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Some of the best compounders operate in businesses so utterly boring that most investors never give them a second look. TerraVest Industries (TVK.TO) manufactures propane tanks, heating oil vessels, boilers, transport trailers, … There is more to it, but you get it, it’s hardly the stuff of a great party conversation, Jensen Huang-style.

Yet, beneath this unsexy exterior, sits a business that has delivered 30+% CAGR over the past decade through M&A and pristine operational execution.

The thing is that TerraVest isn’t your typical mediocre industrial roll-up destroying value through low-ROI acquisitions and weak integration. It’s a case study in capital allocation discipline, decentralized operations, and one of the most aligned management compensation structures I’ve seen in public markets.

Sound familiar ? 🧙🏻‍♂️ 👀

Let’s dive in.

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The Leadership Team and Culture

Understanding TerraVest requires understanding the partnership between Executive Chairman Charles Pellerin and CEO Dustin Haw.

Their collaboration began over a decade ago when TerraVest was a struggling, over-leveraged mess. Pellerin, a charismatic former college football player turned entrepreneur, brought his operational instincts and deal-making abilities. Dr. Haw, who earned a PhD in physics and became CEO in his early 30s, contributes with his genius.

Much like another familiar bearded capital allocator many CSU followers admire, there’s relatively little publicly available about him. But digging into the limited background information and, most importantly, his track record with Terravest, you can easily deduce the guy is smart as hell. The people closer to him characterize him as a “deep thinker” and a “pragmatist”, highly analytical and hard-working.

He leads capital allocation at TerraVest and so far, the results have been exceptional.

By the way, there is a great interview by Matthias Riechert with US-based money manager Guy Gottfried about his views on TerraVest Industries. Guy is the founder and Managing Partner of Rational Investment Group, LP, a Boston-based firm following a concentrated, long-term investment approach. Guy identified the company very early on, many years before I did or anyone on Fintwit, and has developed a close relationship with key people at the firm.

Feel free to read it here: 🔗 YoungElephants TerraVest

If you are feeling lazy, I took some key notes from the interview: 🔗 TerraVest - Interview Key Notes

Now, on top of an exceptional management team, what separates TerraVest from the graveyard of failed roll-ups is how they’ve structured the organization. Rather than suffocating acquired businesses with corporate bureaucracy, they empower the founders and managers who stay on. Divisional presidents receive autonomy and are encouraged to source acquisition targets within their niches. The company essentially operates as a decentralized platform for entrepreneurs who want to keep building.

But where it gets even more interesting is its executive compensation structure. Top executives earn cash bonuses based on performance, and they’re required to use that bonus (after taxes) to purchase TerraVest shares on the open market, which must be held for a minimum period.

I told you. Sound familiar, right? 🧙🏻‍♂️ 👀

This creates an owner-operator alignment with little shareholder dilution. If more public companies adopted this structure, we’d see far fewer value-destroying acquisitions. Then again, if every company had this kind of culture, finding true qualitative alpha in public markets would be a lot harder.

The Operational Playbook: Where Returns Come From

TerraVest targets fragmented, unglamorous industrial niches. The typical acquisition is a distressed or retiring baby-boomer founder operating a small-scale manufacturing shop, purchased at around 5x EBITDA.

The magic happens in the restructuring phase, where TerraVest leverages scale to unlock competitive advantages that small operators simply cannot replicate:

• Steel Purchasing Power: Steel represents over half the cost of producing a storage tank. While small competitors buy from local distributors at a premium, TerraVest’s scale allows direct purchases from steel mills at 10-30% discounts. This cost advantage flows straight to margins almost immediately post-acquisition.

• Speed: These local shops acquisition targets lack working capital to carry inventory, so they only order steel when customers place orders. TerraVest maintains their steel inventory, allowing delivery in 10-14 weeks versus 20-26 weeks for competitors. When an oil & gas customer urgently needs a pressure vessel to begin drilling, this speed commands a price premium while simultaneously capturing market share.

• Optimization: Post-acquisition, management consolidates duplicate facilities, shifts production to the most efficient plants, pools skilled labor, and cuts any low-return vanity projects. They optimize for profits over revenue growth, which is exactly what you want to see.

Through this playbook, acquisitions purchased at 5x EBITDA frequently get optimized down to 2x-3x post-synergy multiples. When you factor in leverage, TerraVest generates 20-25% after-tax returns on deployed capital.

The Business Mix and Secular Realities

TerraVest’s operations fall into three economic buckets:

Storage Tanks (~55%): The crown jewel. Propane, ammonia, heating oil, natural gas liquids, and water tanks generate the bulk of cash flows. While North American propane usage is relatively flat, tank demand is driven by replacement cycles and provider switching. This segment historically funds TerraVest’s broader acquisition strategy.

Boilers, Furnaces, Radiators (~25%): Probably the most challenging segment. Long-term environmental regulations favor high-efficiency systems and heat pumps, putting traditional cast-iron boilers on a path to structural decline. Management knows this. They acquired these assets at dirt-cheap multiples (single digit P/E) and operate them as cash cows, redirecting cash flows into higher-growth acquisitions rather than fighting regulatory headwinds.

Energy Services (~20%): Tied to Western Canadian oil & gas and water management. Inherently cyclical but recently delivering exceptional organic growth (+30% YoY) following successful integration of acquisitions like Green Energy and Aureus.

The 2025 Inflection: Stepping on the Gas

For years, the bear thesis was simple: as TerraVest grows, the pool of small acquisition targets will dry up, stunting capital deployment.

In fiscal 2025, TerraVest demolished this concern. The company deployed over C$850 million across four businesses, completely dwarfing its historical run rate. The centerpiece was the 🔗 March 2025 acquisition of Entrans for C$780 million, roughly double the size of all previous acquisitions by this leadership team combined.

This scale-up deployment proves the runway might not be shrinking, but expanding. Going into 2026, TerraVest and their management team are pushing into adjacent verticals like water management, fire suppression, and wastewater treatment, where the same fragmentation and demographic trends (retiring founders) persist.

There is great visual, shared by the always great 🔗 C.J. (give him a follow on X for everything TVK and CSU family) on TerraVest intricate business segments that gives you a good idea of what this company is cooking :

Near-Term Volatility and the Hidden Data Center Optionality

Scaling up brings volatility.

TerraVest’s Q1 2026 results showcased this reality: organic revenue grew 9%, cash EBIT margins compressed from 14% to 9%, driven by weakness in the newly acquired Entrans tank trailer business (down over 25% YoY).

As is often the case with serial acquirers, integration takes time. But when executed well, the benefits of operational optimization tend to show up beautifully in the cash flow statement. Of course, that requires an exceptional management team at the helm.

Beyond that, management pointed to tariff uncertainties and an industrial slowdown in Western Canada as additional pressures. These look more like short-term cyclical headwinds than structural concerns.

