Subscribe now

Jet2 (JET2)

More background: Deep Dive

Jet2 reported strong results on July 8 and launched another £250mm buyback, equal to about 10% of the market cap before the stock rose after results.

Just as importantly, rival easyJet accepted an acquisition offer from Apollo that demonstrates how cheap Jet2 is. Apollo’s offer is about 80% above easyJet’s undisturbed price and values it on 11x P/E or 10x EV/EBIT when treating leases and deferred revenues (customer deposits) as debt.

Jet2 trades on 7.2x and 6.6x respectively, for a ~35% discount to easyJet despite in my view having a better business (mostly package holidays rather than flight-only), better competitive position, growth rates, balance sheet, and management team.

EPS for fiscal 2026 was £2.1, despite being impacted by the Middle East crisis in March. Earnings this year will be heavily reduced by the crisis, but over three years I could see underlying EPS growing to around £3, driven by high single-digit revenue growth and buybacks per annum. That would put the stock on 5x P/E as things stand, even after the recent runup in the stock.

A takeover of easyJet by private equity may also make it less of a competitor to Jet2. easyJet has been the disruptive competitor over the last 12-18 months, growing its Holidays business and offering cheap fares on flights at some of Jet2’s northern bases. A private equity model more focused on immediate profitability and doing a sale & leaseback of planes would be helpful.

Much of Jet2’s full-year results (ending March 2026) had already been announced at the trading update in April, and the key points were:

• Revenues = £7,482mm, +4% y/y

  • Package = £5,963mm, +3%

  • Flight-only & other = £1,519mm, +8.5%

• EBIT = £440mm, -2%

  • Includes £11mm of Gatwick startup costs and £50mm of increased employment taxes and sustainable fuel premiums.

• PBT = £551mm, -7%

• EPS = 211p, -1%

• Outlook:

  • Summer ‘26 capacity +7.7% (unchanged), bookings +7.1% (+6.2% at end of April), load factor +1.2ppts (“in line” at April)

  • “Reduced geopolitical uncertainty has led to strong booking momentum in recent weeks, supported by targeted price investment”.

  • Summer ‘27 capacity expected to increase 4%, with some aircraft deliveries delayed.

• Others:

  • £250mm buyback announced, expected to complete by May 31, 2027. ~10% of market cap at the time of results. Share count now 191mm.

  • Gatwick performance ahead of expectations with aircraft to increase from 6 to 7 for Summer 2027. Package holiday mix higher than expected and load factor in line with other London bases despite going on sale later in the booking cycle.

  • Newer bases at Bournemouth and Luton have performed well, with Luton to see a 30% increase in capacity for FY27.

  • Will finance all A321neo deliveries for Summer ‘26 and ‘27, with target of 50% financing across the entire delivery to 2035.

• Customer retention goes from strength to strength:

  • Holiday customers who rebooked in 25 months increased by 60bps to 61.2%, ~20ppts ahead of Jet2’s biggest competitor TUI.

  • Package bookings through the app increased 2ppts to 30%.

  • myJet2 members increased 45% to 9.3mm, allowing tailored browsing, discounts, and rewards.

  • Brand awareness among under-35s increased by 5ppts to 82%.

While the uncertainty created by the Middle East crisis has delayed customer bookings and will reduce profits this year (late bookings are lower margin because of discounting), this was a really strong set of results on what matters to the company’s value in the long run: customer retention, new bases, and the buyback.

Jet2 also appear to be taking share from its biggest competitor, TUI. In mid-May, TUI had reported that its Summer ‘26 Markets + Airline booked revenue in the UK was -10% y/y, and that the company was cutting capacity by 4% at a group level, and higher in the UK.

While I expect TUI’s bookings have picked up since mid-May, Jet2’s results at the time were already significantly stronger, with the company reporting Summer ‘26 bookings were +6.2% at the end of April. Overall, this is a roughly 15% difference in bookings, which given Jet2 and TUI each have about 20% market share converts to about a 3ppt swing in share to Jet2.

TerraVest (TVK.TO)

More background: Special Report, TerraVest’s next chapter, 2026 outlook

On June 5 and June 23, news publications reported (Le Journal de Montréal, then La Presse) that Quebec’s financial-markets regulator, the AMF, is investigating TerraVest’s Chairman and largest shareholder Charles Pellerin over allegations that he provided material non-public (“privileged”) information about TerraVest to members of his family and acquaintances. According to the reporting:

• No charges have been filed. The matter is at the investigation stage — nothing has been proven or prosecuted, and Pellerin is entitled to the presumption of innocence.

• The AMF obtained a search warrant (dated February 3) and carried out searches at Pellerin’s home and other locations on February 11 and 13.

• The AMF alleges that people connected to Pellerin traded ahead of market-moving news after speaking with him: people close to him sold before TerraVest stock fell ~12% following disappointing Q1 results (February 12, 2025), and nine people he had spoken with bought before the stock rose ~38% after TerraVest announced the EnTrans acquisition (March 17, 2025) — the purchases often occurring within minutes of his calls. The AMF puts the alleged gains at roughly C$6.8mm.

• On June 20, a proposed shareholder class action (an application for court authorization) was filed on behalf of shareholders who lost money after the June 5 stock drop. The claim names not only Pellerin but also TerraVest and its CEO and two CFOs, on the basis that they certified TerraVest’s financial reports — which stated the company’s internal controls were effective and that it had a code of ethics and an insider-trading policy. The suit has not been authorized or decided, and its allegations are unproven.

TerraVest stock is down 26% since June 5. While there is obviously a lot we don’t know, here is how I think these events affect the company and an attempt to quantify it in my valuation.

Read more

• On track for 2-3x EV/FCF

• Net cash is one-third of the market cap

• Excellent CEO who just doubled margins

• Chair, CEO, and CFO all bought stock a few weeks ago

• Buying back 15% of the share count

This is a ‘real’ industrial company that is US-listed, generates most of its revenues in the US, has been in business for decades, and consistently grown revenues.

Why does this opportunity exist?

The company was run by its founding family until recently. One former employee told me the CEO was “a really good guy but didn’t drive for efficiencies.”

That changed when a well-known large shareholder pushed for change. The company now has a refreshed board, its first professional CEO, and a new senior management team. The new team has already doubled EBIT margins.

The stock remains a ‘hidden gem’: The market cap is under $500mm, the stock trades $5-10mm/day, and is only covered by two sell-side analysts.

This writeup is built on primary research — five interviews with former employees and two background checks on the new CEO. Paid subscribers get:

• The bridge to EBIT margins doubling again

• What the company is likely to do with its cash

• Valuation scenarios over three years

• The precedent: a similar turnaround that took that stock from $15 to $265

Situation Overview

Read more

Subscribe now

Watches of Switzerland (WOSG.L)

More background: Special Report, 2026 outlook, Podcast

WOSG reported excellent results on May 14. Although the stock is up ~85% since I published the Special Report, I continue to believe that there is substantial upside on a three-year horizon.

Many of the risks the company has faced in the last few years (luxury slowdown, declining secondary prices, and tariffs) have reversed or are reversing. The company has demonstrated its significant resilience in the last 18 months, given these conditions, and I believe the thesis that the business has economics more similar to a subsidiary of Rolex than a retailer continues to play out. The outlook for WOSG looks stronger than it has done at any point since the report. Despite that, the stock still only trades on 13x FCF. See my 2026 Outlook for a detailed breakdown on the company’s structural growth opportunity, cycle, and valuation.

My data suggests that waiting lists continue to be very strong in the U.S:

The thesis continued to play out at fiscal H2 results:

• Revenues = £983mm, +17% at constant currency (‘cc’).

  • Revenue from the Deutsch & Deutsch acquisition was £16mm, so organic revenue was £967mm and +15% cc. There was also an extra week which added 4%, so I estimate this was +11% cc on an underlying basis.

  • This was a really strong performance. They did +10% in H1 against an easy comp of +4% for a two-year stack of +14%, while H2 was +11% underlying on a tough comp of +12% for a two-year stack of +23%.

  • There were of course price rises in response to tariffs which boosted the revenue number maybe 5% beyond normal price rises, but that would still mean an acceleration in the two year stack to +18%. The costs of tariffs also makes the EBIT number and guidance even more impressive.

  • The performance was strong across the board, including the US, UK, CPO +22%, e-commerce +21% in cc.

• Adj EBIT = £83.5mm-£86.5mm, -0% to +3%, 8.5%-8.8% margin vs 9.7% margin last year

  • Ahead of my expectations given H1 benefited from pre-tariff inventory costs but post-tariff higher prices. H2 would not have benefitted from this to such an extent.

  • FY adj EBIT expected to be £152-£155mm on revenues of £1,828mm for an adj EBIT margin of 8.3-8.5%. That compares to 9.1% in FY25, for a 60-80bps decline vs their guidance of 0-100bps. That guidance was made before the implementation of 31% / 39% Swiss tariffs.

• US:

  • Revenues = £518mm, +27% at cc, +21% reported.

  • Adjusted for the £16mm from Deutsch & Deutsch this is £502mm or +22% cc, or +18% ex the extra week. That is incredibly impressive against a comp of +19% cc.

• UK:

  • Revenues = £465mm, +7%.

  • This is an acceleration from +2% in H1 and surprising. The category is benefiting from brands releasing new watches at lower prices. The Bond St stores has also been a major success.

• Outlook:

  • FY27 revenues +5-10% at cc. Adjusted for one less week this would have been +7-12%, and ex Deutsch (assuming £50mm FY revenue) its +5-10% again.

  • Adj EBIT margin expansion of 40-80bps. This was a positive surprise, as I had expected a contraction given higher COGs from tariffs. The expansion means they are getting to 8.7%-9.3%. It looks like about 20bps is from not having the Saks business go bust (which means underlying EBIT margins were even more impressive this year).

• Other points:

  • The Roberto Coin business appears to be doing very well. WOSG has integrated Roberto Coin into Mayors, which has more than doubled their business in those stores. I expect that we will continue to see Roberto Coin rolled out across the store base.

Despite the run-up in the stock, I think it is hard to see significant downside. The company still trades on only 13x NTM FCF for mid/high single-digit organic growth and a long runway to grow in the US and deploy capital. There will also be a boost from Rolex in the next few years, which has publicly said they will increase employees by 20% its capacity expansion. That is likely to be a proxy for production growth.

I could see the stock re-rating back to 20x, which is where it used to trade.

The biggest ‘problem’ in my valuation is that with net debt down to £53mm and their amount of cash gen, they’re going to have up to £500mm acquisition capacity over the next three years (assuming they are willing to take net debt up to 1x EBITDA). It is hard to see them deploying all of that in M&A.

TerraVest (TVK.TO)

More background: Special Report, TerraVest’s next chapter, 2026 outlook

TerraVest reported a reasonable set of fiscal Q2 results. Although organic growth was -7%, this was against a tough comp of +14%. As I wrote recently in TerraVest’s Next Chapter, I believe the two big trends affecting the company are the:

1. Growth into new markets

2. Cyclical slowdown in the trailer business

Both of those trends continued in the quarter.

