A Lollapalooza post covering 15 stocks! Yearly I review the danger zone, stocks that trades at EV/EBIT at over Thirty - ejecting some! to make sure that they do not become 2026 loosers.
Very interesting read! Looking at the valuation of my AeroEdge position, I recently asked myself: what would Mr. Long Term Hold do? Guess I have the (somewhat surprising) answer now. So, thanks for that!
Thanks for this - always interesting to get these portfolio reviews!
I am doing the same on Adyen, Nintendo, Mercado Libre and already sold-out of ASML in autumn/winter last year. Will also have another look now at AeroEdge (momentum made this too uncomfortable for me in 2025).
While this might not be news to you, I would not use or compare Operating Income between US and European Gaming Developers (Ubisoft, CD Project, etc.) due to the difference in R&D Accounting/Capitalization (IAS 38). So I always found the Europeans rather pricy in general (when I looked at CD Project a few years ago after the Cyberpunk launch disaster).
Thanks! What is your view with Meli, Nintendo and Adyen? Regarding the issue of capitalizing project development cost, I agree this is quite different and makes it more tricky to analyse a company like CD Project. This makes the Euro company looking better in between release and make it a bit worse during those years when big release are launch. Would it be fair to say that if CD project was expensing R&D today, then the operating income in 2027-2029 would be even higher?
A more rigorous evaluation must be applied for turnaround story to get onto the portfolio. Understanding the unit economic, the competitive advantage, the long term margin and the cyclicality is even more important in the context of a turnaround. Turnaround dont have the historical data to prove that this company have a sustainable moat.
Successful turnaround are often great opportunity especially if unfollowed. D-Box and Bombardier are great examples. These stocks are not priced at a premium since the additional risk. This issue is that we have to make sure that the profits are not temporary or cyclical.
I was thinking more of non-cyclicals, but agree with all you say for cyclicals and turnarounds. And I'm more comfortable with the former than the latter. With the non-cyclicals, on the other hand, I've got a pretty good record of getting out way too early. I've usually tried to work with a "danger zone" based on EV/S, but applying a zone boundary based on a mature company may be overly restrictive for a younger company. Just thinking out loud. Thanks for the discussion.
I agree with you about decoupling from AI Capex, i took profit from Google and amazon in q4 3025. You add this to energy and regulatory bottlenecks - the risk/reward profiles changed. However, i could argue that Capex for Amazon has always been quite high, this is part of their Dna from start.
Amazon had a real moat in the pre AI era. They still have one - operationally but less so since the GPU infrastructure is diverging significantly from the legacy CPU infrastructure. Also, Neocloud are offering bare metal solution at razor thin margin.
Thanks for the write-up.
Very interesting read! Looking at the valuation of my AeroEdge position, I recently asked myself: what would Mr. Long Term Hold do? Guess I have the (somewhat surprising) answer now. So, thanks for that!
do you agree with Mr. LT Hold view? :)
It’s already my largest position, so I won’t be adding here. Other than that, for a micro-cap it’s as close as it gets to a buy-and-hold stock for me.
Thanks for this - always interesting to get these portfolio reviews!
I am doing the same on Adyen, Nintendo, Mercado Libre and already sold-out of ASML in autumn/winter last year. Will also have another look now at AeroEdge (momentum made this too uncomfortable for me in 2025).
While this might not be news to you, I would not use or compare Operating Income between US and European Gaming Developers (Ubisoft, CD Project, etc.) due to the difference in R&D Accounting/Capitalization (IAS 38). So I always found the Europeans rather pricy in general (when I looked at CD Project a few years ago after the Cyberpunk launch disaster).
Thanks! What is your view with Meli, Nintendo and Adyen? Regarding the issue of capitalizing project development cost, I agree this is quite different and makes it more tricky to analyse a company like CD Project. This makes the Euro company looking better in between release and make it a bit worse during those years when big release are launch. Would it be fair to say that if CD project was expensing R&D today, then the operating income in 2027-2029 would be even higher?
Great work here. Just out of curiosity, do you apply any different metrics/standards to companies that are just turning profitable?
A more rigorous evaluation must be applied for turnaround story to get onto the portfolio. Understanding the unit economic, the competitive advantage, the long term margin and the cyclicality is even more important in the context of a turnaround. Turnaround dont have the historical data to prove that this company have a sustainable moat.
Successful turnaround are often great opportunity especially if unfollowed. D-Box and Bombardier are great examples. These stocks are not priced at a premium since the additional risk. This issue is that we have to make sure that the profits are not temporary or cyclical.
I was thinking more of non-cyclicals, but agree with all you say for cyclicals and turnarounds. And I'm more comfortable with the former than the latter. With the non-cyclicals, on the other hand, I've got a pretty good record of getting out way too early. I've usually tried to work with a "danger zone" based on EV/S, but applying a zone boundary based on a mature company may be overly restrictive for a younger company. Just thinking out loud. Thanks for the discussion.
I agree with you about decoupling from AI Capex, i took profit from Google and amazon in q4 3025. You add this to energy and regulatory bottlenecks - the risk/reward profiles changed. However, i could argue that Capex for Amazon has always been quite high, this is part of their Dna from start.
Amazon had a real moat in the pre AI era. They still have one - operationally but less so since the GPU infrastructure is diverging significantly from the legacy CPU infrastructure. Also, Neocloud are offering bare metal solution at razor thin margin.