Beating The Tide: Stock Picks That Outperform

Celestica (CLS) Q1 2026: Déjà Vu. Beat, Raise, Drop

George Atuan, CFA — Tue, 28 Apr 2026 22:16:32 GMT

Has this happened to you?

You’re in a moment… a conversation, a place, a setting… and as it’s unfolding you’d swear you’ve lived it before. Same person, same words, same chair. I get them more often the older I get. One time I went down a rabbit hole trying to figure out what déjà vu actually is, and I think I read it’s a millisecond hiccup in the brain while it’s generating the sensation of memory (don’t hold me to that, it was a long time ago). The point is: it’s a feeling that something has happened before when it actually hasn’t.

Yesterday I was reading through CLS’s Q1 2026 earnings, and for a second I had that exact feeling. I was pretty sure I had already written an article about CLS dropping double digits the session after a beat. “Not again… déjà vu,” I thought. Then I pulled up my Q4 2025 piece and no, it wasn’t déjà vu. I really had written that article. The script was identical. Mr Market just likes to play with my head.

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Since I called Celestica the most important AI stock you’ve probably never heard, the position has compounded into one of the largest contributors in the portfolio.

My CLS is in CAD as I bought it on the TSX, but it is on the NYSE. In the article I refer to the stock price in USD (the NYSE shares).

From the original $153 target to the $320 in September 2025 to $575 in January, the thesis has done more than its share of work. As of today, CLS sits at $355. Pre-earnings, it was over $420.

Subscribers who acted on my January 30 update (when shares were $295) were up +43% pre-earnings and +20% even after today’s pullback.

I told subscribers in last week’s Weekly that I expected CLS to beat both the top and bottom line.

It did…kinda.

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Adjusted EPS came in at $2.16 against the $1.95–$2.15 guide, above the high end. Revenue of $4.05B landed at the midpoint of the $3.85B–$4.15B range and missed consensus by 0.02%… a rounding error. The 2026 outlook moved from $17B and $8.75 in adjusted EPS to $19.0B and $10.15, and the 2026 adjusted operating margin guide stepped up from 7.8% to 8.1%.

Then the stock fell 17% in pre-market.

If this feels like déjà vu, that’s because it is. Q4 2025 was a beat-and-raise on every line that mattered…

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… and CLS dropped about 15% the next session.

I called that one an emotional overreaction in my Q4 2025 update. Three months later, the script is identical: print above guide, raise the year, lay out a stronger 2027, market sells. Same movie, sequel edition.

TLDR

Q1 2026 was a clean beat: adjusted EPS $2.16 vs. $1.95–$2.15 guide, revenue $4.05B at the midpoint (+53% y/y), 8.0% adjusted operating margin record.
2026 outlook raised: revenue $17.0B → $19.0B, adjusted EPS $8.75 → $10.15, operating margin 7.8% → 8.1%.
Of 6 thesis pillars, 5 are confirmed and strengthening, 1 is evolving (FCF compression as 2027 capex steps to ~$1.5B).
Customer concentration worsened to 65% from the top three (vs. 51% a year ago), the only risk worth an active update.
Maintaining the $575 target. Today's drop is a sentiment unwind, not a thesis event. Conviction unchanged.

Thesis scorecard

Pillar #1. Transformation from commodity EMS to AI-infrastructure design partner: Confirmed and strengthening

Original thesis: When I wrote the original deep dive, the argument was that CLS had quietly remixed itself out of low-margin commodity manufacturing into a design-led HPS business that co-engineers networking and compute for the largest hyperscalers.

Evolution: In the Q4 2025 update, I noted HPS at $1.4B, or 38% of company revenue. CCS as a whole was 78% of the top line. The pillar was already strengthening then.

What happened since last update: HPS revenue in Q1 2026 was approximately $1.7B, +63% y/y, now 42% of total revenue. CCS overall hit $3.24B (+76% y/y) and is now 80% of the company. The CEO told the call that CLS just won “the first major production scale deployment of co-packaged optics, using Broadcom’s Tomahawk 6 Davisson module,” calling it a validation of a multi-year investment that pulled the company up the value stack. R&D headcount sits at roughly 1,350 design engineers, materially higher than a year ago.

Assessment: HPS at 42% of revenue, growing 63%, is structural. The CPO award puts CLS in front of the next networking node. Pillar strengthens.

Pillar #2. Hyperscaler AI infrastructure spend is structural, not a hype cycle: Confirmed and strengthening

Original thesis: AI capex is in a multi-year supercycle. Hyperscalers are tearing down and rebuilding data centres from scratch, and that build cycle has years to run.

Evolution: After Q4 2025, the question was whether the $1B 2026 capex plan was demand-pulled or speculative. Management said demand was “essentially already in hand.” Markets didn’t believe it.

What happened since last update: The CEO opened the Q1 call by saying "Our awarded backlog and the opportunity pipeline with both existing and new customers are the strongest they have ever been during my tenure as CEO." Q2 communications guidance is +50% y/y; enterprise +130% y/y. The CFO disclosed 10 active 1.6T networking programs ramping heavily in 2027 — a fact not in the previous outlook. Mass production on 1.6T begins with two hyperscalers in H2 2026, plus the new CPO program ramping in 2027, plus the AMD Helios scale-up partnership announced in March.

Assessment: Bookings are getting longer, not shorter. The CEO said CLS is now “dipping into 2028 and actually booking awards right now that ship into 2028.” That is the shape of a supercycle, not a hype cycle. Pillar strengthens.

Pillar #3. 400G/800G/1.6T networking ramp: Confirmed and strengthening

Original thesis: Hyperscalers upgrading switches to handle AI workloads is a multi-year revenue engine, with each generation bigger than the last.

Evolution: By Q4 2025 the 800G ramp was driving the bulk of communications growth. The 1.6T story was emerging.

What happened since last update: Communications grew +69% in Q1, ahead of the low-60s percentage guide. The CFO said 800G is "accelerating materially." The CPO Ethernet switch program announced this morning is 1.6T silicon. Per the CEO: "This is not just another switch award. We actually believe it's the first major production scale deployment of co-packaged optics… we are now a sophisticated co-design partner for the most advanced hyperscalers… it also sets us up well for the 3.2T adoption."

Assessment: The runway just got longer. My original framing was that switches were the bottleneck for AI workloads. The market is now treating CLS as a designed-in supplier for the next two generations. Pillar strengthens.

Pillar #4. Inference-driven durability. Long runway beyond 2026: Confirmed and strengthening

Original thesis: Inference, unlike training, runs continuously. As workloads shift toward inference, the demand for hyperscaler infrastructure becomes structural rather than episodic.

Evolution: Q4 2025 had visibility “well into 2026.” That visibility was the cleanest argument for paying up.

What happened since last update: The CFO put a number on 2027 for the first time.

We’re growing by about six and a half billion this year, and we think we’re going to grow significantly more than that, which means the floor would be somewhere around $25.5 billion. We do see revenue higher than that.

Read that twice. The 2027 floor is now $25.5B against the freshly raised $19B for 2026. That’s +35% growth on top of +53% growth, with the company describing it as a floor. The CEO confirmed that customer-funded NCNR (non-cancellable, non-returnable) orders extend into 2028. On the digital-native rack-scale program, mass production starts late Q1 2027 with sample shipments this year.

Assessment: This is the pillar where my January target work was most conservative. A $25.5B 2027 floor wasn’t in my Jan 30 model. Pillar strengthens, materially.

Pillar #5. Free cash flow machine and capital returns: Confirmed, evolving

Original thesis: CLS converts net income to cash at high rates and uses the cash to retire shares, with leverage held below 1x.

Evolution: By Q4 2025 capex was guided to $1B in 2026 (5x prior year), with the company saying it would be funded entirely from operating cash flow. FCF for full-year 2025 came in at $458M. Guidance for 2026 FCF was set at $500M and it’s the only number that didn’t move higher today.

What happened since last update: Q1 2026 FCF was $138M against $94M in Q1 2025. Capex stepped up to $230M (5.7% of revenue) and full-year capex stays at $1B. The CFO put a placeholder on 2027 capex of around $1.5B. With 2026 FCF held at $500M while revenue and EPS guides moved up, the FCF margin compresses from 3.7% on the prior $17B revenue plan to 2.6% on the new $19B plan. Inventory rose $885M y/y to $2.67B, but accounts payable rose $2.0B y/y, so the working-capital build is being supplier-financed. Net debt finished Q1 at $341M, leverage at 0.6x (actually better than a year ago). The credit facility was upsized to $2.5B with the revolver moving from $750M to $1.75B. Buybacks were $20M in the quarter, modest by historical standard.

Assessment: Capital is being redirected from buybacks into capacity, which is rational given the order book. On valuation: my $575 target used the old $17B / $8.75 EPS base. At $355 against the new $10.15 EPS, CLS trades at roughly 35x forward — the same multiple the market paid 90 days ago when EPS was $8.75. The model has caught up to the price. Maintaining $575. The $25.5B 2027 floor at the same operating margin folds through to EPS in the $13–$14 range, putting CLS at roughly 26x 2027 numbers at today's price — not expensive for +35% growth with a designed-in position in the next two networking nodes.

Pillar #6. Defensive moat via design complexity: Confirmed and strengthening

Original thesis: CLS isn't just a contract assembler. The HPS business co-designs reference platforms with hyperscalers, single-sourced and difficult to displace once qualified.

Evolution: By Q4 2025 the moat argument hinged on whether Wiwynn, Quanta, and Inventec could replicate HPS. The DigiTimes scare suggested Google might shift orders. Management said no; Google was diversifying suppliers because it physically can't single-source the volumes.

What happened since last update: Three new commercial proof points.

The AMD Helios scale-up networking switch: a brand-new architecture for AI rack-scale designs, announced in March.
The 1.6T CPO program. Won not because CLS bid lowest, but because the existing customer had already given CLS "multiple 1.6T awards" and trusted the execution.
The CEO on Q&A: “In the land of very dynamic supply constraints, we do advanced planning very well, and typically, we gain share through that environment because we find that peers or competitors have a hard time executing through turbulent times.” Capacity tightness, in his read, is a moat-strengthener.

Assessment: Moats deepen when execution under stress separates leaders from the field. The industry is in exactly that regime now. Pillar strengthens.

Q1 2026 earnings: what the print actually said

The table speaks for itself, so two reads worth pulling out. The q/q GAAP softness (earnings from ops -$42M, gross margin -100 bps, EPS -$0.48) is mostly tax timing as the GAAP rate normalised from 11% in Q4 to 17% in Q1. On adjusted, every line moved the right way both sequentially and y/y, with margin expansion and ROIC the standout; adjusted ROIC of 49.8% (+1,830 bps y/y) is capital efficiency you don't see in EMS comps. The 2026 outlook moved with it: revenue $19.0B, adjusted EPS $10.15, operating margin 8.1%. The $500M FCF guide held flat to absorb the unchanged $1B capex plan.

Share Beating The Tide: Stock Picks That Outperform

Segment dynamics

CCS did the heavy lifting and the mix kept improving. CCS revenue of $3.24B (+76% y/y) was 80% of the company. CCS segment margin expanded 60 bps to 8.6%. Inside CCS, communications grew +69% (above the low-60s percentage guide) on 800G ramps. Enterprise grew +101%, slightly below the high-teens guide of the prior period because of a component-supply issue on an AI/ML compute program. The CEO said it “wasn’t a demand issue, it was actually a material supply issue. That has been resolved and will be catching up in subsequent quarters.”

ATS held flat with materially better margins. ATS revenue of $806M was approximately flat y/y but ahead of the company’s own low-single-digit decline guide. Segment margin moved up 100 bps to 6.0% on portfolio reshaping in the aerospace and defence business and stronger HealthTech. Capital Equipment, the soft spot, is now showing what the CFO described as “a very nice cycle where there is a very strong order book from our major customers.”

HPS is now the centre of gravity. HPS revenue of approximately $1.7B (+63% y/y) is 42% of total company revenue, up from 38% at the end of 2025. The CFO said HPS “is really underpinning the majority of the growth that we’re seeing.” Every new program announced from the AMD Helios switch, the 1.6T CPO program, the digital-native rack-scale system to the next-generation AI/ML compute program are HPS.

Capex stepped up exactly as planned. Q1 capex was $230M against $37M a year ago, or 5.7% of revenue. The full-year capex guide stays at $1B and the CFO put a placeholder on 2027 of around $1.5B to support the program ramps already booked. The CFO described the framework: “When we make our capacity decision, it’s tied to a business case, it’s tied to program-level specifics, it’s tied to programs that we are winning… The business cases are strong. Strong ROIs, strong paybacks.”

Working capital is being supplier-financed. Inventory of $2.67B is up $885M y/y. Accounts payable of $5.02B is up roughly $2.0B y/y. The cash conversion cycle improved to 55 days from 69 a year ago. This is the shape of a company building ahead of long-lead programs while pushing payment terms out… not a company stuffing the channel.

Guidance: what changed in 90 days

Two things stand out. The EPS guide moved faster than revenue (+16% vs. +12%), operating leverage thesis confirmed. And the $25.5B 2027 floor is the most important number disclosed today. It frames the entire valuation question.

Management credibility: three quarters of EPS beats in a row, two full-year raises in 90 days. When this team calls a number "high confidence," read it as a floor.

Risk register: what bears actually have left to work with

Customer concentration materialized, and worse. Three customers each over 10% of Q1 revenue, 35%, 15%, 15%, totalling 65%. A year ago the same three were 28%, 13%, 10%, totalling 51%. The single-largest moved from 28% to 35% in twelve months. CLS is more concentrated today than when I wrote the original thesis. The offset: the 35% customer is funding the AMD Helios and digital-native rack-scale builds, both under NCNR contracts. But concentration is concentration, and any single-customer pause is now a much bigger event.

Supply constraint: new and rising. Component shortages are "more constrained now than 90 days ago" per the CEO: custom silicon, memory, 40+ layer PCBs, power components, optical components. Q1 enterprise revenue was capped by exactly this dynamic. The new $19B guide already factors these constraints in, and lead-time extensions are giving CLS "unprecedented visibility from our customers' end-item demand." If supply loosens in 2H, there's upside; if it tightens further, the H2 ramp slips into 2027, which the demand backdrop can absorb.

Capex absorption evolving, not yet a problem. 2027 capex at ~$1.5B against an unchanged $500M FCF guide for 2026 means free cash compresses through this build-out. The balance sheet absorbs it. Net leverage is 0.6x and the upsized $2.5B credit facility was put in place yesterday but the buyback story slows. This is the trade I’m willing to make at this stage of the cycle, but it’s the trade.

AI capex normalization faded, monitored. Twelve months and two raises after the original bear case, hyperscaler capex is accelerating, and CLS is now booking awards that ship in 2028. Leaving this risk in the register because secular cycles do end, but the evidence has moved against it.

Verdict

CLS beat the guide, raised by $2B in revenue and $1.40 in EPS, disclosed a $25.5B 2027 floor, and the stock fell 17%. Maintaining $575. I'd rather be wrong on the 90-day path than the three-year compounding.

Weekly #79: Why I Cap Even My Best Calls at 5% (Position Sizing)

George Atuan, CFA — Sun, 26 Apr 2026 21:51:34 GMT

Hello fellow Sharks,

Another strong week for the portfolio. Yes, the market was up, but the portfolio gained more widening the gap. If you want to skip straight to the numbers, jump to the Portfolio Update.

Everyone is talking about Tim Cook’s replacement at Apple or Monday’s earnings results for CLS…not me. There are many news outlets covering the story and I am not going to aggregate the news and report it back. Remember, I am not in the business of reporting the news to you, I am in the business of making you a better investor. Yes, Apple’s CEO change (might be good to refresh the innovation cycle which lacked under Cook) and CLS’ earnings results (I think they will beat both top and bottom line…again) are relevant, but in the long-term view, they won’t affect our investment approach.

Instead, in the Thought Of The Week, I want to talk about the arithmetic of position sizing.

But first a quick poll…

It matters, especially now, as the secret to long-term success is not finding the next 100x multibagger, but minimising your portfolio drawdown, not wiping out your account (avoiding the Death Line as I explained here), and letting the portfolio compound over decades.

Enjoy the read, and have a great Sunday.

~George

Earnings Results

This week three companies reported. Only one missed revenues. Paid subscribers can read the details here.

Thought Of The Week

The Arithmetic That Punishes Conviction

A subscriber emailed me last week. He wanted to know why I size positions at 2% to 5%. “If you have conviction, you should go all in.” He is not the first to ask, and with the market sitting where it is in April 2026, he won’t be the last.

So this week’s note is about the brutal mathematics that keeps me sized small even when the analysis says go big. It is about why “all in” is the fastest way to vapourise a decade of compounding. And it is about what just happened in PayPal that proved the rule.

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The casino has gotten loud

Today, I watched a video about how Polymarket and Kalshi are rigged.

I knew they were rigged. The Charles de Gaulle weather sensor manipulation, the US Army soldier insider-trading the Maduro raid for a 12x return, the senators trading their own legislation: those are not edge cases, those are the business model. Information asymmetry is what every counterparty on those platforms is hunting.

What the video reminded me is why this kind of gambling has become so popular. People feel locked out. Wages have not kept up with rents and groceries. The career ladder that used to compound into a house and a pension now compounds into student debt and a long commute.

Index investing for thirty years feels like a prescription for someone who already has the cushion to wait. So a lot of people go looking for the asymmetric payoff: $33,000 into $400,000 on a Polymarket bet, or one stock that takes the portfolio from $50K to $500K. The promise of skipping the ladder. The participants are not professionals. They are retail gamblers, people who think they have an edge because they followed a Twitter account or watched a debate. They are not sure. They are being routed against the people who actually are sure.

In Weekly #13 I defined gambling as:

Gambling is the act of engaging in negative expected value activities.

Buying a lotto ticket is gambling. Betting on a Polymarket weather contract against a counterparty who has tampered with the sensor is gambling. Anything where the expected value is negative because the other side has an edge you don’t have is gambling. By that definition, prediction markets are not investing dressed up as finance. They are casinos with better marketing.

There is another form of gambling that doesn’t look like gambling. The kind that happens inside brokerage accounts run by serious-looking people. Going all in on one or two stocks because the conviction is high. That is the same impulse with a respectable wrapper. The asymmetry of recovery, which I will walk through below, makes it EV-negative far more often than people realise. The “all in” trade has a fat left tail that the “all in” advocate refuses to model.

That is what this Thought Of The Week is about. Why I size 2% to 5%, even on the calls I am sure of. And why the math, not the conviction, has to drive the size.

The math nobody runs

Most people size positions as if upside and downside are mirror images. They are not. The arithmetic of recovery is asymmetric in a way that punishes anyone who ignores it.

A 10% drawdown needs +11% to get back to flat. Easy. A 20% drawdown needs +25%. Still recoverable inside a normal year. A 50% drawdown needs +100%. That is a doubling. Most people don’t double their money in five years, let alone get the chance to do it just to stand still.

A 70% drawdown needs +233%. That is the number that should keep position sizers honest. To recover from a 70% loss you have to triple what is left and add a third on top.

The S&P 500 has not actually drawn down that far in 25 years (the GFC bottomed at -57%, COVID at -34%)…

…but the Nasdaq Composite did during the dot-com bust: down 78% from March 2000 to October 2002, and it didn’t make a new all-time high until April 2015.

Almost fifteen years of dead money. Single stocks blow up that hard all the time.

PYPL drew down 78% in one year from July 2021.

Meta drew down 77% in the same period.

Cisco just recovered earlier this year to its 2000 peak, twenty-six years later.

On the way down, it always feels like the world is ending. Sometimes it is. More often, it just takes time to get back.

The asymmetry doesn’t only apply at the index level. Single stocks blow up harder and recover slower. Often they don’t recover at all.

What PayPal taught me in real time

Last quarter I closed PYPL at a 52% capital loss.

Everything about that trade went wrong. The thesis on consumer spend held up, but the take-rate compression management pretended was temporary turned out to be structural, the new CEO inherited a Branded Checkout product that was bleeding share to Apple Pay and Shop Pay every month, and the buyback was funding a dilution treadmill rather than shrinking the float.

I wrote about all of this in the PayPal Post-Mortem and in the trade alert that closed the position. Read both if you haven’t.

But here is the part that matters for today’s discussion: PYPL was 1.7% of the portfolio. A 52% loss on a 1.7% position cost me 88 basis points.

Note that the 0.9% position was at the closing price of $41.

If this changed how you think about position sizing, send it to the friend who's running 25% positions.

Less than half a percent of NAV. In the week that I closed the position, the rest of the book had already covered the damage 7x over.

The portfolio kept compounding. The mistake stayed contained.

Now imagine the same trade at 10% of the portfolio, the size a “high-conviction” advocate would have chosen. A 52% loss on a 10% position is 5.2% of NAV gone. To recover from that single mistake, the rest of the book has to deliver +5.5% just to stand still. A full year of acceptable returns, vapourised by one wrong call.

At 25% of the portfolio (which I have been asked about more than once), the same mistake removes 13% of NAV. Recovery requires +15%. That is half a year of compounding lost to one trade. And PYPL was not even a catastrophic blow up. PYPL has, in its history, drawn down 83% during the inflation shock of 2022. Imagine sizing a name 25% with that kind of left tail in the distribution.

This is the asymmetry the “go all in” crowd never models.

CDE: the opposite lesson

Coeur Mining [] is the tenth best-performing position in the portfolio.

It is also one of the most volatile: silver moves 5% on a Tuesday, the equity moves 12%.

If I had gone “all in” at 25%, every silver tantrum would have had me down 3% on the portfolio in a session. By the third one I would have been managing my emotions instead of my analysis.

Instead I sized CDE at 4%1. The conviction was high, but the volatility was high too. So the position sized to what I could hold through a 40% peak-to-trough drawdown without flinching. CDE has had two of those since I bought it. I am still long.

The lesson cuts both ways. Sizing small didn’t cost me on CDE. The position has more than doubled and added meaningfully to portfolio returns. It just delivered those returns without forcing me to make a single emotional decision along the way. That is the trade-off most people get backwards: they think small position sizes mean small returns. What they actually mean is smaller emotions, which is what allows you to hold the winners for years instead of selling them in the next drawdown.

The rule I actually use

Position size = conviction × (Risk:Reward / 100) x (pain budget / max plausible drawdown)

Where:

Conviction is a number between 0.5 and 1.0, reflecting how confident I am that the thesis is right.

Risk:Reward is a score I calculate and track in my watchlist for each name, weighting the upside path against the downside path. A higher number means a more attractive investment.

Pain budget is the maximum percentage of NAV I am willing to lose on a single name in the worst case. For me that is 3%.

Max plausible drawdown is the worst peak-to-trough loss I can imagine on the underlying equity. Not the average. Not the comfortable case. The 95th-percentile bad outcome. Monte Carlo simulations are useful here.

Run the numbers and the table is the table. For example, at a Risk:Reward of 80 and a 3% pain budget you get the below:

Note that in that table there are sizings above 5%, but that is just theoretical. If you find a name whose maximum plausable drawdown is just 20% to 30%, please let me know!

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A strong-conviction call (0.9) on a name with a plausible 50% drawdown sizes at 4.3%. The same conviction on a name that could draw down 70% sizes at 3.1%. A 0.7 conviction call on a 50% drawdowner sizes at 3.4%. Notice the punishment that drawdown depth inflicts on size: hold conviction constant and double the worst-case drop, and the position size more than halves. Even at maximum conviction, a name with a plausible 70% drawdown caps at 3.4%, around half of what the same conviction earns on a 40% drawdowner. That isn’t because I lack confidence in my work. It is because the asymmetry of recovery does not care how confident I am.

The rule also forces me to be honest about what “max plausible drawdown” means. PYPL’s was 78% in 2022. Anyone sizing PYPL today as if 30% is the worst case has not done the work. The drawdown number is where most people lie to themselves. Pull the 10-year chart, find the worst peak-to-trough, then add a third on top because the next bear market will be worse than the last one in some way you can’t predict.

Three layers of conviction

The other thing that separates a 5% position from a 2% position in my book is whether the thesis has three layers of conviction or only one.

Layer #1. The business.

Do the unit economics work in good times and bad? Is the moat real, or a temporary share advantage that competition will erode? Can I draw the income statement five years from now without squinting?

Layer #2. The valuation.

Is the price disconnected from a defensible estimate of intrinsic value, by enough margin to absorb being half-wrong on growth or margins? If the answer is “yes, if you assume management hits guidance,” then it is not a 5% name.

Layer #3. The capital allocator.

Will the people running the company compound shareholder value or extract it? Buyback discipline, M&A history, executive compensation structure, insider ownership. This is the layer most people skip.

If a name only has one of those three, it is a 2% position or it is a watch-list name. Two layers gets you 2% to 3%. All three layers, sized to the drawdown profile, is what gets you to 4% or 5%. Without all three, concentration is gambling dressed up as analysis.

This matters more in April 2026 than in most months. The market is richly priced. The 2025 winners are up multiples. The temptation to size up the names that worked is exactly when the math becomes least forgiving. A 25% position in a name that has run 4x in a year, sized for the next move up, is a portfolio-ending decision waiting for a catalyst. The catalyst will come. They always do.

Conviction is not a substitute for sizing. The arithmetic of recovery doesn’t care how confident I am, and neither does the next 40% drawdown that lands in a name I was sure of. Sizing 2% to 5% isn’t timidity. It is the only way I know to be wrong on three or four positions a year and still let the winners compound to the upside they deserve.

Share Beating The Tide: Stock Picks That Outperform

Portfolio Update

The market hit an all time high. The portfolio outperformed the market, expanding our lead.

Portfolio Return

Month-to-date: +17.5% vs. the S&P 500’s +9.8%.
Year-to-date: +26.8% vs. the S&P 500’s +4.7%. That is a gap of 2,215 basis points.
Since inception: +79.0% vs. the S&P 500’s +24.6%. That’s 3.2x the market.

Contribution by Sector

Tech led the gains.

Contribution by Position

(For the full breakdown plus commentary on earnings results and the big movers, see Weekly Stock Performance Tracker)

How to read the heat map? Click here.

+51 bps (Thesis)
+48 bps (TSX: CLS) (Thesis)
+36 bps (Thesis)
+33 bps (Thesis)
+24 bps (Thesis)
+12 bps (Thesis)
flat (Thesis)
-25 bps (Thesis)

That’s it for this week.

Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!

Further Sunday reading to help your investment process:

I didn’t buy CDE but rather received the shares as an exchange for my NGD shares after the merger. Having said so, I performanced the same position sizing calculation as if I bought the shares. If I wasn’t find with the sizing I would have trimmed,

The Halal Chicken Plant That Taught Me To Close Pilgrim's Pride

George Atuan, CFA — Thu, 23 Apr 2026 19:17:38 GMT

Before I get to Pilgrim’s Pride, a story.

Years ago, back in my Moneda days in Santiago, I flew to Brazil for a site visit to a chicken plant. It wasn’t PPC. It was Marfrig, one of JBS’s biggest rivals at home. I put on the white coats and the hairnets and spent a morning watching an industrial poultry operation run flat out.

The plant ran halal. That meant a Muslim slaughterman stood at the head of the line saying a short prayer over each bird before cutting its throat, “Bismillah, Allahu Akbar,” in the name of Allah, Allah is the Greatest. The chickens came to him upside down, hanging by their feet from a steel hook on a mechanised chain that never stopped moving. They came at him so fast that I honestly didn’t understand how he was getting the full phrase out between birds. His lips barely paused.

From the kill floor we walked through the cutting room, where the birds were broken down into breasts, thighs, wings, and tenders by a wall of fast-moving blades and faster-moving workers. Then we got to the sausage line. I won’t ruin it for you here by describing what actually goes into a sausage, but I’ll tell you what the tour taught me. I didn’t touch a sausage for a month afterwards.