However, tucked inside the 🔗 late-2023 Highland Tank acquisition is a flourishing business manufacturing specialized cooling tanks for data centers. Management explicitly noted “strong demand for products related to the data center build-out in North America” in their Q1 2026 outlook. What was originally purchased as a straightforward steel-tank manufacturer has inadvertently given TerraVest a high-growth call option on AI infrastructure spending. Something to follow up closely this year. 👀

The Investment Case: Compounding Where Others Won’t Look

The numbers (Returns + Reinvestment Rates) over the past few years speak for themselves … 🤯

TerraVest operates in what many investors dismiss as melting ice cubes or cyclical commodities. That’s precisely the market misperception that creates the opportunity.

Management is laser focused on high-ROIC cash extraction. They buy cheap, optimize operations, leverage steel purchasing power, and channel the cash into the next target. The market continually fails to price in the compounding effect of management’s ability to reinvest incremental capital at 20-25% returns (for a niche industrial company, this is outstanding).

The reality is that businesses like TerraVest exist in every market, hiding in industries boring enough that institutional capital ignores them. Combining this with an exceptional management and culture is harder to find though. That said, this name has arguably already been “discovered” by parts of the FinTwit community and attentive retail investors, especially following last year’s acquisition spree (I include myself).

I’d argue the best entry window is probably behind us (2022–2023 was the opportunity). Still, exceptional management teams have a habit of surprising to the upside for longer than most investors expect.

With a freshly upsized credit facility, a new potential foothold in data center infrastructure, and a leadership team that reinvests its own bonuses into the stock, TerraVest remains a good example of quality compounding in the dull corners of the market.

To Sum Up, What Makes This Compelling:

• Elite Capital Allocation: Management operates with ruthless financial discipline, consistently turning 5x EBITDA entry multiples into 2x-3x post-synergy multiples through operational improvements

• The “Steel Moat”: Direct mill purchasing at 10-30% discounts creates a sustainable cost advantage that small competitors cannot replicate

• Management Alignment, Smart Leadership: The compensation structure, mandating bonus investment in company shares, creates owner-operator alignment without dilution. CEO Dustin ‘Genius’ Haw and Executive Chairman, Charles Pellerin.

• Accelerating Deployment: The C$780 million Entrans acquisition proves the runway might not be as limited as some thought. Going into adjacent verticals with similar fragmentation dynamics looks to be the way going forward.

• Potential Hidden AI Exposure: Recent acquisitions positioned TerraVest as a supplier of specialized cooling tanks for the North American data center buildout.

Thanks for following along,

—Nikotes

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🔗 Portfolio Corner - 🗓️ Monthly Updates (Last Update: 29-Mar-2026)

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🔗 Portfolio Corner - 🗓️ Monthly Updates (Last Update: 30-Jan-2026)

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Unlike the standard series, these special editions are exclusive to Paid Subscribers and spotlight under-the-radar businesses that are either part of the Expanse Stocks 🔗 Portfolio or high on the long-term Watchlist. These companies stand out for their exceptional business quality, underrated fundamentals, or strong growth potential often supported by compelling technical setups.

In the world of serial acquirers, certain names like Constellation Software have achieved cult-like status among investors for their disciplined, wealth-creating models. Flying under the radar is a Swedish counterpart that has delivered even more spectacular returns since its relisting in the public markets 11 years ago:

If you had invested in this company upon its return to the public markets, you would be up over 14x, an astounding track record that speaks to the power of its unique model. We are talking about:

Read more

The real opportunity lies in the digital infrastructure enabling Japan's next economic phase. The analog world is ending, and the companies building the digital bridge are trading like it's still 2008.

I would even go as far as to say that missing Japan's SaaS revolution might be this decade's equivalent of missing China's manufacturing boom or India's IT services explosion. The main difference? This time, you're getting it at a discount.

In the second part of this series, I will uncover one case study on one of the most successful pure-play SaaS companies in Japan I recently added to the watchlist at the 🔗 Portfolio Corner.

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🔗 Portfolio Corner - 🗓️ Monthly Updates (Last Update: 30-Nov-2025)

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2. 💼 Full Portfolio Access – Holdings, valuation metrics & performance tracking

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4. 🎧 Podcast Picks – Biweekly handpicked episodes on business & investing

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After digging deeper through podcasts, Japan business literature, Japanese companies’ IR websites, and some wonderful information shared by great investors experts on X (e.g. 🔗 Made In Japan), my view is also that this time really looks different.

A confluence of structural reforms, demographic necessity, and a massive technological catch-up is creating what I believe to be one of the most compelling, under-the-radar investment opportunities for the next decade, particularly within the country's (still) nascent Software-as-a-Service (SaaS) sector.

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The Multi-Billion Digital Gap Creates Generational Opportunity

While Warren Buffett continues doubling down on Japanese trading houses with "no plans to sell" for the next 50 years (true story, source: 🔗 Investopedia), there's a better story unfolding behind the scenes of Japan's massive economy.

The other day I read a piece on Japanese software business culture, that made me laugh. Picture this: “Taro, a mid-level manager in Tokyo, starts his morning paying with his phone at a modern POS system, then walks past a cash-only stationery shop, arrives at work to input data from faxed orders into a cloud accounting platform, and ends his day at a government office where digital ID cards coexist with paper forms.”

This isn't contradictory, it is Japan's reality, and it potentially represents one of the most undervalued investment opportunities in global tech today.

The Numbers Don't Lie

Japan ranks 31st globally in digital competitiveness. For the world's fourth-largest economy, I’d would call it embarrassing but I prefer seeing it as an opportunity.

Consider the scale: Japan's 99.7% Small and Medium Enterprise (SME) market has only 30-ish% SaaS adoption. Around 70% of manufacturing orders still arrive by fax. The Japanese SaaS market sits at roughly $11 billion, representing just 4% of total IT spending versus 15-18% in the US. That's a $200+ billion addressable market sitting there, waiting.

But here's where it gets interesting (and urgent): Japan's Ministry of Economy projects an $80 billion annual economic loss by 2025, dubbed the "2025 Digital Cliff", if legacy systems aren't modernized. Nearly 60% of critical systems will be over 20 years old by then, with the expertise to maintain them retiring en masse.

The government is concerned and throwing money at the problem. The Digital Agency launched with a $660 million grant program, 130 cloud migrations completed, and aggressive “My Number” card adoption (71% increase in cardholders in a single year). This isn't gradual change – it's systematic transformation.

The Small-Cap SaaS Goldmine

While true that Berkshire and other big financial institutions can't touch small caps due to size constraints, this creates a structural advantage for everyone else. Japanese small-cap SaaS companies are trading at steep discounts versus US counterparts, despite comparable growth rates and superior retention metrics.

The recurring revenue model works differently in Japan. That consensus-driven decision-making process that seems slow? It creates customer stickiness that US SaaS companies can only dream of. Once adopted, these solutions become deeply integrated into workflows, generating extraordinarily low churn rates and high lifetime values.

