Then came June 2025, we made a broader list of 40 companies, and seperated them into sectors. We then ranked the top 20 companies scoring best on quantifiable metrics like growth, margins, stability, return on capital and price. But, in contrast to the 2024 list, returns have been negative 1% one year later for the group as whole.

Negative contributors like Revenio and Invisio have weighted on the positive returns from Mycronic, Atlas Copco and OEM International in particular.

An interesting observation, is that the average EV / EBIT for the group as a whole is today at 22x trailing EV/EBIT, where it was closer to 26x last year. Thus, resulting in a cheaper multiple for the same fundamentals (margins and growth still as high).

We though an interesting idea, would be to add these writeups into a hypothetical portfolio strategy, where $100 was added to each idea every year a company reached the top 20 list. We are not certain such a portfolio will outperform, but we think it’s interesting to track the companies the screener chooses over time.

We screen using simple criteria like growth, margins, return on capital and price.

You can see the hypothethical portfolio visualized below, with returns in colour.

For this year, we wanted to use the same criteria like last year. We got 3 more companies this year, from the 40 last year, but several names have been replaced. Mostly due to growth or margins falling below the screen threshold. Since we’re using 5-year averages, a company with poor results during covid would for instance have a favourable comparison point, and vise versa.

We really enjoyed putting this together, and hope you’ll enjoy it as much as we did. Perhaps you can recognize a few companies on this years’ list below?

Disclaimer: This newsletter is provided for informational and educational purposes only. The views expressed are my own and do not constitute financial advice or recommendations to buy or sell any securities. The author may own shares in the equities discussed.

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Top Nordic Industrials of 2026

2026 have been an eventful year for many industrial companies, especially those catering to the demands from the Datacenter buildout and Defence in particular.

On the other hand, those investing in healthcare industrials, like Revenio, Cellavision and Demant, have done poorly. Importantly, past returns are no guarantee for future returns. Today’s winners may be this year’s losers in the stock market.

Our goal in the stock market is to participate in the value creation from the most exceptional people and businesses over time. The average company in this year’s top 20 list, have quantifiable metrics few companies can match.

2026 Average Scores:
The companies on this year’s list sell physical products with a 59% gross margin on average, with a 5-year average EBIT margin of 23% (!). And this, with a compounded annual growth of 15%, despite paying out 61% of profits to dividends. That results in a 5-year ROCE of 29%, without using much leverage.

And on top of that, investors receive a 2,7% dividend yield as of today, at a forward EV / EBIT multiple of 18,5x. And after deducting tax, roughly 23x Price to Earnings.

The full list can be seen below, with top 10 and 20 coloured in dark and light green.

We’ll leave the full detailed list at the end of the writeup.

New Companies top 20 — Niche Leaders

Among companies we haven’t seen in the top 20 before, we find several companies, with a common characteristic — mostly niche leaders within their markets:

• Royal Unibrew

• CTT Systems

• Incap

• Lagercrantz

• Envirologic

• Medcap

Of these, we are most familiar with Lagercrantz (#19), perhaps the most impressive Nordic Serial Acquirer currently. In Q1 2026, Lagercrantz delivered an outstanding quarter, with 6% organic growth and 12% more from acquisitions. All their sectors are performing strongly, especially Electrify.

Royal Unibrew (#4), a Danish beverage company also appeared on this years list. 56% of Royal Unibrew’s sales are to non-alcoholic brands. Impressively, Royal Unibrew has managed to deliver positive organic growth in a tough beverage market for the last 5 years. Moreover, they’ve completed many acquisitions of brands, and with ROIC around 13%, they’re able to create value doing so.

CTT Systems (#9) is a much smaller company, operating as a niche supplier within humidity control for aircrafts. While they do sell aftermarket parts, CTT have been quite cyclical over the years. This is also what enabled them to pop up in this years screen, given the favourable comparison period in 2021 (travel restrictions covid). But CTT is in a new cycle now, driven by production delays from Airbus and Boeing.

Investors interested in CTT Systems should probably understand the cycle before extrapolating past profits into the future. Positively, ROIC over the cycle looks good.

Incap (#15) is a niche electronical equipment manufacturer from Finland. We first heard about the company in 2023, but their customer concentration was a clear weakpoint at the time — a risk that materialized quickly after when losing a key customer.

But since then, Incap have impressed, also with contribution from acquisitions. By focusing on low-cost manufacturing regions, like India and Slovakia, combined with the attractive unit economics within high-mix low-volume products, Incap continues to generate attractive returns on capital. They also reinvests all profits. With expectations for FY2026 around €28 million EBITA, Incap trades at 8x EV / EBITA.

On the other hand, investors interested in Incap today should be well aware of their turbulent past — being close to bankruptcy several times. The combination of cyclical end-markets, tough competition (in the past at least), concentrated customer base and illiquid stock, have made Incap a bumpy ride for long-term shareholders.

While it feels advantegous looking for small and micro-caps sometimes, many smaller companies remain small for a reason. Time will tell whether Incap can move from a €200 million market cap to something larger. If they’re on track for that now, it may take investors a long time to recognize, given the scars left from Incap’s turbulent history in the past.

Envirologic (#19) was a new name for us. They specialize on automating the cleaning of lifestock facilities, especially for pigs. They primarily sell equipment through distributors and the end-customers achieve labour savings and increased animal wellfare. The largest opportunity, may be to expand into chicken and egg production, much larger markets than the pig market, where Envirologic is already a market leader.

However, Envirologic has just had their best 5-year period in a long time, with a cyclical history behind them. That means investors looking at their favourable performance in recent times, should probably understand a potential cycle before extrapolating current earnings going forward. Those also seem to head down for now.

We believe these companies, which we haven’t researched that thoroughly, explains the danger of investing strictly based on screens. There’s often much more than what meets the eye in a couple key financial metrics. If we acted as model-based investors in real life, a 10-year financial period would probably have made more sense, as illustrated with Envirologic’s positive 5-year period currently.

However, it’s always interesting to look closer at such names. There’s almost always something to learn from different companies, even if they never touch your own portfolio.

Medcap (#20) is a niche life science equipment business, with everything from surgical equipment to medical consumables. Their key advantage, however, is their acquisition-engine and decentralized culture, which have enabled them to compound profits at attractive rates, despite the niche markets their businesses typically have.

With thousands of small healthcare companies run by founders approaching retirement, Medcap can be a preferred owner for many looking to exit. And with ROCE around 16%, Medcap is one of the higher-quality serial acquirer with a defensive traits.

Looking at Medcap’s stock performance, it’s clear their history have been much more stable, and they resemble more a classical compounder. Total returns for shareholders have been very attractive, and they’ve delivered these from a combination of organic + acquired growth.

Looking at the price for Medcap’s stock, it always trades at a market premium, but currently trades at a 23x FCF multiple, which is lower than it’s own average (31x). You can see the shareprice return for Medcap stock below, not including dividends.

Now for the final two sections — the complete list with detailed company profiles and our five top picks from this group.

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Outsiders’ Corner: Top 5 Picks

Regular readers will not be surprised that Medistim and Norbit remain two companies where we have a strong positive bias. Both businesses have demonstrated exceptional returns on invested capital, attractive margins, and a proven ability to expand into new growth opportunities while maintaining strong competitive positions. We own both, and have covered them closely in previous writeups.

However, 3 ideas popped up in the top 20 section this time. We’ll go over those in detail here, with our expected return from each one.

Invisio

At a $1 billion market cap, Invisio is still relatively small, but still a high-quality company positioned in the modernization of defence equipment in particular.

Earlier in their history, Invisio was most known for providing the best tactical headset. However, over the years, and especially following the Racal Acoustic acquisition in 2021, Invisio became more a complete communication provider for military settings. There’s also ample opportunity for Invisio to expand beyond military operations

However, the stock have fallen 35% over the last year, also due to a shrinking order book. Importantly, defence orders are lumpy in nature, and the CEO said this in Q2:

Our assessment is that no orders were lost, only delayed — and we expect to recover this business gradually during the second half of the year

You can see our KPI and forward return potential for Invisio below. With an EV / NOPAT going from 200 (!) → 30x, the stock may finally reach closer to Intrinsic Value. Invisio is a company that always have had a lot of investor expectation, with good reason like you can see from the revenue figures and impressive ROIIC below.

And positively, we’ve seen 5 different insiders purchase shares on the open market since May. Further, CEO Lars Hansen has 12x higher stock ownership than his fixed salary, or 6x vs total compensation in 2025. His variable compensation is determined from 60% order book and 40% operating margin. Invisio’s CFO also has a meaningful stake (47 million SEK) in shares, likely a multiple of 6-8x his salary. Importantly, Invisio also has an anchor shareholder in William Demant Invest, which is a long-term owner.

We think Invisio management is incentivized to optimize this company for the long-term, and with a track-record like theirs, we’re happy to see them have ambitious goals of roughly 20% profit growth annually. However, orders will be lumpy, like we’re seeing now. That’s typically when such a quality stock becomes cheaper.

Firefly

Firefly develop fire prevention and explosion protection systems for industrial processes, a mission-critical piece of insurance. This goes for wood, paper and food processing, recycling, biomass plants, tunnels or even in energy plants.

Their equipment is a critical part of manufacturing lines, and can be custom designed. Firefly have built up niche expertise and a portfolio of patents since 1969. Sales are either directly or through distributors in more than 70 countries. But it’s just in the last 5 years, Firefly started establishing subsidiaries outside the Swedish borders, in Poland and Italy. They also have a long-track record of innovations, recently with an automated water cannon. Their equipment is also combined with their own software, making the competetive advantage within their niche harder to replicate, and unfeasible for customers to do themselves..

The company is small, just $102 million in size, but has attractive unit economics. Since 2019, ROIIC have been 34% and with a reinvestment rate of 42%, profit growth has been exceptional at 17% annually. Last year, investors even received a 6% dividend boosted by a special-dividend, enabled by their significant net cash balance.

Lifco

An investor favourite, with good reason, is serial acquirer Lifco. With strong returns on incremental capital of 16%, combined with high reinvestment rates of 87% for the last 7 years, Lifco have been one of the more stable compounders out there.

And, with today’s acquisition of ErgoPack in France and last quarters acquisition of Glass Umbrella in the UK, it’s clear that Lifco is no longer just a Swedish Industrial acquirer. Just 9% of Lifco’s sales are currently in Sweden.

Another thing we particularly appreciate with Lifco is their focus on organic EBITA growth, not just organic sales growth. Where exiting less profitable business over time hurts organic sales growth, organic EBITA is less impacted. And with Lifco’s focus on profitable growth, they’ve been able to become a higher quality company over time. Note that most industrial acquirer struggle to reach 10% EBITA margins. Lifco’s 22% EBITA margin speaks volumes about business quality and cost discipline.

When it comes to our expected future returns for Lifco, we have them at today’s price of 324 SEK around 12% annual return for the next 5 years. That factors in some multiple contraction from today’s ~28x. But, a problem with valuing Lifco is just how durable their strategy have been so far. Looking at Lifco’s track-record, the assumption that Lifco would move towards average in year 5 or 10, would have consistently underestimated the strength of their capital allocation model.

Given wthis, we would accept a slightly lower expected return in our model for a company of Lifco’s caliber, versus Invisio or Firefly for instance. This due to the smaller likelihood for disruption and higher confidence around their growth runway. At today’s price of 324 SEK, Lifco does not look like a bargain, but it’s definitely more attractively priced than it’s been in a long time.

Time to wrap this up. For those interested in the numbers, we’ll leave the full screen below, with all the data. For those interested in the 2 prior years' versions, you can find the link through those below.

All the best,
Ole

And if you’re interested in reading about Norbit and Medistim, the two companies in our portfolio today, we’ll share writeups where we discuss those in closer detail.

Detailed 2026 List

Note that a company like Harvia scored poorly this year, and excellent last year. That’s simply due to the comparison point 5 years ago hits a cyclical peak today, and the opposite last year. Cycles is one of the things we should be mindful of when using such data to generalize quite complex underlying businesses.

There’s often much more than what meets the eye at first glance…

In this month’s letter, we’ll share a lesson we learned this month, recent updates to a few of our Holdings having reported and our Portfolio Holdings as of writing this.

We hope you’ve had a wonderful summer, and look forward to share more writeups over this autumn.

All the best,
Ole

Introduction

This month we did a deep dive on Alternative Asset Manager EQT. Two things made us interested in researching the company.

1. Investor AB, a key holding of ours, increased their stake in EQT recently.

2. Since EQT purchased a large stake in OEM International, the business have improved — turning a high-quality low reinvestment business into one with higher reinvestments, and thus also more growth. Solving the problem we outlined with OEM when we covered it as a standout in the Serial Acquirers writeup of 2024.

OEM is an error of omission from our side, with the stock up 48% since that writeup. Luckily, we’ve had other great picks, like Investor AB — a key owner of EQT, where we indirectly benefitted from the rise in OEM’s value — through their ownership in EQT.

EQT surprised us in several ways — partnerring with a house of investors’ having earned 15-20% IRR’s does not sound to bad an idea.

We also had 2 other writeups this month — an update for Investor and our 5 best ideas currently. You can find the link to all these below if you’re interested.

This month’s key Lesson

During July, we’ve learned to appreciate how quantitative metrics should rarely be viewed in isolation. recently analyzed the Fundsmith letter, where Fundsmith’s decision to update their strategy of “doing nothing”. Now, they’ll implement a more momentum-based strategy. What fewer took notice of, but Leandro pointed out, was Fundsmith’s mistake in optimizing for ROIC alone.

Leandro’s observation made something click for us, when we tuned into the earnings report of Eurofins this week, where their CEO called out a similar dynamic, but for a different figure (organic growth).