Then, like every analyst who tours a plant, I forgot the unsettling parts and went back to eating sausages. And I went back to owning chicken names, because the unit economics still worked on a spreadsheet even when they didn’t work on a factory floor. That’s the job. You see an industry up close, you file away what you saw, and you keep underwriting the businesses anyway. Sometimes that’s the right call. Sometimes it isn’t. This deep dive is a sometimes-it-isn’t.

Last week I sent a trade alert to paid subscribers closing my Pilgrim’s Pride (PPC) position at a 15.7% loss.

I bought at $41.59, watched the stock run to $57, and sold at $35.05 as the cycle rolled over. Factor in the $8.40 per share of special dividends PPC paid out during the holding period ($6.30 plus $2.10), and the realized position actually delivered a +4.4% total return (Total return : ($35.05 + $8.40 − $41.59) / $41.59 = +4.47%).

The chicken cycle giveth, and the chicken cycle taketh away. I’d argue the second part is louder than the first.

That trade alert was the capital-recycling call. This deep dive is the homework behind it. I’m publishing the full thesis now because I want subscribers to see how I walked myself out of a position that still shows 13% upside on my own DCF, and why, even with my target sitting at $38 versus a market price near $33, I think closing was the right call.

The short version: my DCF target is real, but it’s built on assumptions that sit near the optimistic end of what’s plausible for a commodity protein producer at the top of a margin cycle. When I stress-test those assumptions with a 5,000-path Monte Carlo simulation, 56% of the runs finish below today’s price. The expected upside is thin, the left tail is fat, and the capital has a better home.

TLDR

Pilgrim’s Pride [] is the second-largest US chicken producer, with Europe and Mexico rounding out a $18.5B revenue base. JBS [] owns more than 80% of the shares. It’s a commodity business with no brand moat, no pricing power, and a balance sheet now levered 1.2x net debt to EBITDA.
FY2025 EBITDA margin hit 12.2%, near cycle peaks. The two prior years were 5.7% and 12.2%. The five-year average is under 8%. Q4 2025 already marked the turn: EBITDA margin of 9.2% was a 280bp compression y/y, and Mexico’s operating margin collapsed from 6.4% to 1.0%.
My DCF spits out a $38 target using a 6.5% WACC, 1.5% terminal growth, and EBITDA margins fading from 12.2% to 7.6%. The assumptions aren’t aggressive in isolation, but a 0.9 beta on a business with ROIC swings between zero and 19% in five years is hard to defend.
A 5,000-run Monte Carlo across revenue growth, gross margin, capex intensity, and WACC puts the median target at $30.9 and the 95% VaR at $5.2. 56% of simulations land below the $33 market price. The implied risk-reward is roughly 1 to 0.3 against.
I closed at $35.05 for a 15.7% capital loss, though $8.40 of special dividends over the holding period flipped the realized position to a +4.4% total return. The capital has been redeployed into my April stock pick, where the Monte Carlo distribution, the cycle position, and the moat all favour staying long.

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What Pilgrim’s Pride Actually Is

PPC is the second-largest chicken producer in the US and the second-largest poultry producer in Europe. It runs a vertically integrated model: feed mills feed hatcheries, hatcheries feed grow-out farms, farms feed processing plants, plants feed customers. That integration is the entire cost-advantage story. It doesn’t create pricing power on the way out, but it controls input costs on the way in.

The business is built from three reporting segments, and the segment mix tells you where the money is made and where the risk lives.

The US segment is the engine, and the engine just started misfiring. US operating margin for the full year was 12.1%, but the Q4 exit rate was 7.4%. That’s a four-percentage-point margin compression in a single quarter, driven by what management called y/y declines in commodity market pricing. Translation: the Big Bird business, which sells whole birds into foodservice channels, got repriced down as supply caught up with demand.

Europe is the defensive leg. It carries more prepared-foods exposure through the Moy Park and Pilgrim’s Food Masters brands, and margins expanded y/y in Q4. The catch is that prepared foods here are largely private-label, so brand equity belongs to the retailer, not to PPC. It’s better than fresh commodity chicken, but it isn’t the high-moat snack aisle.

Mexico is the one to watch. Operating margin dropped from 6.4% to 1.0% in Q4 on what the company described as supply-demand fundamentals driven by an increase in imported proteins. That’s a polite way of saying imported chicken crushed local pricing. Mexico has historically been PPC’s highest-returning geography, so the timing stings.

How The Money Is Actually Made

A chicken producer doesn’t have many levers. Revenue is a function of pounds produced times average price per pound. Gross margin is a function of the spread between that selling price and the feed, labour, and energy cost to produce the bird. Everything else (SG&A, D&A, interest) is a rounding error against those two drivers.

Feed is corn and soybean meal, and it’s the single biggest cost bucket. PPC discloses that a 10% move in feed prices is a first-order hit to gross margin. The company runs hedging programs to smooth that volatility, but hedges delay the impact, they don’t eliminate it. When corn and soy are cheap and chicken is scarce, margins look like FY2025. When they aren’t, margins look like FY2021, when EBITDA margin was 4.0%.

Average selling price is a function of the broiler cycle: when hatcheries ramp, supply lags by about 9 months, then overshoots, then prices fall, then producers pull back, then supply tightens, then prices climb again. PPC has lived inside that cycle for 40 years and will live inside it for the next 40.

Q4 2025 earnings signalled the down leg of the current cycle. US chicken prices have fallen roughly 20% since July 2025 as industry hatch rates caught up with the demand surge that was driven by expensive beef and pork during FY2024. That’s not a PPC-specific problem. It’s the cycle doing what the cycle always does.

The Cycle Rolled Over In Q4

Here’s the frame that most of the sell side is missing. FY2025 full-year numbers look strong in aggregate: revenue +3.5% y/y to $18.5B, adjusted EBITDA up 2.5% to $2.27B, margin holding at 12.2%. A casual reader would see those numbers and conclude chicken markets are stable. They aren’t.

Q4 2025 is where the cycle shows itself. Adjusted EBITDA fell 21% y/y to $415M. Adjusted EBITDA margin compressed 280bp to 9.2%. Operating income fell 33% y/y. Diluted EPS dropped to $0.37 from $0.99, a 63% decline. The full-year stamps were strong because Q1 through Q3 ran at cycle peaks. Q4 broke the streak.

This matters because cycles don’t end with a press release. They end with one quarter where margins compress faster than volume growth can offset, and the next quarter looks worse, and the one after that worse still. The Q4 print is consistent with the classic broiler-cycle top: prices fall, margins fall, volumes hold or grow, and reported earnings decline even as the topline looks fine.

The historical pattern is instructive. In FY2021, chicken markets rolled over and adjusted EBITDA margin dropped to 4.0%. In FY2023, another downcycle took margin to 5.7%. Those weren’t left-tail events. Those were the cycle running its normal course.

EBITDA Margin Cyclicality

The six-year average EBITDA margin is 8.0%. The current margin is 12.2%. If you believe margins mean-revert toward the historical average over the next three to five years, you’re underwriting a revenue base that grows at low single digits while EBITDA falls toward $1.5B. That’s not a catastrophe. But it isn’t the $2.3B run-rate the current price is anchored to either.

No Moat, And That’s The Point

I’ve written about moat businesses before. My Moats 101 guide is one of my most popular LinkedIn posts.

I've also written about how moats can trap you.

PPC isn't a moat business, and I knew that before I bought it. Most people think you should only own companies with moats. That isn't true. Take my February stock pick.

No moat. Best operator in the peer group. Shares up 72% in two months.

Start with pricing power.

Over the past decade, PPC’s realized prices have risen roughly 2.4% per year on average. Industry wholesale chicken prices have risen closer to 3% per year over the same period. A true brand producer raises prices faster than the industry. PPC doesn’t. It’s a price taker, the vast majority of contracts are indexed to commodity benchmarks, and the company’s ability to pass costs through depends on market structure in the quarter the price reset happens.

Continue with market share.

In US frozen processed poultry, Tyson holds roughly 36% share, Perdue holds about 5%, and PPC holds about 1%. In fresh chicken, PPC is the number-two producer, but fresh chicken is the commoditized end of the aisle. The Just Bare brand is the most promising value-added franchise in the US portfolio, but it’s small relative to the commodity base.

End with returns.

ROIC over the past decade has averaged 10.48%, which barely clears an honest cost of capital estimate for a commodity protein producer. The current reading of 15.31% looks moat-like on its own.

The dispersion around that average is what gives the moat story away. ROIC peaked near 20% in 2017, fell below 5% through 2020 and 2021, briefly recovered above 10% in 2022, plunged back toward zero in 2023, and has only climbed back into the mid-teens through 2024 and 2025. A business with a genuine competitive advantage doesn’t see ROIC collapse to zero twice in five years. It sees zero, or maybe one near-zero year, during a generational downturn. PPC earns excess returns at the top of the cycle and destroys capital at the bottom. That’s the definition of no moat.

Management is operationally competent. The European restructuring has lifted UK margins from 3.3% adjusted op margin in FY2024 to 5.6% in FY2025, and Q4 2025 Europe margin of 6.7% is a decade high. But operational excellence in a commodity business doesn’t create a moat. It creates a cost advantage that peers will eventually replicate. Sanderson Farms, before being acquired in 2022, ran a similar playbook and landed at around 6% operating margin mid-cycle. That’s the ceiling for this industry.

Capital Allocation And The JBS Problem

JBS S.A., the Brazilian meat giant, owns more than 80% of PPC’s shares outstanding. That ownership structure is the single most underappreciated feature of this stock.

In 2021, JBS attempted to buy out the remaining ~20% minority stake. An independent board committee blocked the offer, deeming it inadequate, and JBS retracted. That episode tells you two things: first, JBS views PPC as a strategic asset it would like to fully consolidate. Second, the independent directors are willing to block a parent-initiated buyout on valuation grounds. The governance is functional. But the overhang remains.

PPC’s board chairman is also the CEO of JBS.

PPC 2025 Proxy Statement

Related-party transactions (Moy Park was acquired from JBS in 2017) pass through committee review, but the structural conflict exists. For the minority shareholder, this creates two forms of risk: first, a low-ball re-offer if PPC shares drop meaningfully; second, capital allocation decisions that serve JBS’s broader portfolio rather than PPC’s standalone intrinsic value.

On capital allocation itself, PPC has done fine, not great. The company paid out $6.30 per share in a special dividend in Q2 2025 and announced another $2.10 per share. Returning cash at the top of the cycle is the right call. It avoids the classic commodity-producer mistake of plowing peak-margin cash flow into capacity expansion right before the cycle turns. Share repurchases have generally been opportunistic rather than mechanical.

The M&A record is mixed. The 2017 Moy Park acquisition at 7.1x trailing EBITDA and the 2019 Tulip pork acquisition at undisclosed terms were reasonably priced, but neither materially upgraded the moat. The 2021 Kerry Consumer Foods deal at 8.5x EBITDA for the UK prepared-meals business made operational sense but added private-label exposure, which doesn’t scale into a brand franchise.

Valuation

This is the section where I argue against my own DCF. Bear with me.

My DCF model gives a fair share price of $38, which implies roughly 13% upside from the current $33 market price. The inputs are in the table below. They are not wildly aggressive in isolation. The problem is how they interact at the margin.

The terminal value is the tail wagging the valuation dog. About $7.1B of the $11.7B enterprise value sits in the terminal, which is standard for a DCF but worth flagging. A 50bp move in the WACC or the terminal growth rate flexes the target by more than my 13% upside. That’s not a bug in the model. That’s the commodity nature of the business.

Why Even My DCF Is Optimistic, Starting With The WACC

When I back-solved my own assumptions, the WACC is where I kept stopping. 6.5% is defensible on the surface and fragile underneath.

The build is 4.38% risk-free, plus a 4.23% equity risk premium, times a 0.9 levered beta, giving an 8.0% cost of equity. Cost of debt is 3.5% after tax. Target debt-to-capital of 35% blends the two into 6.5%.

The 0.9 beta is where the trouble starts. Beta is a backward-looking measure of stock-price volatility relative to the market. Over the past five years, PPC’s stock has moved with the market during risk-on phases and underperformed during cycle downturns, which averages out to something close to 0.9. But this is a business whose ROIC swings between zero and 19% in five years. Whose earnings per share went from $0.13 in FY2021 to $4.54 in FY2025. The economic volatility of the underlying business is far higher than the beta suggests.

Seeking Alpha

A more honest cost of equity for a commodity protein producer sits closer to 9-10%. Sell-side peers use 8.5%-9% regularly. At a 9.5% cost of equity and the same 3.5% after-tax cost of debt and 35% debt-to-capital, the WACC moves to roughly 7.4%. At 10% cost of equity, you’re at 7.7%.

That 90bp to 130bp increase in the WACC is worth a lot. The DCF model shows an implicit WACC of 7.0% at the current $33 market price, which means the market is already using a more realistic discount rate. The gap between my $38 target and the current $33 price is, to a first approximation, a disagreement about WACC, not about business fundamentals.

Second, the EBITDA margin path. My model fades margin from 12.2% at FY2025 to 8.3% in year 5, 7.7% in year 10, and 7.6% in the terminal. While the six-year historical average is 8.0%, the long-term average is 7.3%.

My fade path sits above the historical reality for the entire forecast period. A flatter path, taking terminal margin to 7.3%, would cut the target by several more dollars.

None of these is egregious individually. Together, they mean the $38 target is closer to the bull case than the base case. And that’s before I stress-test any of it.

Monte Carlo: The Stress Test That Closed The Trade

I run Monte Carlo simulations on every DCF I build. The point isn’t to produce a single target price. It’s to map the distribution of outcomes and understand how much of that distribution sits above the current market price.

For PPC, I simulated 5,000 paths, varying four inputs independently: revenue growth, gross margin, capex intensity, and WACC. Each input was sampled from a distribution calibrated to the last five years of realized data plus a forward view. The simulation pulls values from those distributions, re-runs the DCF, and logs the resulting target price. Five thousand runs gives a tight distribution.

The results are the reason I’m writing this article with a loss instead of holding for 13% upside.

Monte Carlo Distribution Statistics

Sit with that middle block for a moment. My point-estimate DCF says $38. The mean of 5,000 Monte Carlo simulations says $32.5, which is below the current $33 market price. The median is $30.9. And 56% of all simulations finish below today’s closing price.

That last figure is the number I care about most. A thesis that implies 13% upside on the point estimate but fails to clear the current price in more than half of plausible paths is not an asymmetric setup. It’s a coin flip with a fat left tail. The 95% CVaR, which is the average outcome across the worst 5% of runs, is -$0.9. That means in a real downside scenario, PPC isn’t just down 30%; it’s worth effectively nothing to the equity.

The sensitivity analysis confirms where the risk lives. WACC explains 44.5% of the variance in the output. Gross margin explains another 34.3%. Capex intensity adds 17.3%. Revenue growth is almost irrelevant at 3.9%. That ranking makes intuitive sense: this is a cyclical commodity producer where the two things that matter are the cost of capital and the margin the market happens to be paying in any given year.

The bear case scenario in my model pins the target at $15, which represents a 55% drawdown from here. The R/R on a point-estimate basis is 1 to 0.3 against: $5 of expected upside ($38 minus $33) versus $18 of expected downside ($33 minus $15). For a business that has spent four of the last ten years earning below its cost of capital, that risk-reward profile doesn’t warrant holding through the cycle turn.

Share Beating The Tide: Stock Picks That Outperform

Steel-Manning The Bear

The bear case is straightforward enough to write in a paragraph, but each clause matters.

First, margin mean reversion.

US chicken prices are already down roughly 20% since July 2025 as industry hatch rates caught up with peak demand.

Q4 2025 US adjusted operating margin dropped to 7.4% from 11.5% y/y. Q1 2026 and the rest of the year are likely to print well below FY2025. The question isn’t whether margins revert. It’s how fast and how deep.

Second, Mexico.

The 540bp margin collapse in Q4 2025 wasn’t a weather event. It was imported protein flooding the market as US producers redirected supply south. If US tariff policy tightens or peso weakness intensifies, the import dynamic reverses. If it persists, Mexico becomes a structural margin drag rather than a cyclical one.

Third, feed input inversion.

Corn and soybean prices are at multi-year lows on strong global harvests, which has helped margins in FY2024 and FY2025.

A single weather year in the US midwest, a renewed China-US trade disruption on soybeans, or an Argentina or Brazil harvest failure takes the feed cost tailwind away immediately. PPC’s hedges smooth this over 6-9 months, but they don’t eliminate it.

Fourth, avian flu.

HPAI has hit the US egg and turkey markets harder than broilers so far, but outbreaks in broiler houses remain a live tail risk. A flock cull event at one of PPC’s large integrated complexes could take a full quarter’s volume off the books. Insurance doesn’t fully cover it.

Fifth, legal overhang.

PPC pleaded guilty in 2021 to price-fixing charges and paid $110M. Civil litigation continues. Litigation settlements added $163M to the FY2025 P&L adjustment, which is why GAAP and adjusted numbers diverge materially. Another meaningful settlement is possible but not quantifiable from the outside.

If PPC shares trade down meaningfully on cycle weakness, JBS could return with a low-ball buyout offer. The independent committee blocked the 2021 attempt, but a 30-40% share price decline changes the calculus. That’s not a left-tail event for the business; it’s a left-tail event for the minority holder.

Any one of these risks is manageable. Two at the same time pushes the thesis underwater. The Monte Carlo distribution already embeds these in the fat left tail.

What The Bulls Are Missing

The bull case on PPC, which I held as recently as October 2025, rests on three pillars: chicken is the fastest-growing protein, operational excellence is creating structural margin expansion, and the balance sheet finally cleaned up enough to support capital returns.

Each of those is true. None of them changes the Monte Carlo distribution.

On chicken growth: the USDA’s projection calls for US chicken consumption to grow about 1% per year through 2032. That’s a volume story, not a margin story. If PPC captures its share of that growth, revenue compounds at 1-2% per year. That’s already baked into my DCF. It doesn’t push the distribution higher.

On operational excellence: the European restructuring did work. Europe margin went from 3.3% in FY2024 to 5.6% in FY2025 and is trending toward 6% in Q4. But operational improvements in commodity businesses get competed away over time. Every large integrator (Tyson, Perdue, Wayne-Sanderson, Koch Foods) is running the same playbook. At mid-cycle, the industry lands at 5-6% operating margin. That ceiling isn’t moving.

On capital returns: the $6.30 special dividend and the $2.10 announced follow-up are right-sized and well-timed. They return peak-cycle cash to owners instead of getting recycled into capacity expansion. This is exactly what I want to see, and it’s partly why PPC ran to $54 in mid-2025. But special dividends don’t create a moat. They confirm the absence of one: if there were high-return reinvestment opportunities inside the business, the company would reinvest.

The variant perception in my original thesis was that the market was underpricing the durability of the margin expansion. The Q4 2025 print disabused me of that view. Margins didn’t just plateau. They rolled. The durability case collapsed in one quarter, which is exactly what you’d expect for a business with no moat and high operating leverage into commodity prices.

Post-Mortem: Why I Bought At $41.59 And What I Missed

The entry was anchored in three beliefs, and each looked reasonable at the time. Two of the three turned out right. The one that mattered most was wrong.

Belief #1. The US chicken cycle was mid-innings, not late.

By Q2 2025, PPC had posted four consecutive quarters of double-digit adjusted EBITDA margins, with Q2 printing 14.4%. US foodservice demand was strong, beef was expensive because the US cattle herd was at multi-decade lows, and consumers were rotating into cheaper protein. The hatch-to-slaughter data I was tracking suggested supply was growing in line with demand, not ahead of it. That combination called for the cycle to run another four to six quarters, with more special dividends and buybacks waiting on the way out. This belief was right, for one more quarter. Then it wasn’t.

Belief #2. European margins had a real runway.

The Moy Park and Pilgrim’s Food Masters restructuring was lifting adjusted operating margin from 3.3% in FY2024 to 5.6% in FY2025 full year, with the Q4 2025 exit rate at 6.7%. That’s a +300bp improvement in roughly 18 months. Management was guiding to continued expansion through FY2026 on cost savings and network optimisation. I viewed this line as uncorrelated with US chicken pricing, which made it a natural diversifier inside the same ticker. This belief was right. Europe is doing what I thought it would. It’s just not enough to offset the US and Mexico together.

Belief #3. The margin structure had stepped up durably.

This was the thesis-definer. My view was that PPC’s cost position had stepped up meaningfully versus prior cycles because of the European restructuring, better US feed hedging, and operational discipline after the 2021 price-fixing resolution. I underwrote a mid-cycle EBITDA margin of 9-10%, above the 8% historical average. On $19B of revenue and a 10% mid-cycle margin, normalised EBITDA was $1.9B, and at a 7x multiple the equity was worth $45 per share. That was my buy-level anchor. This belief was wrong. Q4 2025 disabused me of it in a single quarter.

What I missed, specifically.

Miss #1. Hatch data.

Industry hatch rates started climbing sharply in spring 2025. By August, broiler egg sets and chicks placed were running 3-4% ahead of the prior year, which historically is the level that triggers price compression within two quarters. I saw the data but discounted it because the demand side was still absorbing the supply, right up until it wasn’t. The signal was there in the weekly USDA broiler reports. I let the strong Q1 and Q2 margin prints override it.

Miss #2. Mexico.

A 1.0% operating margin in Q4 2025 wasn’t on my risk register. I had Mexico flagged as PPC’s highest-margin geography, not as a risk. Imported proteins flooded that market faster than I expected. Tariff uncertainty and peso weakness amplified the effect. This was a failure of specificity in the bear case: I had Mexico listed as “stable” when I should have had it listed as “structurally exposed to US supply redirection.”

The lessons I’m taking forward.

First, commodity margin narratives compound the wrong way. A thesis that assumes “margins have stepped up durably” for a commodity producer is a bet against mean reversion in a business where mean reversion is the base rate.

Second, the weekly industry data matters more than the quarterly company data at cycle turns. Hatch sets, cold storage inventories, and wholesale spot prices lead the reported margin by two or three quarters.

Why I’m Recycling Into The April Pick

The capital has a better home. Last week’s April 2026 stock pick sits in the aerospace and defence complex, where the setup is the inverse of PPC: structural tailwinds on revenue, a moat grounded in qualification barriers and switching costs, a multi-year backlog visibility, and a Monte Carlo distribution where the mass sits above the current price rather than below it.

I won’t re-underwrite that thesis here; the trade alert and the accompanying deep dive cover it. The point is that capital is finite and time is expensive. Every dollar tied up in a 1-to-0.3 risk-reward is a dollar not working in something better.

The 15.7% capital loss on PPC stings less once I add back the $8.40 of special dividends that flipped the realized position to a +4.4% total return. It's still the correct recognition of a thesis that failed. My original underwrite assumed margins had structurally stepped up. Q4 2025 said otherwise. Waiting for a dead-cat bounce to break even is how investors hold commodity producers through full cycle downturns. I'm not doing that.

The Verdict

When my own DCF target shows 13% upside and I’m still selling, the reason is simple: the target is the optimistic tail of a distribution, not the centre of it. A thesis that needs my assumptions to hold up to survive the cycle turn isn’t a thesis. It’s a hope. Recycled capital beats hope every time.

A Record Quarter, a Stock Still Trading Like Nothing Happened

George Atuan, CFA — Tue, 21 Apr 2026 23:49:16 GMT

Hello fellow Sharks,

Here is the latest update on one of the positions in the portfolio.

Short version: results were great, execution is exactly what the thesis called for, and the stock is up a mere +4.6% since I added it to the portfolio.

That mismatch, between what the business is doing and what the market is paying, is the entire trade.

This quarter delivered a double-digit EPS beat versus consensus, double-digit revenue growth, another consecutive quarter of zero provision for credit losses, a meaningfully stronger capital position, and a management team that, for the first time in years, put buybacks back on the table.

And yet, the stock still trades at single-digit forward earnings and roughly 1.6x tangible book for a business earning 20% on tangible equity with zero debt at the holding company.

This Latam Utility Hit My Target (+40%) in 3 Months. Now What?

George Atuan, CFA — Mon, 20 Apr 2026 17:26:11 GMT

Back in January, I published a deep dive on a Latin American utility offering 40% upside.

Three months later, it touched my target price. The rerating played out faster than I expected.

The stock has since pulled back a bit, Q4 results just dropped, and I’ve refreshed the model. The new target is 30% higher. But my rating has changed too, and probably not in the direction you’d expect.

Weekly #78: TSMC Beat Every Line, The Market Yawned. That's the Setup

George Atuan, CFA — Sun, 19 Apr 2026 21:20:38 GMT

Hello fellow Sharks,

The positive developments regarding the Iran war pushed the market to all-time highs, but the portfolio still outperformed the market 🤑

If you want to skip straight to the numbers, jump to the Portfolio Update.

Last week I realized that having worked 18 years in the corporate world ingrained some habits that I have no use for anymore. But they are so ingrained that I don’t realize they are there. Some are good, like my research approach, attention to detail and project management. But for example, last week I realized I am working 5.5 days a week (Mon-Friday plus half of Sunday). But I realized I can change the schedule as I want. I’d rather work on Sundays when the market is quiet and take Friday off. So my new weekdays are Sunday to Thursday and my weekend is Friday and Saturday. Interesting project, let’s see how it goes.

Another observation this week was that the easing of tension in the Strait of Hormuz caused one of our energy stocks to decline 15% (after it increased 73% since it was picked as the December Stock Pick).

People said I should have taken profit as this was “obvious”. But they are missing a huge point that I am not “trading individual stocks” but rather each position has a role in the portfolio. I have positions that benefited from the decline in oil prices, so no matter what happens to oil prices, the portfolio will balance itself. The critical part is picking the best companies in each sector so that gradually the portfolio will generate alpha no matter what happens in the macro environment. This is an important concept and I will dedicate a full Thought Of The Week on it in the future.

But for today, in the Thought Of The Week, I go over the Q1 2026 earnings results for our beloved TSM.

Enjoy the read, and have a great Sunday.

~George

In Case You Missed It

On April 13, I sent the trade alert for the April Stock Pick.

On April 15, I followed up with the deep dive.

This is not some generic industrial name hoping to catch a cyclical bounce. It supplies specialized materials and components that go into some of the most demanding aerospace and defence applications in the world. In several cases, it holds deeply embedded positions that are difficult to replace, not because management says so on a slide deck, but because qualification cycles are long, technical requirements are brutal, and customers cannot afford mistakes. Over the last several years, the business has reshaped its portfolio, pushed further into higher-value end markets, and materially improved margins. Management is guiding for more growth ahead, and the market has noticed. The stock is trading near its highs.

The stock is already up 1.6%.

Paid subscriber? Click here for the unredacted list.

Thought Of The Week

The Market’s Yawn Is the Opportunity, TSM’s Q1 2026 Earnings Review

Since adding TSM to the portfolio, it is up 119%, the 6th-best performance in the portfolio.

TSM reported Q1 2026 earnings on 16 April. The company beat on every line…

Seeking Alpha

…raised full-year revenue guidance, guided Q2 revenue well above consensus…

…and quietly told investors that capex for 2026 will come in at the high end of the $52-56B range. Management also disclosed a new N3 fab in Tainan, a second N3 fab in Arizona, a second N3 fab in Japan, and a firm 2028 timeline for A14. Every incremental data point in this print tightened the thesis I’ve been running on this stock for more than a year.

And the market’s response? A shrug.

TSM is up 8.21% since I refreshed my target to $565 in Weekly #65.

Over the same stretch, the SOX index is up 20.54%, SMH [] 15.93%, Nvidia [] 8.3%, ASML [] 7.45%. The single most important company in the semiconductor supply chain has underperformed its own index by roughly 12 points in the strongest fundamental setup of the cycle.

That is the update. The fundamentals accelerated; the price didn’t. I’ll walk through what Q1 2026 actually delivered, how it maps onto the five original thesis pillars I laid out in the deep dive last March, what it does to my DCF, and why my conviction on TSM is higher today than at any point since I started writing about this company.

If this framing on TSM's mispricing changed how you see semis, pass it to one person who's overweight SOX.

