• Deep Dive: Tiger Brokers ($TIGR)

• Revisiting UP Fintech ($TIGR)

• 2026-01: Investing in China When the Rules Are Changing: Opportunity, Illusion, and Tail Risk

• The Most Absurd Stock Valuation in the Market Right Now?

• Robinhood’s Entry into Singapore: Assessing the Competitive Threat to Tiger Brokers and Futu

Despite all the noise surrounding anything China-related, and despite the underwhelming share price performance, I still believe it is one of the most inefficiently priced stocks in all of Asia right now.

Most investors see a volatile fintech play. The “Robinhood of Asia,” which completely misrepresents the business we are looking at.

I see something else entirely. A brief discussion in our community this morning sparked a new perspective for me, which I wanted to write about.

Subscribe now

Tiger being a prime takeover target at a roughly $1B market cap has crossed my mind before. But today, for some reason, I was immediately reminded of a valuation framework I applied to Edenred recently (in the article linked below; that buy worked out quite well from those levels so far).

In that analysis, I argued the market was completely ignoring the replacement cost of the underlying network (merchants, users, corporate clients).

It turns out that when you apply that same logic to Tiger, the math becomes similarly impossible to ignore.

This is not a traditional discounted cash flow exercise. It is a look at what the business is actually worth to a strategic buyer today. It’s another lens to illustrate the massive mispricing in Tiger’s stock.

If a massive financial institution wanted to replicate Tiger’s footprint in Singapore or Hong Kong, they couldn’t just snap their fingers. They would have to spend a lot of money (and I’ll share my best estimate in this analysis). They would have to fight for every single user.

This replacement cost lens provides a massive, invisible floor for the stock that the current market price seems to completely disregard. I also looked at churn and valued the Up Fintech funded account base on an LTV basis. This was fun. I hope you enjoy the analysis.

Disclaimer: I own a lot of UP Fintech stock (relative to the rest of my portfolio). The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

If you’re unsure about what you get, here’s an overview of some of the companies we covered in a little over a year:

Read more

The acquisitions of foodpanda Taiwan and Stash Financial were both announced in Q1 2026, but if you check the latest Q1 earnings, you won’t see these deals reflected anywhere in revenue yet.

Both are still awaiting regulatory approvals, and Grab categorizes them as “planned acquisitions” in the earnings report; and thus, they are also not reflected yet in the full-year 2026 revenue guidance of $4.04B – $4.10B.

At first glance, it’s tempting to ignore these deals when thinking about Grab’s valuation. After all, the revenue hasn’t hit the books, and the balance sheet hasn’t felt the full impact – and what if they won’t be approved by regulators in the first place? In 2025, Uber ended its ambitions of acquiring Delivery Hero’s foodpanda in Taiwan, roughly three months after Taiwan’s antitrust regulator blocked the deal (citing competitive issues).

But that would miss the bigger picture. As investors, we are required to project the future, and each acquisition adds a meaningful slice of revenue and, in the case of Stash, a high-margin, subscription-based business that could reshape how to think about Grab’s overall revenue, margin, and growth profile.

The numbers tell part of the story. Foodpanda Taiwan closed at $600 million in cash and delivered roughly $1.8 billion in 2025 GMV.

Stash, with a 50.1% stake priced at $425 million, manages over $4 billion in assets under management.

Both deals are sizable, but the more interesting question is what they contribute to Grab’s future revenue once fully integrated.

This is what I was thinking about over the past weekend, and I put together this write-up. Because by ignoring these acquisitions, the market could be underestimating the scale and quality of revenue that’s about to hit the company – very soon!

In the sections that follow, I’ll break down the projected revenue contributions, how deal-related cash outflows affect Enterprise Value estimates, and how to think about Grab’s valuation after making some key adjustments.

Via the link below, you get access to a rare 20% discount on the annual plan (limited to the first 5 who take it). The 20% discount is then locked in forever, meaning it applies to all future payments as well.