The lesson here is that organic growth combined with margins makes for a better understanding of the development within the business. This is one of the key reasons behind how Eurofins grow adjusted EBITDA by 8%, in a quarter with only 2,9% organic growth (even lower if not adjusting for currency headwinds).

Consequently, investors should consider organic growth together with margins. Taking down unprofitable business can be a rational decision even if it hurts organic growth short term.

Lifco is another great example of this exact dynamic. They deliberately track organic EBITA CAGR instead of organic sales growth. One of the reasons behind their incredible margin expansion over the years, resulting in profits growing faster than sales, is their deliberate action to remove less profitable business lines.

Investors recognizing Lifco’s excellence in capital allocation, would have been well rewarded — as you can imagine from the profit growth and strong margins below.

We think this lesson is particularly relevant for incentive structures. If a board incentivize their management team on organic growth alone, a logic that seem feasible at first thought, that would actually incentivize not removing “the weeds”.

And in the stock market, you’re typically rewarded for having more flowers than weeds — something investors owning deeply discounted Holding Companies can relate to, with management teams often compensated on NAV growth. It’s a different, but also somewhat similar dynamic.

We prefer our Holding Companies, and individual businesses, to optimize their portfolio over team — watering the flowers and removing the weed.

A master Capital Allocator in Mark Leonard of Constellation Software, brilliantly combined the idea of combined metrics with: ROIC + organic growth. The beauty of this model, is how it captures both profitability, capital returns (also from acquisitive spend) and durability (organic growth) in one number. Return on capital and margins compensate for the drawdowns of looking at organic growth alone, and vise versa.

Genius is making complex ideas simple, not making simple ideas complex.
— Albert Einstein

H1 2026 updates

Several companies have reported H1 results so far, and we wanted to cover these before going over our usual Portfolio Update.

First out, our Holding Company MBB. It includes a business laying underground pipes, a cybersecurity player, a production line equipment business, polish toilet paper and one specialized wood producer, recently expanding into cork within batteries. And a lot of cash, which is partly invested in bonds, liquid large securities and gold.

MBB’s preliminary numbers on the 22nd of July, surprised us positively. EBITDA margins of 25,1% for the quarter and 21,8% for the half-year, up 700 basis points compared to H1 2025 (14,8%). That margin expansion, meant we had to increase our margin estimates for the full year, and now see 25% profit growth.

At a valuation of 8x EV / NOPAT (FY26), roughly 1-2% dividend yield, 3-4% share buybacks and a net cash position almost 50% of market cap, MBB delivers a unique combination of growth, capital returns and optionality currently.

MBB remains a top 3 holding of ours, and publish their full H1 report on August 13.

Next out is a Scandinavian Brokerage Platform, in the process of expanding to Germany — an investment that could lengthen their reinvestment runway. Still, they have lower hanging fruits too — like capturing market share within pension accounts.

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In short, we found that EQT’s market-beating investment returns and strong fundraising in recent years, have set themselves up nicely for the coming decade — with a long wave of carried interest not shown in today’s investment results.

Moreover, as institutional investors continue increasing their allocations to private markets — a market which have grown roughly five times faster than public markets since 2004 — capital is likely to continue concentrating with managers like EQT — with long and proven track records.

Disclaimer: This newsletter is provided for informational and educational purposes only. The views expressed are my own and do not constitute financial advice or recommendations to buy or sell any securities. The author may own shares in the equities discussed.

This writeup will be structured in 5 sections:

1. The Wallenberg Strategy: Long-term Active Ownership

2. EQT’s competetive advantage

3. How EQT makes money

4. The Wave of Carry

5. Acquisition of Coller Capital

6. Valuation

Long-term Active Ownership

Conni co-founded EQT in 1994 with the backing of Investor AB, where he was until then serving as Vice President. More than three decades later, Investor remains EQT’s largest shareholder and Conni serves as Honorary Chair. Investor AB has recently increased their stake to 14,7%, and continues to also be a major investor in EQT’s funds, and last year even co-invested with EQT to take Fortnox private.

We have followed Investor closely for half a decade. Historically, EQT have been priced at a substantial premium, reflecting its faster growth, higher margins, and asset-light model. But that changed in 2026. For the first time in its history, EQT traded at both a lower valuation and a higher dividend yield than Investor.

EQT’s Competitive Advantage

Private equity is ultimately a business built on trust and track record. Pension funds and other institutional investors commit capital for more than a decade, making past investment performance one of the industry’s strongest competitive advantages. Once a manager has consistently delivered superior returns, investors are often willing to allocate more capital rather than switch to an unproven competitor.

EQT has been one of the industry’s biggest beneficiaries of this dynamic. Despite growing into one of the world’s largest private markets managers, it has continued to deliver attractive investment returns while steadily taking market share across private equity, infrastructure and real estate.

We believe this is supported by two structural advantages. First, EQT has built a strong ownership culture and compensation model that helps attract and retain experienced investment professionals. This is not something we say, their retention numbers are best in class — similar to many Wallenberg firms.

Second, the firm operates through locally embedded investment teams with significant autonomy, combining deep local market knowledge with the resources of a global platform.

Together, these advantages have allowed EQT to scale without sacrificing investment quality—a rare achievement in private markets. As long as EQT continues delivering strong returns, its reputation should reinforce a virtuous cycle: better performance attracts more capital, larger scale expands investment opportunities, and greater scale further strengthens its competitive position.

How EQT makes money

EQT is a giant within the Private Equity industry. Actually, they’re a clear market share gainer, now number 2 (from #7 in 2019) globally in size within Private Equity, and climbing within Infrastructure and Real Estate as well (#6→5 and #40→10).

The key reason for this is simple: extraordinary investment returns. Below, you can see EQT’s outperformance vs public markets — 20% vs 10%. Although, one could argue comparing against MSCI Asia Pacific don’t make much sense. Still, the point stands even if comparing against a global index, which delivered ~12% over that time.

The way EQT achieved these extraordinary returns is also notable. Looking at the infographic below, we can see most of the returns came from sales growth and margin expansion — suggesting businesses under EQT ownership improved. Additionally, EQT benefited from a dual engine with multiple expansion, likely as a result of the higher business quality achieved during their ownership.

We think EQT’s strategy of buying high quality companies, similar to that of Wallenberg’s Investor AB, is a durable strategy. We wouldn’t be interested in EQT if they delivered these returns from financial engineering or adding risk through leverage for instance. EQT have proven they can generate attractive returns at modest risk levels (meaning little reliance on leverage and a diversified portfolio).

These returns are what EQT’s clients — such as pension funds, sovereign wealth funds, asset managers, insurance and other stakeholders — are willing to pay EQT to generate for them.

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EQT monetizes their investment skill in two ways: management fees and carried interest (”carry”).

Management fees are similar to how individual investors would pay 1-2% annually for an actively managed fund. As EQT launches new and larger funds, fee-generating assets grow — resulting in a predictable high-quality earnings stream.

Carried interest is more complex, but is the performance-based upside. After investors receive their capital back and and achieve a minimum return (often 6-8%), EQT holds 20% of the remaining profits. Carry is therefore less predictable than management fees, but highly profitable, as it requires little incremental costs for EQT.

The math is a bit complex, but the picture below illustrate a typical fund’s carry well.
From a fund delivering a 2x return ($1→2), EQT here charged 12 cents over the lifetime of the fund in management fees. The 88 cents in fund profits after management fees are split 80 / 20 between EQT and fund investors. From here, another split of 35 / 65 are between EQT AB as a company and it’s professionals. Consequently, EQT’s highest performing employees earn incredible salaries.

In simple terms, management fees provide the durable base and carry provide upside. And in the illustration above, a fund with a 2x return: EQT AB would earn 12% + 6% of their clients Invested Capital base over the lifetime of the fund.

If we take a quick look at EQT’s funds below as of Q2 2026, we can see to the far right, that the funds prior to launching 2020 are all with returns from 2,0 → 2,7x, and all other funds are also Above plan or On plan for the Expected Gross MOIC.

In the current fundraising cycle, we can see that funds like EQT Infrastructure VI from 2022 is only halfway invested, and BPEA IX launched in 2025 is less than 10% invested. From Dec 25 until June 2026, we saw the total Invested Capital go from €127 → 143 billion, meaning EQT is currently deploying capital in these funds.

In the older funds, we see EQT VII and EQT VIII have increased realized capital and less remaining capital than at year end. This means these funds are slowly being realized, capital is returned to clients and the carried interest is realized.

But a key observation here, is that the FAUM for the funds launched before 2020 is just €16,7 billion of the €155,4 billion in FAUM as of today. This means that EQT have already secured a stable earnings streams for many years, and are well on the way to secure a long wave of carried interest from the “above plan” funds in particular.

The Carry analysis, Acquisition of Coller Capital and the Valuation section will be exclusive for paid subscribers. A subscribtion currently costs €75 per year or 12 per month. Subscribers keep their rate if prices go up in the future.

And if you got interested in learning more about EQT, we can recommend Business Insiders’ podcast of EQT: Returns at Scale.

EQT’s Next Wave of Carry

Earlier we explained how carried interest works economically. Timing, however, is just as important.

Unlike management fees, which begin immediately after a fund is raised, carried interest typically arrives years later. EQT generally earns management fees from day one, but meaningful carry is usually not realized until investments are exited—often beginning around year four and continuing throughout the remaining life of the fund.

The chart below illustrates this relationship.

Historically, EQT’s funds have tended to realize relatively little carry during their first few years. Instead, exits accelerate later in the fund’s life as portfolio companies mature. Carry is only earned once investors have received their 6-8% return and the fund has generated sufficient profits, meaning timing ultimately depends on both investment performance and the exit market.

This timing matters because EQT experienced an extraordinary fundraising cycle between 2020 and 2023, launching several of the largest funds in the firm’s history. A similar dynamic occurs today, with the launch of EQT XI, additional strategies, and the acquisition of Coller Capital.

Those 2021-2023 funds are approaching the stage where exits normally begin. Let’s look closer at why we believe the upcoming cycle of carry will be unusually large.

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Disclaimer: This newsletter is provided for informational and educational purposes only. The views expressed are my own and do not constitute financial advice or recommendations to buy or sell any securities. The author may hold shares in the equities discussed.

PEG ratio

Peter Lynch popularized the term price/earnings-to-growth, or PEG. The logic is simple: investors are willing to pay a premium for more growth.

The PEG ratio is typically calculated one of two ways:

1. Forward PEG — one-year forward earnings growth estimates, priced against today’s earnings

2. Trailing PEG — last-twelve-months earnings growth, priced against those same earnings

We prefer stable businesses, those relatively easy to predict this and next year. A PEG ratio for a cyclical like Equinor, seeing 90% growth in 2021 for instance, would not make much sense to put into a PEG ratio exercise. Thus, other tools works better for cyclicals. Given that the ideas below are all stable, predictable businesses, we price them against 2026 earnings estimates and the growth compared to 2025.

You’ll also notice we use an EV/NOPAT multiple alongside PEG. It’s conceptually similar to price/earnings, but instead of net income, it uses operating profit (NOPAT). That strips out noise from things outside the company’s control — interest rate swings, one-off tax items — leaving a cleaner read on the growth of the underlying operating business.

^{EV / NOPAT = Enterprise Value (Market Cap + Net Debt) / (EBIT + amortization of acq. int. - tax normalized)}

The first company out is a firm we’ve owned for more than 3 years, and is a market leader within it’s niche, and has the unique combination of earning excellent returns on historical investments and still reinvest a healthy portion of profits every year.

NORBIT — 26% growth vs 21x price

The graph above clearly show the strong years NORBIT have behind them. Growth has been supported by several tailwinds, with increased defence spending receiving the most attention recently. This has transformed NORBIT’s Product Innovation & Realization (PIR) segment from a relatively low-margin contract manufacturing business into a faster-growing and more profitable operation, as defence customers increasingly prioritize local electronics manufacturing and higher-value products.

A closer look at NORBIT's two best segments — Oceans and Connectivity — shows that the company is also solving increasingly complex challenges through its own proprietary products. Whether supplying sonar technology underwater to support security during the Paris Olympics or enabling Toll4Europe's interoperable tolling solution, which allows truck drivers to use a single on-board unit across multiple European toll domains. Across both segments, the common denominator is that NORBIT delivers mission-critical technology in niche verticals.

And if you ever wonder what’s the competetive advantages are for Norbit to earn such high returns on capital, the word niche is key here. We remember Per Jørgen calling this out some years ago, when he mentioned that a company like Huawei would not be interested in the small niches Norbit operates in.

The irony, is that the same argument could also be a bear case longer term.
Consider a surveying vessel previously having a couple of Norbit camera’s and tens of employees, now being able to replace this with twenty unmanned drones being remotely controlled by the employees by land. Such an automation upgrade, would not only lower the cost and likely increase the amount of missions (jevsens paradox), but also result in a massive demand for such sensors. And if the end-markets Norbit operates in grows enough, they may ultimately catch the interest of larger players — thus increasing competition.

On the other hand, reality today still show a company delivering exceptional topline growth and expanding margins. And perhaps just as importantly, Norbit allocating capital to expand into more of these niches. They just completed the acquisition of WaterLinked, another company with 20%+ margins and similar topline growth as Norbit. This follows the acquisition of Innomar in 2024, which also expanded the problems Norbit could solve, and importantly for investors, generated an attractive return on incremental capital invested.

Given this, we think Norbit again trades below Intrinsic Value (given what we know today). It trades at a roughly 21x multiple, while being expected to grow more than this in 2026. Resulting in a PEG ratio less than 1. You can see the financial KPI’s we track for Norbit below, in measuring the EV / NOPAT, and measuring returns on capital.

The second company out is one we recently covered in a detailed writeup.

Adyen

We just covered Adyen in our recent writeup.

After years of being valued as one of Europe’s most expensive growth companies, the Dutch payment giant has derated significantly as investors became concerned about slower growth and increasing competition.