The financial dynamics looks compelling:

• Overall SaaS market growing 10-13% CAGR through 2032

• High-growth segments (cloud integrations, accounting) hitting 35-45% CAGR

• Operating leverage accelerating as fixed costs spread across growing subscriber bases

• 200% increase in companies achieving 20%+ ROIC over the past decade

Framework for Success: The Localization Moat

Foreign investors, like me, have consistently underestimated that getting into Japanese SaaS and making it right isn't just about translation. It's about deep localization: understanding nemawashi (consensus-building), integrating with legacy hanko stamp workflows, and building solutions that align with monozukuri (craftsmanship) principles. 🔗 Source: Podobas

Companies like Money Forward (3994.T) and Freee (4478.T) are more than accounting platforms as they provide a cultural Japenese bridge between analog business practices and digital efficiency. This creates defensive moats that global competitors struggle to breach.

The thing is that this localization creates both opportunity and limitation. While domestic focus limits international expansion potential, it also means these companies are perfectly positioned to capture Japan's massive digital transformation without foreign competition.

The Counterargument (And Why It's Wrong)

"But Japan's been promising digital transformation for decades"

While true, this doesn't change the fact that three catalysts make this time different:

1. Demographic crisis: 30% of the population is over 65, creating 11 million worker shortfall projections

2. Government mandate: Digital Agency is encouraging change but also mandating it

3. Economic necessity: The $80 billion Digital Cliff is a present reality

"Cultural resistance will slow adoption!"

Yes, initial adoption might take longer; but once implemented, and it is already underway, software solutions achieve retention rates that could make the competitive US SaaS sector weep with envy.

The Active Catalyst: M&A Acceleration

The Kaonavi acquisition by U.S.-based private equity firm Carlyle Group (🔗 Source) for $325 million in December 2023 wasn't just a one-time thing, but a preview of what’s coming. Large Japanese and International corporations with business in the country are racing to acquire digital capabilities, while private equity recognizes the undervaluation gap.

This creates multiple exit pathways for investors: strategic acquisitions by domestic giants, private equity buyouts, or international expansion as these companies scale their localized advantages.

Investment Framework: What to Look For

Quality indicators:

• Vertical specialization (healthcare, construction, logistics)

• High customer retention rates (>95%)

• Recurring revenue models with predictable cash flows

• Strong balance sheets with low debt

• Management teams with both technical and cultural expertise

Red flags:

• Heavy dependence on project-based revenue

• Aggressive international expansion without domestic scale

• Underinvestment in cybersecurity (critical as threats increase)

• Weak pricing power in the SME segment

The Reality Check

I’d argue finding these opportunities is not without risks. Talent scarcity remains severe (2.3 million digital worker gap by 2026), integration with legacy systems creates implementation complexity, and the SME market's price sensitivity limits monetization potential.

But the thing is these challenges create the very inefficiencies that generate outsized returns for patient capital and the market has been pricing in all these problems (with pretty low multiples) while ignoring the solutions.

The Takeaway

Japan's SaaS transformation is a multi-year structural shift backed by government mandate, demographic necessity, and a multi-billion cliff in economic urgency. The small-cap segment offers exposure to this transformation at valuations that make little sense relative to fundamentals.

The real opportunity lies in the digital infrastructure enabling Japan's next economic phase. The analog world is ending, and some of the companies building the digital bridge are trading like it's still 2008.

I would even go as far as to say that missing Japan's SaaS revolution might be this decade's equivalent of missing China's manufacturing boom or India's IT services explosion. The only difference? This time, you're getting it at a discount.

In the second part of this series, I will uncover one case study on one of the most successful pure-play SaaS companies in Japan I’ve recently added to the Watchlist, available in the 🔗 Portfolio Corner.

Thanks for following along,

—Nikotes

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Welcome to the fifth edition of Hidden Gems!

In this series, we spotlight small- and mid-cap companies that tend to fly under the radar, but stand out for their business quality, overlooked fundamentals, or long-term growth potential.

If you’re new here, start by exploring the earlier editions (most of the content’s open) in the 🔗 Hidden Gems corner.

For this fifth edition, we’re heading down under to the land of the Aussies. Not just a wonderland of beaches, open-minded people, and multicultural charm, but also home to a surprisingly deep pool of underfollowed, world-class businesses.

This time, we’re diving into a company that, in my view, is an exceptional high-growth engine, arguably one of the cleanest and most impressive financial profiles I’ve ever seen in software. It’s far from cheap, but the quality is undeniable, and its success story is worth unpacking.

Let’s get into it. But first, here’s a quick look at what Expanse Stocks is all about.

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• ✨ Top Picks: 2026

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Welcome to the fourth edition of Hidden Gems!

In this series, we uncover small- and mid-cap companies that often fly under the radar but hold unique advantages—whether it’s exceptional business quality, underrated fundamentals, or sustainable growth potential.

If you’re new here, start by checking out the earlier editions (most of content is free to read):

• 📎 Hidden Gems -First Edition

• 📎 Hidden Gems - Second Edition

• 📎 Hidden Gems - Third Edition

For this Fourth Edition, we’re heading to Canada, one of those rare wonderlands. Not just for its landscapes, open-minded people, and multicultural friendly environment (though I might be biased, having lived, studied and worked there for almost 3 years as a European)… but also for its incredible pool of world-class yet often overlooked businesses: Shopify, Brookfield, Thomson Reuters, etc.

But the company we’re diving into this time is, in my view, one of the wonders of the investing world: Constellation Software (CSU).

Led by its already legendary founder and still-owner-operator, Mark Leonard who has earned his place in the hall of fame as one of the best capital allocators of the 21st century.

Let’s dive in! But before, let’s take a look at what Expanse Stocks has to offer 👀

📰 What’s New at Expanse Stocks?

📊 Quarterly Update - Portfolio Composition (by Industry and Geography) + Valuation Metrics → 🔗 Behind-The-Scenes [Free access]

📚 Articles

🔎 Deep Dive Briefs
⛅ Cloudflare | 👷‍♂️ Parsons | 𓇲 MPS | 🥼 Medpace | 🔌 Arista | 🛒 Amazon | 🤖 ASML | 🦎 Topicus | 💡 Lumine | ✈ HEICO | 🧙‍♂️ CSU Part #1, Part #2, Part #3 | 🤖 Intuitive

💸 General Investing
💎 Hidden Gems Series
✨ Annual Specials – Annual Letters, Investing Philosophy, Industry Write-ups & Top Picks of the Year
📚 Resources for Investors
📢 Latest Stock News
💬 Join My Chat → [📎 Learn more]

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💼 Portfolio Corner – Holdings, valuation models, trades, performance & more!
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👀 Recent Releases!

