When a stock drops in price, there can be 3 causes:

1. There’s an overall market reason

2. It’s related to a specific sector

3. It’s the company itself

For each of these 3 reasons, we have to ask ourselves:

Why?

If it’s company-specific, that’s the most troublesome. There might be something wrong with the company you own.

This usually leads to the question: Is it temporary or structural?

If the problem is temporary, then you can wait it out. If it’s structural, now you might have to revisit your thesis.

If it’s the entire sector, which you can easily spot by looking at what the other companies are doing, the question gets a little easier:

What is the long-term trend for the entire sector? And how cyclical is this sector?

If the long-term trend is unchanged, and cyclicality is low, you might want to keep holding your company.

The easiest situation is when the entire market goes down. Now, you know that market forces are at work. High rates? Unexpected higher inflation numbers? Some kind of tariff announcement that creates a global market shock?

This is what you want. Because your high-quality company might just become cheaper because of simple market forces. You only need to assess which market force it is and whether it will really impact your company in the long term.

So let’s do a quick check of our holdings, and I’ll show where I’m adding to my positions based on this analysis.

The charts you see below are created by an agent that analyzes market, sector, and company forces. (You can visit Invest with AI if you want to see how this works).

This is not a full portfolio analysis(will be released later). I’m busy writing updates for Pharmx and ITECH as they just released new information. But I wanted to do this quick analysis because I think it’s useful with everything that is going on.

Pharmx

Primary force that is influencing price: Company information

• Market forces: Partly, but that’s not what is driving the price action

• Sector forces: None; expected growth is still strong

• Company forces: Pharmx released its update, but while the marketplace is growing ahead of its initial target (about 80 million AUD in ARR at the moment), revenue growth is still slow.

The market wanted faster results and punished the company for it.

My stance: I’m going to hold. I’ll release my earnings analysis next week, as they did a webinar 2 days ago. Here is the chart showing that marketplace GTV is ahead of their target. The market is punishing them because revenue isn’t growing fast enough yet.

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It’s been sitting in my serial acquirer database for some time.

This company is run by a management team from another successful serial acquirer that increased the market cap 10x in 10 years.

The company is called Berner Industrier.

Let’s dive in ⬇️

A short introduction

A family-controlled Swedish industrial group, founded in 1897 and listed on Nasdaq Stockholm (BERNER), with ten Nordic subsidiaries that make and distribute pumps, electric boilers, water treatment, and other industrial equipment. It is an early-stage serial acquirer coming out of a turnaround. “Berner 2.0” began in 2022 with a new management team, with Caroline Reuterskiöld at the helm. She previously ran a division at Lagercrantz, arguably the most accomplished serial acquirer in the Nordics.

Lagercrantz’s returns aren’t too bad 😉, with an almost 25% CAGR over the last 10 years.

Pricing:

• Market Cap: 1.5B SEK (€133M)

• Net debt ex IFRS 16: 125.1M SEK

• Net debt incl. IFRS 16: 200.5M SEK

• LTM EV (ex IFRS16)/EBITA: 15x

• LTM PE: 18x

Management’s future guidance:

• Net sales growth of at least 10% per year on average over a cycle

• EBITA growth of at least 15% a year on average over a cycle

• Return on equity of at least 25%

• Net debt/LTM EBITDA below 2.5x

The moat: They have 2 segments. The moat is high for Energy & Environment, which owns its products and holds niche, IP-protected positions in electric boilers, dampers, screw presses, and patented low-shear technology. But the moat is weaker for the distribution segment, which relies on long supplier relationships and industry expertise as its core advantages.

The bet: A management team that repaired the old business (EBITA from SEK 31m in 2021 to SEK 100m in 2025) now compounds through acquisitions.

The problem: like most Nordic industrial serial acquirers, the acquired companies grow only 5% organically, so the upside depends on future and continued M&A. The first deal under the new CEO closed in 2025, leaving a short track record at Berner, though her Lagercrantz track record is strong. A further, more short-term issue is weak order intake over the past two quarters.

Potential outcome: The outcome is straightforward. If management deploys capital into good businesses at high ROIC and hits its target of at least 15% average EBITA growth over a cycle, Berner looks like an early version of the Swedish compounders, with a long runway and a potential IRR of +20%. If not, it is a 5% grower on 18x earnings, and the multiple could derate.

What to watch: organic growth, sensible acquisitions and EBITA growing faster than revenue.

A deeper look into the business

Berner Industrier started in Gothenburg in 1897 as Christian Berner, an importer of technical equipment for breweries. Norwegian, Finnish and Danish subsidiaries followed between 1910 and 1924, and for most of its history it was a Nordic technical trading house. It was listed as Christian Berner Tech Trade in 2014 and renamed itself Berner Industrier in May 2024.

A capital raise around the 2017 uplisting funded the first standalone acquisitions: Zander & Ingeström (2018), Empakk and Alfa Tec (2019), Bullerbekämparen (2020) and Swedenborg (2021). In 2022, the new management team arrived, split the group into two decentralized business areas, and spent three years fixing margins and cash generation. Acquisitions restarted with Autofric (May 2025), Typhonix (January 2026), and Jernbro Water Technologies, a small asset deal added to Autofric (March 2026). All of these deals targeted the higher-quality Energy & Environment segment.

What are you actually buying?

Two very different businesses under one roof:

• a low-margin distributor

• a higher-margin cluster of own-product companies.

Technology & Distribution is the heritage business. The four Christian Berner companies sell other makers’ products in water treatment, vibration damping, packaging, process technology, and technical plastics, mostly in their home markets and partly on commission. Empakk in Norway (packaging and processing equipment) has been the business area’s best performer in 2025 and 2026. The margin was 1.3% in 2024 and 5.3% in 2025, after cost cuts and pruning of low-margin lines.

Energy & Environment is where the earnings are. It produced about three-quarters of segment EBITA in 2025. These companies make or own their products and sell across the Nordics and abroad: Zander & Ingeström, bought in 2018, is the main engine of the business area. It makes Zeta electric boilers that replace oil, coal and gas boilers, as well as high-pressure and process pumps. The rest of the business segment consists of: industrial dampers (Swedenborg), noise-reducing control cabins (Bullerbekämparen), Autofric screw presses for sludge dewatering, and Typhonix low-shear pumps and valves for produced water.

Where will growth come from?

Acquisitions

Berner looks for niche businesses, usually with specialist technology or a strong position in a small market, and lets them run in a decentralized way. The model is not unique: Lifco, Addtech, Indutrade and Lagercrantz have run variations of it for decades. What makes Berner interesting is its size. It gives the company a long runway, provided management stays disciplined, as it has so far.

So what about the last 3 acquisitions?

• Autofric: sludge dewatering, closed May 2025, for SEK 55M

• Typhonix: low shear pumps and valves, closed January 2026, for SEK 55M

• Jernbro Water Technologies: add-on to Autofric, March 2026, small & no price disclosed

Headroom to keep buying. The balance sheet supports that runway. Net debt is 0.9x LTM EBITDA against a ceiling of 2.5x, which leaves considerable room for acquisitions. In addition, more than 70% of net income should convert into free cash flow, which adds further headroom.

Competition for good deals: Berner competes mainly with Lifco, Addtech, Indutrade, Lagercrantz, Teqnion and private equity, all with far longer track records. Its advantage is size. A company with SEK15 to SEK60m of revenue moves Berner’s earnings, while larger buyers need many such deals to matter and so target bigger ones. The CEO’s track record, network and expertise from Lagercrantz also help a lot.

Organic growth

Over a full cycle, I think the businesses can grow organically at 5 to 10% a year. Where they land depends on three things.

1. End-market demand: spending on water treatment, electrification of industrial heat, and resource efficiency, which drives Energy & Environment.

2. International Expansion: How far are the subsidiaries able to take their own products beyond the Nordics, as Zander & Ingeström has started to do with a new partner in France and the Benelux, and Typhonix with its first order in Asia.

3. Industrial customers’ willingness to invest. That has been cautious since 2025 and weighs most on the distribution business.

The water tailwind. Berner’s current M&A focus is water, which is also the most attractive exposure in the group. Its two latest acquisitions show this. Autofric sells sludge-dewatering equipment, and Typhonix has patented technology for produced water treatment. Both tie Berner to long-term spending on cleaner water, resource efficiency and industrial infrastructure, without heroic assumptions about a new technology taking off. Water scarcity already affects billions of people and will only get worse.

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Management and ownership

Berner 2.0. Caroline Reuterskiöld became CEO on April 28, 2022. She came from Lagercrantz, one of Sweden’s most accomplished serial acquirers, where, as division CEO, she ran Niche Products and oversaw many acquisitions in the same areas where Berner is active. Investors and industry experts I have spoken to consistently praise her grasp of the business as a whole and her sense for capital allocation, as one would expect from a former Lagercrantz division head. Henrik Nordin, CFO and deputy CEO, joined later in the same year from Infrea.

Together they reset Berner into the classic Swedish programmatic acquirer mold, introducing its typical best practices and a decentralized management structure.

Decentralized, but with new operators. Eight of the nine subsidiary directors listed in the 2025 annual report took their role in 2022 or later. In other words, they brought in fresh blood to drive performance.

Alignment. The CEO owns 173,875 shares, worth 2.4x her 2025 pay of SEK 5.3m. The CFO owns 38,000 shares. Both hold 50,000 warrants from the 2025/28 program, which they bought at market value; the warrants are struck at SEK 115, 40% above today’s price, and can be exercised in November 2028.

➡️So the incentives look aligned.

Family control. Gårdaverken, chaired by Joachim Berner, owns 22% of the capital and 51% of the votes through all 1,250,000 A shares (ten votes each). Gårdaverken’s CEO, Pim Polesie, also sits on the board. Two further holders carrying the Berner name own another 11.9%.

Capital returns. The policy is to pay out 30% to 50% of profit after tax, taking acquisitions, cash flow and financial position into account. The 2025 dividend was SEK 1.25 per share (SEK 0.95 the year before), SEK 23.8m in total, about 33% of 2025 profit. In September 2026, the company also bought back 275,000 shares for SEK 19.9m (average SEK 72.30) and holds them in treasury; the AGM authorization allows up to 10%.

As I understand it, however, the buyback is meant to fund acquisitions without dilution rather than to return cash to shareholders.

Explanation of the recent price drop

In February 2026, Berner reiterated its 10% annual sales growth target. Having already passed its 9% EBITA margin target (10% in 2025), it swapped that goal for average EBITA growth of at least 15% a year across a cycle, a major guidance upgrade. Since then, order intake has made the sales target, and therefore the EBITA target, hard to justify, with growth of only 5% in Q1 and 1.8% in Q2, and shares have fallen from SEK 115 to SEK 80.

Management points to the natural lumpiness of the business and expects H2 order intake to be meaningfully higher, but for now this gap between orders and sales is the main reason the shares have fallen.