Trigger: Q1 2026 earnings on 16 April. Revenue $35.90B (+40.6% y/y), EPS $3.49 per ADR (+55.7% y/y), operating margin 58.1%. Every line beat.
Thesis status: All 5 original pillars confirmed, 4 strengthened. None challenged.
Biggest change: FY2026 revenue guide raised to above 30% growth (from mid-20s), and 2026 capex now tracking to the high end of $52-56B. Growth is accelerating, not decelerating.
Verdict: Conviction increased. $565 target maintained pending the next formal DCF refresh. Any short-term weakness below $260 is a gift.

The full update, thesis scorecard, earnings detail, guidance comparison, DCF implications, new risks, and the updated conviction call, is below.

This post is public. If you find it valuable, share it with a friend who invests.

Thesis scorecard

I’m going to walk through each of the five pillars from the original deep dive, track how each one has evolved through the Q2, Q3 and Q4 2025 reviews, and grade it against what Q1 2026 just delivered.

Pillar #1. Technical monopoly at the leading edge: Confirmed (strengthened)

Original thesis: TSM is the only foundry on earth that can manufacture 3nm and below at commercial volume. Intel has stumbled. Samsung can’t yield. The gap is structural.

Evolution: This pillar has been scored Confirmed in every prior update. Q3 2025 brought N2 risk-production timing in; Q4 showed N2 customer tape-outs running ahead of N3 and N5 at the same stage.

What happened since last update: Management disclosed that N2 is on track for HVM in Q4 2026, with customer tape-outs still pacing ahead of both N3 and N5 at the equivalent lifecycle point. A16 moves into HVM in H2 2027. Most interesting, management formally confirmed A14 for HVM in 2028 with a narrower, more confident product roadmap than in any prior call. They also announced three new N3 fabs (Tainan, second Arizona, second Japan) on top of the three already running.

Assessment: Stronger. Intel Foundry’s Q1 setback on 18A and Samsung’s continued inability to close the yield gap mean TSM’s leading-edge monopoly is arguably less contested today than when I started this thesis a year ago. Pillar 1 is the clearest Confirmed in the scorecard.

Pillar #2. Structural AI demand: Confirmed (strengthened)

Original thesis: AI accelerator demand compounds at +40% through 2028 and TSM captures most of the wafer economics through both logic (GPU/ASIC) and CoWoS packaging. The model rested on AI accelerator revenue doubling in 2025 and mid-40% growth in 2026.

Evolution: Q2 2025 showed AI-accelerator revenue on track to double; Q3 reaffirmed; Q4 saw HPC hit 53% of sales, and management pointed to another year of AI-driven growth in 2026.

What happened since the last update: HPC hit 61% of revenue in Q1 2026, up from 53% in Q4 2025 and 51% in Q3 2025. Smartphones collapsed to 26% of the mix. Management raised the full-year 2026 revenue guide from “mid-20% y/y” to “above 30% y/y”, a material lift, and specifically called out AI accelerator revenue continuing to grow at a strong pace, though off a much larger base. Capex guidance moved to the high end of the $52-56B range; CoWoS capacity is sold out through 2027.

Assessment: Stronger. The mix is now so skewed to HPC that any incremental AI capex, hyperscaler, sovereign, or enterprise, flows through TSM before it reaches anyone else in the stack. The original deep dive had AI as a tailwind. Q1 2026 makes it look like a secular regime shift.

Pillar #3. Pricing power ahead of the cost curve: Confirmed (strengthened)

Original thesis: TSM can re-price new nodes at premium ASPs, absorb overseas cost dilution, and hold gross margin in the 53-58% band over the cycle.

Evolution: Q2 2025 GM was 58.6%, Q3 59.1%, Q4 59.0%. Each print came in at or above the top of the original 53-58% band.

What happened since last update: Q1 2026 gross margin printed 66.2%, with operating margin at 58.1%. That’s the highest gross margin the company has posted in years. Q2 2026 guidance calls for 65.5-67.5% GM. Management attributed the step-up to a richer product mix (HPC, premium nodes), favourable cost efficiencies, and the N3 node finally crossing company-average profitability. They explicitly said N3 gross margin now crosses the corporate average in H2 2026.

Assessment: Stronger. The original thesis band of 53-58% GM is now a floor, not a mid-point. Long-term, management reiterated that a 53%+ GM and 25%+ ROE remain the structural targets but then added something new on the call: they now view +56% as the structural long-term floor and mid-20s% to high-20s% ROE as the new normal. If the base case is 56%+ GM through cycle rather than 53%, the DCF moves materially.

Pillar #4. Moat driven by scale, capex cadence and customer lock-in: Confirmed

Original thesis: TSM’s combination of installed base, customer co-design relationships, and its ability to spend $30-50B per year on capex while still earning mid-20s% ROE keeps the competitive set structurally narrow.

Evolution: Every quarter has reinforced the moat. The recurring read has been that TSM’s $52-56B 2026 capex is a competitive weapon that none of Intel, Samsung, or GlobalFoundries can match.

What happened since last update: Capex 2026 is now tracking to the HIGH end of $52-56B, not the mid-point. That implies roughly $56B in gross capex in 2026 vs. roughly $40B at Intel Foundry (including IDM Inc. internal spend) and Samsung Foundry combined. Six new fabs announced over the cycle (three N3 fabs just in this update alone), A14 confirmed for 2028. The second Arizona fab is being accelerated to production “several quarters ahead of schedule.” If there was any doubt that TSM would use its balance sheet to extend the moat, this print removes it.

Assessment: Confirmed without reservation. No peer can credibly match this scale of reinvestment without destroying returns.

Pillar #5. Mispricing relative to earnings power: Confirmed (strengthened)

Original thesis: TSM traded at a semiconductor-cyclical multiple while earning a software-like return profile. The market was pricing in cycle risk that the business doesn’t have anymore.

Evolution: In every update since Q2 2025, the gap between the market’s cyclical framing and the business’s secular earnings profile has widened. Target price marched from $338 to $370 to $565.

What happened since last update: TSM has underperformed SOX by roughly 12 points since 18 January. Same business, same mix, stronger guidance, higher margins, bigger capex, and a lower relative multiple. The market is doing me a favour.

Assessment: Stronger. The mispricing thesis is now more compelling than it was in January, both in absolute and relative terms.

Scorecard summary

5 of 5 pillars confirmed. 4 strengthened (technical monopoly, AI demand, pricing power, mispricing). 1 confirmed without upgrade (moat).

Q1 2026 earnings: the actual numbers

Here are the headline numbers vs. consensus, prior-year comparables, and what my DCF model was projecting for the quarter.

The revenue beat is material, but the margin beat is what matters. Gross margin came in 630 basis points above consensus and 670 basis points above what my model assumed for the quarter. Operating margin beat by over 800 basis points. That level of variance, this late in a reporting cycle, tells you two things: the Street is underestimating the structural step-up in product mix, and the internal cost curve is moving faster than anyone outside the company can model.

Segment/platform mix tells the story. HPC revenue came in at 61% of sales vs. 53% in Q4 2025, 51% in Q3 2025, and 48% in Q1 2025. Smartphone dropped to 26% from the mid-30s a year ago. Each percentage point of mix shift from smartphone to HPC is margin-accretive because premium nodes and advanced packaging carry structurally higher ASPs and better incremental margins. There is nothing cyclical about a mix shift driven by AI accelerator demand; the cycle is not arriving, it’s already here.

On the balance sheet, cash and securities stand at NT$2.52T (roughly $77B), long-term debt declined modestly, and the company raised the Q1 dividend to NT$6/share. Net cash position strengthened sequentially despite $11.22B of Q1 capex. The financial profile hasn’t looked better in a decade.

On the call, management tone was crisp. No hedging on full-year guide, no “monitoring macro” qualifiers on AI demand, no softness anywhere in the commentary. The only risk flag raised, and management raised it themselves, was Middle East supply-chain exposure (chemicals and specialty gases). Note: this is a new risk that didn’t exist in prior calls.

Guidance comparison: what management just told us

Here’s the side-by-side on what management was guiding when I last wrote on 18 January vs. what they just guided on 16 April.

Every line in that table moved in the same direction. It is hard to overstate how unusual that is at this point in a cycle. Ordinarily, you expect at least one metric to go the wrong way, a mix lift here, a capex trim there, a margin give-back somewhere. Instead, revenue guide raised, capex raised, near-term margin guided well above Street, and the long-term structural profile upgraded. This is the definition of pricing power meeting scale.

Management credibility check

Over the last four quarters (Q2 2025 through Q1 2026), management has beaten its own prior-quarter revenue guide every single time, in two cases by more than $1B. Gross margin guidance has been beaten by 50-200 basis points in each of those quarters. The capex guide for 2025 was raised once (from a starting band around $40B to a finish around $40B actual) and 2026 capex is now moving toward the high end of its initial range. Pattern: this management team sandbags quarterly, over-delivers, and tends to lay out conservative guidance with upside bias.

Read: the Q2 2026 guide of $39-40.2B revenue and 65.5-67.5% gross margin should be treated as a floor, not a point estimate. I’d expect actual Q2 2026 to print above $40.5B revenue and +66% GM unless something breaks. Apply the same discount to the full-year “above 30%” guide, the realistic outcome is 31-34% YoY growth on reported currency.

Valuation: what Q1 2026 does to the model

The Q4 2025 DCF assumed mid-20% revenue growth for 2026, structural gross margin settling in the 57-58% zone, operating margin around 49-50%, and capex in the $52-55B band. Every one of those assumptions is now visibly conservative.

I’m maintaining the $565 target pending a DCF refresh later this year (I just refreshed it in January and I have more pressing positions to refresh first). The directional read is that the updated assumptions push the target higher, not lower, probably to the $600-640 zone on mid-case assumptions if I feed in the new margin profile, the high-end capex, and the management-guided revenue trajectory. I’ll size the formal update carefully in the next DCF run because the margin upgrade is the biggest swing factor and I want two more quarters of evidence before baking a 58% terminal GM into the model.

For the avoidance of doubt: $565 is a floor on the current set of assumptions, not a ceiling.

Risk register: what’s changed

None of the original risks has fully materialized. Taiwan geopolitical tension remains elevated but has not escalated to anything that would force a re-rating. Trade policy, specifically US tariff policy on semiconductors, is active but remains bounded. No material risk has hit the numbers in Q1 2026.

Faded risks

Intel Foundry as existential threat: Intel’s 18A ramp has stumbled again, capacity commitments from major customers are softer than feared a year ago, and the competitive picture in 2nm-class production is arguably more one-sided today than in March 2025. I’m moving this from “live risk” to “faded risk,” with the caveat that if Intel’s Panther Lake client volumes exceed expectations later in 2026, I’ll revisit.
N3 margin drag: Management explicitly confirmed N3 crosses corporate-average gross margin in H2 2026. This was a persistent concern in 2024-2025. It’s now effectively resolved.
CoWoS bottleneck: Capacity is fully sold through 2027, but management has aggressively built out CoWoS capacity and new packaging-focused fabs. I’d call this more of an execution story now than a risk.

New risks

Middle East chemicals and specialty gases exposure: Management flagged that regional instability could affect input costs for certain specialty chemicals and gases. The exposure is small in dollar terms but the tail risk is disruption of leading-edge production if supply is interrupted. What would it take to materialize: a major disruption to shipping routes or direct regional escalation. Magnitude: modest for 2026 (likely sub-1% of GM), potentially larger if compounded with other supply-chain shocks. I’m pricing this in as a discrete low-probability, moderate-impact risk.
HPC customer concentration: HPC is 61% of revenue. A large portion of that is concentrated in a small number of hyperscaler and fabless AI customers. Any one of those customers pulling back their AI capex by +20% would be visible in TSM’s results within a quarter or two. What would it take to materialize: a genuine hyperscaler spend plateau (not just a quarter of digestion). Magnitude: meaningful, could take 5-10 percentage points off revenue growth for a quarter or two. This risk didn’t exist in 2024 when the mix was more balanced; it’s a consequence of the AI-driven mix shift.
Terafab and the Tesla-Samsung LPU, first credible competitive signals in years: The Q1 call surfaced two under-discussed competitive developments. First, the quiet emergence of Terafab as a US-based alternative foundry play, still largely subsidy-dependent but now formally backed. Second, the Tesla-Samsung LPU announcement, where Samsung finally secured a marquee hyperscale-class customer for its 2nm process. Neither is a near-term threat to TSM’s book of business but both represent the first concrete signs that the leading-edge market may eventually have a third credible player. If either develops faster than I expect, I’ll need to revisit Pillar 4 (moat). For now: a risk to watch, not a risk to price in.

Unchanged risks

Taiwan geopolitical risk (the big one), currency risk (NT$ vs. USD), and customer concentration at the single-customer level (the largest customer remains a meaningful share of revenue) all continue to be priced in at the same weighting I used in the original deep dive. No update.

Relative performance: the market’s mistake

Since my last update, TSM is up 8.21%. Over the same period, the SOX semiconductor index is up 20.54%, SMH up 15.93%, Nvidia up 8.3%, and ASML up 7.45%. TSM has underperformed its own sub-sector by 12 points into the strongest fundamental print of the cycle.

Reading the tape: the outperformers are the names the market perceives as pure AI plays. Nvidia’s run stalled briefly (it’s roughly matched TSM), but the equipment-and-materials cohort that dominates SMH has re-rated more aggressively than the foundry at the bottom of the stack. That’s an asymmetric mispricing. TSM is the single largest beneficiary of every dollar Nvidia books, every dollar ASML ships, and every dollar Broadcom earns on ASIC. The foundry is structurally late to re-rate because it’s measured on cyclical semiconductor multiples rather than the secular AI-infrastructure narrative.

If you’re asking whether the easy money has been made: no. If anything, the easy money is what’s been made by SOX and SMH over the last three months while TSM has been basically flat. The catch-up trade is what’s sitting there.

Verdict

Conviction on TSM is higher today than at any point since I initiated coverage. The fundamentals accelerated, the guide was raised across every line, the moat got deeper, and the stock underperformed its own index by twelve points. I’m holding the position unchanged and treating any retest below $260 as a gift.

$565 target maintained pending a formal DCF refresh. Directionally, the refresh should move higher.

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Portfolio Update

The market continued its recovery due to the ceasefire with Iran. The portfolio outperformed the market, expanding our lead.

Portfolio Return

Month-to-date: +15.4% vs. the S&P 500’s +9.2%.
Year-to-date: +24.6% vs. the S&P 500’s +4.1%. That is a gap of 2,046 basis points.
Since inception: +75.8% vs. the S&P 500’s +23.9%. That’s 3.2x the market.

Contribution by Sector

Tech led the gains.

Contribution by Position

(For the full breakdown plus commentary on earnings results and the big movers, see Weekly Stock Performance Tracker)

How to read the heat map? Click here.

+162 bps (TSX: CLS) (Thesis)
+29 bps (Thesis)
+19 bps (Thesis)
+14 bps (Thesis)
+11 bps (Thesis)
+9 bps (Thesis)
+4 bps (Thesis)
+1 bps (Thesis)
flat (Thesis)

That’s it for this week.

Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!

Further Sunday reading to help your investment process:

The Next Boom No One Wants to Talk About Is Already Underway

George Atuan, CFA — Wed, 15 Apr 2026 22:55:34 GMT

As I mentioned in Weekly #76, I think the odds of a much broader global conflict are rising, yet I had no aerospace and defence exposure in the portfolio.

So for my April Stock Pick, I started digging into that world. On April 13th, I sent a trade alert with my pick.

Below is the deep dive.

I will admit, this is not a cheap corner of the market anymore. The sector has already re-rated as the market woke up to the obvious: war, rearmament, and strained supply chains tend to get attention. But once you look past the headline valuation multiples, there are still a few pockets where the risk-reward looks interesting.

There are two things worth keeping in mind from the start.

First, the situation with Iran is fluid. Right now, there is a two-week ceasefire (or has the ceasefire been cancelled? Not sure anymore 🤔), but that can change quickly. The conflict could resume, escalate, or cool off. My own view is that it is more likely to continue than disappear. Still, that part is outside my control, and it is outside yours too. So I don’t want an idea that only works if the war gets worse. I want a fundamentally strong business that can hold up even if the headlines calm down and sector valuations cool off.

Second, investing in this theme does not mean buying the obvious defence prime contractors. The better opportunity can sometimes sit one level deeper in the chain. It is the same way I have approached AI and energy. Rather than chase the most crowded names, I would rather look for the picks-and-shovels businesses that supply something critical, hard to replace, and easy to underestimate. That is what led me here.

The stock market loves a clean story, and right now, aerospace and defence is one of its favourites. You have war in the background, defence budgets moving higher, a multiyear ramp in commercial aircraft production, and a supply chain that is still tight in the materials that actually matter. The company I found sits right in the middle of all of that.

That leaves the real question. Is this still an attractive way to own a protected franchise at the center of one of the market’s strongest themes, or is it now just a great business priced as if nothing can go wrong? That is what I set out to answer.

Trade alert: The April Pick is A Picks-and-Shovels Play on Aerospace and Defence

George Atuan, CFA — Mon, 13 Apr 2026 16:14:54 GMT

Hello fellow Sharks,

As I teased in previous posts, the April Monthly Pick comes from aerospace and defence, click here to jump to the trade alert.

The sector has re-rated as the market woke up to war, rearmament, and strained supply chains. But that does not mean the easy money is gone. It means you have to dig deeper into the chain.

I didn’t want a company that only works if the Iran war escalates. The ceasefire is fragile, the situation is fluid, and I don’t build a thesis around outcomes I cannot control. I wanted a business strong enough to hold up even if the headlines calm down and sector valuations cool off.

That led me to the same approach I have used with AI and energy: picks and shovels. Rather than chase the obvious defence prime contractors, I looked one level deeper for a supplier that provides something critical, hard to replace, and easy to underestimate.

What I found is a company that sits at the center of three overlapping demand waves. It supplies specialized materials and components for some of the most demanding aerospace and defence applications in the world. Jet engines, airframes, military aircraft, missiles, and naval programs. The kind of end markets where failure is not tolerated and switching suppliers takes years, not quarters.

This is not a generic industrial name hoping to catch a cyclical bounce. Here is what stood out in my research:

The company holds deeply embedded supplier positions that are difficult to replace. Not because management says so on a slide deck, but because qualification cycles are brutal, technical requirements are extreme, and customers cannot afford mistakes. In several critical product categories, there is no qualified alternative supplier. That is pricing power in disguise.

Over the past several years, the business has reshaped its portfolio. It pushed further into higher-value end markets and materially improved margins. Revenue mix has shifted toward aerospace and defence, which now makes up the majority of sales. That shift matters because it changes the earnings floor. This is no longer a cyclical metals story dressed up for the moment. The transformation is structural.

Management has paired the operating improvement with meaningful shareholder returns: debt reduction and large buybacks funded by improving FCF.

The stock is not cheap. The market has noticed the story. But my deep dive shows the risk-reward still works, and I will walk through exactly why later this week when the full analysis goes out.

The deep dive covers the full thesis: moat analysis, Iran war demand implications, margin trajectory, valuation, the bear case, and my verdict on risk-reward. Paid subscribers get it all.

Funding the Position

To finance the new position, I made three moves.

Closing KINS. I have been transparent about this. KINS delivered the most profitable year in its history. But as i wrote in Weekly #72, the easy upside has been captured. The stock is up +35% from cost basis, the thesis has played out, and the risk-reward from here depends on catastrophe assumptions and growth in a tighter insurance market.

I flagged it as a trim candidate if I needed capital. Now I need capital for a higher-conviction idea.

Closing PPC. Full postmortem coming later this week.

Trimming POWL. Partial trim to fund the balance of the new position. POWL remains a conviction hold, and the thesis is intact.

Trade alert:

Weekly #77: The Physics of Investing, Why Higher-Order Thinkers Win While the Crowd Panics

George Atuan, CFA — Sun, 12 Apr 2026 18:04:38 GMT

Hello fellow Sharks,

This week the portfolio gained 7.29% versus the S&P 500’s 3.56%. I think it was among the best weekly performances since launching Beating The Tide. The market recovered due to the ceasefire with Iran (how long will it last? 🤔). The portfolio still outperformed the S&P 500, widening the gap. If you want to skip straight to the numbers, jump to the Portfolio Update.

The performance was driven by the tech sector. The top three performers hit all-time highs this week.

The April Stock Pick is coming out next week. It is in the aerospace & defence industry. The pick has taken me longer than I expected, as I wanted to pick one that would see upside no matter if the Iran war continues or not. Following my philosophy in AI and energy, I have picked a picks & shovels name, providing a critical input for the industry.

The Thought Of The Week is the third part in my physics of investing series. People get stuck with what is in front of their eyes rather than digging deeper. That is why I go into higher-order derivatives.

Enjoy the read, and have a great Sunday.

~George

The Physics of Investing Series: Higher-Order Investing

This is the third part of the physics of investing series. The first was the pendulum effect, and the second was friction. This one will be about higher-order derivatives.

I know this may sound nerdy, but in high school, I used to do integrations for fun. It was a fun game (for me), and it definitely helped my calculus grades 😊

Years later, after high school, I came to the realization that in life, poker and investing, you get rewarded when you think more deeply than everyone else. Just as physicists name each successive derivative of position (velocity, acceleration, jerk, snap, crackle, pop), to be a good poker player, you have to think one level deeper than the competition.

So, at the basic level, you play your hand. The second level is you play your opponent’s hands. The third is you play what your opponent thunks you have. The fourth, you play what your opponent thinks you have, and so on. The key I found was to play one level deeper than your opponent to keep an edge, no deeper than that.

Hobbyist poker player, 1st order: play their hand

Beginner, 2nd order: play your opponents’ hands

Intermediate, 3rd order: play what your opponent thinks you have

Advanced, 4th order: play what your opponent thinks you think you have

Elite, nth order: assess your opponent and play just one order higher than your opponent

The same applies in investing. In markets, first-order thinking is reading the headline. Second-order is asking what the headline means for earnings. Third-order is asking what it means relative to what the market already expects. The edge lives in that gap between what you see and what the consensus has priced in.

Investors who move beyond first-order “headline” thinking to second- and third-order analysis gain a structural edge.

What are Higher-Order Derivatives?

Before we go deeper into this topic, let me explain what higher-order derivatives are. In simple terms, a higher-order derivative measures the change in the previous order.

So in physics:

0th order: position (where you are)

1st order: velocity (how fast your position is changing)

2nd order: acceleration (how fast velocity is changing)

3rd order: jerk (that sudden "snap" you feel when a car brakes or speeds up unevenly. It’s the rate at which acceleration changes)

Then you have the 4th (snap), 5th (crackle) and 6th (pop)… you get the point.

In calculus, think about concavity and curvature,

1st order: the slope (tells you if the graph is going up or down)

2nd order: the concavity (tells you if the graph is "bending" upward like a cup or downward like a frown)

As you can tell by now, the higher the order, the more sensitive the measurement is. In both physics and finance, tracking these prevents surprises.

Howard Marks and the architecture of second-level thinking

Howard Marks introduced “second-level thinking” in Chapter 1 of The Most Important Thing. He argues that first-level thinking is simplistic and superficial. And that just about everyone can do it, which is a bad sign for anything involving an attempt at superiority. The first-level thinker only needs an opinion about the future.

Second-level thinking, by contrast, is deep, complex, and convoluted. The core idea: to outperform, your thinking has to be both different and better than the consensus. The three famous contrasting examples from the book:

First example. First-level thinking says, ‘It’s a good company; let’s buy the stock.’ Second-level thinking says, ‘It’s a good company, but everyone thinks it’s a great company, and it’s not. So the stock’s overrated and overpriced; let’s sell.’

Second example. First-level thinking says, ‘The outlook calls for low growth and rising inflation. Let’s dump our stocks.’ Second-level thinking says, ‘The outlook stinks, but everyone else is selling in panic. Buy!’

Third example. First-level thinking says, ‘I think the company’s earnings will fall; sell.’ Second-level thinking says, ‘I think the company’s earnings will fall less than people expect, and the pleasant surprise will lift the stock; buy.’

The second-level thinker’s checklist: What is the range of likely future outcomes? What outcome do I think will occur? What’s the probability I’m right? What does the consensus think? How does my expectation differ from the consensus? How does the current price align with the consensus view … and with mine? Is the consensus psychology too bullish or bearish? What will happen to the asset’s price if the consensus turns out to be right, and what if I’m right?

This post is public. If you find it valuable, share it with a friend who invests.

Example #1. Impact of the Closed Strait of Hormuz on Micron

1st order: Closed Strait of Hormuz = no helium = bad for Micron

2nd order: Closed Strait of Hormuz = no helium for Micron’s competitors = good for Micron

On February 28, Iranian drones struck Qatar’s Ras Laffan Industrial City, the world’s largest LNG export facility and a cornerstone of global helium production. QatarEnergy declared force majeure on March 2.

Within days, Iran declared the Strait of Hormuz closed to Western shipping. On March 19, additional strikes on Ras Laffan prompted QatarEnergy CEO Saad Al-Kaabi to estimate 3–5 years for full repairs.

Semiconductor-grade helium has no viable substitute. It cools wafers during etching, cools ASML’s $200M EUV lithography machines, detects microscopic vacuum leaks, and serves as an inert carrier gas in deposition. In October 2025, semiconductors overtook MRI as the world’s largest helium-consuming industry. Qatar supplies roughly 33% of global helium; the U.S. produces 43% but consumes most domestically.

The first-order reaction. Semiconductor stocks sold off broadly. reached an all-time high of $471 after blowout Q2 earnings. It then fell sharply, driven by Google’s TurboQuant memory-compression announcement and helium/geopolitical anxiety, reaching a trough of $311.

But while Mr. Market was focusing on first-order insights, it missed the second-order derivative: Micron sources helium domestically, as I explained in a previous Weekly.

Micron’s primary fabs are in Boise, Idaho, and the company holds long-term supply contracts with Air Products and Linde. Its fabs reportedly recycle 80–90% of helium, making effective external consumption 5–10x lower than its Korean peers. Estimated helium buffer: 12–24 weeks. By contrast:

SK Hynix imported 64.7% of its helium from Qatar in 2025; estimated buffer only 2–6 weeks at the national (South Korea) level.
Samsung sourced over 60% from Ras Laffan; its HeRS recycling system captures only 18.6% of used helium.

As I said in my previous post on MU, it is the only U.S.-based memory manufacturer benefiting from reshoring tailwinds that peers cannot claim.

The competitive implication. If SK Hynix (62% HBM market share) faces production curtailment (potentially as early as September 2026 if the disruption persists and stockpiles run low), Nvidia (90% dependent on SK Hynix for HBM) may need to shift orders to Micron, which already has a 5-year strategic customer agreement with Nvidia and whose HBM capacity is sold out through 2026. This could lift Micron’s HBM market share from 21% toward 25–30%.

Some may say that the war with Iran is almost over. That may be true or not. But the point is that companies will take this as another lesson to fortify their supply chains, which implies more business is coming toward Micron.

Example #2. TurboQuant to Kill The Memory Space

1st order: TurboQuant will compress memory usage by 6x = bad for memory demand = bad for MU

2nd order: TurboQuant will compress memory usage by 6x = increased adoption = more demand = great for MU

MU’s selloff was multi-factorial (TurboQuant was arguably the biggest single catalyst, not helium).

But even the TurboQuant drop was a first-order drop. The stock dropped on worries that cheaper memory would hurt MU’s top line. But 2nd-order thinking makes you realize that cheaper memory drives wider adoption. History has shown that volume growth when prices drop is substantially larger than the price decline itself. For example, an IBM PC PXT in 1985 cost $4,395 ($13,500 in today’s money).

The IBM PC PXT had 10MB of storage, was slow and big. I am writing this on a Lenovo T490 laptop that cost me $600, has 512GB of memory, is faster, lighter and I can take it anywhere.

So I got 52,428x1 more storage for 4% of the price. I don’t think I need to provide you with backup that the demand for computers is massively greater now than in 1985 (but if you don’t believe me read this).

