations was previously rare to non-existent. I can only assume that the activist intervention of an investor has something to do with this. In any case, the communicated growth strategy seems coherent.

Mind Technology

It may come as a surprise to many that a stock on which I myself did a write-up appears so far down in my list. The conversion of the preferred shares ($MINDP) has now been completed as originally expected, but orders have largely failed to materialize. Now there has been an order intake and generally more bullish language. However, as long as there are no signs that the backlog will at least be replenished, I am not convinced to make this a bigger position.

Positions sold

Centrotec SE $CEV.HM

Most won’t be particularly surprised that I decided to sell. The decision was based on a very simple analysis: which stocks carry the greatest risk relative to the upside. Centrotec was the first that came to mind. We are dependent on the whims of a single individual, and with every year that passes without seeing the squeeze-out, the IRR suffers significantly. In contrast, I saw more potential for short- to long-term performance in all my other holdings, and the risk seemed lower.

I ultimately made money with Centrotec, but it was well below my hurdle rate. It’s unlikely that I’ll invest in a squeeze-out scenario like this again.

Fitlife Brands

I have a lot of confidence in the management, the company, and especially in their approach. At the moment, I’m hoping that not all current investors feel the same way, and that I might get the stock again at around $20. I don’t think it’s entirely out of the question, as the low-hanging fruit has already been picked, and now the question is whether they’ll be listed with larger retailers again, or if there will be new acquisitions, etc. Until then, some investors might lose interest as the YoY numbers won’t look quite as attractive, but admittedly, that’s rather unlikely since I believe the shareholder base is mostly well-informed.

New Undisclosed Position 1

I'm not done with the stock yet and sold just a few days before it jumped from 0.6 to 3.2. In my view, it did so for irrational reasons. It's now back down well below 2.0. I'm definitely keeping an eye on it

Zoomd Technologies $ZOMD.V

I was fairly successful with this stock as a trade, though unfortunately with a small position. From an uncritical valuation perspective, the stock appears very cheap, but everything else feels 'off' to me. After the earnings call, I already knew I wouldn’t stay invested for long, as there were more open questions than answers, combined with a few yellow flags that I personally saw as warning signs.

Conclusion

My focus on not always capturing the full upside and instead prioritizing risk reduction is relatively new for me. This includes not allowing more risky positions with high upside, such as Regis to grow beyond 20% of my portfolio. It also means not initially investing more than 5% in cases with open questions, like $COV.V and $KLNG, but rather waiting for confirmation of a trend. Although this approach has cost me some performance, particularly with the latter two, I believe that in the long run, I will fare better with this strategy.

I've just gone through another lengthy dry spell. Although I read filings every day, I haven't been able to find a stock in the last few months that has convinced me as much as $IMB.AX or $IVFH. However, this might also be a good sign, as it could simply mean that my standards have risen.

I would like to extend my special thanks to Sven, Sebastian, and Paul, with whom I had many discussions again in the last quarter. Just today, another investor, Sam, mentioned in a meeting that one advantage we Germans have when investing is that we are willing to speak up when someone has a completely wrong idea. 😉 Based on our recent conversations, this does indeed seem to be true.

I will mostly limit my update to what is genuinely new and where there is room for clarification. For those who are not familiar with IMG, you can read my write-up here. Much of what I am communicating is tentative, as I still have some unanswered questions, which I expect to resolve soon. I will publish an update or edit afterwards.

No red flags regarding the integration

The biggest risk I mentioned in my write-up was the integration of the acquisitions. This is something the company, and especially CEO Dennison Hambling, is well aware of, as he has repeatedly brought it up. It's all the more interesting now to see that he is describing the company as being in a 'calm place' in this context:

At present, there are no negative signs regarding the integration of the acquisitions. This is also reflected in the better-than-expected figures, which are consistently above or at the upper end of the guidance or pro forma EBITDA. I usually avoid using this term, but so far, they have clearly been conservative in their estimates. There have been no negative surprises in this regard.

Dennison Hambling also mentioned just a few days ago that, while they remain open to acquisitions, they do not consider themselves a roll-up.

The guidance for FY 2025 is set to be released at the AGM in October. However, based on the statement in the press release, it can already be assumed that this year's results will surpass those of the previous year. Based on the company’s recent comments, I suspect that the 'customer discussions' are primarily related to the commercial segment, which could result in significant increases in both revenue and profitability.