Based on past numbers and the recent acquisitions, management is clearly focusing on growing the higher-margin part of the business (Energy and Environment). But, for example, the electric boiler sales create lumpiness in the numbers. Their more recent acquisitions have a steadier revenue flow. If they keep acquiring similar businesses, future revenue and earnings will be more predictable. In the meantime, it could offer a more compelling entry point into this business.

Here are the revenue and EBITA charts for each segment:

And for EBITA

This last one is especially telling. Management should focus on growing the blue part, which drives most of the profitability.

Finally, a quick look at past EV/EBIT (for Berner, EBITA is close to EBIT)

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So it has come down quite a bit from the highs this year.

Risks

Unproven deal discipline. The thesis rests on M&A, but management has completed only three deals and has no public track record.

Family control. Gårdaverken holds 51% of the votes, two of six directors depend on the main owner, and the payout preference is the family’s. That brings patience, but minorities have no say on a sale or on capital returns.

Key people. With a two-person head office, the CEO and CFO drive acquisitions. Losing either would hurt.

Order Intake. Orders are lagging sales, as discussed above. If the H2 pickup doesn’t materialize, the market will react strongly.

Current status

There is something here: a cleaned-up group, real niche products in energy and water, a lean head office, low leverage, and a management team with the right pedigree and incentives. What is not yet proven is the part that makes a serial acquirer worth owning: buying well, repeatedly, and making acquired companies earn more under Berner than they did before. The early signs are encouraging. The CEO built a strong track record at Lagercrantz, and so far every acquisition is developing as planned.

The thesis comes down to whether the new Management can deploy capital at a high, sustained ROIC and whether order intake recovers. Both rest on one thing: do you trust management and its ability to deliver?

Decision:

More research needed. Tracking the company. The next disclosure of their interim results will be on November 3rd. The beauty of a serial acquirer like this is that we don’t have to rush. Let’s first see if the recovery the CEO pointed at materializes. Even if the price moves up based on the November results, we are aiming for a serial acquirer with a working engine.

I will write about more companies in the pipeline soon.

May the markets be with you, always!

Kevin

Here’s the most recent version of the bubble meter:

One thing that turned towards an all time high is the margin debt.

The vertical grey lines are the past recessions.

While margin debt doesn’t predict a future recession, it does show investors are taking on more risk.

Yesterday, I had the honor of being on a debate panel in front of 500 investors.

It was a full house!

One question was: How do you position yourself with rising interest rates?

Using Claude, I analyze my portfolio for interest-rate exposure. But most of our companies have solid balance sheets.

We cannot control the macro. I try not to spend too much time on it. We can control the quality of the companies we pick.

That brings me to this week’s idea.

2. Stu(o)ck in the funnel

Intred (ITD.MI)

The setup in short

• What: Regional fiber operator in Lombardy, Italy. Owns 15,000 km of its own network, serves 57k customers, mostly SMEs, town halls, and schools

• Valuation: €140M market cap, €180M EV, 7.0x EV/EBITDA today, 4.8x on 2029e

• Balance sheet: €41M net debt, 1.6x EBITDA. Not stretched, but not empty either

• The moat: Nobody builds a second network into a village of 3,000 people. The replacement cost of what Intred owns is €200M

• The bet: Capex normalizes after the data center is finished, and the cash finally shows up at the shareholder level

• The problem: That happens in 2029. FCF is negative in 2027 and thin in 2028

• Outcome: Not binary. Slow, boring, and probably positive.

• My stance: Interesting enough to do the real work on

Description: Intred (Ticker: ITD.MI) is a vertically integrated telecom operator in Lombardy. It sells fiber connectivity, and it owns the fiber it sells. Revenue splits into B2B/professional (56%), residential (18%), public administration (17%), and wholesale (9%). While the consumer brand is what people see, 85% of profits come from B2B, public, and wholesale.

This is an infrastructure business.

FY25: €55.8M revenue, €25.5M EBITDA, a 45.8% margin. About 96% of revenue is recurring or prepaid, and churn was only 4.4%. Founder Daniele Peli controls 60% of the stock.

Type: Profitable, owner-operated, illiquid infrastructure microcap

Why it’s interesting: A local monopoly you can buy at 5x forward EBITDA, with a founder who already declined a takeover offer of twice the current price.

The rundown: The economics of fiber are simple. You spend an enormous amount of money once, digging ditches. After that, connecting a new customer near an existing cable costs little. In the small Lombardy towns, Intred got there first, and it is the only one there. A second builder would have to earn a return on €200M of replacement cost while Intred, already paid off, undercuts him at will. So nobody comes.

B2B and public administration deals run three to five years with automatic renewal. ARPU went from €700 in FY15 to €1,050 in FY24, in a national market where telecom pricing only goes down. Not through price hikes, but through speed upgrades, bundles, and managed services. And OpenFiber, the state wholesale layer, does not chase bespoke B2B connections, which is exactly the segment carrying the profits.

An important accelerator for Intred was the €60M Infratel contract in 2021, which put them into every school and town hall in Lombardy. Once your cable is in the town hall, the next tender in that town is cheaper for you to win than for anyone else.

The problem: Capex runs roughly in line with EBITDA for the next couple of years. FY27 is the peak data center investment year, which is being built as a further cross-selling point. FCF is negative in 2027, thin in 2028, and distributable cash arrives around 2029.

Management guides to capex normalizing and a shift from expansion to utilization, which would push ROIC from 10% toward 15%.

I find that credible.

Ownership: Peli holds 60% of shares, is chairman and CEO, is deeply involved, and there is no succession plan. Italian public tenders and heavy capex carry integrity risk.

Current status: Warrants deeper due diligence.

At €8.8, the shares trade at roughly 6.7x FY26e EV/EBITDA and about 10x normalized FY26e free cash flow. As EBITDA moves toward €37M by FY29e, those multiples compress to about 5x and 7x respectively. On top of that, the company has spent roughly €200M building its network, or €12.5 per share. Well-run fiber operators such as Intred typically trade near 3x replacement value, which for a network this recent should sit close to build cost.

The founder reportedly turned down €18/share in early 2025, and said he’d think about it closer to €30.

Either he’s stubborn, or the market is asleep.

3. Best article of the week

A great article I’ve read recently by Dean over at Petty Cash called

Petty Cash

Filtering Ideas: Learning to Say No

This post is part of my How I Run My Portfolio series—where I break down how I actually manage my capital. You can find the full series here…

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5 months ago · 10 likes

Filtering Ideas: Learning to Say No
Not everything deserves your time. Most ideas don’t fail because they’re bad. They never get the time or attention required to become actionable…

It’s about saying no.

Dean tells a story from before he was a full-time investor, when he first became a manager. Thirty-plus direct reports, overdue reviews, safety audits, other departments waiting on him, a family, and an investing education he was trying to squeeze into the cracks. He laid it all out for his boss, hoping for a solution.

Her answer: you will need to pick who you disappoint. It’s part of your job.

Not “prioritize better.” Not “delegate more.”

Pick who you disappoint.

Most advice about focus is about cutting the things you don’t want to do. That’s the easy version. Anybody can drop the boring meeting. The hard version is that with limited time, you also say no to things you genuinely want to do.

Which is exactly what research feels like.

You have more ideas than hours. Every hour spent understanding one company is an hour not spent on another. So you abandon an interesting name at 70% complete, because you already know you’re not going to take it the last 30%. You pass on something with a couple of yellow flags, and three months later it triples while everyone on X takes a victory lap.

Being disciplined means you will sometimes look stupid. Get used to it.

What can we learn from this:

• Your filter is your edge. Not your analysis. Anyone can analyze; almost nobody says no.

• Reframe the question from “what should I do?” to “what am I choosing not to do?”

• Not having an opinion is a legitimate position. “I have no idea what will happen” is often the most honest answer available.

• The cost of saying no is social, and it’s real. Pay it anyway.

Also, we’re all guilty of mindlessly saying yes. Including me.

May the markets be with you, always!

Kevin

I swore to myself never to look at banks.

For a long time, it was outside my circle of competence.

But then AI came. It not only amplifies what you can do, but also lets us learn faster than ever.

The setup: I collected all data for 125 banks in Europe. (The US sits on the agenda too.)

The results:

It’s the colors that matter. Everything colored red can be dismissed as fairly valued or expensive.

But 14 of them were flagged as possibly cheap. (green)

I dug deeper and settled on the number 1.

This bank is a turnaround story, which partially explains why it’s still cheap.

I see this stock doubling in the next 3 years.

Let’s dive in! ⬇️

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In the past, I explained that my favorite companies are what I called phoenix companies.

Like that bird that rises from the ashes.

A company that reinvents itself. On the surface, a declining business, but under the hood, something powerful is brewing.

Phoenix companies give us a chance to profit from a double whammy:

• Multiple expansion

• EPS growth

After all, if the company looks good on the surface, that goodness is already priced in, and you can only profit from possible future earnings growth.

The company below is already up 200% over a year.

It’s a great example of a phoenix company and also a test of whether we can overcome price anchoring.

Winners keep on winning. Does that statement hold true here?

Let’s find out!

When a company acquires another business, and it does so well that it becomes the biggest part of the business within a few years, screeners and analysts are slow to pick up on these changes at the micro cap level.

This offers the unique chance of getting in early into a company that is transitioning and will eventually re-rate thanks to a changing narrative from dying broadcaster to advertising technology fast grower. The new management is actively pushing this change and is convinced that they changed the payment structure towards as much Equity as possible. At the same time, the company has a nice dividend yield of 2.3%.

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This is the new edition of our portfolio update.

For each position inside our portfolios, you’ll receive:

• The initial thesis in short (to remind myself and you why we bought the company in the first place)

• The current situation with the company

• Our rating of the company.

Reply to this email if you want me to add, change, or remove anything from these reports.

I invest with a 3-5 year horizon. So I’m not swayed by short-term volatility. But these reports force me to think about the full portfolio each month.

During earnings updates, we re-underwrite our position (or not). During portfolio updates, we assess the risk level and position sizing of the whole.

We run 2 portfolios. The Peter Lynch portfolio and the Inverted Nick Sleep portfolio.

The article below is long, but feel free to skip to the companies you like.

Here’s the current performance:

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I stood in a room on Tuesday with 225 investors to teach a masterclass on how to research faster and cover more names with Claude.

The stock below came from a screen my agent ran. I teach how to build them, and early access closes on 20 September.

Here’s what’s inside.

Let’s look at the stock.

Stock in my funnel: Ilyda (ILYDA)

In short

• What: A Greek vertical-market software house selling mission-critical systems into regulated niches like pharmacies, universities, hospitals, and ministries

• Valuation: €56M market cap, €50M EV, 11x trailing earnings, 8x 2026E, 9.5x EV/adj. EBITDA

• Balance sheet: Net cash

• The moat: 70%+ of Greek pharmacies, 80% of universities, 85% of all student data. Their churn is under 5%, which proves the moat.