However, the underlying business remains highly attractive: Adyen continues to grow around 20% per year, maintains industry-leading margins and benefits from strong customer relationships with some of the world’s largest merchants.

The market appears to underestimate the durability of Adyen’s competitive advantage. While many investors view payments as a commodity, Adyen’s value comes from its global infrastructure, higher authorization rates and ability to simplify complex payment operations for large enterprises.

At today’s valuation, investors are paying a much more reasonable price for a business with software-like economics, strong returns on capital and a long runway for growth. If Adyen continues compounding earnings while maintaining its margins, the current multiple leaves room for attractive long-term returns.

The next company, is a family-owned company with 20% operating margins, similar high returns on capital, net cash, structural growth tailwinds and a 9x profit multiple!

To us, it seems like the market is mistaking this niche market leader for competing in the wider more commoditized market of it’s larger peers. With a 9x profit multiple, we ask ourselves — Is the market really extrapolating that last year’s margin contraction from a one-off cost item and investment in opening new locations will continue forever?

This, and the next 2 companies is reserved for paid subscribers.
If you consider becoming a paid subscriber, the cost is €75 per year or €12 per month. Subscribers receive a monthly letter covering lessons learned, portfolio changes, and exclusive updates on existing holdings.

The content is not AI-generated, nor will it ever be. I genuinely enjoy doing my own research, and one of the most rewarding parts is sharing our ideas while also receiving ideas from you readers.

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Investor AB shareholders have been well rewarded again in 2026, with the stock up 22% YTD. We will take a look at potential scenario’s for what future returns could look like. We’ve owned and covered Investor’s development closely for many years, we’ll leave some of our writeups here: Jan 24, Oct 24, Feb 25, July 25, Nov 25, Feb 26

Stock vs Fundamentals

If we compare Investor’s stock returns compared to the fundamentals, shown in red vs blue line below, we can start to see that Investor’s stock price is running ahead of it’s fundamentals. Something it also did from 2019 to 2021 in particular.

While most focus on this valuation gap, it’s hard not to overstate how impressive Investor’s underlying profit growth have been (blue line). That is the key reason for Investor’s outperformance.

If we add the roughly 2% dividend yield per year, we can quickly see that the 15% compounding rate does not match the stock’s 21% CAGR for the last decade. This is explained by multiple expansion — the market being willing to paying more today.

The key question we wanted to dissect here is therefore, is Investor now priced for subpar returns going forward or will (arguably) Europe’s best holding company continue outperforming?

Valuation expanding

It’s important to note that there’s nothing particularly dramatic about Investor’s Valuation getting higher. If Investor continues compounding earnings at more than 10% annually and the valuation multiple gradually normalizes again, the stock may simply need a year or two for fundamentals to catch up with the share price.

That’s perfectly normal — even for exceptional businesses. Great stocks do not move up to the right forever, and share prices often fluctuate far more than the underlying business performance. Investor shareholders experienced this in both 2017 and 2021, when the stock delivered essentially no returns for roughly two years despite the company continuing to grow its intrinsic value.

The challenge, of course, is that valuation changes are almost impossible to time. Many investors have hurt their long-term returns by selling their highest-quality holdings simply because they appeared expensive. A good example was 2023, when many sold Investor after its NAV discount narrowed to its lowest level in more than a decade. What they overlooked was the rapidly growing earnings power of Investor’s largest holdings, which went on to drive exceptional share price performance over the following years. As it turned out, the NAV discount also continued to narrow from 2023 until today, allowing patient shareholders to benefit from two powerful return drivers simultaneously: rising intrinsic value and multiple expansion.

Given that the probability of continued multiple expansion from today’s historically expensive levels, we view it unlikely that this multiple expansion tailwind will persist. However, that does not necessarily mean Investor is a bad investment.

It simply means we don’t think it’s possible seeing the 20% CAGR again from here, as there is just one driver of positive returns — fundamentals.

Forward CAGR scenario’s from today’s price

As of July 8 2026, the price of an Investor A share is 392 SEK per share. The adjusted EPS if you like is closer to 16,5 SEK — implying a profit multiple of 24x today. You won’t find these figures in your stock brokerage, as it’s a complex calculation.

Below, you can see our implied return potential for Investor stock today.

In our Base Case, we assume that Investor’s portfolio companies, on average, reinvest 65% of earnings while distributing 35% as dividends. Over the past seven years, the split has averaged roughly 70% reinvestment and 30% dividends, so our assumptions imply a modest shift toward higher shareholder distributions.

We further assume that these incremental investments earn an average 16% return on capital, below the 19% average achieved over the past seven years. This reflects our view that the portfolio is unlikely to benefit from the same degree of margin expansion that supported returns during the recent period. But it also reflects our opinion that management of both Investor itself and their underlying businesses will continue allocating capital well.

Finally, we assume today’s 24x EV/NOPAT multiple is modestly above a sustainable long-term level. Our Base Case therefore assumes the multiple gradually compresses to 21x, creating an annual valuation headwind of approximately 2% for 5 years.

The Joker — Debt

Investor’s historic NAV growth is truly impressive, but a figure that stands out in the table below is how small the net debt (yellow bars) is relative to their assets value.

We think of Investor’s low Net Debt to NAV (1,2%) as extremely conservative. Given that Investor is primarily an investment vehicle, they can always sell assets if they have liquidity issues. They also have their own cashflow within Patricia, dividends from listed portfolio and fluctuating cashflows from EQT.

Given this, we think Investor could tolerate a higher net debt ratio than most companies. And especially when you see their investment returns. For the last 7 years, we’ve measured the underlying ROIIC to be roughly 19%. That’s quite a jump from the 3,8% they paid in interest expense on their debt last year.

Consequently, we think Investor taking on more debt when seeing opportunity would be clever. During our time following the company, we don’t see Investor as a turnaround investor. Instead, they look for high quality durable assets, exemplified by them purchasing Piab Group for 20x EV / EBITA in 2018 from EQT.

We’d hope Investor would be more aggressive in the future, especially in times of volatility. We were a bit dissapointed not seeing Investor reinvest more capital during 2022, as that year presented many great buying opportunities for quality companies in our opinion — like those in Investor’s portfolio.

Holding Company Compensation

Considering that Investor consistently reports and discusses NAV as its primary measure of intrinsic value, one might expect management’s compensation to be tied directly to NAV growth. Interestingly, it is not.

Instead, long-term incentives are primarily linked to Total Shareholder Return.

We think this is an elegant design for Investor and Holding Companies in general. Rather than rewarding management for simply growing the asset base or maximizing reported NAV, it aligns them with the experience of shareholders. The objective becomes creating a portfolio that the market values highly and that delivers attractive long-term returns — not building a larger investment empire for its own sake. This also explain why Investor and it’s subsidiaries are so active in spinning off businesses.

Over the long run, succesfull reinvestments would either way result in a growing NAV per share, but by having an attractive portfolio, shareholder returns should follow that number closely. By linking incentives to TSR instead of NAV, Investor encourages management to focus on what ultimately matters: creating lasting value for shareholders, not merely increasing the reported value of the underlying assets.

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NAV premium or discount?

Most holding companies trade at a large discount to their Net Asset Value (like Exor). Investor is almost priced at a premium, with just a 1% discount. A reflection of investors’ confidence in management’s ability to allocate capital and compound value over time. Investors are willing to pay the same as the underlying portfolio is “worth”, because they trust Investor to create additional value through future capital allocation.

That premium, however, is far from guaranteed. If major holdings such as ABB, EQT, or Atlas Copco were to decline materially, Investor’s NAV would fall alongside them. Most of the time, you would then expect a similar drop in Investor’s shareprice.

However, given that Investor is a seperately traded vehicle, we often see that the shareprice of Investor can fall more or less than the value of their holdings (NAV). From a starting point with no NAV discount, the short-term downside risk is more material, as investors may sell their Investor shares to a greater extent than the likes of ABB, Atlas and EQT in times of panic. Thus, leading to the NAV discount returning.

There’s nothing dramatic in this either, it’s just a result of trading a vehicle that has two layers of trading — the underlying stocks beneath it and the stock itself. This is different to buying a fund for instance, where the price of the fund is directly tied to the assets they own. It’s a distinction to be mindful of, especially if Investor trades at a large premium. As of today, Investor’s discount is at 1%.

Latour shareholders in 2021 still have scars from trading at a 50% premium to NAV in 2021. If that scenario occurs, a rational capital allocator would issue more of those expensive shares of their own currency, in order to make more attractive investments.

Conclusion

We still like Investor AB, their management team and their investment portfolio. At the same time, we acknowledge that today’s starting point is less attractive than it have been for the previous years (lower underlying multiple and NAV discount).

The bull case is simply that companies like ABB, SAAB and EQT’s strong current earnings momentum will drive the underlying profit figure more up and to the right.

Capital allocation is where we’re focused most right now. Investor AB recently increased its stake in EQT — and we’re preparing a writeup on them, out in July. Perhaps their alternative asset manager is an interesting opportunity currently?

Among other holding companies, MBB stands out to us. We’ve covered them several times before, and while their portfolio doesn’t match Investor’s business quality, management is more opportunistic and flexible with capital allocation. Combined with a much smaller starting base, a massive net cash pile, a steep discount to NAV, and an excellent track record, we think readers will find our MBB writeups worthwhile too.

Links to both below.

Similarly, both Constellation Software and Topicus have excellent track-records and trade at historically low valuation points. You can find our writeups of Topicus and it’s recently acquired stake in Asseco Poland below as well.

“A famous lesson about a margin of safety, is that you don’t drive a truck that weighs 9,900 pounds across a bridge that says limit 10,000 pounds, because you can’t be that sure about it” — Warren Buffett

We recently completed our write-up of Adyen, and Buffett’s analogy captures an important investing lesson relevant to quality investors: buying a great business isn’t always enough — you also need a sufficient margin of safety.

Think of the bridge as Adyen’s future earnings power, and the truck as the expectations embedded in its share price. In 2021, the truck was simply too heavy at a €2,700 price. Investors were relying on perfect execution to generate attractive returns. The still impressive 23% profit CAGR Adyen delivered was not enough.

Fast forward to today, and the business continues to grow at a similar pace. The difference is that the truck has become much lighter. At around €820 per share, we estimate Adyen’s intrinsic value to be closer to €1,450 (the limit of the bridge), providing what we believe is a meaningful margin of safety.

And the best part — we still see the fair value increasing — a margin of safety in itself, and the advantage of buying quality (the value can improve over time).

One important note is that the limit of the bridge is in the eye of the individual investor, and is a number that should fluctuate as the business develops positively or negatively. For those disliking Adyen’s recent acquisitions for instance, they may see the limit of the bridge decreasing. For those worried AI enables merchants like Netflix to do payments in-house, they may see a bridge far less supportive, and would perhaps even want an even larger margin of safety than the current ~40% we see.

That’s the fun part of investing, we can come to our own conclusion on what something is worth, and the answer will gradually unfold to us in the future.

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Valuation

You may wonder how we got to that €1,450 number — we’ll share this and the usual Portfolio Update comes shortly after.

Below, you can see to the left: Today’s shareprice and our potential return scenario’s. And to the right: forward returns from a price of €1,450, around 9% CAGR on average.

Any investor will have different inputs to such a valuation framework. Some may wonder why we include a dividend yield here. That’s just Free cashflow accruing to shareholders — either as dividends, share buybacks or on the balance sheet. We only invest in management teams we think will allocate that capital well. And the recent acquisitions from Adyen made us lower the payout ratio (thus also higher reinvestments) and lower ROIIC (inorganic reinvestments typically yield lower ROI).

And if you wonder how we landed on around €1,450 as the fair value, it’s just where our base case delivered 9% CAGR (right picture) — a reasonable expected return given that most investors can generate 4-5% risk-free, and any attempt at investing in something else than that should yield a material upside given the higher risk.

Share Outsiders' Corner

For this month’s portfolio update, we’ll take a look at the portfolio as a whole, and also cover some key happenings — including acquisitions, insider buying, quality on sale (?) and (unfortunately) governance issues for a holding on our bench.

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Introduction

Why we ignored Adyen for years — and why we’re revisiting it now.
We also explore parallels to Apple under Steve Jobs, despite operating in a very different industry. Our thesis is that Adyen is still building their moat.

Lastly, we’ll look at valuation — where the market offers us this 40% net margin payments leader still growing 20% at a 4% owners earnings yield + net cash.

Two years ago, we studied the payments industry and Adyen stood out with their impressive merchant list (Netflix, Spotify, Booking etc), remarkable financial figures and market share gains.

Yet the stock was expensively priced, and we struggled to fully convince ourselves of the durability of the company’s edge. That edge had long been explained by two things: higher authorization rates through a single integrated platform, and seamless global expansion enabled by Adyen’s banking licenses across the world.

argued in a podcast in October 2025 that Adyen did not have a durable competetive advantage at all. Durable is perhaps the key word here, as it’s very clear that Adyen must have something special in order to capture market share for 2 decades in a row — including delivering payment solutions to the likes of Netflix, Uber and Spotify around the globe. And doing that while delivering industry leading net profit margins, around 40%.

Another point brought up in TDI’s podcast, was Adyen’s unique (in the payment sector at least) ability to grow without having done a single acquisition. But, just 8 months later, that changed, with the acquisition of Talon.One and Orb so far in 2026.

We’ve come to a different conclusion on Adyen than what we have found from others online, and thus decided to do a writeup. We will try to answer why Adyen’s sudden acquisition spree makes a lot of sense. And, why Adyen keeps hoarding cash, refusing to listen to shareholders asking for dividends and (more so) buybacks.

We’ll also argue why we think the most frequently read framing of Adyen’s moat is getting outdated (single integrated platform, no m&a and higher authorization rates), as we think those where just the first step of Adyen’s evolution.

