Jamil is the managing member of TurnMark® Capital LLC, a San Francisco Bay Area-based private investment firm he co-founded in 2008. Before TurnMark, Jamil managed the research team for Cannell Capital, a long/short hedge fund, covering neglected equities, high-yield bonds and PIPEs. Assets grew to $1B during his tenure. TurnMark invests in unique public micro and small cap companies across industries with a multi-year investment horizon. Within microcaps he favors entrepreneur led businesses with material insider ownership. Before investing in any company, he looks for what he calls the “TurnMark”: the point when its fundamentals have shifted meaningfully and the stock market is beginning to take notice. He has been on the Board of AudioEye, Inc. (NASDAQ: AEYE, $165 million market cap, ~25% held by insiders) for seven years and is the Lead Independent Director. In total, Jamil has more than 25 years of public stock and bond investing experience. He earned a dual degree from UC Berkeley: a BS in Business Administration and a BA in Economics.

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Jamil, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch TurnMark Capital?

Edwin, thank you for inviting me on. It’s great to be here. In terms of background, I grew up in Dhahran, Saudi Arabia, where I focused on academics and team sports like soccer, but when I moved to the States I was perhaps a bit of an outsider and threw myself into more eclectic individual pursuits like skateboarding and powerlifting. I guess that mix of collaboration, curiosity and persistence led me into an entrepreneurial career as a generalist investor. My introduction to public markets came by way of a couple of summer internships at Cannell Capital while I was at Cal in the late ‘90s. After a stint in investment banking in New York, I returned to SF and was with Cannell for seven years…so from intern to research director.

I’ve always had a bit of an independent streak, so launching TurnMark with primarily my own capital was a natural next step for me, and the timing was right personally. Well timed…right into 2008. As a net long-biased fund, it was a bit of a baptism by fire, but early 2009 turned out to be the best buying opportunity of my career, and we were positioned to take full advantage of it.

Since then, TurnMark has focused on managing internal capital along with that of some friends and family, a stable base that has carried the fund through several full market cycles. Following a challenging period in 2022 and 2023, I assumed full responsibility for TurnMark in early 2024 and have been running it independently since. More recently, part of my focus has been on a concentrated, long-term position in AudioEye, where I serve on the Board. In 2025, I also carved out a dedicated allocation to microcap companies, those with market caps below $500M. These are essentially private companies that happen to trade publicly, and very few institutional investors are calling on them yet. On a personal note, my wife and I have three sons interested in finance who are in and out of college, and I’ve been thrilled that each of them has done a tour of duty of sorts with me at TurnMark over the last couple of years.

Could you please walk us through your overall process, from first discovering the company to deciding to buy?

My origination process is a blend of treasure hunting through screening, conferences and revisiting old names, which after 25 years is quite a list. I’m sorting through the T.J. Maxxes of the world, looking for unique, discounted merchandise of quality that’s hidden among the odd sizes and colors. That said, I am not looking to buy a broken mirror just because it is on sale. I’m hoping to find overlooked companies undergoing real change that can grow into larger ones, earning a higher valuation on higher earnings in the process. To keep track of these opportunities, I log them in what I call the “Repo” and continually revisit them. When these out of the way stocks revalue, the upside can be several hundred percent, so “buying on the way up” can be very effective.

While I recognize we’re buying stocks, much of my research is general business analysis, since that’s ultimately what lets you stay comfortable in small and microcaps that might trade down 20% because it’s Tuesday. These days, when I find a stock that looks interesting, I’ve moved to having Claude run a comprehensive report I created called a T-line, a nod to my old school days of using Value Line. It’s a rich look back covering SEC filings, management biographies and years of earnings calls, showing how the company got to its current situation. It covers several dozen items and calculations I used to run manually, plus work I might otherwise hand to an analyst or intern (or do myself). This compresses 1–2 hours of work into minutes and allows faster, higher-quality first looks. I like to think my edge is in using AI tools to get the right information quicker, not just more information.

From there, I try to interview management as soon as possible. With smaller companies, if I can’t reach some level of management, I tend to pass unless there are very clear goals, evidence of success and the market is already starting to pick up on it. Usually, though, I can find a way to connect, and not many investors are calling these companies, so they welcome the inbound calls. I like to hear directly why the managers chose to work there, how the company got here and what they’re trying to accomplish over the next couple of years. If I need to get on a plane to meet them, I will, since I think these meetings are a clear edge in this market cap range. It’s become clear that the competition in this space is often a computer program, or day traders primarily focused on daily price action and headlines who move on after an initial one day surge. There isn’t much thought to what the company could be worth in a year or two, so what an acquisition, a recent hire or a move by a private competitor does to the trajectory of a business often isn’t priced in. Since the companies I’m looking at are usually going through some sort of change, more of the same historical data isn’t what’s going to cause the stock to revalue. It’s about what they’re doing now that’s new. What’s the plan, how committed is management to it, what are the tougher aspects and what might they be able to do after that? As I get up to speed, I might buy half a position and then look to double it as I connect with the company and they execute. I try to keep the book to 15 or so names to focus my efforts.

What are some interesting ideas on your radar now?

I’ll share a few ideas in different industries that are at various stages and hopefully your readers will find at least one that resonates.

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Prior to joining Colony Bancorp, Mr. Fountain served as President and Chief Executive Officer of Planters First Bank in Hawkinsville, Georgia, from 2015 to 2018, and as Chief Financial Officer of Heritage Financial Group and HeritageBank of the South from 2007 to 2015. He has over 25 years of experience in the banking industry, with experience spanning executive leadership, financial management, strategic growth, and mergers and acquisitions.

Editor’s note: This interview was conducted with help from Perry Weinstein. Sunday’s Idea Brunch is looking to interview more exceptional small and mid-cap CEOs. Please send nominations to edwin@585research.com

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Heath, congrats on all your success and welcome to Sunday’s Idea Brunch. What attracted you to pursue a career in banking?

I got into banking by accident. I started my career in public accounting with a regional firm, and I spent a lot of time auditing banks. I was intrigued by the banking industry, and ultimately ended up going into banking on the wealth management side. I did that for 5 years before getting into management on the finance side of banking as a controller then a CFO.

What have been the keys to success in transforming Colony?

There have been a lot of things that we did to transform the bank, but really it comes down to culture and talent. When I got to Colony, they had been the same size for about a decade, and finally finished cleaning things up from the great financial crisis. I knew that to turn it around, we would have to instill a culture that embraced growth and high performance. We very methodically built that. As we did that, we were able to see many people on the team step up and embrace it. At the same time, many people on the team didn’t want to be part of a high performance culture, and most of those people self selected out. As they did, we brought in new talent, including many people I had worked with at other banks. One of the most important things a CEO can do is to shape and communicate the culture. The second thing is to have the right people in the right seats doing the right things. Thankfully, we have been able to develop talent, and bring in outside talent, and those people are in the right roles and embrace our culture.

The acquisition of First Reliance has given you a regional presence in the Southeast and Colony will be nearly $5bn in assets. Talk a little about the lessons you learned integrating Colony’s prior three acquisitions and how that has shaped your strategy regarding the First Reliance deal?

We try to learn and get better in everything we do. After each acquisition, we perform an after action review so that we can go over the things that we did well, and the things that didn’t go as planned. We have a very well documented playbook that we use to integrate an acquisition, and we update that based on those after action reviews so that we can do better the next time. As that list grows and is refined, we get better each time. The biggest lessons we learn each time comes down to things we could have done a better job of communicating. I tell our team that 90% of problems come down to some failure in communication, and if they think a problem we have isn’t about communication, they better go back and dig deeper because it’s highly likely it was a communication issue. So we take particular care to keep increasing our communication, trying to keep the new team members and new customers apprised of the process and what to expect. With First Reliance, one of the things we are doing different is creating a leadership orientation process, where we are taking the leaders at First Reliance, who will be leaders in the combined company, through a process where we talk about our culture, we explain why we lead like we do, and prepare them to embrace our culture, meeting structure and communication cadence. I think this is going to be helpful in ensuring that this is our smoothest integration to date.

Since you took over in 2018, how have drastic shifts in rates and geopolitical and technological environments affected your strategic priorities and how you run the bank?

Just prior to the rate increases, we had grown the bank from about $1.2 billion to over $3 billion, through both organic growth and through 2 acquisitions. Through that, we did not focus enough on interest rate risk, and that really hurt us rates moved up rapidly. As I look back now, it is probably one of the best things that could have happened to us. I was fortunate enough in my career to be at a bank that was able to be offensive during the great financial crisis. I learned lessons about credit risk by sitting across the table from folks who messed up real bad, and we were acquiring their bank through an FDIC-assisted acquisition. That was impactful to me, and I learned to be very careful about managing credit risk. But I got to live the interest rate risk lesson firsthand, and I am not going to make that mistake again. I am proud of how our team responded, and we are a better bank today for having gone through that. As rates rose and our margin declined, it forced us to look at our expense base, and do a better job of managing headcount and noninterest expenses. We bit the bullet early, and cut headcount and other expenses. That allowed our performance to remain stable while margin decreased. And now that margin has improved for the last 8 quarters, we’ve seen our performance improve above the median of our peer group, and we see that improvement continuing.

The pace of change in financial technology has been another major challenge, but one that I feel like our team is doing a great job of managing. We like to think of our strategy not as cutting edge, but being a fast follower. We brought an innovation officer several years ago, and that really helped our team develop a culture of innovation. We participate in several fintech investment funds, and that allows us to stay up to date on what’s out there, and what’s coming down the track. We have great support from our board on this. The chairman of our technology committee is a heavy user of digital banking tools, and he keeps pressing us, with the full support of the board, to keep leaning into technological advancements. We’ve been an early adopter of AI advancements as well, and I feel good about the steps we are taking to drive both revenue and efficiency as AI opportunities evolve. With AI, and really with all technological investments, the key is really to get as much of the team as you can involved. If they embrace innovation, you will be successful. If they don’t, you will fall behind the curve. We are in a great place now, and will continue to drive our innovation culture as we move forward. It’s an exciting time, and I am excited to see where all it can take us.

All corporations and senior leaders grapple with opposing goals, the paradoxes of leadership. This is especially true for CEOs of public community banks that strive to do what is best for their communities while also focusing on increasing long-term shareholder value. Another one that comes to mind that investors talk about all the time is profitability versus growth. What is your thought process, and how do you grapple with these decisions to achieve your organization’s objectives?

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Francisco is currently a Managing Director at Arqos Capital, an investment firm focused exclusively on Venezuela investing across private equity, venture capital, and real estate. Before joining Arqos in May 2026, Francisco was a senior investment analyst at Harspring Capital, a fundamental L/S hedge fund where he focused on global consumer, music and technology investing. Francisco is also the founder of Sleepwell Capital, a private investment vehicle and content platform focused on consumer, music, tech and experiences across public and private markets.

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Francisco, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background, Sleepwell Capital, and why you decided to join Arqos Capital?

I’m honored to be here.

I grew up in Caracas, Venezuela and moved to the US when I was 18 to go to college in Massachusetts. While I was majoring in engineering, I quickly realized I wanted to work in finance, and more specifically focus on investing after playing around in the stock market with a small inheritance (mostly a failed experiment).

I managed to get a job in JPMorgan where I worked for six years, first in the Private Bank and then in Fixed Income and Credit Research. I then moved into Equity Research at TD Cowen covering industrials, automation and robotics.

During the pandemic I created the pseudonymous account Sleepwell Capital on Twitter and started posting about stocks. After gaining a bit of a following, I decided to try to find a job on the buyside by posting my anonymized resume. To my surprise it worked. I interviewed at a few different funds and ended up at Harspring Capital, a L/S fundamental hedge fund. It was a dream job; I could look at any company I wanted to in any sector that interested me working with people that I admired and were smarter than me. I covered consumer, tech, music and financial services.

I spent four and a half years at Harspring. Early this year the firm went through some organizational changes and ultimately it didn’t make sense for me to stay there. Coincidentally, this happened just a few weeks after January 3^rd – a date that Venezuelans will forever remember – when Nicolas Maduro was removed from office by US forces.

Over the following weeks and months, I began an exploratory journey to find what I should do next. During this process, I realized that Venezuela could potentially be a once in a lifetime investment and career opportunity.

Historically, when a country that has been closed from the rest of the world under an authoritarian regime undergoes a transition into an open-market democracy, investment opportunities can be highly attractive for those that are best prepared and are willing to invest in the early phase of the transition. This happened in Poland, Russia, Peru and Vietnam.

After appreciating how difficult it is to differentiate and find an edge in the public markets, I became convinced that I was in a fortunate position to capitalize on this opportunity. I had the Venezuelan background, the skillset of investing professionally for over 10 years and this was a market that institutional capital couldn’t go after. This led me to make my first Venezuela investment in Yummy – Venezuela’s leading ridesharing and SuperApp – where Arqos Capital happened to be leading an investment round.

After learning more about Arqos, I was surprised to see that they had been investing institutional capital exclusively in Venezuela since 2019 (practically by themselves). I was intrigued and decided I wanted to get to know them better. I started chatting often with Daniel Rottenberg, the Founder and Managing Partner. When I told him one day I was considering potentially launching my own Venezuela fund, he suggested I should join him instead and help them build their Private Equity and Venture efforts. This quickly became a no-brainer career decision for me as it gave me the opportunity to be the driver seat at one of Venezuela’s most established and reputable institutional funds.

For readers who have never been to Venezuela, can you give us a sense of what the country and culture are like right now? Why is now a good time to be bullish on Venezuela?

Venezuela is a gorgeous country. Venezuelans are warm, friendly, humorous and resilient. Caracas, the capital, is a beautiful city, located in a valley with a large mountain range to the north, which separates the city from the coast.

You can feel an optimistic energy in the city now as people have become hopeful that positive change has already arrived. There is still a long road ahead though, and much of the country is still living in very dire conditions.

I’m incredibly bullish on Venezuela because for the first time in two decades, we are in the early stages of a transition to a democratic and markets-oriented regime. If this transition goes through successfully, Venezuela is likely to experience a prosperous decade of double-digit GDP growth and recovering from a crisis that has hit the country and its people very hard.

How is Venezuela today different than the one you grew up in and left in 2009?

The country has changed in many ways. Over eight million people left, many of these represented some of the best young talent the country had. The country went through its worst economic crisis with hyperinflation, food shortages, electricity outages and a GDP that declined 75% peak-to-trough. A lot of companies have been through a period of underinvestment, many of them were expropriated or nationalized, others left, and a lot of assets are dilapidated. There’s been little new construction or infrastructure projects built. Not much innovation has taken place and competition has been very limited in most industries, which has made many companies complacent.

I think Venezuela is entering a major recovery and reconstruction phase. Opportunities abound in practically any sector you look at. It’s a blank canvas.

What external signs or pieces of information should outsiders be looking for to measure positive progress in the country?

The best leading indicator today is probably oil production. For context, Venezuela produced between 3-3.5 million barrels p/day at its peak. That declined to the 700 thousands and now it sits around 1.2M after recent investments in the sector. As more investment keeps coming, this number is likely to increase and should have a trickle-down effect on the rest of the economy including employment, GDP growth, and investments into other sectors like electricity, infrastructure and tourism for example. It’s very important that oil revenues get re-allocated properly by the government.

Another important piece of information to track is the progress of the democratic transition. There’s a lot of noise now, and ultimately the US is working towards democratic elections, but before those get announced there’s a few important developments that need to take place. These are the reform of the National Assembly, the Supreme Court and the National Electoral Council. These three institutions need to regain credibility to hold legitimate and fair elections. It’s possible that State and Municipal elections take place before the Presidential Election, something else to watch out for. But the biggest catalyst will certainly be the Presidential Elections, something I think will happen in the next 2 years or so.

The final piece of information I’m looking out for is foreign investments, specifically outside the oil sector (which has seen most of the activity so far). For example, any large M&A transactions or foreign companies announcing that they intend to come back into the country.

What do you think are the biggest risks to the Venezuela investment thesis? What could go wrong over the next few years?

Any political transition is not without risks. The biggest risk is that the US suddenly decides to abandon its commitment to a democratic transition and support for Venezuela, leaves the country and the socialist regime retakes power via military coup or something similar. If we’re using analogs, this is the Myanmar example, or Afghanistan after the US left.

I think this is very low probability and I consider it a tail risk, but it’s a risk none the less. It also becomes less likely each day that goes by as the socialist party is losing relevance and their institutions are being dismantled and key members removed from power positions. My base case is that the US wants a full democratic transition, as it’s in their best interest. They want to keep democracy, stability and strong allies in the Western hemisphere. And of course, the fact that the US is now directly involved in the O&G sectors gives them yet another reason to stick around. Incentives matter a lot here.

That said, I’m certainly not a political analyst.

How does your investment research process in Venezuela differ from your research process in more developed markets? What can you only learn by being on the ground?

It’s night and day. At Arqos, we are mostly focused on private investments, as there is not much to do in the Caracas Stock Exchange (trades ~$200K per day!). This means that there are no screening tools, annual reports, investor days or expert calls to swift through. There is little reliable information online. Everything is done manually, on the ground, and leveraging the local network. We source deals by talking to businesses, bankers, lawyers and asking around in our social circles.

When we start to diligence a deal, in many cases the company doesn’t have the information we require so we need to involve an accountant, auditor or lawyer. We make on site visits to stores, warehouses, manufacturing plants and ask industry experts about a specific company and its competitors as well as talking to its employees. In many cases we need to create new entities and figure out the best structure and governance is for each deal. You also need to be highly confident and comfortable with who you’re partnering with, given the reputational risks involved.

I think it’s important to be Venezuelan and be on the ground to invest successfully in Venezuela. It’s a very peculiar place, with lots of local nuances, complexities and customs. You must understand how business is done, how the government and regulators behave, and what the people are like. I’m still learning and getting familiar with the universe of companies here, as I’ve been away for 17 years, so it helps a lot to be here while I build the pipeline of attractive opportunities. There are also financial complexities coming from a dual exchange rate system and hyperinflation accounting, it’s taken me some time to get used to this coming from reading 10-Ks in dollars.

Contrary to what some people believe, great investment opportunities are difficult to come by in Venezuela. First, because there wasn’t ever really much distress since there’s no leverage in the system – credit represents only 3% of GDP as opposed to 50-60% average in the Latam region. Second, because most business-owners are already rich – Venezuela was a very prosperous country in the second half of the 20th century – so people have very little reason to sell their businesses. This makes deal sourcing very difficult and is yet another reason why being on the ground with a vast network and good reputation is so important. The best deals typically come off market, and you need to build trusted relationships with business owners, which takes a long time and cannot be done over a Zoom call.

Who are some of the operators you admire most in Venezuela? Generally, do you find that management teams act in the best interests of shareholders?

Two of the largest companies are very well managed and broadly admired. Polar is the local beer producer, Pepsi bottler, and food conglomerate and Farmatodo is the largest pharmacy chain (inspired by CVS/Walgreens). These companies doubled down in the country during the worst times and that bet has paid off today as they sit in a strong competitive position. They also sell to the entire population, so their brands are very strong.

In the tech and startup space, Cashea (BNPL) and Yummy (Ridesharing/SuperApp) are the two largest companies and consumers love them. They have an incredible track record of achieving national scale quickly, founded under very difficult conditions and operating at a very high level. They also know Venezuelans deeply well and adapt to their needs. There are a lot of smaller startups that are also executing well with a very strong talent bench and trying to solve some of the most important problems in Venezuela.

The treatment of minority shareholders very much depends on the company, a lot of the family-owned businesses have been owned by multiple generations and are not used to dealing with minority shareholders, so this can create tension. Younger companies are more modern and shareholder friendly as they understand that they depend on good relationships with their capital providers who themselves require certain protections, assurances and a voice in the company’s strategy.

What are some interesting ideas on your radar now?

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Will is a Partner at Kestrel Merchant Partners, a Boston-based merchant bank founded by Albert Hanser that invests in small-cap special situations. The firm’s two equity funds, the Kestrel Flight Fund and the Kestrel Phoenix Fund, invest in small public companies going through transition. Before joining Kestrel in 2025, Will spent 10 years as a Partner at Manatuck Hill Partners, a small-cap hedge fund in Connecticut, and five years as an analyst at Granite Point Capital, a small-cap hedge fund in Boston. Earlier he was a sell-side equity analyst at Sanders Morris Harris. Will holds a B.A. from Duke University, is a CFA charter holder and lives in Connecticut with his wife and two children.

Albert founded Kestrel Merchant Partners in 2019. He has 30 years of experience in emerging growth and special situations equity spanning London, New York, San Francisco and Boston. Previously, Albert was Managing Director of investment banking at Craig-Hallum Capital Group for seven years and ran the Boston office for the original ThinkEquity Partners for nine years. Earlier, Albert worked with Alex. Brown & Sons through the Deutsche Bank acquisition and began his career on the trading floor of Piper Jaffray. Albert received his B.A. from Brown University and lives in Boston with his wife and three children.