Early trading in the new financial year has been above the “upgraded” proforma level of EBITDA ($40.2m) with a number of positive significant customer discussions occurring. The company expects to give FY25 earnings guidance at its AGM in October.

IMB Annual Result Market Release

What's new?

At the Coffee Microcaps Morning Meeting, I asked Dennison Hambling about both the churn rate and the organic residential customer acquisition cost (CAC). Business relationships with corporate customers typically last 10–15 years. According to him, the gross churn rate in the residential segment is 10%. Most cancellations are usually due to customer relocations. A third of those customers immediately renew the service in their new home. Therefore, I don’t think this is an area that requires particular attention.

He was unable to answer the question regarding the CAC (yet). I understand this, as the acquisitions and the very different approaches to customer acquisition make it difficult to provide a clear answer. He plans to revisit this next year when they have more data to provide a meaningful response.

What I generally like and notice is that their presentations are increasingly tailored to outsiders and shareholders. Special effects are not only mentioned but also explained. Some might consider this unnecessary detail, but given this, and their frequent communication through various channels (there isn’t a month where they don’t present or release new details somewhere), I see a clear intention to communicate a message to the market that could indeed impact the stock price.

Especially since 47% of the shares are held by one investor and 9.6% by another, I at least recognize that they are not ignoring or forgetting minority shareholders. Of course, this alone doesn’t fully protect against the potential exploitation by majority shareholders, which is something I always keep in mind when investing in companies with this ownership structure.

CapEx in 2024 was higher than originally expected, at 18.5 million AUD. The majority of this, as communicated, was due to the transition of medical alarm products from 3G to 4G. With the remaining approximately 4.6 million AUD required for the transition in New Zealand, this special expenditure should be completed.

For the first time, the company also disclosed how many customers are being added to the residential segment of the monitoring services. An additional 200 customers per month doesn’t seem like much to me, but until now, much of this has been handled by technicians. With the increased use of DIY kits, the number should rise significantly.

Open questions

It is questionable to me how, and even more so whether, the wholesale monitoring is included in the 200 customers per month. Based on my current understanding, customers from this segment are not included, as it was explicitly mentioned in the residential segment that the customers are generated through in-house technicians and DIY, which should fall under 'Direct Services.'

What is also noteworthy is that they emphasize having a new focus on 'wholesale monitoring only.' Unfortunately, the Annual Report does not shed light on what this entails. However, it would not surprise me if, in the future, the installation of cameras and other equipment becomes less significant and IMG focuses even more on recurring revenues from the respective contracts.

What surprised me were the figures for D&A (Depreciation and Amortization). In my write-up, I had estimated Maintenance CapEx (MCX) to be between 8.8 and 3.5 million AUD, as a significant portion of the amortization came from customer contracts, which are essentially one-time effects from acquisitions that do not affect cash flow. After Dennison Hambling provided more details on Maintenance CapEx in a meeting, I concluded that we are closer to 3 million AUD.

Looking at the breakdown now, however, three components qualify as maintenance: 'Business depreciation,' 'lease depreciation,' and 'subscriber assets.' The latter is undoubtedly increased due to the transition from 3G to 4G, but this doesn’t guarantee that a similar transition won’t occur in the future, and of course, they are also subject to wear and tear. From a very conservative perspective, one would have to assume 6.7 million AUD as MCX. However, after a brief contact with the management, I concluded that 1 to 1.5 million AUD for the subscriber assets is a realistic long-term estimate. I expect to be able to assess this point more confidently soon.

I don’t want to be too picky about this aspect. The medical alarm products evidently generate a high return and have been identified in the past as a segment with significant growth potential. The new partnership with NDIS highlights that the potential application field is also very broad and that IMG is capable of forming new partnerships.

Additionally, it is possible that there are currently leased buildings that will not permanently belong to the company. At least, it seemed that way at one point during the Coffee Microcap Morning Meeting. I will inquire further about this as well.

Nevertheless, based on the current information, I will adjust my calculations:

I did not subtract the SBC (Stock-Based Compensation) from the EBITDA but rather considered the shares on a fully diluted basis. It should be noted that the EBITDA can at best be considered preliminary and that the official guidance, according to the latest communication, will very likely be set above this.

Conclusion

I am currently very satisfied with the company's development. None of the unanswered questions cast doubt on the case as a whole. On the contrary, some of the questions are related to specific growth measures.