To illustrate the shift, just listen to Adyen’s co-CEO Ingo’s first statement of Q1 2026:

What we are seeing across our customer base reinforces a structural shift in where value is created in payments.

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Table of Content:

1. Where Value is Created in Payments

2. Why Investors Lost Interest

3. The Direction of the Moat

   Dynamic Identification
   Similarities to Apple under Steve Jobs

4. Inadequate Capital Allocation?

   Adyen’s Acquisitions in 2026

5. Valuation

Where value is created in payments

Historically, most value in payments was created at the moment of transaction. The winners were those that could improve authorization rates, optimize routing, increase reliability, expand geographic coverage, and lower acceptance costs.

Those capabilities remain important today. In fact, they may still the foundation of Adyen’s strong competitive position among large enterprise merchants. However, payments are increasingly becoming embedded within broader merchant workflows, where there’s untapped potential for a company like Adyen to solve more problems for their merchants.

This shift is particularly relevant given current market sentiment. Many listed payment processors trade at low valuation multiples, reflecting investor concerns that payment acceptance is becoming increasingly commoditized. Fintech researcher illustrated the “crowded field” by his tracking of 80 publicly traded fintech companies. Given that every one of those 80 companies trade below all-time-highs and at low valuation multiples, there’s little doubt the market starts pricing in a future where payment processing gradually generate less economic value over time.

You can see Adyen’s topline growth vs other listed payment companies below. Since 2022, they’ve compounded roughly 15% faster than the average here. The numbers suggest Adyen has something very unique.

Our view on the competetive threat to Adyen is somewhat different. Payment acceptance has historically been an attractive business, but the strongest companies are increasingly those that solve a broader set of merchant problems.

Rather than competing solely on processing costs, they are becoming infrastructure providers that help merchants operate, grow, and scale globally.

Adyen appears to be one of the companies benefiting from this shift, as evidenced by its continued share gains against larger incumbent processors.

The most obvious example of value creation outside the moment of payment, may be the intersection of payments + software in the real world. Some first-movers in this space are Toast and Shift4, both capturing majority market share within verticals like restaurants, hotels and stadiums — by having capabilities that those offering just one piece of the pie can’t match. They did not win customers by lowering price, but by solving more problems for its merchants than just payments.

In Adyen’s instance, the story is more complex. Their initial success likely stemmed from their ability to go very deep on a single problem: payment acceptance. But in doing so, they set up an excellent integrated platform perfect to layer new competetive advantages on top of. Perhaps the most obvious example being Unified Commerce (both physical and digital merchants), where these merchants can leverage Adyen’s technology to recognize shoppers that have purchased either place. That’s much harder to achieve if your solution is stitched together from many vendors.

Another one is Adyen Uplift, which predicts which payment options to show, when to use fraud measures and not, and where to route payments to achieve the lowest costs and highest acceptance rates. They’re also trying to predict what loyalty tools to apply to which shoppers (Talon.one acquisition).

Another problem, quite different, is how enterprise customers typically have 40 bank accounts and their CFO’s spending a third their time managing this complexity. By using Adyen as the primary banking connection, CFO’s can centralize flows and more easily manage working capital in real time. This Intelligent Money Movement is an interesting development, and listening to management, this continues to scale.

Another one, is how Platform customers, like Deliveroo, can deliver Adyen-issued cards to their drivers, enabling them to receive their money right after delivery. Normally, drivers would have to wait for a payment reconciliation for this. Adyen is changing the money movement to become faster and more intelligent. And the proof is in the figures: “Issuing volumes growing 8x YoY as platforms embedded cards in their workflows”.

We believe Adyen’s key edge to follow is the below, which we’ve heard numerous times in our research about Adyen, both from Adyen themselves but more importantly from it’s merchants.

Why investors lost interest

And why the opportunity exist today?

The first explanation is simply that expectations where too high. In 2021, the company traded north of 100x Price to Earnings multiple. Even after more than an 80% drop in the valuation multiple (20x), the stock is just now priced closer to the market average.

Part of this is also explained from a broader selloff in payment stocks, with the likes of Global Payments, Fiserv and Paypal trading at single digit earnings multiples for 2026. On a relative basis, Adyen is therefore still trading at a premium multiple, and other payment peers have seen a similar drop in it’s shareprice.

Competetively, the market may also have been spooked by private companies like Stripe and Checkout.com gaining market share rapidly. From the table below, it’s clear that Stripe especially is firing on all cylinders (also boosted from acquisitions).

When comparing Adyen to Stripe, it is important to recognize that the two companies have historically approached the market from opposite directions. Stripe initially focused on startups, software companies, and digital-first merchants before gradually moving upmarket. Adyen, by contrast, built its business around large enterprises and is now expanding deeper within those organizations. While both are competing for the same attractive payments market, the opportunity remains large enough for multiple winners, as illustrated in the table above. And both seem to increasingly solve more problems outside of payments.

When investors hear news about Stripe or Checkout.com winning high-profile partnerships — such as Stripe’s recent integration with ChatGPT-enabled shopping — it is easy to assume that Adyen’s weak share price reflects a deteriorating competitive position. In reality, Adyen’s business is largely invisible to the average consumer despite its enormous scale. The company operates behind the scenes when we pay for our Spotify or Netflix subscriptions, book accommodation through Booking.com, or order food delivered by a Deliveroo or Just Eat Takeaway rider.

Adyen has also deliberately avoided aggressively pursuing small and medium-sized businesses, a market that often requires a large salesforce and significant customer acquisition efforts. Instead, the company remains focused on larger enterprises and, increasingly, highly complex organizations. Its expansion into Platforms further signals an ambition to enable other businesses to scale rather than compete for direct customer attention. Adyen does not appear interested in being the most visible player in the industry; it is focused on operating where it can create the most value.

It seems like where Stripe scale rapidly by going wide with a lot of merchants, Adyen rather goes really deep with fewer merchants. Best exemplified with Stripe having roughly 25x as many merchants as Adyen(5mill vs 200k), despite market share being much closer to eachother.

A few additional factors may also be weighing on investor sentiment. The company’s CFO is leaving the same year that Adyen completed its first two acquisitions, creating uncertainty around an important strategic shift. There is also frustration among investors who have watched the stock lose roughly half its value over the past five years while management has shown little interest in actively “fixing” the share price.

At this year’s AGM, for example, one shareholder repeatedly challenged management on why the company does not repurchase shares or pay dividends, arguing that its capital allocation strategy was inadequate. Management’s response was calm and straightforward.

First, they view their strong balance sheet as an enabler to obtain regulatory licenses and launch financial products more quickly and efficiently. Exemplified with their A- credit rating from the S&P.

Adyen’s fortress balance sheet may also help land big deals. For global corporations outsourcing mission-critical operations, a vendor's long-term solvency is a key consideration. Adyen’s substantial cash reserves mitigate counterparty risk, providing the financial reassurance necessary to win and expand large-scale enterprise contracts.

Moreover, management believes it can create more shareholder value by reinvesting capital into growth, demonstrated by the two acquisitions completed this year. But they also stated no intention to hoard cash forever. Given the roughly €4 billion net cash position to Adyen, we may start seeing capital returns or more reinvestments (like the two acquisitions) going forward.

The last clear reason we see, is a revenue deceleration from the high levels sustained through 2021. But even a 20% currency-neutral growth they target this year and for the next few would go under rapidly gaining market share in almost any industry, also payment processing. Thus, we don’t see this as a structural problem, rather that Adyen’s smaller base was much easier to grow from earlier in their journey.

For those familiar with McKinsey’s base-rate studies on growth persistence, Adyen’s trajectory is notable. Companies starting at ~35% growth typically see a sharp normalization, with average growth falling to ~15% by year three and ~7% by year five. Against this backdrop, Adyen’s deceleration from ~mid-30% growth in 2020–2022 to ~21% in 2023–2025 is meaningfully stronger than the base-rate expectation. And management expects the 20%-rate to continue for longer than 2026.

We don’t see why Adyen’s growth story is over. But the stock is priced for this to continue to decelerate.

To conclude, once Adyen’s multiple have moved closer to the average business out there, we should start asking ourselves — will this above-average business (20% growth + 45% net margins) really move towards average already?

The answer of this should lie in the direction of their Moat.

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The Direction of the Moat

The key question for us in evaluating Adyen as an investable idea is not what the moat is today, but where it is going. We are looking at a highly technical company in an industry we can’t fully understand. More specifically, we cannot precisely judge how difficult it would be for a legacy processor to replicate Adyen’s single integrated stack.

But we can observe something more important: whether replicating Adyen seems to get easier or harder over time. Our analysis lead us to believe the answer is the latter.

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“I mean it oughta just scream at you that you’ve got this huge margin of safety.”

Despite global indexes at all-time highs, we see many boring, stable businesses there now. Driven by their stock prices not being part of the markets momentum, despite their underlying businesses doing very fine (in some cases at least).

In this month’s letter, we’ll go through some things we learned this month, an update on a few key holdings and the Portfolio Update at last.

New Lesson for AG Barr

We recently called out AG Barr from the UK as an investable idea. With impressive incremental returns, a well positioned drink portfolio, net cash and a decade low earnings multiple (11x EV / 2026 NOPAT), we quite like AG Barr here.

That said, we typically avoid sizing positions up quickly. It takes time to learn the business and management well. As a result, AG Barr remains a small 1% holding for now, while we continue to learn more about the business and its durability.

One concern we’ve started to appreciate is recipe changes of Irn-Bru, as regulatory standards evolve — especially around sugar levels or certain additives. UK’s sugar tax could force Irn-Bru to another sugar reduction, which consumers did not like in 2018. With UK children’s sugar intake at twice what’s recommended, we can see why the government is pushing for such regulation. At the same time, there’s no doubt that AG Barr’s portfolio is gradually adapting to the changing demands over time, with more zero-alternatives and more drinks crafter with real fruit juice for instance.

Still, Barr is not in an industry with secular tailwinds, in contrast to several of our other holdings. That said, many beverage players seem worse positioned than Barr. With young consumers drinking less alcohol for instance, AG Barr’s exposure there is mostly their Funkin brand. And that category actually resonate well with young consumers, especially ready-to-drink cocktails.

Over the coming quarters, we’ll continue to follow AG Barr and learn more. For now, we think we’re being well compensated for the risks we can see. Another trait we like with AG Barr is that it’s more defensive than most of our holdings.

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ABB driving Investor’s performance

Since the end of March, Investor’s stake in ABB have grown from 199 billion SEK to 262. That means ABB currently occupies 21% of the Total Assets of Investor AB, almost double the weight of their second largest position, Atlas Copco.

A key reason for the growth in ABB’s market value is the Electrification segments Order Backlog. The chart below even understate the growth, as the LTM figure to the right only covers Q1, meaning that if growth was annualized, the red line will go through the roof. And their motion and automation segments, are still developing steadily up to the right, whereas their robotics segment was exited recently.

The catalyst behind the recent Order acceleration is AI infrastructure. The hyperscale data centre buildout requires vast amounts of power distribution and electrification equipment — precisely markets where ABB holds a leading position.

When it comes to Investor AB, this is another positive driver for underlying EBITA, which you can see illustrated below next to it’s shareprice. We continue to believe Investor’s portfolio is highly attractive longer term, and that the shareprice (black line) should follow the underlying EBITA (grey columns) over time. Let’s look at valuation.

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Q1 2026 was an eventful quarter for our portfolio, with a lot of shareprice volatility. However, the underlying fundamentals continue to be much more stable.

But before we’ll go through the recent developments, we just want to say a big thank you to the 57 new paid members who’ve signed up in the last year and all the 3,500 Substack followers in total.

Our inbox is always open for feedback or to discuss investing-related topics.

We’ll go through the development last quarter for some key holdings. These writeups are exclusive for paid subscribers, but the update for Topicus will remain free.

Going into this report, we thought the AI risk was overblown for Topicus. Mostly, due to the fact that horizontal software has some unique properties, including deep knowledge within a vertical’s workflows, often low cost and the challenges of maintaining such systems individually. For mission-critical software, you don’t want to risk not being able to operate your business to save a few bucks in annual expense. However, we also acknowledge the speed of development is fast, and that some of Topicus’ many subsidiaries are probably in more risk than others.

Another thing that helps Topicus, is simply their business model. At their reinvestment rate of the last 5 years (100% at 19% ROIIC), roughly half their revenues and profits would stem from new businesses within 5 years. This is a strength of Topicus’ (and big-brother Constellation Software) acquisition playbook — their high hurdle rate (low acquisition prices) is a protection against future disruption.

In Q1 2026, the key number to watch, maintenance organic growth, was up 7% (5% total organic). This means there are still no signs of AI disruption in the numbers yet.

Despite this, the stock went down after Q1. We think the likely answer are these two.

1. Acquisition spend was low this quarter, only €18 million (~15% reinvest. rate annualized).

2. Net Income down by 21% to €55 million (€70m).

We find both to be not meaningful, first one due to the fact that Topicus acquisition spend is lumpy, and they just had a record year of deployments in 2025. Second, the Net Income was not driven much by fundamentals, and rather some lumpiness in working capital changes, reporting of their Asseco Poland stake and higher interest payments, as they invested a lot of capital last year (and increased debt).

A third reason could be that it’s too early to tell whether the AI risk is real. This is understandable, as the multiple of Topicus stock has fallen from very high levels. At such prices (50-60x profits) you don’t have much headroom for things going wrong.

However, a day later (May 7th), Topicus stock went up 6%. Most likely from news of another acquisition in the US, of Keypoint Intelligence. Just a couple days later following the acquisition of Desyde in Netherlands. Acquisition timing can be lumpy, as they should be.

At $90 CAD per share, you can see the potential for different growth assumptions. We deducted the Asseco Poland stake from enterprise value.

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This issue is free for all subscribers.