Will and Albert, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your backgrounds and the strategy at Kestrel Merchant Partners?

Will: I have been in equity research and portfolio management for over 20 years, primarily in small caps. Before joining Kestrel, I worked at two small cap hedge funds where I looked for orphaned and under followed companies that were often undergoing a turnaround. I had known Albert for a decade, and we began talking about turnaround opportunities among all the busted SPACs and broken IPOs from the 2020-2021 boom period. We both thought it would be a perfect fit in Kestrel’s special situation mandate so in April 2025 I joined the firm to launch the Kestrel Phoenix Fund (KPF). Since inception that June the fund is up about 30% net.

Albert: I have a non-traditional background for portfolio management. I spent 22 years in investment banking selling, sourcing and syndicating small cap growth investments. Over that timeframe, the small cap landscape changed dramatically leaving many smaller companies abandoned to non-fundamental structure funds damaging cap tables and performance. I saw an opportunity to launch a merchant bank focused on fundamental investing in small cap special situations. Our first fund was the Kestrel Flight Fund (KFF) investing in sub $100M market cap turnarounds, a category we call “public venture”. We use our banking skillset to help these companies navigate significant transitions. The fund looks and feels like a venture fund in the public markets but without a 10-year lock up. Since inception, the fund is up ~500% net.

Kestrel’s two small cap equity funds target what the firm calls PUMAs. Please tell us about that acronym and what is the philosophy behind those four catalysts for each fund?

The PUMA process is a lens we use to identify turnarounds and companies experiencing a change that will be a catalyst for growth and increased shareholder value. For the public venture Kestrel Flight Fund, we look for new Product cycles, Uplistings, Management changes and Acquisitions that accompany big pivots. For the Phoenix Fund, we screen for Profitability improvement, Unburdening cap table, Management team, and Attractive growth. KPF is looking for busted SPAC and turnarounds that are making the pivot from operating losses to positive earnings and free cash flow, along with cleaning up the capital structure by eliminating warrants, earn-outs, debt, preferred shares or collapsing dual-class shares. These developments can be major catalysts for the stocks, especially when coupled with good management teams and growth opportunities.

Albert, the Kestrel Flight Fund will make direct investments into small caps?

Yes, our investment banking capabilities enable us to make direct investments onto the balance sheets of companies in transition. It allows us to put capital to work efficiently with the greatest impact. Not all turnarounds require funding, but when they do it gets us in front of new situations early where they may need help and guidance. We lead with our own capital and work closely with management teams, boards and fundamental investors who join us in an investment. This collaborative process is an important piece of the equation that is good for companies and our partners.

Will, what makes busted SPACs an interesting investment right now for the Kestrel Phoenix Fund?

The fantastic boom and bust period for SPACs in 2020-2022 is analogous to what happened in dot-com tech period of late 90s/early 2000s. Many early stage, unprofitable companies went public with aggressive financial projections and excessive valuations. When interest rates went up in 2022, as they did in 2000-2001, those valuations came crashing down. From the rubble of the dot-com collapse many companies emerged that became today’s blue-chip companies. We believe a similar opportunity exists among the cohort of former SPAC companies as some transform their businesses, improve profitability, and/or clean up their balance sheets. Proprietary data we collected also shows that former SPAC on average outperform in years four and five post de-SPAC, which is the window many are entering now. These fundamental changes are often initially going unnoticed because the group became so hated, so it is certainly a contrarian idea.

What are a few of your favorite ideas in public equities right now? For each one, which PUMA catalyst is at work, and what is the market missing?

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Chris is the portfolio manager of Breach Inlet Capital, a Charleston, South Carolina-based investment manager that he launched in March 2016. Breach Inlet runs a concentrated portfolio of small cap companies undergoing transformation. Before launching Breach Inlet, Chris was the portfolio manager at a family office, a senior analyst at Highland Capital Management, and an investment banking analyst at Stephens. Breach Inlet owns more than 5% of BK Technologies and about 3% of PROG Holdings, and recently published research on both companies.

Editor’s Note: The Sunday’s Idea Brunch team is launching Bullpen.News, a platform to help you track all the new stock ideas from Twitter, newsletters, podcasts, investor letters, and more. Check out our free daily newsletter here. If you like Sunday’s Idea Brunch, you’ll love our free daily idea roundups.

Chris, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch Breach Inlet Capital?

Thanks for having me. I need to start with a disclaimer…Nothing here should be construed as investment advice or a recommendation to buy or sell any security. This is not an offer to sell or a solicitation to buy an interest in any fund. Views are as of the date presented and subject to change without notice. Breach Inlet Capital Management, LLC and its affiliates may hold a position in the securities discussed and may buy or sell them at any time without notice.

I grew up near Breach Inlet, which is a waterway in Charleston, SC. Hence, the firm name. I came from a family of entrepreneurs from my great grandfather to my dad, so I’ve wanted to start my own business since I was kid. I really became intrigued with the stock market when I worked for my dad’s stockbroker before my senior year of college (at Wake Forest) in 2004.

The broker gave me a stack of sellside reports and told me to pick one to pitch to his clients. I chose Anthem, which was trying to acquire Wellpoint but the merger was being blocked by one California regulator. It seemed likely Anthem could appease this regulator, so the merger could close and that would transform Anthem into a better business. Downside appeared limited because Anthem traded near its historical multiple. This played out and Anthem’s stock hit all-time highs. This type of investment is similar to our targets today…transformations where downside seems limited.

I enjoyed various forms of investing, but believed that I could compound my capital at the highest rate by focusing on small cap public equities so I started Breach Inlet Capital after a decade of investing for others.

Before Breach Inlet, you worked in investment banking at Stephens, invested in distressed credit at Highland Capital, and ran a public portfolio for a family office. How did those experiences shape your focus on small caps undergoing transformation?

As you mentioned, I started my career working for the Stephens family. I was an investment banking analyst, but I also helped their family office evaluate private equity investments (which is what attracted me to Stephens). I then invested across the capital structure in the public and private markets at an institutional asset manager (Highland Capital) followed by a family office.

When I launched Breach Inlet, I had the most interest and success investing in “transformations” so I decided to mainly target these. Transformations are companies undergoing major change to transition into better businesses. Transformations are often mispriced until their fundamental improvements flow into reported financials and those act as self-fulfilling catalysts.

What do you look for in a potential investment? Can you tell us more about your investment process?

For Longs, we want to invest in companies with high returns on incremental invested capital (EBITDA growth relative to capital deployed), experienced & aligned leadership, fortress balance sheets & significant FCF, undervalued on an unlevered FCF basis, and often transforming into better businesses. For Shorts, we are effectively targeting the opposite…companies that claim to be transforming but face secular headwinds or new competitive threats.

We apply an extensive five-step investment process that includes sourcing, qualitative research, quantitative analysis, positioning, and monitoring. We source ideas from our internal watchlist database, other investors, screens, and general reading. Our qualitative research consists of reading public filings & expert calls; speaking to CEO’s former colleagues, former company employees, competitors, & customers; and using AI tools to diligence. We then utilize our qualitative research to complete our quantitative analysis, which includes creating a detailed forecast with two cases (base & downside), answering our 50+ question checklist, and summarizing our thesis into a four-page tearsheet. Next, we input our base and downside case price targets into an internal positioning model that guides us on position size. Last and most important, we monitor for relevant news and update our price targets accordingly.

You recently published a presentation on BK Technologies (NYSE: BKTI), a maker of radios for first responders, and Breach Inlet now owns more than 5% of the company. When did you first come across BK, and what caught your eye? Why is BK a good investment today?

Hat tip to Brandon Daniel, my former intern and now founder and portfolio manager of Atai Capital, for putting BK Technologies (NYSE: BKTI — $277 million) on my radar. The company produces and sells land mobile radios (“LMRs”) to first responders. Under a new CEO, BK had transformed by launching a new handheld LMR (BKR 9000) to significantly expanded its TAM while shifting its internal production to an outsourced contract manufacturer. As a result, this no-growth and barely profitable business became a high-growth company with 20% EBITDA margins.

That was the first leg of the transformation and the next leg should begin next year. BK will launch a companion in-vehicle LMR (BKR 9500) that already has a built-in sales pipeline from its customers of the BKR 9000 (who need a matching in-vehicle LMR) and customers of BK’s prior in-vehicle model (who want the latest product). In conjunction with this product launch, BK’s proven CEO introduced new long-term targets calling for a doubling of Revenue and tripling of EBITDA by 2030. He also had the Board grant him five-year stock options tied to share prices that are up to ~150% higher.

BK has no debt and trades at only ~18x LTM unlevered FCF (UFCF), which would triple by 2030 if targets are achieved.

Your deck says Motorola has 70%+ share but focuses on the largest cities, while BK is going after smaller, budget-conscious agencies. Who else does BK compete with for those customers and how are BK’s products differentiated?

BK also competes against Kenwood and Tait, but our research indicates their products are often more expensive or inferior to the BKR series. BK’s new radios look like the Motorola, the gold standard, yet cost half as much.

You also published a deck on PROG Holdings (NYSE: PRG), the parent of Progressive Leasing, where Breach Inlet owns about 3% of the company. Can you share your thesis with us?

We view PROG Holdings (NYSE: PRG — $1.21 billion) as another unappreciated transformation with potential catalysts. The company had a challenging first five years as a public company from 2020 to 2025. During most of that time, PRG was primarily just a virtual lease-to-own (“VLTO”) business called Progressive Leasing. Progressive has attractive attributes including: market leader, countercyclical, high Revenue visibility, and stable margins. However, its results were hurt by consumer stimulus fading coupled with high inflation then a retail partner bankruptcy. Starting last quarter, Progressive began growing again as these headwinds faded and its sales team more proactively targeted non-national retailers.

More interesting, PRG just began to disclose financials for its Buy Now, Pay Later company called Four Technologies. No one noticed when PRG paid only $23mm for this small and unprofitable business five years ago. Based on 2026 guidance, Four’s Revenue is now 50x higher at ~$150mm and its EBITDA margins have rapidly expanded to 20%. Four continues to grow ~100% y/y and should have room to expand EBITDA margin much further with its closest peer at ~40% (SEZL).

As part of its transformation, PRG also divested its unprofitable segment (Vive) for $150mm in 4Q25 and acquired Purchasing Power (“Power”) for $420mm in 1Q26. Power is the largest provider of employee purchase programs and growing double-digits. It further high graded PRG’s portfolio, so we believe PRG is now a collection of high-quality assets.

Earlier this year at its inaugural Investor Day, PRG gave a three-year EPS CAGR target of 17-20%. This appears achievable, but we don’t think needs to be achieved to earn a high IRR given PRG trades at only ~7x FY26 UFCF (implied by guide). If PRG’s material mispricing doesn’t correct soon, then we think Four Technologies could be spun off at a much higher valuation given the high multiples of its trading comps.

What are some other interesting ideas on your radar now?

Here are some of our other investments with excerpts from our 3Q26 letter…

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David and Tim are the founding partners of Immersion Investments, a Boston-based fund management company they co-founded in June 2021. Immersion focuses on opportunities in publicly traded micro- and small-cap securities. Before launching Immersion, Tim and David worked together at Lowell, Blake & Associates, a well-regarded Boston-based investment manager, where Tim served as Managing Director of Investment Strategy and David as Senior Research Analyst. In the years since going out on their own, they have earned a reputation among micro- and small-cap investors for deep, source document research and hands-on engagement with the management teams they back.

Editor’s Note: Looking for more great stock ideas? Check out Bullpen.News our new site curating high-quality stock pitches from across the web. Sign up for the free daily recap to discover ideas you might otherwise miss.

David and Tim, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background, how you divide responsibilities within your fund, and why you decided to launch Immersion Investments?

Thank you for having us. Our partnership never would have survived this long if we did not share some common traits. We both love investments and are naturally curious people. Probably annoyingly curious. We aren’t sure if other people would talk to us about what we love to chat about. We are constantly dissecting business models wherever we go, the vet, daycares, the local grocer…and then we tell each other about it. We can’t help it. We wake up every day excited to see what is happening in the markets and with the companies Immersion owns. We both love puzzles, piecing together a mosaic from a hundred different sources, and it is the most interesting puzzle there is, since unlike most puzzles, every piece is eventually quantifiable. We are both sort of pains in the butt when it comes to investing, but in complementary ways.

As far as splitting up responsibilities, after ten years of working together we mostly just fall into some of our long standing routines. We split the administrative work between us, and when it comes to research and new ideas we tend to work independently before coming together. If David likes a stock, he will take the first pass and loop Tim in once he thinks it is worth a second look. Tim will dig in on his end and then we compare notes. After this long together, we agree on the conclusion most of the time. On the rare occasion we disagree, we will keep watching the name rather than force it into the portfolio.

We launched Immersion because we saw an underserved corner of the market where we felt we had a real edge. We only invest in companies under five billion dollars in market cap, and when we launched, investors could not have cared less about micro and small cap stocks. Quant funds and large technology funds were where all the attention was going, which left a lot of good businesses trading for less than their larger peers, and in some cases less than what a private buyer would pay for the same asset. Those same dynamics still hold today.

What we learned over the years is that it always comes back to the people running the business. We would find talented management teams who were simply not very good at shareholder communication, mostly because that was never really their job. Those teams signed up to grow sales, improve margins and fix operations, not to think about capital markets. With Immersion, we finally had the time to practice what we call light activism, which just means helping management keep shareholders in mind as they run the business. We do not push for board seats or try to run day-to-day operations, but we will remind a management team of its obligations to shareholders, and we try to offer useful perspective on capital allocation and the kind of communication investors actually want. A CEO will often want to talk about revenue growth when investors are really trying to understand free cash flow or margins.

We also hold a core belief we arrived at through our years together, micro and small cap equities represent a structural opportunity for patient, discerning investors willing to do the legwork. There are thousands of businesses that are too small, too illiquid, too unusual or simply too much work for most institutional investors to bother with. We wanted the freedom to spend what we would call an unreasonable amount of time researching those companies, own a small number of them when we believed the odds were heavily in our favor, and then give each thesis enough time to work.

Alignment matters just as much to us. We launched Immersion with most of our own liquid net worth invested alongside our partners, and that has not changed. Today, there is a lot of intentional overlap in our roles. We are both generalists, we both research companies, and neither of us can add a position without the other agreeing. As fifty-fifty partners, we are each accountable for every holding, and no one owns an idea individually.

Can you tell us more about your investment strategy, including your Ideal Immersion Setups, or IIS?

As we mentioned, we invest in companies with market capitalizations under five billion dollars and usually much smaller. We believe there are a small number of really good companies, so we build a concentrated portfolio with a multi-year time horizon. We care most about business and management quality, balance sheet strength and valuation, in that order.

Business and management quality are tied together. Every industry has certain truths that do not change, but management teams and their incentives determine how a business actually performs against those truths. On the balance sheet, we are skeptical of debt and what it can do to management behavior. Debt does not just reduce the earnings available to equity holders; it can also stop a company from investing in a turnaround, funding growth, or simply maintaining the business through a rough patch. We take pride in owning companies with cash-heavy balance sheets, generally much stronger than the typical Russell 2000 constituent.

Valuation is the final filter, and our sense of value can look different from the market’s. If we get the direction of earnings right, a stock that looks expensive today can look cheap three to five years from now. We are not value investors who need a stock trading below some arbitrary multiple, and we are not growth investors who think a high growth rate makes valuation irrelevant. Every investment comes down to the same handful of questions. What will this business earn several years out? What is a fair value for those earnings? How likely are we to be right? And how much could we permanently lose if we are wrong? We say internally that direction matters more than the current state of affairs. The past helps frame the present, but it is not the whole story.

Over time, we noticed our best ideas tend to fall into one of five recurring setups, which we call our Ideal Immersion Setups, or IIS.

The Underdog

Overlooked and underappreciated, usually for surface-level reasons that are temporary but still keep investors away, such as being too small for an index like the Russell 2000 or too small for most institutions to consider. That tends to correct itself through growth, better liquidity or more analyst coverage.

The Babushka Doll

Has a hidden asset inside it that is worth far more than the market is giving it credit for. It usually looks like a large, slow-growing business on the outside with a small, fast-growing subsidiary buried on the inside. These get overlooked because they do not screen well on the surface, but a management team willing to unlock that hidden value can create a lot of upside.

The Social Pariah

Seen as toxic, whether the reasons are fair or not. Sometimes the label is deserved, but a change in perception, from better results, new leadership or simply passing time, can move the stock a great deal.

The Ugly Duckling

A genuinely good business that does not look like one yet because heavy investment in people and capital is masking its true profitability. It is usually early in its life and growing quickly. As it matures, investors eventually come around and pay more per dollar of earnings. Eventually, the duckling turns into the swan.

The Doubted Champion

The simplest of the five. A business growing quickly with strong margins and returns on capital, but the market does not believe that performance will hold up. When we can identify a real Doubted Champion, we get paid well once the market realizes the growth has more room to run than everyone assumed.

Our research process itself is fairly old fashioned. We read filings, earnings calls, proxy statements and competitor materials from the source rather than relying on aggregators or sell-side research. We talk to management, former employees, customers, competitors and other shareholders when it makes sense. We are also increasingly using AI and other tools to build our own datasets when we think there is useful information sitting in plain sight before it ever shows up in reported financials.

In late 2024, you invested in Mama’s Creations (NASDAQ: MAMA), a deli and prepared-food manufacturer, citing a CEO so outlandishly passionate about their job and the brand they represent that you could not help but take notice. What made you excited about the leadership of Mama’s Creations? Why has the stock done so well, and where do you think the business goes from here?

We first met CEO Adam Michaels at an investor conference more than a year before we invested. He walked in wearing mulberry shoes and a mulberry sport coat, the company’s brand color, and told us he was going to turn a subscale meatball manufacturer out of suburban New Jersey into one of the largest prepared-food and deli brands in the world. Our first reaction was that this guy could not possibly be for real. It is a fine line between self-promotion and pumping a bad business, and at first Adam seemed to be walking right up to that line.

Then we dug into the company and liked what we saw in the business and the numbers, so we kept meeting with him, including a visit to the facility where we found his car wrapped in that same mulberry color. He was not putting on an act. This is a guy who sleeps and breathes MAMA, and, more importantly, he has the operating skill to back it up. Michaels spent nearly a decade at Mondelez across data analytics and M&A, and before that worked closely with PepsiCo as a consultant at Booz & Company. He also built out a leadership team that punches above its weight, including a chief marketing officer from Tate’s Bake Shop, a chief operating officer from Gordon Food Service, and a chief commercial officer from Boar’s Head. Passion only gets you so far. You still must execute, and this team executes.

Adam has a line he would not mind us sharing, which is that people drive results. That happens to be close to our own philosophy, with the caveat that we also care about what you are paying for those people. Since we invested, the stock has worked because the business has done almost exactly what management said it would do. The sales team keeps expanding its shelf space with retailers like BJ’s, Weis Markets, and Walmart, where Mama’s has gone from one item two years ago to seven today, plus a first placement at Kroger announced on the most recent call. The Crown I Enterprises acquisition, carved out of Sysco, mattered too, since it added revenue and a nearby production facility without Mama’s overpaying, and we think that facility alone can contribute more than ten million dollars of EBITDA within a year.

On whether it is too late to invest, which we get asked constantly, earlier this year the company spent money getting a factory ready to fill a large Walmart order. That created a short-term mismatch between spending and revenue right around a quarterly report, and the stock got hit hard even though Adam explained the whole situation clearly on the call. It still took the sell-side a couple of days to update their models before the stock recovered. That kind of gap between what is actually happening and what is reflected in the numbers is exactly the sort of opportunity the small-cap world serves up if you are willing to listen and analyze rather than just read the headline print.

Looking ahead, the playbook has not changed much. Sell more into existing customers, win new customers and channels, use scale to improve margins, and selectively roll up a fragmented industry. We think the company’s earnings power is meaningfully ahead of what current estimates reflect, so even though the stock can screen as expensive on trailing numbers, we think it is considerably cheaper than it looks.

In October 2024, you publicly urged Potbelly to consider a sale, repurchase shares more aggressively, and restrain technology and headcount spending. Less than a year later, Potbelly agreed to be acquired by RaceTrac at a meaningful premium. How often do you engage with your portfolio companies on strategy and when do you decide to take your ideas public? What did you learn from your experience with Potbelly?