CEO Dennison Hambling has confirmed the key aspects at critical points. From my perspective, these include the strong cash flow for 2025, reasons for optimism regarding refinancing, the robustness of the business model even in challenging macro phases (see New Zealand), and the fact that the gearing is expected to remain at a level of 1.5 to 1.7. I conclude that the cash flow will soon lead to dividends or buybacks as planned, provided there are no additional acquisitions in the meantime. These acquisitions seem to be integrating very well, although it is still too early to make a final judgment.

Along with the high proportion of recurring revenues (6.8 million per month), the strong return-driven ownership structure, and a management team that has been very reliable so far, I continue to see significant potential here. Based on the pro forma EBITDA of 40.2 and an EV/EBITDA of 10, there is an upside of 68.4%. If we receive a higher guidance at the AGM, a significantly higher upside is likely.

Everything as expected with one minor and one major exception

Much of what we saw in Q4 was to be expected, which is not to say that everything speaks for Regis, but it is at least an indicator of how predictable the further development will be and how reliable the management is. Let's start with the positive aspects.

As expected and positive

As expected, adjusted EBITDA YoY grew. However, a significant portion of the 7.4 million is due to a change in the regulations for gift card breakage. This resulted in a positive effect of 1.3 million, which was attributed to the company-owned stores. In my opinion, this effect should not be included in adjusted EBITDA. As I calculate the EBITDA myself in the end anyway, it plays a subordinate role for me. However, the more relevant franchise adjusted EBITDA has also risen from 5.5 to 6.1.

The positive income effect from the debt forgiveness was offset by the substantial NOLs, which meant that no tax was paid on the substantial profit, from which the company will continue to benefit as the remaining NOLs amounted to 490 million at the end of the FY.

The significant cost savings are a relevant factor for the rising EBITDA and the positive cash flows. In August, there was a major workforce reduction, which was not specified by the Executive Board, but is presumably not insignificant, as the G&A run-rate previously amounted to 43 to 46 million and is to be reduced to around 38 to 40 million by the end of the year. In FY 2025, G&A costs are expected to be between 40 and 42 million. Another aspect that I would see as a cost saving is the subletting of 3 out of 4 floors of their headquarters, which should result in 1.2 million rental income that will be allocated to “Other income”. These signals are exactly what I want to see and for me the management here is acting strictly according to the textbook in the most positive sense.

Based on these measures, it can be assumed that both EBITDA and cash flow will increase or be positive from here on. In Q4, the positive cash flow already amounted to 5 million. Q1 is traditionally cash flow negative, as insurance premiums, bonus payouts and prepayments for the January stylist event are due there. From Q2 onwards, management expects cash flow to be positive for the rest of the year.

As expected and negative

Store closures remain the most critical problem after refinancing. 404 franchise stores were closed in FY 2024. The fact that this is a lasting effect for the time being was discussed again in the last call. CFO Kersten Zupfer made it clear in this call that a similar number of closures can be expected in 2025. Most of them in Q3, as a large number of leases for SmartStyle franchises expire there.

We continue to see significant net store closures as we move towards a smaller, albeit healthier salon network from a sales and profitability perspective.

Matthew Doctor, Regis Corporation, Q4 2024 Earnings Call, Aug 28, 2024

This is a real problem and just because it was expected doesn't make it good. The stores may be underperforming on average and some of the franchisees are just waiting for their contracts to expire, but with each closed store not only the royalties decrease, which partially negates the cost savings, but also the contributions to the advertising fund. At the end, I will discuss the expected short-term impact of store closures on EBITDA in FY2025.

Nevertheless, there are aspects that suggest that we will return to growth after a transitional phase. The fact that Regis is no longer under immediate threat of bankruptcy alone could give franchisees who were previously reluctant to expand a nudge in the right direction.

Apart from that, I can see that the management has the right focus. The most urgent problem was refinancing and now it is a matter of uniform standards and checking compliance with them. I know that many people would like to see new stores springing up again now, but considering that Regis was a company that felt like it was stuck in the early 2000s, I think this approach is exactly right. You don't put the walls up before the foundations are in place. A strong franchise system is what attracts new franchisees. When these measures are implemented, a large overhang of poorly performing stores, which are repeatedly mentioned in the calls, will fall by the wayside.

As we enter this new chapter as franchisor with singular focus, I've mentioned on prior calls that we were starting with our first major initiative of defining, monitoring and enforcing the components that we believe make for the proper end-to-end customer experience that we call excellence standards.