• The bet: A regulation-embedded monopolist in small niches, priced like a no-growth microcap, with multiple growth levers

• The problem: A 73-year-old founder-CEO, no earnings calls, undisclosed backlog, and a revenue line that depends on tender timing nobody can see

• Potential outcome: Not binary. The downside is a flat year. The upside is a re-rate and +20% earnings compounding

• My stance: Interested. Prepping it for a potential deep dive.

The longer description

Description: Ilyda (Ticker: ILYDA) is an Athens-listed software company founded in 1992. It builds and runs vertical software for industries where the software is not optional: pharmacy and healthcare (30% of revenue), mid-market ERP (25%), university management (30%, including public sector), and e-invoicing (15%). Recurring revenue was 50% in 2025. FY25 was a record: revenue €9.0M (+26%), 71% gross margin, 59% adjusted EBIT margin, €4.4M net income. 48 employees. The CEO guides to roughly 20% growth in 2026.

You know what they say about trying to switch critical software: It’s like going to the dentist without any anesthesia. It hurts!

Type: Profitable, founder-controlled microcap monopolist

Why it’s interesting: Because regulation writes the switching costs for them, and nobody is following this stock.

The rundown: At €56M for a business earning €4.4M with net cash on the balance sheet, you are paying roughly 10x for a company with 70% gross margins and dominant share in three separate niches. That is not a growth multiple. That is a “we have never heard of this company” multiple.

Here is what you actually own. Dioscorides runs more than 70% of Greek pharmacies; the competitors left the market. UniTron and MyCosmos sit under 80% of Greek universities and 85% of all student records in the country. Over 7,450 customers, churn under 5%, and more than 20% of revenue reinvested into R&D for ten years straight.

There is a second edge that took me a while to appreciate. Ilyda sells through IT-services houses and does not sell directly. That sounds like a weakness until you realize why the partners work with them: Ilyda does not poach their clients, unlike the larger Greek players. (Confirmed by multiple industry insiders)

The growth case, in the CEO’s own order of priority: international expansion of e-invoicing and MyCosmos through those existing IT-Service relationships; the Greek e-invoicing mandate, with e-invoicing guided to grow 50–100% in 2026 (10% of revenues in 2025); more public tenders, with the 2026–27 EU and Greek government spending looking positive; SLA conversion across 2027–28, which should push recurring revenue above 50%; and new verticals, starting with car rental software, already in discussions with the two players who control 75% of that market.

On capital allocation, I emailed the CEO and asked how he weighs M&A against buybacks at the current share price. He said it comes down to which yields the better return on capital. M&A stays selective and complementary, targeting verticals that add know-how, specialized people, and product speed. He will not buy revenue without strategic relevance, and he screens on return on capital, integration time, and technological fit. (a good answer from the CEO)

Risks

EU & State Tenders: Roughly 15% of revenue is tied directly to EU and state tenders, where timing is unknown, and awards are not always publicly announced. In addition, a significant portion of private-sector spending is supported by EU or government funding incentives. As a result, the path beyond FY27 depends on the next tender cycle and converting future contracts, neither of which is fully visible today.

Key-man risk is real. The founder-CEO is 73–74, owns 40.4%, and drives both the tender relationships and the instinct to spot the next vertical. His children are already on the management team, and a succession plan is in place.

Capitalized software costs were €4.4M in FY25, roughly 2.3x the prior year, and will likely stay elevated as it builds product and adapts software for new countries. Although I do not expect this to continue over the medium term.

Then the general disclosure problem: no earnings calls, unresponsive to non-fund investors (well, he did get back to me), and zero international coverage.

On their website, information is sparse:

But they did announce a new strategic cooperation in July 2026.

It’s a joint effort of Ilyda and 2 other companies to develop a new platform:

Two additional risks are Greek macro sensitivity and unproven M&A ambitions.

Current status: It is a genuinely good business at a boring price, with some issues around revenue visibility post 2027. But in my process, I’m leaning more on future predictability, so I need a better estimate of what the future might hold, not just the CEO’s word. This company could even be a prime target for a VMS serial acquirer.

Will dig deeper and decide if it’s worth a full deep dive.

As I mentioned at the start. If you’re interested in how to source more ideas or track your positions on auto with Claude. You can check out our early access course. It’s built from the ground up, even if you’ve just started using AI tools.

GO TO EARLY ACCESS

May the markets be with you, always!

Kevin

The bad news first: Their legacy business barely grew this year.

The good news: Their new segment showed .. growth in the past month.

Music to my ears.

Peter Lynch gave different names to different types of companies:

• Fast growers (pretty self-explanatory)

• Asset plays (hidden value on the balance sheet)

• etc.

I call this kind of company a Phoenix.

In mythology, this bird repeats an endless cycle of dying in flames and being reborn from the ashes.

In business, it means the transition from a mature or declining company back to high growth.

Those are our favorite types!

There can be different ways a company becomes a Phoenix, but the simplest is a change in business model and trying to make sales into a new segment.

That’s exactly what is happening here.

They reported their annual results on August 27.

Let’s dive deeper into what has happened.

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Original write-up:

Previous update (they report every 6 months)

Short recap

We first bought Supreme roughly a year ago and added once since. In the half-year update in November, I asked three questions:

1. Has the company become stronger?

2. Is it cheaper

3. Is the price move about the market or about the business?

Supreme delivered revenue of £270.2m and adjusted EBITDA of £40.6m, with the EBITDA coming in ahead of the £37.0m analysts were carrying before the April 2026 trading update. The shares are nonetheless lower than they were in November.

What was in the full year

Revenue: £270.2m, up 17% (FY25: £231.1m)
Gross profit: £78.9m, up 7%. Gross margin: 29% versus 32%
Adjusted EBITDA: £40.6m, flat (FY25: £40.5m)
Profit before tax: £26.7m, down 14%
EPS: 15.4p, down 23%. Adjusted EPS 18.9p, down 13%
Free cash flow: £23m, up 12%
Adjusted net cash: £7.5m
Dividend: 5.4p, up 4%

The good

Vaping grew 15% to £148.1m, entirely organic, through the category’s largest regulatory disruption. The disposable ban took effect on 1 June 2025 and removed £54.1m of FY25 revenue at the format level. Supreme retained every major retail customer, transitioned them to pods, added Hayati and IVG to its distribution portfolio, and took no material stock write-offs.

Drinks and Wellness grew 60% to £69.3m, from £23.9m two years ago. This was mainly driven by M&A. Their gross margin held at 31%. Soft drinks grew to £26.3m, roughly 20% above pre-acquisition levels. That came despite a material headwind from the post-deal reduction in contract manufacturing (c.£5m to £10m), which was more than offset by new product launches and international expansion. All other sub-segments also saw strong organic growth.

The balance sheet ended in net cash despite £12.9m of acquisition outflow and £6.0m of capex.

The bad

Vaping added £19.1m of revenue and £0.1m of gross profit. Drinks and Wellness added £26.1m of revenue and £8.2m of gross profit. Electricals and Household lost £6.1m of revenue and £3.1m of gross profit. Net gross profit gain: £5.2m. Administrative expenses inside EBITDA rose by £5.0m (of which £3.9m due to M&A). Hence EBITDA of £40.6m versus £40.5m.

Vaping gross margin fell from 36.4% to 31.8%. Management attributes this to the structurally lower margin of pods versus disposables and to early purchasing inefficiency, and expects it to improve meaningfully as buying disciplines mature, as happened with disposables. That is plausible, but we don’t have any evidence yet.

Electricals & Household is the ugly part. Revenue down 10%, but gross profit down 26%, with margin from 20.7% to 17.1%. Panasonic exited the European battery market, and Amazon moved to direct supply, cutting out resellers. Management explicitly says the Amazon stream is not expected to return. I had modeled this segment as a stable cash cow. It is now a shrinking one. Though the rate of decline should slow down from here, to c.5% p.a. on my estimate.

Organic EBITDA Growth: Strip out the acquisitions and FY26 EBITDA was likely down c.5%. The legacy business went backward while the company deployed a very large amount of capital, and flat headline EBITDA is hiding it.

The case for reading this as a timing problem.

Read more

So we looked at the numbers, and this week the bubble meter looks like this:

I would say the market is still high but more or less stable. With a probably healthy correction in the US.

But even if the market as a whole looks expensive and we are mostly risk-on, that doesn’t prevent us from finding interesting opportunities.

Well, when you go small, that is.

Many stocks sit in our funnel for processing and maybe eventually a deep dive.

Here’s an interesting one ⬇️

2. Stu(o)ck in the funnel

It’s time for another company that is stuck in my funnel. Just outside the typical market cap I go for (I usually stay under 500M), but it’s an interesting setup.

That company is Mensch und Maschine (MUM)

• What is it? : A German engineering-software group; that owns hyperMILL (5-axis CAM), SOFiSTiK(structural/BIM) and the largest Autodesk value-added reseller in Europe

• Market pricing? : €600M market cap, €620M EV, 19x FY25 earnings, 17x FY26e

• Balance sheet? €20M net debt, 6% dividend yield, €50M of an existing credit facility still earmarked for buybacks

• Does it have a moat? Let’s look at some numbers. 3% churn, 95%+ renewal rates, 55% recurring gross profit, and high switching costs

• What is the bet? Three years of one-offs, and German macro pressure compressed the P/E from 35x to 19x. Future earnings are set to compound in the low teens on a highly recurring, sticky revenue base.

• So what’s the problem? Management has missed its own guidance two years in a row. The 72-year-old founder owns half the company (I like skin in the game, but too much skin can also lead to issues; remember Anexo!)

• The potential outcome: This is not a binary play like some of our positions. So let’s say your earnings compound at 10%+; you get a dividend (which used to be a 3% yield, but now 6% because of the lower market price) and, if the price stays low, an opportunistic buyback by management. You’re looking at something like an 18% IRR with no re-rating; more if the multiple comes back or the founder sells

• My stance: This is the kind of boring I like, and I will keep digging to decide if it’s worth a deep dive.

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Description: Mensch und Maschine (Ticker: MUM) builds and sells engineering software in DACH (55%), the rest of Europe (32%), and internationally (13%). The business has two main parts. The Software segment is proprietary: hyperMILL, the CAM software that tells five-axis milling machines how to cut metal, at roughly 40% of company profits; SOFiSTiK, structural analysis for bridges and tunnels, at 15%; DATAflor, a Computer-Aided Engineering (CAE) product, for the rest. The Digitalization segment (VAR) customizes, implements, and trains. Half of its gross profit comes from reselling Autodesk licenses, and half from services built on top. The company was founded in 1984 and IPO’d in 1997. Founder Adi Drotleff still runs it and owns 48%.

Type: Hidden-Champion, dividend-paying, founder-controlled European microcap

Why it’s interesting: A high-quality compounder trading at half its own ten-year average multiple, for reasons that are mostly finished.