We think of ourselves as “suggestivists” rather than activists. We have more than a hundred meetings a year with management teams, and most of that engagement is not adversarial at all. We might have views on capital allocation, communication or which parts of the business management should be emphasizing to public investors, and the great majority of the time we keep those conversations private.

We aired our concerns about Potbelly publicly because the gap between what we thought the business was worth and what the market was assigning to it got too wide to ignore. To be clear, we were not criticizing the operating turnaround. In the letter itself, we specifically credited management with putting the business on solid footing, improving shop-level economics and building a real franchise pipeline. Our frustration was that none of that progress was showing up in the stock. Someone described our letter as the “nicest meanest activist letter ever written,” and we will happily take that description.

Our ask was simple. Evaluate a sale of the company, repurchase shares much more aggressively at what we thought was a deeply discounted price, and slow down spending on technology and headcount unless management could show a real return on it. The letter was not the end of the conversation either. We kept meeting with management and the chairman afterward to keep making the case for buybacks, capital-efficient growth and better alignment between the board and shareholders.

RaceTrac ultimately agreed to buy the company for seventeen dollars and twelve cents a share, more than double the roughly eight-dollar stock price when we published the letter, and about twice what the public market had been assigning to the business just eleven months earlier. We would be careful about drawing too straight a line from writing a letter to getting bought out. The real lesson for us was that running a business well and allocating the value that business creates are two different jobs. We thought the Potbelly team did an excellent job on the first one. We just thought the board needed to move faster on the second, and the experience only reinforced our preference for working things out privately before ever going public with a view. That team has since moved on to Wendy’s, where they are working through some similar and some very different challenges, and we have a lot of respect for what they accomplished.

Are you currently invested in Wendy’s?

Yes.

Care to elaborate?

Not at this time.

What are some interesting ideas on your radar now?

One newer name is Strata Critical Medical (NASDAQ: SRTA — $472 million), which we started buying in September 2025 and first shared in our Q2 letter to investors in July. It is close to a textbook Babushka Doll.

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Zack Buckley is the Founder and Portfolio Manager of Buckley Capital, a value-oriented investment firm focused on North American small- and mid-cap equities. Buckley Capital takes a private equity approach to public markets, investing in a concentrated portfolio of high-quality businesses with long-term growth potential and attractive risk/reward profiles. Zack has been investing since 2008 and founded Buckley Capital in 2011. He has generated a 14.5% annualized return since inception and a ~22% annualized return since 2020. He has been featured in The Wall Street Journal, Barron’s, Reuters, CNBC, MarketWatch, Business Insider, and other financial publications, and has spoken at numerous value-investing conferences. Zack was previously featured on Sunday’s Idea Brunch in January 2022.

Editor’s Note: Sunday’s Idea Brunch is growing and looking to hire an MBA student for part-time paid work, remote and on your own time. If you are passionate about investing and interviewing great emerging managers, please reach out: edwin@585research.com

Zack, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch Buckley Capital? What have been the biggest developments since we last spoke in 2022?

I became interested in investing when I was 16. I grew up in the western suburbs of Chicago, and although my parents were both highly educated professionals, investing did not come naturally to them. I saw firsthand how much stress financial uncertainty could cause, which pushed me to start learning about investing at a very young age. I was a voracious reader in high school and eventually came across Warren Buffett and Charlie Munger. From there, I was hooked on investing.

I was very competitive growing up, both academically and athletically. I was valedictorian of my high school, played several sports, and attended the University of Miami on an academic scholarship. I love investing because I view it as an incredible intellectual competition - I think of investing as one of the world’s most challenging and competitive intellectual games. While I was in college, my father gave me $100,000 to manage beginning on January 1, 2008. It was certainly an interesting time to begin investing, right before the Global Financial Crisis, but it ended up being an incredible learning experience. I was down with the market in 2008 and then up more than 100% in 2009.

Early on, I used Buffett’s career advice as a roadmap. He said to study accounting, so I studied accounting. He emphasized starting early, so I began managing money while I was still in school. And he encouraged working for someone you respect, which led me to Baker Street Capital, where I worked for Vadim Perelman, who was a highly regarded small-cap value investor. That experience helped shape both my research process and, equally importantly, my views on portfolio construction and risk management.

I formally launched Buckley Capital in 2011. By the end of that year, I had raised outside capital and was managing approximately $25 million at age 23. The distinction in our track record is that the period from 2008 through 2010 reflects the personal account I was managing, while the fund itself officially began in 2011. I think the earlier period is important because it shows that I have managed capital through multiple market cycles, including the GFC, and that I have over 18 years of investing experience today.

Over time, the investment process has evolved significantly. We have become more disciplined around concentration, incorporated much more alternative data and primary research, and shifted the strategy to be long-biased. But the core philosophy has remained the same: find high-quality businesses where the market is mispricing long-term value, do the work to develop a differentiated view, and invest with a long time horizon.

How has your investment strategy evolved over time?

The core philosophy has remained consistent, but the process has evolved considerably as we’ve learned from different market environments.

We now have defined concentration limits of 15% at cost and 20% through appreciation, although a typical large position for us is closer to 10%-12%. We want our best ideas to matter, but we never want a single position to create an unacceptable level of portfolio risk.

We’ve also dramatically expanded our use of alternative data and primary research. The amount and quality of information available today is completely different from what existed ten or fifteen years ago, and I think we’ve done a very good job incorporating those tools into a fundamentally driven investment process. We spend approximately $500,000 per year on alternative data and use a range of sources depending on the business, including credit card transaction panels, email receipt data, web-scraped information, web traffic data, and app downloads. The objective is not simply to collect more data; it is to identify the operating indicators that matter to each thesis and incorporate them into our financial models. We also conduct hundreds of public-company management calls and thousands of primary-research calls across the ecosystems of the businesses we follow. We think the combination gives us a more timely and complete view of how a company is performing than any single source could provide.

If I had to choose, I think the primary research is the most important element of our process – having detailed financial models that we can use to test our assumptions, speaking with hundreds of management teams allows us to glean insights about what the business will do and whether it is tracking significantly different from consensus – which usually drives stock price appreciation. Some management teams are aggressive, some very conservative, and some fairly accurate in forecasting their businesses. One of our biggest jobs is to determine which guidance style a management team has between those three. We much prefer the ones that are conservative – and underpromise and overdeliver.

The other major evolution was moving away from short selling. Historically, we ran a long/short strategy, although we were always heavily long-biased, but shorting was a meaningful drag on performance from 2020 through 2022. Beginning in 2023, we became primarily long-biased, and today investors should generally think of us as always running around 100% net long.

What differentiates Buckley Capital?

At its core, investing in stocks is a relatively simple math equation: a company’s sales, EBITDA, or earnings, multiplied by an appropriate valuation multiple, gets you to an estimate of value.

That means investors are essentially trying to solve for two variables: what the business will earn in the future, and what multiple earnings deserve.

The better you can forecast the earnings power of the business, and the better you can determine the appropriate multiple, the better you should be at forecasting where a stock is ultimately going.

On the multiple side, the framework is fairly standardized across the industry. Investors look at public and private market comparables, historical trading ranges, transaction multiples, and the quality and durability of the business to determine what a reasonable multiple should be. Doing this well—and maintaining valuation discipline—is obviously important. We believe the opportunity to create a truly differentiated view is generally much greater on the earnings side of the equation.

That is where we have designed our entire research process to focus.

Forecasting the future of a business is inherently difficult, and management teams approach guidance very differently. Some management teams are conservative and consistently underpromise and overdeliver. Others attempt to guide as closely as possible to economic reality. And some are more aggressive, which can lead to a pattern of overpromising and underdelivering.

We particularly like situations involving management teams with a demonstrated tendency to underpromise and overdeliver. We believe these situations can create significant mispricings because the market often anchors to management guidance and consensus estimates rather than independently determining what is most likely to occur in the business.

This is where our emphasis on alternative data and primary research becomes particularly important.

Our objective is what I call “closest to the pin” forecasting. We are not trying to build a conservative case or an aggressive case. We are trying to determine, as precisely as possible, what is actually going to happen.

We start by identifying the handful of variables that truly determine a company’s earnings. Those variables are different for every business. We then design our research process around answering those specific questions, typically through intensive primary research, alternative data, or some combination of the two.

We take those real-world observations and translate them into assumptions in our financial models. We can then compare our independently derived estimates with management guidance and sell-side consensus.

The most interesting opportunities tend to emerge when there is a significant divergence.

For example, we may conclude through our research that consensus earnings estimates are materially too low. If the stock is simultaneously trading at a depressed valuation—perhaps below its own historical range and at a discount to relevant peers—we may have both earnings upside and multiple upside. That can create a particularly attractive risk/reward.

The second part of our differentiation is velocity.

We don’t want to apply this process to a handful of companies each year. We want to apply it to as many potentially attractive situations as we can while maintaining a very high research standard. Our research organization is deliberately designed around increasing the number of companies we can evaluate with a high degree of precision.

I sometimes think about it almost like a factory. The objective is not to manufacture investment ideas; it is to manufacture well-researched decisions. If we can evaluate more businesses with “closest to the pin” precision, we should uncover more genuine mispricings. And if we uncover more mispricings, we can be increasingly selective about which ones ultimately make it into the portfolio.

That is an important distinction. Increasing research velocity doesn’t mean owning more stocks. It means having a larger pool of thoroughly researched opportunities from which to choose.

Ultimately, we want to invest only when the discrepancy between price and our independently derived view of value is unusually obvious.

That philosophy explains why we invest heavily in alternative data, build a large number of detailed financial models, and conduct extensive primary research. Each is designed to accomplish the same thing: increase the number of businesses we can forecast accurately enough to identify the situations where the market’s expectations are most likely wrong.

Over time, we believe that combination of precision and velocity should improve both our batting average and our slugging percentage: being right more often, while generating larger returns when we are right.

Where do you get your ideas from? What is the primary metric or metrics that you use to evaluate potential investments?

Our ideas come from a wide range of sources, but the common thread is that we are looking for some form of significant mispricing. That can be a temporary operational issue, a management change, an earnings inflection, an industry dislocation, or simply a high-quality business that is less well understood because it receives limited sell-side and institutional coverage.

If I had to identify one primary metric, it would be prospective IRR, but we never look at IRR in isolation. We underwrite what we believe a company can be worth over multiple years and then compare that expected return with the probability of actually achieving it and the downside if we are wrong. A stock can screen with an extremely high prospective IRR, but if the probability of execution is low or the downside is too significant, we may not own it. Conversely, a business with a somewhat lower headline IRR but a very high degree of predictability can deserve a much larger position.

So the framework is really prospective IRR, probability of execution, and downside risk. Those three factors drive both whether we invest and how large we are willing to make the position.

How do you approach periods of significant market volatility?

Volatility tends to create some of our best opportunities because the relative attractiveness of businesses can change very quickly.

During significant drawdowns, we’re willing to reallocate capital aggressively. If one company we own falls 5% while another high-quality business we’ve researched falls 50% without a corresponding deterioration in intrinsic value, we’re willing to sell the first investment and move that capital into the second.

March 2020 is a good example. We viewed that period as an extraordinary investment opportunity and substantially reallocated the portfolio as prices became disconnected from our estimates of long-term value. That’s generally how we think about volatility: not simply as something to endure, but as an opportunity to improve the prospective return of the portfolio.

We have had very strong performance in periods of volatility, while we may be down the month or quarter that the Russell 2000 is down, we tend to rebound and outperform over the next 12 month period.

You have been investing through several market cycles. How has that experience influenced the way you manage downside?

I started managing money in January 2008, so my first year investing professionally coincided with one of the largest market dislocations in modern history. Since then, I’ve invested through a number of very different environments—the Global Financial Crisis, the 2015–2016 small-cap drawdown, 2018, COVID, 2022, and more recent periods of volatility.

Every drawdown teaches you something. Over time, we’ve become more disciplined about position sizing, more sophisticated in how we monitor companies, and faster at reallocating capital when the opportunity set changes.

I think experience is particularly valuable during periods of stress. We’ve been through enough market cycles that volatility doesn’t change our process. If anything, it often creates the environment in which our research advantage becomes most valuable. This is why we have such strong performance in periods of volatility - like 2020 and 2021 as an example.

Dentalcorp is an example where your engagement and thesis culminated in an announced sale at a meaningful premium. What did that investment teach you about when boards are willing to act?

Dentalcorp reinforced that shareholder engagement can be effective when it is supported by detailed fundamental work and a realistic path to value realization.

In May 2024, we published an open letter urging Dentalcorp’s board and management to undertake a strategic review, including a potential sale. We believed the public market was materially undervaluing the company’s scale, recurring demand, leading position in Canadian dentistry, and long-term earnings power. Our analysis suggested that these attributes could be worth considerably more to a long-term financial or strategic buyer than the valuation being assigned by the public market.

Several factors made us believe a transaction was possible. Dentalcorp operated in an industry that had historically attracted private-equity interest, its business model was well suited to private ownership, and its concentrated shareholder base created a clearer path to alignment. A buyer could also retain management and allow existing stakeholders to roll a portion of their ownership into the private company.

The board ultimately formed an independent special committee and approved an all-cash acquisition by GTCR at C$11.00 per share, representing a 33% premium to the unaffected share price and 20-day volume-weighted average price. Management and several key shareholders agreed to roll part of their ownership into the new private company, while shareholders representing a majority of the voting power supported the transaction.

The lesson was that undervaluation alone does not cause a board to act. There also needs to be a credible buyer universe, alignment among important stakeholders, and a structure that offers shareholders both an attractive price and certainty of value. Our role was to identify that opportunity, communicate the case publicly and constructively, and remain patient while the board evaluated its alternatives.

Your idea pitches from 2022, Macy’s (M) and Destination XL Group (DXLG), have generally underperformed. What went wrong with these stocks? And do you still see value in retailers like you did back in 2022?

One thing I’ve learned over the years is that investing is a business of probabilities, not certainties. Despite our overall success in generating a high average annual return, we make mistakes in individual companies all the time. It is a repeatable process that has worked over 100s of companies over almost two decades, but that does not mean we get every investment correct.

Not every thesis plays out exactly as you expect. Retailers in general have had a brutal 5 years, and we have almost entirely stayed out of retail as a result of that. So while I obviously wish those ideas worked out, we realized fairly quickly that there were significant issues these businesses were facing, and we got out having still made a gain in each investment. That is why it is so important for us to have a long-term investment thesis, but also track the business in real time to see how our investment thesis is doing - as oftentimes the thesis can change.

What are some interesting ideas on your radar now?

Basic-Fit (BFIT)

What it is: Basic-Fit is the leading low-cost gym operator in Western Europe. We view it as a high-quality, highly replicable business model with attractive unit economics and a long runway for expansion. Mature clubs can generate roughly 30% returns on invested capital, creating the potential for substantial long-term free cash flow compounding.

Why the opportunity existed: The company expanded too aggressively around COVID, particularly in France, which resulted in staffing problems, inconsistent customer experiences, slower membership ramps, and weaker economics at newer clubs. Investors extrapolated those issues and treated them as structural rather than temporary.

Our edge:

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Scott is currently the chief investment officer of the AFC Uzbekistan Fund, an Uzbekistan-focused investment fund founded in March 2019. Prior to leading the AFC Uzbekistan Fund, Scott restructured a Burmese mining conglomerate’s portfolio of assets, based in Yangon, Myanmar. Prior to this, he worked with a New Zealand-based private equity outfit where he sourced private equity deal flow in Asian frontier markets and co-founded a publishing company focused on providing financial news coverage in frontier markets. He has spent the last fourteen years living in Asian Frontier markets and currently resides between Tashkent, Uzbekistan, and Istanbul, Türkiye.

Scott, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch the AFC Uzbekistan Fund?

I’m originally from Los Angeles, and while completing my undergrad in Boston in 2012 I realized the competitive edge in investing in parts of the world few were paying attention to. This attracted me to Asia, specifically Asian frontier markets, whose “baby-boom” generation was coming of age and driving GDP growth, consumption, productivity etc.

So, after graduation I booked a one-way plane ticket to Singapore, and snaked my way throughout Southeast Asia for three weeks before settling into Mongolia for the better part of two years, on and off between there and Cambodia. I was working with a private equity outfit sourcing frontier market deals.

Come 2013, and after meeting Thomas Hugger, Founder of Asia Frontier Capital, on a few occasions across the Asian frontier, I joined the company as an analyst for our AFC Asia Frontier Fund, covering Mongolia, Cambodia, Laos, and Myanmar (living between Cambodia and Vietnam). During this role, I took a separate job between 2017 and 2019 in Yangon, Myanmar, leading the restructuring of a local mining conglomerate where I cleaned up some of their industrial and hospitality businesses, preparing them for sale.

Then, in May 2018, I was invited to join an investor tour of Kazakhstan. While in the region I added Kyrgyzstan and Uzbekistan. When I arrived in Uzbekistan, roughly 18-months after the former President, Islam Karimov, passed away, I was shocked to find no one paying attention to the country of 34 million people (now 39 million), with a formal economy of USD 80 billion (now USD 145), rich endowments of gold, copper, and uranium, a property market with 25% cap rates, and an equity market with companies growing several hundred percent per year, while trading at P/Es in some cases less than 1x and dividend yields pushing 50%. I had to question if I was being led astray through all of my meetings, for it felt a bit like an episode of the Truman Show. No one was paying attention to the country upon its opening; meanwhile, when there’s a volcanic eruption in Iceland, for example, you hear about it on global news within 30-seconds. The opportunity was fascinating.

At that point, having lived between Mongolia, Cambodia, Myanmar, and Vietnam, my only question was, would the country shut again? President Mirziyoyev, the former Prime Minister, kept promising the world that this was a “new dawn” and with my second visit to the country later that year it was increasingly obvious they were serious. So, we began investing into the market even though there were still capital controls. However, the Central Bank and development banks had all confirmed to me they were in the process of being eliminated. Finally in early March 2019 capital controls were eliminated and we were the first foreign investor to repatriate proceeds from share sales on the Tashkent Stock Exchange back to Hong Kong. By month-end we launched the AFC Uzbekistan Fund.

Why is now a good time to be bullish on Uzbekistan?

Since the beginning of my time in Uzbekistan, my thesis for what needs to happen for the market to become attractive to investors has been that inflation needs to slow (from 15.2% in 2018 to 6.4% in July 2026). As inflation slows the currency has stabilized (from double-digit depreciation in 2018 to approximately 7% appreciation in 2025, and YTD further modest strength versus USD). This has brought unofficial savings into the banking system, firstly into term deposits, though rates have fallen from 26% to the high teens. And for the past two years we have seen capital flow into the corporate bond market. Where previously companies struggled to raise USD 2 million, you now have companies raising USD 20 million+ at a time, and coupons have decreased from a high of 30% to the high teens/low 20% range.

This confluence of events should enable the Central Bank of Uzbekistan to cut its policy rate later this year (barring any further geopolitical issues) from 14% toward 13%, helping to further decrease the cost of capital. Naturally, as the attractiveness of fixed income instruments, at this point, rather quickly decreases (though still highly attractive), we are seeing an inverse relationship in the listed equity market which over the past eighteen months has been in a significant uptrend.

One of the catalyzing events for the market and why now is a good time to be bullish on Uzbekistan is that in May 2026 the Uzbekistan National Investment Fund (UZNF), managed by Franklin Templeton, had an IPO and dual listing on the London and Tashkent Stock Exchanges. This appears to have woken up many investors and has made Uzbekistan an increasingly more mainstream frontier market opportunity. JPMorgan for example is getting onboard as they plan to include Uzbekistan’s som-denominated sovereign international bonds in their “Government Bond Index-Emerging Markets (GBI-EM)” from 30^th September 2026.

Further, it used to be a challenge to open a local brokerage account (still not the easiest in the world) due to the infrastructure. Now, foreign retail can open accounts online in about 5-minutes and Bank of Georgia, OTP, and Raiffeisen are all offering custody in the local market.

Liquidity is picking up and the next catalyst is going to be more IPOs. The capital markets infrastructure is in place, investors are increasingly active in the market, and the next focus is product (IPOs), both of additional SOEs and from the private sector, something I see potentially happening from next year.

Can you tell us a little more about your research and investment process? What makes you different than other frontier market funds?

I’m not sure if it makes us different, but I’ve lived in Uzbekistan for over five years. Not only have I visited our portfolio companies’ operations and met with management on multiple occasions over the years, but I’ve networked into broader society which has provided immeasurable benefits to my understanding of the country and culture. My relationships have allowed us to do several significant off-market equity trades with large state entities and private companies in the country that would otherwise not have been available if I wasn’t based there.