Summary:
Not every position earns its place. This quarter, one didn’t — and we exited before it could do real damage. That’s the bench working as intended, a key part of how we think about portfolio allocation. A topic we’ve found surprisingly harder than finding great ideas.

Alongside that, we go through three bench holdings (small weight) and two watchlist ideas — including a defensive UK compounder at ~12x earnings, a John Malone-linked spin-off trading at ~11x cash flow, and a holding company with exposure to the AI buildout.

Disclaimer: This newsletter is provided for informational and educational purposes only. The views expressed are my own and do not constitute financial advice or recommendations to buy or sell any securities.

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We recently made a mistake. After our recent Serial Acquirer writeup, we initiated a small position in Momentum Group — while passing on Lifco, a clearly better business at a slightly higher multiple. Lifco’s quality became even more evident after Q1 2026: Momentum delivered -6% organic growth, Lifco came in positive, as usual. The market reacted accordingly, sending Momentum Group down ~17%.

So why did we choose the cheaper, lower-quality alternative?
We had studied Lifco years earlier at roughly half the price. That reference point probably stayed with us — making it harder to justify buying a better business at a higher price. This is a classic case of anchoring bias — something we’re aware of, yet didn’t fully overcome here.

The important safeguard here was position sizing. Momentum was intentionally kept small. The “bench” is designed exactly for these situations: to let conviction either build or fade before a position earns meaningful capital allocation. In this case, conviction faded, and we exited with a modest loss.

This stands in contrast to our investment in Norbit three years ago. We scaled in gradually, conviction strengthened with each report, and it has since become our largest position today.

This experience reinforced something we increasingly believe: finding great businesses is often easier than allocating well between them. A structured bench makes that allocation process meaningfully better, at least in our experience.

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Why the Bench matters

Over time, we understand businesses better — both their strengths and their flaws. Our decision-making seem to improve the longer we’ve followed or (more so) owned something. Keeping new positions small gives us time to refine our view before they meaningfully impact returns. If we sized up Momentum Group immediately to 10%, we wouldn’t have a similar opportunity to reassess without impacting returns similarly

Another lesson this year is what a lack of diversification brings — volatility.
Volatility is often viewed as a measure of risk, we think the bigger risk lies in not being able to participate in upside, for instance with the exceptional earnings from the Google and Amazon’s of the world, or the recent rally in energy-related stocks.

However, predicting which style wins when is hard.
Fairfax Financial — a stock that seems to appear every so often in our X feed — is a good illustration. In their 2019 Annual Report, they called out FAANG stocks as trading at absurd valuations. With the benefit of hindsight, that call was spectacularly wrong: those stocks have since returned 3 to 6 times. Similarly, Fairfax themselves have delivered similar returns over the same period, through an entirely different approach.

Given the challenge in predicting the future, we are now more mindful of using the bench and watchlist to look for traits our current key holdings lack. For instance, our latest bench addition, is a defensive consumer business trading at 12x profits, expecting double-digit growth this year.

It’s a very different business from what we currently own: 95% of revenues in their home country gives minimal risks from tariffs and geopolitcal instability. And the defensive traits means it usually performs well in tough economical times.

Similarly, on our watchlist, we have one idea that benefits from the current AI investments. Exposure our portfolio currently lacks. We’ll now go through our 3 Bench Holdings (<3% weight) and 3 Ideas on our Watchlist.

Harvia (3% weight)

Harvia is the leading player in a historically 5% growing global sauna market, now expected to grow faster going forward. A leading brand with stable operating margins around 20% and efficient scale-advantaged sourcing + production. Taking a consolidator role, by buying up attractive assets within the fragmented sauna industry. Significant growth markets: US, Japan and China to name a few, whereas replacement demand provides recurring revenues in well-established markets closer to home (Finland).

To fuel the significant growth Harvia has had, we estimated a ~70% reinvestment rate, while paying out a 50% dividend payout ratio (both in relation to NOPAT). Net Debt to EBITDA have remained stable around 1x, exactly what a high ROIIC business enables — growth, free cashflows and low debt. We estimate around 19% ROIIC.

We believe Harvia is well positioned for double-digit profit growth, while paying a 2%+ dividend yield. Given the growth potential and market-leading position, we think the stock is fairly priced around 20x EV / NOPAT today (36 EUR per share).

We have avoided making Harvia a larger position so far, due to the price tag well north of 20x EV / NOPAT for a long period. Recent share price pressure provided an attractive entry point. We’ve owned Harvia for a year now, and consider scaling it up.

Scottish Mortgage Investment Trust (watchlist)

We’ve learned that we prefer sleep-well businesses — steady growth, lots of free cashflows and easy to understand businesses.

However, the recent AI buildout we did not participate in would require a different investment style. One which the Scottish Mortgage Investment Trust have finetuned over a century. Early investments, fast growth and Long holding periods.

They benefited from Nvidia’s and Tesla’s surging demand, transitioned those position into more Taiwan Semiconductor and ASML. Further, they invested in the private companies SpaceX and Anthropic, both of which could IPO at multiples higher prices than what Scottish Mortgage paid for their ownership stake.

We think Scottish Mortgage is a great way for us to outsource research into the type of companies we would not have an edge in studying, while getting exposure to the largest megatrends of the world. In the last years, they’ve also demonstrated that they’re willing to buyback their own shares when trading at a large discount to NAV.

Momentum Group (recent sale)

An industrial market leader comprising 37+ decentralised businesses. We covered the company in our Serial Acquirer Writeup; key figures are shown below.

In our ROIIC calculations, we’re including our expectations for 2026, which is now showing flat EBITA and negative organic growth, which hurts ROIIC, as plenty of investments will occur this year. 12% ROIIC is not the return we’re looking for, but this is calculated from peak margins in 2021. The comparison point is more favourable from 2019 or 2022 for example.

Organic growth of -6% is not necessarily structural, but it reinforces an initial concern: Momentum Group operates with structurally lower EBITA margins than peers such as Lifco, potentially signalling lower underlying business quality. This concern is further amplified when compared to other industrial acquirers—AQ Group, Lagercrantz, and Diploma—which continue to deliver solid organic growth.

We also note a shift in tone from CEO Ulf Lilius. In Q4 2025, commentary pointed to improving conditions into 2026. However, in the Q1 2026 call, that optimism appears to have faded, with guidance now implying a weaker outlook for the year.

Our long-term view on Momentum Group remains positive. Nevertheless, we expected the Industry segment, given its exposure to aftermarket demand, to show greater resilience. However, the recent performance suggests that a significant share of revenues remains tied to underlying activity levels, making the business more cyclical than initially assumed.

The challenge is compounded by valuation. Even after a ~17% share price decline, the stock trades around 21x EV/NOPAT, offering limited margin for error alongside a modest ~1% dividend yield.

From an opportunity cost perspective, alternatives look increasingly compelling. Volati trades at a ~40% discount, with indications of exiting its current downturn and a planned spin-off of its most cyclical segment — potentially leaving a higher-margin quality core. Alternatively, one could justify paying a ~20% premium for Lifco, given its superior margins, more consistent organic growth, and similarly disciplined acquisition strategy.

We have not reached a final conclusion, but for now, we do not plan to increase our position in Momentum Group despite the recent share price weakness.

Now to the newest bench holding, a defensively positioned UK small-cap at a 12x profit multiple and expected to grow at low double-digits this year. Following this, we share a watchlist idea trading at 10x free cashflows and recently announced a significant acquisition, perhaps the first of many.

A.G. Barr (2% weight)

A portfolio of drinking brands in the United Kingdom, with Irn-Bru as the enduring standout - the only soda brand beating Coca-Cola in a developed market (Scotland). Today, they have 3 other key brands - Boost, Rubicon and Funkin - all acquired at attractive prices and grown organically since. Along with several smaller brands, and partnerships with famous products like Bundaberg, San Benedetto and Snapple.

AG Barr has been a steady grower with low reinvestments around 50% of NOPAT since 2019 and dividend payouts of 40%, resulting in an increasing net cash position. However, the introduction of management compensation tied to EPS growth and relative Shareholder returns to the stock index, means the company now requires high reinvestment rates. The company has clearly stated the ambition to reinvest more.

Luckily, AG Barr has historically been a disciplined capital allocator, with a target of around 20% return on capital employed. Add double-digit EPS growth targets for the compensation to fully vest and 20% ROCE together, and you would have a compounding machine, not something the market is pricing in at 12x EV / NOPAT.

We believe AG Barr will continue increasing their reinvestment rate, and grow high single-digit to low double-digits. The table below does not take into account that the net cash position allows a higher dividend payout while reinvesting. At 12x EV / NOPAT today, around 21% ROIIC and the resilience of a well-tasting drink - we think AG Barr is a more defensive addition to the portfolio, but with upside.

Recent News: The 2026 acquisition of Fentimans at 1x sales, a low-margin century-run family brand, looks like a synergy-play, where AG Barr’s manufacturing scale may generate higher margins for the Fentimans products.

GCI Liberty (watchlist)

We’ve been following GCI Liberty for several months and came away positively surprised by its acquisition of Quintillion.

Quintillion adds a highly complementary network footprint, strengthening redundancy across GCI’s infrastructure in rural Alaska. In practice, this means improved reliability: where one network is vulnerable, traffic can be rerouted through the other. This also serves as a counter to the risk of loss of rural customers to Starlink.

(See video below for more on the transaction and its rationale.)

The deeper investment thesis here is not just about getting a complementary network, it’s about John Malone making this into an acquirer with durable cashflow streams, an advantaged tax-benefit following it’s spinoff in 2025 and a proven acquisition strategy of Malone & Co. Following the spin-off from Liberty Broadband, the small $1.3 billion company GCI Liberty benefits from the M&A knowledge from the broader Liberty Media Group and John Malone himself, as chair of the board.

The stock is now down to $34 per share, or a $1.3 billon market cap. At an Enterprise Value of $360 million, Quintillion is a significant investment for GCI.

The deal is done at ~7x EV / EBITDA, and GCI expects $20 million of cost synergies over the next 2 years, plus the benefit of GCI’s advantaged tax assets being used.

Let’s apply some rough napkin math:
GCI Liberty generates approximately $400 million in annual EBITDA on $1,046 million in revenue. At a capex intensity of around 18% of sales (19–22% range last 3 years, guides lower) — pre-tax profit lands near $200 million. Strip out stock-based compensation and apply zero cash taxes given the company’s unique tax shield, and you’re left with roughly $190 million in pre-interest free cash flow from the core business.

Layer in Quintillion’s ~$25 million in annual FCF and approximately $10 million of first-year cost-synergies, and the post-acquisition run-rate lands around $225 million. Against an enterprise value of roughly $2.3 billion — inclusive of the Quintillion purchase price — the stock trades at approximately 10x EV/FCF.

That price seems low to fair for the defensability this business offers, but very low if John Malone succeed in his ambition of turning this into an acquirer. With the first acquisition underway, the next move may take GCI beyond Alaskan broadband. That would at least make the acquisition-story more compelling, given the lack of growth opportunities within Alaskan broadband.

We recommend Chris Waller’s substack if you are interested to read more about GCI Liberty.

Hidden Gems Investing

GCI Liberty (GLIBK) Acquires Quintillion: What is John Malone up to?

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

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3 months ago · 22 likes · Chris Waller

That’s it for today, let me know if you have any questions or ideas to look into!

All the best,
Ole

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Two events shaped the portfolio this month: we trimmed our position in Investor AB, and exited Secure Waste Infrastructure following a bid from GFL Environmental.

Investor AB: Our estimated CAGR going forward now at mid to high-single digit.
Secure Waste: Full exit at a 36% IRR over 1-year following GFL’s bid for the business.

And to the lesson of this month. After we studied the Serial Acquirer space again, we appreciated more that growth is not created equal. We illustrate this with two key holdings - Norbit and Shift4 - and why their stock returns turned so different in the last 5 years (1000% vs -50%), despite similar growth (~40% profit CAGR).

NORBIT vs SHIFT4

We gave Claude access to our detailed spreadsheets on both companies to generate the illustration below. The core takeaway is simple: the difference in ROIIC led to very different capital requirements — and the market responded accordingly. Norbit was re-rated from 16x to 26x EV/NOPAT, while Shift4 was punished from 42x down to 15x.

Two similar growing companies had a 20x variance in shareholder returns!

While the answers today are glaringly obvious Norbit was the winner, we think timing of investments are an underappreciated factor in both cases.

Norbit’s elevated ROIIC today reflects sector tailwinds and prior years of groundwork bearing fruit — including a decision to invest in their Norwegian manufacturing facilities at a time when most peers were outsourcing. Shift4, by contrast, are currently within their heavy investment phase: acquiring key assets for future cross-sell opportunities (including the massive acquisition of Global Blue) and securing new contracts by subsidising merchant onboarding.

That last point deserves more attention in understanding ROIIC. Buying out a merchant’s residual commissions to accelerate a switch, or giving away hardware for free, are upfront investments that drag on near-term returns. But once a merchant is on Shift4’s platform, that cost disappears into the rear-view mirror — and the toll-booth kicks in, quietly taking a small share of every transaction the merchant processes, year after year, with limited maintenance investments. The stickiness is the point. Shift4 has deliberately focused on verticals where switching is painful: stadiums with hundreds of software integrations, hospitality, and complex environments. We think that’s a moat built through years of patient investment — not currently reflected fully in trailing ROIC. Thus, once Shift4 slows down on growth spending, the ROIC should expand.

The thesis for Shift4 is therefore relatively simple: Key investments for success in the coming decade has been made, and as a result, debt is at a record 5x NOPAT level and ROIIC is at record lows, scaring investors. But, behind the ugly ROIIC and debt level, is a business ready to generate a ton of cashflows going forward — enough to pay down much of their debt, buyback stock and reinvest a healthy portion going forward too. The first proof was the North American Business in Q4 2025, not impacted by acquisition impact, expected to grow mid-double digits in 2026.