Too many years have gone by without our finger on the pulse and eyes on salons, leading to the breeding of independent behaviors and an inability for us to take advantage of our size and our scale.[….] We know how important it is to have clean great-looking salons for our customers and our stylists, especially in this highly personalized services business. Our salon image and service offering form a key element to perceive value and is the tone-setter of the experience. So we will aim to make the most inroads here to start, and over time, we will shift our efforts more towards further influencing the behaviors at the salon level.

Matthew Doctor, Regis Corporation, Q4 2024 Earnings Call, Aug 28, 2024

Considering that the management has consistently taken comprehensible steps since Matthew Doctor took over as CEO, which have been part of an overarching plan, I am willing to give the management the benefit of the doubt here too. Basically, we have no other choice here. Except to sell.

Not expected and negative

The migration to Zenoti's POS is now finally complete. In purely arithmetical terms, the outstanding payments from the software sale to Zenoti should have amounted to 13-14 million. According to the statements from the call, it is now more like 7-9 million. Contrary to Kersten Zupfer's statement, this is not solely due to the store closures. I can only speculate, as I don't know the details of the purchase agreement, but from a buyer's perspective, my willingness to pay the full amount would probably also be rather low, given the long migration phase and the expectation of the closure of a large number of other stores. The comment in the last 10-Q already pointed in this direction.

Another negative aspect, which in my opinion weighs more heavily in terms of the signal effect, is the negative same-store sales in Q4. There was no explanation of the reasons for this in the earnings call. My mail to the Management Board in this regard has so far remained unanswered. What is striking, however, is where the negative SSS predominantly originated.

Of the 146 store closures from Q3 to Q4, 90 were due to SmartStyle. If you look at how SSS is measured, this alone could have had an impact. Apart from that, however, it suggests that this brand in particular is the underperformer in the portfolio, which also corresponds with the CFO's statement that most closures will take place in Q3 and are attributable to SmartStlye. It is little consolation, but unlike Supercut, this has a slightly lower impact on royalties, as SmartStyle franchisees only pay 5% royalties, while Supercut and Costcutters pay 6%.

However, there are signs that same-store sales could soon improve. The mere fact that Zenoti is now available in every store opens up new opportunities in terms of personal marketing and is apparently already having a positive impact elsewhere, with significantly more and positive reviews in the Supercut stores.

In addition, the pilot tests with Supercut Rewards were successful, as demonstrated by the 3.4% increase in traffic, and will now be rolled out to all Supercuts first and then to the other brands. Again, I like the planned and calm approach of the management. They don't see anything as a no-brainer. They test first and 'then' implement across the board.

The new brand standards should also contribute to this.

And while we have strong belief in the merits of these programs, we can't emphasize enough that the key to retaining and driving new guests starts first and foremost with the operational and service excellence I mentioned above.

Matthew Doctor, Regis Corporation, Q4 2024 Earnings Call, Aug 28, 2024

As I myself am a person who predominantly uses what he can already see in the financials to judge, I understand that these aspects are marginalized, but we should not forget that Regis is a company with significant operational weaknesses, the causes of which need to be addressed before we can think about growth. A successful refinancing will not change that.

Valuation

At the valuation at the moment, I am deliberately taking a short-term view of one year, as we do not have any good long-term indicators and there is generally a lot of change going on at the company at the moment.

I illustrate here in two scenarios the effects of store closures, the development of SSS and cost savings.The result is to be understood as if the effects of the individual aspects occur immediately, which makes sense from my perspective, as they all take place continuously and partly negate each other. I have assumed several conservative aspects in scenario 2.

Scenario 1 assumes 0% SSS growth, the announced 400 store closures and average store sales of 150000 dollars. In the penultimate call, management said that the most recently closed stores had average sales of 131,000. For G&A, I have assumed the lower limit of the guidance and added the 1.2 forecast rental income to the difference with fees and royalties. This results in EBITDA of 32.9 million, which is significantly higher than TTM EBITDA.

Scenario 2 assumes a 1% decline in SSS, 500 store closures and average store sales of 200,000 dollars, which I consider to be very conservative compared to the average sales of all stores of approx. 260,000. I have assumed the upper limit for G&A and thus arrive at an EBITDA of 27.7 million.

I consider this range to be very realistic from the lower end to the midpoint of expectations.

If I apply the corresponding EBITDA to the current valuation and assume various multiples of 6.5 to 10, I get a significant upside from today's perspective.

How realistic is the upside?