The pattern is not limited to PCs. NAND flash prices fell over 99% per gigabyte from 2000 to 2024. Total NAND shipments over the same period grew by more than 10,000x. The cheaper the storage, the more use cases emerge and total spending on memory went up, not down. TurboQuant compressing memory usage by 6x is the same dynamic playing out again.

The 5 Whys as a derivative-deepening tool

One way to force yourself to think in higher-order is to ask yourself “so what?” or the 5 Whys as I detailed in Weekly #48.

Here is the 5 Whys applied to the Micron thesis as an example:

Iran closes the Strait of Hormuz → so what? →

Global helium supply drops by a third → so what? →

Korean semiconductor fabs face production curtailment → so what? →

Nvidia needs an alternative HBM supplier → so what? →

Micron, the only U.S.-based memory manufacturer with domestic helium supply, gains market share.

Each “so what?” is another derivative. Most investors stopped at the first one and sold.

Successful investing isn’t just about memorizing ratios or following the crowd; it’s about understanding a business deeply and knowing why you own it. You should constantly ask: ‘Why am I investing in this company?’ followed by ‘Why do I believe that?’ and so on.”

The connection to higher-order thinking: each successive “Why?” is essentially taking another derivative of your investment thesis. The first “Why?” yields a surface-level answer (first-order thinking). By the third or fourth “Why?”, you reach structural or competitive-advantage-level insights (higher-order thinking).

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Portfolio Update

The market continued its recovery due to the ceasefire with Iran. The portfolio outperformed the market, expanding our lead.

Portfolio Return

Month-to-date: +9.6% vs. the S&P 500’s +4.2%.
Year-to-date: +18.2% vs. the S&P 500’s -0.4%. That is a gap of 1,866 basis points.
Since inception: +66.9% vs. the S&P 500’s +18.5%. That’s 3.6x the market.

Contribution by Sector

Tech and industrials led the gains, partially offset by gold.

Contribution by Position

(For the full breakdown plus commentary on earnings results and the big movers, see Weekly Stock Performance Tracker)

How to read the heat map? Click here.

+218 bps (TSX: CLS) (Thesis)
+86 bps (Thesis)
+56 bps (Thesis)
+48 bps (Thesis)
+35 bps (Thesis)
+30 bps (Thesis)
+27 bps (Thesis)
+4 bps (Thesis)
+1 bps (Thesis)

That’s it for this week.

Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!

Further Sunday reading to help your investment process:

1 GB = 1024 MB

Weekly #76: "Everyone has a plan 'till they get punched in the mouth"

George Atuan, CFA — Sun, 05 Apr 2026 19:05:50 GMT

Hello fellow Sharks,

The market recovered a bit this week as investors grew optimistic the war will end soon, buoyed by Trump’s comments. The portfolio still outperformed the S&P 500, widening the gap. If you want to skip straight to the numbers, jump to the Portfolio Update.

I am back in Toronto!

We arrived yesterday. Because I was busy last week finalizing things for the trip, I was only going to share the portfolio update in this Weekly as I had no time for anything else. I had everything planned. I called my internet provider to ensure internet was reinstated two days before we arrived, and I unfroze my phone plan to be active on April 3rd. Everything was planned so I could hit the ground running.

But life happens.

When we arrived, I noticed all my Google devices were offline. I thought it would be a simple router reset. That didn’t work. I was going to switch my SIM to my Canadian one but I lost it. I couldn’t find it. So I had no way to reach my internet provider. I asked my neighbour to share her Wifi. I used that to troubleshoot the internet, and it took 2 hours of troubleshooting. We didn’t get anywhere. On Monday they will ship me a new router.

As for the phone, I just got a new number and I am using my phone’s data to write this…fun times!

Now, back to the trip. The trip was long and I had lots of time inside my head. I read a bit and listened to some podcasts, but between comforting a crying baby and calming down my dog who couldn’t take it anymore in the carrier after hours, it was difficult. Even when everyone was quiet, I still couldn’t relax. I am a big guy and when I had tried to get a seat with extra leg room, they were not available.

So I had 12 hours inside my head, and I reflected on many things…some investment, some not. I thought you would find my thoughts on following your gut valuable.

Enjoy the read, and have a great Sunday.

~George

This post is public. If you find it valuable, share it with a friend who invests.

Thought Of The Week

People Trust My Gut Feeling More Than I Do.

Last week, when everything was free-falling, some of you reached out to let me know that they doubled down on MU at $330. They are already +10% up on that trade.

But then there is a long-time subscriber who only buys my top annual picks. When I gave him the diversification explanation, he would argue that when you have high conviction you should go all in. I argued with him and explained that when I run a 10-stock portfolio, the drawdown is more than my stomach can handle, but he stuck to his beliefs. And I admit that he has a point. While I would never go to a single-stock portfolio (or two-stock in hhis case), I understood his point.

In January, I closed the position at $313.90, representing a +166% gain.

I argued that the stock could go further up, but AGX no longer had the right risk:reward profile. Well, that subscriber sent me a note that he was holding on to AGX…and within 2 days after I sold, the stock jumped to $395 and last week it jumped to $575.

If I had kept the shares, the upside would have been 388% rather than 166%.

So while my gut was telling me there was room for AGX to go up, my rigid risk:reward formula told me it was time to let go. I am not going to abandon the risk-to-reward ratio in my investment process. But this made me realize that I should start listening more to my gut feeling.

Another gut feeling moment was in late 2025. I had a feeling the energy sector was being ignored. I had the data to back it up and wrote about it.

That article went viral and it is still the most popular article in Beating The Tide.

So far my call has been right.

But did I turn all my portfolio into energy stocks? No. Two weeks after that article on December 16, 2025 I added one energy stock to the portfolio (up 67%). Three months after that, on March 16, 2026, I added another energy position (up 11.1%).

Decades ago I read Blink, and it argued that while our conscious processes a limited amount of data that we collect, the unconscious processes everything the conscious does not pick up while we sleep, are in the shower, or our minds are relaxed. That is why sometimes you see a situation and your gut tells you something that contradicts the data you see. That’s the unconscious interpreting itself.

So I have known that for decades, and while I have learned to trust my gut a bit more, there is still room for improvement.

Another instance that comes to my mind is February 2020. By that time we had heard about COVID in China. I knew it was a matter of time before it became a global pandemic, so I bought puts on the S&P 500 far out of the money. That is something I rarely do unless I want some insurance on my portfolio. I don’t go crazy. I only buy one contract far out of the money for 5 cents, so it costs me $50.

I remember that more news kept coming out of China about COVID and the S&P 500 was hitting all-time highs. So when it came time to roll over the put, I just didn’t… huge mistake.

So the 5 cents would have been worth at least $500. That is, my $50 investment would have been worth $500,000!

That happened because I didn’t listen to my gut feeling.

So now what is my gut feeling telling me?

Even though Trump makes it sound like the war will be over soon, the market is not agreeing with him.

And my gut feeling tells me this is just the beginning. I think World War III is coming (a friend of mine argues that we are already in WWIII).

So if my gut feeling is right this time, what should I do? I think some of our holdings related to the AI theme would be hurt. I should also increase our oil & gas holdings, gold, and include defense stocks (we have none).

Actually, the April stock pick is likely an aerospace and defense stock. But don’t hold me to that, I am still trying to talk to my gut about it 😂.

Leave a comment

Portfolio Update

The market recovered a bit last week as investors believes the war is ending. The portfolio outperformed the market, expanding our lead.

Portfolio Return

Month-to-date: +2.1% vs. the S&P 500’s +0.8%.
Year-to-date: +10.2% vs. the S&P 500’s -3.8%. That is a gap of 1,404 basis points.
Since inception: +55.5% vs. the S&P 500’s +14.5%. That’s 3.8x the market.

Contribution by Sector

Tech and gold led the gains.

Contribution by Position

(For the full breakdown plus commentary on earnings results and the big movers, see Weekly Stock Performance Tracker)

How to read the heat map? Click here.

+59 bps (TSX: CLS) (Thesis)
+55 bps (Thesis)
+24 bps (Thesis)
+19 bps (Thesis)
+9 bps (Thesis)
+7 bps (Thesis)
+5 bps (Thesis)
+2 bps (Thesis)
-4 bps (Thesis)

That’s it for this week.

Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!

Further Sunday reading to help your investment process:

Weekly #75: 7 Mines, 3 Metals, One Thesis

George Atuan, CFA — Sun, 29 Mar 2026 13:10:47 GMT

Hello fellow Sharks,

The war drags on and the S&P 500 keeps falling. The portfolio, meanwhile, keeps climbing. This week it widened the gap further, now sitting at 4.7x the S&P 500 since inception. If you want to skip straight to the numbers, jump to the Portfolio Update.

Getting work done this week was a challenge. We fly back to Toronto on April 3rd, so the last few days have been a blur of errands and logistics. Between packing and chasing paperwork, one thought kept surfacing: a line from Elon Musk about rules. His argument is that the only real limitation is physics. Everything else is a choice. He was talking about the military and NASA layering pointless bureaucratic rules onto spaceflight, rules that no one created with a purpose and no one can trace back to a reason. They exist because someone wrote them down decades ago and no one ever questioned them.

That reminded me of the monkey ladder experiment. The setup: put five monkeys in a cage with a ladder and a banana at the top. Every time a monkey climbs toward the banana, spray all five with cold water. Eventually, the monkeys stop any monkey from climbing the ladder, even after you replace the original five one by one. New monkeys enforce the rule without knowing why it exists.

Sound familiar?

Why am I telling you this? It has nothing to do with investing, except that it does. I spent several hours this week trying to get a travel document from a Chilean government ministry. To get that document, I needed a document from a different ministry. That second ministry required a document from a third ministry, which requires a document from the first ministry. A circular reference, except this one has no Ctrl+Z. Chilean bureaucracy is in a league of its own.

Here is the investing angle: the companies that disrupted entire industries were almost always built by people who got fed up with the existing system and refused to accept it. Reed Hastings did not start Netflix because he saw a market opportunity in DVDs. He started it because Blockbuster charged him a $40 late fee and he was frustrated enough to do something about it. Frustration is underrated as a founding motivation. I will save that thread for another week.

This week, I go deep on CDE. It is a position I did not choose. I inherited it when NGD merged with Coeur Mining. By the time NGD and CDE merged, we locked in a 85.8% gain.

Here is the original NGD thesis.

That raises a fair question: should I hold it or cut it loose?

Short answer: keep it.

For the long answer, grab a coffee.

Enjoy the read, and have a great Sunday.

~George

Thanks for reading! This post is public, so feel free to share it.

Thought Of The Week

Coeur Mining (CDE): The New North American Precious Metals Powerhouse

Two years ago, Coeur Mining [] was a company fighting for survival. Leverage had ballooned past 4x. FCF was negative $297M. The Rochester mine expansion, a bet-the-company $730M project, was running behind and over budget. The stock traded below $3.

Today, Coeur sits on $554M in cash, carries net leverage of negative 0.2x, and just closed a $7B merger that creates the only all-North American senior precious metals producer. Management is guiding for $3B in EBITDA and $2B in FCF for 2026. They just authorized a $750M buyback and declared their first-ever dividend.

The turnaround is real. The question now is whether the market has caught up.

Since the January highs, gold has pulled back from $5,589 to $4,500.

Silver has dropped from $121 to $69.

CDE has fallen from $27.72 to $17.10.

That creates a window worth examining. Because behind the noise is a business that has fundamentally changed its cost structure, its balance sheet, its production profile, and its strategic position.

TLDR

CDE is a US-based precious metals producer with seven wholly-owned North American operations producing gold, silver, and now copper following its March 2026 acquisition of New Gold [].
The bull case rests on a transformed cost and production profile: 2025 adjusted EBITDA tripled to $1B, FCF surged to $666M, and the NGD merger is expected to push combined 2026 EBITDA past $3B with $2B in FCF.
The key risk is the 42% pullback in CDE shares mirrors a 20% correction in gold and silver prices from January peaks. If metals prices mean-revert further, the inflated earnings power evaporates. Integration risk from the New Gold merger also looms.
My NAV model values Coeur at roughly $19.88 per share on a conservative base case. But the base NAV understates true value: unpriced resource optionality, exploration platform value, mine-life extensions, and the K-Zone copper-gold deposit.

From Near-Death to North American Leader: The Coeur Mining Story

CDE was incorporated in 1928 and is headquartered in Chicago. For most of its history, it was a mid-tier silver and gold producer, often punching below its weight. The company cycled through acquisitions, divestitures, and operational struggles across the Americas and beyond.

The turning point came in the early 2020s. Under CEO Mitch Krebs, who has led the company for over two decades (first as CFO, then CEO), Coeur made two high-stakes bets. First, it committed $730M to expand its Rochester mine in Nevada into one of the largest open-pit heap-leach silver operations in the US. Second, it acquired SilverCrest Metals in February 2025 for $1.8B, adding the high-grade Las Chispas silver-gold mine in Mexico.

Both bets were risky. Rochester’s expansion ran over budget and behind schedule, pushing leverage above 4x at one point. But by mid-2025, Rochester was hitting its stride, crush tonnage was climbing toward design capacity, and Las Chispas was gushing cash. In 10.5 months of contribution, Las Chispas generated $286M in FCF.

Then in November 2025, CDE announced a $7B all-stock acquisition of NGD, adding the New Afton copper-gold mine in British Columbia and the Rainy River gold mine in Ontario. The deal closed on March 20, 2026, creating a seven-mine, all-North American platform.

That is three transformative moves in three years. The company went from a stressed balance sheet with four mines to a net cash position with seven mines across three countries, producing gold, silver, and copper. Whether you think that is brilliant capital allocation or empire building depends on what the next two years bring.

How the Business Makes Money: Seven Mines, Three Metals

CDE is a straightforward business. It mines precious and base metals from the ground, processes them, and sells the output at prevailing market prices. Revenue is a function of two variables: ounces produced and price received. Costs are a function of geology, operational efficiency, energy prices, labor, and government take.

Post-merger, the combined company operates seven mines

Las Chispas (Sonora, Mexico): The Cash Cow

An underground silver-gold mine acquired from SilverCrest in February 2025. In its first 10.5 months under CDE, it produced 54,705 oz of gold and 5.1M oz of silver and generated $286M of FCF. That is a staggering return. Average grades of 4.4 g/t gold and 409 g/t silver make this one of the highest-grade operations in the world. The mine has five years of reserve-based life (2030) with exploration upside from new vein discoveries (Augusta, Promesa, Lupita). 2026 guidance calls for 55,000 to 65,000 ounces of gold and 5.5 to 6.3 million ounces of silver.

Palmarejo (Chihuahua, Mexico): The Workhorse

An underground gold-silver complex that produced 100,768 oz of gold and 6.5M oz of silver in 2025, generating $155M in FCF. Palmarejo’s story has an important wrinkle: 40-50% of its gold production is sold to Franco-Nevada under a streaming agreement at $800 per oz. With gold at $4,500, that means CDE hands half its Palmarejo gold to Franco for roughly 18 cents on the dollar. That is a meaningful drag on profitability.

The good news is CDE is aggressively exploring east of the Franco-Nevada area of interest, where 70% of the 2026 exploration budget is now allocated. Maiden resources at San Miguel, La Union, and Independencia Sur are all royalty-free. The 2025 reserve update extended Palmarejo’s mine life by five years and grew reserves by 36-40%. If CDE can shift more production outside the Franco boundary over time, the economics improve materially.

Rochester (Nevada): The Beast Waking Up

America’s largest source of domestically produced silver. Rochester is an open-pit heap-leach operation that underwent a $730M expansion. In 2025, it produced 60,178 oz of gold and 6.1M oz of silver, with y/y increases of 54% and 40%. FCF reached $101M after being negative in prior years.

The operation is still ramping toward its target crush size of 5/8 inch (it ran at P80 around 0.84 inch in Q4 2025). As crush size improves, silver recoveries should climb toward 60%, which would be a meaningful production tailwind. Rochester has a 16-year reserve mine life and a large adjacent land package (Lincoln Hills, Wilco) with brownfield expansion potential. 2026 guidance: 70,000 to 90,000 oz of gold and 6.4 to 7.8M oz of silver. This mine has more upside left than the market appreciates.

Kensington (Alaska): The Steady Eddie

An underground gold mine that produced 106,068 oz of gold in 2025 and generated $92M in FCF. The Q4 quarter was Kensington’s best ever: $51M of FCF on the back of 29,567 oz at $1,533/oz costs. A multi-year underground development program has improved operational flexibility and extended reserve life to roughly five years. 2026 guidance: 98,000 to 110,000 gold oz.

Wharf (South Dakota): The Surprise

An open-pit heap-leach gold mine that CDE bought for $99.5M in 2015. It has since returned over $600M in cumulative FCF. In 2025, it generated $162M in FCF. The big news: a 2025 reserve update nearly doubled mine life to 12 years and tripled inferred resources to 1.5M oz. A fire at the tertiary crusher in Q4 will weigh on early 2026 production but a new, larger crusher is being installed in Q2 2026, which should improve throughput, recoveries, and energy costs going forward. 2026 guidance: 72,000 to 90,000 gold oz (back-half weighted due to crusher replacement).

New Afton (British Columbia, Canada): The Copper Card

A block-cave copper-gold mine that is CDE’s entry into copper production. The C-Zone cave is ramping up in 2026 with throughput expected to reach 15,000 tonnes per day. Nine-month 2026 guidance: 60,000 to 80,000 oz of gold and 50M to 65M pounds of copper. The longer-term story here is the K-Zone, where an initial resource of 48M tonnes of M&I plus 6M tonnes of inferred was announced. This represents a potential multi-decade mine life extension, with a feasibility study kicking off in the second half of 2026. Capital investment for K-Zone development will likely run around $600M, spread over several years leading up to 2032.

Rainy River (Ontario, Canada): The Volume Producer

A large open-pit and underground gold mine that produced 290,236 oz of gold in 2025 and is positioned for its highest-ever annual production. The reserve-based mine life was extended by two years out to 2035 with the addition of a Northwest pit extension. Nine-month 2026 guidance: 230,000 to 275,000 gold oz. The CFO noted that even with only nine months of contribution, Rainy River and New Afton are expected to be CDE’s two largest FCF contributors in 2026. That is a telling data point.

The Macro Backdrop: Why Precious Metals Miners Matter Now

The backdrop for this thesis is a precious metals market that has undergone a structural shift. Gold hit a record $5,589 per oz in January 2026 before pulling back to around $4,500 today. Silver touched $121 before correcting to $69. Copper sits above $5 per pound.

The structural drivers behind this metals cycle remain intact. Central banks added over 1,000 tonnes of gold to reserves in 2024, the third-largest annual increase on record. Countries like China, Poland, and Turkey continue buying regardless of price. Geopolitical uncertainty, from the Russia-Ukraine conflict to Iran tensions to disruptions in the Strait of Hormuz, keeps safe-haven demand elevated. The Fed has signaled a shift toward easing, which historically supports gold by lowering the opportunity cost of holding non-yielding assets. Wells Fargo, JPMorgan, and UBS all have year-end gold targets of $6,000-$6,300.1

The recent pullback in metals prices is worth acknowledging. Gold dropped 20% from its January peak. Silver fell even harder, from $121 to $69. These drawdowns are painful but not unprecedented in a secular bull market. Gold saw similar corrections in both the 1980s and the 2010s bull runs before resuming its uptrend.

The question is not whether volatility will continue but whether the structural demand drivers remain in place. I believe they do.

For miners, the math at current prices is extraordinary. Even at $4,500 gold, CDE’s lowest-cost mine (Palmarejo at $700-$900/oz) earns a margin of $3,500 per oz. Even Kensington, the highest-cost legacy CDE mine at $1,750-$1,950/oz, earns margins above $2,400. That kind of pricing power has not existed in the gold mining industry for decades.

On the supply side, global gold mining output is expected to peak around 2027 before plateauing. New mine development takes 10 to 15 years from discovery to production. There is no wave of new supply coming. Companies that already have producing, long-lived assets in safe jurisdictions are positioned to capture that scarcity premium. CDE, with seven mines averaging roughly 10 years of remaining mine life and all located in Canada, the U.S., and Mexico, fits that profile.

Competitive Positioning: What Makes This Platform Different

The precious metals mining landscape is dominated by Newmont [], Barrick [], Agnico Eagle [], and a handful of other large-caps. CDE is not in that weight class on a production basis, but it occupies a unique niche that is hard to replicate.

First, it is the only senior producer with all assets in North America. This matters more than it sounds. Mining in Africa, Central Asia, or Latin America (outside of Mexico) introduces political risk, currency risk, tax risk, and community risk that investors increasingly discount. CDE faces none of this. Its biggest jurisdiction risk is Mexico, where it has operated for years and has established relationships.

Second, the metals mix is unusual. Post-merger, revenue splits roughly 65% gold, 30% silver, and 5% copper. CDE remains a top-five global silver producer. That silver exposure provides differentiated torque in a silver bull market that many peers lack. The copper component, though small, adds a hedge against precious metals weakness (copper follows industrial demand, not just safe-haven flows).

Third, the FCF yield is among the highest in the sector. Management guided for $2B of FCF on a $16.7B market cap. Even adjusting for the recent pullback, that implies a double-digit FCF yield of 12% at current metals prices. Most senior gold producers offer mid-single-digit yields.

Where CDE is vulnerable: it lacks the mega-scale and Tier 1 asset base ofAEM or NEM. None of its individual mines, except perhaps the Rainy River-New Afton combination, would be considered world-class on their own. The portfolio works because of diversification and aggregate output, not because of a single dominant asset. If any two mines underperform simultaneously, the thesis weakens.

Management and Capital Allocation

Mitch Krebs has run CDE for over a decade. His track record is mixed but improving. On the positive side, the SilverCrest acquisition looks brilliant in hindsight. The Wharf mine, bought for $99.5M, has returned over $600M. The Rochester expansion, while painful, is now producing results with record crush tonnage and climbing FCF.

On the negative side, the Rochester expansion ran over budget and over time, inflicting real financial stress. CDE also diluted shareholders substantially over the years: the share count more than doubled to over 640M before the NDG deal added more.

The company sold assets (Northern Empire, Preciosa) during the balance sheet crisis that could have added value long-term.

The new capital allocation framework announced in March 2026 is sensible. Management has three priorities in order: invest in high-return organic growth (brownfield exploration, sustaining capital, projects like K-Zone, Silvertip, East Palmarejo), maintain a net cash balance sheet with the new $1B revolving credit facility, and return excess capital through a $750M buyback program and a small inaugural dividend ($0.02 per share semiannually).

The preference for buybacks over dividends is wise at this stage. The stock is trading well below consensus targets (analyst average of $28.75 vs. current $17), and buybacks at these levels would be accretive. The token dividend signals a commitment to returns without locking in a fixed obligation that would be painful if metals prices fell.

One area to watch: the authorization to increase shares outstanding from 900M to 1.3B. Ostensibly, this was for the NGD deal. But that kind of authorization creates optionality for future dilution. I will be watching closely whether management uses equity for future M&A.

ROIC was a peer-leading 26% in 2025. That number, more than any other, tells you that the capital allocation is working.

Financials: What the Numbers Say

The 2025 Scorecard

FY2025 revenue: $2.07B, up 96% y/y. Net income: $586M ($0.95 per share). Adjusted EBITDA: $1.03B (50% margin). FCF: $666M. Cash at year-end: $554M. Total debt: $341M. Net leverage: negative 0.2x.

These are not normal numbers for CDE. Two years earlier, the company generated $142M in EBITDA and burned $297M in FCF. The transformation is driven by three forces: higher metals prices, the Rochester expansion reaching scale, and the addition of Las Chispas. Each contributed roughly a third of the improvement.

The Balance Sheet Transformation

The balance sheet story is one of the most compelling aspects of the thesis. At Q2 2024, CDE carried $629M in debt with cash of only $74M, producing net debt of $535M at a leverage ratio of 1.7x. By December 2025, total debt had fallen while cash had exploded, resulting in a net cash position of $213 million. The leverage ratio flipped to negative 0.2x.

Stock Unlock: my go-to tool for fundamentals. The free version is great, and if you upgrade, here’s my affiliate link for 10% off.

The NGD deal brings additional financial capacity. NDG ended Q4 2025 with roughly $532M in cash. Combined with CDE’s cash position, that is over $1B of cash at closing. Add the new $1B revolving credit facility and total liquidity approaches $2B. The CFO noted they are working toward an investment-grade credit rating, which would further reduce borrowing costs.

Valuation: A Net Asset Value Approach

For a multi-asset miner like CDE, the right valuation framework is net asset value. Multiples-based approaches (EV/EBITDA, P/E, FCF yield) have their place for a quick screen, but they obscure what matters most: the sum-of-parts value of seven distinct mines, each with its own reserve base, cost structure, mine life, and jurisdictional tax rate. NAV forces you to value each asset on its own merits and then add them up. It also surfaces where the optionality sits.

View the NAV model here

I built a full NAV model for CDE with individual mine-level DCFs, stream deductions, resource option values, and corporate-level adjustments. The base assumption for metal prices are $5,500 gold, $100 silver and $7 copper using a 7% discount rate.

The Base-Case NAV

What the Assumptions Mean

The model projects each mine’s annual gold and silver (and copper, for New Afton) production over its reserve life, applies metal prices, deducts costs applicable to sales (CAS), sustaining and development capex, and taxes at the applicable jurisdictional rate. The after-tax FCF stream is then discounted at 7% to arrive at each mine’s NPV.

The 7% discount rate deserves explanation. For senior gold producers like Agnico Eagle or Barrick, 5-6% is standard. For mid-tiers with execution risk, 8-10% is more appropriate. I use 7% because Coeur is still in the middle of three things: integrating the NGD acquisition, ramping the Rochester expansion to full capacity, and transitioning New Afton from B-Zone to C-Zone. All three carry execution risk that justifies a premium. As these de-risk over the next 12-18 months, a 5%-6% rate becomes defensible.

The Franco-Nevada stream is modeled as 50% of Palmarejo’s gold production from the original concession at the lesser of $800/oz or spot. At today’s gold prices, Franco-Nevada effectively gets half of Palmarejo’s gold for roughly 18 cents on the dollar. This costs Coeur approximately $387 million in present value. The silver lining: over 70% of Palmarejo’s 2026 exploration budget targets the Paramount and Fresnillo concessions, which are explicitly excluded from the stream. Every ounce discovered there accrues 100% to Coeur.

The Royal Gold stream at Rainy River takes 6.5% of gold production at 25% of spot price. This is a smaller drag but still material.

Why the Base NAV Is Not the Full Story

A NAV of $19.88 per share against a stock price of $17 might look like the market is properly valuing CDE shares. It is not. The base-case NAV is deliberately conservative. It values proven and probable reserves, a conservative assumption for resources, uses an 7% discount rate, and relies on metal prices below most outlooks.

There are six levers that move the NAV closer to, and then above, the current stock price.

First, the discount rate. If CDE executes on Rochester’s ramp, integrates New Gold smoothly, and maintains its net cash balance sheet, a 6% rate is justified. That alone lifts NAV to $20.57 per share.

Second, the K-Zone. My base case carries this at $750M, a pure placeholder. The maiden K-Zone resource is 715,000 gold oz plus 606M pounds of copper in M&I alone, plus 86,000 gold oz and 77M pounds of copper in inferred. At current prices, the in-situ metal value exceeds $6 billion. A feasibility study kicks off in the second half of 2026, using existing New Afton infrastructure, which slashes capital intensity. The K-Zone could effectively double New Afton’s mine life. At even a conservative 15% of in-situ value, that is $900M or more. A $1B value is plausible.

Third, mine life extensions. Rochester and Wharf both have far more resources than reserves. Rochester has 353,000 gold oz plus 51.5M silver oz in M&I resources outside reserves, plus the Wilco project with 531,000 inferred gold oz nearby. Wharf has 1.19M M&I gold oz plus 1.49M inferred outside its 1.25M oz reserve. If you add three to five years of production from resource conversion, the mine-level NPVs increase materially.