I believe the business is developing into four platforms:

• Storage Tanks (~C$120mm EBITDA)

  • Led by Highland Tanks, KBK, Simplex, Mississippi Tank, Pro-par.

  • Traditionally driven by storage of propane and chemicals. Increasingly focused on new markets like data centers, LNG, and convenience stores.

• Trailers (~C$75mm EBITDA)

  • Led by Entrans, Advance, LBT, Tankcon.

  • Transport of petroleums and chemicals. Driven by industrial cycles.

• Water / Services (~C$60mm EBITDA)

  • Led by GES, LV, Aureus, Wave.

  • Water for oil & gas.

• Legacy businesses (~C$50mm EBITDA)

  • Led by ECR, Granby, NWP.

  • Not a platform but a legacy group of businesses across heating oils, boilers, wellhead equipment, and others.

TerraVest does not segment its business according to these four platforms, but I still believe that the reported segments give us a clue to how each of the platforms is performing.

Read more

I think that is about to change.

This article discusses:

• Four catalysts that begin from August

• Why property-level EBITDA is about to turn positive for the first time

• Profitability by segment after programmed leases and spaces begin

• Why earnings power is likely substantially higher than management’s own numbers suggest

Seaport Entertainment spun out of Howard Hughes in July 2024 and owns a complex portfolio of properties, primarily in Manhattan just 10 mins walk from Wall St. The company is put in the ‘too hard’ bucket by investors but has a market cap of $300mm vs $87mm of net cash and properties Howard Hughes spent $1.2bn on. Execution by new management post-spin has been strong and the company is about to turn Operating EBITDA positive.

For more background read the Special Report, based on interviews with 21 sources and multiple site visits.

Subscribe now

Underlying Earnings Power Today

Seaport’s financials are incredibly complex, but I estimate run-rate EBITDA at the property-level has now improved to a $-7.3mm loss, and will be positive $5.9mm once already announced leases and programming begin.

Given the summer tends to be more profitable for the company, I expect Seaport will generate positive property-level EBITDA for the first time in either Q2 or Q3, which may allow investors to start thinking beyond the company’s previous losses and towards what future profitability will look like.

Seaport reports three segments:

• Hospitality - Restaurants and bars at the Seaport

• Entertainment - Seaport rooftop and major events, Vegas baseball team

• Landlord - Leases at the Seaport

By breaking out the financials by segment, we can see that only the Hospitality segment is now loss-making:

Note that I have excluded the now shut Tin Building from Hospitality to show what earnings are today. The segment generated $49.3mm in revenues and $-32.2mm in EBITDA over the last 12 months, while the company’s presentations show the Tin lost $17.8mm in EBITDA in 2025. I have estimated what that implies for revenues and costs using ratios from the Tin’s filings in 2024.

All of these numbers are before inter-company eliminations. The Hospitality segment leases a significant amount of space from the Landlord business and those costs get excluded after intercompany eliminations.

However, I think looking at the P&L before that is a better way to understand each segment’s standalone economics, as the space leased by Hospitality has a real opportunity cost as it could have been leased to external parties at market rates.

Programmed Profitability

In its Q1 presentation, Seaport disclosed that incremental EBITDA from announced programming is expected to total $31mm.

Given that we know the Tin lost $17.8mm in 2025, that implies management expects the additional leases and programmed space to generate $13.2mm in EBITDA.

By allocating each programmed space to a segment, we can see that the company is expected to generate $4.1mm in EBITDA once the leases begin. Adding the $1.2mm in trailing 12 month earnings from JVs and $0.5mm in Other segment profits gets to the announced property-level EBITDA of $5.9mm I estimated above.

There are two key conclusions I draw from this.

• The Landlord business is about to become a solidly profitable business with a projected EBITDA margin in the high 20s/low 30s. But the implied lease rates sit well below comparable space nearby, and I think will grow significantly.

• Very little of the new programming sits in Hospitality, so on my numbers the segment stays loss-making before inter-company rent. That is about to change as new tenants drive more visitors to the area.

The investors who figure out Seaport's real earnings power won't get there by just adding programmed EBITDA to today's numbers. And the Entertainment segment, which barely registers in these numbers, I believe will also be a key catalyst for the stock.

Finally, a constraint has tied management’s hands since the spin-off. That ends in August, and at that point I see four upcoming catalysts for the stock.

Read more

Last Wednesday, GCI announced that it had acquired $107mm worth of Liberty Latin America (‘LLA’) shares and that it was in discussions to swap John Malone’s shares in LLA for newly issued shares in GCI. The stock dropped 20%.

On Monday, GCI U-turned. Malone is keeping his LLA shares, no exchange will happen, and he is personally buying GCI’s $107mm LLA position at cost. The stock recovered somewhat.

Most investors view this episode as Malone mistreating minority shareholders.

I have a different read: Malone was trying to buy more GCI, and LLA was the currency.

This article will explain:

1. The GCI/LLA deal and reversal

2. Why I think Malone was trying to buy more GCI, not exit LLA

3. What this means for GCI’s future acquisitions

GCI Liberty (GLIBK) spun out from Liberty Broadband in July 2025, has 90% market share in its key business, and trades for 10x underlying FCF. Investors ignored the spinoff, but John Malone did not. He is Chairman, owns 7.3% of GCI, and has been buying stock. He structured the spin to turn GCI into an advantaged acquirer and “the beginning of a new Liberty Media”. We see well over 100% upside in our Base case.

For more background, click here to read our 30 page report on GCI, based on interviews with 17 industry sources, and this article analyzing the recent acquisition of Quintillion.

Subscribe now

GCI’s Purchase of LLA Shares

Last Wednesday, GCI announced that it had acquired 61,000 shares of Liberty Latin America (‘LLA’) class A shares and 12.3mm class C shares from Searchlight Capital Partners for $107mm, or $8.63/shr. That represents around 6% of LLA. Searchlight had been LLA’s largest shareholder.

I won’t go into detail as it is academic now, but LLA has been a disaster for shareholders for a decade with the stock down 65% since it was spun out in 2018. To summarize briefly:

• The company levered up to acquire AT&T's Puerto Rico assets, then completely botched the integration and missed every target. A highly dilutive rights offering was required and the subsidiary now carries 8x ND/EBITDA and is in negotiations with creditors.

• Chile was a parallel disaster. LLA’s subsidiary was overrun by fiber competition that management publicly downplayed for years as they kept investing capex, and ultimately rolled what was left into a JV that crystallized a near-total loss on one of the two anchor assets at the time of the spin.

• Despite all this, management were not replaced but instead rewarded generously ($16.9m CEO comp in 2025 on a net loss against a ~$1.7bn equity market cap).

Additionally, GCI announced that it was in discussions to buy John Malone’s LLA shares, including the Class B 10x vote shares. Malone owned 14.5mm shares in LLA across various share classes, and at a rough ~$8 share price that would be another $116mm. GCI would own 13.3% of LLA shares and 27.3% of the votes if it bought all the Malone shares.

The acquisition of Malone’s shares would have been paid for via an exchange of newly issued class C shares in GCI to Malone. At the price shortly after the announcement of $27/shr that would be 4.3mm new shares and would more than double Malone’s ownership in GCI.

I, and many investors, did not like the LLA deal. The GCI acquisition strategy was supposed to be about using the company’s tax shields and acquisition capacity to buy non-traditional cable companies and build the next advantaged acquirer. The LLA deal at face value looked like Malone using GCI to buy himself out of a tricky asset.

The stock fell, and just three trading days later GCI U-turned:

GCI Liberty, Inc. (“GCI Liberty”) today announced that, following unexpected obstacles to completing a larger, more strategic transaction relating to Liberty Latin America Ltd. (“LLA”), Chairman of the Board, Dr. John C. Malone has determined to terminate discussions with GCI Liberty regarding any further acquisitions of his LLA interests and has offered to acquire GCI Liberty’s 6% equity interest in LLA at the same price paid by GCI Liberty last month. The Board of Directors has accepted this offer.

Dr. Malone states as follows: “My vision for GCI Liberty contemplates two distinct units — one built around stable, cash‑generative operations, with declining capital intensity and an ability to return capital from its rapidly growing free cash flow, and another focused on long‑term investment growth. While regulatory, tax, and structural complexities have complicated and delayed executing that framework fully, I continue to believe strongly in its merit. Given that I was unable to complete a larger transaction as originally contemplated, I have offered to purchase the LLA block at GCIL’s cost. This demonstrates both my support for LLA, but also my belief in the concept of GCIL becoming two business units under one umbrella.”

Most investors view this whole episode as Malone mistreating minority shareholders. While I have no doubt this was a mistake, I have a different view.

Was Malone Trying to Exit LLA, or Buy More GCI?

The consensus appears to be that Malone was using his control of GCI to move a problem position onto minority shareholders.

I think the opposite is true.

Look at how the deal was structured. GCI bought the Searchlight shares with

Read more

• See the Table of Contents for a list of all published articles, grouped by stock.

Hidden Gems Investing has reached over 6,500 free subscribers and 300 paid members in the 17 months since the newsletter was launched. Thank you. Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription saves you enormous time and cost and protects you from future price rises. Join our members by upgrading below, or go here to learn about what you can expect as a paid subscriber:

Subscribe now

Douglas Dynamics (PLOW)

More background: Special Report

PLOW reported excellent results on May 4, with the Attachments segment revenues increasing 67% y/y and the company raising full year guidance despite it only being Q1.

The stock jumped 17% on the results, but bizarrely gave it all back the next day on no new information. The silver lining is that you can now buy in for the same price having seen Q1 earnings validate the investment thesis. Read the recent Special Report for more background.

To summarize, PLOW is a good business that has been under-earning. The company is the dominant manufacturer of professional snowplows and de-icing equipment in the U.S. and Canada, with over 50% market share, but suffered from well below average snowfall between 2020-25 which masked its underlying earnings power and caused the stock to sell down.

My data and industry interviews show the 2025/26 winter season has been the strongest in almost a decade and is already acting as a catalyst to bring earnings back to normal. Earnings may even overshoot to the upside given the pent-up demand that I believe has built up. I estimate the company’s 2026 EBIT will be +54% y/y and 32% above consensus estimates.

I think Q1 results showed that it is a near certainty that this thesis is playing out to at least to some degree.

Group revenues increased 20% in the quarter, while the key snowplow Attachments business saw revenues increase 67% in its seasonally weakest quarter and EBITDA increase from $0.3mm last year to $7.7mm. In the Special Report I had estimated that Attachments revenues would increase 43% in 2026, so the +67% in Q1 and +55% in Q4 are trending well ahead of my expectations.