The rundown: What are you actually buying? MuM sells a family of engineering software, each product built for one narrow technical problem:

• HyperMILL generates optimized CNC toolpaths for five-axis milling.

• SOFiSTiK does structural analysis and reinforcement design for bridges, tunnels and buildings.

• DATAflor runs planning, measurement, costing and invoicing for landscaping and groundworks.

• eXs handles electrical circuit diagrams for projects running to thousands of sheets. Around these sit the digitalization toolboxes:

• PDM Booster for product data

• BIM Booster for construction

• MAPedit for GIS and infrastructure

• CustomX for variant configuration, plus the customization and training layer on top of Autodesk.

Every one of these products is a 2D or 3D model of physical reality, sold into a workflow where the output gets built, machined, or poured. None of them is generic enough to be bought off a shelf; all require deep industry knowledge to write and use, and all are customized to the individual customer before they produce anything. When your software plans the toolpath for a titanium aerospace part, or tells an engineer whether the bridge needs vibration dampers, a migration that goes wrong is not a bad quarter; it is physical damage. Switching costs in engineering software are of a different species than in normal enterprise software.

hyperMILL is the best example of this model. At about €30,000 per seat, it’s the most expensive CAM software on the market by a wide margin. It sells anyway, because it sits next to a milling machine that costs mid-six to low-seven figures and makes that machine 20 to 30% faster, in certain applications up to 10x. Gross margins from 90 to 95%. Group churn sits around 3%.

So why did the multiple compress from mid double digits to low double digits?

Three things happened.

1. Autodesk changed its billing model from resale to agent, which mechanically collapsed reported revenue while leaving gross profit untouched. It also pulled cash flow forward in 2023 and then unwound over the following three years.

2. On top of that came an ERP rollout, an efficiency program, and roughly €2.5M of non-recurring costs in 2025.

3. Underneath it all, Germany’s industrial economy has been flat on its back.

There is no demand problem.

The result: gross profit compounded at about 5% instead of the planned 7–10%, EPS at about 6% instead of 14–20%, and the multiple halved.

Most of that 3-part list is temporary and self-inflicted, not structural. The Autodesk working capital drag largely completes by Q3 FY26. The ERP is in. The cost base has been adjusted to a lower-growth setting. And the operating model is built for exactly this: 100 independently managed profit centers, compensation tied to gross profit growing 50% faster than OPEX, 20–25% of wages variable and around 50% for upper management.

The valuation math for this type of company is straightforward.

About 6% dividend yield, roughly 2% buyback yield, around 10% EBIT growth. So a 18% IRR with the multiple frozen exactly where it is. Management is funding the buybacks with debt at 2–4% to retire shares yielding 6–7%. Roughly half the dividend is paid in stock, which makes the buyback the better use of the euro.

This management missed guidance materially in 2024 (3.6% gross profit growth against 8–12% guided) and missed again on gross profit in 2025, hitting EPS only on an adjusted basis. Their 2030 target of €3.80 EPS assumes 8% gross profit growth and 15% EPS growth.

The other risk everyone will ask about is AI, and I think it’s mostly misplaced here. Only about 10% of the R&D headcount are generic developers; the other 90% are engineers, mathematicians, and physicists. Cheaper code doesn’t erode a moat made of 25 years of five-axis kinematics and jurisdiction-specific building codes. hyperMILL is licensed per machine, not per person, so productivity gains don’t compress seats. The risk is real at the low end of the services business: basic training, standard implementations, first-line support. That’s a small slice of a segment (c.10% of EBIT), not the company.

Current status: Interested. What tips this from “cheap German industrial” to something worth owning is the ownership structure. Drotleff is 72, holds 48%, and MUM sits in the Scale segment, where a delisting is straightforward. A take-private has been the consensus expectation for five years without happening; maybe not in the near term, and it would almost certainly happen at a higher multiple than today.

3. Best article of the week

Complexity Investing by Brinton Johns and Brad Slingerland

https://static1.squarespace.com/static/5ca38f3216b6405d11e3d4b4/t/60131df6a8d27d63432ea5ff/1611865607574/Complexity_2021update-v9pt2.pdf

This week: Complexity Investing by Brinton Johns and Brad Slingerland (NZS Capital, 2014, updated 2021). A 46-page paper, free on their site.

The starting point is the same ergodicity problem I covered in our previous article.

Markets are complex adaptive systems, so outcomes follow power laws, not bell curves. Extreme events aren’t rare exceptions; they are the norm. Most economics, and most risk models, assume otherwise.

Their answer to that is a portfolio built on two things:

Resilience: companies optimized to survive and adapt rather than to squeeze out maximum short-term efficiency. Their example is ants: about half the colony sits idle at any time, which looks wasteful until a flash flood hits and the reserves matter.

Optionality: small positions with large asymmetric upside, structured like a VC fund. Most go to zero; a few pay for everything.

This is something I will do more and more in the future. But we did the inverse with our Nick Sleep portfolio, and with great success.

The rest of the framework:

• Cut the middle. Anything that is neither resilient nor optional shouldn’t be in the portfolio. It won’t protect you, and it won’t pay you.

• Size by how many predictions you need. The more specific the future a position requires, the smaller it should be. Big positions belong to companies where you only need current trends to continue. → This relates to how well you can predict the future.

• Duration of growth beats rate of growth. The market chronically undervalues slow, long-duration compounding. Hyper-growth is fragile. This directly relates to what we wrote about the Competitive Advantage Period in the past…

• Moats can be liabilities. In a world of free-flowing information, barriers turn into vulnerabilities. They prefer win-win economics over pricing power.

That’s it for this week

May the markets be with you, always!

Kevin

I pitched RADCOM on 10 July 2026 as an overlooked microcap trading at roughly 2x its cash pile, with a 7% FCF yield, double digit growth and activists pushing to unlock the hidden value.

Five weeks later the growth lever of the thesis has broken.

I will start with the conclusion, then you can read the full analysis below.

My conclusion: sell th…

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Time to organize them so you can find them!

You’ll find all of them below. The articles that start with NEW, are the ones added since our last update.

Articles with a * are paid. If you want access to the full library ⬇️

Subscribe now

Categories: Start Here · Portfolio Performance · Stock Deep Dives · AI Tools for Investors · Investment Ideas · Frameworks · Lessons from Great Investors · Earnings Updates

Start Here

New to 100 Bagger Hunting?

These are the foundations of how I think and invest.

• How to hunt for 100-baggers, an investment check-list — A full checklist for hunting 100-baggers — the original.

• 100-Baggers, where are they born? — Where 100-baggers actually come from — the common traits.

• How to hunt for 100-baggers — Updated 100-bagger hunt with 50 companies from Joel Greenblatt.

• My 100-bagger investing philosophy — The core philosophy behind every pick on this newsletter.

• The 8-step AtmosInvest Investment process — My 8-step investment process, start to finish.

Portfolio Performance (most recent first)

Annual, half-year, quarterly, and monthly updates on how the portfolio is doing.

• NEW Quarterly video update (for pro)* — Q2 2026 quarterly video update for Pro members.

• NEW Portfolio update: May 2026* — May 2026 — positions, sizing and what changed.

• April 2026 portfolio review* — Atomical Capital reveal — and a candid portfolio update.

• Quarterly video Update* — Q4 2025 quarterly video update for subscribers.

• 2025 was crazy — A wild 2025 reviewed, with lessons carried into 2026.

• Up 71%, End of year Portfolio Update (Jan 26)* — +71% for the year — what worked, what didn’t.

• Pro Q3 2025 Update* — Q3 2025 portfolio review for Pro members.

• Monthly Portfolio Update (Dec 25)* — December 2025 — up 18% on the month.

• Monthly Portfolio Update* — Monthly portfolio check-in with position-sizing commentary.

• Quarterly Call Q2 2025* — Q2 2025 quarterly call for Pro members.

• Half Year in: 6 to 25% YTD* — Mid-2025: from +6% to +25% YTD, plus a 20-bagger I missed.

• Q1 2025 Quartely call* — Q1 2025 quarterly call recording.

• 100-bagger hunting - 5 takeaways from 2024 — 5 takeaways from 2024 — mistakes to avoid.

• Half-year review - 11 companies - still investible? — 11 portfolio companies reviewed — still investible?

• 2023 Annual review: Investment mistakes and goals for 2024 — 2023 in review: mistakes made, goals for 2024.

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Stock Deep Dives (most recent first)

Individual company analyses, destination analyses, and new buy pitches.

• NEW 50% market cap in cash. 7% FCF yield.* — Half the market cap in cash, activists pushing for unlock.

• NEW The Pentagon is funding my next 100-bagger candidate — A defense-funded autonomy bet, and why survival beats averages.

• NEW A cheap AI-resilient software play — Israeli telecom software at 8x earnings after cash.

• NEW This $400m microcap is the hidden backbone of the world Cup* — A cyclical hardware vendor becoming a recurring-revenue platform.

• Data infrastructure 5x play* — A data infrastructure play derisking into a potential 5x.

• This software company, impervious to AI, has never been cheaper* — A software company AI can’t kill — never been cheaper.

• A double or triple, hidden from the markets* — A base business with a hidden future-growth business layered on top.

• Important info on the 10x opportunity* — Addendum to the 10x opportunity — engineering data matters.

• A data infrastructure 10x opportunity* — The setup for a potential 10x in data infrastructure.

• 172% upside for this hidden serial acquirer* — CareCloud: 172% upside if the turnaround delivers.

• Industry roll-up at a 20% free cash flow yield (and poised for growth) — Industry roll-up at a 20% FCF yield and still growing.

• Weight watchers, value trap or multibagger? — Weight Watchers: value trap or multibagger? My take.

• If Constellation Software and SAP had an Italian child...* — An Italian serial-acquirer that looks like baby Constellation + SAP.

• Update on one of the best risk-reward setups out there* — Update on one of my highest-conviction risk/reward setups.

• Hidden Earnings power about to be unleashed* — Tiny, quality, and an earnings inflection coming.

• Poised for 2,500% returns like Costco? — Long runway, Costco-style compounder potential.

• A data center liquid cooling play — A data center liquid cooling pick with real tailwinds.

• Towards a multibagger with the twin engines* — Toward a multibagger with twin engines — Deep Dive part 1.

• Is Fiserv an easy double? — Fiserv — is it an easy double from here?

• Hidden serial acquirer up 125% in 6 months* — A hidden serial acquirer up 125% in 6 months.

• A small medtech company growing at 50%/year* — A small medtech growing 50%/year with purpose and profit.

• A double in 5 years with the potential for more* — A microcap with unique growth — double in 5 years, maybe more.

• David vs Goliath, David is winning and growing fast* — David vs Goliath: margins expanding, I’m buying.

• From a 200M to a 1 billion dollar Business: A roll-up in security growing at 43% per year* — Security roll-up growing 43% from $200M toward $1B.