• 🔍 Deep Dive Brief: How to Build a DCF for Serial Acquirers Like Constellation Software - Part #3

• 🔍 Deep Dive Brief: Intuitive Surgical

👀 Coming Soon

• ✨ The Rareness of Moaty Industrials: A Selection of 6 Gems

• 💎 Hidden Gem: Special Edition III

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Founding and Origins: The Unconventional Capitalist Legend

The story of Constellation Software (CSU) starts in 1995 with its enigmatic, private and eccentric founder: Mark Leonard—a man who is equal parts capital allocator, systems thinker, contrarian philosopher and Santa Claus in disguise.

Before entering business, Leonard’s secretive life was anything but conventional. He worked as a gravedigger, bouncer, furniture mover, …—an unusual résumé for someone who would go on to build one of the world’s most successful software holding companies. Eventually, Leonard earned an MBA and entered the world of venture capital (VC).

But he grew disillusioned. VC culture in the 1980s and 1990s was increasingly focused on chasing unicorns, short-term growth stories, and quick exits. Inspired by Warren Buffett and Berkshire Hathaway, Leonard envisioned a decentralized conglomerate that would buy boring, profitable software companies that no one else wanted and hold them forever.

In 1995, with $25 million from OMERS (Ontario Municipal Employees Retirement System), Leonard founded Constellation Software with a unique vision: a decentralized acquirer of Vertical Market Software (VMS) companies, focused not on flipping businesses but on compounding capital through permanent ownership.

The company’s first acquisition was Trapeze Software, a provider of public transit scheduling software. Niche, unsexy, but mission-critical—exactly Leonard’s kind of business. The acquisition proved that small vertical markets could deliver high recurring revenue, loyal customers, and defensible moats.

Leonard structured CSU from the ground up as a learning machine, designed to scale not just software, but also knowledge, culture, and capital discipline across geographies and industries.

When CSU IPO’d in 2006, it wasn’t to raise capital, but to transition away from OMERS, which had a more short-term focus. That year, revenue was around $150M. Today, CSU generates over $8 billion and still hasn’t issued new shares…

“Hello there, Silicon Valley SaaS darlings dishing out 20%+ of revenue in stock-based comp, livin’ the dilution dream, huh? How you doin’?” 👋 — Nikotes

What is Vertical Market Software (VMS)?

Think software that’s focused on niche, often quirky industries. Think: municipal transit systems, bowling alley operators, poultry farms, regulatory-heavy funeral homes... you name it.

These industries:

✅ Have tiny TAMs—so tiny they scare off VC-backed competitors.
✅ Need deep customization, tight integration, and reliability, aka “sticky” software.
✅ See near-zero churn (unless the customer literally goes out of business).
✅ Offer high-margins, recurring revenue, upfront payments, and barely any CapEx.

Here’s the kicker: Constellation doesn’t build these software tools. They acquire the best operators in these niche spaces—usually small, under-the-radar businesses with durable cash flows and great returns on capital.

For context, here's a great comparison between VMS and your usual big-name horizontal SaaS (credit @zeroxpectation on X for the table):

Growth Drivers

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Welcome to the Second Hidden Gems Special Edition!

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👀 Recent Releases!

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• 🔎 Deep Dive Brief: Constellation Software Capital Allocation Outlook - Part #1

👀 Coming Soon

• 💎 Unlocking Japan - Part #1: The Overlooked SaaS goldmine

• 💎 Unlocking Japan - Part #2: A Hidden Gem

Unlike the standard series, these special editions are exclusive to Paid Subscribers and spotlight under-the-radar businesses that are either part of the Expanse Stocks 📎 Portfolio or high on the long-term Watchlist. These companies stand out for their exceptional business quality, underrated fundamentals, or strong growth potential often supported by compelling technical setups.

For this second Special Edition, we're heading to Switzerland and Sweden to uncover one surprisingly overlooked biopharma powerhouse and one small-cap industrial serial acquirer gem.

1️⃣ A Surprising Undiscovered Healthcare Powerhouse

With a €43B market cap, this high-quality company plays a crucial role in the pharmaceutical supply chain, specializing in third-party drug manufacturing—helping biopharma firms outsource production & process development. I like to think of it as the TSM of Drugs Manufacturing.

I already highlighted this gem in my Monthly Specials - February 2025 (for Paid Subscribers), as it’s forming one of my favorite technical setups—an Inverse Head & Shoulders emerging from a long consolidation phase. The good news? It’s still actionable.

2️⃣ A Small-Cap Serial Acquirer Keeping Sweden’s Factories Running

A $750M small-cap Swedish serial acquirer, specializing in industrial components & services across the Nordic region. With strong management, a winning culture, and solid fundamentals (+15% sustainable revenue growth, 27% ROCE), this high-quality compounder caught my attention—first brought up by REQ Capital, one of the best investment funds in serial acquirers.

Not cheap at Fwd. 35x EV/FCF, but great businesses rarely are.

Topics I’ll Cover

🔹 Founding & Origins
🔹 Industry Trends & Strategy
🔹 Growth Drivers
🔹 Leadership & Culture
🔹 Fun Facts & Golden Nuggets
🔹 Final Thoughts & Technical Setup

Let’s dive in!

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Welcome to the third edition of Hidden Gems!

In this series, we uncover small- and mid-cap companies that often fly under the radar but possess unique advantages—whether it’s exceptional business quality, underrated fundamentals, or strong growth potential supported by compelling technical setups.

If you’re new here, check out the earlier editions (free to read):

• 👉 Hidden Gems -First Edition

• 👉 Hidden Gems - Second Edition

And for Paid Subscribers: 👉 Hidden Gems -Special Edition

For this third edition, we’re heading to the rainy Great Britain islands to explore two small-cap gems. Despite operating in vastly different industries, these companies share exceptional management, a commitment to shareholder returns, and a genuine passion for their craft.

1️⃣ A Legendary Miniature and Fantasy Board Game Maker (Free to read)
Known as the House of Warhammer, this iconic British brand has a market cap of £4.4B. (Yes, I was a big fan back in the day! 🤓). Topics, I cover:

• Founding & Origins

• Leadership & Vision

• Growth Drivers

• Fun Facts & Golden Nuggets

• Final Thoughts: What makes it a Hidden Gem

2️⃣ A Young Serial Acquirer (for Paid Subscribers)
With a £500M market cap, this small-cap “cash generation machine”, that I’ve recently added to my portfolio, specializes in acquiring and scaling scientific instrument businesses, enjoying a surprising high ROIC and a big runway for growth. Topics, I cover:

• Same Topics as for the first gem

  ➕

• Summary of FY 2024 results and FY 2025 Outlook

• Final Thoughts: What makes it a Hidden Gem and a rare opportunity for (new) shareholders at current levels

I’m especially excited to share these two 💎s —not just because one brings back nostalgic memories from my childhood, but because both are truly high-quality, hidden businesses amidst a sea of more hyped investment options. Let’s dive in!

📰 What’s New at Expanse Stocks?