We may be wrong, which is also why we don’t size up positions more than the low double-digits for individual businesses. That’s still meaningful positions in our portfolio, representing almost half a years’ salary for ourselves.

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Portfolio Update

The past year has been challenging for the portfolio, with a -11% YTD return — largely driven by our decision to concentrate into Constellation Software and Shift4 at a time when software and payments became some of the most disliked sectors in the market. That said, zooming out we’re still up 102% over 3 years, and since inception in late 2021, we’ve compounded at a money-weighted CAGR of 13%. Albeit with more volatility than most indices, a price we’ve paid for concentration.

Activity has been relatively limited in recent months, aside from adding to a few key holdings. To better visualize our highest-conviction ideas, we revisited our models and estimated forward CAGRs with a ±1 standard deviation range. The goal is simple: be prepared to act decisively when opportunities arise — and focus on ranges of outcomes, with the aim of being directionally right.

This framework highlighted volatility in names like Norbit, Medistim, Eurofins, and MBB earlier this year — allowing us to increase our ownership at what we thought was attractive levels. Below, you’ll find our estimated CAGR for each of our holdings.

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I’ll be increasing the price for new subscribers tomorrow, Monday, April 13th. For current subscribers, nothing changes — you’ll remain on your current plan going forward.

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As this has grown, I’ve become increasingly focused on businesses led by exceptional capital allocators. Over time, I’ve found it easier to hold onto companies where management is well-incentivized and has a clear track record of rational capital allocation.

Eurofins Scientific and MBB SE are two such examples — still underappreciated by the market, in our view. It’s no coincidence that both are actively buying back shares (links to writeups below).

These are the types of businesses we will continue to focus on.

If you or someone you know has been considering joining, you can still lock in the current price before the change takes effect tomorrow. Annual plan: $60 → $75

I’m grateful to have you along for the journey.
— Ole

A year and a half after our first deep-dive into serial acquirers, we return with an updated look at seven elite capital allocators. If you’re new to the topic, we recommend starting with the original piece from 2024 — it lays the groundwork for what we cover here, particularly around return on capital and reinvestment rate.

This years’ writeup is available to everyone via the PDF below. If you’re on your phone, download it and open it from there.

Serial Acquirers 2026 Free Writeup

1.45MB ∙ PDF file

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The Valuation Backtest and Discussion at the end are exclusive to paid subscribers.

A note on pricing. We’re raising the annual subscription from $60 to $70 from next week. To everyone who has subscribed, both paid and free — thank you. It means more than you might think.

All the best, Ole

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Today’s piece borrows a framework from elite sport to work through a couple of biases we’ve run into. And as always, there’s a Portfolio Update at the end.

But first, a quick note. It’s been exactly one year since we launched the paid tier, and we wanted to say a genuine thank you. We’re now at 3,500 total followers and 60 paid members — something we don’t take for granted.

While we’ve been quite busy over the past six months running two businesses, one of which was founded this January, things are now settling. Our next piece will be an update to our most-read Serial Acquirer writeup, and we’re hoping it’s something worth waiting for.

One heads-up: from the 1st of April, the annual price moves from $60 → $80. If you’ve been considering a paid membership, now is a good time to lock in the current rate.

Thanks again for being here.
All the best, Ole

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What we learned about Investing from Sports

The Bench
A winning sports team rarely stays at the top forever. Over time, two things tend to happen: competitors catch up, or the players grow too comfortable.

Within any soccer team, there’s a starting eleven.. If those players feel their place is guaranteed, the small edges may start to slip — fewer extra sprints, a bit less intensity, slightly later mornings. Nothing dramatic, but it adds up. At the other extreme, you can turn over the entire squad with hungry players every season but lose the continuity that made the team strong in the first place.

The best teams strike a balance. They consistently introduce a few hungry new players each year, and suddenly the starting eleven has to earn their place again. The same applies to individual sports, where a deep pool of athletes pushing for limited spots forces even the best to go the extra mile, because their position is never secure.

I’ve seen this firsthand after years working in and competing in elite sport. And we believe applying the same lesson transfers well to portfolio construction.

Portfolio Allocation and Bias
If you’re newer to investing, it’s worth spending time understanding the biases you carry. They’re easy to underestimate early on, but you eventually realize they quietly shape almost every decision you make.

Two I’ve personally struggled with: the constant pull toward new ideas (“grass is greener on the other side”), and almost the opposite: constraining myself by thinking we always have to be long-term, even when something better exists.

This is where the sports lesson applies. My portfolio should have a bench.

The purpose isn’t to trade more. It’s to introduce competition.
A bench forces comparison: why have X% in this company, when another option looks better overall? And hopefully, works the other way too — a new idea wasn’t as strong as you thought, and your existing holdings may have had qualities you hadn’t fully appreciated.

When writing about Latour last week, it made me appreciate better how strong Investor AB’s governance is. No real key-man risk, succession already solved, a portfolio structured for stable cash flows across cycles, and the Wallenberg Foundations providing long-term continuity in ownership and strategy.

Without something to measure against, it’s easy to forget why you own what you own. Your best idea may already be in your portfolio.

How we apply the Bench in Practise

In practice, 90% of our portfolio is rarely replaced. But the last 10% change more frequently, we might introduce a handful of new companies in a year, but only a few survive longer than twelve months. There are many ways to invest, and this is simply what works for us. Your approach may look very different, and your strategy should reflect that.

How would you approach sizing up a new idea?

We’ve noticed that conviction tends to grow once we own a business — you read the reports differently, pay closer attention to how management communicates, notice things you’d otherwise skim past. So when we got interested in Kontron recently, we didn’t open at 1% with the intention of sizing up later. We opened at 1% because that is the right size for this stage — enough skin in the game to follow it seriously, not enough to be committed before we’ve seen them execute. With earnings next week, that’s a meaningful data point in deciding what comes next.

We’ve made the mistake of sizing up too early, we didn’t open at 1% with the intention of sizing up later.. The cost of that discipline is occasionally being slow to add into a great opportunity. We think that’s a worthwhile tradeoff — moving carefully means fewer large mistakes, and on the bench, that’s exactly the point. Most of these positions won’t make the cut. That's exactly what the bench is for.

If you find interest in the topics discussed above, you would probably love the book: What I learned about investing from Darwin, by Pulak Parsad. If you’re too busy for that, check out his very quick lesson summary in half a minute below.

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For the first time in 8 years, Latour is priced at a discount to its Net Asset Value. Let’s look under the hood of this $14 billion Holding Company, and ask whether the market has handed us a good entry point into one of Europe’s finest compounders.

Latour was founded in 1985 by the Douglas Family, who remain the controlling shareholder to this day, with four decades of skin in the game.

With the press of a button, we have the chance to partner with these market-beating capital allocators and the portfolio they’ve quietly compounded for 40 years. 15% annually over the last 25, a return that puts most institutional investors to shame.

But perhaps just as impressive as the returns is the patience behind them. Look 20 years back, and you’ll find roughly 70% of today’s portfolio holdings there!

This is not a private equity firm with an exit mandate and a short-term horizon. Latour operates as a permanent home, predominantly for industrial businesses. And the crown jewel is Assa Abloy: the $40 billion global champion in doors and locks.

And yet here’s the detail that separates Latour from most holding companies: its outperformance has not been driven by its largest holding. The portfolio ex Assa Abloy has actually outperformed the market-beating giant itself — a dynamic that stands in sharp contrast to another Hold’co like Exor or Prosus, where the growth story has been driven more by their largest investment alone.

This, more than anything, may explain why this holding company has commanded a premium to NAV for the better part of a decade. That premium is now gone.

Content:

• Management & The Douglas Family

• Track-record

  • NAV Premium / Discount

• Latour’s Portfolio with extensive Data Breakdown

  • Wholly-owned

  • Listed Holdings

• Underlying Valuation

  • Relative to Investor AB & Lifco

  • Market Optimism turn sour

• Conclusion for our own Investment Journey

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Management & The Douglas Family

The irony of partnering with the Douglas Family is that it costs less than the average fund manager — despite a vastly superior track record. Latour runs a Headquarter of only 16 people, with management costs below 0.1% of assets. The family owns 76% of the company and the group is designed to empower decentralized operations.

Gustaf Douglas (1938–2023): The Architect
Gustaf is the man who engineered Latour. Pushed out of his CEO role at Sweden’s largest newspapers for running conflicting private investments, he pivoted to industry and in 1985 negotiated a corporate swap — exchanging his stake in the Skrinet group for a subsidiary (AB Hevea) that came with a 95% stake in Securitas and 25% in Trelleborg. AB Hevea was renamed Investment AB Latour in 1987.

His philosophy was clear: “My role would be an active owner — not to vote with my feet, but to take responsibility for governance and control.”

ASSA ABLOY is a key part of the Latour’s story, which Gustaf co-architected in 1994. Latour remains its largest shareholder today, and the stock is a 100-bagger since the early 2000’s. Such concentrated long holdings remains the backbone of Latour’s long-run returns, benefiting from compound interest.

Gustaf passed away in May 2023, aged 85, having compounded the share price at ~22% annually since inception — a 3,000-fold return over 40 years.

The Keys Pass to Eric & Carl
Gustaf didn’t hand over Latour suddenly — he handed it over slowly and deliberately. Eric joined the board in 2002 and Carl in 2008, both spending years learning the business alongside their father before Gustaf’s passing in 2023 marked the formal transition. Succession done well.

The brothers combined stake carries ~79% of votes, protected by a dual-class share structure common among Scandinavian holding companies. One meaningful distinction from Investor AB, however, is that the Wallenbergs hold their stake through family foundations — a structure explicitly designed to bind future generations to a common mission and prevent fragmentation. Eric and Carl own Latour more directly, which raises a legitimate long-term question: what happens in generation three?

On operations, the family governs — they don’t run the business. The previous CEO, Jan Svensson, ran Latour for 17 years and delivered ~1,500% total return during his tenure, nearly 3x the broader market. His successor, Johan Hjertonsson, was appointed in 2019 after running Fagerhult — a Latour portfolio company — for a decade. The family watched him execute with their own capital at stake before handing him the role.

CEO tenure of 17 years and insider hire says a lot about the culture within Latour. The Douglas family clearly thinks in decades rather than quarters.

A final encouraging signal: Insiders, including Eric and Carl, have been adding shares at current prices. Buying more of something the majority of your wealth is already tied into is a strong statement — and notably, these purchases came after the valuation premium collapsed, not during the frothy years of 2021.

Track-record

Similar to Investor AB, Latour has had market-beating results both from its Listed Investment Portfolio and Wholly-owned Portfolio over time. Remember, the majority of investors (both retail and professionals) don’t beat the index over time.

Below, you can see the Financial Results of the Wholly-owned Portfolio. Compounding sales at high rates with improving profitability over time.

These 2 charts combined show that Latour is both a great capital allocator and a good operator of businesses. Additionally, they’ve been able to partner with other great capital allocators / operators on the public stock market. This creates what we previously referred to as a Dual Engine for Growth for Investor AB back in 2024.

Net Asset Value Premium / Discount

Given this track-record, we think it could explain some of the unusual high premium the market has assigned to Latour’s Net Asset Value (NAV) in the past. While many Holding Companies trade at a substantial discount to its assets, the market decided to price Latour at a 70% premium late 2021!

That premium is now gone and the portfolio trades again close to NAV. This explains the poor 5-year returns for Latour stock.

A good argument for why the discount has closed, is that in recent years, the NAV growth have actually underperformed the SIXRX index, lastly at 2025 with only 2,4% growth vs the 12,7% increase for the index.

While a premium or discount to NAV usually gets most of the attention, there is little doubt that management and the controlling owner, The Douglas Family, has done an excellent job compounding the underlying profits of Latour over the long term.

Latour’s Portfolio

Wholly Owned Holdings (47% of NAV)

The main takeaway from the Wholly Owned Portfolio is that it’s a high quality Industrial. Organic growth averaging more than 5% combined with solid acquired growth, means this portfolio have compounded EBITA by 13% annually since 2018.

The organic growth has on average been 2% higher than the inflation rate in Sweden. Operating margins have expanded and Return on Operating Capital have been stable around 14 → 17% in this period. Note that the wholly owned companies also conduct acquisitions by themselves. This gives the Group a high reinvestment rate, which we can see in the growth in Operating Capital below.

The wholly-owned portfolio has been a growing share of NAV over time, but it’s still the publicly listed holdings held for decades, that is most meaningful for Latour.

Listed Holdings (64% of NAV)

Below, we break down the key figures for all the Listed Holdings. In the valuation section further down, we examine Latour’s share of these profits and how they have evolved over time — and the results were more surprising than we expected.

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This was not a sophisticated cyberattack. It was weak security in connected devices. As connectivity also expands into higher-stakes industries than household appliances, security shifts from a feature to a neccesity.

This is where Kontron operates — supplying embedded systems and connectivity solutions to mission-critical infrastructure, like components used in the F-16. This writeup aims to get a sufficient understanding of the Austrian €1.4 billion firm Kontron, to see whether it can be an interesting Investment Opportunity.

Disclaimer: This newsletter is provided for informational and educational purposes only. The views expressed are my own and do not constitute financial advice or recommendations to buy or sell any securities. The author did not own shares in Kontron as of the time writing this.

Overview

We will go through these topics, starting out with a comparison to a firm we know well.

• Kontron vs Norbit

• Business Model & Capital Allocation

• Capital Allocation & Growth Opportunity

• Management & Incentives

• Risks & Acquisition of Katek

• Valuation

Kontron vs Norbit

Kontron reminds us a lot of Norbit. And not just because you can find some of their products in similar places. We’ll go through 5 key traits we think they have in common.