Management stated that:

“Our core markets experienced the heaviest snowfall in a decade this past winter, with snowfall totals approximately 25% above the 10-year average. The snowfall-driven strength of parts and accessories sales carried into the first quarter, and we are now focused on ensuring that the pre-season orders we’re currently taking for all our products are efficiently delivered to dealers in the second and third quarters of this year.”

It is important to remember the seasonality in the business. Snow falls in Q4 and Q1, and snowplow contractors tend to order parts and accessories in these quarters rather than new plows. Contractors tend to wait until winter is over before ordering plows in Q2 and Q3 to prepare for the next season.

We are therefore still early into pre-season orders, and crucially management said on the call that dealer inventories are now “solidly below” historic levels. That matches my conversations with industry sources. As one dealer told me:

“We sold 139 plows this season, the most ever in this area, I don’t think it’ll ever happen again.”

That and the pent-up demand I estimate is in the industry means I think the Bull case is now playing out. After five years of under-earning, PLOW is now benefitting from both end-user replacement demand and dealer restocking.

Consider the fact that PLOW raised group full-year adj EPS guidance by 10%, despite it being so early into the year. This is a historically conservative management team that has only recently seen pre-season orders - why would they raise guidance by 10% already? That translates to 18% group revenue growth for the year and probably 34% growth for the Attachments business. Growth over the last two quarters is well above that, and my guess is management is seeing pre-season orders which indicate that will continue through the summer.

The last time PLOW raised guidance after Q1 was in 2014, and the year ended with Attachments revenue growing 56%. That remains the biggest increase since PLOW began publishing financials in 2006. I believe 2026 is turning into a similar setup, and expect further beats and raises in Q2 and Q3.

XPEL

More background: Special Report, Manufacturing Build-Out, Growth Runway With OEMs & Color PPF

XPEL reported good Q1 results on May 6:

• Revenues = $117.4mm, +13.1% y/y

  • US +9.9% / China +44.4% / Canada -10.9% / Europe +19.0% / Other Asia +25.1%

  • PPF +9.3% / Window film +24.8% / Installation +23.9%

• Gross profits = $51.2mm, +16.7%, 43.6% margin

  • Gross margins increased 140bps y/y. Management had expected margin expansion to continue through the year, but higher oil prices, which feed into TPU and ultimately performance films, mean increasing margins are no longer guaranteed. XPEL has been conservative in pricing and may raise prices to offset increased costs.

• EBIT = $13.0mm, +16.9% y/y, 11.1% margin

  • EBIT margins increased 40bps y/y despite sales and marketing increasing as a % of sales by 140bps. I expect margins will continue improving through the year.

• Q2 guidance is for revenues to be $135-137mm, or +8.3% to +9.9%.

These results exceeded my expectations, and continue XPEL’s impressive performance in a slow market. For context, XPEL’s US revenues grew 10% when the big US auto dealers, AutoNation, Penske, and Lithia, all reported Q1 new vehicle volumes down 7-10%. Luxury vehicle imports and EV sales, both of which XPEL over-indexes to, were down far more given the expiration of EV tax credits and comparison against a strong Q1 last year when demand was pulled forward in anticipation of auto tariffs.

I would not extrapolate Q2 growth slowing to 8-10% as an indicator of XPEL’s structural growth rate, given the current environment.

As I wrote after attending XPEL’s Dealer Conference earlier this year, XPEL is significantly outperforming key competitors like SunTek and Llumar:

“In the short term, installers suggested to me that the difficult conditions over the last two years have not improved yet. While PPF customers are typically higher net worth individuals, my sense is that things may have actually gotten marginally tougher.

However, several installers told me that XPEL is doing better than its competitors, which matches what management said on the last earnings call. Many imported and challenger film brands are struggling because of tariffs, while XPEL remains significantly better than others at growing the market for its installers.”

In fact, there was a clue on the earnings call that XPEL’s structural growth thesis is playing out well.

Read more

I was recently at the largest propane tank trade show in the US and spoke with TerraVest’s Chairman, CEO, Chief Investment Officer, distributors, major competitors, mom & pops, and Mexican manufacturers.

Since Hidden Gems Investing published a Special Report on TerraVest the stock has risen from C$45 to C$140, and this article summarizes my latest thinking on the company’s:

1. M&A runway

2. Opportunities in new markets

3. Current cyclical conditions

4. Future returns on capital

5. Valuation

If you are interested in TerraVest you should subscribe to Hidden Gems Investing. Subscribers get access to:

• 35-page Special Report (published in 2024 and available for free)

• Update from the Eastern Energy Expo

• 2026 outlook

• Update from the NPGA Expo (this article)

• Updates after every quarterly results like this

Go here to learn more about Hidden Gems Investing. Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription saves you significant time and cost. Join the 300 members who have upgraded to paid over the last 17 months:

Subscribe now

M&A Runway

The key question I tried to understand from the trade show was what TerraVest’s runway to continue making acquisitions was. I believe that the company is increasingly forming into four platforms and while no trade show covers all of the company’s businesses any longer, I was able to get good insights into the Storage Tanks and Transports verticals, which together account for about 60% of TerraVest’s markets.

• Storage Tanks (~C$125mm EBITDA)

  • Led by Highland Tanks, KBK, Simplex, Mississippi Tank, Pro-par.

  • Traditionally driven by storage of propane and chemicals. Increasingly focused on new markets like data centers, LNG, and convenience stores.

• Trailers (~C$80mm EBITDA)

  • Led by Entrans, Advance, LBT, Tankcon.

  • Transport of petroleums and chemicals. Driven by industrial cycles.

• Water / Services (~C$60mm EBITDA)

  • Led by GES, LV, Aureus, Wave.

  • Water for oil & gas.

• Legacy businesses (~C$55mm EBITDA)

  • Led by ECR, Granby, NWP.

  • Not a platform but a legacy group of businesses across heating oils, boilers, wellhead equipment, and others.

TerraVest does not segment its businesses in this way, but I believe as it continues to scale these platforms will operate with increasing autonomy. While the Storage Tank and Trailers verticals have each made an acquisition in the last year, these were still mostly driven by head office rather than at the platform level.

The result of the last decade of acquisitions is that TerraVest now dominates many of the niches it operates in.

For example, one of the companies I spoke to was Hiltz Propane Systems, a distributor and installer of large propane tanks. Hiltz told me that they source from three of TerraVest’s businesses, Highland Tanks, Mississippi Tank, and Pro-par, and that TerraVest has bought up more than half of the market.

I would categorize the remaining acquisition targets in Storage Tanks into three groups:

1. Major competitors

2. Mom & pops

3. Mexican manufacturers

Major Competitors

TerraVest’s biggest competitor is probably Westmor Industries, which is a comparable size to TerraVest’s Storage Tanks business and makes a wide range of tanks, trucks, and terminals.

Westmor would be an ideal acquisition, offer many synergies, and is probably one of two companies that would move the needle in the propane industry.

Westmor was sold in 2008 to private company Superior Industries (not the same Superior Industries that is publicly listed). However, since Westmor and Superior were both headquartered in a town with a population of 5,000 people it looks to me like this was one family business selling to another, possibly with no intention of the company ever being sold again.

The other major competitor is Triarc Tank, which makes a range of storage tanks and pressure vessels. Triarc was acquired by private equity firm Black Diamond Capital Management in late 2021, and the company was generating around US$250mm in revenues and US$52mm in adjusted EBITDA at the time.

Given the average length of private equity ownership, Triarc may become for sale in the next five years. However, I suspect Black Diamond has loaded the company with debt and would be unlikely to sell at the multiples TerraVest has historically paid.

Mom & Pops

There continue to be a number of mom & pops in the industry, but these by definition are small. TerraVest generated an annualized C$309mm in EBITDA in the last six months, up from C$145mm just in fiscal 2024. That rapid growth means that C$30mm acquisitions buying in around C$6mm in EBITDA no longer move the needle.

The biggest mom & pop was Quality Steel, a family business that has acquired several other family businesses and is trying to replicate what TerraVest has done.

Mexican Manufacturers

I met Tabsa, Ingusa, and Metsa, all Mexican manufacturers that are growing in the US. Tabsa and Ingusa claim to manufacture tanks up to 130,000 gallons, but from the exhibits and people I spoke with I got the impression these were still fairly small businesses that would not move the needle for TerraVest. All of them told me they have been hurt badly by the recent change in Section 232 steel tariffs, which have removed an exemption for imported products made using US steel.

Trailers

My discussions with people in the trailer market were similar. For example, Exosent, a manufacturer of LPG trailers, told me that TerraVest have bought up most of the trailer market and that there were primarily mom & pops left.

The impression I got was similar to my conversations at the Eastern Energy Expo last year. At the expo, I met a company called Tri Tank which provides distribution and aftermarket services for trucks and trailers. They told me that their niche had consolidated down to four major companies. On their banner (below with green arrows) you can see that they stock seven brands, of which three are owned by TerraVest’s acquisition EnTrans (Heil, Jarco, Polar), one was acquired by TerraVest last year (LBT), two are owned by Westmor (Transtech, Westmor), and one is independent (Brenner).

Overall, I think the runway for TerraVest in its traditional storage tank and trailer markets is now fairly limited. I’m sure the company will still acquire mom & pops, and perhaps Westmor or Triarc will be available at some point, but there are not many acquisitions left that still make a big difference.

However, I am impressed every time I speak with TerraVest’s management team: They are great capital allocators, entrepreneurial, realistic, and heavily incentivized. They have done an excellent job taking cash out of slowing or limited end markets for over a decade and successfully redeploying that into acquisitions in adjacent industries, typically at 20%+ incremental returns.

So while TerraVest’s runway in its traditional markets is now mature, I believe management are well aware that the company needs to keep pushing into new markets. Below, I break down the key new markets TerraVest is entering, the next chapter for the company, and lay out the scenario where the stock still generates a 21% IRR from here.

New Markets

In my March update I highlighted that fiscal Q1 included a clue that one of TerraVest’s segments was about to accelerate rapidly:

Read more

Last week, John Malone’s GCI Liberty announced it is acquiring the Quintillion fiber network for $360mm.

Malone had given the impression that GCI would buy assets outside of Alaska, so why is he buying the Alaskan fiber network Quintillion?

I view this deal as Malone’s first step in turning GCI into his “next Liberty Media”. As I outlined in the recent Special Report, most investors think of GCI as an Alaskan telecom, but the company should instead be viewed as Malone’s next advantaged acquisition vehicle.

This article will explain:

1. Why I estimate the deal was done for 8.9x EV/FCF but could be as low as 6.6x

2. The strategic benefits to combining the companies

3. A clue that Quintillion may become a significant growth asset

4. Why I see 169% upside to GCI over the next three years

GCI Liberty (GLIBK) spun out from Liberty Broadband in July 2025, has 90% market share in its key business, and trades for 10x underlying FCF. Investors ignored the spinoff, but John Malone did not. He is Chairman, owns 7.3% of GCI, and has been buying stock. He structured the spin to turn GCI into an advantaged acquirer and “the beginning of a new Liberty Media”. We see 169% upside in our Base case.