📊 Quarterly Update - Portfolio Composition (by Industry and Geography) + Valuation Metrics → 🔗 Behind-The-Scenes [Free access]

📚 Articles

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💸 General Investing
💎 Hidden Gems Series
✨ Annual Specials – Annual Letters, Investing Philosophy & Top Picks of the Year
📚 Resources for Investors
📢 Latest Stock News
💬 Join My Chat → [📎 Learn more]

👀 Recent Releases!

• 💆‍♂️ A Reflection on my Investing Mistakes

• 💸 Optionality: Hidden Engine of Long-term Compounding

👀 Coming Soon

• 💎 Hidden Gem - Fifth Edition

• 💸 Why Equities Win Against Other Assets

🎲 Games Workshop (GAW): The House of Warhammer

Founding and Origins: The Punk-rock Group of Gaming Companies

Games Workshop’s journey feels like an independent punk-rock group hitting it big. Founded in 1975 by three friends—Steve Jackson, John Peake, and Ian Livingstone—the company began in a shared London flat. Driven by their love of board games, the trio initially treated the venture as a fun side hustle, aiming to make a bit of beer money rather than build an empire.

Operating out of a London Peake's bedroom, the founders handcrafted versions of classic games and even launched their own magazine, Owl & Weasel. The enlightening moment? Discovering an early version of Dungeons & Dragons (D&D) at a gaming convention. They fell in love, became Europe’s exclusive distributor for D&D, and started opening doors to a world of opportunity.

But it wasn’t all smooth. By 1976, John Peake, less enamored with roleplaying games stepped away. This left Jackson and Livingstone free to focus on their growing obsession with fantasy miniatures, eventually founding the mythic White Dwarf magazine in 1977 and the legendary Citadel Miniatures in 1978.

This was the birth of Games Workshop as we know it—a company that combined a love for games with a touch for craftsmanship.

Pivotal Moment: “The Great Master Plan” by Sir. Kirby

Games Workshop’s stock returns and business growth took off after what is often referred to as The Great Master Plan. In the late 2000s, under the leadership of then-Chairman Tom Kirby and then-CFO Kevin Rountree, the company streamlined operations, cut unnecessary costs, and refocused entirely on its core strengths: making the best miniatures in the world and building Warhammer into a dominant niche brand.

• They stopped trying to be a broader game company and doubled down on Warhammer.

• They closed unprofitable retail stores and prioritized markets where demand was strong.

• Licensing deals, previously a side thought, became a strategic pillar for long-term growth.

The result? Leaner operations, higher profit margins, and a focus that allowed Games Workshop to excel in what they do best. This strategy laid the groundwork for the company’s remarkable turnaround and has kept it on a steady upward trajectory ever since. If you had become a shareholder back in 2008 at the dawn of the “Great Master Plan”, your investment today would have grown into an incredible 90x bagger 👇

Leadership and Vision: Culture is King

Current CEO Kevin Rountree sums it up nicely: “We hire for attitude, not skills.”

At Games Workshop, passion for the product and the right mindset matter more than a well-dressed CV. Many senior leaders have been with the company for decades, and there’s a clear preference for promoting from within.

The culture is refreshingly no-nonsense: respect, accountability, and a focus on doing what’s best for the company and fans. Mistakes are viewed as part of bold decision-making, and leadership encourages continuous improvement. This pragmatic yet genuine approach is at the heart of their sustained success.

Growth Drivers:

• The Warhammer Universe: The company created a deep, sprawling fantasy and sci-fi lore that’s irresistible to fans. The Warhammer IP is not just a product; it’s a lifestyle for fans who collect, paint, and play with its miniatures.

• Vertical Integration: From design and manufacturing to retail and marketing, Games Workshop controls every part of its supply chain. This keeps quality high and costs under control.

• Licensing Boom: While licensing contributes just 5% of revenues now, it’s a key growing area with tremendous potential. Deals like the rumored Warhammer TV series with Amazon Prime (exciting, right?) and video game success stories (Space Marine 2, anyone?) are planting the Warhammer flag in mainstream media."

• Community Magic: Whether through the White Dwarf magazine or its Warhammer+ digital platform, Games Workshop connects with fans on a deeply personal level. This builds loyalty and a sense of belonging.

🧐 Fun Facts and Golden Nuggets

• Bedroom Beginnings:

  In its first year, Games Workshop operated entirely out of the bedroom of one of his founders, John Peake in Shepherd’s Bush, London; proving again that global giants can start small.

• Name Choice:

  The company was almost called “Games Garage.” They went with “Games Workshop,” which, in my opinion, sounds not as a cool the alternative. Here is a bit more on their history in their official website, 👉 here

• The Magazine:

  White Dwarf magazine started in 1977 and is still going strong over 500 issues later. It’s been a must-have for hobbyists, with painting guides, lore, and exclusive content.

  

• Miniatures Mania (featuring my own "golden nugget"):

  The early miniatures were sold unpainted, giving fans the chance to unleash their creativity. This Do-it-yourself spirit is still a big part of the hobby today.

  Fun fact: here’s one of the miniatures I built and painted at 11 years old—my “golden nugget” from back in the day. It makes me wonder… when did my latent craftsmanship skills slip away? 😅

  

• Licensing Golden Opportunity: The upcoming Warhammer TV series on Amazon Prime could be the company’s ticket to mainstream pop culture.

  The already available Secret Level anthology series, featuring Warhammer 40K lore, are expanding its reach—definitely check it out if you haven’t, it’s a fantastic series for sci-fi/fantasy 10-15min short stories! More details on Prime 👉 here

🧠 Final Thoughts

Games Workshop’s competitive advantage lies in its niche focus and the deep loyalty of its fanbase. It’s not chasing trends or trying to be everything to everyone. Instead, it’s doubling down on what it does best: crafting incredible miniatures, creating immersive worlds, and keeping its community engaged.

For investors looking for a company with one-of-a-kind moat, exceptional management, and room to grow from its current £4.4B market cap—specially through its IP licensing optionality— Games Workshop is a rare find.

Now, let’s get into our second hidden 💎 available for Paid subscribers.

The following under-the-radar British small-cap is a true “cash generation machine” focused on acquiring and scaling scientific instrument businesses. The stock has recently give good opportunities for an entry. So, I took advantage and recently added it to my long-term portfolio and plan to gradually build my position throughout 2025.

Ready to dive deeper? Here’s what I offer and how I can help you

Unlock Premium Content – For just $0.39/day ($12/month) or $0.27/day ($100/year)!

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3. 📊 Valuation Tools – DCF, reverse DCF, capital efficiency & growth models

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5. 🔎 Stock Picking Framework – My methodology & investing philosophy

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8. 🔐 Full access to all my articles

Read more

Unlike the standard series, these special editions are exclusive to Paid Subscribers and spotlight under-the-radar businesses that are either part of the Expanse Stocks 📎 Portfolio or high on the long-term Watchlist.

For this first special edition, I’m highlighting one little-known small-to-mid-cap semiconductor company with incredible financial performance:

• Return on Invested Capital (ROIC): Averaging over 50% across the last five years.