Research-wise, my focus in the early years was to meet as many listed companies as possible and get the proverbial “lay of the land”. The country was still heavily state-subsidized, so you had sectors like vegetable oil processors that received subsidized oil seeds; those subsidies eventually were eliminated making the entire sector, and about 20 listed companies loss-making. The same happened in oil and gas logistics as the Asian Development Bank helped facilitate the restructuring of the state oil & gas company, Uzbekneftegaz making service providers and metal fabricators loss-making overnight. Therefore, my focus has been on understanding the intricacies of the economic reforms, the subsectors of the market that would be impacted (positively or negatively) and positioning accordingly.

As part of this filtering process, I’ve selected the “must-own companies” in the country on a mix of quality management, profitability, leverage to economic growth, and of course attractive valuations. The market being small and the AFC Uzbekistan Fund being a first mover, I wanted to own the “blue-chips” of Uzbekistan and have concentration, for any foreign investor flying to Tashkent looking for what to buy is likely to be directed to the funds core holdings. With growth being strong and valuations attractive, the goal was to benefit from companies that have the most upside in a re-rating scenario, and getting positioned ahead of these flows.

You have worked across Mongolia, Cambodia, Myanmar and other frontier markets. What are the ingredients for success when investing in frontier markets? What similarities and differences have you observed among the countries you’ve worked in?

I think most markets are the same, honestly, whether developed or undeveloped markets. In frontier markets one needs to understand the societal trust dynamics from a macro standpoint and on a micro-market level, liquidity. There are some amazing opportunities but they are illiquid which means one can’t either build size or sell on the spot with orders needing to be worked over days. That again is the opportunity, to invest in participations of a business as frontier market investing is about investing, not trading.

One key ingredient for success is actually hopping on a plane to the location, meeting management teams and visiting facilities. But equally important is spending some time to learn about the culture, learn some of the language, and how the country function etc. This will give an investor a much better chance of understanding local mindsets and the pace at which business is done and how it’s done (i.e. very slowly in Myanmar and much, much faster in Cambodia and Vietnam).

How important is “on-the-ground research” in frontier markets like Uzbekistan? Can you share some examples where being physically present in the country has led to an edge?

On the ground research across frontier markets is paramount. Because in many instances there just isn’t that much information on some of these countries you can easily obtain without being there.

For example, the opportunity that caused us to start investing in Uzbekistan after my first trip in 2018 is that after visiting several companies with my broker, at dinner in the courtyard of a great Georgian restaurant in Tashkent I started interrogating him about valuations. He opened up his laptop and showed me the past several years of performance for the 50 or so most liquid companies on the Tashkent Stock Exchange. The average annual bottom line growth rate was probably in the 20-30% range with those at the top (such as the Uzbek Commodity Exchange) growing 400-600%, and paying double-digit dividends while trading at low single digit P/E’s.

Being early and even something as basic as discussing financials over dinner allowed the AFC Uzbekistan Fund to acquire significant blocks of shares in the “blue-chips” of the country before anyone was paying attention and which simply can’t be done in today’s market without pushing prices significantly higher.

Another example was being at the EGM of a consumer goods company that voted to do a stock split during the meeting. In Uzbekistan, the ex-date for dividends and corporate actions, such as stock splits, is 5-days before the meeting, but the split wasn’t announced beforehand. By living in the country and being in attendance at the meeting I was privy to the vote to split shares and had the opportunity to sell a part of our position on the market at the previous day’s closing price which of course hadn’t yet adjusted for the share split, making a several hundred percent profit in the process.

Who are some of the management teams you admire most in Uzbekistan? Generally, do you find that management teams act in the best interests of shareholders?

Bar none, the best management team of a public company in Uzbekistan is that of the Uzbek Commodity Exchange. They have the best investor relations/engagement of any public company, are transparent and focused on shareholder returns through continually strong dividend payout ratios. Generally, yes most of the companies we have dealt with over the years have acted in shareholder’s best interest. The financial regulator over the years has also gotten much stricter in enforcing legislation on minorities behalf which has benefitted the fund greatly.

What are some interesting ideas on your radar now?

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Lee is a private investor who publishes The Value Road, a newsletter focused on finding deep value in microcap stocks. Lee focuses on “stocks so far off the beaten path that almost no one else is talking about them,” often trading for a discount to liquidation value. Lee also shares his ideas @leevalueroach on X and was previously featured on Sunday’s Idea Brunch in March 2025.

Lee, thanks for doing Sunday’s Idea Brunch again! You recently quit your job to pursue investing and writing full-time following the great success of your Substack. How have your writing and investing been going for you since you went full-time? Have your results improved?

Thanks for having me back. I’ve been able to write more and have begun doing a lot more research now that I can dedicate a full uninterrupted day to looking at stocks. When I was working at a factory full-time, I would do all of my research late at night, which I actually enjoyed much more than being on a first shift schedule. This is mostly because it’s very hard to make a hasty decision when the market is closed. Now that I’m on the same schedule as the rest of the world, I can process information in real time. I still try and never act on impulse by making myself wait at least a day before I make an investment decision, but it was honestly nice to not even have the option.

My results have improved. I’m up 56% YTD and 93% on a 1-year basis. I wouldn’t even say this improvement is due to me quitting my job as much as it has to do with me finding some good companies that I’ve sat on that finally took off.

You’ve published on over 100 companies and often find filings and disclosures that others miss. Can you share a little more about your research process and any technology or AI you use to help find hidden alpha?

So I rarely use AI to find companies, but I may use AI to scrape information I might have missed while reading through that company’s financials. I used to go through the OTC stock screener, pop a couple of filters in, and then look through about 36 pages of tickers. The biggest improvement that has changed my life is that now I know a lot of these companies and can put them into a site called CapEdge, which then lets me know when any financial info from these companies drops.

Now that I’ve slowly built up a base of like 80 or so names that I follow, when something interesting happens to one of them I know about it before others do. It’s very unlikely you’re going to find a company right at the cusp of some transformative event. In my experience, it’s a much higher probability that you’re going to find a bunch of cheap companies that you can then wait around on for an inflection point to show up. That’s when you really put your money into something.

In your research, how often do you go beyond reading SEC filings (e.g., talking to management and customers or testing out products yourself)? Or can you generate most of your outperformance solely from reading SEC filings?

Whenever possible, I talk to management. I went to the Planet Microcap conference not too long ago which was a great way to squeeze in a bunch of 101 meetings in one place face to face with management. Now that I am writing full time, I try to contact management as soon as I am done researching a business. After I read through some earnings calls I try and get a couple of questions that I haven’t heard other investors ask the management team. Management calls are great because you can really see how management reacts to tough questions that don’t often get asked at these small earnings calls somehow. That being said, 99% of my investment decisions can be made without talking to another person but talking to management can give you that extra confidence to throw down a decent chunk of change on an idea or in some cases, taper your execution expectations.

The economics of a paid newsletter reward regular output, while disciplined investing often requires doing nothing. How do you keep the publishing incentive from becoming an idea-generation quota lowering your investment bar? And as you’ve grown, has it become more difficult to write about illiquid companies?

This has been the hardest thing to balance as I’ve become a writer on Substack. Substack seems to want you to write two or three articles a week. I’ve got complaints from both ends of the spectrum concerning how much I write. Some people want me to write once a month and only on the biggest knockouts I can find while other people want me to effectively manage a portfolio for them with up to date buy and sell ratings and write ups on any new news from the stocks I research. Others want me to look into every company under the sun.

The way I thread this needle is that I try and write up the best couple of companies that I’ve looked into that week. These may not be buys, but they’re usually companies I’m very interested in and keeping on my radar should a buy in opportunity arise. I then recently offered a premium tier where my readers can have access to all of the research that I don’t publish on The Value Road. This tier can also talk about this research on a discord channel. Even still you can’t make everyone happy.

My goal on The Value Road is to turn over as many rocks that are worth looking at as I possibly can. As time goes by I can keep an eye on the best rocks of the bunch. Eventually when a catalyst comes along, you’ll know where to put your money while everyone else is trying to figure out what’s going on. I’m just writing about what I find along the way.

As far as having a harder time writing up illiquid stocks, I haven’t had any trouble. There’s a market for people who love investing in these tiny companies. A lot of investors with much larger portfolios will have an account where they just trade microcaps because they’ve learned to love this niche in the market even though their wealth has long since outgrown it. It becomes a fun game to them.

One of your best-performing ideas is Entravision Communications (NYSE: EVC), which is up ~5x since your first pitch and is part of your basket of legacy broadcasting stocks. What went right with Entravision? And do you still see value in legacy broadcasting companies?

The most important part of EVC’s story isn’t even what went right; it’s what went wrong. When META dropped EVC as their Spanish advertising partner the market priced EVC as if bankruptcy was inevitable. It wasn’t, in fact it was pretty obvious that SMADEX was growing fast enough to justify a valuation at least double what EVC’s share price was at the time. That’s how I invest. I get nervous when I look at a green stock chart and excited when I see a 1yr wall of red. EVC had a big problem drop in their lap and investors weren’t about to sit around with a pen, a pad of paper, and a calculator to figure out just how bad the problem was. That’s how investment opportunities are born.

I am still invested in a lot of the legacy broadcasting companies (SSP, SBGI, EVC, NXST, and GTN). I see a lot of value in the legacy broadcasting space. This is yet another heated political advertising cycle which should offer a large tailwind for many of these names. The biggest thing I’m still waiting on is a court decision on the 39% station broadcasting cap. If you’re a legacy broadcaster you can only broadcast to 39% of the United States population. The FCC has given exemptions to this rule for M&A activity in the past, but now this rule has caused a legal battle that may end up at the Supreme Court. If this 39% cap is lifted these companies will almost certainly rerate as the current M&A activity gets sorted out and as a new M&A environment opens up. It really been a game of patience. Luckily, it seems like the FCC is about to vote on lifting this station cap on August 6th. This should be a huge development.

All of these companies (SBGI, SSP, NXST, and GTN) have pretty cheap P/E’s, EV/Sales, and some massive hidden assets in the form of spectrum the next time a spectrum auction takes place. All of this combined with an election advertising cycle, The World Cup, and sports gambling driving an increase in sports viewership across legacy broadcasting, I think these companies are set up for a rerating long-term even if the 39% station were to remain in place.

What are some interesting ideas on your radar now?

I have a couple of positions in my portfolio that I still think have a lot of juice in them.

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Jamie is currently the chief investment officer of Senjin Capital, a Sydney-based fund manager focused on shareholder activism in the Japanese equity markets. Before co-founding Senjin in June 2024, Jamie managed $1 billion across two long/short funds - global brands and Japan at Platinum Asset Management, where he worked for 13 years. Jamie is active as @JamieHalse on X and on LinkedIn. Senjin Capital publishes a monthly newsletter and provides case study analyses and other insights at senjincap.com/news-insights/

Jamie, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background, your passion for Japanese stocks, and why you decided to launch Senjin Capital?

My journey really started when my father handed me Rich Dad, Poor Dad when I was 18 or so. I am from New Zealand, and the government provided an interest-free student loan to fund university fees, but also a weekly amount for living costs. I was living at home, so my costs were low. I saved my living cost amount rather than blowing it over the bar like many others did, and looked for investment opportunities where I could deploy this “free” money.

I had not executed anything, but had the fortune to sit down in a criminal law lecture one day next to Lyall Taylor (@lt3000Lyall on X). He now runs his own very successful global equities fund out of Singapore. We got talking and it turned out he had done the same thing with his student loan. He was investing in stocks, and suggested I read Peter Lynch’s One Up on Wall Street. From there I was hooked.

Over the next few years, while investing in NZ and Aussie small & micro-cap stocks, I devoured a library-full of books on investing, markets, financial history, and finance theory. Long daily discussions with Lyall, which we loved but which bored everyone else at law school to tears, rounded out my financial education. I studied law and politics, so the reading and discussions were crucial providing the foundation for me to later move into the investment industry.

I moved to Sydney in 2008 for a buyside job with CP2, which was predominantly an infrastructure manager across public and private assets. This gave me a great grounding in modelling, and in understanding both public and private asset markets, which has been a major advantage relative to the standard equities person. In 2011 landed a role with Platinum Asset Management, which at the time was probably Australia’s most successful fund manager, with ~$30bn AUM. The key founder, Kerr Neilson, was arguably Australia’s most famous investor, and I had avidly read his quarterly reports from about 2005 onwards.

Platinum was a global contrarian fund manager with a value bent, which meant they were nearly always very overweight Japan. They liked to set up targeted funds where they saw an opportunity – rather than where they saw investor demand (which tends to chase performance which is sub-optimal if you are looking for the best returns). This meant that in the late 90’s they set up a technology fund with the stated purpose of shorting the TMT bubble (and totally shot the lights out), but they also set up a Japan fund which I believe managed around $3bn at its peak.

A year or two after I joined, the Japan fund manager took me under his wing and encouraged me to spend more time on Japanese stocks. He (Jacob Mitchell) later founded his own global equities shop, Antipodes Partners, and now manages around $20bn.

He was always trying to get analysts to do work on Japan, but because of the added difficulty – poor IR, limited English disclosure, translated calls etc he struggled with that. I had some history with Japan, so was more willing than most to get on board.

At high school I took Japanese as a subject, and did a homestay in Takasaki – around an hour on the Shinkansen north of Tokyo, and attended the local high school for a couple of weeks. I also studied some Japanese history at both high school and university. So I had more understanding of the culture and historical context than most. I am still in touch with my host family, and took my family to meet them in January this year (after a week skiing amazing powder in Niseko first of course!).

There were incredible value opportunities in Japanese stocks almost everywhere back then, but if I pitched something trading on 10x P/E with half its market cap in cash, the feedback was always “You can’t value the cash, because you’ll never see it. You need something that’s going to grow earnings better than the market expects.”

This made little sense to me, as why would I value future earnings (ie: future cash) if I can’t value actual cash on the balance sheet!

The practical reason was that stock prices responded to earnings, and the market ignored the asset side. These stocks were nearly all classic value traps, because the management did not care at all about the share price, and hoarded cash while having a low payout ratio. Buybacks were unheard of.

Around 2015/16 I started seeing some headlines about shareholder activists doing things in Japan. I had for a long time been attracted to the idea of shareholder activism, because of how as an activist you can be directly involved in generating the return, creating your own catalyst to realise latent value. Whereas traditional active management is really quite passive outside of the buy/sell decisions. I had read about Icahn, Peltz, Dan Loeb, and the Michael Milken junk-bond fueled 1980s wave of corporate raiders/activists, and the approach just seemed like a better mousetrap to me, unlocking obvious value, rather than trying to guess where earnings will be in 3-5 years, while guessing where the market thinks they will be, and then what multiple the market will put on those earnings.

I did not think this activism was possible in Japan, as I had always been told that Japanese management teams do not have to listen to shareholders. Seeing the headlines around Oasis with Nintendo and Dan Loeb with Fanuc made me realise I was probably missing something. So, I did a deep dive into the history of shareholder activism in Japan, the legal basis for the corporate governance framework in Japan, and the corporate governance reform program that was part of Abenomics – starting with the Stewardship Code in 2014 and Corporate Governance code in 2015.

I pitched the idea of a dedicated Japan activist fund to my bosses at Platinum. Partly because I saw a great opportunity, and partly because I wanted a promotion to portfolio manager! To get promoted back then, a PM of a fund either needed to leave or you had to create a new product.

The idea did not get up. Platinum was not an activist, and I was just an analyst. Jacob leaving to found Antipodes (I almost joined him), kicked off an internal restructuring at Platinum, which eventually culminated in my being given a global fund to run in 2017. I focused on that rather than Japan until 2021, when the Japan fund was added to my remit – partly because of my pitch back in 2016.

I quickly saw that the opportunity in Japan for activism had become even better. Stocks were still very cheap, but the environment had evolved to become even more fertile for activism. You could do things as an activist in 2021/2022 that you could not do back in 2016.

I had a mandate to engage a lot more actively in Japan than was Platinum’s traditional style, but I quickly realised that we were not set up to do activism properly. We needed a dedicated fund with its own team, operating under a different philosophy. By 2023 I had recruited a co-PM for the Japan fund, and had approval and budget to establish a dedicated concentrated activist strategy. My plan was to give up the global fund as well as half of the Japan fund, and focus on this new product. The return opportunity was so obvious to me, that I had no doubt it would be highly successful.

A key aspect of setting up was paying a global search firm a ridiculous amount of money to find the perfect Japanese person to help me with the strategy. He (Tsubasa (Toby) Umezaki) is now my co-founder, and is a total unicorn. I had a page-long list of experiences/attributes that I was looking for that I gave the search firm, but had limited hope of ticking off even a third of them. Toby satisfied the vast majority, and is a great guy to boot – super smart, humble, and very high EQ, while still being very willing to disagree and put forward his own view.

Unfortunately, Platinum went through tough times, the CEO stepped down and cut all new projects in advance of a new CEO starting, so Toby was never able to join.

We both really believed in the activist strategy we had put together though, so we resolved to do it anyway!

I finished with Platinum in March 2024, and established Senjin Capital in June, with Toby joining shorly after.

The Nikkei 225 index in Japan is up ~70% over the last year and up ~140% over the last five years. Are Japanese stocks still undervalued? Now that many companies are already adopting shareholder-friendly stances, is your activism still needed?

Our fund has returned around 55% net of fees in yen terms over the period, which is great – and above the broader cap-weighted TOPIX index, but the Nikkei (which is price-weighted, like the Dow) has been absolutely crazy. We of course have very different exposures, focused on small/micro-cap stocks where much of the company’s value derives from its cash and real estate holdings, and relatively low correlation to the index (observed equity betas of 0.3x-0.5x).

I would not encourage investors to allocate to the general Japanese equity market at this point, and definitely not via an index fund. The large cap stocks have run hard, most recently on the AI boom, but before that on the normalization of interest rates resulting in massively expanded margins for the financials, and also the reforms to the defense industry. Return concentration has hit peak levels, and has potentially begun to unwind (NAND memory stock Kioxia is down almost 40% from its peak). Depending on your views on AI, there may be opportunities in the SAAS and IT services sectors

The story I was pitching to investors when running Platinum’s Japan fund (eg: https://www.livewiremarkets.com/wires/how-japan-regained-its-mojo ) has also played out well in the large cap space – the corporate governance reform has had a big impact. Companies have massively increased dividend and buybacks, adopted RoE targets, and are increasingly willing to follow Hitachi’s lead and undertake major restructuring. In many cases, investors have positioned ahead of planned restructuring actually delivering tangible results. This is a big shift from the 2010s - Hitachi was restructuring for the better part of a decade from 2009 before its stock really started to work.

Money has flowed into activist/engagement funds, with around US$100bn invested in the space now. However, this is concentrated in the biggest five or six activists, which together manage probably $60-$70bn or more.

In the small/micro-cap space it is a different story, with corporate governance reform still in the early innings. Small/micro caps are the lion’s share of Japan’s listed companies, with something like 2,000 companies having a market cap smaller than US$300m. The big guys can’t really play in that area anymore due to size constraints.

We still regularly find companies with solid businesses that have half the market cap or more in cash, plus often a tonne of real estate that doesn’t show in the accounts as it is held at historic cost.

You have said Senjin intends to raise equity-based compensation in its engagements after examining Kioxia’s option program. What would a well-designed Japanese equity-incentive plan look like? Who should participate, which performance metrics should be used, and how do you prevent short-term share-price engineering?

A good incentive plan gives managers in a position to affect outcomes real skin in the game. Most Japanese equity programs are token and do not really affect behaviour. Kioxia was different, because Bain Capital put the plan in place. That plan has now minted hundreds of new multi-millionaires.

Short term share price engineering is a problem in the US, where CEOs design the strategy based on their KPIs. If the KPI is EPS growth, expect a tonne of debt-funded acquisitions. If it is ROIC, expect a lot of cost cutting and stretched payables. Japan is so far away from this being a problem, that I would not worry about it.

You could say that undertaking a buyback of 20-30% of your stock is short-term engineering, but is it really? If you have ample cash to carry that out, your stock is cheap, and you don’t have other fantastic investment opportunities, that’s actually great capital allocation.

There is some handwringing in some quarters in Japan about the lack of focus on growth as companies allocate cash to dividends and buybacks, but this overlooks the fact that the company that currently has the cash does not need to be the one that invests in growth. In a well-functioning capital market, cash paid out to investors is ultimately reinvested where capital is demanded. That is how the US’ startup ecosystem works. It is not IBM and General Motors that have driven the last 20 years of economic growth in the US, it is Amazon, Google, Salesforce et al.

How does shareholder activism in Japan differ from activism in other markets? What have you found works well? What doesn’t?

There are a bunch of differences in Japan that can make activism more difficult in some ways, but also easier in others.

Directors in Japan owe no duty to shareholders, only to some imaginary idea of “the company” – which is supposedly a collection of stakeholders such as customers, employees, suppliers, and somewhere down the list, shareholders. Courts give a high degree of deference to directors’ business judgment, meaning legal challenges are near impossible.