Fourth, the exploration platform. Coeur is spending $160 million per year on exploration across the portfolio. Quality gold explorers typically generate two to five times value per dollar spent. At a 3x multiple with a 40% risk discount, this exploration program is worth $288M. If you believe Coeur’s recent track record (Palmarejo’s 97% increase in inferred resources y/y, K-Zone maiden resource, Rochester resource growth) justifies a 4-5x multiple, the number climbs to $320M-400M.

Fifth, the cash balance. The model uses $554 million in cash (December 31, 2025). But CDE generated $222M in operating cash flow in Q4 2025 alone. By the NGD close date (March 20, 2026), they likely added another $150M-250M in cash generation, plus whatever cash sat on NGD’s balance sheet. A $700M-$800M starting cash position for mid-2026 is more realistic, adding $0.15-$0.25 per share.

Sixth, metal price assumptions. My base case is above management’s guidance but still below most Street estimates. The sensitivity is clear. A $500 move in gold adds $1.63 per share. Silver contributes $1.83 for every $20 move. Copper matters less, with each $1/lb increase worth about $0.26 per share.

Putting It Together: Why This Is a Buy

While the base-case NAV of $19.88 is the target price, think of it more as a floor. The conservative anchor that tells you what CDE’s existing reserves are worth at a higher discount rate with “industry-average” exploration success, resource conversion, or mine-life extension (they have been more successful).

The Bear Case: Why a Rational Person Would Hesitate

The bull case writes itself at current metals prices. The bear case is harder but more important. Let me steel-man it.

Reason #1. Metals Prices Can Fall Hard and Fast

Gold dropped 20% in two months. Silver dropped even more. CDE dropped 42%. This is the reality of owning a high-beta miner. CDE’s 24-month beta is approximately 1.9. Every 10% move in gold translates to roughly a 20% move in CDE. If gold returns to $3,000 (still well above long-term averages), EBITDA roughly halves. If it returns to $2,500, several of CDE’s mines operate at or near breakeven. At $2,000, the thesis breaks entirely.

I view a return to $2,000 gold as unlikely in the near term given structural central bank demand and geopolitical risk, but I cannot rule it out. Any investor in CDE must accept this as the primary risk.

Reason #2. Integration Risk Is Real

CDE is digesting two major acquisitions in twelve months (SilverCrest and NGD). Having worked on several integrations in my corporate days, I can safely say that integration is never as smooth as management presents. Rainy River has been a historically challenging asset. New Afton is in the middle of a zone transition (B-Zone winding down, C-Zone ramping up). There will be accounting complexity (GAAP vs. IFRS treatment differences already inflated Rainy River’s reported CAS by over $1,000/oz). Cultural integration across three countries is nontrivial.

If integration stumbles, if Rainy River’s underground development falls behind, if New Afton’s C-Zone ramp disappoints, the $3 billion EBITDA target will miss. And the market will punish that miss harshly given the elevated expectations.

Reason #3. The Franco-Nevada Drag at Palmarejo

With gold above $4,000, selling half your Palmarejo gold at $800 per ounce is excruciating. This stream cost CDE an estimated $150-180 million in forgone revenue in 2025 alone. The stream covers virtually all current production for the next few years. While exploration east of the boundary is promising, there is no near-term fix. This is dead weight on an otherwise strong portfolio.

Reason #4. Mine Life Concerns

While the combined reserve base is substantial at 10 years of mine life, gold miners are always depleting their inventory. Some of their mines, notably Kensington (five years) and Las Chispas (five years), have shorter lives that require continuous exploration success to extend. If drill results disappoint, the production profile declines and the valuation multiple compresses.

Reason #5. Share Dilution History

CDE has a long history of diluting shareholders. The share count went from 400M in 2024 to 642M (pre-NGD deal), and now is over 1B. The authorization to increase to 1.3B shares creates the possibility of further dilution. The buyback helps, but at $750M, it would only retire roughly 44M shares at current prices, 4.3% of the float.

Reason #6. Tax Exposure Is Rising

Cash taxes paid in 2025 totaled $178M, with 80% going to Mexico. For 2026, cash tax guidance is $475M-600M for the combined company. US federal NOLs are down to $530M and at current profitability will be exhausted within two years. As the tax shield erodes, a larger share of operating cash flow gets siphoned to governments.

Variant Perception: What the Market May Be Missing

The consensus view on CDE seems to be: it is a high-beta precious metals play that just did a big deal at a potential metals cycle top. The recent 42% drawdown reflects that skepticism.

Here is what I think the market is underappreciating.

First, the FCF profile is self-reinforcing. Unlike the 2022-2023 period where FCF was negative because of Rochester capex, the heavy spending is done. All seven mines are now in production or late-stage ramp. Sustaining capex is predictable. Growth capex (K-Zone, Silvertip) is years away from peak spending. The FCF generation at any reasonable metals price is substantial enough to fund buybacks, debt reduction, and exploration simultaneously.

Second, the exploration pipeline is undervalued. Wharf’s mine life nearly doubled to 12 years with minimal drilling spend. Palmarejo’s eastern exploration is opening up 70,000 royalty-free acres with only 3% explored. Rochester has brownfield expansion options at Lincoln Hills (4x the reserve grade, 1km from the crusher) and Wilco. New Afton’s K-Zone could extend that mine’s life by decades.

Third, the copper exposure adds a free option. New Afton produces 50-65 million pounds of copper annually. At $5/lb, that is $250M-325M of revenue from a metal with its own structural deficit story tied to electrification and the energy transition. Most precious metals funds and ETFs do not explicitly value this copper contribution.

Fourth, the path to investment-grade credit is underappreciated. If CDE achieves IG ratings, borrowing costs fall, institutional access expands, and the stock potentially qualifies for inclusion in additional indices. The CFO explicitly flagged this as a near-term goal.

Catalysts and What to Watch

Over the next 6 to 18 months, several data points will confirm or challenge the thesis.

The Q1 2026 earnings report (expected early May) will be the first to include even partial NGD contributions. Watch for the combined guidance, integration commentary, and any surprises on Rainy River or New Afton costs. Rochester’s crushing metrics through winter will show whether the ramp is sustainable year-round. New Afton’s C-Zone throughput ramp to 15,000 tonnes/day is a key operational milestone. The K-Zone feasibility study launch in H2 2026 will provide the first detailed look at this long-term growth option.

The initial buyback activity post-Q1 earnings will signal management’s conviction. Credit rating upgrades from S&P and Moody’s are expected in the near term. And of course, gold and silver prices remain the single biggest variable.

Verdict

Coeur Mining at $17 is a Buy. The base-case NAV of $19.88 per share is my conservative target price. The risk is primarily metal prices. A sustained move below $3,500 gold would require re-evaluation. Integration risk is real but manageable given Coeur’s clean execution on SilverCrest.

The original New Gold thesis we published in June 2025 gained 85.8% before the CDE acquisition closed. The combined entity represents a more diversified, more liquid, and more powerful way to play the same structural precious metals theme. The opportunity has evolved, not ended.

Portfolio Update

As the war drags on, the S&P 500 keeps falling. Opposite to the S&P 500, our portfolio is up, widening the gap.

Portfolio Return

Month-to-date: -5.8% vs. the S&P 500’s -7.4%.
Year-to-date: +6.4% vs. the S&P 500’s -7.0%. That is a gap of 1,331 points.
Since inception: +50.1% vs. the S&P 500’s +10.7%. That’s 4.7x the market.

Contribution by Sector

Industrials and energy led the gains, offset by tech and consumer cyclical.

Contribution by Position

(For the full breakdown plus commentary on earnings results and the big movers, see Weekly Stock Performance Tracker)

How to read the heat map? Click here.

+47 bps (TSX: CLS) (Thesis)
+24 bps (Thesis)
+23 bps (Thesis)
+15 bps (Thesis)
+1 bps (Thesis)
-2 bps (Thesis)
-3 bps (Thesis)
-59 bps (Thesis)

That’s it for this week.

Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!

Further Sunday reading to help your investment process:

www.reuters.com/business/finance/jp-morgan-expects-gold-prices-reach-6300oz-by-end-2026-2026-02-25/

au.finance.yahoo.com/news/wells-fargo-resets-gold-price-153300506.html

Weekly #74: Micron Q2 2026. The Supercycle Just Got Louder. My Target Goes to $934.

George Atuan, CFA — Sun, 22 Mar 2026 17:13:58 GMT

Hello fellow Sharks,

As the war drags on, the S&P 500 keeps falling. Our portfolio is down too, but still outperforming and widening the gap. Since inception, it has delivered 3.7x the S&P 500. If you want to skip straight to the numbers, jump to the Portfolio Update.

On Friday, our NGD shares were exchanged for CDE shares. The NDG position, the June stock pick, gained 85.8% before being exchanged. At one point, the shares were above $13, but the entire sector was hit lately.

So I am removing the paywall on my NGD deep dive and next week I will share my analysis on CDE as we received those shares in exchange.

In this Weekly, I go over Micron’s earnings results and my refreshed valuation.

Enjoy the read, and have a great Sunday.

~George

Thanks for reading! This post is public, so feel free to share it.

In Case You Missed It

On March 16, I sent a trade alert closing OPFI and trimming POWL to finance the March Stock Pick.

This wasn’t a random rotation. It was the continuation of a thesis I’ve been building for months around where the real value sits in today’s market. Not in the obvious names everyone is chasing, but in the infrastructure quietly enabling them.The setup is simple, but powerful. Instead of betting on the commodity, I’m positioning in the picks and shovels behind it.

And on Friday, I followed up with the deep dive.

It’s already working.

The position is up 1.3% in its first week, and the thesis is just getting started.

Paid member? Click here for the uncensored list.

Thought Of The Week

Micron (MU) Q2 2026 Earnings Review, The Supercycle Just Got Louder

Since I named Micron [] my top stock pick for 2026, the stock is up 44%.

At one point, shares passed $470, but the Iran war and a wave of profit-taking dragged the price back to around $423.

That pullback does not change the thesis. If anything, the fundamentals today are stronger than when I first wrote the piece. The Q2 2026 results blew past even the elevated guidance management set in Q1. Revenue, margins, earnings, and free cash flow all hit records, and the Q3 outlook is so far above historical norms that a single quarter of guided revenue exceeds its entire annual revenue for every fiscal year through 2024.

Stock Unlock: my go-to tool for fundamentals. The free version is great, and if you upgrade, here’s my affiliate link for 10% off.

I have updated my model, refreshed every assumption, and run a new DCF. My target price goes from $480 to $934. I will walk through every input below and tie each one back to what Q2 revealed.

But first, the quarter itself.

Q2 2026: A Record-Setting Quarter Across Every Line

The headline numbers are staggering.

Seeking Alpha

And they beat every relevant metric:

Revenue came in at $23.86 billion, up 75% sequentially and 196% y/y. That figure obliterated the guidance of $18.7 billion that management issued alongside Q1 results.
EPS reached $12.20, beating the $9.21 consensus by 32% and jumping 682% from the year-ago period.
Gross margin soared to 74.9%, up from 56.8% in Q1 and 37.9% a year ago.
Operating income was $16.46 billion, a 69% operating margin.
FCF hit $6.9 billion, after net capex of $5.0 billion.

The $10.2 billion sequential revenue increase was the largest in its history. This was its fourth consecutive quarterly revenue record. To understand the scale, consider that the company ended the quarter with $16.7 billion of cash and net cash turned positive at $6.5 billion. A year ago, MU had a negative net cash of $4.8 billion.

Pricing Drove the Blow-Out, Not Volume

This is the detail that changes the entire investment framework. DRAM bit shipments grew only mid-single digits sequentially, and NAND bit shipments rose in the low-single-digit range.

The revenue explosion was almost entirely price-driven.

Management confirmed it can currently satisfy only 50% to two-thirds of demand from several key customers. That statistic alone explains the margin trajectory. When you are rationing supply, you do not discount.

DRAM: The Engine

DRAM revenue was $18.77 billion, representing 79% of total revenue and up 207% y/y.

Every business unit set a record in either revenue growth, margin or both.

The MCBU margin expansion deserves attention. A year ago that segment ran a 15% gross margin and a 1% operating margin. In Q2, it posted 79% and 76%, respectively. That kind of swing happens only when you have extreme pricing power from a supply-constrained market being met by soaring AI-driven content requirements.

NAND: Catching Up

NAND revenue was $5.0 billion, up 169% y/y and 82% sequentially. Data center NAND revenues more than doubled sequentially, reaching a new record, and management expects further growth in Q3.

The 122TB high-capacity SSD is gaining traction, delivering 16 times the sequential read throughput per watt of a capacity-matched HDD configuration. AI use cases like vector databases and KV cache offload are accelerating NAND demand in the data center. Management stated it is now seeing NAND demand in excess of available supply for the foreseeable future.

HBM and Technology Leadership

MU began volume shipments of HBM4 36GB 12-high in the first quarter of 2026, designed for NVIDIA’s Vera Rubin platform. It has also sampled a 16-high product providing 48GB per HBM cube, a 33% capacity increase over the 12-high. HBM4E development is underway with volume shipments expected to ramp in calendar 2027, delivering what management calls a step-function improvement in performance for next-generation AI compute platforms.

The 1-gamma DRAM node is ramping volumes faster than any prior node in MU’s history and is on track to become a majority of DRAM bit mix by mid-2026. In NAND, G9 achieved a record mix of QLC bits in the quarter and is also on track to be a majority of bits by mid-2026. A clear majority of customers now rank Micron number one in quality.

The Guidance That Shocked the Street

Q3 2026 revenue guidance is $33.5 billion (plus or minus $750 million), with gross margins of approximately 81% and non-GAAP EPS of $19.15 (plus or minus $0.40).

That single-quarter revenue guide exceeds every full-year revenue total in its history through fiscal 2024. It represents a roughly 40% sequential increase from the record-breaking Q2.

The board also approved a 30% increase in the quarterly dividend to $0.15 per share, a signal of management’s confidence in sustained cash flow generation.

Management expects fiscal 2026 capex to exceed $25 billion, up from the $20 billion guided earlier. The increase is driven primarily by cleanroom facility-related spending, with the Tongluo acquisition (completed ahead of schedule) and accelerated U.S. fab construction accounting for most of the step-up.

In 2027, construction-related capex alone is expected to increase by over $10 billion y/y (spillover to & ?? 🤔), with equipment spend also rising. One critical caveat from the CFO: any impacts from trade or geopolitical developments are not included in the guidance.

Strategic Customer Agreements: A Structural Shift

Beyond the numbers, the most important strategic development may be the introduction of multi-year Strategic Customer Agreements (SCAs). Micron signed its first five-year SCA during the quarter.

These differ from the traditional one-year Long-Term Agreements. SCAs provide specific multi-year commitments from customers on both volume and price, giving MU improved visibility and business model stability.

The terms are confidential, but the structural implication is clear: the relationship between memory supplier and hyperscaler is evolving from transactional commodity purchasing to contracted infrastructure supply. If that trend continues, it changes the volatility profile and the valuation framework for the entire memory industry.

The Iran War: A Bottleneck Within a Bottleneck

For the semiconductor industry, this is not just a macro headline. It is a direct operational threat that has introduced what I would call a bottleneck within a bottleneck: a physical shortage of critical materials layered on top of the already extreme AI-driven demand-supply mismatch.

The Strait of Hormuz and the Helium Crunch

The most immediate transmission mechanism is the Strait of Hormuz. Iran has deployed naval mines, drones, and shore-based missiles to disrupt shipping through the strait, which is the transit point for roughly 20% of global LNG and helium flows from Qatar.

Ultra-pure helium is essential for semiconductor fabrication. It is used in cooling and chip etching processes. The closure of the strait has triggered a “helium crunch”.

This is where MU’s positioning matters. It’s the least affected among the three major memory makers because its U.S. fabs source helium primarily from domestic and Algerian supplies. Samsung and SK Hynix, by contrast, have an estimated 65% dependency on Qatari helium and have already begun rationing.

That asymmetry reinforces Micron’s competitive position in the near term. The supply squeeze that was already driving memory pricing higher is now being amplified by a physical materials shortage that disproportionately constrains MU’s competitors.

Energy Costs and Manufacturing

Semiconductor fabs are among the most energy-intensive operations on earth, requiring reliable 24/7 power to maintain EUV lithography cycles. Rising oil prices act as a direct manufacturing tax.

MU’s centers of excellence span Taiwan, Singapore, Japan, and Malaysia, and each faces energy surcharges and shipping delays from the conflict’s ripple effects. The risk is that these costs erode some of the pricing gains of the supercycle, even if MU passes a portion through to customers.

Rare Earth and China Risk

The conflict has also exposed the fragility of just-in-time supply chains for raw materials. Micron remains dependent on China for certain rare earth elements, minerals, and metals used in advanced manufacturing.

There is a non-trivial risk that the Middle East conflict emboldens China to impose new retaliatory trade restrictions, specifically targeting materials required for EUV-based manufacturing, as a response to U.S. regional operations.

This feeds into a second risk vector: CHIPS Act milestone compliance. MU’s domestic expansion in Idaho, New York (Clay), and Virginia (Manassas) is strictly conditioned on meeting construction or production milestones. War-related labor shortages or delays in specialized equipment could put CHIPS Act disbursements at risk, further straining the $25 billion-plus capex budget.

The “RAMageddon” Contagion Across Sectors

The HBM-first allocation strategy is creating real pain for non-AI sectors. The shortage of traditional DRAM is jeopardizing Level 2 and Level 3 ADAS rollouts, forcing carmakers to prioritize high-margin luxury models.

In consumer electronics, Gartner projects the sub-$500 PC market will disappear by 2028 as current memory costs make budget models unsustainable. Average smartphone prices have jumped 14% to a record $523.

This creates a mixed dynamic.

Pricing power remains exceptional because supply is constrained everywhere. But there is a mounting risk of demand destruction in price-sensitive consumer markets, which could mean lower unit volumes in PCs and smartphones for 2026.

The data center segment, where deep-pocketed hyperscalers absorb higher costs, is where Micron’s pricing power is most durable. According to management, data center DRAM and NAND bit TAM is expected to exceed 50% of the entire industry TAM for the first time in calendar 2026.

Will the War End Soon? Parsing the Signals

This is the question everyone is asking. The answer determines whether the supply chain disruption is a one-quarter shock or a multi-quarter headwind that reshapes the industry landscape.

Evidence Pointing Toward an Exit

Several indicators suggest Trump is actively seeking an off-ramp. On March 20, Trump stated on Truth Social that he is considering winding down military operations, claiming the U.S. is getting close to meeting its objectives. House Speaker has asserted that the original mission is virtually accomplished, citing the successful targeting of ballistic missile production and the neutralization of much of the Iranian navy.

The U.S. Treasury announced a 30-day sanctions waiver on March 20, permitting the sale of Iranian oil currently stranded at sea. I think this is a tacit admission that Iran’s closure of the Strait of Hormuz has given it significant economic pressure. Under the War Powers Act, the President faces a 60-day limit for military operations without Congressional authorization, and lawmakers are questioning the lack of a clear endgame as the Pentagon requests an additional $200 billion for the war effort.

Evidence Pointing Toward Prolonged Conflict

Despite the rhetoric, several factors suggest the conflict could persist well beyond the next few weeks. The UAE has explicitly informed U.S. officials it is prepared for the war to last up to nine months. While Washington discusses an exit, it is simultaneously deploying thousands of ground troops from East Asia to the region, and as of March 20 sent three additional warships and thousands of Marines to the Middle East.

The Strait of Hormuz remains effectively closed. Iran continues to use drones, naval mines, and shore-based missiles to harass shipping, making a clean exit difficult without a total cessation of hostilities. Netanyahu may seek to prolong operations to ensure the total degradation of Hezbollah and Iran’s regional influence, exercising what amounts to a veto over any early U.S. withdrawal. And the Iranian regime under Mojtaba Khamenei has not collapsed as some initially anticipated. Instead, it has doubled down on resistance, using the Strait as its primary tool of economic pressure.

A further risk factor is the quality of the U.S. negotiation team. Lead Negotiator, Steve Witkoff, is perceived by multiple observers as out of his depth, increasing the probability that diplomacy fails to contain the escalation.

My Assessment

If I was a betting man (I am 🙂), I think the likelihood of major combat operations winding down is within 1-2 months, driven by domestic political pressure and the risk of systemic global economic fallout.

The market is betting it will take longer.

Regardless, I think that the likelihood of a comprehensive diplomatic settlement remains low. The most probable outcome for mid-2026 is a transition to contained hostility: a frozen conflict where the U.S. maintains a heavy naval presence to enforce freedom of navigation in the Gulf while the Iranian regime remains weakened but intact and hostile.

For MU, this means the helium crunch and energy-cost headwinds are likely to persist beyond Q3, even if the most acute phase of the conflict eases. Samsung and SK Hynix will continue to face disproportionate supply-chain friction relative to MU. The structural supply squeeze, already in place before the war started, has been extended and amplified. And if Iran retains the ability to disrupt the Strait, it may simply invite future rounds of conflict, keeping geopolitical risk priced into the market for the remainder of 2026.

Q2 Reality vs. My Original Thesis: Where I Was Right and Where I Was Wrong

When I published my original analysis, I identified Micron as a structural winner sitting at the heart of the AI memory boom. The core pillars of that thesis were: exploding HBM demand, contracted supply through 2026, a forward P/E discount to peers, and a DCF fair value of $480 per share.

Let me score that thesis against what Q2 2026 actually delivered.

Revenue: I Was Right on Direction, Wrong on Magnitude

I originally estimated fiscal 2026 revenue of approximately $74 billion, roughly a doubling versus fiscal 2025. That estimate was based on management’s own guidance at the time. With Q2 actuals at $23.86 billion and Q3 guided at $33.5 billion, Micron has already generated $37.5 billion in the first half alone. Analyst consensus now projects fiscal 2026 revenue of approximately $109 billion. My original estimate undershot by roughly 47%. The AI supercycle moved faster than I modeled.

Margins: I Was Conservatively Wrong

My DCF assumed a long-run gross margin of 40%, which I described as a through-cycle normalization above historical averages. I chose that number deliberately. Memory has always been cyclical, and I did not want to anchor a ten-year model on peak-cycle margins.

At 74.9% actual and 81% guided, Micron is operating at double my assumed mid-cycle margin. The transition to HBM, Strategic Customer Agreements, and the AI-driven supply squeeze have created a structural floor for margins that my original model did not anticipate.

SG&A: I Was Too Conservative

I modeled SG&A at approximately 3% of sales for the long term. In Q2 2026, SG&A was $344 million on $23.86 billion of revenue, or 1.4% of sales. The velocity of revenue growth has turned SG&A into a negligible line item. Absolute spending barely moved q/q ($337 million to $344 million), but the revenue denominator nearly doubled.

HBM TAM: My Thesis Was Validated

I highlighted HBM as the core catalyst and noted that management forecasted the total addressable HBM market growing from $35 billion in 2025 to $100 billion by 2028.

Management has since accelerated that projection, now expecting the $100 billion milestone to arrive two years earlier than previously forecasted. The HBM market alone would be larger than the entire DRAM industry was in 2024.

Competitive Positioning: Better Than Expected

My thesis flagged Samsung and SK Hynix as formidable competitors and identified YMTC as a long-term Chinese threat. What I did not anticipate was the Iran war creating an asymmetric advantage for Micron’s U.S.-sourced supply chain. The helium dependency of Samsung and SK Hynix on Qatar has turned MU’s domestic manufacturing base into a strategic moat that goes beyond node leadership.

What I Missed Entirely: The War

My December thesis was written in the Party Economy, pricing in a North American World Cup and USA 250th anniversary celebrations as macro tailwinds.

The March reality is War-a-Lago.

I did not model any geopolitical disruption scenario. The Iran war introduced a supply chain shock that simultaneously validates the scarcity thesis (prices soar) while threatening the broader macro environment (energy costs, demand destruction in consumer segments).

The net effect has been positive for Micron’s relative positioning but negative for absolute sentiment, which is why the stock gave back gains from $470 to $422 despite printing the best quarter in the company’s history.

Refreshed Valuation: From $480 to $934

I have updated the assumption to reflect what Q2 2026 revealed and what the guidance implies for the trajectory of the business.

As a result, my target price increases from $480 to $934. That is not a rounding error. It reflects a fundamental re-rating of its earnings power.

Let me walk through each assumption and tie it to the evidence.

Revenue Growth

The 2026 revision is the most impactful. When I wrote the original thesis, management guided fiscal 2026 revenue at $74 billion. The current trajectory is $109 billion. That is not forecast risk. That is realized revenue acceleration, already confirmed through Q2 actuals and Q3 guidance.

Gross Margin

The key insight from Q2 is that this is not a typical memory margin spike. HBM carries a 3-to-1 trade ratio, meaning it consumes three times the wafer capacity of standard DRAM.

With HBM supply sold out through calendar 2026 and SCAs locking in multi-year pricing, the floor for margins has moved permanently higher. My old 40% assumption was appropriate for a traditional memory cycle. This is not a traditional memory cycle.

R&D as Percentage of Revenue

I hold this at 11% throughout the projection period. Management plans to meaningfully increase R&D investments in fiscal 2027 to support next-generation nodes like 1-delta DRAM.

The CFO projected a 2027 total opex run rate of $1.7 billion per quarter. At the revenue levels we are now projecting, 11% accommodates that increase.

SG&A as Percentage of Revenue

In the near term, SG&A is running at 1.4% of sales, massively outperforming. But as the sovereign fabrication model scales (Boise, Clay, Singapore, Tongluo), administrative overhead will grow in absolute terms..

Capex Intensity

Capex intensity is the one area where the model gets more demanding. The mega-fab buildout (Idaho fabs 1 and 2, Clay NY, Singapore NAND, Tongluo, Hiroshima expansion) requires sustained investment. But the revenue base has expanded so dramatically that the absolute capex dollars generate proportionally more FCF than my old model assumed.

Tax Rate

I use 17% for the projection period, up slightly from my original 15%. Management guided a fiscal Q3 and full-year 2026 tax rate of around 15.1%. As Micron’s geographic mix shifts toward more U.S. production (with CHIPS Act incentives phasing over time), I conservatively assume a gradual increase.

Working Capital Assumptions

I keep days in receivables at 72, days in inventory at 130, and days in payables at 50, consistent with Q2 actuals. There is a reasonable case that DSI compresses from here.

The Iran war's supply chain disruption is accelerating inventory drawdowns across the industry, particularly at Samsung and SK Hynix, where the helium crunch is forcing output curtailments. That dynamic pulls finished goods off shelves faster than normal replenishment cycles allow.

I hold DSI constant at 130 rather than modeling a decline, because building a drawdown curve into a ten-year model introduces precision that the uncertainty does not warrant.

The conservative assumption also means any actual inventory reduction flows through as upside to FCF, not as a baseline expectation baked into the target price.

What the New DCF Produces

With these updated assumptions, my DCF yields a fair value of $934 per share. That is a 121% upside.

The single biggest driver of the increase is the revenue reset. When you take a company from $74 billion of expected revenue to $109 billion in a single fiscal year, and that revenue carries 65-81% gross margins instead of 40%, the FCF generation transforms.

The secondary driver is the margin re-rating. A company that earns 65% gross margins on $109 billion of revenue produces a fundamentally different cash flow profile than one earning 40% on $74 billion. The capex increase is a partial offset, but the revenue and margin expansion overwhelm it.

Risk Factors and What Could Go Wrong

Risk #1. Cyclical timing risk remains the primary threat.

New fabs are scheduled to come online between 2027 and 2028. Each one adds a fixed block of supply to the market, whether demand shows up or not. Micron is spending over $25 billion per year to build these facilities. That spending does not slow down once construction begins.

If AI demand cools at the same time this wave of new supply arrives, the industry floods with chips that nobody is urgently buying. Prices fall. But the costs to run those fabs, depreciation, labor, energy, and debt service on the capital raised to build them, do not fall with prices.