• Earnings Per Share (EPS): Growing at an impressive 26% annually for the past decade.

• Investor Returns: Delivering a +35% compound annual growth rate over the last ten years.

This hidden gem was featured in my recent article on Top Picks for 2025. I’ve recently initiated a position in this remarkable company within my long-term portfolio. My plan is to gradually build it out further over the course of 2025.

Now, let’s dive in!

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Welcome to the second edition of Hidden Gems!

In these Hidden Gems series, we explore small- and mid-cap companies often overlooked by investors. Each featured company, in my view, possesses a unique edge—be it exceptional business quality, underrated quantitative fundamentals, or outstanding growth potential backed by strong technical setups.

If you missed the first part, feel free to take a look:📎 Hidden Gems - First Edition.

In that post, I uncovered two small-cap Italian companies in the high-end luxury market and one U.S.-based growth SaaS company addressing complex financial needs for some of the world’s largest corporations.

For this second edition, we’ll spotlight two hidden gems. First, we travel to the Netherlands to explore a company in the intricate yet crucial semiconductor equipment industry—and no, it’s not the company that likely comes to mind to everyone. Next, we head to the chilly yet beautiful landscapes of Norway to uncover a young 500m small-cap specializing in niche technology solutions with excellent fundamentals.

Let’s dive in!

ASM International: The Pioneering 'Advanced Semiconductor Materials' Company without the ‘L’

Not to be confused with its best-known younger sibling ASML (Lithography), ASM International, is a €25B mid-cap semiconductor equipment company founded in the Netherlands in 1968 by Arthur del Prado, at the very start of the semiconductor industry.

A Bit of History

Source: ASM Website, Company’s History

In the early 1970s, the company ventured into the furnace deposition market, producing advanced systems in the Netherlands. Over the decades, the company expanded globally, founding ASMPT in Hong Kong for semiconductor assembly, ASM America for epitaxy, a key technology for advanced semiconductors, and ASM Japan for plasma chemical vapor deposition.

One of ASM’s most intriguing chapters unfolded in the mid-1980s when it partnered with Philips to create ASML—a name that would later become synonymous with lithography technology. However, ASM’s focus shifted, and in 1988, it sold its stake in ASML, choosing instead to sharpen its expertise in deposition technologies.

Since the 1990s, ASM has focused on deposition technologies, pioneering Atomic Layer Deposition (ALD) with breakthroughs like the Pulsar ALD tool in 2007 for high-volume manufacturing. Recent growth includes a strong push into epitaxy, marked by the 2022 acquisition of LPE for silicon carbide (SiC) equipment, catering to the electric vehicle market.

By establishing centers of excellence close to its customers while centralizing manufacturing in Singapore, ASM has created a global structure supporting innovation.

Core Technologies

Atomic Layer Deposition: The Crown Jewel

At the forefront of ASM’s portfolio is Atomic Layer Deposition (ALD), which contributes over 50% of its revenue and holds a dominant 55% global market share.

ALD is a highly precise process that deposits ultra-thin films of material one atomic layer at a time. This meticulous control allows chipmakers to build structures at the nanometer scale.

Why ALD Matters?

• Miniaturization: As the semiconductor industry moves toward smaller nodes (<=3nm), traditional deposition techniques struggle to maintain uniformity. ALD excels by delivering highly uniform, defect-free films even on the most intricate 3D architectures like gate-all-around (GAA) transistors. The industry’s transition to GAA transistors beginning in 2024 is expected to grow to >40% by 2027 👇

  

• 3D Architectures (more on this technology 📎 here): With the industry’s shift to 3D NAND, DRAM scaling, and GAA designs, ALD enables the creation of structures that were once thought impossible. Its ability to deposit material layer-by-layer ensures reliability and performance.

• Selective Deposition: One of ASM’s key innovations is Selective ALD, which allows deposition only on targeted areas, eliminating unnecessary material use. This not only reduces waste but also simplifies the manufacturing process and enhances efficiency—traits that are becoming increasingly critical as sustainability gains importance in the semiconductor industry.

Epitaxy: Another Core Pillar of Innovation

While ALD gains much of the spotlight, ASM’s epitaxy technology is also key. This technique involves depositing crystalline layers on a substrate to form the building blocks for semiconductors. ASM has rapidly expanded its presence in this domain, positioning epitaxy as another major growth driver:

• GAA Transistors: Epitaxy is indispensable for GAA transistor manufacturing, where it ensures the precision layering required for next-gen chips. ASM’s expertise in this area aligns with the industry’s move toward smaller nodes and enhanced power efficiency.

• Silicon Carbide (SiC): With the rise of electric vehicles (EVs) and renewable energy systems, demand for SiC wafers is surging. ASM’s SiC epitaxy technology is well-positioned to capitalize on this shift, offering higher yields and scalability.

• Advanced Platforms: The company’s 800mm epitaxy systems are cutting-edge technology, as they enable high-volume manufacturing for both logic and memory applications.

Key Growth Drivers

ASM’s growth is intertwined with several transformative semiconductor trends:

• Logic and Memory Scaling: As 3D NAND and DRAM scaling continues, ALD and epitaxy solutions are becoming essential for these increasingly intricate designs. The ALD market is projected to grow at a double-digit CAGR through 2027, reaching a total size of $4–$5B.

  

  Additionally, the industry’s pivot toward GAA transistors is another tailwind, providing further ground for expansion.

  

• Advanced Packaging: The demand for through-silicon vias (TSVs) — to create 3D packages and integrated circuits—, hybrid bonding, and backside power distribution networks is growing as chips become more complex. ASM is well positioned to capitalize on this trend, providing the necessary tools for these next-gen designs.

• Epitaxy Growth: ASM’s entry into SiC epitaxy provides access to high-growth markets like EVs and renewable energy, diversifying its revenue streams. The company’s increasing market share in this domain is promising. The SiC epi leading-edge market is expected to grow at 10-15% CAGR through 2027, reaching a total size of $2.3-2.9B.

  

Challenges and Risks

• Geopolitical Uncertainty: With 20% of its revenue tied to China, ASM faces risks from export restrictions and rising local competition.

• Market Cyclicality: The semiconductor industry’s inherent volatility adds unpredictability, particularly in memory segments where recovery timing remains uncertain.

• Competitive Pressures: Heavyweights like Tokyo Electron and Lam Research are intensifying their focus on ALD and epitaxy, posing a long-term threat — although ASM still has the lead.

🧠 Long-Term Potential

Despite these challenges, ASM potential is hard to ignore. Its ALD dominance, investments in advanced packaging, expanding footprint in high-growth markets like SiC epitaxy, and its strategic alignment with semiconductor megatrends make it a compelling choice for long-term investors looking for overlooked gems in the semi industry.