For more background, click here to read our 30 page report on GCI, based on interviews with 17 industry sources.

Subscribe now

Quintillion Deal Economics

GCI is buying Quintillion for an EV of $310mm + $50mm in reimbursements for capex, for an overall adjusted EV of $360mm.

Quintillion owns a subsea fiber network in Alaska’s North Slope, going from Prudhoe Bay in the North of Alaska to Nome in the West (red line below). The company is also in the middle of extending that fiber from Nome to Homer in the South (green line).

GCI estimates that in 2026 Quintillion will generate:

• Revenues of $55-60mm

• Adj EBITDA of $30-35mm. Adj EBITDA was $9.2mm in Q4 2025, but that included significant add-backs for costs related to a subsea fiber cut.

• Maintenance capex of $2mm

Additionally, the deal is expected to result in:

• Synergies of $20mm

• A $360mm step up in tax basis which can be used to offset future taxes. Assuming a 30% tax rate, that is a nominal $108mm in taxes and worth about $27mm if we take a 75% haircut to account for its present value (GCI already had a $1bn step up in basis from the spin that could be used first).

Depending on how much credit you give management on synergies and capex, this converts into a pre-tax FCF of 6.6x-11.8x. GCI has $1.36bn in tax shields post deal and accelerated depreciation from the One Big Beautiful Bill Act, so is unlikely to pay taxes for the next decade.

Here is how the valuation changes in different scenarios:

Subscribe now

Read more

Here is a video summary of the report:

• Other recent articles: XPEL’s Dealer Conference, Judges Scientific Recovery?, 2026 outlooks for TerraVest and Watches of Switzerland.

• See the Table of Contents for a list of all published articles, grouped by stock.

Hidden Gems Investing has reached over 7,300 free subscribers and 300 paid members in the 16 months since the newsletter was launched. Thank you. Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription gives you all of that for just $397/year, saving you enormous time and cost and protecting you from future price rises. Join our members by upgrading below, or go here to learn about what you can expect as a paid subscriber:

Subscribe now

Judges Scientific (JDG)

More background: Special Report, 2026 Outlook, Podcast

Judges Scientific reported full-year results on March 31, and I continue to believe that the company is beginning its recovery, driven by a rebound in US spending and a Geotek coring expedition.

Much of 2025 results had already been annouced at the trading statement in January, but the key points were:

• Organic revenue growth +6%, split US -22%, Europe +9%, China +7%, UK +10%, RoW +34% or +15% ex coring.

• EPS = 275p, in line with the reduced guidance. EPS guidance for 2026 remains 200-250p, while assuming no US recovery and no coring expedition. At the mid-point that puts Judges on 19x trough earnings. For context, EPS in 2022 and 2023 were £3.64 and £3.75, which in my view reflects underlying earnings power and puts Judges on 11.5x.

• 2025 organic order intake -10%, split US -23%, China +8%, Europe +6%, UK -9%, RoW -2%. YTD order intake -17% y/y, but remember this is comparing against Q1 last year which was not affected by the US research funding freeze.

• Direct exposure to the Middle East is 2%. No indirect exposure either beyond a general macro slowdown being unhelpful to government budgets.

The two key drivers for the stock over the next 12-18 months are likely to be the size of recovery in the US and coring, and I see positive news in both areas over the last couple of months.

In mid-March, the US Office of Management and Budget (‘OMB’) finally approved the National Institutes of Health (‘NIH’)’s apportionments, allowing the NIH to access the increased funding Congress had approved for FY2026.

This appears to have cleared the key bottleneck to the increased NIH funds being released. At a March 17 House hearing, lawmakers had criticized the OMB for delays in releasing funding.

As Nature magazine wrote in late February:

“Weeks after the US Congress rejected unprecedented cuts to science budgets that the administration of US President Donald Trump had sought for 2026, funding to several agencies that award research grants is still not freely flowing. One reason is that the White House Office of Management and Budget (OMB) has been slow to authorize its release. The US National Institutes of Health (NIH) has so far not received approval to spend any of the research funding allocated in a budget bill signed into law on 3 February. The US National Science Foundation (NSF) was authorized to spend its funding just last week.”

We should now begin to see NIH grant disbursements recover, which I expect will translate into improved orders for Judges in H2. As another scientific instrument supplier Harvard Bioscience said on their earnings call in early March:

“I would love for it to turn into a better academic environment in 1 day…there was a lot of grant submissions, which were waiting to be approved. And we expect to start to see a positive impact both towards the end of Q1 as well as going into Q2…we are a build-to-order business. So we’re starting to see improvement in orders, but in order to get the revenue, it actually needs to come in, in the first half of the quarter. So most of the benefit will start seeing probably in second quarter from the NIH release.”

There will likely still be bumps along the recovery, however.

Just last week, President Trump asked Congress for a $5bn cut to the NIH’s budget for fiscal 2027. That is lower than the $20bn proposed cut last year, which was rejected entirely by both parties in favor of a slight increase in budget, and the Democrats will likely have increased control of Congress after the mid-terms in November. Nevertheless, that and other proposed cuts probably mean there will continue to be noise around scientific spending, even if it does not translate into actual funding reductions.

But given the huge uncertainty and reduced US academic spending over the last 12 months, even this environment should lead to a significant recovery in orders later this year. Judges investor presentation shows that group orders on a trailing four-month basis (green line below) bottomed around the middle of last year and have been recovering since, on course for positive y/y growth by H2 this year:

There was another important piece of good news from the earnings call which I think has gone underappreciated.

Read more

Last week, Hidden Gems Investing published a 30-page Special Report on Douglas Dynamics (PLOW), a snowplow manufacturer with over 50% market share and a clear catalyst for earnings to grow 54% this year. I see 104% upside over three years in my Base case valuation.

I used Google’s NotebookLM to turn the report into an 8-minute video podcast (see above).

I was amazed by the result.

The video includes two AI presenters summarizing the key points from the report to provide an overview of PLOW, its moat, cyclical rebound, the replacement cycle and pent-up demand, valuation, and catalyst path.

Check the video out above if you want to see an example of what AI can now do or simply prefer the video format to reading a 30-page report.

Here’s how I did it.

Subscribe now

NotebookLM is a free tool from Google where you can upload sources to a notebook and query them and/or produce other outputs. Because NotebookLM only uses the sources you upload, it has far fewer hallucinations than other LLMs.

To create this video, I simply:

1. Uploaded the Hidden Gems Investing report.

2. Clicked “Video Overview”.

3. Clicked “Explainer”, then “Generate”.

That was it.

NotebookLM allows you to tell the AI what to focus on as well. The video you see at the top of this post included some additional instructions, but the first attempt with no prompt using just the three steps above was good enough that I could have published it.

The video had only one error - it states that the report includes the full transcripts from 13 interviews with industry sources. That’s not true; I conducted 13 interviews as part of my research which informed my analysis, but they are not reproduced.

Of course, this process is still garbage in, garbage out. That is why I believe in a world of AI hallucinations and shortcuts, feeding genuine primary research into your investment process is more important than ever.

I believe the video is high quality because it draws entirely upon the 30-page Special Report, which was the result of months of research, 13 long-form interviews with industry sources, and dozens of short interviews with dealers. I believe PLOW will grow EBIT 54% this year, 32ppts above consensus estimates, and see 104% upside over three years with a superior IRR because strong results this year should act as the catalyst for most of that upside. Don’t forget to read the Special Report. If you are a free subscriber, take a look at the video summary above.

Subscribe now

Here are a couple more examples of how AI is helping my investment process.

If instead of clicking “Video Overview” in NotebookLM you select “Audio Overview” then “Debate”, NotebookLM will produce a 20-minute podcast between two AI hosts debating the key points of the uploaded documents and stress-testing its analysis.

Selecting “Critique” instead of “Debate” takes this further by creating a review to find holes in your research.

Another tool I find increasingly useful is the ability to create Custom GPTs in ChatGPT.

By going to “Explore GPTs” then “Create”, I have created a suite of Custom GPTs that are able to automate parts of my investment process. For example, every week I read all the earnings transcripts from companies in the same industries as stocks I am invested in, looking for any relevant read-across.

Instead of reading every transcript, I now read the most important ones in their entirety but upload ones where there may only be an occasional read-across into ChatGPT.

If you do that in ChatGPT’s standard chatbot, the quality and approach of the answers will vary each time, and many answers will not be precise and try to give you what it thinks you want.

I created a CustomGPT called “Earnings analysis” to solve this problem.

The GPT has instructions on what to look for when deciding whether a transcript or results statement has a genuine read-across to a company I’m invested in, to extract the key read-across, quote important passages in full and verbatim so I don’t have to find them, to ignore generic / imprecise commentary, double-check its work, and conclude whether I should read the transcript in full.

No coding was needed as instructions can be directly written into the “Instructions” box.

There is also the ability to upload model answers and other relevant information as “Knowledge” files, which it can refer to on an ongoing basis.

By using a CustomGPT, I am able to ensure answers are consistent and high quality. That allows me to follow more companies, extract more insights, and do so quickly.

Let me know in the comments how AI is improving your research process.

Subscribe now

If you enjoyed this article, click “like” or “share” below to help it gain more visibility!

This article is for informational purposes only and is not investment advice. Plural Investing, LLC currently holds a position in Douglas Dynamics. Read important disclosures here.

Situation Overview

Douglas Dynamics (’PLOW’) is the dominant manufacturer of professional snowplows and de-icing equipment in the U.S. and Canada, with over 50% market share. The company suffered from well below average snowfall between 2020-25 which masked its underlying earnings power and caused the stock to sell down, but our data and industry interviews show the 2025/26 winter season has been the strongest in almost a decade and is already acting as a catalyst to bring earnings back to normal. We estimate the company’s 2026 EBIT will be +54% y/y and 32% above consensus estimates.

PLOW has the industry’s leading scale, dealer network, manufacturing facilities, and a deep bench of expertise led by an honest and capable CEO.

We see limited risk to an investment today. Even if we are completely wrong and EBIT does not grow at all in 2026, the stock trades on 15.1x EV/EBIT and below its historic average of 16.3x. Our Base case sees 104% upside over three years and a superior IRR because we expect strong results this year to be the catalyst for most of that upside.

Key Insights

1. PLOW and its main competitor BOSS control most of the snowplow market, which results in orderly competition and no price wars. PLOW’s scale is its competitive advantage. The company supports the largest dealer network, which is key as dealers act as the gatekeepers to the industry. The density of the network means PLOW’s dealers are often closest to snowplow contractors, which allows them to provide spare parts and repairs quickly during snowstorms. This is usually the main reason contractors pick a brand, and those contractors rarely switch brands afterwards. (See p.7-13)

2. We collected data from 54 weather stations in PLOW’s key cities and interviewed dozens of dealers and smaller OEMs. Many sold out this winter for the first time in years, and our analysis of the industry’s replacement cycle suggests there is substantial pent-up demand that is now returning. We believe 2026 will see PLOW return to its underlying earnings power and possibly overshoot to the upside. (See p.14-20)

3. We think PLOW will beat and raise guidance in Q2 and Q3. The company usually starts the year guiding conservatively because winter has not ended and it does not know what orders will be. Contractors typically place orders in the summer. (See p.27-30)

Research Methods

In addition to utilizing secondary sources such as company filings and transcripts, the information in this report was gathered by speaking with primary sources. This included long-form discussions with:

• 5 former Douglas Dynamics employees

• 6 competitors to Douglas Dynamics

• 2 other relevant sources

• Additionally, dozens of short discussions with independent dealers.