1. Niche, high-specification components

Both companies operate in technically demanding niches, supplying components where reliability is critical and failure is costly.

Technical complexity and niche end-markets acts as barriers to entry. Customers require high performance, consistent up-time, certification, security, software and long product lifecycles. It’s very different than commoditized electronics.

2. Local manufacturing and in-house R&D

While Kontron did struggle during the chip-shortage of 2022, they are still one of few European manufacturers of certain components, and with their in-house R&D department (3,600 engineers and €200 million spend), they also seem to benefit from the “Made in Europe” label helping win some contracts where that has value.

This is especially relevant in the Defence sector.

3. Having acquired 20+ companies

We’ve shared a lot of research on Serial Acquirers before. Where both Kontron and Norbit is not considered typical serial acquirers doing multiple deals per year, they are more a hybrid — both investing organically and doing 0-2 M&A deals annually.

We’ll look closer on a recent deal Kontron further down.

4. Outsider CEO’s

Both Hannes Niederhauser and Per Jørgen Weisethaunet have unusually high stock ownership relative to their salaries. Hannes was paid just €8k (!) in total remuneration in 2024, whereas Per Jørgen was closer to €690k (60% of this tied to bonuses).

Comparing this to their ownership stakes, Hannes with €73 million (5% stake) and Per Jørgen’s €131 million (11% stake), means their stock ownership stood at 9,000x and 190x their yearly compensation by the company. This is exactly the type of management alignment we’d like to see, as we know these business operators will be kept more up at night than us if a Black Swan occurs. It also signals these managers are highly incentivized to focus on the long-term success of their companies.

The outsized ownership stake relative to base salary is a sign of an Outsider CEO.

5. High Cash Conversion

A concern we had with Kontron, was not finding much disclosure of returns on capital, we think of that as a yellow flag for a (relatively) capital intensive firm like Kontron.

Importantly, Kontron invests heavily in both R&D, tangible capex and acquisitions. Which metric we use to measure capital efficiency matters. For instance, in our calculations, Return on Capital Employed is in the low teens, nowhere near the likes of Norbit. Another return metric we think is underappreciated, is the Bergman & Beving model, popularized by Addtech and Momentum Group, two of B&B’s spinoffs.

Momentum Group’s idea is simple: for asset-light or acquisition-driven industrials, the real capital at work often lives in working capital — receivables, inventory, and payables — rather than fixed assets. Their framework measures value creation as EBITA divided by working capital, where EBITA is EBIT plus amortization of acquired intangibles specifically. Stripping out acquired intangible amortization removes the accounting noise from M&A purchase price allocation, and better measure underlying profitability.

When we put Kontron and Norbit through this calculation, Kontron gets mid 50% and Norbit’s around 100% (!), both above the upper 45% target for the B&B group.

Importantly, Kontron management have called out that there are still room to improve the Working Capital further, especially in the newly acquired solar company Katek. You can see the big jump in working capital in 2024, most of which from that deal.

Good working capital efficiency combined with a large growth opportunity ahead tends to be a good combination for great incremental returns on capital.

Business Model & Capital Allocation

In this segment, we want to try and answer 3 questions.

1. Are profits defensible over time? Pace of Innovation and/or Competetive edge

2. Are customer demand cyclical? Are there any secular demand drivers?

3. Track-record of clever Capital Allocation? And are there attractive places to reinvest capital currently?

We think assessing whether price is cheap, can wait until the end. Most mediocre businesses should probably just be rented until a price discrepency narrows. That’s not our strategy, we’d rather own assets where time is our friend.

Kontron typically operates in niche markets with high barriers to entry. This is important, as larger end-markets are typically more at risk to be commoditized. The Kontron Harrakan is a good example of such a product, made for tough environments.

The competetive position of Kontron varies by vertical. Within high-speed railways for instance, Kontron has >50% market share and 25% EBITDA margins, and is the sole supplier of the new standard, FRMCS edge devices. In contrast, they have closer to 10% EBITDA margins in their automotive segment. There’s no doubt Kontron operates in a competetive field, but their decision to avoid the larger consumer electronics market is a sign they prefer to look for more technical and niche markets.

Kontron view their R&D capacity as a competetive advantage. With more than 3,000 engineers and annual R&D budgets of €200 million (14% of revenue), Kontron is an innovation force in their field. Management highlights their in-house engineering workforce as cost-competetive to, being primarily located in Central and Eastern Europe, with average salaries around €55k p.a.

And with the evolving technology, no wonder Kontron invests so heavily in R&D. They expect disruptive technologies to drive future growth (Exhibit 3).

Cyclicality is there within many Kontron’s markets, but the sheer breadth of their offerings, reduce the Group’s cyclicality. Below, you can see breakdown by vertical.

The breadth of markets, check a box we like seeing for Niche Industrials — the ability to expand into more verticals. Where the technical niche give room for not competing on price, it’s the ability to expand into more verticals which gives room for the reinvestment of capital. If you have both, you got a recipe for compounding.

Capital Allocation Strategy

Over the last decade, there’s two overarching Capital Allocation moves of Kontron. First, moving away from consumer products into networking critical applications, such as trains, aircraft, military equipment and robots. Secondly, the increased portion of sales towards software.

The best example of this is the recent sale of Kontron’s COM modules to their strongest competitor, Congatec, in 2024. This allowed Congatec significant synergies. What we found noteworthy, was that a part of the deal included a partnership between the two, where Kontron will equip future Congatec COM moduls with security software.

This move looks similar to what the semiconductor industry is well known for — specializing. With complexity increasing in Kontron’s industries, it seems they are confident moving up the value chain to the piece with higher margins — Software.

The increased focus on high-margin software and exiting lower margin businesses explains most of the significant gross margin expansion we’ve seen last decade.

A result of the Portfolio Streamlining is freed up resources within Kontron. Their focus is currently on 3 key areas:

1. Cyber Resilience Act in EU from 2025: New standards change the way the industry work, especially for high-stake fields like defence and infrastructure. Kontron OS is the first CRA compatible software for IOT solutions.

   Companies are increasingly having to ask fundamental questions, like:

   1. Are our devices updatable?

   2. Do we meet CRA requirements?

   3. How do we protect data flows in OT networks?

   4. How do we modernize outdated but still used systems?

Kontron expects 100 million devices to be installed with this system until 2030, with a goal of installing more than 30 million by 2028.

2. Future Railway Mobile Communication Standard (FRMCS): By cooperation with Qualcomm, Kontron has become the only full solution provider for solutions that aim to deliver increased train safety and utilization of the rail network. FRMCS is expected to be mandatory from 2028, but most tenders specify this.

3. Network Access Devices (NAD): Also a result from cooperation with Qualcomm, is Kontron’s ability to take a leading position within the connectivity required for autonomous vehicles to detect digital traffic signs etc. Kontron already have orders above EUR 300 million, expected to start delivering this year (2026).

Our view is that Kontron’s strategy seem proactive.
Becoming the first non-Chinese supplier for certain automotive components or having majority market share within new standards for high-speed rail, does not seem like a coincidence. While others could follow, Kontron’s pace of innovation enables them the first-mover advantage, which strengthens their position as a trusted partner for many clients in adapting to new times / regulations / demands.

The Growth Opportunity

Kontron’s Order Backlog as of the Sep, 2025, was €2.44 billion, +18% since Dec, 24. That’s a Book-to-Bill ratio of 1,47x, signalling plenty of opportunity to generate growth.

This backlog comes from contract wins across many sectors, and some of the recent growth is also attributed to the Katek Acquisition in 2024. Kontron has also partnerred with notable much larger companies, namely Qualcomm.

Qualcomm’s General Manager, Nakul Daggal, said this:

“Kontron is one of the Industrial Leaders. It’s a company we really wanted to learn from and expand our portfolio along with them. In a really short time we established a lot of intersection points from connectivity to industrial processors. And because AI is part of all our products, we look forward to expand our partnership with Kontron”.

There is no doubt Kontron is on a winning streak when it comes to contracts.

With the market being especially intrigued with Defence exposure lately, it’s interesting to see the many defence related contracts. But where other IOT players like Curtiss Williams have seen massive multiple expansion, Kontron does not break out their Defence exposure in numbers.

As you can see below, Kontron stock has not benefited from a “Defence Label”.

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The way all the numbers below is calculated is by multiplying all individual subsidiaries fundamentals with Investor’s ownership share. We think the NAV discount popularly used to value Holding companies has its value, but think a better way to value a hold’co is to measure the underlying profitability of the group. If there’s a lot cyclicality in there, probably best to do 3- or 5-year averages.

Exhibit I, show the drivers behind the 2025 returns, which comprised 2% dividend yield, 6% growth in underlying EBITA and another 4% multiple expansion.

With another 10% shareholder return since year-end 2025, the multiple expansion is about to expand 3 years in a row. The market efficiency theory would suggest fundamentals are to improve further, in an attempt for the stock to price in improving fundamentals. But when looking back historically, we wouldn’t say the market have had much success doing this in the past. If anything, the conglomerate may have been consistently undervalued, given Investor’s market-beating returns.

The key number we look at for Investor is the Underlying EBITA. We think this number should correlate well with shareholders returns over long time, as you can see in Exhibit II below.

The 6% growth in EBITA, was driven positively by Ericsson (3% contribution), ABB (2%), Saab (1%), Sobi (1%) and EQT (1%). Negative contributors were SEB (-2%) and Atlas Copco (-1%). Note that currency was a headwind for many in 2025 with weakening USD in particular (eg. AstraZeneca).

Exhibit III show the underlying EBITA by company over time.

Exhibit IV show growth contribution by company for different time periods.

The table below highlights well why Investor does not deserve to trade at a large discount to Net Asset Value. Most of it’s companies are steady growers.

Leverage

Investor AB had 23 billion SEK of Net Debt in 2025. That’s at the lower end of their target range (0→10% NAV), which gives them a lot of optionality going forward. However, what is the leverage of their Listed subsidiaries?

Since we’ve used EBIT (earnings before interest and tax) before to value Investor, and valued this against the Enterprise Value of Investor (calculated using market cap - net debt - EQT funds).

The problem we realised with that calculation is it doesn’t include interest expense or the debt from subsidiaries is excluded. Thus, we have now included the subsidiary net debt in measuring the Enterprise Value of Investor AB.

In Exhibit V, you can see the leverage ratio for key Listed Subsidiaries of Investor.

Leverage went down in 2025 on average, only at 0,5x Net Debt to EBITA. If we multiply this weighted average figure with the Underlying EBITA, we arrive on 30,9 billion of underlying Net Debt. The last component of the Enterprise Value calculation we use to value Investor, is the 39 billion of EQT funds.

Valuation

This section is exclusive to paid subscribers.
The figure below is not available on most brokerage platforms, or even in Investor’s reported financial statements. It requires extensive work to calculate.

We use EBITA, in line with elite serial acquirers, to better reflect the economics of businesses with acquisitive growth models — an approach particularly relevant given the acquisitive nature of many of Investor’s holdings. A subscribtion only costs $8 per month, or a $60 per year price.

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In the January Letter, we shared how we prefer to measure Intrinsic Value over time. Since then, we appreciated that buying stuff below that value is just one side of the coin, with the other being buying something that grows Intrinsic Value. Thus, we wanted to use this letter to share how we can value companies taking into account both these.

An approach we have not seen before, so we always welcome some feedback.

A north start to for quantifying Value Creation is Markel. They published their Annual Report this month, and the highlight below shows their methodology for doing so.

Markel use a simple 3-step framework to measure Intrinsic Value (adjusted profits x fair multiple ± balance sheet adjustments).

We believe this is the best way to measure a company’s success in the rear view mirror. While it can be used as a valuation tool, it’s one that only works of history repeats itself. To value a stock you usually have to look into the future, or at least see whether what’s priced into the stock sounds pessimistic or optimistic. And to be able to do any of this, you should have an opinion of Cyclicality.

Markel worked around their Insurance cyclicality, by multiplying 3-year averages of profits for an estimate of a fair multiple. This approach seem to work well.

Below you can see we’ve done something similar with a company we own, called Medistim. While Medistim is among the more stable topline companies, their operating expenses and capital expenditures fluctuate somewhat, distorting the view.

However, we believe an investor trying to buy companies simply below Intrinsic Value would have a bias towards cheap companies not growing. They would miss the direction of that orange line, which in the case of Medistim, means long-term owners have time to their advantage, as their business keeps getting better (for now).

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The problem of buying a dollar for 50 cents

A low purchase price can serve as downside protection, but as we illustrated with Medistim, so can a business compounding its’ value. Although, owners buying the stock for 80x business profits in 2021 may still disagree there...

We learned after researching Exor that buying something at a discount to NAV (in that example) is alone not very attractive, given the uncertainty around when (and if) that discount closes. If it occurs within one year, great — but then you may have to look for something else (if there aren’t other return drivers there).

The good thing about Exor is that they have grown NAV over time. The problem we have with Exor today, is that we do not know how to value it, nor estimate future compounding rate. The mix of cyclicals, high-priced luxury and other assets with minimal transparency makes it to hard for us.

Investor AB is a different beast. They have focused on stable profitable companies being good at reinvesting capital themselves, and reinvest their own cashflows continoussly at good returns into their wholly-owned Patricia Industries, in addition to some rare additions to their Listed Portfolio of Quality Companies. This makes it easier to value the underlying profits, and compare it to other opportunities.

Link below, to how we track Investor’s Intrinsic Value development over time.

But the question remains, why don’t we use a traditional method like DCF or just slap a multiple on today’s profits?

Why Not a Discounted Cash Flow Model or Multiples?

A DCF can work well, but most of the value usually comes from assumptions far out in the future — especially the terminal value. Change a growth rate or discount rate slightly, and the valuation moves a lot. We find estimating a decade out to hard.