I have seen many discussions on various platforms suggesting that the share price is currently far too low. It may surprise some people, but I don't see it that way. Any calculation based on the short-term EBITDA or FCF multiple is only meaningful if the company at least continues to achieve these on a sustainable basis. With a store count that is on its way to 0 purely from a chart perspective and falling SSS, this can be doubted purely on the basis of the information we have de facto, which is anticipated by the market accordingly.

Any calculation of the current multiples therefore only shows how significant the upside is if the management turns the company in the right direction on a sustained basis. If store closures were to fall significantly at some point and SSS were to rise, then the share price would reflect the trend reversal within a very short time, in my opinion. It should be noted that 10 x EBITDA is potentially a rather low multiple for a franchise model.

Regis remains a bet. A bet that store closures and SSS decline are only temporary problems. The odds of this are significantly higher than before the refinancing as the company has been given the financial room to make changes and improvements to the business model.

Conclusion

I remain invested in Regis. The management has acted along a common thread so far, which I can still see now. The potential to transform the Regis brands into successful and competitive franchises is there in my view, but this should not marginalize the current problems.

I think you need more staying power with the stock than many would like, which is reflected in the volatility. As many are sitting on high profits and the share price does not reflect what I feel are sometimes irrational assumptions, we will have to get used to it for the time being.

However, I also see some potential for positive surprises until the next figures. For the first time since Matthew Doctor has been CEO, the management can buy shares themselves, as they are no longer in a blackout period. Considering the nice cash injection of half a million that he has just deservedly received from the company, I don't see this as unlikely. Nevertheless, I believe that we need to think in terms of 1-2 years rather than quarters.

If you don't know the stock yet, you can read my write-up here. Sven Klass first brought it to my attention. Make sure to give him a follow.

Ticker: SUP.L

Price: GBX 172

Market Cap: 200,53 Million GBP

EV: 188,93 Million GBP

Financials

At first glance at the earnings figures for FY 2024, we seem to be looking at an absolute growth company that also appears to be benefiting from considerable operating leverage. Mid double-digit sales growth with more than double the growth in adj. EBITDA.

At least the point about operating leverage is indisputable. When it comes to sales growth, however, I would again make myself aware of where this primarily comes from.

While 4 divisions only achieved single-digit growth, almost all of the growth is attributable to the "Branded Distribution" segment, which represents sales from the Master Distribution Agreement with ElfBar and LostMary. So far, disposables are still being sold under the two brand names, but these could be banned as early as April next year. In addition to the planned tax on vaping, this is the reason for the currently prevailing valuation discount, and not only in the opinion of investors.

Vaping

I have set out in detail in my write-up what is planned in regulatory terms and what the likely impact will be. The conditions have not changed significantly since then, even with Labor's election victory.

Gross profit from the company's own vaping brands improved by 28% despite only a slight increase in sales. In the earnings call, CEO Sandy Chadha and CFO Suzanne Smith reaffirmed that they do not currently expect the ban on disposables to have a negative impact on the business.

The reason for this is simple. The rechargeable pod system, which looks the same and delivers the same flavor, costs the same as the disposable. So, in theory, customers could buy the pod kit and throw it away after use. The margin is slightly lower on the kit than on the disposables, but higher if customers buy the pods, which can then simply be inserted into the rechargeable system. This applies not only to the company's own brands, but also to ElfBar and Lost Mary.

I still consider the disposable ban to be more of a non-event and think that the effects of the planned tax will be more negative.

Other Categories

In the other categories, significantly higher increases in gross profit can be seen and the picture that dominated sales is largely reversed, as "Branded Distribution" pulls down the average with a gross margin of 15%. The gross margin in the "Vaping" segment is better, as production has now been consolidated at a single location. Looking purely at sales growth can therefore lead to a false picture of Supreme, as its strength lies more in increasing efficiency and utilizing distribution opportunities, while overhead costs are only rising slightly.

Unsurprisingly, the battery division has only grown slightly, but it is growing. According to its own statements, Supreme currently has a market share of around 35%. The gross margin increase is mainly due to changes in the sales mix. The segment is also seen as a door opener through which the company gains access to customers in order to be able to offer additional products. According to the management, overhead costs are zero, which is why they want to hold on to the segment in the long term.