We spoke with some sources more than once. Information that could reveal the identity of the sources above is redacted from this report unless sources gave their permission. While Hidden Gems Investing gained many insights from these conversations, no information that was both material and non-public was shared.

Table of Contents

• Why Does This Opportunity Exist? (p.6)

• Economics (p.7)

• Cyclical Rebound (p.14)

• Governance (p.21)

• Valuation (p.27)

Paid members get the full 30-page report, the 54-station snowfall data, dealer-channel evidence, replacement-cycle model, and the Q2/Q3 beat-and-raise roadmap before the market sees it. This required over 100 hours of research and thousands of dollars. A subscription gives you all that work, saving you enormous time and cost.

If you are a free subscriber and would like to view an example of our Special Reports before upgrading, click here to view our report on TerraVest for free. Now is a good time to upgrade because new subscription prices increase each year, but existing members lock in today’s rate for life.

Subscribe now

Read more

• See the Table of Contents for a list of all published articles, grouped by stock.

Hidden Gems Investing has reached over 7,000 free subscribers and 300 paid members in the 15 months since the newsletter was launched. Thank you. Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription gives you all of that for just $397/year, saving you enormous time and cost and protecting you from future price rises. Join our members by upgrading below, or go here to learn about what you can expect as a paid subscriber:

Subscribe now

Seaport Entertainment (SEG)

More background: Special Report, Podcast

Seaport made two important announcements in the last couple of weeks:

• The sale of 250 Water St was completed for $142mm

• The Tin Building has been shut and leased to Balloon Museum

I will cover these announcements in more detail in an update after Q4 results which are being announced this week, but overall I think these two events remove most of the risk associated with investing in the company and give it a clear path to profitability.

Net of Q4 cash burn and taxes on the 250 sale, I estimate Seaport now has $175mm of cash and $50mm of debt and preferred equity. Its market cap today is $295mm and before these announcements it was $250mm. The remaining properties net of capitalized corporate expenses are worth over $500mm in my view.

The company has made big progress on cash burn since the spin-off, but the Tin Building was the one property holding it back - the building generated $-22mm in EBITDA in the last twelve months.

I think leasing the building out is the best case scenario.

Not only will the cash burn disappear overnight, Seaport will actually generate an undisclosed amount of rent from Balloon Museum when it opens this summer. Combined with a roughly $10mm swing from not having to pay interest expenses on the 250 Water St mortgage and now earning interest income on the cash that means most of the company’s cash burn has been eliminated.

Balloon Museum will also benefit the area more broadly. I argued in the Special Report that the most important thing to successfully turn around the area is creating attractions that New Yorkers are willing to walk 10 minutes from the subway for. Meow Wolf is likely to bring over 1mm visitors to the area when it opens in late 2027, while Balloon Museum attracted 300,000 visitors to a New York pop-up exhibition over 77 days in 2023.

A criticism of the Seaport area in my conversations with industry sources has been that there are too many food & beverage options in comparison to the number of visitors. Now, that is likely reversed with more visitors and the biggest source of food & beverage, the Tin Building, shut down.

The restaurants and bars at Pier 17 and the Cobblestones are likely to do very well as a result, and I would expect the company to have the area mostly leased up in the next six months or so.

That gives Seaport a clear path to profitability when Meow Wolf opens late next year.

TerraVest (TVK.TO)

More background: Special Report, 2026 outlook, Update & trade show

TerraVest reported a weak set of fiscal Q1 results on February 10. Organic revenue growth was +9% against a weak comp of -13%, but cash EBIT margins weakened from 14.1% to 8.9%, driven by a decline in the Entrans business that was acquired in Q2 last year:

Many of the same trends from recent quarters continued to play out:

• HVAC: +1% organic growth. I am surprised that growth wasn’t much stronger against an easy comp of -1% last year considering the long order book at Highland Tank and Simplex from data centers for cooling tanks.

• Compressed Gas: +3% against an easy comp of -13%. These organic numbers exclude the acquisitions of Entrans, Tankcon, and LBT. Management highlighted lower demand on tank trailers in the US, which is impacting Entrans in particular. EnTrans sales were C$115mm in the quarter, down 26% vs the C$154mm in fiscal Q1 last year, which was disclosed to SEDAR at the time of TerraVest’s acquisition.

• The segment is also being impacted by an industrial slowdown in Western Canada, partly driven by tariffs and lower oil prices and highlighted by several companies. For example, Mattr (ticker: MATR), a US and Canadian manufacturer of wire and cables, highlighted “significant declines” in Canadian industrial demand late last year, which it expects will persist for several quarters.

• Processing Equipment: +19% against an easy comp of -40%.

• Service: +30%. This includes the Aureus and Waves acquisitions, which cannot be broken out as it is now fully integrated and boosted growth. The companies were acquired for C$28.5mm and my estimate is that true organic growth was still impressive at around +20%. The strength of the Services business over the last two years continues to significantly exceed my expectations and has boosted profitability given the segment is high margin.

The outlook statement changed significantly for the first time since FQ1 2025 (changes in bold below), suggesting a weakening of the Entrans business and strengthening of cooling tanks for data centers:

In general, TerraVest’s portfolio of businesses is performing well. Recent acquisitions have made a meaningful contribution, and we expect this to continue throughout this fiscal year. Opportunities to enhance performance through synergies between recent acquisitions and the base portfolio of businesses continue to exist and are a focus for management. Recent tariff announcements have created an environment of uncertainty in North America’s manufacturing sector. TerraVest does benefit from a diverse manufacturing footprint in North America that allows it to mitigate against direct tariff related impacts. However, this uncertainty has resulted in softer demand for certain of TerraVest’s businesses, particularly those that manufacture tank trailers. On a positive note, several of TerraVest’s portfolio companies are seeing strong demand for products related to the data center build-out in North America. The Company continues to make targeted investments to improve its manufacturing efficiency and expand its product lines, particularly in end-markets where it has a meaningful presence. With the new credit facility obtained in March 2025, TerraVest is very well-positioned to pursue its acquisition strategy.

While the quarter was fairly weak, there was a clue that one of TerraVest’s segments is about to accelerate rapidly:

Read more

I recently discussed GCI Liberty (GLIBK) with John Mihaljevic from Latticework by MOI Global. Our conversation covered:

1. John Malone’s vision for GCI to become “a new Liberty Media”

2. Three advantages GCI has as an acquisition vehicle

3. The existing Alaska business’ dominant competitive position

4. Why Starlink is a manageable risk

5. Why I see well over 100% upside over three years

The video of our discussion is available above. Paid members additionally have access to:

• A 30-page Special Report on GCI Liberty based on interviews with 17 industry sources

• A cleaned transcript of the podcast (below)

• The 23-page presentation from the podcast (below)

• Monthly updates like this.

• A library of content at the Table of Contents

Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription gives you all of that for just $397/year, saving you enormous time and cost. Join the over 7,000 free subscribers and 300 paid subscribers who have upgraded in the 14 months since the newsletter was launched, or go here to learn about what you can expect as a paid subscriber:

Subscribe now

GCI Liberty (GLIBK) spun out from Liberty Broadband in July 2025. The company is Alaska’s dominant telecom operator with 90% market share in its key business yet trades for 10x underlying FCF. Investors have overlooked the spinoff because Liberty Broadband was 13x larger and is being acquired.

But John Malone did not ignore the spinoff.

He is Chairman of GCI, owns 7.2% of the company, and has been buying stock. He structured the spin to turn GCI into an advantaged acquirer and “the beginning of a new Liberty Media”. GCI is an ideal acquisition vehicle because it benefits from two substantial tax shields and has ~$2bn of acquisition capacity over three years, greater than its current market cap.

We see limited risk over three years given GCI trades on 10x FCF, our Base case has 155% upside, and the Bull case is that we are at the beginning of GCI being transformed into an advantaged acquirer.

Click here to read our 30 page report on GCI, based on interviews with 17 industry sources (preview image is above).

Timestamps to the Podcast

• [01:45] Introduction to GCI Liberty

• [05:50] The spin-off and why this opportunity exists

• [07:00] John Malone: vision, insider buying, and the $300m rights offering

• [10:15] The Alaska telecom cash cow and dominant position

• [16:00] The Universal Service Fund and ‘use-it-or-lose-it’ subsidies

• [22:10] Starlink risk deep dive

• [32:30] Advantaged acquirer: Huge tax shields, $2bn buying power, best-in-class management

• [35:40] Valuation scenarios with acquisitions

• [43:20] Q&A

Read more

I was in San Antonio, Texas, recently for XPEL’s Dealer Conference (‘XDC’). The conference was attended by 725 of XPEL’s top installers, making it the company’s biggest event ever. I spoke with many of the installers to get their views on XPEL’s manufacturing plans and growth runway.

The stock has risen from $32 in March 2025 when I published a Special Report on the company to $55 today, but I think can double again over the next three years.

If you are interested in more background, take a look at the 35 page Special Report. I believe XPEL is a great company with an excellent owner/operator that is now coming through a blip. The report was based on 54 interviews and covers XPEL’s:

• Economics and competitive advantages

• Growth runway

• Difficult cyclical conditions

• Governance

• Valuation

Hidden Gems Investing has reached over 6,500 free subscribers and 300 paid members in the 14 months since the newsletter was launched. Thank you. Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription gives you all of that for just $397/year, saving you enormous time and cost and protecting you from future price rises. Join our members by upgrading below, or go here to learn about what you can expect as a paid subscriber:

Subscribe now

Manufacturing Build-out

At its Q3 results, XPEL announced that it will invest heavily in manufacturing. This is expected to:

• Require $75-$150mm over 2 years via capex, M&A, and/or JVs

• Increase gross margins by 10ppts to 52-54% and EBIT margins to mid/high 20s% by the end of 2028

My experience is that the base rates of companies achieving transformational changes on time and on budget are low, but I believe that XPEL’s plans are plausible.

XPEL’s manufacturing goals are mostly centered around cost reduction and margin improvement, but there was some evidence from XDC that installers would see minor benefits also.

CEO Ryan Pape’s keynote speech focused on deepening the quality of the company’s existing products, and the insourcing of manufacturing should allow the company to speed up the innovation of new films by months and improve quality.