Many shareholders do not exercise their AGM votes based on the prospects for their equity investment, but rather based on historical business relationships.

Countering these factors, such “cross” shareholdings are in decline, opening up more of the market to shareholder influence. An investor can buy up to 30% of a company on market without launching a tender offer to all shareholders. If a tender offer is launched, it can be for any amount of the company – there is no requirement to bid for 100%. Poison pill takeover defenses must be approved by a shareholder vote. Shareholders can submit binding proposals to the AGM on almost any topic – shareholders’ legal rights to govern public companies are probably stronger in Japan than anywhere, the issue is cross-shareholdings and traditional corporate culture.

We have studies hundreds of cases of activism in Japan, and synthesised what we believe is the optimal approach.

That is, we constructively and politely engage with management on all areas where we see the company can improve, ranging from the obvious capital allocation decisions through to the potential for operational and/or business portfolio restructuring, and growth options. This culminates with submitting a draft strategic plan to the company that we would like to see implemented.

If the company gets on board with serious reform, then the stock will do very well. The easiest win is increasing the dividend payout ratio. Typically you see payouts around 30%, and stocks trade on a ~4% yield. If the ratio goes to 60% or more, then the stock should generally double.

Operational restructuring requires a lot more heavy lifting, and difficult internal decisions that run completely counter to the corporate culture. If a company gets religion on this, then that is fantastic, but it is not a high probability outcome.

If we can generate most of the upside we see in the stock in a reasonable timeframe from changed capital policies, then we will generally be happy to exit.

If the company is unwilling to change, then we will use the rights attached to our shares to see the latent value unlocked. A fully friendly approach does not work, as it has no teeth. However, we will always be polite and constructive, even when escalating things. Being publicly aggressive and arrogant can cause a lot of issues in Japan that can hurt an engagement – including increasing the likelihood of being hit with a poison pill.

Which investors and management teams in Japan do you admire the most?

One has to admire the Murakami family’s ability to generate amazing returns. Yoshiaki Murakami was basically the OG activist fund manager in the early 2000s. He later relocated to Singapore, and they now run their money as a family office. They are amongst the most aggressive activists in Japan, and are the exception to my rule above. When you have scale and unconstrained capital, the rules that apply to you are different.

Other investors I admire are Seth Fischer at Oasis – he has had fantastic success, and now manages >US$15bn. I invested alongside him a lot with the Platinum Japan Fund in stocks like Sun Corporation – where he was able to engineer the Nasdaq IPO of its subsidiary Cellebrite, and Fujitec where he was able to replace the board of directors. Also Kanya Hasegawa of 3D Investment Partners – I was invested alongside them in Fuji Soft to the great benefit of Platinum’s investors, and they have also had great success with Sapporo. Like us, they like companies with heavy real estate exposures.

To some extent, I believe these managers will become a victim of their own success. The law of large numbers means their future returns are highly unlikely to match their past returns. Oasis’ investment in Kao (which I wrote about here: https://senjincap.com/larger-activists-larger-targets-new-tactics-similar-returns-oasis-v-kao/ ) may be an example of this dynamic. That said, I would still rather be investing with them than a US-focused activist. There is just much more low-hanging fruit in Japan.

Managers I admire include Issei Ainoura, who is CEO of GMO Payment Gateway. He has set up a highly structured sales-driven culture that is rare in Japan. Similarly, Masaru Tange of Shift Inc has set up a strong growth organization with a highly coherent strategy targeting an inefficient industry.

Most executives in Japan get to their positions by not making mistakes rather than through taking smart risks. They don’t really understand why the share price is important other than because the Tokyo Stock Exchange told them it is. They refuse to make hard decisions to improve the bottom line, because maintaining internal harmony is viewed as much more important than making money or contributing to the productivity of the economy. So when you do meet a manager who really gets it, it tends to stick with you.

Jamie, what are some of the first things you do when researching a potential investment? What does that first hour of research look like for you? Do you do anything that few others do?

We are very process driven, to the extent that we have a six-page word document outlining our process steps. Our shortlist of potential investments comes from our proprietary database, which we built out with a lot of grunt work to identify the cheapest stocks – including uncovering hidden real estate assets.

We do a review of the companies on the shortlist to ensure there are no buried landmines and to establish the quality of the underlying businesses, and then produce a shorter shortlist from there which we work through in sequence.

Identifying cheap companies is not rocket science as our approach is quite asset based. We simply value the balance sheet at market values, and run a model to determine what a PE fund might pay to buy the business. That is our upside case.

We are probably more willing to take on liquidity risk than most others, as we are confident in our ability to generate an exit or other strong outcome, due to having a flexible approach that is not constrained by our investor base.

What are some interesting ideas on your radar now?

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Brian is currently the chief investment officer of Findell Capital Management, a long/short Smid-cap focused equity fund he founded in July 2019.

Since July 2019, Findell Capital has annualized 22% net (1.5/20), compared to 9% for the Russell 2000 and has never had a down year while more than tripling the Russell’s cumulative returns (~300% vs. ~91%). Findell launched with $14mm and manages a little over $400mm today. Brian was previously featured on Sunday’s Idea Brunch in April 2023.

Brian, thanks for doing Sunday’s Idea Brunch! Maybe tell us how you got interested in investing?

Towards the end of my freshman year of college, I read A Random Walk Down Wall Street (1973), where Burton Malkiel famously argues that markets are efficient and impossible to beat, and you are better off in a passive index fund if you want to build wealth.

For whatever reason, that inspired me to open an Ameritrade account and I started actively trading stocks – basically doing the opposite of what Malkiel suggested.

The first stock I bought was a company called HealthSouth. HealthSouth operated a chain of rehab centers and was run by a charismatic high school dropout named Richard Scrushy.

The stock had traded as high as $110 a share but nose-dived in late 2002 after Scrushy was accused of fraud. By the summer of 2003 when I stumbled upon it, the stock was trading for 40 -50 cents a share on the pink sheets.

I didn’t do any fundamental work (nor would I have known how to at the time). I just thought that the stock was cheap at 50 cents for the simple reason that not that long ago it was worth more than $100.

However, foolish that logic might have been, the stock did phenomenally well. Within several weeks, the company gave signs that the business could survive the fraud claims. Within a year, the stock was in the mid-teens – up over 35x. The company would eventually settle with the SEC and re-list and now trades as Encompass Health – EHC – for $100 a share.

That experience made me fall in love with markets and I started studying economics. More specifically, I wanted to understand how such an outsized opportunity like HealthSouth could exist if markets were efficient. I quickly discovered the field of behavioral finance.

In the early 2000s, behavioral finance was just becoming a thing. Within the economics department at Harvard, a young Russian economist named Andrei Shleifer published Inefficient Markets (2000), which essentially created it as an academic field.

The basic premise of Behavioral Finance is that the efficient market theory is wrong because its core assumption is wrong - humans are not rational decision makers.

We are quick decision makers whose internal algorithms are optimized for surviving the pre-historic savannah, not pricing securities on a computer screen.

Just consider how you would act if everyone on the street started to run in a certain direction. You too would run in that direction. That is called herding and makes sense evolutionarily – you are a descendant of the humans who ran, not the ones who sat there analyzing whether it made sense to run.

While adaptative in the state of nature, this bias can lead to irrational decision making in financial markets. Just as we overreact to harmless noises in the wild, markets can overreact to harmless noise and those over reactions can cascade and compound on each other until you get very dislocated prices.

Herding is one of dozens of heuristics that behavioral finance brought forth and explained.

I got so into it that my senior year, I co-authored a book on the subject matter with a Harvard post-doc student called The Story of Behavioral Finance (2006) where we tried to outline all these different heuristics.

The book didn’t become a best seller, but I at least was now armed with a framework that could explain HealthSouth – how did this stock get so dislocated that it subsequently 35x’ed in 6 months?

The behavioral finance explanation was that HealthSouth was a victim of recency bias, which causes humans to overestimate the probability that unusual things that have recently happened will happen again.

When HealthSouth blew up in 2002, the traumatic memory of Enron was still very fresh.

HealthSouth like Enron involved smooth talking southerners accused of accounting fraud and so the market was quick to assume that HealthSouth like Enron was a zero. No one did the work to discover that the business was fundamentally sound and the financial improprieties the C-suite was accused of, while real, did not mean the business was failing.

When I bought the stock, my reasoning was profoundly unsophisticated - but now armed with this behavioral finance framework, I could look at markets and begin to make sense of them.

Stock prices didn’t move like a drunk person randomly staggering home as Malkiel suggested, but moved to the beat of our evolutionary psychology and when crazy things happened that evolutionary psychology is where you had to look for answers.

Interesting, so how did behavioral finance inform your subsequent experiences?

After graduating in 2006, I had a random sequence of jobs. My first job was on a prop desk at Deutsche Bank in New York trading mortgage derivatives but then that blew up in the GFC. I then worked in Switzerland at Glencore trading commodities but then the commodities collapsed. I finally arrived back in New York City in the equity space at a hedge fund in 2012.

Being in these unrelated situations might have hurt my early career momentum, but in the long run it was good because I was able to build a mental model for how smart people made money. And that again took me back to behavioral finance.

The best investors and traders were the ones who had some sort of intuitive appreciation of how behavioral biases manifested in markets and how to take advantage of them.

I remember a great trader at Glencore telling me that he knew he had made a good trade because it always felt awful at the time he made it. And I think that is probably generally true – when buying something makes you want to puke that generally is a good sign.

The reason why those trades feel bad is because you are fighting against a behavioral bias – and your evolutionary psychology was designed to reward you when you give into a bias and punish you when you don’t.

So how did all of this lead you to create a fund?

I developed this approach focused on Smid cap names offering dislocated valuations apparently caused behavioral or technical factors and likely to be resolved through a foreseeable catalyst. Obviously, the approach in practice is not exactly that simple—and also involves substantial fundamental analysis-- but that is thematically what I try to do to gain an edge.

I began to build a track record using this approach in 2016 with a managed account and then in 2019 I turned that account into a limited partnership to start Findell.

Why is now the time to look at this sort of strategy?

I think there are a few reasons. The multi-strats have gotten way too big and increasingly boxed in by their own risk parameters. They are blowing in and out of stocks for short-term reasons, creating enormous dislocations that you can exploitif you are patient.

I also think that now is the time to get exposure to the small cap space. The Russell is just due for a long period of outperformance over the SPY and Nasdaq and we are starting to see that this year. You can still find lots of value in the smaller cap universe of names.

What is an example of a name that you like today?

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TripleS Special Situations is an anonymous and free publication about special situations, distressed securities, bankruptcy, litigation, and other quirky financial setups.

TripleS, thanks for doing Sunday’s Idea Brunch! Can you please tell readers about your background, your desire for anonymity, and why you decided to start Triple S Special Situations?

Thanks for having me.

The short version is that I’ve been trading for over twenty years, and I came up through the oil & gas exploration world, which is where I developed my extreme level of comfort with holding risk assets and placing large bets on them.

The longer version is that as a young and excitable person, I took everything I had plus a frankly irresponsible amount of credit card debt and bought Washington Mutual stock on the theory that TARP was coming and the banks would be saved. I landed from a flight to my brother’s wedding to find the bank had been seized and I had negative equity. So, I was broke and in debt on the same afternoon.

Out of pure spite, I taught myself bankruptcy law and helped put together the WAMU equity committee, which turned into the equity committee for the largest bank failure in US history. Some of the debt from that case eventually paid 100 to 1 and equity received hundreds of millions of dollars of value. If I’d had real money at the time, I’d be retired. Instead, I got an education and my start in the investing world.

From there I got pulled into every flavor of special situation, with legal ones being a favorite as I have some edge in those since I am willing to do the work others aren’t.

On my semi-anonymity, I run money and I write under a pseudonym so I can be blunt and not make the focus of the writing me personally, since I’m not interested in a cult of personality. I’d rather the ideas stand on their own than have anyone weigh them by who’s saying it.

Why start the publication?

Honestly, because I read constantly, subscribe to 380 Substacks, and I wanted to give something back to the community.

Writing also forces me to sharpen a thesis and build conviction on something I am holding. If I can’t explain it clearly and concisely, I probably don’t understand it well enough to size up in it.

There is also the additional benefit of getting new ideas and meeting new people, which improves my sourcing, which is a challenge for a one-lady operation.

Your Substack lives in the market’s odd corners: bankruptcies, litigation claims, distressed bonds, liquidations, arbitration, merger arb, critical minerals, and weird holdcos. How did you end up here instead of becoming a more conventional value investor?

Because I’m ultimately a small fish, and the ocean is full of sharks who are smarter, better connected, and resourced than I am. I have to focus on areas where I have some sort of edge and that larger players can’t or won’t wade into.

A lot of what I do is deliberately subscale. A $20-$50 million market cap with a billion-dollar arbitration claim is fantastic for a private individual or a small family office and completely useless to a fund that needs to put hundreds of millions or billions to work.

The other reason is my personality. I am a bit of an advantage player (Poker helped fund some of college).

I look for asymmetry, run the odds, and then make my bet, trusting in the process working out over time.

Conventional value investing felt like waiting for a multiple to re-rate.

The stuff I like has to have an identifiable catalyst, that based on my analysis will return at least 3 to 1, but more ideally 4 or 5 to 1.

The other type of investment I like is where I can hedge my downside through use of options strategies or sometimes even Polymarket.

You’ve said publicly that you come from the oil industry. How has that background shaped the way you analyze messy assets, commodity cycles, counterparties, and political risk?

Oil & gas teaches you a lot of things.

First, messy is expected. Energy assets always come with hair, whether it’s abandonment liabilities, take-or-pay contracts, terrible joint operating agreements, questionable title, or completely fabricated reserves. Your job is to figure out if there is a unicorn under all the shit or just more shit, which is basically Special Sits 101.

Commodity cycles tend to be pretty violent and come on quickly. Managing exposure and controlling things like cost are something that is within your control, but the reality is most oilmen will tell you it’s more luck than skill. You need to buy the right lotto ticket, but really it is more important to buy at the right time in the cycle. Price hides a lot of mistakes. This directly applies to investing also. The only thing you control when you buy a stock is your entry price and your exposure management strategy. Everything else is inshallah.

Counterparties and political risk are sort of an interesting discussion, since the oil industry is so full of large characters and scam artists. I grew up right at the start of the shale boom, so I got to meet all the people profiled in books like the Frackers, such as Aubrey McClendon. There are a lot of opinions on Aubrey (RIP), and I will leave it at that. One of the reasons why I enjoy bankruptcy so much is that I can just assume everyone involved in bringing the company under is a questionable person, until proven otherwise. I was planning to be a psychologist in College, so analyzing a person and their motivations is something I really enjoy.

Also, having done deals across the world makes you a lot more cognizant of understanding international cultural and legal differences. When I do arbitration analysis, this comes into play quite a lot. If you win an award, is there even a way to enforce it? How do various treaties and jurisdictional issues come into play?

What are the ingredients of success for distressed and special situations investing? What do you see amateurs often get wrong?

I could turn this into an essay as I have done an enormous number of stupid things in my life but let me break it down into a short list:

1. They focus too much on the upside, without taking a real look at the downside.

I purposefully do the opposite. I want to know what I lose first and if there is a way to minimize my loss through either use of puts, calls, covered calls, collars, or a short position on a related sector business.

2. They confuse or get married to a great story vs. understanding if something is a great trade.

A billion-dollar claim is worthless if the defendant or country can’t pay. Legal enforceability and timelines can wreck you. The merits are maybe half of an investment. You need to clearly identify what your goal is with an investment when you enter into it and stick with it and not have idea creep.

3. They get emotional and forget their thesis.

When a distressed name gaps down 50%, that’s exactly the moment when you find out if you have conviction. And you can’t buy conviction, which is why I think everyone should write up their largest positions, even if they don’t publish anything. Laying out why you are invested in something will allow you to stay calm and remember why you’re even in the trade.

4. They won’t take the loss and they don’t size appropriately.

Sometimes you have to amputate an arm to save the body. It hurts, but it’s not possible to come back from a 100% loss. I concentrate when conviction is genuinely high, but I’m not yolo’ing my family’s money. There’s a difference between a punt and a position, and you should always know which one you’re making.

In a recent post, you said a lot of sourcing has been coming from Special Sits Digest, which tracks activist campaigns, strategic reviews, spin-offs, restructurings, divestitures, liquidations, and other odd situations. How do you use tools like that without just ending up in the same crowded trades as everyone else?

Since you mentioned it, great tools like the Special Sits Digest, are excellent funnels of information, but having a list of hundreds of situations sent to you weekly doesn’t substitute for my personal analysis and judgment.

My biggest problem for most of my life was finding enough stocks worth reviewing to invest in. Now, thanks to AI, Substack, and various stock websites (like Swen Lorenz’s amazing Undervalued Shares), I don’t have to search for situations. I just need to choose which ones I want to be involved in and triage the large number of opportunities. I review something like a hundred to hundred fifty investments a week and usually only buy a few names from that work.

I also get a lot of quality ideas from various Discord groups I am in and friends I have made across the world as a result of writing this blog. There are no better sources than people who think similarly to you but live in a different time zone. A large portion of my investments are overseas. I have trades going on in 8 to 10 countries at a time. Most US traders won’t open a foreign brokerage to buy a £15 million AIM name.

Finally, I try to credit my sources religiously when they want me to, which sounds like basic manners but the more generously you share, the more good ideas land in your DMs.

Special situations investing seems increasingly crowded. Is it tougher to maintain an edge? Can you share some insights into where your edge comes from (e.g., better information acquisition, better analysis, longer time horizons…)?

It is getting more crowded, and a lot of people are selling services they probably shouldn’t and making claims that are frankly downright inaccurate. I think ultimately being a big fish in a small pond, an excessive tolerance for pain, a willingness to suffer through court documents/Edgar filings and being not overly emotional help.

Also, I don’t answer to any investment committee and keep a pretty cheap standard of living (my car is about to hit 200,000 miles and I live next to some trailers), which prevents me from being overly concerned about monthly paychecks coming in.

What are some interesting ideas on your radar now?

Happy to share. These are my two largest positions, although I generally keep ~50 names in my book at any time. Since I like international, let’s do one of those and a domestic one.

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Andrew is currently the CIO of Fairlight Capital, an alternative investment manager based in Greenwich, Connecticut. Before launching Fairlight in 2019, Andrew had 20 years of institutional investment management experience, including time at a hedge fund in London and the asset management arm of AIG. Fairlight’s investor letters are available on its website and they are active @Fairlight_Cap on Twitter, as well as regularly posting on Substack @fairlightcap. Andrew was previously featured on Idea Brunch in December 2022 and the fund has returned 950.7% net of fees since its 2019 inception.

Andrew, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background, why you decided to launch Fairlight Capital, and what has contributed to your strong returns?

I originally launched Fairlight Capital with the idea of pursuing old-style value investment, but trying to move it forwards into the current and future markets. Many value investors (including me) start off focusing purely on value, looking for cheap companies, with low PEs, high free cash flow yields, and/or cheapness to their assets. After various experiences and investments, I’ve moved more towards, Growth Equity, GARP, and Quality investing, whilst also bearing in mind momentum factors.

Our investment approach now works along these lines and is typically focused on micro-cap stocks. We don’t have a specific mandate to invest in smaller companies (we can essentially own any public company), but that’s predominantly where we’ve found the best returns. And the best protection against value traps for cheap companies that I’ve come across is to look for companies that are also growing revenues, have some kind of inflection, or a strategic change in their business. That guards against investing in a stagnating cheap company that stays cheap for years.

If the company can grow revenues well above 15%, then even if there isn’t a re-rating the company will appreciate over months and years. And if there is a re-rating then you get a double appreciation in the stock price. The quality aspect, which can include low debt, high cash flow production, good return on equity, high margins, being driven by something special about the business, then gives you a lot of protection and slows down mean reversion in revenue growth, and the income from the company.

These are the kinds of companies that have really contributed to our returns, which are often coupled with market dislike or neglect. Once growth and extreme cheapness become obvious, stock price static friction gives way to dynamic friction and the moves can be quite rapid.

There are a lot of emerging manager equity funds. What are some of the ways Fairlight differentiates itself from the crowd?

I think we try to keep things simple. We aren’t great at predicting complex industries with many competitors, and how difficult dynamics might play out. Or in cases where there are some complex economics, or accounting factors that are forward looking, e.g. trying to predict margin changes in future years, or revenue growth that has yet to kick in. Often the ideas we like best are the ones where the financial results are already obvious and are starting to play out.