Gross margins collapse because revenue drops while costs hold. Memory has done this before: it built for a future that arrived late, and investors paid the price while waiting. That is the risk I am watching most closely.

Risk #2. China’s emerging competitive threat is real.

China’s recent success in developing a functional EUV lithography prototype in late 2025 could introduce new competitive pressures by the late 2020s. If Chinese-subsidized DRAM or NAND catches up at scale, it would erode pricing power industry-wide.

Risk #3. The Iran war has a tail.

Even under my base case of contained hostility, the Strait of Hormuz remains a chokepoint. Future rounds of disruption are possible. If the conflict escalates rather than freezes, energy costs could spike further and trigger broader demand destruction beyond consumer electronics.

Risk #4. Customer concentration is unchanged.

Roughly half of MU’s revenue comes from its top 10 customers. Any reduction in hyperscaler spending would hit the top line directly. The SCAs mitigate this somewhat, but they do not eliminate it.

Risk #5. Insider selling has continued into early 2026, with one exception.

The pattern I flagged in December remains largely intact. Sumit Sadana (EVP and Chief Business Officer) sold 25,000 shares across three tranches on February 2, at $430 per share. Manish Bhatia (EVP, Global Operations) sold 24,623 shares on January 22 at prices between $389 and $395. The SVP and Chief Legal Officer Ray Michael Charles liquidated over 12,000 shares on January 27 across a series of tranches ranging from $401 to $416.

The one data point that breaks the pattern is Liu Teyin M, a Director, who made open-market purchases totaling 23,200 shares across two days in mid-January, at prices between $337 and $338, for a combined outlay of approximately $7.8 million. A director writing a $7.8 million check at $337 while the stock now sits at $422 is a meaningful signal. It does not reverse my caution on the broader selling pattern, but it is the first insider buy in the dataset and it came from someone with board-level visibility into the business.

I keep this as a yellow flag rather than a red one. The selling reflects diversification by executives who have held stock for years and are taking gains on a position that has compounded dramatically. The buying, however, is the data point worth watching most closely going forward.

Conclusion

Micron just printed the best quarter in its history, guided for an even better one, and the stock sits 10% below its recent peak because a war broke out.

That is not a thesis problem.

That is a buying opportunity dressed up as a news cycle. The fundamentals have not just held. They have accelerated beyond what I modeled in December. Three quarters remain in 2026, the stock is already up 44%, and the earnings trajectory suggests we have not seen the best of this cycle yet.

I maintain my Strong Buy.

The top pick stands.

Leave a comment

Portfolio Update

As the war drags on, the S&P 500 keeps falling. Our portfolio is down too, but still outperforming and widening the gap.

Portfolio Return

Month-to-date: -6.8% vs. the S&P 500’s -5.4%.
Year-to-date: +5.2% vs. the S&P 500’s -5.0%. That is a gap of 1,016 points.
Since inception: +48.5% vs. the S&P 500’s +13.1%. That’s 3.7x the market.

Contribution by Sector

Energy led the gains offset gold.

Contribution by Position

(For the full breakdown plus commentary on earnings results and the big movers, see Weekly Stock Performance Tracker)

How to read the heat map? Click here.

+20 bps (TSX: CLS) (Thesis)
+12 bps (Thesis)
+5 bps (Thesis)
+1 bps (Thesis)
-3 bps (Thesis)
-4 bps (Thesis)
-5 bps (Thesis)
-15 bps (Thesis)

That’s it for this week.

Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!

Further Sunday reading to help your investment process:

Deep Dive: The Eagle in the Desert: My Highest-Conviction Energy Buy of 2026

George Atuan, CFA — Fri, 20 Mar 2026 17:18:13 GMT

My March stock pick sits at the core of a thesis I have been building since late last year: the energy sector is undervalued, and the best way to profit from this mispricing is not to bet on the commodity itself, but to own the picks and shovels.

This should be a familiar theme if you have been following my writing for a while. Rather than investing in Nvidia [] directly, I invested in the infrastructure that makes Nvidia possible: the advanced node manufacturer (), the data center builders (, ), the power suppliers keeping those centers running (), the memory providers (), and the rack manufacturer on which those Nvidia chips sit (). The same logic applies here. I am not buying a barrel of oil. I am buying the company that gets paid to pull it out of the ground.

Late in 2024, I published my view that the S&P 500 energy sector was cheap relative to the rest of the market.

I followed through with an energy stock as my December pick…

… and on March 16 I added a second position in the same sector.

But this one is different.

The company does not produce a single barrel of oil. It provides the tools, the crews, and the technology that allow producers to pull that barrel out of the ground.

Trade Alert: The Oil Paradox: Finding Value While the Middle East Burns

George Atuan, CFA — Mon, 16 Mar 2026 18:07:13 GMT

While OPFI continues to print cash, my view on the long-term risk has shifted. Also, I am reallocating the capital from OPFI to another name where I see a higher upside and clearer short-medium term catalysts. If you want to jump straight to the trade alert, click here.

We are closing the position with a small gain of +6.3%.

This looks frustrating as we were up 131% at one point 😞, but it is what it is, we can’t win them all.

Also, I reduced the POWL position to finance the rest of the position. As I previously mentioned, POWL has been a trimming candidate if I needed capital.

Q4 2025 Earnings Results

OPFI’s numbers tell a story of growth meeting a more difficult economic wall. Profitability metrics reached new heights during the final quarter of the year. Total revenue increased 17.3%.

Adjusted net income grew 27.2%, which set a new record for any fourth quarter.

I track operating leverage as a primary indicator of a healthy business. OppFi [] succeeded here. Total expenses as a percentage of revenue fell to 34.3% from 41.4% a year ago.

The credit side of the ledger shows growing pains. Net charge-offs as a percentage of revenue rose to 45% from 42% year over year.

Management blamed this increase on early summer loan groups. Revenue also narrowly missed the analyst forecast of $160.1M (revenue = $159.2M). While the company beat EPS targets by 2 cents (EPS = 30 cents), the market focused on the revenue miss and credit risk.

Q4 2025 Call Highlights

The call focused on how technology will fix recent credit issues. Management plans to launch Underwriting Model 6.1 in the first half of 2026. This update aims to better weight borrower attributes to lower risk. I am watching Model 7.0, which is scheduled for the third quarter of this year. The company is also migrating to a new platform named LOLA. They believe this system will push auto-approval rates higher.

Analysts asked tough questions about the impact of high gas prices on borrowers. Management noted that inflation is a tax on its customers. It reduces their ability to pay back loans. He stated the company sees indicators of payment trouble within one month of a loan starting. Management is banking on their new line of credit product to find new growth. This product will launch in the summer of 2026.

Relevant Industry Trends and Outlook

The digital lending industry in 2026 depends on automation for survival. Borrowers now expect instant decisions and digital journeys. Any lender relying on manual steps will face higher costs and slower speeds. Real-time credit decisions are now the industry standard. OppFi is following this trend with its high auto-approval rate of 79%.

Regulation is becoming a heavier burden for small lenders. The Consumer Financial Protection Bureau is focusing on how lenders use artificial intelligence. Lenders must now give specific reasons for loan denials when using algorithms. New rules on data privacy and stablecoins are also changing the landscape. Larger peers like SoFi and Upstart are scaling faster across more categories like home and auto loans. This competition could squeeze the margins of niche players like OppFi.

Valuation

The market has repriced the entire subprime lending sector and the risk profile of the business has shifted. I rebuilt my valuation incorporating the most recent operating trends.

Two key assumptions changed in this update.

First, I increased the expected net charge-off rate in the model to reflect the recent deterioration in credit performance and the possibility that subprime borrowers remain under pressure from inflation and higher living costs.

Second, I raised WACC. The financing environment for subprime lenders has become more uncertain, and investors are demanding a higher risk premium for businesses exposed to weaker consumer credit conditions.

These adjustments reduce the present value of future cash flows. As a result, my fair value estimate declines from $21 per share to $15 per share.

Even with this more conservative framework, the stock still trades at a meaningful discount to intrinsic value. At current prices, OPFI sits at roughly 55 cents on the dollar relative to my updated estimate.

However, a low price alone is not enough to justify holding the position when the underlying risk profile of the business has changed.

Verdict

The bear case for OPFI is convincing. Subprime borrowers are facing a mix of high inflation and rising unemployment. If the new underwriting models fail to catch these trends, losses could spike. This would erase the margins that make the business attractive. If bank partners lose confidence, the entire lending funnel could collapse.

I am dismantling that bear case by looking at the cash. OPFI has eleven years of profit history. It generated $93.5 million in free cash flow this year alone. They have paid off their corporate debt and are returning capital to shareholders. The business is a cash machine.

I am closing my position to finance the acquisition of a company with better prospects. This new opportunity is in the energy industry. The stock has been hit lately because of the conflict in the Middle East.

You might think that rising oil prices would benefit the share price, but this company focuses strictly on the MENA region, where the war is happening. While the market is pricing in the immediate risks of the conflict, I believe this creates a superior entry point compared to waiting for an uncertain turnaround in subprime lending.

Weekly #73: The Fog of War & Why I’m Ignoring The Friction

George Atuan, CFA — Sun, 15 Mar 2026 13:09:58 GMT

Hello fellow Sharks,

Even as the S&P 500 slipped further last week, our portfolio regained ground continuing to widen the gap. Since inception, it has delivered 3.3x the S&P 500. If you want to skip straight to the numbers, jump to the Portfolio Update.

The Thought Of The Week is in response to several questions you sent me this week. I hope this covers most of what you are looking for. If you have any pending questions, please let me know.

Leave a comment

The reality of war is that it is fundamentally uncertain. We don’t know if Operation Epic Fury will end in a few weeks or if it will drag on for years. To be fair, when the Russia-Ukraine war began, I thought it would take a few weeks. I obviously got that very wrong.

For my March stock pick, I have been analyzing an energy company. You would think a company in this sector would thrive as oil prices spike, but the stock has actually been dropping as the conflict in Iran progresses.

This is because the company operates primarily in the MENA region. I have questioned if this is the right move given the current instability. Still, I have to remind myself that history shows wartime is often constructive for stock returns over the medium and long term.

Enjoy the read, and have a great Sunday.

~George

Thanks for reading! This post is public, so feel free to share it.

New Feature: You Can Rank Your Portfolio On www.RankedStocks.com

This week, we shipped one more feature at Ranked Stocks. My objective is to make Ranked Stocks the ultimate research tool for stock investing. Now you can upload your portfolio to Ranked Stocks and have it ranked!

Just go to the My Portfolio tab at the top of the page.

Then at the bottom of the page, you can upload a CSV with your holdings or add them manually.

1. Rank Your Portfolio

I uploaded the Beating The Tide portfolio and got it ranked. 74 is a good score, keep in mind some of our holdings were excluded…we are expanding the coverage every week, so eventually there won’t be any position excluded.

2. See The Historical Score of Your Portfolio

3. Check the Score Mix

4. Review which holdings have the highest and lowest scores

5. See the biggest improvers and decliners

6. Review the score details per position

Check it out and let me know what is your portfolio’s RS score!

Leave a comment

Earnings Results: 2/3 EPS Beats

This week, 2/3 companies beat either EPS or revenue consensus estimates. Paid subscribers can read the detailed earnings analysis here.

Seeking Alpha

During the week, I will be releasing a detailed review for OPFI earnings results.

Share Beating The Tide: Stock Picks That Outperform

Thought Of The Week: Investing Through the Fog of War

The most dangerous thing someone can do during Operation Epic Fury is exactly what feels safest: selling everything and going to cash. History, data, and the greatest investors who ever lived all converge on one conclusion: geopolitical crises produce short, sharp drawdowns that punish those who flee and reward those who stay.

We are Sharks, we stay!

The S&P 500 has been positive one year after 73% of armed conflicts since WWII…

Source

… and wartime stocks have outperformed bonds or just holding cash.

Source

The current Iran conflict fits a familiar pattern: maximum fear, modest equity damage, and enormous long-term opportunity cost.

What the greatest investors say about investing during war

From Graham in 1949 to Howard Marks in 2025, the message is consistent: uncertainty is the investor’s friend because it drives prices down, and the worst response to crisis is inaction disguised as prudence.

Warren Buffett: “The last thing you’d want to do is hold money during a war”

He bought his first stock (three shares of Cities Service) at age 11 in the spring of 1942. At the time, the U.S. was suffering devastating losses in the Pacific. He paid $38.25 per share, watched it quickly sink to $27, and then sold as soon as it recovered to $40.

After commissions, he walked away with a tiny profit of about five dollars. He felt relieved until the stock price shot up to $200. This was his first hard lesson in the “American tailwind.” He realized that by chasing a small, safe profit during a crisis, he missed a life-changing gain.

Buffett told CNBC: “The one thing you can be quite sure of is if we went into some very major war, the value of money would go down, that’s happened in virtually every war that I’m aware of. The last thing you’d want to do is hold money during a war.” When asked whether escalation to a cold war or even WWIII would deter him, he was unambiguous: “If you tell me all of that’s going to happen, I will still be buying stocks.”

His October 2008 New York Times op-ed, “Buy American. I Am.,” was published while the S&P 500 was in freefall: “A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.” The S&P fell another 26% after that column. But anyone who bought on publication day was up 613% as of today.

Perhaps his most powerful framing: “Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.” (source)

John Templeton: the man who bought war

In September 1939, as Hitler’s armies swept across Europe, Templeton borrowed $10,000 and bought 100 shares of every stock on the NYSE trading under $1 per share, 104 companies, 37 of which were already in bankruptcy. Only four turned out worthless. After an average holding period of four years, the portfolio returned approximately 400%. His most spectacular pick, Missouri Pacific Railroad, went from $0.125 to $5.00.

His core principle: “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy.” And: “To buy when others are despondently selling and sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.”

Howard Marks: “Deciding not to act isn’t the opposite of acting”

Marks deployed $450 million per week at Oaktree during the final 15 weeks of 2008. His September 2008 memo, “Nobody Knows,” articulated the binary framework: “Will the world end or won’t it? We will invest on the assumption that it will go on, that companies will make money, that they’ll have value, and that buying claims on them at low prices will work in the long run. What alternative is there?”

I think Marks is spot on. What is the real alternative here? We already know that bonds tend to lag behind stocks and cash simply gets eaten alive by inflation. Allocating a portion of a portfolio to gold as a safe haven isn’t a mistake. In fact, it is part of my strategy.

I’ve written before about my thesis that gold truly begins to outperform the moment the VIX passes 45.

We saw that play out as gold has outperformed the S&P 500 since I published that article.

While we are Sharks who stay invested in productive companies, we are also pragmatists.

In his April 2025 memo addressing tariff-driven market turmoil, Marks recycled the same title: “Everyone was happy to buy 18-24-36 months ago, when the horizon was cloudless and asset prices were sky-high. Now, with heretofore unimaginable risks on the table and priced in, it’s appropriate to sniff around for bargains: the babies that are being thrown out with the bath water.”

His most actionable insight: “We must make our decisions in the absence of certainty. But we also have to bear in mind that deciding not to act isn’t the opposite of acting; it’s an act in itself.” Sitting on the sidelines during a crisis is a deliberate bet that things will get worse and history shows that bet usually loses.

Operation Epic Fury and the market right now

I have watched this conflict escalate since the protests began in December. It turned into a full military buildup after the tanker seizure in early February. Operation Epic Fury launched on February 28 with nearly 900 strikes in the first day and resulted in the immediate death of Supreme Leader Ali Khamenei.

As of March 13, the war is still active. The White House has four clear goals. They intend to destroy the ballistic missiles, sink the navy, cut off proxies, and end the nuclear program for good.

Oil is the primary way this war hits us. Brent crude jumped from $70 to over $100 in just two weeks because the Strait of Hormuz is effectively closed.

Iran is using the world’s most important oil chokepoint as a tool of pressure. Even with a massive 400 million barrel reserve release, the global supply gap remains severe. The first 100 hours of the war alone cost the U.S. $3.7 billion.

The market is holding up better than the headlines suggest. The S&P 500 is down 5% from its all-time high.

I find this notable because the drop is actually milder than the tariff shocks we saw in April 2025 of 15%.

The fear index is high…

… and the damage is across all sectors except energy, utilities and communications.

Seeking Alpha

Energy stocks are hitting records or near-year highs. On the other side, travel, airlines, and cruise lines are getting hammered. The extreme fear in the market is creating the exact kind of price gap that sharks look for.

What prediction markets say

I am tracking the Polymarket Iran ecosystem, which now includes 231 active markets and over $529 million in total volume. This is one of the largest event clusters in the history of the platform. The main market regarding when the conflict ends shows a 48% probability that military operations conclude by April 30.

These markets are pricing a conflict measured in weeks rather than months. This is consistent with the historical pattern of brief U.S. military operations. I also cannot ignore the insider trading controversies. Six wallets made roughly $1.2 million by correctly betting on the February 28 strike date. Most of those accounts were funded within 24 hours of the attack, which suggests that some participants had early access to the timing of the strikes.

The crisis-by-crisis record

Wars and military conflicts tend to produce modest, temporary drawdowns. The Korean War saw a 5% drop on day one, followed by an +11.2% return in year one. The Gulf War’s -19.9% drawdown recovered within 4-5 months, and the S&P returned +10.2% in the following year. The start of the Iraq War in March 2003 actually marked the beginning of a major rally: +27.0% in year one.1

The pattern holds for surprise attacks, too. After Pearl Harbor, the S&P 500 dropped -19.8% but was essentially flat one year later and returned +11.7% annualized over the next three years. After 9/11, the immediate 11.6% weekly decline was recovered within one month (though the broader dot-com bust continued independently). The Cuban Missile Crisis (the closest the world came to nuclear war) produced a mere -6.6% drawdown that recovered in two weeks, followed by a +32.0% return in the next year.

The catastrophic exceptions share a common feature: they coincided with or caused economic recessions. The 1973 Arab Oil Embargo triggered a -48.2% drawdown that took seven years to recover. The 2008 financial crisis produced a -56.8% collapse that required 5.5 years. COVID-19’s -33.9% crash recovered in just five months.

The critical distinction for the current Iran situation: geopolitical crises alone almost never cause long-term market damage. What truly damages markets is the combination of geopolitical shock and economic recession. As long as corporate earnings are growing and the economy holds, markets recover often faster than expected. CFA Institute data shows wartime annualized large-cap stock returns of +11.9% actually exceeded the overall long-term average of +10.0% across all U.S. wars from 1926 to 2013.

The devastating math of missing the best days

Perhaps the most powerful argument against panic-selling comes from data on what happens when investors try to time the market and miss the best trading days.

A $10,000 investment in the S&P 500, fully invested for 20 years, grew to $71,750 (10.4% annualized). Miss just the 10 best trading days (out of 5,040 trading days total) and that drops to $32,871 (6.1% annualized). Miss 60 best days and you’re left with $4,712, a negative return that destroyed more than half of your original capital.

Source

The Invesco data over 30 years (1994-2024) is even starker. A $100,000 investment grew to $2,272,407 if fully invested. Missing the 10 best days, cut that to $1,041,072 effectively halving the gain. Missing 30 best days reduced it to $386,178.

The critical insight that makes this data devastating for market timers: 7 of the 10 best trading days occurred within two weeks of the 10 worst trading days. Hartford Funds found that 76% of the stock market’s best days occurred during bear markets or the first two months of a new bull market.

Vanguard’s research shows 2% of trading days account for 80% of positive market returns. This is taking the 80/20 rule to the extreme!

In other words, the best days happen precisely when investors are most terrified and most likely to be sitting in cash. Every single one of the 15 best market days of the past 30 years occurred during a crisis.

What to actually do with your portfolio right now

Action #1. Stay invested.

This is the single most important decision. Every piece of data points in the same direction. Going to cash feels safe, but has a ruinous expected value.

If you have cash to deploy, dollar-cost average in. I think the optimal DCA window is within six months, beyond 18 months, the opportunity cost of delayed investment becomes prohibitive.

Action #2. Diversify with intention.

The current crisis has created sharp sector divergences; energy and defense up, travel and consumer discretionary down. This is a natural rebalancing opportunity.

Action #3. Favor quality.

During uncertainty, companies with strong balance sheets, consistent cash flows, pricing power, and competitive moats tend to weather shocks far better than speculative names. Graham’s margin of safety concept is most valuable precisely when the future is least knowable.

My portfolio only contains quality companies.

Actio #4. Automate and stop checking.

The fewer ad hoc trades, the less room for emotional error. Setting up automatic contributions and stepping away from the screen is a disciplined edge.

Conclusion

The greatest risk to most isn’t the war itself but rather it’s their own behavioral response to it.

As Seth Klarman wrote in Margin of Safety:

high uncertainty is frequently accompanied by low prices, and by the time the uncertainty is resolved, prices are no longer low.

Leave a comment

Portfolio Update

Even as the S&P 500 slipped further last week, our portfolio regained ground, continuing to widen the gap.

Portfolio Return

Month-to-date: -5.5% vs. the S&P 500’s -3.6%.
Year-to-date: +6.7% vs. the S&P 500’s -3.1%. That is a gap of 985 points.
Since inception: +50.6% vs. the S&P 500’s +15.3%. That’s 3.3x the market.

Contribution by Sector

Tech and energy led the gains, partially offset by consumer cyclicals, utilities and industrials.

Contribution by Position

(For the full breakdown plus commentary on earnings results and the big movers, see Weekly Stock Performance Tracker)

How to read the heat map? click here

+56 bps (TSX: CLS) (Thesis)
+52 bps (Thesis)
+18 bps (Thesis)
+4 bps (Thesis)
-1 bps (Thesis)
-3 bps (Thesis)
-3 bps (Thesis)
-12 bps (Thesis)
-13 bps (Thesis)

That’s it for this week.

Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!

Further Sunday reading to help your investment process:

www.isectors.com/blog/stock-markets-times-uncertainty

Weekly #72: The Year the KINS Thesis Graduated. Plus, the Friction That's Quietly Destroying Your Returns.

George Atuan, CFA — Sun, 08 Mar 2026 16:50:40 GMT

Hello fellow Sharks,

The portfolio took a hit this week alongside the market. The war in Iran did most of the damage. If you want to skip straight to the numbers, jump to the Portfolio Update.

On a completely unrelated note, I made what I can only describe as a textbook avoidable mistake this week. I tried to change the email linked to my Substack account.

Simple enough, right? Wrong.

Instead of updating the email, Substack decided to create an entirely new account, migrate my newsletter and subscriptions over, and leave my +3,000 followers stranded on the old one.

Profile rebuild, support tickets, the works.

And those 3,000 followers are still sitting on the old account while I figure out what to do about it. Genuinely one of the more frustrating Saturdays of 2026. Consider this your public service announcement: do not change your email on Substack. Just don’t.

Anyway. This week, five companies in the portfolio reported earnings, three of which missed EPS consensus estimates. I go deep on KINS, which posted its most profitable year in history and then got sold off because its 2026 catastrophe guidance. I walk through exactly why, and what the numbers actually say when you strip out the weather assumption.

I also continue the Physics of Investing series with Part 2: Understanding Friction.

Enjoy the read, and have a great Sunday.

~George

Thanks for reading! This post is public, so feel free to share it.

In Case You Missed It

Last week, I published my Q4 2025 earnings review on STRL.

STRL beat on both revenue and EPS by a wide margin, delivered its fifth consecutive year of adjusted EPS growth above 35%, and ended the year with $3.01B of backlog up 78% y/y with total visibility stretching toward $4.5B when you include unsigned awards and future project phases.

The stock sold off anyway.

I walked through exactly why that happened, why none of it breaks the thesis, and why my updated DCF now points to a $600 price target, 44% above current levels.

Earnings Results: 3/5 EPS misses

This week, 3/5 companies missed EPS consensus estimates. Paid subscribers can read the detailed earnings analysis here.

Seeking Alpha

KINS Q4 2025 Earnings: The Year the Thesis Graduated

The most profitable year in Kingstone’s history closed exactly as the thesis demanded. Now the conversation shifts from turnaround to what comes next.

The stock is +41% from the cost basis (originally bought at $10 but have added to the position since then).

KINS printed the most profitable year in its history. Full-year net income more than doubled to $40.8 million. Diluted EPS came in at $2.88, up 95% y/y, and well ahead of the $2.50 midpoint I used to anchor my target.

The Q4 standalone numbers are even harder to dismiss: a 64.2% combined ratio, $1.03 diluted EPS, and a 51.3% annualized ROE. These are not the metrics of a turnaround story. These are the metrics of a company that has completed its turnaround and is now executing from a position of strength.

The Quarter and the Full Year: By the Numbers

Q4 was KINS’ ninth consecutive profitable quarter and the strongest in the company’s history.

Seeking Alpha

Direct premiums written grew 14%. Net premiums earned jumped 37.5%, driven by the continuation of the quota share reduction that has been flowing into earned revenues all year. The underlying loss ratio landed at 34.7%, down over 14 points from Q4 2024. The net expense ratio printed at 27.9%, a record quarterly low.

For the full year, the numbers are equally clean. DPW grew 14.8% to $277.8 million. NPE grew 45.6% to $187.1 million. The net combined ratio hit 75.0%, improving 5 points from 2024. Book value per diluted share increased 75%. Equity grew 84%. The company holds zero debt at the holding company and runs a $440 million catastrophe reinsurance tower with a $5 million first-event retention.

The full-year underlying combined ratio, which strips out catastrophes and prior year development, came in at 74.4%, a 5.1 point improvement from 2024. This is the number that matters most for evaluating the core business. Management introduced it as the primary operating lens going forward, and I think that framing is right. The reported 75% combined ratio looks almost too good, and it partly is, because 2025’s actual catastrophe loss ratio of just 1.2 points sat roughly 6 points below the six-year historical average of 7.1. But strip the weather luck out and the underlying business improved by 5 full points y/y.

The Select Engine: Still Running Hotter

The thesis was always about Select. When I wrote the original deep dive, entering around $10, I identified the Select product as the key to sustainably better loss performance.

Select policies, by design, target lower-risk properties with tighter underwriting standards: better credit profiles, newer roofs, higher deductibles. The result is fewer everyday claims, especially the non-weather water damage events that plague homeowners insurers.

At the time of the deep dive, Select sat at roughly 34% of policies in force. By end of 2024, it had climbed to 45%. By year-end 2025, it hit 57%. The cumulative claims frequency advantage of Select over the legacy book now stands at approximately 31%.

That gap, running across more than half the book, explains why the underlying loss ratio dropped from 48.2% in 2024 to 44.4% in 2025.

The Select penetration curve still has runway. As legacy policies renew and flip over to Select, the mix continues to improve. Management has already adapted the product architecture for California. The same firm that designed New York’s Select will build the California version.

The Quota Share Lever: One More Year of Tailwind

One of the cleaner mechanics of this story is the quota share cession schedule. In 2025, KINS reduced its quota share from 27% to 16%. That kept more premium on the net earned line, contributing roughly $0.25 to full-year EPS.

For 2026, the quota share drops again from 16% to 5%, adding another estimated $0.20 to EPS before any underlying business movement. The 30% quota share on California business is a deliberate offset to the CA risk as the company starts small there.

To be direct: the 46% growth in net premiums earned in 2025 was not all organic growth. A large portion reflects the quota share mechanics and the late-2024 new business surge earnings through. Both of those tailwinds continue into 2026, though they become smaller contributors as the base grows. The point is that the net premium growth story has a few more quarters of mechanical support before it reverts to a more moderate pace closer to the raw DPW growth rate.

The 2026 Guidance: Read It Right

The headline guidance looks like a step back. Diluted EPS guided at $2.20 to $2.90, midpoint $2.55, versus $2.88 in 2025. ROE guided at 24% to 30%, against 43% last year.

Management built in a catastrophe loss assumption of 7 to 10 points for 2026, which is at or above the six-year historical average of 7.1 points. This is cat normalization. Crucially, Q1 2026 has already been active: seven catastrophe events have been declared since January 23. That front-loaded the year’s cat budget meaningfully. If the rest of 2026 is quiet, the actual cat load may land near the lower end of the range. If it isn’t, the company’s $5 million first-event retention caps the damage on each storm.