That is partly because the incentives for XPEL are different to its manufacturers. It makes sense for XPEL to increase the amount of waste/discarded PPF at the manufacturing stage if that results in less work being redone by its installers down the line, as the cost to installers and XPEL is much greater than the cost to the manufacturer.

When I asked installers about XPEL’s plans, they were optimistic that this would ensure the company had the best quality films. They did admit though that most major film brands are already similar on quality and were unsure if much innovation was possible.

The Acquisition Route

My assumption is that XPEL’s manufacturing buildout will only address:

• The US market (56% of sales)

• Product COGS (82% of COGS)

• TPU and coatings but not every process and product (80% of product COGS)

That means the company’s plans address 56% x 82% x 80% = 37% of COGS.

With XPEL likely to have generated $480mm in sales and $280mm in COGS in 2025, that translates to about $100mm in COGS.

If XPEL were to acquire a manufacturer for $150mm, the top end of management’s guidance, that would imply an EV/S ratio of 1.5x. That is a lower multiple than most acquisition multiples in the industry over the last decade, but not unheard of.

The Capex Route

I spoke to ex-employees from XPEL’s suppliers recently to better understand the challenges involved in the company building out its film manufacturing from scratch.

All of them felt XPEL was in a good position to in-source its supply chain, but there was still significant execution risk.

PPF typically has three layers:

• TPU (urethane) - this is the vast majority of the film by cost and volume

• Adhesive - glue beneath the TPU that sticks it to the vehicle

• Clear coat - on top of the TPU for scratch resistance.

The hardest and most important part of this process for XPEL will be making its own TPU. This involves buying resin from large chemicals companies and using an extruder to turn the resin into film that consistently has the correct clarity, thickness, stretch, etc. without tiny defects.

The people I spoke to thought building this process out and perfecting it would take at least three years, meaning XPEL’s end of 2028 target appears ambitious.

Buying the equipment is unlikely to be the hard part. There are major equipment suppliers like Davis-Standard and Midwest Engineering that know XPEL well.

This equipment can also be customized. For example, the machines that handle coating and lamination often have cartridges that can be pulled out and replaced. Similarly, other machines have coating heads that can be customized.

XPEL will also benefit from all new equipment, which makes customization easier - its key supplier Entrotech has an old production line that has limited its ability to retrofit pieces and improve quality.

The hardest part for XPEL is likely to be staffing.

Running the three lines (TPU, adhesive, lamination) will likely require four people per line for three shifts a day, or 36 people in total before staff for warehousing and material handling.

While the employees will not be anywhere near as expensive as the equipment, they will be essential to the lines running effectively and on time. I believe that whether XPEL can bring the right people on board who have run these lines before will be the key determinant of whether its manufacturing buildout is successful.

One negative XPEL has is that if its plant is built near San Antonio that will make it harder to hire more than a few former employees from Entrotech, which is based in Ohio.

However, the company has got off to a good start. I met XPEL’s Director of Manufacturing Greg Booth at XPEL’s Investor Open House in 2023. Booth was previously Director of Film Technologies at Entrotech and the people I spoke to recently said he is exactly the type of person who has the right knowledge and knows who to contact.

XPEL already has a team of engineers that go on site with its suppliers, do some R&D, and test the products. If management does go down the capex-only route this will have been the result of years of planning and recruitment, which I think reduces the execution risk.

These tables lay out what I think XPEL’s economics look like once it insources its production:

Read more

• Expect an update from XPEL’s Dealer Conference next week.

• See the Table of Contents for a list of all published articles, grouped by stock.

Hidden Gems Investing has reached over 6,600 free subscribers and 300 paid members in the 14 months since the newsletter was launched. Thank you. Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription gives you all of that for just $397/year, saving you enormous time and cost and protecting you from future price rises. Join our members by upgrading below, or go here to learn about what you can expect as a paid subscriber:

Subscribe now

Judges Scientific (JDG.L)

Special Report, Podcast

Judges released a brief but tough trading statement on January 23rd:

• 2025 EPS guidance cut from previous consensus of 289p to 275p (-4.8%).

• Order book ex coring -6% for the full year, with the US -23%.

• No recovery so far in the US.

• No coring expedition likely until early 2027.

• 2026 EPS guidance of 200-250p, -18.2% at the mid-point. Guidance assumes no recovery in the US throughout 2026.

These results look very tough at face value, but as I wrote last month I expect the trading statement to mark the low point of the cycle and for a recovery to begin from here. I added to my position significantly post results.

I continue to view Judges as a great business with an excellent management team who as outlined in the Special Report have a 20 year track record of delivering 20%+ returns on incremental capital. The company has had a difficult couple of years, primarily for macro reasons, and I believe investors have been too quick to dismiss the previous track record.

I estimate the stock is trading on 13.8x underlying earnings power today, or 9.6x EPS in three years before acquisitions are taken into account.

Underlying Earnings Power

Despite guiding to adj EPS in 2026 of 200-250p, I believe the same guidance implies that Judges’ underlying earnings power is £3.78/shr.

There are two effects that I think are one-offs and impacting earnings in 2026:

• No coring expedition (53p headwind)

• Dramatically lower US college spending (100p headwind)

By backing these two effects out, we can see that the mid-point of 2026 guidance for 225p EPS implies 378p without the one-offs. That is 6% higher than 2025 and in line with Judges’ historic organic growth of about 7%.

I assume that over three years both of these one-offs recede and that the underlying business continues to grow at 7%, which results in EPS of 433p and £10.30/shr of cash generation in the interim.

At today’s share price of £52 that implies the stock is trading on 9.6x P/E minus excess cash in three years. Of course, Judges will likely do better than that by creating value with the cash through good acquisitions. The stock has historically traded on 25x and above.

Coring

By comparing earnings in H1 2025, which included a coring expedition, to H1 2024, which did not, I estimate a coring expedition adds about £3.5mm to EBIT or 52p to EPS.

Judges will have owned Geotek / coring for five years by the end of 2026 and in that period will have had expeditions in three years out of five.

Does that mean that these missed coring expeditions are no longer a one-off?

I have data on coring expeditions from 2002-2018 which shows 19 expeditions in 17 years. There were no expeditions in 2003, 2008 (but two in 2007), 2009, 2011 (but two in 2012), and 2014 (but three in 2015). So there were no expeditions in five out of 17 calendar years, but three of those were because of timing with multiple ones in adjacent years.

It is hard to know whether having expeditions in 3/5 years is meaningfully different to 12/17. My research suggests that there is nothing substantially worse about coring’s end markets. But even if we assume three expeditions in five years from now on, it would only lower EPS by 21p on average. That would be disappointing, but not a game-changer against my estimate of 433p in three years before acquisitions. This is one of the reasons why I believe investors are too focused on the Geotek acquisition.

US College Spending

I estimate that the decline in US academic spending was an 80p headwind in 2025, given Judges cut guidance by 38-82p in July last year when this issue became apparent then finished the year below that guidance.

Since academic spending began falling in March the full year impact, assuming no recovery in 2026, should be higher at 100p.

But I believe the recovery is about to begin.

Two weeks ago, the US House of Representatives passed a major spending bill which increases the National Institute of Health’s funding by 1%. Budgets for various other institutes are also about flat y/y, not the roughly 40% cuts the President was very publicly calling for.

The bill passed the House 341-88 and there has been consistent support for scientific funding from both House and Senate committees. The bill now needs to pass the Senate to avoid another partial government shutdown. The shutdown will have likely begun by the time you read this article, but Polymarket has the odds of a shutdown over 7 days at just 14%.

In other words, we should see much greater certainty in funding for Judges’ customers soon.

That is crucial because it is primarily uncertainty that has stopped colleges from spending. While the NIH and National Science Foundation (NSF) terminated a large number of grants between March and July last year as the President asked for ~40% cuts, most of the grants were in fact restored by September and there have been no material cuts since.

Customers have halted spending because of the rhetoric and fear of future cuts, which the House’s bill should begin to draw a line under.

As Thermo Fisher, a major seller of scientific instruments, said last week:

Read more

Watches of Switzerland (‘WOSG’) is a retailer and partner to Rolex and other luxury watch brands. Rolex only sells through authorized retailers like WOSG, which gives WOSG economics closer to a subsidiary of Rolex than a typical retailer because of lengthy customer waiting lists, no online or price competition, and no inventory risk.

WOSG has around 50% share of all Rolex sales in the UK and 10% share in the US where it is the leader consolidating the industry. Management are competent, experienced, and well incentivized, with CEO Brian Duffy owning around £40mm worth of stock.

Despite this, the company trades on just 11x FCF. I believe intrinsic value in three years will be more than double today’s price.

This update to the 30 page Special Report Hidden Gems Investing published in August 2024 is the result of 59 interviews with watch industry sources over the last two years, and updates on WOSG’s:

1. Fiscal H1 results and expectations for H2

2. Risk of being disadvantaged following Rolex’s acquisition of Bucherer

3. Cyclicality - Waiting lists, secondary market prices, and tariffs

4. Structural growth through market share gains and acquisitions

5. Valuation

Hidden Gems Investing has reached over 6,400 free subscribers and 300 paid members in the 13 months since the newsletter was launched. Thank you. Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription gives you all of that, saving you enormous time and cost and protecting you from future price rises. Join our members by upgrading below, or go here to learn about what you can expect as a paid subscriber:

Subscribe now

Read more

• Expect an update on Watches of Switzerland next week.

• See the Table of Contents for a list of all published articles, grouped by stock.

Hidden Gems Investing has reached over 6,400 free subscribers and 300 paid members in the 13 months since the newsletter was launched. Thank you. Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription gives you all of that for just $397/year, saving you enormous time and cost and protecting you from future price rises. Join our members by upgrading below, or go here to learn about what you can expect as a paid subscriber:

Subscribe now

TerraVest (TVK.TO)

Special Report, Update & trade show, Podcast

TerraVest reported a strong set of fiscal Q4 results on December 11. Organic revenue growth was 7%, with FCF growing 128% in absolute terms driven by the acquisition of EnTrans and others.

Organic revenue growth for the year was 1% and has averaged 2% over the last three years. That is lower than CPI inflation of 3.2% and RPI of 5.7% over the three years, as some of TerraVest’s traditional businesses continued to decline and the company faced headwinds with a slowdown in the US trailer market which has particularly impacted EnTrans, tariffs, and lower oil prices that have affected Western Canada.

These headwinds have been offset by strong growth in the Services business and TerraVest entering new verticals like serving datacenter customers. Those new markets have led to some investor excitement, but I think it is worth re-emphasizing that organic growth has averaged below inflation for three years.

These trends continued to play out in the quarter:

• HVAC: +14% organic growth, against an easy comp of -13% last year. Driven by growth in demand for cooling tanks from data centers, which has resulted in a very long order book at Highland Tank and Simplex. Some of Highland Tank’s orders are being completed by TerraVest’s other subsidiaries.