• A fast-growing, under-the-radar (30% ROIC) serial acquirer trading at a P/E of 10* — 30% ROIC serial acquirer at a P/E of 10 — too good to be true?

• 55% revenue growth, 158% expected return. I’m buying.* — 55% revenue growth, 158% expected return — I’m buying.

• A small fintech accelerating earnings (+40% yoy)* — A small fintech with +40% YoY earnings — operating leverage kicking in.

• The n°1 stock pitch from Omaha* — The #1 stock pitch from Omaha — not what you’d expect.

• A mini-Palantir growing fast* — A mini-Palantir growing fast, with a smaller crowd watching.

• A microcap monopoly accelerating growth* — A microcap monopoly accelerating into a faster growth phase.

• A secretly growing net-net at an EV/EBIT of 3 — A net-net at EV/EBIT of 3 — secretly growing.

• Rearm Europe: A defense drone producer that goes kaboom (100% growth)* — A European defense drone producer with 100% growth.

• Fast-growing at 25%/year and a forward EV/EBIT of 3.3* — 25%/year growth at a forward EV/EBIT of 3.3. I’m buying.

• Another Pharma becoming a 70-bagger?* — Another pharma setup with 70-bagger potential.

• This microcap won’t stay micro for long…* — A microcap that won’t stay micro much longer.

• Dino Polska is accelerating! — Dino Polska is accelerating — the setup.

• The hidden monopoly is getting stronger* — Update: the hidden monopoly is getting stronger.

• A hidden monopoly promising multi-bagger returns — A hidden monopoly pivoting into something wonderful.

• One 100-bagger for you! — One potential 100-bagger — skill plus a little luck.

• An under-the-radar 20-bagger — An under-the-radar 20-bagger — what’s the next leg?

• A high gross margin software company trading at a PE of 7* — High gross margin software at a P/E of 7.

• Inmode Updated 30-page Deep Dive — InMode — full 30-page deep dive, updated.

• Epsilon Net - A 10-bagger. Can it repeat that feat? — Epsilon Net — a 10-bagger. Can it repeat the feat?

• Retail adventures in Poland: Is Dino still on track + a short position? — Is Dino still on track? Plus a short position.

• Lovesac - The fastest growing company in the furniture industry- A destination analysis — Lovesac — the fastest growing furniture company.

• Inmode Update in 7 steps: Beautiful devices and nasty lawsuits — InMode in 7 steps: beautiful devices, nasty lawsuits.

• Till death do us part: A multi-bagger in the funeral industry? — Fu Shou Yuan — a multibagger in the funeral industry.

• Kaspi – The future Wechat of Central Asia? – A destination analysis — Kaspi — the future WeChat of Central Asia?

• Tinybuild (TBLD) dropped 96% in price since its IPO. Is this the beginning of a turnaround? — Tinybuild down 96% — is this the turnaround?

• Adyen: A destination analysis, where is it headed after Investor Day? — Adyen — destination analysis post investor day.

• Inmode: destroy the long thesis, 7 risks to consider, selling rules, and Q3 update — InMode — 7 risks, selling rules, and a Q3 update.

• Dino Polska: Where is it headed? A destination analysis — Dino Polska — destination analysis.

• Deep dive into Inmode: Multi-bagger or value trap? — InMode — the original deep dive: multibagger or value trap?

• Maison Solutions Inc. - a road to multi-bagger delights? — Maison Solutions — a road to multibagger delights?

• CD Projekt: Taking the company to the next level? — CD Projekt — taking the company to the next level?

AI Tools for Investors

How I use AI (GPT, Claude, Perplexity, Grok) to accelerate stock research. Love AI for investing?

➡️I have a dedicated newsletter on the topic: Invest with AI.

• NEW My investing tech stack — The five tools behind my daily research workflow.

• NEW This tool has saved me hours on stock research — Five Fiscal.ai features that cut research time.

• Better Call Grok: 5 prompts to analyze a stock in less than a minute — 5 Grok prompts to analyze a stock in under a minute.

• 5 steps to accelerate your stock research with Perplexity AI — 5 steps to accelerate stock research with Perplexity AI.

• Perplexity Finance VS GPT-5—here’s what truly wins — Perplexity Finance vs GPT-5 — which wins for research?

• 3 prompts to find hidden winners — 3 prompts to find hidden winners.

• GPT5.2 for stock analysis is here… — GPT-5.2 for stock analysis — plus a descent into cybersecurity.

• GPT5: Will it supercharge your stock analysis?* — GPT-5 applied to The Trade Desk (TTD).

• Measure pricing power in 1 minute with a simple prompt — A one-minute prompt to measure pricing power.

• A 4-step AI enhanced stock analysis process — A 4-step AI-enhanced stock analysis process.

• 📊5 investing tools and the dangers of bad data quality — 5 investing tools — and the dangers of bad data quality.

• Is AI going to kill your favourite SaaS company? — An AI-resilience checklist — is your favorite SaaS safe?

• Will your portfolio companies die by AI? — Will your portfolio companies die by AI?

Investment Ideas

Screens, lists, and roundups — raw idea flow to dig into.

• NEW The 15 best stock pitches from Omaha* — Ideas swapped in Omaha — part 1 of 3.

• NEW The 15 best stock pitches from Omaha part 3* — Ideas swapped in Omaha — part 3 of 3.

• NEW The 15 best stock pitches from Omaha part 2* — Ideas swapped in Omaha — part 2 of 3.

• NEW Opportunities in the medtech sector* — How CMS reimbursement changes reshaped the medtech opportunity set.

• A death-focused serial acquirer: recession-proof — Death and taxes — a serial acquirer in death care.

• 72 quality companies generated using Buffett’s checklist — 72 quality companies generated with Buffett’s checklist.

• Peter Lynch’s golden rules: 41 Fast Growers on the cheap — 41 fast growers on the cheap — Peter Lynch’s rules applied.

• 50 Wide MOAT Companies, which one reigns supreme? — 50 wide-moat companies — which one reigns supreme?

• Top 4 favorite stocks to own forever — Top 4 favorite stocks to own forever.

• 3 companies inflecting towards high ROIC — 3 companies inflecting toward high ROIC.

• 20 Founder-Led Companies: The one skill you need to look for! — 20 founder-led companies and the one skill that matters.

• 5 watchlist Companies and a Quality Investing Strategy — 5 watchlist companies and a quality investing strategy.

• 1-foot hurdles: 192 companies with an FCF yield > 100% — 192 companies with an FCF yield > 100%.

• TOP 2 “Lynch” fast growers to buy* — The top 2 Lynch-style fast growers to buy now.

• Blooming Ideas: Springtime Investment Collaboration — 7 investors, 7 companies of all sizes — a collaboration.

• 100 Software companies tested for AI resilience — 100 software companies stress-tested for AI resilience.

• 3 Tollway companies - Buffett’s favorite type of business — 3 tollway companies — Buffett’s favorite business model.

• 1 potential multi-bagger and a Zebra — 1 potential multibagger and a turnaround Zebra.

• 🥢Japan, found 3 gems in the rubble? 💎 — Japan — 3 gems found in the rubble.

• 142 serial acquirers to discover* — The database — 142 serial acquirers to dig into.

Frameworks

The reusable checklists, mental models, and tools I use to evaluate companies.

Finding Great Companies

• The alchemy of multibaggers - Which factors can help us find them? — The factors that help find multibaggers — from theory to money.

• Hunting for global stocks that return 1,000% — Hunting globally for stocks that return 1,000%.

• Why unit economics matter when searching for multi-baggers — Why unit economics matter for multibaggers.

• Picking the right wave for better returns — A 7-step checklist for picking the right wave.

• How a Modified Lynch Strategy Could Transform Your Portfolio (While You Do Less Research) — A modified Lynch strategy — more edge, less research.

• 5 steps to pick a software company — 5 steps to pick a software company.

• A 3-step ranking system to beat the market — A 3-step ranking system to beat the market.

• 10 key questions to discover the most profitable yet overlooked companies — 10 questions to uncover overlooked cash-rich companies.

• A ranking system to beat the market — A market-beating ranking system: S for Sales Strength.

• Fantastic MOATS and how to find them — Fantastic MOATs — and how to find them.

Valuation & Multiples

• To boldly go, beyond ROIC: what to do? — Beyond ROIC — what to do when it isn’t enough.

• Stop using the P/E multiple — Stop using the P/E — here’s the one multiple to rule them all.

• Are discounted cash flow models useless? — Are DCF models useless? The competitive advantage period.

• Unlocking 633 Billion USD - The cash conversion cycle and why you should care as an investor — Cash conversion cycle — why it matters, with $633B at stake.

• 6 things I learned about ROIC and how it can help identify a 100-bagger (applied to Inmode Ltd) — 6 things about ROIC — applied to InMode.

• 11 takeaways by applying Musk’s ‘first principles thinking’ to the P/E-ratio — 11 takeaways applying Musk’s first principles to P/E.

• The 6 dangers of Return On Equity (example: Dino Polska) — The 6 dangers of ROE — Dino Polska example.

• The valuation of a fine dining restaurant - Hof Van Cleve — Valuing a fine dining restaurant — Hof Van Cleve case.

Management & Capital Allocation

• A Definitive Spinoff Checklist towards 1500% IRR — A definitive spinoff checklist — Marriott case study.

• Show me the incentives, and I’ll show you the outcome, a checklist to evaluate management — A checklist to evaluate management incentives.

• A 10-step checklist you can use to evaluate management capital allocation to make better investment decisions — A 10-step checklist to evaluate management’s capital allocation.

Buying, Selling & Position Sizing

• Position sizing for massive returns — Position sizing — the most underused lever for returns.

• 5 steps to avoid stupid mistakes before buying in the markets — 5 steps to avoid stupid mistakes before you buy.

• A stock investor’s n°1 secret weapon for excess returns — An investor’s #1 secret weapon for excess returns.

• When to sell a position and boost returns? — When to sell a position — and how it boosts returns.

• A strategy to increase your holding periods and get better returns: The Reactor Portfolio — The Reactor Portfolio — a strategy to increase holding periods.

Mindset & Mistakes

• NEW How to find your investing edge for outsized returns — Bill Miller’s three edges, and how to build yours.

• I missed a 10-bagger in 6 months (IRR = 9900%) — I missed a 10-bagger in 6 months — make sure you don’t.

• 5 easy steps to multibagger returns — 5 easy steps to multibagger returns — wisdom from India.

• The one mistake 99% of investors make — The one mistake 99% of investors make — I made it too.

• 10 lessons from Darwin for 20% yearly returns — 10 lessons from Darwin for 20%/year returns.

• From SpaceX to Einstein and how to gain an edge in investing — From SpaceX to Einstein — how to think for yourself.

• Quality traps and how to avoid them to protect returns — Quality traps — and how to avoid them.