A great thesis will be one where a company has pivoted between business segments, re-prioritized a business segment, or changed its strategy and that is just starting to play out. An example of this would be Cematrix, a seemingly boring cellular concrete manufacturer. They have pivoted from lower margin business, standard concrete construction, to highly specialized cellular concrete used in tunnels, highways, overpasses and bridge retaining walls.

Also, as well as trying various angles to scuttlebutt an investment idea, we do try to get a strong business understanding of a company using any alternative public data that is out there, which is perhaps typical, combined with real-world experience of the product or service. What I mean by that is that we will always try a product where it’s possible, or pay for the company’s service to see how it performs and how the company interacts with its customers.

If a company makes dried snacks, or food supplements, we will try them, which gives a lot of data points that you won’t find in an annual report. You get to see how they onboard customers, how long it takes for the product to arrive, the condition, packaging and the performance of the actual product itself. Also, you see first hand how the company deals with aftersales. Does it bombard you with e-mails, or is there no contact whatsoever. And you can then introspect as to whether would be a repeat customer, and how much of the company’s growth is due to real factors, the company’s operations and their sales and marketing process.

When we last spoke in 2022, you described Fairlight’s edge as a willingness to take on liquidity risk and “reputational risk” by owning things other managers avoid because they don’t want to be wrong alone. Is this still the case? Can you share an example?

Yes, we are a specialist investment manager, looking for specific ideas and investments that other managers would not want to look at in areas of the market that they wouldn’t touch. This can be for many reasons, including reputational risk, business risk, meaning they risk losing their job (in the case of an individual), or risk losing their clients (in the case of a firm or investment fund). A good example of this is a South Korean stock we like called Dong A Eltek (DAE) that makes OLED and OLEDoS screens (and is now also branching into Perovskite solar panels).

This is a company that at first might look like a chaebol, family-owned structure, with all the corporate governance issues that would entail. There are many of those in South Korea, but DAE is closer in nature to a western-style holding company, subsidiary structure. They have had good corporate governance, been buying back stock and managing the parent company DAE and their 51% owned subsidiary Sunic System in a responsible way. There should perhaps be some discount for DAE, but at present it trades at a very deep discount at a market cap of KRW 123 billion, with the market value of its Sunic System stake currently trading at KRW 350 billion.

So there is clearly some avoidance of the name from other investors and managers, in the west as well as in Korea. But this is an example of where the discrepancy is large and doesn’t make sense for a successful and growing business. A larger fund wouldn’t be able to justify owning this business, when the investment committee would likely be throwing recent stock price rises of Micron, Nvidia, or SK Hynix back at them asking them to justify not owning those names.

You have previously also said you were willing to go where investors were fleeing, such as Hong Kong, Southeast Asia, OTC names, and other unpopular corners. What is the most disliked or under-researched pond you are fishing in today?

You will likely be able to guess from the previous answer that we still look in East Asia and are currently investigating several names in South Korea. That is a very interesting market and even with recent index gains, it still contains some pockets of extreme value. It is also interesting in that it is following the Japanese model of encouraging better capital allocation with its “value up” program. This will name and shame, and encourage companies to increase their market valuations relative to their book value and discourage build up of passive assets, cash, and the wasting of reinvestment opportunities.

Beyond there, we are expanding our searches into many smaller countries across Europe, South America and Asia. There seem to be a lot of opportunities across a wide range of markets, but being mindful to keep an eye on local legal practices, corporate governance, and capital allocation. We will likely talk more about any themes we come across in the coming quarters in our future writings and letters.

You have previously pitched Monument Mining (TSXV: MMY), Beng Kuang Marine (SGX: BEZ), and Valeura Energy (TSX: VLE) as some of your top ideas. They have risen approximately 460%, 96%, and 64% respectively since your pitch. What went right with these businesses, and where do you stand on these names today?

Monument Mining benefited from a commodities tailwind as the gold price appreciated, but that was a factor over and above the original reason for investing. I originally thought that they were an inflection business which had switched gold oxide to sulfide production. Production has dipped prior to when we were looking this in mid-2024, but was ramping back up as they completed their new production facilities at the Selinsing mine. It looked likely that they could ramp up production over 10koz per quarter and had already reached 7.5 koz.

At the time gold had risen to $2,600/oz and to this implied a revenue base of over $100 million per year, and given their low cost structure (they have a low AISC which combines the key costs in the business), they looked set to earn over $50 million per year. In mid 2024 the company traded between $35 million and $40 million, which was an extraordinary level. So on top of an inflection set up, we also got the gold price appreciation. The business is still cheap, but investors might now feel a lot of the run up in price has captured some of the value, but on many measure it still looks pretty cheap.

Beng Kuang Marine and Valeura are names we still like and hold currently. They have appreciated, but still seem cheap as well. Beng Kuang Marine has re-rated the most, but its full acquisition of the ASOM subsidiary looks set to increase its earnings from 3.5 cents to over 5.5 cents per share annually. And the business is growing well and so this is still good value I think.

Valeura has had some volatility given oil price and geopolitical fluctuations. We talked about this idea and invested last year, so well before the Strait of Hormuz closed up. Our idea here, is that this is a low-cost oil producer and is growing production. It has recently secured deals meaning that it controls a large portion of the Gulf of Thailand oil fields. These are sea oil fields, but it is key to differentiate the nature of these versus deep water oil fields.

The depth of the gulf of Thailand is in the range of just 45-80 meters, versus deepwater areas like the North Sea or Gulf of Mexico that are hundreds or thousands of meters deep. This means that the company can stand oil rigs directly on the sea bed (jack-up rigs) and easily tie-back the pipes and infrastructure to central processing platforms or floating storage units. Overall, this drastically reduces the infrastructure costs for Valeura versus other deepwater producers. It’s not as cheap as Saudi Arabian onshore oil production, but is among the cheapest globally. It is a long distance from the Middle Eastern disruptions, and close to some of the largest energy customers in the world.

Earlier this year, their oil price was pegged to Dubai Crude, which surged at one point to a price of $160 per barrel. Now it tracks more closely to Brent, but still commands a premium as it produces light, sweet crude, which is very easy to refine and process. Production is expanding this year, and the company recently recorded April oil sales at an average realized price of over $110 per barrel. This is likely to mean revert at some point of course, but I think it likely that prices will remain elevated way above the pre-Hormuz crisis levels of close to $60. The equity market still doesn’t seem to be pricing this in, in our view, with the current valuation of $690 million, it could reasonably earn more than $350 million EBITDAX this year.

What are some interesting ideas on your radar now?

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Ralph Molina is an outsourced investment analyst for investment firms and publishes the free High Conviction Investing newsletter. In 2024, Ralph Molina became the youngest individual ever to be elected to the Board of Directors of a publicly traded company. He joined Parks! America (OTCQX: PRKA) as a board member and executive officer to support the company’s turnaround in conjunction with a shareholder activist campaign.

Ralph Molina was then called on by the Board of Directors of Armanino Foods (OTCQX: AMNF) to support their newly hired CEO in the areas of investor relations, strategy, and corporate governance. Ralph Molina famously invested 100% of his net worth into Armanino Foods of Distinction (OTCQX: AMNF) in 2021.

Ralph has four years of experience investing in small/micro-cap companies on behalf of Focused Compounding Capital Management and also lectures at San Diego State University on the topics of competitive strategy, shareholder activism, and corporate governance.

Ralph, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and your passion for small-cap/micro-cap investing?

I worked for a highly concentrated hedge fund called Focused Compounding Capital Management for 4 years on a part-time basis while also doing investor relations at companies like The Cheesecake Factory (NASDAQ: CAKE) and Edison International (NYSE: EIX). Then in 2024, I was nominated to the Board of Parks! America (OTCQX: PRKA) during an activist campaign. After helping with the company’s turnaround effort as a Board Member and Executive Officer, I consulted for Armanino Foods of Distinction (OTCQX: AMNF) to help the Board and the new CEO in the areas of investor relations, strategy, and corporate governance.

My passion for microcap investing really relates to my journey as an investor. I always thought I was going to become a small business owner or entrepreneur because my mentor owned 3 small businesses. Then, my mentor quoted Ben Graham and Warren Buffett told me that a stock is simply partial ownership in a business. He told me that I could be a small business owner simply by buying shares in a small-cap/micro-cap business, instead of fully owning a small private business.

Over time, I also came to love the fact that the small-cap/micro-cap universe is one of the few places left in public markets where you can still find “Hidden Champions.” My investing style essentially comes down to taking a private business approach to public market investing and specifically looking for Hidden Champions.

You famously invested 100% of your net worth into Armanino Foods of Distinction (OTC: AMNF) in 2021. Can you tell us more about the experience and what drove your conviction?

Armanino Foods is a perfect example of my investing style and what I’m looking for: a hidden champion trading at a fair price.

The setup and way to frame the company and the stock in 2021 were surprisingly simple.

The stock was valued at a multiple that was similar to where it had traded in the past, even though Armanino Foods had compounded shareholder value at ~20% for the last decade. Therefore, the key question was: “Will the next 10 years look just as good, if not better, than the last 10 years?”

I spent nearly 100 hours of research on understanding all the nuances of this question. But there were essentially only 5 pieces of information I needed to answer that question with 80–90% conviction that it was a “Yes”:

1. Armanino effectively operated in a duopoly and controlled roughly 50% market share.

2. Its main competitor, Carla’s, entered bankruptcy during my due diligence process.

3. The company had doubled plant capacity in 2017, meaning future growth would require very little incremental capex.

4. The economic value proposition to foodservice operators was extremely compelling: operators could use roughly $0.25 worth of pesto to upgrade a menu item and increase the selling price by around $1.00.

5. The profit pool was too small for large competitors to care about, while the scale and distribution advantages were too difficult for smaller entrants to replicate.

Those 5 factors gave me confidence that revenue growth could continue at rates similar to (or better than) the past, while operating leverage would allow earnings to grow even faster than sales. I also believed Return on Incremental Invested Capital (ROIIC) would be well over 100% as growth occurred on top of an already-expanded asset base. If you look at the financials from 2021-2025, that’s exactly what happened.

When you moved from researching companies to being on the inside of a public company, what part of your investing beliefs held true, and what part turned out to be naïve?

One of the biggest things I learned from being inside companies is that capital allocation is far harder than most investors realize. I think many investors approach capital allocation too theoretically. A lot of people read books like The Outsiders and come away thinking capital allocation is mostly about comparing IRRs, NPVs, and choosing the mathematically highest-return opportunity.

In reality, capital allocation happens inside an uncertain and highly competitive world. Management teams are not allocating capital in a vacuum. Every decision interacts with competitive dynamics, customer behavior, operational realities, industry structure, and long-term positioning.

That’s why I think pairing a book like Profit from the Core with The Outsiders gives investors a much more realistic framework. It forces you to think about capital allocation through the lens of competitive strategy rather than pure finance.

I like to think about this as “strategic capital allocation” or “competitive capital allocation.” Ultimately, management is trying to balance two things simultaneously:

• Protecting and strengthening the company’s moat and long-term positioning

• Still generating acceptable returns on capital over time

And those two objectives are often in tension with each other.

Some companies maximize short-term returns while slowly weakening their competitive position. Others endlessly invest in strengthening the moat without ever generating sufficient returns for shareholders. The hard part is balancing both.

I also learned that investors often underestimate how interconnected everything inside a business really is. Most decisions create second- and third-order effects. One operational decision changes customer behavior, which changes competitive dynamics, which changes pricing power, which then affects future capital allocation decisions. Businesses are much more like interconnected systems than isolated spreadsheets.

When did you learn from being on the inside of a company that outside investors routinely miss? Given your experience in investor relations, what can investors do better to get the most out of management interactions?

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Myles, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background, your investment process, and why you decided to launch Value Zoomer?

I got into investing in late 2019 as I started building some savings from my first job bartending. I wasn’t doing valuation, I was reading Motley Fool articles and punting blindly on vibes, and I got lucky enough to get wrecked in my first year, which drove me to actually put the time into learning how to invest properly. I’m still early in my journey but after a rocky first few years my last 3 years have been consistently strong.

My investment process is pretty all over the place. I get ideas from Twitter, from screeners, from reading the ASX and SGX filings every day, and now often like to get Claude to give me random companies or themes to look into. I run long and short. My research process for shorts is honestly very quick. I look at a company for 5-10 minutes and can quickly assess whether I want to short it, but my position sizing for shorts is small (most below .1%). For longs the first thing I do is look at the financials, and if I find the financials interesting I dig deeper. I’m still not a “deep research” guy except with my largest holdings, and even then I suspect I’m going less deep than a lot of analysts. My aim is to figure out what matters in the thesis, and be right about that.

As far as launching the Substack my purpose at the time was simple. I wanted a public ideas track record that I could use to both self assess, and also to be more employable. Writing up an idea forces me to understand the ins and outs enough to present them to a reader. On top of all of this I just enjoy writing up ideas that I find interesting. The substack has been amazing both for building a community of readers who give me feedback on ideas, and also being able to self assess critically my previous ideas.

I’m obsessed with your research on leveraged ETFs, which you’ve called “the highest alpha I’ve ever put out.” Can you please share your main research points on leveraged ETFs and whether you’ve been able to put on real money trades to profit off your findings? Why do individuals keep investing in leveraged ETFs if they are destined to underperform?

The leveraged ETF stuff all started with me reading a paper by Hendrik Bessembinder breaking down the sources of underperformance for leveraged ETFs. One source of underperformance is volatility drag, which is the decay in a leveraged instrument due to volatility (eg 1*1.2/1.2 doesn’t equal 1). While I knew about volatility drag, I (and most people) wasn’t aware of the extent to which financing costs and other unspecified costs cause these single stock ETFs to underperform. Essentially, your traditional leveraged ETFs would leverage an index, and would have access to cheap (50bps above the base rate) financing to build these products. However, the riskier single stock ETFs get charged significantly higher rates, with areas like crypto and meme stocks being charged well upwards of 2000 basis points above the base rate. I haven’t really seen anything else online written about this.

When borrow fees are low enough (and I track the borrow vs underperformance for upward of 170 ETFs) you can short the 2x ETF and long the underlying, and with the right risk management and trading rules make a very decent, low risk, uncorrelated return. I have been running these strategies for around 6 months now and while I’ve had to tweak and adjust at times, they have provided a very reasonable (>10% annualised) uncorrelated, low risk return. As far as why people keep buying them it’s because your average retail investor has no idea how they work. Many of them don’t even know what volatility drag is, let alone embedded finance costs that aren’t disclosed anywhere (which to be honest I think is pretty gross from the ETF providers). Most people see 2x ETFs as too complicated and avoid looking at them altogether, however I suspect that somebody has started paying attention as I have noticed the spreads between underperformance and borrow cost have compressed recently.

Can you tell us a little more about your research, investment, and writing process?

My research process focuses around identifying the core driver of the stock, while assessing the downside. I think I’m very downside and risk focused, and will always prefer a decent return with limited downside to a high return with moderate downside. I will always read the filings, the quarterly and annual reports, transcripts, etc. I try to read about and understand the industry in decent depth as well, and this is a particular area where AI has been a major factor. I don’t like to get into the nitty gritty, I don’t have the time, money or energy to be out there talking to suppliers or employees, and generally avoid approaching management unless I have a specific question. I think most of the best investment theses are pretty simple, and I’m happy to occasionally miss some little detail as long as I’m getting the core drivers of the stock correct. To be frank, as an individual investor with a social life I have to be deliberate with how I allocate my time. For longs, I have 5 different sizes which are speculative .5%, starter 1%, base 2-3%, core 4-6% and conviction 9-10%. I have around 100 long positions, though I’m trying to cut that down a bit at the moment, and I’m open to all types of ideas at any size except conviction positions, which need to have limited downside.

As for the writing process I imagine it’s a bit different to people such as yourself who do it professionally. For me writing is a hobby, so I write when I feel like writing, and I write when I have an idea worth writing about. One common theme across my writeups is that most of them are interesting companies. If I don’t have any good ideas I don’t force anything, which is why I think many of my writeups have performed very well. When I do sit down and write I kind of just shoot from the hip. I write pretty colloquially, and try to keep my ideas succinct and to the point. Most people don’t care about the 50 year history of the company and what the CEO’s mother ate for breakfast last year. My focus is what they do, why they’re interesting, a breakdown of the financials, and a breakdown of the risks with my favourite question in investing “why is this stock cheap?”.

A big theme in your tweets is the impact of AI, especially among your short ideas. What sectors or companies do you see being most hurt by AI?

The AI revolution is probably the most significant technological development we’ve had since the development of the internet. I do find it hard to assess the long term impact. To be honest I don’t really understand how most people have any level of high conviction on how AI and the world will look in 5 years. With regard to AI my focus has been on separating out the obvious losers from obviously defensible companies that are down with the losers, from the stuff that I don’t have a strong opinion about. I try to short all the obvious losers in small size, even as they continue to get cheaper because most people historically underestimate the impact of a declining terminal value on a stock (look at newspapers in the 2000’s). On the other side I’ve been tactically long companies like $SPGI, $MCO, $V, $MA, $ADP, $RDDT which have been sold off on AI fears that I believe are unwarranted due as these businesses have genuine moats protecting them from disruption.

I think one underdiscussed area of AI impact is advertising. Advertising is a natural beneficiary of AI as margin improvements and efficiency gains in other areas will potentially lead to higher marketing budgets. While there will be a huge amount of low quality advertising space generated through low engagement, AI produced content slop, higher engagement targeted content like affiliate marketing ($ZD, $FUTR.L) will see significantly less clicks as people consume them through AI. As an example, when someone is looking for a credit card, instead of them reading a sponsored article comparing credit cards, the AI will read it with no chance of an ad click. Even something like Google search ads could see less engagement eventually as AI disrupts search. The clear beneficiaries here are any companies that hold high quality, targetable ad space like $META and $RDDT, both of which I own. On the other side, companies that use that kind of content to generate leads like LendingTree, EverQuote and MONY.L in the UK could see significant increases in customer acquisition costs.

Another specific area I want to call out here is Australian software. The Aussie share market has been overvalued for a while as superannuation flows prop up our best large cap stocks. Due to a lack of quality growth, any remotely high quality Australian stock has been bid up to the moon historically, to an even greater extent than in the US. While we’ve seen a derating, I believe that the opportunity set on the short side in software is more attractive than in the US due the lower quality of the companies at comparable prices. One specific example of this is Seek, Australia’s dominant job listings website. While Seek does have network effects, it’s not a monopoly with cashed up competitors LinkedIn at the white collar level and Indeed for blue collar jobs. Seek is already at an expensive 22x earnings with low growth for a business that I believe is going to deteriorate due to AI. Employers are already getting steadily inundated by low quality AI presented candidates hurting the value proposition for employers and candidates. Meanwhile, if candidates end up using AI agents to research and search for as we are expecting in many other industries then the value of listings, especially paid ones disappear. Classifieds businesses worldwide are being slaughtered, and Seek is lower quality, lower growth, more expensive, and more exposed to AI disruption than many of them. While Seek is my largest and highest conviction short within this bucket, there are many examples of these kind of lower quality at higher valuation software stocks in Australia that while down a lot, are still being overlooked.

You’ve said your favorite answer to “why is this stock so cheap?” is “nobody is looking.” What are the signs that tell you a stock is overlooked rather than ignored for good reason?

The core of my investment process is built around turning over rocks, with a focus on rocks that aren’t being turned over often. I’m not against investing in large caps, but I need to have a really clear, differentiated view on why the opportunity exists. “Nobody is looking” ideas are my favourite type of idea as they are the only times when you get presented with actual free money, where you get good opportunities without having to take a contrarian view to the market. These kind of ideas pop up most commonly in niche markets like Asian and European microcaps, and occasionally in Australian, Canadian and US microcaps (though less often as even these areas have so many eyes looking over them). I like to look for a lack of twitter comments and substack articles about an idea, but even more notable is watching how it reacts to news. I’ve seen takeover offers, profit guidances or other transformational announcements that have barely moved stocks, and that’s the sign that people aren’t paying attention. The best ideas I’ve had have been cheap, dead money value traps where a catalyst finally arrives after everyone has stopped caring

You have a diverse portfolio – ranging from a small French holding company to Japanese SaaS companies. How are you able to come up with off-the-beaten-path ideas in an industry with so much groupthink?

This is going to sound a lot like me blowing my own trumpet, but I do think I kind of just think differently about the world compared to most people. I’m a pole dancing, finance obsessed, nerd who likes roleplaying games, live music and rugby, and won one of the largest reality tv shows in Australia last year. It’s not just investing, everything I do in life is outside of the box and it’s never really been weird to me, I just do what I want to, how I want to. More specifically with regards to finance I’m self taught. I studied a physics degree and while I picked up a few finance classes, most of my investing ideas have come from a combination of listening to people smarter than me and personal experience. I’m still early in my investment journey, and I’m finding new lessons to learn every year, but I think I go into this whole process a lot more open minded than a lot of people who figure out a specific style or sector and decide that that’s their focus. My investing style is malleable, which makes me able to bounce around between different types of ideas easily.