Recently, many semiconductor stocks, especially in the equipment sector, have been beaten down, creating attractive opportunities for investors willing to navigate the industry's cyclical yet secular growth trends

Last but not least, I’ll leave an interesting weekly chart on ASM vs the Qs (QQQ ETF) over the last 5 years — feel free to take a look at it over the last 10 years, it’s even better

Now, let’s dive into our second hidden gem! But before that, don’t forget to check out what’s new at Expanse Stocks.

📰 What’s New at Expanse Stocks?

📊 Quarterly Update - Portfolio Composition (by Industry and Geography) + Valuation Metrics → 🔗 Behind-The-Scenes [Free access]

📚 Articles

🔎 Deep Dive Briefs
⛅ Cloudflare | 👷‍♂️ Parsons | 𓇲 MPS | 🥼 Medpace | 🔌 Arista | 🛒 Amazon | 🤖 ASML | 🦎 Topicus | 💡 Lumine | ✈ HEICO

💸 General Investing
💎 Hidden Gems Series
✨ Annual Specials – Annual Letters, Investing Philosophy & Top Picks of the Year
📚 Resources for Investors
📢 Latest Stock News
💬 Join My Chat → [📎 Learn more]

👀 Recent Releases!

• 💆‍♂️ A Reflection on my Investing Mistakes

• 💸 Optionality: Hidden Engine of Long-term Compounding

👀 Coming Soon

• 💎 Hidden Gem - Fifth Edition

• 💸 Why Equities Win Against Other Assets

➕ Unlock Premium Content – For just $0.39/day ($12/month) or $0.27/day ($100/year)!

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3. 📊 Valuation Tools – DCF, reverse DCF, capital efficiency & growth models

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Norbit ASA: A Niche Innovator Betting on Excellence

Norbit ASA is a $500M small-cap niche technology company headquartered in Norway, founded in 1995, with a proven track record of innovation, profitability, and growth. Since its IPO in June 2019 in the Norway Exchange stock market, the company has delivered a +38% CAGR for shareholders or +405% returns in 5 years, backed by its focus on three core segments—Oceans, Connectivity, and Product Innovation & Realization (PIR).

… and it just feels like its getting started. Let’s dive in more!

Strong Financial Fundamentals

Norbit’s financial health is reinforced by its ability to reinvest in its business while delivering returns to shareholders through dividends and capital appreciation.

• Earnings Growth: EPS CAGR of 35.6% (2017–2024).

• Profitability: EBITDA margins of 26% and Return on Capital Employed (ROCE) of 29%.

• Balance Sheet: Low leverage (Net Debt/EBITDA at around 0.5) provides room for acquisitions and investments.

Core Business Segments

Oceans Segment (39% of revenue) with EBITDA Margin of 35%.

• Key Products: Sonars, environmental monitoring systems, and underwater sensors for offshore energy, fishing, aquaculture, and environmental mapping.

• Their flagship Winghead sonar is regarded as the best in its category globally.

• Outlook: Management expects strong demand for their underwater technology as they gain global recognition, and the E.U. push further towards renewable offshore energy solutions and environmentally friendly policies.

  🧐 Fun fact

  In the Olympics Games 2024 arranged in Paris, the French government used the river Seine as both one of the arenas, and the base for the full Olympic Games. As they needed to have security underwater, the French Security Services trusted Norbit ASA to deploy underwater surveillance in the Seine during the Olympics using their flagship sonars.

  

Connectivity Segment (35% of revenue) with EBITDA Margin of 34%

• Key Products: On-board units (OBUs) for tolling and tachographs, as well as fleet management software.

• Growth Driver: Surge in IoT devices and regulatory changes in the EU requiring vehicle data monitoring is driving adoption.

• Outlook: Subscription services within connectivity growing in the high-20% YoY, supporting higher-margin recurring revenue.

PIR (26% of revenue) with EBITDA Margin of 13%

• Key Services: Contract manufacturing and R&D solutions for hardware and software.

• Outlook: Management is targeting higher-margin projects to improve profitability.

🗝 Key Growth and Strategic Drivers

1. Acquisitions

   Norbit has acquired 7 companies since 2021, spending >250m NOK to strengthen its product portfolio and vertical integration.

   A few examples are Seahorse Geomatics (distribution foothold in North America) and iData (smart data segment).

2. Niche Focus

   Norbit has become really good at addressing specific, hard-to-solve problems for its customers. This focus strengthen long-term relationships with customers and creates defensible market positions.

   A good example is the recent 160m NOK contract with a European blue-chip customer proves its ability to identify and solve emerging client challenges.

3. Sustainability and Technological Leadership

   Leveraging Norway’s strengths in ocean engineering, Norbit develops cutting-edge technologies in environmental monitoring, connectivity, and advanced sonar systems.

Long-term Growth Targets

• Organic revenue target of 2.75B NOK by 2027 (exc. future acquisitions), growing at a +16% CAGR until 2027.

• Maintain high Returns on Capital Employed of 30% and expand its presence in more lucrative niches.

Challenges and Risks

• Cyclical Demand: Lower visibility in sonar orders and weaker OBU demand in H1 2024 bring out the variability in the order book and can create temporary slowdowns.

• Geopolitical Risks: With its European focus, global supply chain issues and regional instability could pose challenges.

• Execution Risk: M&A-driven growth requires careful integration of acquired companies and it increases the risk of affecting the company’s operating margins.

🧠 Final Thoughts

Norbit’s fundamentals, balanced portfolio and innovation-driven strategy make it a rare gem in the tech space. Its portfolio ensures resilience with high-margin businesses like Oceans and recurring revenue streams from Connectivity, with strong growth in connectivity offsetting weaker sonar sales in recent quarters.

As someone who appreciates companies that punch above their weight, Norbit stands out as a problem-solver in niche markets. Its growth targets—2.75B NOK organic revenue by 2027—are realistic, given its track record.

For investors seeking a small-cap company with proven growth, a forward-looking management team, financial discipline, and a habit of staying ahead of industry trends, Norbit is a great opportunity.

That’s all! I hope you enjoyed this new series of my hidden gems. We will keep looking for more gems, so stay tuned!

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Welcome to the very first edition of the Hidden Gems Series!

In this Hidden Gems series, we’ll be diving into small- and mid-cap companies that are often overlooked by investors. Each of these companies possesses, what I consider to be, a unique edge—whether it's exceptional business quality, underrated quantitative fundamentals, or outstanding growth potential with strong technical setups.

Today, I’m excited to highlight three gems, each with its own distinctive appeal. We’ll start by traveling to Italy, where two of these companies operate in the high-end luxury market. Then, we’ll move to the U.S. to look at a young growth company that addresses complex financial needs for some of the world’s biggest corporations.

While, we may argue, all three shine in their own way across qualitative and quantitative fundamentals as well as technicals, each has one standout trait that makes it truly special.

Let’s dive in!