• 7 things to AVOID in the stock market (in 7 minutes) — 7 things to avoid in the stock market — in 7 minutes.

• 1 mistake I made and 7 easy tactics to make better decisions in investing — 1 mistake I made and 7 tactics for better decisions.

• 5 ways to tame our stone age brain — 5 ways to tame our stone-age brain for better returns.

Lessons from Great Investors

Takeaways from the masters: Buffett, Lynch, Greenblatt, Karman, Kantesaria and more.

• NEW 5 (life) lessons from Omaha and the Berkshire Hathaway AGM — What the Berkshire AGM taught me beyond investing.

• A simple strategy that beats the market — A simple strategy that beats the market — Polen Capital.

• 5 takeaways from Lynch’s 29% CAGR to find multibaggers — 5 takeaways from Lynch’s 29% CAGR — life cycle investing.

• How to break the rules to find 100 Baggers — Break the rules to find 100-baggers — from one of the best books ever.

• 6 lessons from a 1000-bagger — 6 lessons from a 1,000-bagger. Yes, a thousand.

• Growth, value, or quality, is all useless. The road to a 29% CAGR — Growth, value or quality — useless. The brilliance of Peter Lynch.

• Stop Index Investing! — Stop index investing — 5 lessons from Seth Karman.

• Gates & Buffett: How to invest, when you have little time — Gates and Buffett — Return on Invested Time.

• 5 lessons on “next level quality investing” towards a 15% CAGR — 5 lessons on next-level quality investing — Dev Kantesaria.

• Divesting, Buffett’s most powerful capital allocation skill — Divesting — Buffett’s most powerful capital allocation skill.

• Finding multi-baggers: 7 lessons from breaking down Paul Andreola’s investment strategy — 7 lessons from Paul Andreola’s multibagger strategy.

• 9 lessons for investors: How farmers yield higher returns — 9 lessons for investors — how farmers yield higher returns.

• 9 takeaways from the deals of Warren Buffett before his retirement at the age of 38. — 9 takeaways from young Buffett’s deals.

Earnings Updates

Quarterly and half-year check-ins on portfolio holdings.

• NEW 26x revenue in the next 5 to 7 years* — Three portfolio CEOs from Microcap Las Vegas, reviewed.

• NEW Power scarcity creates massive tailwinds — NUAI business update — power scarcity as the tailwind.

• NEW Pharmx Update: Interview with the CEO* — PharmX CEO interview — what it adds to the thesis.

• SAAS Software at a PE of 7 — H1 2025 update — SaaS at a P/E of 7.

• Our second-best bet, up 50% this year* — Our #2 bet — Q2 2025 update, up 50% YTD.

• A market-leading security roll-up aiming for a 5x in revenue* — IMB update — aiming for a 5x in revenue.

• From heaven to hell: $ADYEY and $INMD — Adyen and InMode — from heaven to hell, welcome to purgatory.

• 3Y Sales CAGR of 48%: Code Cracked* — Q2 2025 — the small fast-grower with 48% 3Y sales CAGR.

• Pharmx and sigma sign strategic partnership* — PharmX x Sigma partnership — what it means for PHX holders.

• Adyen H2 earnings ($ADYEN/$ADYEY) — Adyen H2 earnings — expanding margins.

• A banger quarter for CareCloud* — CareCloud Q3 2025 — a banger of a quarter.

• The security roll-up, is it a buy?* — IMB Q1 2026 — the security roll-up, is it a buy?

• Pharmx earnings update - Thesis aligment review* — PharmX H1 FY26 — earnings analysis.

• Adyen update in 3 minutes + Do you rank your stocks? — Adyen update in 3 minutes — buy, hold or sell?

• IMB update - thesis alignement review* — IMB H1 FY26 — thesis alignment review.

• A solid quarter, time to buy more of this high ROIC serial acquirer?* — A high-ROIC serial acquirer — solid quarter, buy more?

• Robot Payment - Addendum to quarterly update* — Robot Payment — addendum with IR feedback.

• A prime example of operational leverage* — Robot Payment Q3 2025 — operational leverage in action.

May the markets be with you, always!

Kevin

The Center for Medicare & Medicaid Services or CMS is a powerful agency.

It dictates the reimbursement rates and rules for medical procedures, equipment, and supplies.

When CMS changes how much it is willing to pay for a treatment or a product, it directly impacts the revenues and profit margins of the companies supplying the healthcare industry.

We saw this when we covered Semler Scientific in the past.

So when you buy a medtech company that is selling their product to hospitals and physicians, you have to take CMS into account.

So the revised rules from CMS that were published over the last 2 weeks, dropped a bomb on part of the health care market.

For some, that means a crisis, but as an optimist, you always need to look for opportunities.

So we are buying.

Let me explain through first principles and unit economics.

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Right now, everything that is not AI or datacenter-related is likely to be underperforming. You might try to hop on that train, but you soon realize that everything has gone up fourfold in a matter of months, and everything is already priced in.

What if I were to tell you that there is still a company trading at 2x cash on the balance sheet while growing revenues in the double digits? You would think I would pitch you an unprofitable, capital-intensive, infrastructure-built-out company.

On the contrary, I’m talking about a microcap software company with the following characteristics:

• 3y revenue CAGR 13%

• 3y EPS CAGR 46%

• Gross margins >75%

• Net margins 17%

• PEG = 0.8

The cherry on top is that activist investors, including the founders, are pushing to realize the value and have successfully changed the board’s composition.

This company came on our radar when we used our AI resilience framework, which we laid out in this article.

This tool gives a score for how resilient it is against AI disruption.

The score: 74% or resilient.

That’s all we needed to jump into this one.

Let’s dive in

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Yesterday, we did our video update.

It ran over 1 hour!

You’ll find all the details on the current state of affairs for all our positions below.

You will be able to:

• Rewatch the entire video (if it asks for the passcode: 2?S1GzSB)

• Or if you use that link, you can also just read the transcript!

• Download the presentation itself:

GET SLIDEDECK

If you have any questi…

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Let’s go through the markets and look at a company that has all the signs of a 100-bagger.

1. Bubble Meter

In our previous edition, we discussed the rising margin debt.

And it keeps on trending upward.

Now I do not want to rehash the entire analysis from last time. We talked about the difference between the SP490 and the SP500, and what all these metrics we track actually mean.

Predicting when a correction or crash happens is impossible. But we should always be aware of what the general market is doing.

2. Stu(o)ck in the funnel

Merlin (MRLN) - the setup in short

• What: Boston aerospace-autonomy company builds an aircraft-agnostic autopilot for military + civilian planes

• Valuation: $470M market cap on $7.7M trailing revenue (60x sales)

• Balance sheet: $183M cash, zero debt; 6–8 quarters of runway

• The contract: $105M US Special Operations Command contract to automate the C-130J; GE Aerospace partnership

• The bet: First to clear FAA certification for machine learning-in-the-cockpit writes the template everyone copies

• The problem: Better-funded rival (Reliable Robotics) may be ahead on the regulator-agreed path

• Outcome: Binary - 0 if it loses the race, 100-bagger if it establishes a monopoly

• My stance: On the fence, watching from the sidelines

Description: Merlin (Ticker: MRLN) is a Boston-based aerospace autonomy company. It builds Merlin Pilot, an aircraft-agnostic system designed to fly any plane, military or civilian, from takeoff to touchdown. First alongside a pilot, eventually without one. The architecture is a deterministic, rule-based flight core running in parallel with a machine-learning layer. A pure black-box AI cannot be certified for flight, so the machine-learning plans and the deterministic core guarantee the behavior. Merlin went public via SPAC in March 2026. Their anchor contract is a $105M contract with US Special Operations Command to automate the C-130J, plus a partnership with GE Aerospace targeting single-pilot operations. Trailing revenue is about $7.7M. Q1 showed a $90M net loss, mostly non-cash SPAC accounting. Cash is $183M, zero debt.

Type: Pre-revenue defense-tech microcap

Why it’s interesting: A certification race where the customer pays for the R&D, with a binary outcome.

The rundown: At roughly a $470M market cap on under $8M of revenue, you’re paying 60x sales for a company that loses money on purpose. The entire value is future optionality.

Here’s the bet. The flying part of autonomous flight is largely solved. Autopilots have existed for decades. The unsolved problem is certification: the FAA framework requires verifying every output of a flight-critical system, and a machine-learning system has effectively infinite outputs. No accepted compliance method for ML in the cockpit exists yet. Whoever first gets a new autonomy function through FAA certification writes the template that everyone else must follow. That approval, not any funding round, is where the first signs of an actual moat appear.

Merlin’s edge is that defense money pays for the evidence. USSOCOM funds the development; military airworthiness is a lower bar than civil certification; and every assurance artifact generated on the C-130J is partly reusable for the civil case later. Someone else foots the bill. The program passed its Critical Design Review in June, and the stock jumped 32% premarket. For a pre-revenue name, milestones are the earnings reports.

What Merlin does not have is a clear technical lead. The two-layer deterministic-plus-ML architecture is smart, but it’s table stakes. Everyone in the field converged on it. Reliable Robotics claims to have the only FAA-approved certification plan for full automation, to have flown fully uncrewed, and to have raised roughly $294M, compared with Merlin’s $134M in lifetime funding. On the regulator-agreed path, Merlin is behind.

Now the cash position. $183M in the bank. Management guides to $62M in burn for 2026, but if we take the Q1 results, it annualizes closer to $95M. Let’s call it six to eight quarters of runway. The bull case is that defense revenue scales before the market tires of funding the burn. The bear case is that certification takes more time, and they will need to raise more cash.

This is not a compounder, and it is not a value stock. It’s a call option on a regulatory event, partially funded by the Pentagon, with two years on the clock and a better-funded competitor possibly ahead in the queue. The outcome is binary. It could go to 0 because it loses the race. And it could become a 100-bagger if it were to establish a monopoly in autonomous flight.

Current status: On the fence. One thing I did not mention is that insiders are aligned.

Normally I would show you a per-share metrics chart from fiscal.ai, but that doesn’t make a lot of sense here, so here is the insider ownership table:

And that the way the SPAC was structured was unusual for a typical SPAC (meaning some people did not take profits; they went full equity, all in on this company). So I’m watching from the sidelines for the moment. If Merlin has a regulator-agreed compliance path, this setup becomes more bullish (or at least they are actively developing it with the regulator).

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3. Best article of the week

What I loved reading this week was an article written by called:

Polymath Investor

Your Odds Are Not the Average

The average outcome and the typical outcome are not the same thing. In most areas of life you can ignore that distinction. In investing, it can be the difference between wealth and ruin…

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7 months ago · 93 likes · 6 comments · Polymath Investor

It explores ergodicity. (There’s a whole book about this topic written by Luca Dellanna)

Ergo… what?

Yeah, I had the same reaction when I first heard about it. This does not comply with my Feynman approach to explaining things.