To be honest, I don’t understand why so many investors gravitate to the same kind of ideas. I’ve always just turned over rocks and gone where I’ve found value, and it just happens that I find a lot more value off the beaten path. One of my largest positions currently is Reddit, so I’m not opposed to owning more popular stocks, but there are thousands of stocks on the market and I find the higher return on time when I’m looking at ideas that are undiscovered so that’s what I naturally gravitate towards. When you hold a large cap stock like Reddit you need to have some serious conviction around what the collective mind of the market is getting wrong because I do believe that while dislocations do happen regularly, as a whole the market is reasonably efficient.

What are some interesting ideas on your radar now?

In the US a stock I see as the anti-AI stock is Reddit (NYSE: RDDT — $30.0 billion). At 25 years old, I like operating in stocks like Reddit where I feel I have somewhat of an advantage in understanding the product and user base over the generally older finance community.

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David is a Croatia-based investor who writes The Mikro Kap, a research publication focused on global micro-caps and deeply underfollowed stocks. David began sharing ideas online in 2023 and launched his publication full-time in 2024 after leaving an equity research role. David is active @david_katunaric on X and his portfolio is up 176% from January 1, 2023, through the end of Q1 2026.

David, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch The Mikro Kap?

Let’s start way back. My first encounter with the word “stock” came when I was about 10 years old and went to a store to pick up Harry Potter and the Deathly Hallows. I overheard someone talking about stocks and asked my mother what a stock was. Although she is an architect, she was financially literate enough to explain that by buying a stock, you could own a piece of a business you liked. I told her I wanted to buy shares in Algoritam, one of the largest bookstore chains in Croatia and the place where I had bought my Harry Potter book. Algoritam was not publicly listed, but it did file for bankruptcy a few years later. Quite the talented young analyst I was, right?

The reason I share this story is that my actual background is quite boring and follows the kind of textbook path often seen in value investing. The first investing book I read was, of course, The Intelligent Investor. And no, I did not find it boring at all—it clicked immediately. I wanted to analyze businesses, not charts, and I wanted to pay much less than a business was worth.

While I do have some formal background in investing, including a Master’s degree in Corporate Finance and experience as an equity analyst at Croatia’s largest independent asset manager, I do not like to emphasize it online because I do not think it shaped my investing style or helped my track record. If anything, it shaped me by showing me what NOT to do. It gave me a firsthand look at many of the things you read about in books: how incentives in a typical institution are often structured in ways that encourage short-term thinking, subpar decision-making, a focus on the “wrong” parts of the market, and ultimately below-average performance.

Even before I quit my job, what worked for me was focusing on underfollowed corners of the market—areas where you cannot borrow conviction and have to do the work yourself to understand how good or bad the setup really is, and where you are not competing directly with firms that have far larger research budgets.

It was a lonely journey before I started my Twitter and Substack, because the investing community in Croatia is small, the value investing community is even smaller, and once you narrow it further to micro-caps, there was effectively no one to talk to about stocks.

Substack became a way for me to better organize my thoughts around ideas I believed were worth investing in, get pushback on things I had overlooked or misanalysed, and ultimately build a circle of like-minded investors who could bounce ideas off one another.

With some luck, that step has turned out well for me. These days, I probably get just as many ideas from texting with friends I admire, who have a strong eye for a micro-cap bargain, as I do from A-Z research. And there was a time when A-Z research was almost all I did.

I was also fortunate that, while I was still writing for free, a number of people chose to financially support the publication even though they were not getting any content that free subscribers did not already receive. Their support made me think that perhaps I could do this full time, and it ultimately gave me the push to turn The Mikro Kap into a full-time venture.

Can you tell us a little more about your research and investing process?

I’d start by saying that I don’t really believe in a fixed research “process” or investment “strategy.” In my view, limiting yourself to buying or researching only a certain type of opportunity won’t make you a great investor.

It may give you a framework, and those boundaries are sometimes useful, but they are also limiting. That helps explain why many of today’s famous growth investors struggled in the 2000s, and why many historically (seemingly) great value investors have lagged the S&P since the GFC: they did not adapt. There are no proven rules in this game. And if there were, Mr. GPT could simply run through a checklist, and I would have no edge—or a reason to write a Substack.

That said, there are a few principles I place a high value on, even if I remain open to breaking them:

• Illiquidity. I like under-followed companies and obscure setups where I’m not trying to outsmart or compete with “professional investors,” but instead be early to something they’re not yet paying attention to.

• Downside protection. I strongly believe that buying things well matters more than buying good things.

• A clear path to value realization—accelerating growth, improving capital allocation (used to be my main focus), or material corporate actions that eventually force the market to agree with my valuation work.

• Doing deep enough work to be confident in points 1–3, and to know that a lot has to go wrong for the investment not to work out.

At the risk of a shameless plug, and in the interest of not taking up too much of the reader’s time with philosophical reflections they may not care about, I’ve explored this in more depth in my “My Life in Value” article, which is available for free on my website.

To contradict myself a little, though, I would say there are two evergreen truths that can give almost anyone an edge when fishing in micro-cap waters. The first is curiosity—something Greenblatt captures particularly well in his special situations class, on page 245:

“Oh, really? Let me take a look.”

The second is attention span—the ability to research diligently.

So if I had to describe my investing process in a single sentence, it would be this: read, read, read, pass quickly on most ideas, and keep going until something good, cheap, or unusual makes me say “huh?” out loud, at which point I dig deeper to figure out what the “anomaly” is really about.

Opening my eyes to what might be an opportunity on my desk, then doing the detective work needed to figure out what actually matters and how that shapes the risk-reward of a given investment. Ultimately, building enough conviction to decide whether to pass, follow along, or make the bet at the appropriate size.

You have said you like markets where others cannot or will not fish. Which markets or exchanges today are most mispriced to you?

First, I would say that most of one’s edge should come from exploiting single-stock inefficiencies rather than broader market inefficiencies. And IMO the best way to do that is by constantly exchanging ideas with investors you admire and by keeping a close eye on as many stocks as possible that you have already done proper work on. Across any market.

That said, if I had to single out one area today, I would say that Japanese micro-caps are currently the most attractive pocket of the market for investors willing to roll up their sleeves and flip the rocks from A to Z.

Most investors don’t know that Japan, not the U.S., is the market with most publicly listed profitable micro-caps. If you do a simple screen, targeting companies with below 300M USD market cap and with LTM EBITDA of more than 0, your end result will be 762 companies in the U.S. that fit that criteria and 2130 companies in Japan. Almost 3x higher.

Thanks to lack of (proper) private equity competition, less regulatory and financial burden than the U.S. these companies are of higher quality than in U.S. and are not just there to overpromise to investors and dilute the heck out of them. Thanks to less sophisticated local capital markets and foreign competition that finds it hard to overcome language and cultural barriers , these companies tend to trade at a lower multiple.

And thanks to the Tokyo Stock Exchange, the biggest historical weakness of many Japanese companies—their capital allocation—is improving for the better. About three years ago, the TSE began publicly shaming companies that were hoarding too much cash on the balance sheet and failing to generate returns high enough to cover their cost of capital, whether in terms of ROE versus the cost of equity or ROIC versus WACC.

As a result, there is now a higher likelihood that many of these companies will be pushed to improve capital allocation and be re-rated accordingly, making Japan a progressively more shareholder-friendly market over time.

Not to shame them, but I found Japanese investors as probably most short-term oriented and mostly only valuing companies based on P/E, which means there are a lot of inefficiencies that one can take advantage of. It is a case by case basis but I am indeed finding a lot more value there than in other markets in the moment and have initiated two positions there since the beginning of the year.

So, in summary, this combination of a larger opportunity set, higher average quality, cheaper valuations, and less competition from “sophisticated” investors makes me feel good about allocating a significant amount of my time to Japan.

What are some interesting ideas on your radar now?

Let me share a compelling mid-sized U.S.-listed company I currently own that may be compelling to your readers.

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Andrew is an independent global value investor and author of the Underlying Value newsletter. Andrew’s research is focused on finding the “most undervalued public investments” globally. Before becoming a full-time investor, Andrew was a consultant at Accenture, a Vice President at the private equity firm Platinum Equity, a search fund leader and operator. Andrew is also active @UnderlyingValue on X.

Editor’s Note: We are excited to help launch StockPromotionTracker.com, the world’s largest real-time database of paid stock promotion campaigns. If you invest in or short small-cap stocks, visit StockPromotionTracker.com to quickly learn about risks you may be missing.

Andrew, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch Underlying Value?

For a long time, I’ve been an investor in public markets. That involvement ebbed and flowed based on the time I had separate from my professional endeavors. More recently, I got active again, fitting writing on X and Substack as part of my process.

More specifically, writing is an important part of the back-half where I go through discovery (via following fellow investors, use of tools, watchlists) to validation (diligence, management interviews) to investing. In line with the investing decision, Underlying Value works as a way to outline my thesis. Furthermore, it gets this thesis in front of intelligent people I hope will be vocal when they have an alternative perspective.

Why is this a good time to get back in? For me it came down to investing fueling my passion and energy levels, paired with the leverage you’re able to generate with AI. Previously I felt overwhelmed and outgunned by investors who had deeper resources – teams, tools (e.g. Bloomberg) and connections. Now, I feel like I’m able to use AI as a leverage multiplier to screen, diligence, and monitor companies.

You’ve been involved as an operator of companies both in private equity and in your search fund. How did being an operator change or improve your approach to public markets investing?

Being an operator gives you a sense of how the sausage is made. Speaking specifically to the small cap arena, where I think the most value is present for a small investor, I understand how messy it is to run a small organization. The bigger you get; the more politics is important internally and externally. I hate politics (aka fake posturing and veneer shaping) and overpaying for ownership in a company, so I mostly stay on the small side.

I’d say where I was naïve as a young investor was in my belief that others around me perceived the world as I did. That couldn’t be further from the truth.

I think great investors or new operators/consultants do not come in with deeply held beliefs about an organization or the right way to operate it… they approach the situation from a point of discovery. Almost with a childlike curiosity to understand what the business is and how management thinks and subsequently acts without rigid preconceived notions.

From an ops and investing standpoint, I like to start with very broad, open-ended questions – tell me about the business? Who are your customers? Who are your competitors? How are you different?

Where I think value can be added is by understanding what is critical to a successful investment and drilling deep into those areas of the business to see if you agree with management on strategy and execution. For example, if it’s a company compounding through acquisition, that’s something I’ve been a part of. Being part of a platform, adding smaller companies at a lower multiple, doing the integration across people, process and tech. It’s hard work that involves the whole organization. The first 90-120 days are especially critical as they set the basis for how the organization operates moving forward. It’s a bit like concrete in the sense that once it sets, change is going to be much more difficult. However, most people are expecting (and in my experience, more open) to change if it happens close to the transaction. It gets much harder when you’re two years in and trying to turn the ship.

Pricing is so damn important. I think it’s the most underrated and least talked about aspects of a business and you can learn a lot from how management approaches it. Oh, you have a competitive advantage? What would your customers do if you rose price by 15%? Find me a company that doesn’t lose volume in this case and you probably have a pretty damn good investment as long as the valuation is decent.

In your Skull Sessions interview with Maj Soueidan, you talked about how you use AI in your research process and called AI a “great servant, but terrible master.” Which AI models are you using? What are some of your most used prompts? How should investors be using AI to find and research ideas?

Deep work is through Claude. Quick hits are mostly through Gemini. Notebook LLM when I’m going deep on one company or industry and want to drill into the last five-ten years’ worth of transcripts and financial statements.

About 60 days ago, I made the jump from ChatGPT to Claude. Thus far, I’m glad I did. I’ve noticed an ability to automate much more of my process. Specifically, I’ve set up a couple skills that use my watchlist to generate updates on companies that have a big change in price or material filings.

From a prompt standpoint, it depends on the company and industry.

Where I think the most value will be uncovered is to find those companies with large moats. In these cases, I am trying to find the 1 of 1s that have a long growth runway, sustainable competitive advantage and IP moat that will allow them to compound this over time.

Diligence a moat

To give a tangible example, NKT is a pan-European transmission cable manufacturer. In my use of AI to perform due diligence, I was looking to understand: SWOT analysis. What is their ROA and ROIC versus competition? Where did they face primary competitors (e.g. Prysmian) in public tenders and who won? Was there any summary of the decision on those they lost to understand why? How does their direct current product compare to other options available? What tenders are actively being considered and when will that decision be made? What is their core IP, is it protected across geos, has it been challenged?

Diligence a price taker

If this is a price taker or commodity company, I am understanding how inexpensive they are relative to their peer set. The majority of the time, you will find the most inexpensive option is dealing with the hairiest jurisdiction. Therefore, it’s probably wise to filter any geographies you deem un-investable on the front end to not drag them in (I could do a better job of this… too often I start trying to convince myself why PNG is a safe place to allocate funds!). How I’ve been setting this up with oil and gold producers: cost of production and relative placement on a cost curve, amount of reserves, trailing production versus future guidance (looking for increases and past track record of hitting guidance), PEA or NPV discounted 10-15%, how many sites, management/acquisition/capital allocation history and past financial results.

Part of your process that can’t be automated with AI is meeting with management. Why is meeting with management important and what are you looking for in these meetings? Can you please share an anecdote when meeting management provided an important insight that led to an investment decision?

It is the most important thing you can do. If you ask me the biggest change in my process since getting back active after about a five-year break, it’s 1) AI and 2) the need to have management discussions. In the past, I’d have gotten lazy or bypassed this process. Now, only two of my top twelve holdings are cases where I haven’t talked to management. Unsurprisingly, both of these instances have market caps over $1B.

Yesterday I got off the phone with a small cap CEO I’d recently uncovered and walked away with the perspective there are three aspects of their business worth their enterprise value (+ some real estate). This wasn’t rocket science, it was just walking through the aspects of the business and talking through what they could be worth.

I have little doubt I’m the only investor thinking about 2-3 companies when I wake up in the morning. I try to focus my attention there, even though it takes time to build a position because they’re so tiny.

What are some interesting ideas on your radar now?

First off, I think it makes a lot of sense to invest outside of the United States. When you look at the rich valuations, long-term account deficit, unsustainable fiscal deficit and pivot to an isolationist stance – I’m very cautious of what lies ahead. A very likely result is that we’ll try to print our way out, which is bullish for assets, but that will come with a hornet’s nest of consequences. I realize that will draw a lot of eye rolls, but it’s my perspective. Note: To be fair, I’ve thought this way for a long time and been wrong.

With that said, a couple investments I like:

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Yuval is currently the portfolio manager of Fieldsong Investments, a boutique data-driven long/short equities fund he founded in May 2024. Before launching Fieldsong, Yuval worked for 30 years as a book editor and author of non-fiction books and later helped manage Portfolio123, a small financial technology firm. Fieldsong focuses on “safe, boring, under‑the‑radar” small/microcap companies, plans to cap fund inflow at $80 million, and was up ~57% in 2025.

Yuval, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch Fieldsong Investments?

I was a math geek as a kid, but put my bent on hold when I went to college; after that I focused mainly on editing and writing. Editors don’t make much money, and professors (my wife was one) don’t either, so for about 25 years we barely got by on cost-of-living increases and a little help from my folks. But the whole time we contributed as much as we could to retirement accounts. In 2013 we went to Bolivia for a year, and the cost of living there was about 20% of what it was in Chicago. I was working remotely and my wife was working part time. And we found we had a bit of extra money. I wasn’t sure what the best thing to do with it was, so I asked my sister-in-law, who was a private banker, and she advised me to invest in ETFs. And then I went down a rabbit hole. I spent all my free time thinking about investing. It was like a new game to me: can you beat the stock market? My previous extracurricular interests—poker, music, film—all took a back seat to my new obsession. Of course, I lost a lot of money over the next couple of years. But in late 2015 it came to me: the best way to invest is to look at every investment from every angle conceivable. And the best way to do that is to use ranking systems, so you can rank every stock on as many factors as possible. After that, I was off to the races. I made so much money that my wife and I were able to retire early. But I couldn’t stay retired for too long. What’s the next thing you do after you prove that you can invest your own money wisely and effectively? You invest other people’s money wisely and effectively! But I had another impetus: I wanted to become a major donor to charity. I established a private foundation with the help of my wife and kids, and I wanted it to eventually give away millions. So that’s why I decided to launch Fieldsong Investments.

Can you please tell us about your research process and how you construct your portfolio?

I use ranking systems on Portfolio123 to choose which stocks to buy and sell. Developing these ranking systems is time-consuming work. I am constantly reading and thinking about investment factors (by which I mean simply a reason to buy or avoid a company’s stock), and most of those factors are dependent on financial statements. So I’ve done a lot of research into what makes sense from an accounting standpoint, and what works in the markets: I do a lot of backtesting. I’ve also had to research various hedges: a short-based hedge to protect the portfolio during market downturns; a currency hedge to protect it from currency risk; and an odd little derivatives-based fillip that makes money during what I call Red Bull markets: periods when investors favor the riskiest stocks, like the ones I short, and shun the kinds of safe stocks I’m long on. Almost all of my research is done using backtesting, but I also have read a lot of investing-related books. The ones which informed my thinking the most are Frederik Vanhaverbeke’s Excess Returns, James O’Shaughnessy’s What Works on Wall Street, Peter Lynch’s One Up on Wall Street, Mihir Desai’s How Finance Works, Charles Lee and Eric So’s Alphanomics, and the works of Michael Mauboussin. I’ve also read a great number of white papers, both academic and investor authored. Lastly, because I’m a writer, I’ve written over a hundred articles on investing, and those are almost all the product of intense research.

As for portfolio construction, I base it on a very simple procedure: buy the five top-ranked stocks and hold them; if you need cash to buy more top-ranked stocks, sell the lowest-ranked stocks you hold. And then I add lots of bells and whistles. I segment my portfolio into ten little subportfolios (by region and by data provider) and use nine different ranking systems to populate them. I weight my positions based on expected return, which in turn is based on rank minus transaction cost. I set optimal weights for my various hedges and leverage use using worst-case scenario backtests and I vary those weights a little depending on market volatility and momentum.

How did 30 years in publishing/editing change how you research companies or your investment process? Did any editorial habits translate directly to detecting “financial storytelling”?

Editing and writing go hand-in-hand. So I had a built-in proclivity to writing about investing, which forced me to do research that I might not have otherwise done. The writing also hurt me, though, because I spilled my secret sauce too frequently. But I don’t think my editorial process intersected with “financial storytelling” per se.

In your recent interview with Maj Soueidan, you disclosed that your quantitative process “uses 200+ factors.” What are some of the most important factors for investment success? How did you come up with these factors and have any changed over time?

Well, at the risk of spilling my secret sauce again, my biggest factors are size-related (market cap and volume), stability-related (especially price volatility), industry-related (I rank industry groups on how well they respond to my factors), growth-related (especially how the latest quarterly report compares to the same report last year), momentum-related (using a number of different measures), and sentiment-related (especially EPS revisions over the last quarter). Of course, I also use value factors like free cash flow yield, forward earnings yield, and my own intrinsic value calculation. And I use a ton of quality factors, most prominently free cash flow return on assets, regular return on assets, free cash flow return on invested capital, gross margin minus industry average, and cash-flow-based accruals. Of all these factors, some are common, some I came up with from things I read or just thinking things through, and all are backtested in combination with other factors. And yes, many have changed over time as I learn more about the data.

Fieldsong takes “no management fee.” What is your current compensation structure and why did you opt for a no management fee approach?

My partner, Scott Beavers (COO), and I were greatly influenced by an article on compensation structures and their history. (It’s here: https://www.guyspier.com/zero-management-fees-a-survey/). Some of the earliest hedge funds used exactly the same compensation structure we use: zero management fee and a 25% performance fee over a hurdle of 6% per year, with a high-water mark so that we don’t make money on returns that make up for previous losses. This was Warren Buffett’s original compensation arrangement when he started his partnership in the 1950s. We believe we should be paid for performance. Why should an investor have to pay someone to manage his money if the manager’s performance is crappy?

What are some interesting ideas on your radar now?