Each 1 point of cat loss ratio costs approximately $0.13 per diluted share after tax. Take 2026 guidance at the midpoint ($2.55) and add back the cat normalization versus 2025 actual (roughly 6-8 points at $0.13 each), and illustrative EPS at 2025 cat levels would be approximately $3.53. That is the underlying earnings power of the business growing through a normalized cat environment.

The underlying combined ratio guidance of 74% to 76% is almost identical to the 2025 actual of 74.4%. The controllable business is flat to slightly better. The headline looks softer only because management correctly assumed a harder weather year. I respect that intellectual honesty.

The Q&A: What Matters

Three threads from the call deserve attention.

Thread #1. California.

This was the dominant Q&A topic, and justifiably so. The company commissioned an outside actuarial firm to evaluate all catastrophe-exposed markets for expansion. California ranked first: it is the largest homeowners’ E&S market in the country, growing faster than anywhere else, and it is structurally dislocated. The regulatory environment in California prevents admitted carriers from charging adequate prices for wildfire risk. E&S writers are exempt from that. KINS enters as an E&S carrier, giving it pricing flexibility and underwriting discretion that admitted carriers lack.

The plan: write statewide to manage wildfire concentration, focus on low-to-moderate risk properties, start with a maximum coverage A of somewhat below $5 million (raising it later as confidence builds), run under a 30% quota share initially, and limit California to less than 5% of 2026 premium.

This is a deliberate probe of a large, structurally mispriced market using the same product architecture that has worked in New York. The California E&S homeowners market is, by management’s account, the fastest-growing segment in US property insurance right now. Getting in early with sophisticated pricing models and disciplined underwriting is the smart move.

Thread #2. Expense ratio sustainability.

Management guided to 29% to 30% as the equilibrium range, with perhaps half a point to a full point of additional room as scale grows. The California build has been mostly expensed already in product development. Incremental staff additions will be modest. The platform is scalable in a way that the old Kingstone never was. I take the 29-30% range at face value.

Thread #3. New York competition.

This is the perpetual question. The CEO acknowledged that some competitors are signalling intent to re-enter New York. It has happened before, and KINS executed through it.

The Select product, deep producer relationships, a lean expense structure, and superior claims execution create a set of advantages that are not quickly replicated. A carrier walking back into New York tomorrow would need years to build the data, agent trust, and risk segmentation that Kingstone has assembled. The competitive moat is not invincible, but it is real and it takes time to erode.

Thesis Contrast: Where We Came From and Where We Sit

When I entered around $10 and published the deep dive at $18, I framed it as a “Hold” with 20-30% upside to approximately $23. The stock then did the opposite of what I expected: it fell to $14-15 by the time I updated after Q3, even as the company raised guidance twice and delivered record results.

That pricing gap between fundamentals and stock price has been the consistent frustration of this story. The business kept compounding. The stock did not follow in lockstep.

Now the Q4 full-year delivery makes the disconnect harder to justify. The company printed $2.88 in FY25 EPS, ahead of the $2.50 midpoint I used to set my Q3 target of $25. Book value per share is $8.28, up 75% in a year. The dividend is reinstated. The balance sheet carries no holding company debt. A new market adds a growth avenue that did not exist in any prior model. The five-year roadmap to $500 million in DPW by 2029 means roughly doubling the business from here at disciplined underwriting margins.

Despite all of that, I am lowering my price target from $25 to $21.

The reason is simple: I am bringing my catastrophe assumptions closer to management’s own guidance. The 2025 cat load of 1.2 points was a gift. Two consecutive mild years are not a plan. Pricing in a normalized cat year of 7 to 10 points, as management does, produces a 2026 EPS closer to the $2.55 midpoint, and at 8x to 9x earnings that yields a fair value around $20 to $23. I land at $21 as my base case.

The bull scenario still exists. If 2026 weather tracks close to 2025, EPS could approach $3.50, and at 9x that produces a stock range from $27 to $31. That upside is real, but weather is not an investment thesis. Betting on a third consecutive benign year in the Northeast, particularly after seven declared catastrophe events already in Q1 2026, is not a bet I want to make in my base case.

At $21, the risk-reward profile has narrowed. The business is excellent. The management team has earned credibility. But with the stock currently trading 24% below my target price, and with meaningful cat exposure already loading the year, KINS moves to the top of my watch list as a trim candidate if i need capital for a new position with a more compelling setup.

Share Beating The Tide: Stock Picks That Outperform

Thought Of The Week: The Physics of Investing (Part 2), Understanding Friction

As I mentioned two weeks ago, whenever I have time, I will be posting my physics series on investing.

So while everyone is busy posting about the Iran war, I will post part 2 of the series :)

Let me start with something that will sound counterintuitive.

Friction is not your enemy.

We spend so much time in life trying to eliminate friction, to make things faster, smoother, easier. And in some cases, that is absolutely the right move. But the real lesson, the one that applies to physics, to life, and deeply to investing, is that:

Friction is not something to eliminate. It is something to understand.

Because without friction, nothing works. Not a car, not a brain, not a portfolio.

What Physics Actually Says About Friction

In classical mechanics, friction is defined as the resistive force that acts between two surfaces in contact when one moves relative to the other. It is caused at the molecular level by tiny surface imperfections that grip and pull against each other.

There are two main types you need to know. Static friction is the force that keeps an object at rest from moving. Kinetic friction is the force that acts on an object already in motion, resisting its movement.

Now here is where it gets interesting.

If the friction is too high, nothing moves. Imagine trying to slide a refrigerator across a floor coated in rubber. The static friction coefficient is so high that no matter how hard you push, the thing does not budge. In physics, the object stays in a state of rest because the applied force never exceeds the maximum static friction force. In equations, that is written as F < μsN, where μs is the static friction coefficient and N is the normal force. Too much friction, and everything freezes.

But here is the part people always forget: without enough friction, things fall apart too.

A car moves forward because of friction. Specifically, the friction between the tire and the road surface. The engine rotates the wheel, the tire pushes backward against the road, and the road pushes back forward on the tire. That is Newton’s Third Law meeting friction. No friction, and the tire just spins in place. You have seen this on an icy road. The engine revs, the wheel spins, and the car goes nowhere. Try to steer on ice, and you discover that steering also requires friction between rubber and asphalt. Braking? That is entirely friction. Airbags deploy, your seatbelt holds, but it is the friction with the road that actually slows the car down.

So here is the physical truth: too much friction, and nothing starts. Too little friction, and nothing works properly.

The goal is never to eliminate friction. The goal is to manage it.

Friction Is Everywhere Around You

Once you start seeing friction this way, you realize it is literally everywhere. Not just in physics textbooks, but in every single transaction, interaction, and decision you make each day.

Think about cutting a cake.

You take a knife, you press down, and you cut it into slices. Simple enough. But if you were to take all those slices and try to put them back together, you would notice something: the rejoined cake weighs slightly less than the original. Where did that mass go? The knife removed tiny crumbs through friction. The blade’s contact with the cake created heat, compressed molecules, and carried away material. The whole is literally greater than the sum of its cut parts.

In thermodynamics, every real process involves some energy dissipation due to friction. The second law of thermodynamics tells us that no real system is perfectly efficient. Energy is always lost to heat. Friction is the agent of that loss.

And this extends far beyond the kitchen.

Think about the last time you used your credit card. That transaction feels frictionless, even elegant. Tap and go. But what actually happened behind the scenes is anything but frictionless. The merchant who accepted your card paid a processing fee (2% - 3% of the transaction). In 2024, credit card companies in the US earned a record $148.5 billion from processing fees charged to merchants. It was estimated that American families paid an average of close to $1,200 in swipe fees in 2024, either through higher retail prices or surcharges.

Here is the thing that most people miss: even when you pay cash, friction does not disappear. It just changes form. A merchant who accepts only cash has to count it, store it securely, and then physically walk to the bank to deposit it. That is time, which is money. The friction is not gone; it just takes a different shape.

And here is the deeper insight: because the majority of consumers use credit cards, merchants who want to compete cannot simply opt out of accepting them. They are essentially forced to absorb the friction cost and pass it along to everyone, including the people paying cash. The cash customer is subsidizing the credit card customer’s rewards points. Even if you have never touched a credit card in your life, you are paying for this friction.

This is what I mean when I say friction is everywhere. You just have to learn to see it.

When Removing Friction Makes You Weaker

Now I want to talk about a different kind of friction: the friction of thinking.

There is now research suggesting that using AI tools like ChatGPT is already affecting our cognitive capacity, and not in a good way.

Researchers split 54 participants into three groups: one used ChatGPT, one used a search engine, and one used only their brains. They measured brain activity using EEG over multiple sessions. The ChatGPT group showed the weakest neural connectivity of the three groups, particularly in brain areas involved in decision-making and long-term memory. The brain-only group lit up the strongest, showing the deepest cognitive engagement. The search engine group sat somewhere in the middle.

But the most alarming part came in the fourth session. When the ChatGPT group was asked to complete the task without AI assistance, their performance dropped even further. Their brains were showing signs of cognitive fatigue in a task they had done multiple times. They had literally less recall of work they had “produced” themselves because they had not actually done the thinking. The researchers coined this “cognitive debt.” So the task was executed efficiently, but “you basically didn’t integrate any of it into your memory networks.”

Now think about what is happening here through the lens of friction.

When you struggle with a problem, when you get stuck, when you wrestle with an idea and cannot find the right words, that is cognitive friction. It feels uncomfortable. It is slow. It is inefficient. And it is also exactly how learning works.

The friction of not knowing forces your brain to build new pathways. It forces you to connect concepts, question assumptions, and synthesize information in a way that becomes yours. When you remove that friction entirely by outsourcing the thinking to an AI, you get a clean output, but you own nothing. No understanding, no skill development, no durable knowledge.

This is the exact parallel to the car on ice. Remove friction entirely, and you lose traction. You lose the ability to move in the direction you actually want to go.

When calculators entered classrooms in the 1970s, there was a similar panic. Are we making students dumber? The answer was: only if we let them. Educators eventually raised the bar, expecting students to tackle more complex problems because the calculator handled arithmetic. The cognitive effort did not disappear, it was redirected.

The challenge with AI is that nobody has raised the bar yet. The friction has been removed, but the cognitive task has not been elevated to compensate. So for now, in most cases, the result is just less thinking.

Sharks use AI. But Sharks do not let AI replace their thinking. They use it to go faster on tasks that do not require depth. They do not outsource the judgment.

A couple of days ago, I read this piece by .

Noahpinion

Superintelligence is already here, today

People argue back and forth about when artificial superintelligence will arrive. The truth is that it’s already here…

2 months ago · 451 likes · 78 comments · Noah Smith

This piece resonated so much that I posted the below.

So yes, AI helped me eliminate the friction of debugging. I will not get any better at it as a result. That is a trade-off I am fine with. My goal was never to become a great coder. 😉

It is about understanding friction.

Now Let’s Talk About Investing

Everything I have described above shows up in investing too, and in ways most people ignore.

The goal in investing, like in physics, is not to eliminate friction. It is to understand every source of it, quantify it, and minimize the friction that destroys value while keeping the friction that protects it.

Let me walk you through the major sources of friction in investing.

Trading Commissions

This is the most visible form of friction. Every time you buy or sell a security, there is a cost attached to the transaction.

In 2026, there is still a wide range. Some brokers charge $9.95 per trade. Interactive Brokers (my main broker) charges roughly $1. Then there are platforms marketed as completely free: for example, Robinhood in the United States and Wealthsimple in Canada.

But here is what “free” actually means in practice.

Nothing is free. The friction just moves somewhere less visible.

Robinhood and similar platforms generate a large portion of their revenue through a practice called payment for order flow, or PFOF. When you hit “buy” on Robinhood, your order does not go directly to the exchange. It gets sold to a market maker, typically a high-frequency trading firm, who pays Robinhood for the privilege of executing your trade. That market maker profits from the spread between the bid and ask price. In 2020, the SEC charged Robinhood with misleading customers about this practice, noting that customers came out worse after factoring in execution quality. Robinhood settled for $65 million.

You are not paying a commission. But you are paying through slightly worse execution on every single trade.

Wealthsimple in Canada cannot use PFOF because it is prohibited by law. So it earns money differently. It charges a 1.5% currency conversion fee when Canadians buy US-listed stocks. That means every round trip on a US stock costs you 3% just in currency conversion, before you have made a single dollar of return. For a long-term investor who holds for years, that might be tolerable. For someone trading frequently across currencies, it is a tax on every move.

There is also the settlement friction. Both Robinhood and Wealthsimple offer a limited amount of instant access to deposited funds, but larger deposits take two to three business days to fully settle. During that period, your money is sitting in their system earning them interest, not you.

And this brings up a point worth sitting with: the race to “zero commission” was never actually about making investing free. It was about making the friction invisible. When Robinhood launched in 2013, traditional brokers panicked and cut their commissions to zero almost overnight. But the friction did not disappear; it just became harder to see. Visible friction at least lets you make informed decisions. Invisible friction is far more dangerous because you do not even know you are paying it. So I am more than happy paying the commissions at Interactive Brokers and knowing I am getting the best execution for my trades.

The Bid Ask Spread

This one is less visible, but it is always there.

When you look at a stock quoted at $10, you are seeing the last traded price, or sometimes the midpoint. In reality, if you want to buy that stock right then, you pay the ask price, which might be $10.01. If you want to sell, you receive the bid price, which might be $9.99. The difference, two cents in this example, is the spread. That is the friction of liquidity.

For large, heavily traded stocks like Apple or Microsoft, the spread is tiny. Often a penny. But for smaller, less liquid stocks, the spread can be wide. For a microcap stock trading at $10, the bid might be $9.50 and the ask might be $10.50. That means you lose 10% just by entering and exiting the position, before the stock has moved at all. You need the stock to rise 10.5% just to break even.

This is a form of friction that is invisible to most retail investors because it never shows up on a statement. There is no line item that says “bid ask spread cost: $X.” It just shows up as slightly worse performance, every time, compounding quietly over the years.

Institutional traders will break up large orders across hours or days specifically to avoid moving the market against themselves. They trade in ways designed to minimize the friction of the spread.

Management Fees and Fund Costs

If you invest through mutual funds or ETFs, the friction is built into the product in the form of the management expense ratio, or MER.

Actively managed mutual funds in Canada often charge 2% to 2.5% per year. An ETF tracking the same index might charge 0.05% to 0.20%.

That difference of 2% per year sounds small. But over 30 years, on a $100,000 portfolio earning 7% annually before fees, the difference between a 2% fee fund and a 0.1% fee fund is over $300,000 and reduces your final wealth by 42%! That is friction that compounds in the wrong direction.

The fee is the friction coefficient. The lower it is, the more momentum your money maintains over time.

Taxes as Friction

Tax is perhaps the largest and most underappreciated friction in investing.

Every time you realize a gain by selling a position, in most jurisdictions, you owe tax. That tax is friction on your returns. The government is extracting value from every transaction.

The implication is important: unnecessary trading is literally burning money. Every trade that does not need to happen is generating a friction event that costs you taxes.

This is one of the core arguments for buy-and-hold investing. Because every exit and re-entry has a friction cost attached to it. The longer you hold, the more you defer that friction, the more the compounding works in your favour.

Warren Buffett has spoken about this concept in his annual letters. He refers to it as the hyperactive investor paying far more in friction costs than the patient one. The patient investor lets compounding work. The hyperactive investor lets friction work.

Inflation as Friction

Inflation is a form of friction that acts on your purchasing power rather than your account balance.

If your portfolio returns 7% in a year and inflation runs at 4%, your real return is 3%. Inflation is quietly extracting value from your wealth the entire time. It is the most democratic friction: it does not care whether you trade frequently or not, whether you use a broker or not. It is always there, always working.

This is why cash is not a safe haven. It feels frictionless because the number on that $100 bill does not change. But inflation is grinding away at its purchasing power every single day. A dollar in 2000 buys about 52 cents1 worth of goods today in the US, adjusting for cumulative inflation.

Behavioral Friction

The last category is the one that gets the least attention and causes the most damage: the friction inside your own head.

I have talked about this in the context of poker before.

Emotional decision-making is an internal friction force that acts against your rational investment strategy.

It causes you to sell when markets are down and buy when they are overheated. It causes you to hold onto a losing position too long because of sunk cost thinking. It causes you to buy a stock you saw on social media without doing any research, which is the investing equivalent of driving on ice.

The bid-ask spread costs you a few basis points. Behavioural friction can cost you your entire return.

Studies consistently show that the average investor underperforms the average fund, even when investing in those same funds, because of poorly timed entries and exits. Morningstar publishes this gap regularly under their “Mind the Gap” series. The gap between fund returns and investor returns is driven almost entirely by behavioural friction.

And here is how it connects back to the AI and cognitive friction point I made earlier. When you remove the friction of thinking by outsourcing your investment decisions to a hot tip, a trending Reddit thread, or an AI-generated analysis you did not actually process yourself, you are not making smarter decisions. You are making faster ones. Speed without understanding is not an advantage in investing. It is a liability.

The best investors I have observed share one trait: they are comfortable with the friction of uncertainty. They sit with a problem. They think about it for days. They let the discomfort of not knowing push them to do more work. That friction of not yet having an answer is what produces real conviction, and conviction is what allows you to hold through volatility instead of selling at the worst possible time.

Remove the friction of the thinking process, and you get weak conviction. Weak conviction breaks at the first sign of turbulence.

The Point Is Not to Eliminate Friction

I want to be clear about what I am arguing here, because it matters.

The goal is never to eliminate friction. That is physically impossible. There is no such thing as a frictionless system in the real universe. Even in superconductors, which show zero electrical resistance, there are other physical limitations at work. In investing, even the most passive, low-cost, long-term strategy has some friction. Management fees, inflation, spreads. They are all there.

Physics taught us that friction is what makes movement possible. Tires grip the road. Brakes slow the car. Shoes push off the ground. The right amount of friction in the right place is what allows forward motion.

Investing is no different.

The Sharks who win in the long run are not the ones who trade the most. They are not the ones chasing every opportunity or reacting to every piece of news. They are the ones who understand where friction is destroying value, eliminate what they can, manage what they cannot, and use patience as their engine.

Friction is not the enemy. Ignorance of friction is.

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Portfolio Update

The war in Iran hit the market and the portfolio this week.

Portfolio Return

Month-to-date: -6.0% vs. the S&P 500’s -2.0%.
Year-to-date: +6.2% vs. the S&P 500’s -1.5%. That is a gap of 776 points.
Since inception: +49.9% vs. the S&P 500’s +17.2%. That’s 2.9x the market.

Contribution by Sector

Tech and industrials led the losses, partially offset by Energy.

Contribution by Position

(For the full breakdown plus commentary on earnings results and the big movers, see Weekly Stock Performance Tracker)

How to read the heat map? click here

+3 bps (Thesis)
-2 bps (Thesis)
-6 bps (Thesis)
-9 bps (Thesis)
-36 bps (Thesis)
-37 bps (Thesis)
-39 bps (Thesis)
-63 bps (Thesis)
-104 bps (TSX: CLS) (Thesis)

That’s it for this week.

Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!

Further Sunday reading to help your investment process:

CPI Jan 2000 = 59.2

CPI Jan 2026 = 30.7

So in Jan 2026, we could buy 0.519 of the basket from Jan 2000 (30.7/59.2)

STRL Q4 2025 earnings: STRL is not riding a wave...it is riding a tsunami.

George Atuan, CFA — Wed, 04 Mar 2026 19:02:48 GMT

In my portfolio, STRL sits up 450% since I first added it for paid subscribers…

… and up 27% since I published the deep dive to free subscribers on Dec 4, 2025.

Sterling [] reported Q4 eearnigns and beat both top and bottom lines by a wide margin.

Seeking Alpha

Sterling also grew revenue 69% excluding RHB, and management called out organic growth of 36% in the quarter.

For the full year, STRL printed $2.49B of revenue, $10.88 of adjusted EPS, and $503.8M of adjusted EBITDA, with operating cash flow of $440.0M. Those numbers describe a company that compounds earnings faster than revenue because it keeps nudging the mix toward higher-margin work.

Worth noting: this was the fifth consecutive year of adjusted EPS growth above 35%.

How does STRL rank?

Before we get into the numbers, a quick look at how STRL sits relative to the broader market and its sector peers. I use my new platform Ranked Stocks. It scores stocks across five dimensions and gives you an overall composite. As of March 3, 2026, STRL comes in at 79 out of 100, placing it in the 84th percentile in the US universe and the 86th percentile within the sector.

www.RankedStocks.com

For a stock that has already run 450% from my cost basis, that is a name the market still respects.

The two scores that stand out are Outlook (98) and Sentiment (97). Those are not numbers you see often. The Outlook score is essentially the model pricing in what I will spend the rest of this article laying out: a multi-year E-Infrastructure growth runway, a $4.5B visibility pool, and management that has beaten guidance consistently for five consecutive years.

The Sentiment score tells you that institutional money and sell-side analysts are not heading for the exits after the post-earnings selloff, but they are leaning in. When both forward-looking scores sit at the top of their distribution simultaneously, the market is saying the story is intact.

The two scores that look ugly on the surface are Profitability (23) and Valuation (6). Both need context, or they will give you the wrong read on this company.

The Profitability score of 23 is almost entirely an accounting artifact of the CEC acquisition. STRL is carrying roughly $36M of annual intangible amortization from the deal, a non-cash charge that mechanically suppresses GAAP net margins and return metrics without touching actual cash generation. Strip that out and STRL’s adjusted EBITDA margin came in at 20.1% for the full year, with E-Infrastructure running at 22.2% in Q4 alone. The underlying business generated $440M of operating cash flow on $2.49B of revenue, a 17.7% OCF margin. That is not a profitability problem. That is a scoring model reading GAAP figures for a company mid-integration. The score will self-correct as amortization rolls off and earnings grow into the goodwill base.

The Valuation score of 6 is more straightforward: STRL is expensive on trailing multiples, and a rules-based scoring model is going to flag that. Trailing P/E near 49x, EV/EBITDA of 28x on 2025 actuals, these are not value-stock numbers. But valuation scores anchored to trailing metrics systematically misprice companies that are growing rapidly into their earnings.

What makes this more interesting is that the valuation score is not purely backward-looking. It integrates both lagging and leading metrics, with the forward component anchored to consensus growth estimates. Which is precisely the problem. The Street is, in my view, underestimating STRL's forward earnings power, and I will make that case in detail later in this article. If the consensus is too low, the leading valuation metrics are too high, and the score is penalizing STRL twice: once for being expensive on trailing numbers, and again for being expensive on forward numbers that are themselves too conservative.

Net it out: an RS Score of 79, top-decile Outlook and Sentiment, 86th sector percentile, 84th country percentile. STRL ranks among the best stocks in the Industrials sector and sits in the top 16% of the entire US universe. Even with a near-zero valuation score, dragging the composite down. The ranking confirms that this is a stock worth looking at.

Now let’s get into why.

The mix shift did the heavy lifting (and it keeps accelerating)

Here is the clearest way to read the quarter: E-Infrastructure now drives the bus.

In Q4, E-Infrastructure produced 69% of revenue. Transportation delivered 20%, and Building delivered the remaining 11%.

Margins followed the mix, and the cleanest read comes from the GAAP segment table. In Q4, E-Infrastructure produced $109.0M of operating income at a 20.9% margin. Transportation delivered $16.2M at 10.6%, and Building added $6.1M at 7.5%. That put total segment operating income at $131.3M and a 17.4% margin.

If I use Sterling’s adjusted view (non-GAAP), the same picture looks even better. Adjusted segment operating income in Q4 came in at $115.4M for E-Infrastructure (22.2% margin), $18.6M for Transportation (12.2%), and $8.1M for Building (10.0%). Total adjusted segment operating income was $142.2M (18.8% margin).

The structural point here is simple but worth repeating: when your biggest segment is also your highest-margin segment, the operating leverage is enormous. Every dollar of E-Infrastructure revenue gained at the expense of Transportation or Building drops to operating income at roughly twice the rate. That is what drives the earnings compounding that STRL has delivered for five straight years.

Backlog and visibility: “backlog” is no longer the whole picture

STRL ended the year with $3.01B of backlog, up 78% y/y…

… and $3.31B of combined backlog, up 81% y/y.

But the more interesting number is what sits beyond the formal backlog. Management called out $300.7M of unsigned awards plus more than $1B of “future phase” opportunities, pushing total visibility toward a $4.5B pool of work.

Cutillo explained the future phase concept carefully on the Q4 call, and it is worth understanding: STRL is already working on these projects. Customers release work in packages as designs mature. STRL uses this pipeline internally for capacity planning the same way it uses formal backlog, the difference is purely an accounting convention. From an operational standpoint, the $4.5B visibility figure is what the business is actually scheduling around.

Q4 book-to-burn ratio was 1.64x for backlog and 0.81x for combined backlog. This means that STRL is booking new work faster than it is burning through the existing pile. That is a healthy leading indicator for 2026 and beyond.

Thanks for reading! This post is public so feel free to share it.

1) E-Infrastructure: the “data center picks and shovels” thesis stayed intact

The original bull thesis on STRL was that the company had quietly transformed from a low-margin road builder into a specialist site developer for the hyperscale infrastructure boom preparing and powering the land, grading, utilities, and electrical work that data centers require before a single server rack goes in. Q4 confirmed the thesis is tracking.

E-Infrastructure revenue grew 123% y/y in Q4. For the full year, E-Infrastructure revenue grew 59%, including 40% organic growth. The CEC acquisition (which added electrical services capability alongside the site work that STRL had historically done) is clearly contributing, but even stripping CEC out, the organic momentum is real.

At year-end, 84% of E-Infrastructure backlog was in mission-critical work from data centers to semiconductor fabrication and manufacturing facilities. That concentration is intentional. These are the projects where STRL’s integrated site prep plus electrical capability creates a competitive moat, and where project complexity allows for premium pricing.

The CEC acquisition is delivering the combo Sterling bet on

One of the most interesting exchanges on the Q4 call came when an analyst asked whether the CEC pipeline grew post-acquisition and whether margins can improve.

STRL used to celebrate winning a 100-acre data center project. Now they are starting a Texas project where the parking lot alone runs 100 acres. The projects have not just gotten bigger but they have changed category. Cutillo called them “data campuses” rather than data centers, and said the combined site work plus electrical creates room for margin improvement over time as the two service lines are sold together as a single package rather than two separate bids.

That integration is also what drives the margin improvement pathway. When STRL brings CEC electrical services to its existing site work customers, or vice versa, it eliminates a competing bid, deepens customer relationships, and gives STRL more revenue per project dollar with lower customer acquisition cost. The scale of current projects makes that combination increasingly hard to replicate.

The macro tailwind behind E-Infrastructure: the hyperscaler capex supercycle

It is worth zooming out here because the industry backdrop for E-Infrastructure is extraordinary. Data center construction hit a $40 billion annual rate in mid-2025 (a record), up 30% from the prior year.

And that was before the 2026 capex guidance from the hyperscalers landed. The top 5 hyperscalers are on track to spend $602 billion on infrastructure in 2026, a 40% increase from 2025… which itself was already up 65% from 2024.

Each of the four largest is now individually above $100B in annual capex. Roughly 75% of that spend is AI-related infrastructure.

Think about what that means for a company in STRL’s position.

They are not selling into a market that might grow. They are selling into a market that is structurally committed to growing faster than its own cash flows. Hyperscalers have been tapping bond markets just to fund the buildout. Goldman Sachs projects total hyperscaler capex from 2025–2027 will hit $1.15 trillion, more than double the $477B spent in the prior three-year period.

For a more granular data point: in Q3 2025 alone, hyperscaler infrastructure spending nearly tripled year-over-year to $142 billion. The number of hyperscaler data centers has almost tripled since 2018 to nearly 1,300. STRL is not riding a wave; it is riding a tsunami.