The margin increase is particularly evident in the Sports Nutrition & Wellness division. With only a 7% increase in sales, the gross margin rose from 16% to 29%. This was mainly due to the sales mix, which switched more to products produced in-house (protein powder). A breakdown of marketing expenditure would be particularly interesting in this segment, as Supreme recently switched to a classic marketing strategy for its premium brand SCI-MX. Frankly, I assume that the return is not yet too high, as my question to this effect was bypassed in the phone call with the CEO. According to Sandy's statements, acquisitions in this area in particular are to be expected in the coming year.

The Lighting division continues to lag behind pre-Covid levels in terms of revenue. However, Supreme did not lose any customers or shelf space. The higher gross margin is due to a reduced focus on FOB, but also better supply chain conditions.

How many of these changes, which have led to a higher gross profit, are sustainable is still questionable for me at the moment. The consolidation of vaping production seems to me to be the only reliable component at the moment. The consolidation of vaping production seems to me to be the only reliable component at the moment.

Acquisition of Clearly Drinks

In my view, the acquisition of Clearly Drinks offers very good opportunities. The manufacturer of beverages in cans and bottles with a highly automated factory was acquired by Supreme for 15 million. Sales amounted to 22.4 million and EBITDA to 3 million.

Clearly Drinks' own brands, which include water and energy drinks, can theoretically be sold by any of Supreme's customers. From kiosks to retail chains.There are also opportunities and synergy effects beyond this. For example, the Sci-Mx pre-workout drink can now be produced on the company's own production facilities.

Other Supreme own brands can add new products from this area. Acquisitions of other brands and integration into the company's own production facilities would lead to immediate synergies and margin improvements. According to management, 40% growth is possible without further CapEx. Further growth could come from the planned pilot plants, which are to produce small order quantities for other brands.

The acquisition seems like a very reasonable addition to the non-vaping business, which will now exceed 100 million sales, which is another important signal to the market.

Outlook

What may have caused the share price to slide slightly immediately after the results were published was the outlook.

Supreme forecasts FY25 to be another profitable and highly cash-generative year for the Group. Having made a positive start in Q1, the Group is trading comfortably in line with current market expectations

Supreme PLC - Audited Final Results for the Year Ended 31 March 2024

Market expectations currently amount to sales of 242 million and an adjusted EBITDA of 36.9 million. This would represent an increase in sales of around 10%, but a slight decline in EBITDA. However, there are signs that the outlook is clearly too conservative.

The strongest signal in this direction is the CEO himself. When asked why EBITDA is flat in the outlook, even though the company does not expect the plans of the old or new government to have a negative impact on the company, the CFO said: "Caution." Immediately afterwards, the CEO replied: "I think if I was CFO I think the numbers may be different." Suzanne Smith obviously wants to at least plan for the possible (short-term) effects of the disposable ban. After all, at some point the switch from disposable to rechargeable pods will have to be passed on to resellers.

We can therefore assume very cautious planning here, which is in line with FY 2024. The company originally assumed slightly higher than expected sales of 150.5 million and EBITDA of 22.2 million. The outlook was then increased in 4 steps over the course of the year.

In addition, all comments regarding the first quarter are very positive. Nevertheless, I welcome the cautious approach and also tend to take the conservative view.

Valuation

The following calculation refers to the balance sheet at the end of FY 2024. The company is currently debt-free and will apparently remain so after the acquisition of Clearly Drink, as it was stated in the call that none of the credit facilities are currently being used. I have not included the leases in the EV, but take the payments into account in the maintenance CapEx.

Based on the comments, I have made an estimate of 38 million EBITDA, which is only slightly above the consensus. I have deducted the stock based compensation from this and thus arrive at the 36.77 million EBITDA. The maintenance CapEx could be slightly off, as the effects of the consolidation of the warehouses into one and the consolidation of production have yet to be fully realized. However, the de facto CapEx was significantly elevated in the previous year.

With an EBITDA multiple of 5.14 and the obviously good cash conversion, which is already reflected in real terms in Supreme's balance sheet, I still consider Supreme to be undervalued.

Conclusion

Concerns about vaping now also seem to be gradually diminishing, as Supreme has announced further acquisitions in the non-vaping sector, which will presumably sell as well to the company's resellers as those of Clearly Drinks.

Gross profit is still heavily dependent on the company's own vaping products, but on the one hand I think the concerns about this division are exaggerated and on the other hand the company would generate a high double-digit cash amount from the division, which can be invested in M&A, even in the event of a complete ban (which is not currently being debated).

I therefore see a realistic short-term upside of 95% even in the conservative EBITDA estimates.