The basic definition is as follows:

Ergodicity is whether your path through time averages out to the same thing as a snapshot of the whole crowd.

• If yes, ergodic.

• If not, the crowd’s average is not what you should expect for yourself

A typical example is the following experiment: a coin-flip game.

• Heads, you win 50%

• Tails, you lose 40%

So if you math this out, 1.5 on every win, 0.6 on every loss, over time, you’ll get 1.05 or 5% on every flip.

But in reality, that’s not what happens.

You don’t get “the average.” You get a sequence. You flip, and flip, and flip, and your money doesn’t add; it multiplies, because each flip acts on whatever you have left. Say you flip heads, then tails. 1.5 times 0.6 is 0.9. You’re down to 90 percent. Do it again: another heads-and-tails, 0.9 times 0.9. Every pair of flips quietly eats a tenth of you. Keep going, and you’ll go broke.

So if 10,000 people at a concert do the coin flip test, the entire crowd will be up 5% per flip. But not everyone in the crowd will be up. Some will be broke.

What can we learn from this:

May the markets be with you, always!

Kevin

Before diving into the meat of this article, 3 things are going on behind the screen:

• Finishing a write-up on a new company (shall be published soon)

• Finalizing my analysis of the best pitches from Omaha

• Hunting for interesting opportunities that were presented during the Microcap Las Vegas conference last week

I know it’s hot and maybe your scheduled holidays are coming up, but good things are coming.

Since 3 CEOs of our holdings were also presenting in Las Vegas, I think it’s time to review all these positions and give you an updated view of each.

Let’s start with the CEO, who announced a possible 26x increase in revenue over the next 5 to 7 years…

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Let’s go through the markets and look at an interesting software company.

1. Bubble Meter

Over the past couple of months, I’ve been saying, “The market looks hot.”

And what happens?

The market just keeps ripping. 😉

You can see it in the table above. Let’s dive a little deeper…

The Shiller P/E ratio

Note: A gentleman asked me last week, when I was lecturing at a conference on “How to use Claude as a junior analyst”, to let Claude draw this chart. It succeeded, but there were some errors.

So yeah, we’re nearing the peak of the dot-com bubble. (The Shiller P/E divides the S&P 500 index by the average-inflation adjusted earnings over the past 10 years.)

But then the natural first question becomes: What do earnings look like?

• EPS of the S&P500 right before the dot-com crash: 52

• EPS of the S&P500 today: 234

That means that, when looking at the overall S&P 500, we’re not in a 2000 bubble at this time.

Then the question becomes: how is the EPS distributed across the 500 largest companies in the US?

36% of that net income comes from the TOP 10 companies:

So we have a shller P/E that looks high, and a trailing P/E that is lower than in 2000.

It all comes back to margin.

The net margin has increased for the entire S&P 500 over the years. If it stays high, then the Shiller P/E overstates the risk.

But the more worrisome is the margin debt, which is now the second-highest since 1997.

What this means is that investors have borrowed near-record amounts against the stocks they already own in order to buy even more stock, and that pile of borrowed money is the fuel that turns an ordinary market dip into a crash.

So we cannot use it to predict WHEN a crash will happen. The only thing we can say is that if something triggers it, the more margin debt in the system, the more fuel it adds to the crash (downwards).

So what do we do?

We don’t really change our strategy. Hunt for treasures in the microcap space. The only thing we might lean towards is placing more weight on current free cash flows and assessing whether the company’s business model is AI-resilient in the near future.

(You can check what we did with 100 software companies here.)

Remember the master:

More money is lost waiting for corrections than in them

-Peter Lynch

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2. Stu(o)ck in the funnel: RADCOM (RDCM)

Description: RADCOM (Ticker: RDCM) is an Israeli telecom software company. It sells service assurance and network observability software to telecom operators, basically the tooling that lets a carrier see what’s happening inside its network in real time. The flagship is RADCOM ACE, an AI-driven analytics platform, and in February, it launched Neura, an AI agent suite for autonomous networks. In 2025, it generated a record $71.5M in revenue, was profitable with a net margin of roughly 17%, and had $108M in cash and no debt. Customers are Tier-1 operators (historically Rakuten Symphony, 1GLOBAL, and AT&T).

Type: Microcap Software company that looks cheap

Why it’s interesting: Profitable company with activists trying to unlock the value from the balance sheet.

The rundown: This isn’t a turnaround, and it is not a sinking ship. It’s a quiet compounder the market has lost interest in. It grows double digits, runs 20% margins, and generates cash. The headline trailing P/E is 17, which looks unremarkable. But half the market cap is cash. Market cap is $210M, cash is $108M, and there is no debt, so the enterprise value is only $103M. Strip the cash, and you’re paying roughly 8x earnings for a business growing 10%. PEG sits at 0.7. For a profitable telecom-software grower, that’s cheap.

Quick financials:

Per share chart from fiscal.ai

GET 15% OFF FISCAL

Per share revenue and earnings growth, with a high forward earnings yield and a lot of cash on the balance sheet.

Not a 100-bagger, but you might make some money from it.

Current Status: Still doing my due diligence, might turn into a full analysis in the coming weeks.

3. Best article of the week

Sparkline publishes some great research. And a month ago, they published a piece on AI disruption.

It’s not just about software disruption; Sparkline goes deep into the history of disruption in general.

And based on their research, we have reached a new peak, with 72% of US companies now actively exposed to disruption:

They looked into the past and wondered, why did a company like Walmart survive disruption from e-commerce?

The answer is their intangible moat.

Sparkline defines the intangible value factor as including intellectual property, brand, human capital, and network effects.

And this can be applied to software specifically:

These moats are widest in enterprise software, where products often serve as mission-critical systems of record, integrate deeply into customer workflows, and face onerous security and compliance requirements. Even before AI coding, customers had the option to build software in-house or switch to cheaper startups with more modern infrastructure – yet most did not. Rather than reinvent the wheel, they chose to outsource to trusted partners.

They then placed software stocks that had been beaten down by more than 30% this year into a quadrant.

The top-right quadrant means: Early AI adopters with a strong intangible moat.

If you look at the number of bubbles, most of the companies are on the bottom-left side.

Bottom line: Applying this intangible value factor reveals a small selection of software stocks that might outperform over the next few years thanks to their moats and early adoption of AI.

I recommend reading the full article here.

Next week, we’ll look at a full analysis for Microcap Las Vegas.

Over 100 companies presented, so let’s see if we can find the best ones.

May the markets be with you, always!

Kevin

If you’ve never heard about the company before, please read our deep dive first.

Last week, we sat down with Tom Culver, the CEO of Pharmx.

As usual, we prepared more questions than we had time to ask.

Tom gave a lot of additional color to what is happening inside the company, and our understanding of the business has grown once more.

And some of the information was revealing:

This is why we’ll only be able to grow our top line by 20 to 30% per year instead of 50%.

We try to get in touch with the management of all our holdings to delve deeper into each business case. All premium members get direct access to this kind of deeper due diligence.

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Let’s go through the full Q&A.

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I used to be a soccer fan, a long time ago, when my hair was less grey.

Now, I only look at some matches when a World Cup is on.

Which is today, right on the day of the SpaceX IPO.

Let’s take a look at a company that profits from these kinds of events, and who recently dropped 20% in price.

In this article, we are going to look at a company that plays a key and lucrative role in the industry that brings live sports events into the homes of billions of fans.

This company created its own ecosystem and built a trusted brand for more than a decade, with gross margins over 70% and net margins over 15% while reaccelerating revenue.

Whereas most businesses in sports are barely profitable, this company found its niche and is looking to transform itself to capture most of the biggest infrastructure upgrade cycles in decades.

Company Snapshot

• Company: EVS Broadcast Equipment

• Ticker: EVS

• Exchange: NYSE EURONEXT

• Industry: Communications Equipment

• Market Cap: $400M

• Founding year: 1994

• Gross Margins: 70%

• ROIC: 20%

• Guidance for 2026: $230M (11% growth)

Executive Summary: The architecture of live production

The value chain

EVS Broadcast Equipment designs and sells the hardware and software layers that facilitate the capture, management, and engagement of live video content. At its core, EVS solves the problem of instantaneous storytelling. It allows operators to capture dozens of high-resolution video feeds, synchronize them, and create a broadcast-ready slow-motion highlight or tactical review within seconds of the event. EVS is essentially the Adobe of live production, providing the essential, high-end toolkit that professionals rely on to turn raw footage into a finished masterpiece in seconds.

Let’s use the Champions League quarter-final between Bayern Munich and Real Madrid as a real-world example.

Rights owners: UEFA controls the rights to the Champions League and sells them to Broadcasters for billions. The rights are being auctioned ahead of every season.

Broadcasters and streamers: Sky, Amazon, and DAZN pay enormous sums for those rights and monetize via subscriptions and advertising. They then, most of the time, outsource production to…

OB van operators: Companies like NEP Group and Gravity Media own the trucks, hire the crews, and run the entire live production. They bill broadcasters per event or on long-term contracts. They are operationally complex with lower margins.

Broadcast Equipment: Unlike many technology vendors in the broadcast sector that occupy peripheral or replaceable segments of the value chain, EVS provides the fundamental recording, replay, and media-processing architecture for the world’s biggest live events.

Broadcasters are volatile, OB operators are margin-constrained, and EVS is the high-margin, mission-critical, locked-in supplier that wins regardless of who holds the rights.

As customers, we pay for a subscription and get to see these games live. We get to see dozens of camera angles on the pitch, which are the input data that EVS captures. Replay operators use EVS to edit the game while it’s still happening. Adding slow motion and choosing the best angles to show you exactly what happened. Once the game is over, TV stations around the world can instantly access the footage and show it to fans on their phones or in news broadcasts. It also powers the VAR Assistant.

Business Model

EVS segments its revenue into three categories:

• Live Audience Business (LAB): These are customers who have built their own infrastructure to manage their content, such as Sky, ESPN, or stadiums like Real Madrid’s Santiago Bernabéu. EVS can score higher margins in this segment through its recently launched SaaS model and its ecosystem bundle.

• Live Service Providers: These are clients like NEP Group and Gravity Media that own a fleet of vans and are contracted to broadcast events. They are the largest buyers of EVS hardware, often purchasing dozens of servers to equip a single large fleet of trucks at lower margins than LAB customers.

• Big-event rental: These are large contracts for events like the Olympics and the World Cup, where top-quality equipment is needed to ensure reliable broadcasting.

The growth story here is LAB customers who are increasingly broadcasting their own content.

Competitive Advantages

EVS positioned itself as the default operating system of live sports production. This positioning comes from deep product entrenchment, operator lock-in, and a proven track record at the world’s highest-stakes live events. EVS built a sticky ecosystem around its own hardware and software that a software-only player can’t match. As mentioned before, their products are on the same level as Adobe’s professional products, but in the broadcasting space.