The Italian Sea Group: Building Big Luxury Yachts with Great Fundamentals

The Italian Sea Group (TISG) is an Italian €430 million small-cap and a key player in the high-end yacht industry, constructing and maintaining luxury yachts over 50 meters. Founded by CEO Giovanni Constantino in 2012 from the merger of the historic Tecnomar and Admiral brands, TISG has further expanded through partnerships with Armani and Lamborghini, as well as the acquisition of Perini Navi and Picchiotti, funded by its 2021 IPO.

With demand for luxury yachts rising alongside the 5% CAGR growth in high-net-worth individuals, the company is well-positioned to capitalize on it with their current strategy. Its vertically integrated model ensures control over every phase, from design to delivery, which allows for a premium quality and customization that high-net-worth clients seek.

The company recently expanded its production capacity, enabling it to take on larger projects with reduced lead times and capitalize on its still big order backlog. Although this backlog grew considerably during the COVID years, recent normalization and economic uncertainty has caused the stock price to dip.

What makes TISG very interesting at current price levels is their quantitative fundamentals:

• FY2024 Growth: +14.8% Revenue growth and +21.6% EPS growth.

• Valuation Metrics (NTM): P/E of 8.85, PEG of 0.4, and P/FCF at 7.5.

• Capital Efficiency:

  • Profitability (LTM): ROCE at 26.4%, ROIC at 16.6%, with a net profit margin of 10.7%.

  • Capital-light business model (CapEx/Rev close to 0) given its vertically integrated approach and backlog-driven revenue stream.

• Financial Health: Low leverage with Net Debt/EBITDA at 0.6

The company’s backlog high visibility has allowed them to reaffirm FY2025 and FY2026 guidance, expecting +9% revs growth and +16.5% EPS growth.

Main Risks:

• While the backlog ensures some stability through 2026, slowing new orders have raised concerns about potential demand softening in the mid-term, particularly given TISG’s longer lead times and luxury-focused, low-volume sales model.

• Brand deterioration is a high risk. The recent incident involving a TISG yacht sinking, resulting in the death of Mike Lynch (news here), challenges the brand’s image. The luxury yacht business depends heavily on reputation, client trust, and safety perceptions. For high-net-worth clients, brand trust is most important, and this type of events can lead them to shift to competitors, impacting TISG’s low-volume sales model.

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Brunello Cucinelli: High-End Quality with an Hermès Vibe

Hermès is universally known for its craftsmanship and exclusivity, with a 10-year CAGR of 24.34% largely driven by its famous Birkin bags. However, many might not be as familiar with Brunello Cucinelli (BC.MI), the "King of Cashmere."

This Italian brand, worth €6 billion, is also family-owned and founder-led, offering a unique approach to luxury similar to Hermès dedication to timelessness and quality. Below, I’ll explain what sets Cucinelli’s brand apart as a high-quality business in the absolute luxury market.

Positioning in "Absolute Luxury"

Brunello Cucinelli has carved out a place in the “absolute luxury” segment, emphasizing heritage and timeless quality rather than transient fashion trends. For Cucinelli, luxury is about consistency and improvement built on a foundation of “decades of experience, history, and tradition.”

“The luxury market is independent of time and is based on a solid tradition.” - Brunello Cucinelli, 2011 Shareholder letter

A Culture Grounded in Humanity and Talent Retention

Drawing from his roots in Umbria, Cucinelli has cultivated a culture that prioritizes employee well-being and transparency. Employees finish work at 6 PM to preserve creativity and energy. With over 80% of production in Italy, artisans are paid 20% above the industry standard, motivating them to sustain the brand’s high standards.

“So these people can earn €80, €85 instead of €60... there lies our strength for the future.” - Brunello Cucinelli, Q1 2012 ER Conference call.

Mindful, Sustainable Growth

Cucinelli stands for sustainable growth that values quality over rapid expansion. Stores are opened only in prestigious locations, and growth is steady and purposeful to maintain exclusivity and high standards.

“We waited for 4 years in order to land a great location in Miami. I believe in a company that grows always maintaining high quality, high craftsmanship, and hopefully high taste.” - Brunello Cucinelli, 2019 Shareholder letter

Products Designed for Generations

Cucinelli products are created to be cherished and passed down, emphasizing durability and reparability rather than disposability. Each item is crafted with the intent of becoming a heritage piece.

“Contribute to the creation of unique items, which can be handed down and repaired, as they are part of the human-life cycle.” - Brunello Cucinelli, 2019 Shareholder letter.

Final Thoughts

Brunello Cucinelli reminds me of a “little Hermès” in its focus on craftsmanship, quality, and thoughtful growth. The brand represents more than fashion; its commitment to quality and heritage makes it a unique and differentiated business in the global luxury market.

🧐 Fun fact

Top tech execs like Mark Zuckerberg and Jeff Bezos are known for their casual uniforms—simple T-shirts or polos that look low-key but with an unreal high price tag. Jeff Bezos, for instance, reportedly spent over $500,000 on Brunello’s clothing in one shopping spree, a testament to his commitment to understated luxury and Cucinelli's philosophy of quality.

Clearwater Analytics: Growth through Automated Financial Management with Strong Technical Setup

Clearwater Analytics, a $6B cloud-native software company, delivers clarity and control over finances for institutional clients through daily accounting, data analytics, and customized portfolio reporting. Their platform enables informed decisions on performance, compliance, and risk, all while simplifying and automating financial management by replacing outdated legacy systems like SAP with a single, cloud-based solution. This approach not only enhances data integrity but also offers clients a competitive edge— enabling them to take faster and smarter decisions in a fast-paced financial landscape.

Founded in 2004 in Boise, Idaho, Clearwater now manages over $7.3T in assets for over 1300 clients, including JPMorgan, Snowflake, Dell, and Spotify. Since its 2021 IPO, the company has delivered +20% CAGR revenue growth, doubled cash flow, and a strong 32% FCF margin coupled with a 110% net retention rate.

What also makes Clearwater stand out is its current technical setup, let’s take a good look at it.

Technical setup

• Chart shows a large U-shaped base forming since the 2021 COVID windfall, coinciding with their IPO (bad timing, to say the least). The base completed with a recent retest of its previous high at $28 in October.

• MACD has been gaining momentum since mid-year and looks ready to pause as the stock consolidates near ATH. The weekly RSI is in overbought territory, supporting a possible handle formation for a classic Cup and Handle pattern.

• A natural floor for the handle would be near the $24 price tag coinciding with a past strong resistance, broken out in August 2024.

Final Thoughts

Clearwater’s IPO at the end of 2021 came at a challenging time, but they have continued to post 20% y/y revenue growth, with improving free cash flow and, recently, positive net income margins.

Although the financial management market may not seem so sexy, its estimated $11B TAM by 2030 is ready for disruption given the prevalence of outdated systems. Institutions have taken notice, accumulating shares while the stock has flown under the radar of individual investors.

Following the recent ATH retest at $28, I believe Clearwater's best days may still lie ahead with a potential Cup and Handle formation and strengthening fundamentals.

That’s it! I hope you enjoyed this hidden gems series. I’ll be doing more like this so stay tuned!

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