• Performance YTD: 38,0%

• IRR since 01.01.2017: 30,57%

• TTWROR since 01.01.2017: 342,36%

Shares in my portfolio

Below are my current portfolio positions, in descending order of size.

Regis Corp

The wait for the outcome of the Strategic Review paid off. The refinancing was significantly better than anything I had expected. You can find the current valuation in my detailed article. I have also addressed the various criticisms of the company, which are not always justified.

Regis has made me more aware of five things:

1. Why it can be an advantage to come from Europe: This case shows that Europeans can sometimes have a time advantage over Americans, for example, when it comes to processing information. While I was reading the news about the refinancing in Germany at about 12:07 pm, it is very likely that at least the investors from the east coast of the USA were still in bed.

2. Why I invest in micro caps: If you look at the pre-market trading volume, comparatively little happened after the news. I had plenty of time to read the information, process it and exchange information. With large caps, I probably wouldn't have had half an hour to do all that and then buy a relevant number of shares before the market opened:

   

3. How much I appreciate the exchange with others: It was particularly here that I realized once again how valuable it is to have a timely exchange with intelligent investors like Sebastian to check that you really aren't overlooking anything.

4. Sometimes it is enough to simply wait for the Catalyst: you didn't have to be invested before the announcement to generate relevant returns. Quite the opposite. This is especially true for stocks where pre-market trading is possible on a relevant scale.

5. The advantage of investing full-time: If I wasn't investing full-time, I probably would have been in a meeting or otherwise busy.

I do see considerable upside potential in Regis, but at the moment the stock is my largest position and how the upcoming quarterly figures will turn out and be viewed by the market is still an unknown, which I discussed in my update. I have only sold a very small part of my position so far but will probably reduce it further. Nevertheless, Regis will remain one of my larger positions.

Kinovo PLC $KINO.L

Kinovo was largely responsible for my underperformance in Q1. The sold subsidiary DCB was a source of ongoing pain for investors as Kinovo remained liable for the company's debts after it went bankrupt. This issue now seems to be coming to an end. In fact, another project is still pending, but it is still at the beginning of the construction phase. I am not the only one hoping for a termination of the contract with a one-off payment at Kinovo's expense.

As soon as the DCB issue is resolved, investors will focus more on the operational part of the company, which has been performing very well recently.

I had made some additional purchases on the way down and in fact I had also read the announcement at the beginning of May immediately after publication and placed a very large order, but AIM does AIM things and once again I was penalized as a mainland European as my order was not executed. It was only when the market had already risen significantly that I was able to get some shares in the auction. The main reason why I am currently neglecting AIM as a hunting ground.

In any case, even after a small sale at the end of May, my position is significantly larger than before the DCB announcement and I see a clear path for significantly higher prices. Paul has already illustrated this more perfectly than I could in his tweet.

Innovative Food Holdings $IVFH

I only increased my position slightly after the quarterly figures in May, as $IVFH was already a large position in my portfolio. Once again, this showed how slowly the market is pricing in new information on micro caps.

Operationally, I am very pleased with the current development. Even in the seasonally weakest quarter, IVFH was able to report clearly positive earnings figures.

The company has announced several new contracts, which should gradually generate higher revenues without any noticeable increase in SG&A costs, as all of the business contracts are in the drop shipping segment. I still believe that a large number of investors are massively underestimating the operating leverage, although it should take years before the sales really make a significant impact.

In the short term, I see potential for sales, as the company has already communicated that Q2 will be challenging. The reason for this are positive one-off effects in Q2 2023, which will most likely make the YoY comparison look weak.

Intelligent Monitoring Group $IMB.AX

One of my new cases, which I presented in detail here. Little worth mentioning has happened in the meantime.Black Crane apparently did not participate in the capital increase, which I rate as neutral in this case, as its stake is still 47% and Black Crane has already bought significant shares in the market before.

According to the announcement on the completion of the Adeva acquisition, there are apparently no negative surprises in this respect at the moment.

Medical Facilities Corp $DR.TO

If you are not yet familiar with the case, you can read it again here. So far, everything has gone according to plan. Now it will be exciting to see whether I will be right in my original assumption of a complete sale.

Operationally, the company has recently delivered excellent results. I was somewhat surprised by the dividend increase, as I assumed that the company would keep it at the same level and invest all surplus capital in share buybacks. According to the statements from the earnings call, no more buybacks were possible under the buyback program, which I couldn't quite understand as I have other limits in mind.