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Desmond is the founder of Overseas Asset Management (Cayman) Ltd (OAM), a Cayman-based boutique investment manager. Since inception in 1998, Desmond has managed OAM Asian Recovery Fund, which invests in open-ended funds managed by boutique investment managers in Asia, closed-end funds trading at a discount to NAV that invest in the region, and listed equities trading a significant discount to intrinsic value. In late 2002, OAM also launched OAM European Value Fund which invests in listed European companies, closed-end funds and family-controlled investment holding companies which he managed until 2023, but with which he remains deeply involved. Both OAM Asian Recovery Fund and OAM European Value Fund have compounded at around 11% per annum in US dollars over just over 27 years and 23 years, respectively, with their NAV/share increasing roughly 18x and 11x since inception. Notably, in light of empirical studies showing that roughly 90% of fund managers fail to beat their comparable passive ETF or benchmark over a decade, both funds are ahead of the returns of their comparable ETFs, net of withholding tax on dividends, in each of the first two decades this century and on track to do so again this decade.

Desmond, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch Overseas Asset Management?

My finance professor at university, Paul Fenton, sparked my interest in investment analysis. He was unusual in that he founded and ran an investment business in Boston which he sold in the 1970s before switching to academia. Apart from being a finance professor, he had several investment consultancy contracts with UK and European institutions, principally with respect to their US and Canadian equity investments. In my final semester, he was asked by one of his UK institutional clients if he could recommend a student for them to interview for an analytical role in their investment department. That led to me working in London for 2 ½ years, learning investment analysis of UK equities from a very talented team at Clerical Medical.

In the summer of 1986, I visited Cayman and whilst there, a member of senior management at probably the leading trust company in Cayman at the time said that they were looking for someone like me in their investment department. This led to a short interview and a job offer which I initially declined. I am originally from Barbados and although I was educated from the age of 11 in England and Canada, the cold grey winters in London were not exactly nirvana so I subsequently accepted the job offer in Cayman at the end of 1986 and left London. The job turned out to be intellectually unfulfilling and I only spent a year there. Paul Fenton came to the rescue again and I was employed as a roving analyst by one of the earliest hedge funds for which Paul was a consultant. I was allowed to remain based in Cayman but travelled extensively. That role taught me a lot, particularly in analyzing smaller companies in developed markets and larger companies in emerging markets, neither of which had much, if any, analytical coverage at the time. However, I realized that “living out of a suitcase” was not sustainable.

In 1989, I took the bold move of setting up OAM and received a licence to do so days before my 27^th birthday. I looked about 19 at the time so as you can imagine, it was hard raising money. After 3 years, OAM had US$5 million under management. My naïve self-confidence that I could do a much better job of managing equity investment portfolios than the incumbent offerings at that time in Cayman by bank and trust companies was what got me started and kept me going.

Can you please tell us about your research process and how you construct your portfolios?

We do not have a formal or structured investment process and no checklist of questions to ask. Our process is driven more by intellectual curiosity and pulling on strings and seeing where that leads. Having said that, once we discover an area of market inefficiency, we tend to look for further opportunities in that area.

Closed-end funds are one example. In the early 1990s through the early 2000s, there were incredible opportunities in closed-end funds, many of which were not listed but which traded through market makers who posted bid/offer spreads which as we liked to say, you could “drive a truck through”. The market makers were based in London and the funds were generally incorporated in Cayman, Jersey or Guernsey. Our first investment in this sector was in Five Arrows Chile Fund, which was managed by a Rothschild affiliate in Chile, BICE. The Chilean market was trading at about 5x earnings at the time and we bought shares in this fund at a 45% discount to NAV. It was one of our first big winners. Others followed. There was Oryx Fund managed by Blakeney Investors in London which invested in Oman. The Oman market was trading at 10x earnings and a 6% dividend yield but we bought a huge chunk of Oryx Fund at a 40% discount to NAV.

Many of these funds had open-ending or wind-up provisions which created a built-in catalyst for the discount to NAV to narrow or disappear without us having to agitate. In about 2000, I found a closed-end fund listed in Osaka called Asia High Yield Bond Fund which was managed by HSBC and sold to Japanese retail investors. It invested in USD investment grade bonds but the shares traded in JPY. When I found it, this fund was trading at a 55% discount to NAV, and it had an open-ending or wind-up vote in a couple of years. We bought shares daily through a trusted broker in London (with whom we still do business) and were able to invest about $10 million for clients before the discount narrowed significantly. I asked the broker to promise me that he would not share this idea with any of his clients if we gave him exclusivity on the brokerage to buy these shares. Then, we found another similar fund, also listed on Osaka, called Asia Bond & Currency Fund, this time at a 45% discount. It was managed by Jardine Fleming and it too had an open-ending or wind-up vote in a couple of years. I remember going to see HSBC and Jardines in Hong Kong to verify my interpretation of the prospectus and Memorandum & Articles of Association as it seemed too good to be true. We made about $20 million or 100% return for our clients within about 2 years in these two low risk investments during what was a pretty bad bear market. Neither closed-end fund was held by OAM Asian Recovery Fund as it invested in equities, not bonds, but our clients benefited through their segregated accounts.

At the time, and for the first 10+ years, we managed segregated accounts for clients and the Asian and European funds were only launched at the end of 1998 and 2002 respectively because prospective clients wanted to see an audited track record. The funds also simplified our admin processes as OAM grew.

The two funds have a more structured approach than our earlier days. The Asian fund invests in three segments, the largest being funds managed by boutique fund managers who we consider exceptional in their specific area of expertise. We focus on managers who have deep knowledge and understanding of companies serving the Asian consumer as we think this is where the most durable moats can be found, and it seems highly likely that consumer spending as a share of GDP in the region is likely to grow over time. With a double layer of fees, it is difficult for what is in large part a fund of funds to outperform its benchmark so we mitigate this by backing boutique managers early and generally get favorable terms as founding investors. The other two segments in which our Asian fund invests are closed-end funds trading at a discount to NAV or listed companies that we think are decent businesses and well-run which are trading at or below our estimate of liquidation value. In terms of structure and risk control, OAM Asian Recovery Fund has a limit of investing no more than 40% in each of 3 geographic regions: Greater China, consisting of China, Hong Kong and Taiwan; the Indian sub-continent which is almost entirely composed of India in our case; and ASEAN and other, namely Korea. This discipline, though sometimes restrictive, keeps the fund well diversified as geopolitical risks are undoubtedly higher now than even 5 years ago and we have no way of handicapping this risk.

The European fund, since Day 1, has segmented its portfolio into market leaders and consolidators; deep value; family-controlled investment holding companies; and closed-end funds and investment trusts. There are factors we look at such as insider buying, alignment of interest, corporate governance, withholding tax rates on dividends or other tax considerations, barriers to entry, pricing power, quality of management, and many other factors than any good analyst will consider. We look in places where market inefficiency is most likely to arise such as spin-offs, companies with no or little analytical coverage, businesses which are listed in one market but do most or all their business in another market, companies with dual classes of shares, and so on. A few examples of this are Standard Chartered and Wilh Wilhelmsen.

Standard Chartered is listed primarily in London but does most of its business in Asia. It is led by Bill Winters who first came to our attention in Gillian Tett’s book in 2009, “Fool’s Gold”. We think he is a first-class banker and leader. We were able to buy Standard Chartered at about half book value and wait while Bill Winters turned around what is an excellent banking franchise. The reports that I had from clients and people I met in Asia was that he was doing an excellent job. This is now our European fund’s second largest holding, even after trimming the holding.

Wilh Wilhelmsen is our largest holding. The Wilhelmsen family is a multi-generational Norwegian shipping family with an impressive track record. Yet we were able to invest in their listed family investment holding company at a nearly 60% discount to NAV, and even today, the discount remains at around 40%. Our longstanding investment in Wilh Wilhelmsen led us to invest in three Norwegian companies operating in the car carrier business, starting with Wallenius Wilhelmsen during the depths of COVID. It was trading at 0.15x book value and we determined they were very unlikely to go bust and that there was likely to be a shortage of car carriers in a few years, which turned out to be the case. We sold the last of these investments late last year and generated an IRR on the three investments as a package of over 100% per annum. Whilst we have trimmed our shareholding in Wilh Wilhelmsen, we still think it is undervalued and owns an attractive collection of assets.

In your January 2026 Chairman’s statements for both OAM funds, you mentioned that nearly 30% of each fund’s shares are owned by OAM’s directors, employees and their spouses. Has this large insider alignment in your funds always existed? What are some other ways you differ from traditional asset managers?

Whatever money I had when I started OAM, I used to buy a condo and fund OAM’s start-up. When OAM Asian Recovery Fund was launched in 1998, I put all my accumulated savings into the fund and added to my investment in this fund and OAM European Value Fund over the past 27 years. Our non-executive directors and most of OAM’s employees have also invested a significant portion of their net worth in our funds. One of the first things we look at when considering an investment is incentives and alignment of interests. We think it is telling that directors and employees have chosen to invest their own savings in our funds.

I think OAM is probably unusual in that we have low client turnover, low employee turnover and low portfolio turnover. Our average client relationship is probably 15-20 years. We only have 5 employees and 3 of us have been here for 16,21 and 36 years. The average holding period for our investments in both funds is probably approaching 10 years. It is unusual for anything close to 20% of our portfolio to turnover during any year. These factors allow us to take a long-term perspective when making investment decisions. Studies suggest that this is a key factor in determining which of the few investment managers add value after fees and expenses over a decade or more. Apart from the likes Berkshire Hathaway and endowments which have the luxury of a pool of captive assets, we think owner-led boutique investment managers are the most likely to add value within an open-ended investment structure.

International markets have historically underperformed the U.S. stock market. Do you think this will continue? Why is now a good time to invest in Europe or Asia?

For about 15 years until the end of 2024, US equities were the only game in town. US equities peaked then at around 70% of the MSCI World index, a proportion we do not expect to see for a long time, if ever again. The gap between equity valuations in the US and Asia, Europe and emerging markets was close to the most extreme that we have seen in my more than 40-year career. Moreover, value stocks and smaller companies in these markets were at an even greater discount. Finally, the US dollar was very expensive against virtually every other currency in the world. We travel a lot and could see this on the ground in terms of purchasing power parity. US dollar strength was driven by massive capital flows to the US. From 2007, the net international investment position of the US widened from -10% to around -90% of GDP today. We expect this to reverse as capital flows the other way. If we are right, this should cause the US dollar to continue to weaken and non-US equities to outperform US equities for many years, though obviously not in a straight line.

An important point to consider is that equity returns are driven by EPS growth, the dividend yield net of withholding tax, and P/E re/de-rating. For non-US equity returns measured in US dollars, there is a fourth factor, currency re/de-valuation. For Asian and European equities, certainly as far as our funds are concerned, both currency devaluation and P/E derating were headwinds to our funds’ returns from 2014-24. This changed last year and we expect tailwinds from both factors over the next 5-10 years. P/Es and currencies move in long cycles and we think we are much nearer the beginning than the end of the upcycle for these two factors vis a vis our funds.

Another factor to consider is that US equities are very expensive on every measure we look at by historical standards whilst most equity markets outside the US are still reasonably priced, even after last year’s strong returns. Value still looks cheap relative to growth on a historic basis while small looks cheap versus large in terms of factors on a historic basis. This, and the record high concentration of the US equity market have no doubt been driven by the increasing share of passive investing versus active. We avoid crowded trades and seek overlooked investments. US equities now comprise a record 45% of US household assets. In contrast, domestic equities comprise around 5-10% of household assets in the UK & Europe and Asia. This share is starting to increase from a low base. Foreign investors also have low exposure to UK & European and Asian equities. Until about 18 months ago, China was deemed uninvestible, and even after the strong run in Hong Kong & Chinese equities, foreign money is only now starting to trickle in to their stock markets.

The fundraising environment for Asia ex Japan equity managers and European value managers is very difficult, and as a result, we are seeing exceptional terms being offered to founding investors like us in new Asian fund launches by seasoned investment managers. An interesting anecdote worth relaying is that my colleague, Camilla, and I were invited to and attended a value investing symposium in Europe this past summer which served as a forum for investment managers to exchange and pitch investment ideas. Almost every idea was a US company and a couple of the ideas pitched were Costco on 50x earnings and Tesla on 200x earnings (maybe more). This, and other similar examples, suggest to us that everyone is on one side of the boat, and we do not want to be on that side.

In the OAM Asian Recovery Fund, part of what you do is select funds run by boutique investment managers in the region. What qualities do you look for when allocating to managers in Asia? What does your diligence process look like?

We need to understand the investment process and be able to identify the edge a manager possesses. Alignment of interest is also paramount. The manager(s) needs to have a high proportion of his or her net worth invested in the fund. We insist on a strong bottom-up process where the manager can demonstrate that they know the business in which they have invested better than virtually anyone else. We also look for managers who engage constructively with senior management to improve capital allocation when necessary, while focusing in the first instance on strong operational management. We avoid managers who have a significant exposure to commodity-type businesses. Some kind of moat that gives the businesses pricing power is important. Most of these businesses are consumer facing and as mentioned, we think consumer businesses in Asia have a tailwind that from rising consumption as a proportion of GDP in what are amongst the fastest growing, most dynamic economies in the world. Finally, we pay close attention to management fees and fund expenses and have passed at many seemingly attractive funds where we think the fee structure is too high.

You say that OAM Asian Recovery Fund also invests in listed equities in Asia. Can you give us an example of such an investment and explain your investment thesis?

A good example is COSCO Shipping International (Hong Kong: 0517 — HKD 10.5 billion). We started buying shares in 2014 at below HK$3.00. The company had net cash of HK$4.00/share. It made money every year in the previous ten years. The company paid a dividend, not as high as we wanted, and it is a capital-light services business so there was no need in our view for them to hold that much cash. It is majority owned by COSCO, the large Chinese state-owned shipping company so we knew that they would do exactly what they wanted. In 2019, the share price dropped to around HK$2.00 and we bought a lot more shares on the way down, accumulating a stake equivalent to more than 2% of the free float. That year, I started to engage with the company when I visited Hong Kong and tried to persuade them to do three things: repurchase and cancel shares, move to a 100% dividend payout ratio, and put in place a share option scheme to incentivize senior management. We also wrote to the Board of Directors of COSCO. It took a while, but all three things have since happened. In the interim, we collected handsome dividends, all of which flowed to us because there is no withholding tax on Hong Kong dividends, and the company’s share price is now around HK$7.00. This shows the importance of both patience and constructive engagement.

In 2025, we think the company will generate close to HK$0.50 in operating after-tax earnings (ex interest income) per share and they still have around HK$4.00/share in net cash. We think the company’s intrinsic value is roughly HK$10.00 so it remains undervalued but without any remaining visible catalysts for this to be realized. We sold a big chunk of our holding, but still own shares. The reason for the sales were because our Greater China exposure hit our 40% limit and because we found two other opportunities that we felt had greater upside. One was Mandarin Oriental where we made over 100% return in less than a year which was taken private by Jardine Matheson before we had a chance to build a proper holding. Rather than give up on the investment in what we felt was a decent and massively undervalued business, we bought more shares and have so far generated a high teens IRR on our investment.

After more than 40 years of investing internationally and allocating capital, who are some other investors or operators you admire most?

My three heroes in the investment business are Warren Buffett, Sir John Templeton and Jeremy Grantham. There are numerous reasons for this admiration, but one worth citing is that they were naturally frugal and lived relatively modest lives, living well below their means and remaining grounded. Whilst they were frugal in this sense, they treated others generously, gave away a lot of money, and shared their knowledge with others.

Amongst Asian managers, I have known Cheah Cheng Hye, Richard Lawrence and Claire Barnes for at least 25 years. They are all brilliant investors and wonderful individuals who I look forward to seeing whenever I am in Asia. There are other managers who I have known for 10-25 years, such as James Hay who you recently interviewed, that I think can emulate the track records of these brilliant investors and we hope to continue joining them for the ride.

What are some interesting investments in the OAM funds now?

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Ameya, it is great to have you back. 2025 was a strong year for Multiples Capital with a 35.6% absolute return. Can you share more about your “Opportunistic Multi-Asset Strategy” and how it performed so well?

It’s great to be back. 2025 was certainly a defining year, but for me, the most rewarding part wasn’t just the 35.6% absolute return, it was how it was achieved. The hallmark of the performance was generating high-quality, risk-adjusted alpha without leaning on the crowded ‘Magnificent 7’ trade. In fact, while the headlines stayed focused on those tech titans, the reality was that five of them actually trailed the S&P 500 last year.

The multi-asset approach allowed me to look where most weren’t. I found significant alpha in the precious metals complex, driven by global de-dollarization trend, and in industrial metals, which acted as a derivative play on the massive electricity demands from the AI data centers ongoing boom. I also moved into global defense plays as US is looking to pull out from its role as the global police, as well overlooked sectors like shipping, which thrived on geopolitical volatility.

By diversifying into these macro themes and attractive ex-US market valuations, I was able to offer my investor partners a much ‘smoother ride.’ We ended the year with a monthly standard deviation of just 2.49%, about half the turbulence of the S&P 500, resulting in a Sharpe Ratio of 3.15.

In our November 2024 interview, you pitched Garrett Motion as a top idea. Since then, the stock is up ~170%! What went right with Garrett Motion, and where do you think the stock goes from here?

I appreciate you bringing up Garrett Motion (NASDAQ: GTX — $3.87 billion). While the ~170% gain is a highlight, I think it’s only fair to mention that my other pick, MGM Resorts (NYSE: MGM — $9.43 billion), has remained relatively range-bound. However, the success of Garrett has more than compensated for that.

What went right was a ‘perfect storm’ of three catalysts that was anticipated: index inclusion, fundamental resilience, and aggressive capital allocation. The narrative shifted in Q2 when GTX joined the Russell 2000, which provided the institutional liquidity a business of this quality deserved. Operationally, the ‘EV-only’ fear proved premature. We’re seeing a ‘long tail’ for internal combustion, specifically through turbocharged hybrids and Range Extended Electric Vehicles (REEVs) in the US and China.

Management also put on a masterclass in shareholder yield, reducing the share count by 43% over three years. However, investors should note the profile has changed. A year ago, this was a deep-value play at a 20% free cash flow yield; today, after this meteoric run, that yield has normalized to around 9%. While I expect the company to continue performing well operationally, it no longer offers the same combination of a ‘coiled spring’ valuation + near term catalyst that made it a top idea last year.

In your Q3 2025 investor letter you called out several SAAS companies as “AI Losers” well before the recent stock collapses in software companies. Do you still hold this view? What is the market not pricing in regarding AI, and do you see any opportunity?

I believe the market began sniffing out the existential threat AI poses to traditional SaaS models back in 2025, and that trend has only accelerated. I think it is a loser’s game to try and pick winners in a space where competitive moats are being fundamentally rewritten.

However, the market is likely misapplying those same AI fears to non-software businesses, such as in logistics, insurance, and travel. I see AI as a net tailwind and a productivity tool in these other sectors.

Expedia (NASDAQ: EXPE — $26.4 billion) is a prime example of this mispricing. It is currently down 33% YTD and trading at a remarkably attractive 12%+ free cash flow yield. Meanwhile the company is growing top-line revenue at high single digits, earnings at a double digits rate and continues to use over 60% of that free cash flow to aggressively buy back its own stock.

The view that Expedia is a simple ‘online aggregator’ vulnerable to AI search is a fundamental misunderstanding of its model. Expedia is more of a platform. It not only provides a significant distribution channel for hotels but also acts as the ‘merchant of record’ by managing the entire transaction lifecycle from payments to customer service. This is a complex operation that is not as easily replicable as writing new code. There is a reason why Expedia and Booking holdings effectively operate as a duopoly.

Expedia’s real crown jewel, however, is its Business to Business (B2B) segment, which effectively serves as the ‘back-end’ for the global travel ecosystem. The company provides the inventory and technology for thousands of partners, including airlines, financial institutions, and offline travel agents. This segment now accounts for 37% of total revenue and grew 24% in Q4 2025, marking 18 consecutive quarters of double-digit growth. Today Expedia’s white-label services power Marriott’s vacation packages portal and AmEx’s Corporate and Leisure bookings platform to name a few.

Expedia has also proven to be remarkably recession-resistant. During the Great Financial Crisis, while hotel revenues plummeted, Expedia’s revenue actually grew by 14% over 2009-10 period. Hotels become more reliant on Online Travel Agencies (OTAs) in an economic downturn and increase their marketing spend on these platforms to fight for a larger share of a shrinking pie.

Following a multi-year tech stack unification, I see Expedia leveraging AI to drive internal efficiencies. The company is using the technology to improve developer productivity and customer service resolution.

The market is giving us a high-quality, cash-generative business at a deep discount due to generalized AI anxiety. In my view, AI is more likely to replace Google search’s current function in helping travelers reach hotels listed on Expedia rather than replace Expedia’s position as the essential plumbing of the travel industry.

That definitely puts a different light on Expedia’s business than what is conventionally known. Do you have another interesting idea for our readers?

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