They developed operator familiarity over decades. There are over 3,000 operators globally who have spent 10-20 years mastering the EVS remote. Switching from EVS to a competitor would require retraining the entire freelance crew, introducing unacceptable operational risk for the broadcaster. The maintenance and support renewal rate is exceptionally high, estimated at over 95% for Tier-1 broadcasters. This gives EVS pricing power, as it has an intangible asset that justifies premium pricing due to its high reliability.

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The SaaS Transition

Historically, software was a free or low-cost add-on to sell servers or hardware in general. Now the company is pivoting its value proposition from high upfront Capex with long-milestone payments to multi-year subscriptions with software at its center. This recurring revenue mode is expected to exceed 50% of the mix by 2026–2027. This is important for them because it means that they can decouple their base business from its cyclicality.

Strategic Roadmap: PLAYForward 2030

The SaaS Transition is also underscored by management’s stated “BHAG” (Big Hairy Audacious Goal): to be the #1 solution provider in the live video industry by 2030, with a revenue target of $350mn. To achieve this, they plan on executing their strategy via three pillars:

• From product provider to ecosystem:

  • from pure hardware sales (CAPEX) to software and SaaS models (OPEX)

  • from OB van operators to broadcast centers

  • from sports-only to entertainment, news, and digital

  • from a replay specialist to a live production ecosystem in multi-tier markets

• Strategic M&A Track Record:

  They recently started ramping up their M&A activity to accelerate their technology through:

  • Axon (2020) is now part of the MediaInfra division with its control (Cerebrum) and IP-gateway (Neuron) technology.

  • MOG Technologies (2024) was acquired to add to the MediaCeption portfolio, with its cloud-based transcoding and ingest capabilities.

  • Telemetrics & XD Motion (2025) is now the T-Motion robotics division, used to expand the ecosystem to include automated camera capture.

  Those businesses are expected to contribute around €30 million in revenue, accounting for 14% of total revenue in 2025.

• Geographic Strategy “Double Down North America”:

  North America is EVS’s fastest-growing region, contributing 37,5% of revenue in 2025. North America is the largest and most competitive market, driven by massive sports media rights deals (NFL, NBA, MLB) and a concentration of Big Tech (Amazon, Apple) entering the live arena.

Management

The founder is still on board as the CTO of the hardware department (the largest insider owner,>6%). The CEO is an industry veteran who joined in 2019. He pushed the PLAYForward strategy and the aggressive move into IP and North America.

The live broadcast equipment industry

The broadcast equipment industry is currently passing through its most significant structural pivot since the transition from analog to digital. Historically defined by proprietary hardware and quadrennial sporting cycles, the sector is evolving into a software-defined, IP-native, and AI-augmented ecosystem.

Addressable Market

EVS’s own estimated TAM is the best approximation for what the company could address since it does not compete across the entire live broadcast market. It targets tier-1 sports broadcasters and OB van operators for whom downtime is simply not an option. From where we are now, the company projects the TAM will double by 2030, which is ambitious but justified by their product and market expansion.

Demand-side

It is important to note that EVS’s demand has historically followed a power-law distribution of spend. The top 10 global broadcasters and sports federations (e.g., NBCUniversal, BBC, Sky, FIFA) account for more than half of enterprise spend on high-end production kits. This gave them bargaining power over EVS, but it also meant that they chose EVS because of an existing trust relationship.

Streaming Platforms Entering Live Production

In recent years, however, the entry of Amazon, Netflix, Apple, and DAZN into live sports rights has brought substantial fresh capital into the market. They spent a combined $12.5 billion on sports rights in 2025, representing 20% of the global total sports rights spend of $64 billion. These new entrants need to either build, rent, or partner to ensure a good broadcast experience for their customers. This structurally expands the addressable customer base for EVS and OB operators alike.

The best part is that EVS doesn’t care whether it’s Sky, Amazon, or DAZN buying the rights. As long as high-end live production is happening, EVS gets paid. And since it is the de facto default operating system of live sports production, all professionals needed will demand EVS’s products.

Supply-side

The overall market share for broadcast technology is fairly evenly distributed, with no player exceeding 12%, according to EVS’s own management. Historically, the sector struggled with declining revenues due to the decline of TV. This led to consolidation pressured by PE and the expectation of synergies.

Established Players

• EVS stayed independent and kept a tight focus on live production, which is their bread and butter. In recent times, however, they have begun to strengthen their share in other pillars, such as Infrastructure and Media Asset Management, through M&A. This is strategically important, as current trends demand an overall package with greater control across the value chain.

• Grass Valley was taken private by Black Dragon Capital in 2021. Grass Valley has emerged as EVS’s most direct competitor, with comprehensive end-to-end solutions and leadership in cloud platforms. The company competes aggressively by leveraging bundled pricing strategies in major sports contracts.

• Avid Technology was taken private by the PE firm STG in November 2023 in an all-cash deal valued at roughly $1.4 billion. It overlaps with EVS in the newsroom and Media Asset Management adjacency. Avid’s competitive pressure on EVS comes from owning the creative and editorial layer of the value chain that EVS is increasingly trying to reach through MediaCeption.

• Evertz Technologies is listed on the Toronto Stock Exchange (TSX: ET). Its centre of gravity is the broadcast infrastructure. Therefore, it competes with EVS primarily in the MediaInfra pillar rather than in live replay, making it an adjacent infrastructure specialist more than a direct threat to EVS’s core.

• Sony’s broadcast business sits inside the professional solutions arm of Sony Group Corporation, the publicly traded Japanese conglomerate. Sony R&D depth and balance-sheet scale can’t be matched by any pure-play vendor. Sony dominates cameras, sensors and image quality, but it has been deliberately building toward an end-to-end position that competes with EVS’s own ambitions to own more of the chain. The result is a “frenemy” dynamic with EVS because their systems are routinely deployed alongside Sony cameras.

A risk worth monitoring for me is the entry of PE capital trying to consolidate the market to increase pricing power, like in the case of Grass Valley. For EVS, this could result in margin pressure fueled by seemingly infinite money that distorts competition, as seen in the case of Chelsea Football Club and professional football. On the other hand, it could also result in a takeover bid for EVS with a premium between 25% and 40% over today’s price (Avid at 32% over the share price at that time).

Risks

EVS operates in a growing market driven by streaming, but is transforming due to the cloud. More live sports events and more streaming buyers expand the volume of production needed, but cloud-native production workflows threaten to gradually commoditize the hardware layer that EVS has historically monetized at 70%+ gross margins. They redraw the competitive map and hand EVS both its biggest long-term risk and its clearest strategic imperative. This transformation can be categorized into two simultaneous shifts.

The architectural shift: from on-premise to cloud-native production

The industry is moving past the binary choice between on-premises and cloud, with compute, switching, and playout occurringhappen in the cloud rather than in a physical OB truck. Grass Valley’s AMPP platform, AWS Elemental MediaLive and Adobe’s Frame.io integrations are the clearest articulations of this vision. For a vendor whose heritage is purpose-built hardware, this is the most serious threat as it questions not the product, but the premise.

The business-model shift: CAPEX → OPEX

Broadcasters and OB operators are under structural pressure to move away from large upfront capital expenditures, such as buying servers outright, toward operating-expense models. The shift is double-edged. Done well, it converts lumpy, event-driven hardware sales into predictable recurring revenue. Done poorly, it cannibalizes the high-margin hardware business before the software revenue stream is mature enough to replace it. The classic SaaS J-curve.

EVS’s answer: Balanced Computing

EVS’s response is a deliberate bet against the binary. Rather than choosing on-prem or cloud, it is positioning itself around a hybrid model in which high-performance on-prem hardware handles what genuinely requires it, while cloud modules handle everything else in a more elastic way.

Conclusion

The company’s bet is that ultra-low-latency live replay is the last function to move to the cloud, that the 2-second requirement for a Super Bowl replay is a hard physical constraint that keeps dedicated on-site hardware relevant for longer than skeptics assume. So far, the market has validated that bet.

Whether it holds through 2030 is the kicker question!

The opportunity - why the shift to IP matters for EVS

One of the most underappreciated drivers behind EVS’s growth is the industry’s migration from SDI (Serial Digital Interface) to IP (Internet Protocol) infrastructure. Think of SDI as dedicated cables each carrying a single video signal point-to-point, and IP as a flexible, software-defined network. For decades, live production ran on SDI.

Crucially, this is a structural transition over time, making it a long, staggered investment cycle for equipment vendors.

For EVS, that cycle reshapes what it can sell. In the SDI world, EVS sold replay servers, which it pioneered and still dominates. In an IP world, feeds, metadata, replay, routing, and control all run on a single network, and that complexity is an addressable market: EVS can now sell the control systems, orchestration software, and infrastructure layer that tie the whole production together. The prize is the shift from selling one box to capturing a far larger share of each customer’s infrastructure budget.

But IP is not pure upside. The same shift onto standard hardware and networks that expands EVS’s market also lowers the barrier that protected purpose-built broadcast hardware, letting software and cloud players into the same workflows.

For an investor, this is ultimately a revenue-mix story where EVS is trying to turn a cyclical, hardware-driven business into one with more software and recurring revenue. If it works, EVS re-rates from a hardware vendor toward a stickier platform business; if the hardware base erodes faster than software can scale, it becomes the J-curve risk.

The Financials - why EVS stood still for a decade

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In EVS’s 2023 annual report, the company acknowledged a plateau in revenues since 2012. The cause was structural. Even though EVS dominated live replay servers, the market matured as the company only replaced outdated equipment. And for years, EVS simply failed to build a second pillar because its replay franchise was so dominant that it became a comfortable trap. To counter this inertia, the new CEO announced the PlayForward Strategy mentioned earlier.

On the margin side, it looks similar, as the company’s margins are in a slightly downward trend over a 10-year perspective. This is partly due to North American expansion, which increased SG&A costs.

The ROIC and ROE are moving on a similar plateau between 17-25%, which is similar to Evertz.

How much does EVS invest in the future?

EVS is, at its core, an engineering company where R&D is the real investment in the future and almost as big as SG&A. The business itself is high-margin, asset-light, and cash-generative, with excellent existing economics but historically mediocre incremental returns. This should change as EVS revenue becomes more predictable, as evidenced by order backlog visibility. Entering 2026, EVS has a record order book of €182.2 million. This provides coverage for nearly 80% of the 2026 revenue guidance (€220-240 million).

EVS pays a €1.10 dividend at a ~35% earnings payout ratio, while still accumulating net cash. This tells me that EVS has a hard time finding enough high-return projects to absorb them. That is the classic signature of a high-quality but low-reinvestment-runway business.

The counter-signal is management’s public ambition of reaching €350m in annual revenue by 2030. If they mean it, the reinvestment rate should rise from here, and that is the number to watch, not the current margin.

So, although the past looks bad and the future looks promising, is this company a BUY or not?

In the end, it’s all about valuation, as a great company can still be a bad investment.

So what is EVS worth?

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