How STRL is scaling execution: prefab, modular, and AI

Growing revenue 123% while keeping margins in the low-20s is a serious execution challenge. Cutillo was specific on the call about how Sterling is attacking it:

Modular and prefab expansion: STRL expanded its modular fabrication facility to over 300,000 square feet. Work that used to be done in the field is now prefabricated in a controlled environment. This improves labor productivity, reduces on-site headcount requirements, and improves quality consistency.
AI deployment: STRL ran three AI pilots in 2025 and now has six projects underway. The first initiative focused on project manager capacity and generated a 15–20% improvement in early results. Additional AI applications are targeting safety and estimating. Cutillo was clear that project managers are the true bottleneck (not capital, not equipment) and AI is the tool he is using to stretch that constraint.
Geographic expansion: New markets typically start messy before they smooth out. STRL is aware of this and has flagged it as a watch item for E-Infrastructure margins as they expand beyond core geographies.

2) Transportation: analysts worried about the cycle, management reframed it

Transportation Solutions grew 24% in Q4 and contributed $16.2M of operating income at a 10.6% margin. The backlog surprise to the upside prompted analyst questions on the call.

The concern in the market is straightforward: IIJA expires in September 2026. This act provides $350B for federal highway programs over 2022–2026. When the act expires, does Transportation go off a cliff?

Cutillo’s reframe was practical: he estimates only 50–60% of total IIJA funding has actually been spent. States obligate funds early, but physical project starts lag by 18–36 months. That pipeline of already-committed, partially-spent funding will continue flowing into active construction well past the formal expiration date.

He also made a political observation that rings true historically: if Congress delays a new reauthorization bill, they typically extend the existing one and adjust it for inflation. The FHWA itself runs programs through September 30, 2026, but state-level project pipelines extend well beyond that. The cliff risk is more gradual than the market fears.

How I frame Transportation in the thesis: it is not the primary engine. It is the stabilizer as the segment generates steady, predictable cash flow while E-Infrastructure scales. A 10.6% operating margin business that is less cyclical than it looks, well-funded, and cash generative. That is a useful thing to have.

3) Building: a shrinking drag with housing headwinds

Building revenue fell 9% in Q4, and management attributed it directly to housing affordability pressure. At 11% of total revenue and a 7.5% margin, this segment matters less each quarter as E-Infrastructure grows. But it can still drag sentiment in slow housing environments.

The structural trajectory here is clear: Building Solutions’ share of total STRL revenue has declined from 18% in 2024 to 15% for FY25. It will likely fall further. This is not a business STRL is investing in. It is a legacy segment being managed for cash while the mix shifts away from it. The risk is not that it implodes; the risk is that a soft housing environment amplifies margin pressure in this segment in a way that offsets gains elsewhere. For now, it is a manageable drag.

Share Beating The Tide: Stock Picks That Outperform

Cash, buybacks, and the balance sheet

They ended 2025 with $390.7M in cash.

The company has $291M of debt and $58.9M of lease obligations, which implies net cash position of $99.7M or $40.8M if we include the lease obligations.

The $150M revolving credit facility remained undrawn. For a company that just grew revenue 32% and absorbed a major acquisition (CEC), that balance sheet health is genuinely impressive.

They also repurchased $25.7M of stock in Q4 at an average price of $310.09, and they still had $374M left on the authorization.

For 2026, management is guiding $100–110M of capex primarily to support the modular facility expansion and geographic growth in E-Infrastructure. This capex guidance is up from $77.3M in 2025. That is meaningful, but still modest relative to the $440M in operating cash flow the business generated in 2025.

2026 guidance: management did not whisper, they spoke normally

Management guided 2026 revenue to $3.05B–$3.20B, adjusted EPS to $13.45–$14.05, and adjusted EBITDA to $626M–$659M. The midpoints imply 25% revenue growth, 26% adjusted EPS growth, and 28% adjusted EBITDA growth y/y.

To put that in context: those guidance midpoints came in above consensus estimates on every metric. That is management guiding to beat, not guiding to miss.

Cutillo also said STRL expects E-Infrastructure revenue growth of 40% or higher in 2026, including +20% organic growth. That organic number matters because it strips away the CEC acquisition contribution and shows the underlying velocity of the business.

Refreshed valuation: raising my target price to $600

My original price target of $455 was hit last month. When a target gets hit I do not close the position automatically. Instead I go back to the model, re-run the assumptions with everything I know now, and decide whether the thesis still has legs.

It does.

My updated DCF yields a target price of $600 per share, implying a 44% upside.

Here is how I got there and which assumptions drive the most value.

How the model is structured

The model projects STRL’s three segments independently through 2037, then aggregates to a consolidated P&L. This segment-level build matters more for STRL than for most companies because the mix shift is the thesis. E-Infrastructure carries 2x the EBITDA margin of Transportation and 2.7x of Building.

Every point of revenue share gained or lost in E-Infrastructure has a disproportionate impact on consolidated earnings. A top-down revenue model would miss that.

Below are my segment'-level assumptions:

The E-Infrastructure growth rate of 40% in 2026 is directly anchored to management’s own guidance (”40% or higher, including +20% organic”). The step-down cadence reflects the reality that growth on an ever-larger base mathematically compresses over time, even in a strong secular demand environment. By 2037, E-Infrastructure represents nearly 88% of total revenue.

Transportation is modeled at 3% annual growth through the mid-2020s, reflecting ongoing IIJA spend-out and state-level pipeline, fading gently toward inflation as federal funding wanes. Building is modeled at -10% for 2026 (consistent with management guidance) then recovering at 2% annually as housing affordability gradually eases. Neither segment is expected to be a growth driver but they are modeled as predictable, cash-generative stabilizers.

The E-Infrastructure EBITDA margin assumption of 27.0% by 2027 and sustained through the terminal year is the most important single number in the model.

Is it achievable?

I think so, and in fact I am being conservative here as the segment is almost there. I back this up by:

continued prefab/modular productivity gains as the 300,000 sq ft facility scales,
the site prep + CEC electrical combo being sold as a single integrated package at premium pricing, and
geographic expansion normalizing as new markets mature.

Cutillo has said explicitly that margin improvement is the goal as the combination matures. The model does not assume execution perfection rather it assumes steady, consistent improvement over a five-to-seven year arc.

Consolidated EBITDA margin expands from 18.8% in 2025 to 23.6% by 2037 not because any single segment gets dramatically more efficient, but because an ever-larger share of revenue comes from the highest-margin segment. That is the mix shift thesis expressed in a single number.

Here are the remaining main assumptions of the DCF:

Capex intensity rises from 3.1% to 3.8% from 2027 onward. A deliberate conservatism. STRL is a services-heavy business (not asset-heavy like a manufacturer), but geographic expansion and modular facility buildout will require sustained investment. The model does not assume the capex efficiency of the current period persists forever. Even at 3.8% intensity, STRL generates substantial free cash flow: the 2026E FCF comes in around $440–470M consistent with the trajectory of 2025's $440M OCF and the $100–110M capex guide.

The path to $600 is not driven by a heroic exit multiple. It is driven by the compounding of earnings through an extended period of high-growth in the dominant segment.

The sensitivity table makes the asymmetry clear.

The upside scenarios (better margins, lower rates) add $80–154 to the target. The bear case (a material hyperscaler capex pullback) subtracts $250. The risk/reward is not symmetric. That is why monitoring the capex intentions of the hyperscalers is not just a nice-to-have for STRL holders. It is the primary risk management discipline.

Quick reality check vs my original thesis

What stayed valid

The Dec 4 write-up framed STRL as a company that had transformed from low-margin road work into an E-Infrastructure platform with Transportation and Building providing ballast. Q4 confirmed that framing more clearly than any quarter before it.

Mix shift: E-Infrastructure went from 47% to 69% of Q4 revenue in one year. On track.
Margin expansion: Adjusted EBITDA margins exceeded 20% for the first time in STRL’s history. The mix is doing what the thesis said it would do.
Data center runway: Hyperscaler capex is not slowing; it is rather accelerating. The spending commitments going into 2026–2027 are larger than anything previously modeled.
Cash generation: $440M of operating cash flow on $2.49B of revenue. A 17.7% OCF margin is strong for a construction and infrastructure business.

What I watch harder now

Hyperscaler capex is the single biggest external risk: If any of the Big 4 hyperscalers pulls back materially (eg. due to ROI concerns, balance sheet stress, or a technology shift) the impact on STRL’s award flow and backlog conversion is direct and fast.
Execution capacity remains the internal constraint: Cutillo said project managers are the bottleneck. STRL is using AI to expand capacity, but scaling human expertise at +40% E-Infrastructure growth rates is genuinely hard. Any execution slippage on a large Texas-sized campus project would be visible immediately.
Geographic expansion margin risk: New markets start messy. If STRL moves into new geographies to capture demand, early-phase margins will compress before they normalize. That is normal, but worth watching in the segment margin line.
Building sensitivity to housing: Less important every quarter as E-Infrastructure grows, but a persistent drag in a soft housing market.

Share Beating The Tide: Stock Picks That Outperform

Why did the market sell off on great results?

STRL spiked to $476 on the open of February 26 (the morning after earnings) and then sold off sharply, closing down on the day and grinding lower through the week.

By March 4 it was trading around $417, a drop of 12% from the post-earnings spike. That is a notable reversal on what was objectively a strong print. So what happened?

In my view, the selloff was the result of four overlapping forces, none of which represent a structural break in the thesis but all of which are worth understanding.

Force #1. Buy the rumour, sell the news … at a stretched valuation

STRL entered earnings having already run 37% since the December 4 deep dive and was trading near its 52-week high of $455.

The stock had a trailing P/E of 49x.

When a stock priced for near-perfection beats estimates, the market’s first reaction is often “what more can it do now?” and profit-taking follows.

Force #2. EPS growth rate appears to be decelerating on the GAAP line

Here is the number that gave bears ammunition: trailing twelve-month diluted EPS stepped down from $10.2 in Q3 2025 to $9.3 in Q4 2025.

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Full-year adjusted EPS was $10.88, but the GAAP trailing figure moved in the wrong direction. Simultaneously, trailing net margin dipped from 14.1% to 11.7%.

Stock Unlock: my go-to tool for fundamentals. The free version is great, and if you upgrade, here’s my affiliate link for 10% off.

For a stock priced at 49x earnings on the back of a five-year EPS CAGR of 44%, any sign of deceleration in the growth rate invites scrutiny.

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The latest TTM growth rate was just 12.7%, well below the five-year average. Bears read that as a signal that the steepest phase of earnings compounding may already be in the rearview mirror. Bulls would counter that the non-GAAP picture (which adjusts for CEC acquisition amortization) shows continued acceleration but markets trade on perception first.

Force #3. 2026 guidance implied deceleration vs. the Q4 run rate

This one is subtle but important. STRL guided 2026 revenue to $3.05B–$3.20B implying 25% growth. But Q4 2025 alone came in at $755.6M, which annualizes to roughly $3.0B. In other words, the full-year 2026 guidance midpoint is barely ahead of the annualized Q4 run rate.

Some interpreted that as management guiding to deceleration from Q4’s pace, even if the absolute numbers looked strong. The concern: if E-Infrastructure grew 123% y/y in Q4, can it really decelerate to 40% growth for the full year 2026 without some margin compression along the way?

Force #4. Building segment: the guidance was quietly worse than expected

On the call, Cutillo guided Building Solutions revenue to decline high single to low double digits in 2026, with adjusted operating margins staying compressed. That is meaningfully worse than the flat-to-slight-decline most models assumed. Building is now only 11% of revenue, but negative surprises in any segment can disproportionately affect sentiment, especially when the stock is priced for perfection across the board.

The key question to ask: Is this a thesis-breaking selloff or a valuation reset? The business fundamentals (backlog, E-Infrastructure momentum, cash generation) remain intact.

The bottom line

STRL at $422 is not the same bet as STRL at $76. The easy money is behind us, and anyone who tells you otherwise is selling something.

But “harder” is not the same as “wrong.” The business that earned 450% for this portfolio did not stop compounding the day the stock pulled back from its earnings high. The backlog is bigger, the margins are higher, the pipeline is deeper, and the demand tailwind is, by any honest measure, still accelerating.

The post-earnings selloff was real. The concerns behind it are worth taking seriously, not dismissing. I have tried to do that honestly here.

What I keep coming back to is simpler: a $4.5B visibility pool, 84% of E-Infrastructure backlog in mission-critical work, and hyperscalers that are literally tapping bond markets to fund a buildout STRL is embedded in. That is not a setup you walk away from because the stock had a rough week.

Target raised to $600. Position held.

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Weekly #71: DXPE’s Water Segment Is Carrying

George Atuan, CFA — Sun, 01 Mar 2026 16:50:35 GMT

Hello fellow Sharks,

This week, we continued expanding our outperformance over the S&P 500. YTD, the S&P 500 is down -0.5% while the portfolio is at +12.9%. If you want to skip straight to the numbers, jump to the Portfolio Update.

This week we celebrated our daughter’s first birthday. So it was a hectic week (couple of weeks actually).

Also, we had a busy earnings week with seven companies reporting and only one missing EPS consensus estimates. This week, I go over the DXPE results.

Enjoy the read, and have a great Sunday.

~George

Thanks for reading! This post is public so feel free to share it.

In Case You Missed It

On Feb 23, I sent a trade alert and started a new position.

Four days later, on Feb 27, the stock was already +20% after the company put up solid earnings and a strong outlook.

On Feb 27, I published the investment thesis for paid subscribers.

The setup is simple, and it’s one I’ve made money on before: the market sees a “commodity-like” business and concludes it must be uninvestable. That’s lazy. In these industries, the edge rarely comes from a magical product. It comes from execution.

Most people obsess over “moats.” In this corner of the market, process is the moat.

Earnings Results: 5/7 Estimate Beats

This week, two out of the seven companies reporting earnings missed EPS consensus estimates. Below are my thoughts on DXPE’s earnings and the revised valuation. On Wednesday, I will publish my thoughts on STRL’s earnings.

Paid subscribers can read the detailed earnings analysis here.

Thought Of The Week: DXP Enterprises (DXPE) Q4 2025 Earnings Review

www.RankedStocks.com

Last November, I called the 20% post-earnings selloff after Q3 an overreaction. The market panicked. I wrote about it here.

The Q4 results released last week validated that call, even though Mr. Market didn’t like the results.

DXPE beat on both revenue and EPS. Record full-year sales. Record adjusted EBITDA margins. Six acquisitions closed. Three more closed after year-end. The company I called a hidden MRO powerhouse back in February 2025 keeps delivering.

One thing still needs watching: the energy backlog. More on that below.

Share Beating The Tide: Stock Picks That Outperform

The Numbers

Q4 sales hit $527.4 million, up 12.0% y/y and $28.4 million ahead of consensus.

Diluted EPS came in at $1.39, a $0.09 beat.

Adjusted EBITDA reached $59.0 million at an 11.2% margin; that matches the Q2 high and is better than Q3’s 11.0%.

Gross margin was 31.6%, the strongest quarter of the year. SG&A as a percentage of sales ticked down slightly. The one-off insurance and claims costs that crushed Q3 EPS did not repeat at the same scale in Q4.

For the full year, the picture is even cleaner:

DXPE generated $54 million FCF in 2025. Not bad for a company also spending $61.7 million buying six other companies during the year.

The balance sheet improved in Q4. DXPE refinanced its Term Loan B, raised an incremental $205 million in capital, and cut borrowing costs by 50 basis points (to SOFR plus 325). Net debt ended the year at $543 million; the secured leverage ratio sits at 2.3x against a covenant of 5.75x. Room to move.

Segment Breakdown

Service Centers is the biggest engine; $1.37 billion in full-year sales, up 11.0% y/y. Regions that drove year-over-year growth include the Ohio River Valley, Southeast, Texas Gulf Coast and California. Air compressors, metalworking and US Safety Services all posted strength.

IPS is the fastest engine; sales were up 26.4%. The water side of IPS deserves special attention. DXP Water now represents 55% of IPS sales, up from 46% in 2024 and 22% in 2023. The e-commerce channel hit a record year. Energy-related IPS remains meaningful, but water is the growth driver.

SCS posted a 1.4% revenue decline. Customer site closures and reduced activity at oil-and-gas-related facilities drove the softness. The segment’s 8.7% operating margin held steady. Management expects SCS to grow in 2026 as new customers onboard.

In Q4 specifically, IPS ran an 18.0% operating margin; Service Centers ran 13.9%. Those two segments alone show why the broader mix matters.

What the Earnings Call Revealed

Zach Marriott from Stephens asked the two most useful questions of the call.

First, he asked for monthly sales trends. The CFO broke it down: October averaged $7.5 million per day; November, $8.2 million per day; December, $9.8 million per day; and January 2026 came in at $6.9 million per day. January is always DXPE’s slowest month, and this January was up 2% y/y. The CFO added that “February is shaping up” well. Nothing alarming in those numbers.

Second, he asked about margins in Q1 versus Q4. The CFO declined to give specific guidance; that’s consistent with how DXPE always operates. But he pointed out that water acquisitions remain margin-accretive and that three acquisitions closed in Q4 (APSCO, Triangle Pump, Pump Solutions) should contribute positively to Q1 margins if their due diligence profiles hold.

The energy backlog question came up last. Management was transparent: Q4 saw another 9.3% decline in the energy-related average backlog from Q3; that’s two consecutive quarterly declines. The backlog still sits 36.9% above 2024 year-end levels. But the trend is worth watching. CEO David Little put it plainly: there’s been a lot of quoting activity; projects seem to be on hold; he suspects it’s political in part. He expects things to “start being turned loose” in early 2026, which would show up in sales toward year-end 2026.

Checking the Original Thesis

When I wrote the original DXPE thesis in February 2025, I set a sum-of-parts fair value of $156 per share using a WACC of 9.0%. I flagged four main risks: SCS weakness, rising SG&A, leverage, and tariffs.

Here’s how each played out.

SCS weakness: It remains real but contained. SCS is 12.5% of total revenue. It declined 1.4% for the year. Management is managing it rather than ignoring it.

Rising SG&A: SG&A came in at $459.1 million for 2025, up $48.2 million from 2024. As a percentage of sales, it fell slightly to 22.8%. The Q3 cost spike did not persist into Q4. The leverage I expected is showing up; operating income grew 21.7% on 11.9% revenue growth.

Leverage: Net debt to EBITDA sits at 2.3x; my target was below 3.5x. DXPE is comfortably inside that band even after raising $205 million of incremental debt. The refinancing reduced interest costs, which helps.

Tariffs: DXPE has not called this out as a major headwind in 2025 earnings. It remains a risk for 2026, especially for imported pumps, valves and bearings. Management noted inflation dynamics and supply chain variability as things they’re watching.

The diversification thesis is fully validated. Energy is now just 22% of DXPE sales; water and wastewater is 15%; general industry is 15%; chemical is 10%; food and beverage is 7%. Three years ago, DXPE was seen as an oil-and-gas play. It isn’t anymore.

Since I published the original thesis in Feb 2025, the stock has surged +48%. The thesis is intact.

The Energy Backlog Question

Two consecutive quarters of energy backlog decline sound alarming. Here’s why I’m not panicking yet.

The backlog still sits well above the long-term average. Think of a bucket that has been filling up for two years; it’s now 36.9% fuller than a year ago. Some water spilled out in Q3 and Q4. The bucket is still fuller than it’s ever been.

What’s causing the dip? Management pointed to customers putting projects on hold. There is a lot of quoting activity; that means companies are interested, they’re just not signing yet. If that changes in Q1 or Q2 of 2026, energy revenue would follow, back-end weighted to the second half of the year. That’s the management expectation.

January’s energy backlog will be the next data point. Watch the Q1 2026 call closely.

Looking Ahead to 2026

DXPE closed three more acquisitions after year-end: Mid-Atlantic, PREMIERflow, and Ambiente H2O. All three will start contributing in Q1 2026. Management expects to close at least one to three additional acquisitions by mid-year.

With $303.8 million in cash and $457.3 million in total liquidity (including an undrawn ABL), the balance sheet is loaded for deals. Over the last two years, DXPE has deployed $218.3 million in acquisitions while reducing borrowing costs by over 150 basis points. That’s disciplined capital allocation.

Capex should moderate in 2026 after jumping from $25.1 million in 2024 to $40.3 million in 2025. That should help free cash flow conversion improve from the 24.7% of EBITDA seen in 2025 back toward the 40% range seen in prior years.

The ROIC picture is also worth noting. It came in at 38.2% for 2025, roughly flat to 2024’s.

For context, in 2021 it was 21.5%. That improvement reflects the compounding effect of accretive acquisitions and margin expansion over four years.

Water and wastewater remains the clearest growth driver. The DXP Water backlog keeps growing; management called it out specifically as a continued strength heading into 2026.

Valuation Revision: $156 → $210

I’m raising my fair value estimate from $156 to $210 per share.

The method is the same as the original thesis: a sum-of-parts valuation, where I value each segment separately and add them up. Think of it like valuing three different businesses that happen to share a roof.

Two things drove the revision: a higher EBITDA base across all three segments, offset by a lower terminal growth assumption for SCS and a higher net debt position.

When I built the original model in Feb 2025, I was working from 2024 actuals and my own growth projections. DXPE has since printed a full year of results that came in ahead of those projections.

SCS declined 1.4% in 2025; it also declined in Q3. Management is optimistic about new customer wins in 2026, but this segment has underperformed consistently. I’ve reduced the terminal growth rate for SCS to 1.0%, reflecting that more modest reality.

Putting it together:

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Portfolio Update

As it has been a common theme this year, we closed the week outperforming the S&P 500, widening the gap.

Portfolio Return

Month-to-date: +6.9% vs. the S&P 500’s -0.9%.
Year-to-date: +12.9% vs. the S&P 500’s -0.5%. That is a gap of 1,343 points.
Since inception: +59.4% vs. the S&P 500’s +19.6%. That’s 3.0x the market.

Contribution by Sector

Gold led the gains partially offset by industrials and tech.

Contribution by Position

(For the full breakdown plus commentary on earnings results and the big movers, see Weekly Stock Performance Tracker)

How to read the heat map? click here

+8 bps (Thesis)
+4 bps (Thesis)
+2 bps (Thesis)
flat (Thesis)
-8 bps (Thesis)
-14 bps (Thesis)
-20 bps (Thesis)
-27 bps (Thesis)
+50 bps (TSX: CLS) (Thesis)

That’s it for this week.

Stay calm. Stay focused. And remember to stay sharp, fellow Sharks!

Further Sunday reading to help your investment process:

Deep Dive: The Market Is Confusing “Commodity” With “Uninvestable”

George Atuan, CFA — Fri, 27 Feb 2026 21:59:42 GMT

A few years ago, I bought DAQO Energy [DQ]. Polysilicon, DQ’s output, as every commodity lives in the land of supply and demand. Even though the company was not a tech company and it simply relied on mining a commodity, it turned out to be my best investment, multiplying my capital by 17x in a couple of years.

One of my best picks on Seeking Alpha was Daqo Energy (DQ), a Chinese manufacturer of polysilicon photovoltaic products. I first published my thesis and buy recommendation in September 2017 @ $5.23 per share, re-iterated the buy in November 2018 @ $4.71 per share, one more buy in February 2020 @ $15.18 per share and finally closed my position in February 2021 @ $95.25.

That investment taught me a simple rule that still guides me: when the product starts to look like a commodity, the best operator wins.

In commodity-like industries, the edge rarely comes from a secret product. It comes from boring things done at a high level: buying well, building well, shipping on time, managing inventory like it is cash, and squeezing waste out of a messy system.

That operator lens shapes how I look at companies with no apparent “moat”. The February Stock Pick falls into this category. It is in a part of the supply chain that has no bargaining power. However, this company has been able to have +20% ROIC lately.

The company is already +20% since I sent the trade alert on February 23rd.

Paid member? Click here to access the stock picks.

Trade alert: February Pick, A Commodity Business With an Operator Edge

George Atuan, CFA — Mon, 23 Feb 2026 15:07:38 GMT

Hi,

Today I added a new position to the portfolio as the February stock pick.

The funny part is the business sits in a corner of the supply chain that most people write off as “no moat.” The products look like commodities. The competition looks brutal. The returns “should” be mediocre.

And yet, some operators keep proving the same thing: you can earn outstanding returns in a commodity-ish industry if you run the machine better than everyone else.

Think Southwest Airlines, a sector famous for awful ROIC.

By the way, there is a Business Wars series on Southwest if you are into business podcasts.

Or think DAQO, which became my best investment and returned about 17x, even though it sold polysilicon. The product was a commodity. The execution wasn’t.

This new pick fits that playbook.

It sells something the market treats like a box. But the company has built a supply chain and operating model that actually matters when the cycle turns:

It runs at real scale, which helps it source components and execute when others can’t.
It reacts fast to mix and pricing, because it controls the customer relationship, not just the factory output.
It turns working capital into an advantage, collecting cash earlier and paying suppliers later.
It has a services and deployment engine that makes the “box” stickier than it looks on day one.

I’m publishing the full investment thesis to paid subscribers soon.

Beating The Tide: Stock Picks That Outperform

Celestica (CLS) Q1 2026: Déjà Vu. Beat, Raise, Drop

Table of Contents:

TLDR

Thesis scorecard

Pillar #1. Transformation from commodity EMS to AI-infrastructure design partner: Confirmed and strengthening

Pillar #2. Hyperscaler AI infrastructure spend is structural, not a hype cycle: Confirmed and strengthening

Pillar #3. 400G/800G/1.6T networking ramp: Confirmed and strengthening

Pillar #4. Inference-driven durability. Long runway beyond 2026: Confirmed and strengthening

Pillar #5. Free cash flow machine and capital returns: Confirmed, evolving

Pillar #6. Defensive moat via design complexity: Confirmed and strengthening

Q1 2026 earnings: what the print actually said

Segment dynamics

Guidance: what changed in 90 days

Risk register: what bears actually have left to work with

Verdict

Weekly #79: Why I Cap Even My Best Calls at 5% (Position Sizing)

Table of Contents:

In Case You Missed It

#1

#2

#3

Earnings Results

Thought Of The Week

The Arithmetic That Punishes Conviction

The casino has gotten loud

The math nobody runs

What PayPal taught me in real time

CDE: the opposite lesson

The rule I actually use

Three layers of conviction

Layer #1. The business.

Layer #2. The valuation.

Layer #3. The capital allocator.

Portfolio Update

Portfolio Return

Contribution by Sector

Contribution by Position

The Halal Chicken Plant That Taught Me To Close Pilgrim's Pride

Table of Contents:

TLDR

What Pilgrim’s Pride Actually Is

How The Money Is Actually Made

The Cycle Rolled Over In Q4

EBITDA Margin Cyclicality

No Moat, And That’s The Point

Start with pricing power.

Continue with market share.

End with returns.

Capital Allocation And The JBS Problem

Valuation

Why Even My DCF Is Optimistic, Starting With The WACC

Monte Carlo: The Stress Test That Closed The Trade

Monte Carlo Distribution Statistics

Steel-Manning The Bear

First, margin mean reversion.

Second, Mexico.

Third, feed input inversion.

Fourth, avian flu.

Fifth, legal overhang.

What The Bulls Are Missing

Post-Mortem: Why I Bought At $41.59 And What I Missed

Belief #1. The US chicken cycle was mid-innings, not late.

Belief #2. European margins had a real runway.

Belief #3. The margin structure had stepped up durably.

Miss #1. Hatch data.

Miss #2. Mexico.

The lessons I’m taking forward.

Why I’m Recycling Into The April Pick

The Verdict

A Record Quarter, a Stock Still Trading Like Nothing Happened

This Latam Utility Hit My Target (+40%) in 3 Months. Now What?

Table of Contents:

Weekly #78: TSMC Beat Every Line, The Market Yawned. That's the Setup

Table of Contents:

In Case You Missed It

Thought Of The Week

The Market’s Yawn Is the Opportunity, TSM’s Q1 2026 Earnings Review

TLDR

Thesis scorecard