Slapping a multiple on today’s earnings is quicker and can also be useful. But a single number doesn’t tell you much about durability, reinvestment opportunities, or how strong the business will look a few years from now. Cash conversion and how much cash can be distributed while growing are also key topics to keep in mind.

A Reverse DCF, trying to measure what today’s stock price implies about of future growth, can also be very helpful. Still, we prefer another way to look at valuation.

Our Alternative: A 5-Year Valuation model

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Disclaimer: This newsletter is provided for informational and educational purposes only. The analysis shared is based on my personal research and is not tailored to individual circumstances. The views expressed are my own and do not constitute financial advice or recommendations to buy or sell any securities.

Investor AB set a record in 2025 — beating the index for 15 consecutive years! We believe an underappreciated metric in general, but also of this conglomerate, is hit-rate. Over the last decade, 10 of 15 (66%) existing Listed holdings delivered market beating returns (13% CAGR for MSCI World Index), despite having a low portfolio turnover (trading activity). Most current holdings where there 10 years ago.

If we also include Patricia Industries and EQT AB, Investor’s hit-rate was >70% (!).

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HIT-RATE

A simple exercise that any investor can do is to review all past positions, including exited ones, and categorize them by whether they beat a relevant benchmark. When we ran this analysis on our own history (Exhibit II), it made us appreciate a few things.

1. Avoid the big losers, and the winners will take care of the portfolio’s returns. Thus, High risk–high reward is not our game to play.

2. Most positions don’t contribute, despite taking up a lot of research time and also mental bandwith. Losing money hurts more than winning. Those -2% contributors to the right feel much more significant than those 3-4% positive contributors to the left.

3. Further concentration would likely hurt results. We do not believe we could have predicted in advance which holdings would’ve become the biggest winners, nor the magnitude of their success. This creates a dynamic similar to the idea that “time in the market beats timing the market”: Long-term success are driven by having winners in the portfolio — even if they start as small positions.

Let’s go back to Investor’s Hit-rate, we think there are more lessons to draw. If we compare it to another Holding Company like Exor, how do those compare?

From 2016 until 2025, both grew Net Asset Value (NAV) nicely, Investor by 13% annually and Exor 9%. Exor's NAV went from €14 to €35 billion, with more than €13 billion of that NAV increase was from their Ferrari stake alone (>60% contribution). This means that the reminding positions generated subpar shareprice CAGR of 2% for the Agnelli family. Adding dividends (not much from Ferrari), the CAGR for the rest was likely closer to high single-digits. Arguably, not as bad as one may think.

Investor, on the other hand, had multiple winners. Patricia Industries, ABB and Atlas Copco were the largest contributors. We believe the table below, showcase why Investor deserves to trade at a premium to Exor’s portfolio. They delivered more consistent strong returns across the portfolio. Note that dividends received are included in the column to the right for both, which is more impactful for Exor.

We would argue that Investor’s portfolio is also better positioned for the future. But this is also the consensus view — something the market signals through Exor’s substantial discount to Net Asset Value relative to Investor. The discount may even be so deep that Exor’s challenges are not only recognized, but more than fully priced in.

That said, valuation alone is not enough for us. In the section ahead, where we discuss Intrinsic Value, it becomes clear why Exor fits our framework far less naturally than Investor. Our key takeaway from studying Exor was that its combination of cyclical exposure and an unusually heterogeneous portfolio makes it extremely difficult to rely on any meaningful measure of “underlying profitability”.

One could argue that investing in Exor is essentially buying Ferrari and getting almost everything else for free. But if that is the thesis, what is the exit — selling once the discount closes? For us, that is not a sufficient framework.

A credible investment case for Exor would, in our view, need to look different. We focus less on the headline discount to NAV and more on management’s ability to compound intrinsic value over time. Exor has been explicit that Industry is not a long-term priority, with luxury, technology, and healthcare identified as the core focus areas. Yet today, cash flows remain overwhelmingly industrial. Seen through this lens, investments such as Philips make strategic sense—and offer a glimpse of what the portfolio could evolve into. If Elkann & Co. succeed in this transition, the combination of share buybacks at a wide discount, substantial dividends from cyclical industrial holdings, continued growth in Ferrari, and the gradual introduction of more stable cash generators could create the conditions for a classic multiple engine for it’s stock.

Thus, an investment case for us in Exor would have to rest on deep trust in management’s ability to allocate cyclical cash flows intelligently into new long-term opportunities aligning with their objectives.
We are not convinced there yet.

But now, let’s go over the key topic of today — how we measure our companies progress and how to potentially find buying opportunities more cleverly than we had in the past. The commonality for both: how to estimate a business’ Intrinsic Value.

Intrinsic Value

If book value per share is no longer the best metric to monitor our value creation over time, what is? We suggest intrinsic value growth over time.

As a “Surgeon General’s warning,” we completely believe that no intrinsic value calculation is perfect. Any calculation involves estimates and trade-offs between simplicity, understandability, and precision. We didn’t create a spreadsheet with fifty lines. We don’t wish to communicate any false sense of precision. But we realize we can’t draw a line with a slope of ascent without some point estimates along the way. (Thomas Gayner, 2024 Markel Annual Report)

We believe Tom presents us the tools needed to do this ourselves. The rest of this writeup will be exclusive for paid members, where we’ll go through how we did this with our 10 core Portfolio Holdings and go over the Portfolio Update as usual.

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Last year, we shared five key lessons from the year and presented an investment idea we had just initiated ourselves — Medistim. While we can’t promise that this year’s idea will match Medistim’s +70% return, we hope this letter is still an enjoyable read.

As Christmas is a time for tradition, we’re keeping a similar format this year, albeit with new lessons and a new idea. Remember, nothing I write constitutes investment advice. Please do your own due diligence.

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We would also like to extend a sincere thank you to everyone following along. The chart below shows the growth in followers on this Substack since we started in 2023. This is a hobby project for us, which we enjoy a lot. Our full-time work now involves operating two small private companies, and we hope to bring the lessons learned from running them back into our greatest passion: investing.

5 Biggest Lessons this Year

1) Don’t drive looking in the rearview mirror

Our biggest mistake this year was Evolution AB. We bought in late 2024, impressed by strong past results, a historically cheap ~15x P/E, and a high dividend + buyback yield — assuming growth might slow from the then 15% rate, but remain solid.

Several risks were already visible at the time, but we had not done the depth of work required to truly understand them. Instead, we relied to heavily on strong past performance, giving us unwarranted confidence that the business would largely continue its historical growth trajectory, albeit at a slower pace.

Lesson learned: By overweighing historical results, we underestimated forward-looking risks and overestimated our understanding of the business. While the stock may work from here, we acknowledged how wrong our initial analysis was, and therefore concluded to sell it. We also recognized that rapid growth often carries lagging risks, which proved to be employee dissatisfaction and security weakness.

Evolution ultimately contributed –2% to our Total Invested Capital, as shown in the table of all exited positions below. Despite this, the aggregate result from all exited positions this year was +1%, helped by Hermès, Paradox, and Borregaard.

Looking at the number of exited positions above, we had unusually high turnover this year, but all these holdings were relatively small at less than 5%.

2) One winner pays for many losers

Evolution now ranks as our biggest realized loss to date. Still, as the Exhibit III illustrates, a single large winner can more than offset all our realized losses to date. We have exited 19 stocks in total since we started investing late 2021. You can see the assymetry of investing starting to show itself in the return contribution from our 5 biggest winners to date, versus our 5 losers.

This underscores a core principle of portfolio construction: long-term returns are driven by asymmetry. If you can consistently avoid large permanent losses (>50%) while allowing a small number of positions to compound meaningfully, the winners will largely determine overall returns.

One approach is the venture-capital model—small allocations across many highly speculative bets. However, we believe superior risk-adjusted returns are more often achieved by prioritizing downside protection while allowing upside optionality to run.

Accordingly, we look for businesses with some form of downside protection: robust balance sheets, durable unit economics, and business models that reduce the risk of catastrophic loss. Certain business models are particularly well suited to this, a topic we will return to in the next lesson. REQ Capital, for instance, has previously highlighted Programmatic Acquirers as an attractive example.

3) Serial Acquirers = low risk, high return business models?

That said, the Serial Acquirer space has become increasingly crowded, making valuation risk a central concern. Even over long horizons, this matters. A multiple compression from 30x to 20x P/E translates into roughly a 4% annual headwind over ten years—longer than most investors’ actual holding periods.

By contrast, Holding Companies — with fewer, larger acquisitions (think Berkshire, Fairfax, Brookfield, Investor AB, Scottish Mortgage, MBB) — have historically traded at persistent discounts to the market. Even after doubling recently, MBB trades around 13x P/E adjusted for net cash and significant NAV discounts, which we view as undemanding given its track record.

We find this structure compelling, with a great example being Scottish Mortgage Investment Trust — participating in upside from a number of exceptional investments (e.g. Amazon, Nvidia, SpaceX) with diversification protecting the downside.

We recommend Tresor Capital if you find interest in Holding Companies.

4) Acquired vs Organic Growth

It seems to us many investors view organic growth as “free”.
While that may be true for your toll-booth business model (think Visa), most companies are not like this. Most companies need to reinvest capital to grow.

With hindsight, reinvestment stories like Amazon and Constellation Software look obvious. In reality, their peak reinvestment years showed little free cash flow (measured as operating cashflow - investing cashflow) and muted reported profits, weighed down by depreciation, amortization of acquired intangibles, and heavy spending on growth. Yet, both returned exceptional long-term returns. We believe the key was not to see whether growth was acquired or organic, but rather how much capital was invested and what returns those investments made on aggregate.

To us, it seems investors looking at Shift4 would prefer their Capital Allocators to build a factory for $1,000 rather than acquire the exact same factory for $500.

With Shift4’s strong multiple contraction in recent years, we think the market is telling us they disagree with how Shift4 management goes about growing their business. We think studying the playbook of Constellation Software, shows where to look.

The previous CEO of Constellation, Mark Leonard, previously stated that they noticed better returns from acquisitions than organic reinvestments. In essence, they are agnostic to the source of growth — they care only about the return. This probably also means there may come a day when they shift their investment spend towards more organic initiatives, if they see that offers more potential.

We believe Shift4’s management team operates under a similar philosophy, but with a different growth playbook. Their primary objective is to scale their payment offerings across as many merchants as possible, but their method of customer acquisition (CAC) is unconventional:

• The Traditional Friction: Competitors often rely on broad marketing campaigns to convince individual hotel or restaurant owners to replace their entire infrastructure — which could be a high-friction, low-conversion process.

• The Shift4 Shortcut: Instead of “hunting” merchants one by one, Shift4 acquires entire customer cohorts by purchasing companies that solve a single piece of the merchant’s puzzle (e.g., a specific software tool or giftcard solution).

• The Cross-Sell Engine: Shift4 lowers its CAC and gains a “warm” lead. They found it far more efficient to cross-sell a broad payment suite to an existing customer than to acquire a new one from scratch.

And with Shift4’s heavy acquisition spend in recent years, most recently with the luxury retail giant Global Blue, they now have a simpler avenue to grow “organically”. And they can benefit from the existing relationship from the likes of Global Blue, and perhaps even combine the technology of Global Blue into a common product.

5) Cash-on-Cash returns — Good way to evaluate growth?

With the recent example of Shift4 in mind, we think comparing reinvestments in vs growth out, is the ideal way to evaluate companies reinvesting capital.

Amazon is perhaps the best example, with consistently expensive looking Price to Earnings and poor traditional return on capital metrics. That was because current P&L profits where punished from reinvestments. However, if investors instead focused on the growth in operating cashflow, and consider what portion of existing capex would actually be necessary to sustain operations — the business quality would appear clearer. And if that growth vs the corresponding capital invested was considered, the Cash-on-Cash return would be much higher than ROIC, ROE or ROCE.

In order to do such an approach, we would only need the growth in operating cashflow, and the cumulative investments into key buckets. We have shown the 10y Cash-on-cash returns of Vitec & Lagercrantz in Exhibit V below.

Both companies delivering fast growth, but Lagercrantz requiring less capital in order to do so — thereby not requiring more debt and issue equity to fund this.

Last Years Top Idea

Last year’s pick, Medistim, has delivered strong fundamentals, and the stock is up more than 70% this year. With roughly 23% topline growth and 16% profit growth from expanding margins, much of this shareprice gain also reflects valuation expansion.

Our 5-year forward return estimate now sits around 9% in our base case — less compelling than it appeared last year. Still, we continue to hold every share, despite Medistim now carrying the highest multiple among our holdings at 24x Enterprise Value to EBIT. We believe Medistim can continue their historical growthrate, due to structural tailwinds and new innovations enabling more pricing power, like we’ve seen in their US pricing this year (occured last half 25, becomes tailwind for H1 26 figures).

Best Ideas 2026

This year, we highlight three ideas for paid members. Two are existing holdings that we added to meaningfully during the year, and one is a new position, inspired by another Substack writer.

The new idea is a stable, low-growth business trading at a very low free cash flow multiple. It operates in an unpopular industry facing structural competitive headwinds. As is often the case, the market has largely thrown the baby out with the bathwater, despite this company being only marginally affected by the industry’s broader challenges.

Crucially, the stability of the underlying business provides meaningful downside protection. The upside depends on the company successfully transforming itself into an advantaged acquirer — an outcome the board and operators have clearly articulated as a strategic goal. Notably, the team involved has a long track record of doing exactly this, and appears unusually capable for a company of this size.

The two existing ideas are long-standing core positions. Over the past year, their fundamentals have strengthened, while their share prices have been flat or declined. We much prefer this to weakening fundamentals, especially when we have the opportunity to add more.

If you’re not a paid subscriber, we still want to thank you for following along. We’ll leave the 3 most popular free writeups to date, if you would like to take a look there.

Wish you a happy new year,
Cheers Ole

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