It will be interesting to see how the company will use the cash once the credit facility has been paid off in full at corporate level. Another SIB would certainly be possible.

Even if the company is not sold completely, there is still upside potential if Medical Facilities is perceived as a reliable dividend payer again.

I reduced my position by around 20% in the first half of the year. The simple reason is that I saw more potential in other stocks.

Supreme PLC $SUP.L

My assumptions about the stock can be found in my write-up. Also make sure to follow Sven, who originally brought me to this stock.

I significantly increased my position again in Q2. There was no operational reason for this at the time, but simply that I realized during my write-up how irrational the criticism of the company seemed to me.

I welcomed the latest acquisition as positively as the market. This has already resulted in synergy effects for the company and considerable potential for the future. For example, acquisitions of smaller brands from the beverage sector without in-house production are conceivable, which can then be produced on the company's own facilities.

I am curious to see what we will hear in general about the various divisions in the presentation on July 2.

DSW Capital PLC $DSW.L

My position is unchanged. I was more than unhappy with the company's communication, which did not indicate that they would miss guidance. I am still invested here due to the very high opportunities from operating leverage on a broad upswing in M&A. The cost base is relatively fixed. If sales per fee earner return to a similar level as before, this will have a disproportionate impact on the bottom line.

The company's annual results presentation is on July 2. Frankly, I hope they don't give an outlook as they are already considered unreliable in this respect.

Centrotec SE

I have become more cautious when it comes to assessing the squeeze-out scenario, although the signs are still very much there. The question "when?" is what concerns me. With the decision of the new share buyback program, which now allows buybacks 20% above the average price, it seems clear that we can expect another buyback offer very soon.

However, I think it is possible that the main shareholder will continue to play with our expectations and delay the SO. I have yet to hear a compelling reason why it doesn’t makes sense to postpone it for another few years while he can collect shares cheaply from frustrated investors. I probably won't be invested here for too much longer either. Over the entire time frame, my IRR here is far below my hurdle rate.

I have already reduced my position because I have seen greater upside in other stocks.

Undisclosed position 1

The second FY quarter of this company looked so promising that I bought an initial position. It all looks like a successful turnaround. I am waiting for confirmation of this in the third quarter. However, the new management has already sent the right signals in the earnings call, which make me believe in a significantly higher upside, while the operational development in the core business is still overshadowed by other aspects.

Undisclosed position 2

A very small stock from the oil sector that has not yet been written up. The last quarter looked very promising. If this success can be repeated, the share is trading at a low single-digit FCF multiple.

Fitlife Brands

Operationally, I am still convinced of the company. I understood too late what characterizes the CEO in particular and therefore significantly missed out on performance.

I sold my position partly to have more cash available in case Regis announces the refinancing and partly because the upside in the short to medium term seemed lower than for my other shares. However, I am still following the case with great interest.

Positions sold

I did most of the selling pre-market when Regis announced the refinancing, which led to poor prices but paid off immediately.

Innovative Solutions and Support Inc

An educational trade. When I got in, I had several questions that I couldn't answer at the time, but which were of a significant nature. After several conversations with other investors, I was no wiser and sold. From today's perspective, I was pretty lucky.

Mind Technology &

I described the situation surrounding the preferred shares here. Operationally, I remain convinced of the company, but as the situation does not seem to be clearing up, as feared, I prefer to wait until it is clear how the prefs will finally be dealt with. I sold my last shares pre-market in order to buy more .If the price of the prefs falls significantly, I will probably open a position again, but the meeting has been postponed for a second time.

Connexion $CXZ.AX

Still an exciting share with too obvious a risk: the company has virtually only one customer. I sold the stock at a small loss to free up more capital for $IMB.AX.

Undisclosed position 3

A company with a simple business model that is still misunderstood. I already had it in my portfolio in the past and sold my starter position in favor of $RGS. I will probably buy it back into the portfolio in the next few months.

GEE Group

Finally, my absolute underperformer in Q1, which I finally disposed of in Q2. There are good arguments and initial signals that the company is right in its decision to carry out M&A instead of buybacks. However, I had invested in a special situation and did not want to reinterpret the case into something else. From a psychological perspective alone, the stock was energy-sapping.

With the sale, I realized the biggest absolute loss I have ever had to accept.

Conclusion

I am very grateful for the second quarter. Especially after a more than lousy Q1. I have recently started reading filings again every day in order to reinvest my cash holdings and planned partial sales.