• Compressed gas: +2%. Higher sales for domestic tanks were offset by weaker demand in Western Canada and a continued slowdown for tank trailers and EnTrans. My estimate is that EnTrans’ EBITDA is currently annualizing around C$90mm, down from C$100mm in 2024 and C$130mm in 2023 (calculated using current USD/CAD rates).

• Processing equipment: -23%. Continues to be hit by reduced demand in Western Canada.

• Services: +19%. The organic growth number included the acquisition of Aureus which has been fully integrated and added to growth. The strength of the Services business over the last two years has significantly exceeded my expectations, and boosted profitability given the segment is higher margin.

The outlook statement was virtually identical to the previous quarter (the only change in bold):

“In general, TerraVest’s portfolio of businesses is performing well. Recent acquisitions have made a meaningful contribution and we expect this to continue throughout the next fiscal year. Opportunities to enhance performance through synergies between recent acquisitions and the base portfolio of businesses continue to exist and are a focus for management.

Recent tariff announcements have created an environment of uncertainty in North America’s manufacturing sector. This uncertainty has resulted in softer demand recently for a few of TerraVest’s businesses. However, TerraVest’s portfolio businesses are well-positioned manufacturing products predominantly for their domestic markets, which greatly limits the impacts of any potential tariffs.

The Company continues to make targeted investments to improve its manufacturing efficiency and expand its product lines, particularly in end-markets where it has a meaningful presence. With the new credit facility obtained in March 2025, TerraVest is very well-positioned to pursue its acquisition strategy.”

With FCF margins down to 10% in 2025 after a strong 2024 and a balance of headwinds and tailwinds facing the company, I think TerraVest heads into 2026 with financials back reflecting the underlying earnings power of C$175mm I estimated in Is TerraVest still cheap?. Unlevered FCF in H2 was C$176mm on an annualized basis.

Last week, the company announced the acquisition of KBK Industries for US$90mm / C$125mm and 5.6x EBITDA. KBK is a manufacturer of steel and fiberglass storage tanks based in Texas, and one of its key markets is underground fiberglass storage tanks for convenience stores. The convenience store market is growing at high single-digit / low double-digit rates, driven by strong ROICs companies are seeing from opening new stores and fiberglass taking share from steel as it lasts 30 years instead of 10.

It will be interesting to see if TerraVest can help KBK take share, as the market is currently dominated by NOV (ticker: NOV) and Mattr’s Xerxes (ticker: MATR). I have spoken with NOV and Xerxes at trade shows and both currently view the market as largely a duopoly with regulatory and reputational barriers to scale (customers have to believe the tanks will last 30 years).

Post the KBK acquisition, I estimate TerraVest is trading on 24x EV/FCF.

At first glance that appears to be not far off fair value, but I believe a better way to value a serial acquirer is to look out three years and estimate how much acquisition capacity the company has and what earnings power could be following future acquisitions and synergies.

Here are my latest estimates:

Read more

Rock & Turner Investment Analysis

Judges Scientific | UK Programmatic Acquirer

Listen now

8 months ago · 5 likes · 1 comment · James Emanuel

I recently discussed Judges Scientific with James Emanuel from Rock & Turner. Our conversation included my updated thoughts on several significant developments at the company this year, including:

1. Whether to view the Geotek acquisition as a red flag on Judges’ acquisition runway and management incentives

2. Succession: The recent news that David Cicurel is moving from CEO to Chairman

3. Recent headwinds: Geotek, US academic funding, China

4. Valuation after the share price decline

You may find the discussion particularly helpful because James has published a series of articles on programmatic acquirers and challenged several of my thesis points.

James’ articles and podcasts on acquirers include:

• The Secret of Investing in Programmatic Acquirers

• Topicus - Part 1

• Valuing Programmatic Acquirers

The video of our discussion on Judges Scientific is available in full and for free at the link above. Paid members additionally have access to:

1. A cleaned transcript (below)

2. Our 35-page Special Report on Judges Scientific

3. Monthly updates like this

4. A library of content at the Table of Contents

Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription gives you all of that for just $397/year, saving you enormous time and cost. Join the over 6,000 free subscribers and 300 paid subscribers who have upgraded in the 12 months since the newsletter was launched, or go here to learn about what you can expect as a paid subscriber:

Subscribe now

Judges Scientific (JDG.L) is a serial acquirer of niche scientific instrument businesses in the UK. The company has delivered 22% returns on incremental capital for 20 years by my estimates and 25% p.a. shareholder returns. Cofounder David Cicurel remains Chairman and is someone with high integrity, a clear customer focus, strong capital allocation skills and owns shares worth around 170x his base salary. The stock trades at 15x my estimate of underlying FCF and I believe can still deliver a 25%+ IRR going forwards, potentially plus a short/medium term bounce back given recent declines.

Timestamps to the Podcast

• [01:27] Introduction to Chris Waller and the appeal of Judges Scientific

• [05:56] Overview of the business model: Niche instruments and high returns

• [09:40] The growth algorithm: Buying at 5x EBIT

• [13:17] Why founders sell to Judges cheaply

• [26:29] The Geotek acquisition: Breaking the playbook or opportunistic?

• [35:26] Management succession

• [42:38] Evaluating the new leadership team

• [59:48] The 50% share price drawdown and current headwinds

• [01:10:48] Incentives, shareholder base, and valuation

• [01:13:47] Final Verdict: Buy, Hold, or Sell?

James Emanuel: Welcome back to the Rock and Turner podcast. I’m James Emanuel. Joining me today is Chris Waller from Plural Investing. He has done a great deal of research on the programmatic acquirer in the UK named Judges Scientific.

So to start with, Chris, do you want to give us a quick introduction of who you are, what you do, and why you were drawn to Judges Scientific?

Chris Waller: Thanks, James. And thank you for having me on this podcast and everyone listening today.

I run a global small cap fund based out of New York. I grew up in the UK, but I’ve been based in New York since 2016. I’m looking for seven to eight what I call “hidden gems” in the small cap markets, typically in the US, Canada, or UK. Generally, I look in the more boring sectors—consumer and industrial businesses.

These are small cap companies that are usually the leaders in a niche industry. For a small cap to be a leader in a niche, that niche probably is not very well covered by the sell-side or even by the buy-side investor base. So there’s an opportunity there, if you do a lot of in-depth research, to understand that industry and business significantly better than most investors. That’s really why I try and fish in those waters.

The centerpiece of my research process is really around trying to do this “scuttlebutt” research—speaking to around 20 people in an industry prior to investing in a company, and then trying to speak to people like that on an ongoing basis and attending industry events like trade shows. That’s really how I try and get that understanding of a company.

Judges, that we’ll talk about today, is a company very much in that vein. It’s a small business that acquires even smaller businesses that are even more niche. So it fit in with my style of investing. I was able to speak to a number of people in the industry who recommended the company strongly. I thought it was undervalued as well, which is what got me initially interested.

James Emanuel: So you run quite a concentrated portfolio. I’m guessing you look for companies that you can buy and hold for the long term. What’s your average holding period?

Chris Waller: Yeah, so seven to eight stocks, typically for a three to five-year initial timeframe. The fund is about five years old and there are several of the biggest positions that were held in the fund at the beginning. So it has been five years and that has played out. So, yes, we do hold for the long term.

I should also have mentioned at the beginning: I run this fund, Plural Investing, but I also started a newsletter on Substack called Hidden Gems Investing, where I publish some of the research that I do. One of the things I do is I try and write a roughly 30-page research report on these companies after doing that research.

The reason I started doing it is I found it gave sources in an industry a reason to talk to me. If I would talk to 20 sources and share this type of research with them in return, particularly in industries that don’t have a lot of research because they’re so niche, it was valuable. Eventually, I realized, why not distribute this further? Anyway, that’s why I started the newsletter.

James Emanuel: Thanks, Chris. So we’ve touched on Judges Scientific at a very high level. They’re a programmatic acquirer. What does that mean?

Chris Waller: It means that acquisition is their business. So they don’t have their own operating model as such. They have a portfolio of smaller companies and they all run relatively autonomously. So there’s no integration involved.

James Emanuel: And incidentally, for those not familiar with the terminology—at least the terminology that I like to use, which is borrowed from McKinsey—I always refer to a serial acquirer as a company that buys similar companies that need to be integrated. So they’re looking for synergies between those companies.

A programmatic acquirer is a company like Constellation Software, which buys lots of autonomous companies which run entirely independently. There’s no integration required. They don’t look for synergies. And Judges Scientific fits into that latter bracket.

So Chris, the name Judges Scientific gives us a hint at the kind of companies that they target. Do you want to just give us a little bit more detail on that?

Chris Waller: Judges is a UK listed company, just under £400 million market cap. It trades for about 20 times free cash flow on its guidance this year—I think probably 15 times its underlying earnings power.

As you say, they do acquisitions of small companies, typically £5 to £10 million deals, of scientific instrument companies in the UK. These are companies that are selling typically expensive and niche instruments like vacuum chambers, ultra-low temperature instruments, and instruments analyzing different rocks and soils. These products typically sell for anywhere from £1,000 up to £1 million for the most expensive system. So very high value. In many cases, these companies invented the particular instrument or niche that they’re in.

They are UK companies, but revenues are split about one-third in the US, one-third in Europe, and one-third rest of world, with China being a big component of that.

They have a very good track record. Over the 20 years Judges have been doing this, they’ve generated about a 20% return on incremental capital, by my estimate. The stock has returned just over 20% as well over that period of time.

So these are good businesses: very good return on capital, leaders in the industry, and sort of 7% to 9% organic growth over this period of time.

Judges is quite selective. They’ve done 25 deals in 20 years. Typically, they’re buying at about 5x EBIT, although there’s one bigger acquisition that we’ll touch on, Geotek, which was more expensive than that.

So very disciplined in their acquisition multiple, very return on capital focused, not a lot of synergies—but they don’t necessarily need them at that multiple and with that organic growth. Their growth algorithm would be sort of 13% post-tax return based on their initial acquisition price and then 7% to 9% organic growth. That’s how you get to the 20%.

That’s really the business model. Their model relies on a very high integrity, hands-off approach, which is why people sell to them cheaply. They have a founder, David Cicurel, who’s just moved up to Chairman and we’ll talk about. They’ve been very, very successful, and I expect them to continue being that successful.

James Emanuel: And in terms of your research process, you touched on it earlier, you go deep and you interview lots of people. For this particular piece of research, I think you said that you conducted an interview with nine former senior management executives and seven other external sources. Are you able just to give us a little bit more color on that?

Chris Waller: I think with a company like this, it’s really important to understand: do they have an advantage as an acquirer? I don’t think it’s good enough just to be an acquirer. There needs to be some reason why you’re able to get good deals or you’re able to extract some extra value in some way. So I think speaking to people who were either the founders of businesses that sold to Judges or they were at the C-level is important to get those insights.

What was really interesting about this company was, probably more than any other I looked at, the feedback from the industry was very, very consistent in terms of why they sold their companies—which was really around Judges’ hands-off approach and about some of the future prospects of the business.

James Emanuel: So the company was listed in 2003 at 95 pence with a £2 million market cap. By 2023, it reached a peak of £600 million market cap, which is a 35% CAGR. Very, very impressive. Today, it’s had a bit of a drawdown. In fact, it sits at half that level, £300 million market cap, which is still a 24% CAGR, which really puts it in the kind of top decile of performance, if not higher. What exactly is the model here?

Chris Waller: I looked at the 25 acquisitions they’ve done so far, and on average they pay about 5x EBIT. That, I think, is by far the most important factor in the success of this company and the discipline that they’ve had in very rarely going above that. That’s why they’re able to buy in that revenue at such a good return.

Now, they do have a little bit of margin expansion over this 20-year period. I think revenue growth has averaged 7%, EBIT growth has averaged 9%. That margin expansion is not really because of any synergies. Some of that’s just the natural growth of the business.

But we could talk a little bit more about what they do once they make those acquisitions. Really three things they do:

Read more

You can read my full thesis on ContextLogic from July here, but essentially the company had no operations, $6.7/shr in cash, and NOLs worth up to $13.4/shr on an undiscounted basis. The stock traded at the cash value of $6.7 and in my view the company was likely to make an acquisition over the next six months that would act as a catalyst to monetize the NOLs. That acquisition was announced last week.

This update discusses:

• The deal and likely NOL usage

• Funding sources and new ownership structure

• Incentives for Abrams Capital and BC Partners

• ContextLogic becoming a serial acquirer

• US Salt

Subscribe now

The Deal and NOL Usage

The deal values US Salt at a $908mm EV, with another $35mm in fees for a total transaction value of $943mm.

Read more

• See the Table of Contents for a list of all published articles, grouped by stock.

Hidden Gems Investing will be raising prices at the end of this year, but any subscription made before then locks in today’s rate for life. Most of our reports require well over 100 hours of work and thousands of dollars in research expenses. A subscription gives you all of that for just $347/year, saving you enormous time and cost. Join the over 5,800 free subscribers and 280 paid subscribers who have upgraded in the 12 months since the newsletter was launched, or go here to learn about what you can expect as a paid subscriber:

Subscribe now

There was a lot of (largely positive) news on many of the stocks this month. This update will be longer than usual, and I will follow up with separate pieces and deeper analysis. Here are the updates:

GCI Liberty (GLIBK)

Special Report

The rights offering is now underway, and you can read my analysis on it here.

John Malone also made some comments about GCI at Liberty Media’s Investor Day on November 20th, which I think are worth reprinting in full:

“And the spin-off of a little company that I’m going to talk about in a minute, GCI out of Liberty Broadband because I was already over 50 of the voting control of Liberty Broadband, I end up in hard control of it. And it will be, let’s say, by next summer, the only company that I expect to still be on the Board of, a public company, where I’ll be Chairman, at least until it figures out what its strategy is.

I personally believe I can start another Liberty Media with appropriate strategy and capital structure using that as a core vehicle. It got spun off with extraordinarily good tax attributes. Why would you think that?

And I think a sustainable cash flow generation, relatively modest capital investment requirements to sustain the business. And I think it is appropriate to think of as a vehicle for growth and for recreating something like the original Liberty Media. The benefit, of course, is that the great staff at Liberty Media that has been assembled, the young folks, quite talented are available to support that enterprise on a contractual basis.

And I’ve asked some close friends of mine to be involved. Now I made the original investment, I believe, in the Alaska Communications business in 1989, I believe, Ron Duncan, who’s been consistently its CEO since, done a great job. It does a wonderful job for the state of Alaska. It’s not like most companies, it doesn’t face multiple competitors in every aspect of its business. It’s a duopoly really in the cellular business in the larger towns and it’s a virtual monopoly in terms of the terrestrial broadband business.

So it’s a little different than what you see under a lot of stress in terms of the average cable company right now or old cable company. So that differentiates it. But using my thesis that you can do well by accumulating undervalued assets, sheltering them, sheltering their taxes, appropriately managing their tax liabilities and their use of capital, I think, it represents kind of an interesting opportunity for me and for anybody else who chooses to come along. We are doing -- we’ve announced the rights offering where we’re going to raise $300 million of new equity. It’s not an over levered business. It’s only levered about 2.7x with pretty good debt.

So I’m setting it up basically to be able to do deals and grow. And I personally am backstopping the $300 million rights offering. So we’ll see what happens. It’s an interesting thing.”

Later on:

“Well, first of all, on my scheme for what do I do with GCI. When markets dump sectors they’re not very discriminatory, okay? They throw the baby out with the bathwater. So trust me in this huge world we’ve got there are a number of communications businesses that are going to generate a lot of free cash flow for a very long time that are selling very cheap okay? And so the goal is to find those, be selective, own enough of them that when you shrink them, you’re just driving up your own economics, okay?

Same model. And shelter their free cash flow because you have extraordinary tax attributes, use financial engineering where it’s appropriate. When we created the spin-off vehicle GCIL, we did it in the state of Nevada, which has much more flexible charter governance than Delaware. We set it up with the ability to do tracking stocks, for instance, to do preferred of anything I can dream up. I might point out the first Liberty Media when we first created it was because we didn’t think we were getting appropriate valuation on miscellaneous assets.

We threw them into an entity called Liberty Media. We did a simultaneous incorporation. Within a month or so of its creation, I issued a preferred stock, distributed to all Liberty Media shareholders that had a bigger face value than the market cap of the company because I wanted to shift tax basis from common to preferred. And then those people who wanted to recover their tax bases like me, could sell the preferred, recover the capital and go forward with an equity that was more levered, but without a risky type of leverage because the preferreds were very soft and very flexible.

And so it was a little financial engineering, but it was very important to effectively in one transaction, double the value of the common equity, which effectively happened. So financial engineering in some situations is important and the flexibility to do so is important. So that’s kind of the way I look at it. So I look at opportunities in a space that I’m familiar with.

If you can’t find them in the space you’re familiar with, you look at tangential synergies where your tax attributes, your financial attributes, your timing, you can be truly opportunistic. I mean what the hell did we know about satellite radio when Sirius became an opportunity, for instance.

So being opportunistic, making sure you’ve got flexibility and currency to be able to take advantage of opportunities when they present themselves. I think -- so timing is a very important thing. I think that’s the way I see it as an opportunity because I’ve got some pretty smart staff members over at LMC.”

XPEL

Special Report, Notes from the trade show

XPEL reported good Q3 results, which included several meaningful announcements. The stock has rallied strongly since, but I think may be just as undervalued today.

• Revenues = $125.4mm, +11.1% y/y

  • US +11.1% / China +11.2% / Canada -10.0% / Europe +28.8% / Asia Pac +21%

  • PPF +4.9% / Window film +22.2% / Installation +16.9%

• EBIT = $16.8mm, 13.5% margin, -8.9% y/y

  • Margins were quite disappointing at face value and once again included various one-offs like timing related issues and significant investments in sales & marketing (+29.7%) and G&A (+15.8%), which they expect to leverage in the future.

  • However, their announcement of a mid-high 20% EBIT margin by the end of 2028 (see below) overshadowed the margin in the quarter.

• Q4 guidance is for revenues to be $123-125mm, or +14% to +16%. That includes the China distributor acquisition, which I estimate adds ~4% to revenues.

The real story though is that management made important announcements on (i) future growth, and (ii) the margin expansion opportunity.

Growth

As a reminder, XPEL’s stock since 2020 has gone from $15 to $100 and back to the $30s after the company went from delivering 25%+ growth for years to 6% in 2024. The Special Report published in March argued that investors have overreacted and are extrapolating 2024 growth to be the new normal when in fact XPEL still has a long runway of around 13% organic growth and that margins will rebound. XPEL still has four large organic growth opportunities, each of which could contribute 5ppts of revenue growth at the company level. These are growth by:

1. OEM & dealership channels

2. New products

3. International expansion

4. Pricing

XPEL’s Q3 results were significant because they directly support the thesis that the company still has a long runway of ~13% growth and addressed points 1-3. Aside from the growth in the quarter and guidance for Q4, which will bring 2025 growth to ~14% despite a turbulent year, management stated that:

1. XPEL experienced double-digit growth in the dealership channel and expects to continue expanding the OEM referral program. See my update from a trade show in September if you’re interested in why I think the OEM opportunity is large and accelerating.

2. The new color PPF products are “probably the best rollout we have ever done”. The +22.2% growth in the Window Film segment in the quarter also suggests that the windshield film rollout continues to progress well, given that it is booked in that segment and window film itself is increasingly a mature business.

3. The reception following the acquisition of their China distributor has been “incredibly encouraging”. My understanding is that the OEM and dealership businesses in China are multiples larger than the aftermarket, and that the distributor had been reluctant to pursue those channels for fear of being cut out. XPEL can now go after that business.

More generally, I think CEO Ryan Pape summed up the growth opportunities well on the call:

“There’s no better time in history to make these really final investments in these countries where we want to operate the most. This is a very tough environment for many people, for many of our competitors. You see a lot of folks pulling back where we’re investing. And I think that’s what you want for the long term. The investments in SG&A in these countries is very much front-end loaded. But these are the best markets in the world, and they’re ones that are impossible to develop in any meaningful way without our direct participation.”

Margin Expansion & Manufacturing

Perhaps even more eye-catching than the growth opportunities was the announcement that XPEL will invest heavily in manufacturing. This is expected to:

• Require $75-$150mm over 2 years via capex, M&A, and/or JVs.

• Increase gross margins by 10ppts to 52-54% and EBIT margins to mid-high 20% by the end of 2028.

If XPEL gets close to these targets it will result in a massive increase in profitability vs my expectations. For context, in the Special Report I had modelled a 2027 EBIT margin of 17.3%.

Assuming XPEL hits 25% implies a 45% increase in profits over what margins would have increased to without the investment. That equates to a ~$50mm increase in EBIT in 2028+ on a $75-$150mm investment for a 1.5 to 3 year payback. A 25% margin would also result in a ~$5 EPS.

I will provide a deeper analysis after attending XPEL’s Dealer Conference in January, and my experience is that the base rates of companies successfully achieving their target paybacks are low. I would prefer XPEL primarily goes down the M&A and JV route given the reduced execution risk and shorter timeline, and suspect that even if that costs $150mm instead of $75mm the company will have made up much of the difference by generating higher margins sooner.

Nevertheless, if management does go down the capex-only route this will have been the result of years of planning and recruitment, which I think reduces the execution risk.

I know this because I attended XPEL’s Investor Open House at its San Antonio headquarters, warehouses, and R&D facilities in 2023, and one of the speakers was Greg Booth. Greg was already XPEL’s Director of Manufacturing at the time and was previously Director of Film Technologies at Entrotech, XPEL’s key manufacturer. It appears that XPEL has been preparing to expand into manufacturing for three years.

My notes from the time were:

Read more