Subscribe now

The full story starts here:

The rest of this post covers TAM penetration and market share dynamics, the identification of key growth drivers going forward, and two valuation approaches. If you’re serious about sharpening your investing edge, the full post (and all my previous premium content, including valuation spreadsheets, deep dives (e.g. well-known mid- and large caps such as LVMH, Duolingo, Meta, Edenred as well as more hidden gems such as Tiger Brokers, Digital Ocean, Ashtead Technologies, InPost, Timee, and MANY more) and powerful investing frameworks are just a click away. Upgrade your subscription, support my work, and keep learning.

As a member, you get:

• Complete Access: Every deep dive in our library (65+ and counting).

• The WhatsApp Community: Real-time discussion and networking with like-minded investors.

• Digital Investing Conferences: 3-4 times a year, we also hold digital conferences where members present and share stock ideas, and discuss broader themes, and we’d love for you to join in!

• Incredible Value: Full access to all of this for less than $1/day.

Read more

Imagine two Harvard Business School students, sitting together, brainstorming ideas that would go on to reshape the landscape of Southeast Asia’s transportation, food delivery, and financial services.

In 2012, Grab was born from a simple, but ambitious business plan aimed at tackling one of the most unreliable and unsafe taxi systems in the world – Malaysia’s. Fast forward to today, and Grab has evolved from that small idea into effectively the “operating system” for daily life in (most of) Southeast Asia.

Subscribe now

And Grab is not just another app. In Southeast Asia, Grab is more than a name – it’s become a verb for many. People say, “It’s raining; let’s just Grab to the mall instead of walking” or “I’m too tired to cook, should we Grab some Thai food?” without thinking twice. And it doesn’t stop there – Grab has mastered the art of creating habits, seamlessly integrating itself into the daily lives of millions of people who now rely on it for everything from getting from point A to point B to paying bills to online shopping.

Grab’s story is also a survival narrative that most tech companies would envy. In 2018, Grab managed to outmaneuver the global giant Uber in its home region and, eventually, when Uber basically gave up, acquired Uber’s Southeast Asian operations in a unique deal. That was a pivotal moment in Grab’s history, solidifying Grab’s dominance and ensuring that Uber’s exit from Southeast Asia would make Grab the undisputed leader in ride-hailing and delivery services.

Fast forward to 2025, and Grab hit a major milestone: profitability. After years of burning through capital in pursuit of growth, Grab reached its first full year of net profit in 2025 – $200 million in the black. This marks a significant inflection point, where the company is transforming from a “growth-at-all-costs” startup-like-business into a more disciplined, profitable growth powerhouse with a clear path to long-term value creation.

But here’s the thing: Grab’s story is far from over. In fact, despite its massive scale already – Grab is a multi-billion-dollar company today –, the company is still just scratching the surface. Grab’s Monthly Transacting Users (MTUs) currently represent just 6% to 7% of the Southeast Asian population. That means there’s a huge growth runway ahead – roughly 94% of the market is still untapped.

What’s even more exciting is Grab’s ecosystem flywheel. About two-thirds of Grab’s users engage with two or more services, and for those using three or more services, the one-year retention rate is an impressive 88%. When customers stay, they not only use more services, but they spend more, too. This is a growth driver that keeps feeding itself.

And then there’s Grab’s cutting-edge use of AI-driven efficiency. By utilizing proprietary AI models, Grab has been able to double its revenue from 2022 to 2024, all while keeping headcount flat. Over 90% of mobility rides are now dispatched using AI, showcasing just how much the company has automated its operations.

On the financial side, Grab has successfully expanded into digital banking. In just three years, Grab amassed 7.4 million deposit customers across its three digital banks, and its loan portfolio crossed the $1 billion mark in 2025 and is expected to exceed $2 billion by 2026 year-end.

And as if all of this wasn’t enough, Grab is setting its sights on global expansion. In early 2026, it completed the $600 million acquisition of foodpanda Taiwan, signaling the company’s intention to push beyond Southeast Asia and tap into new, high-value markets. This marks the first major step in Grab’s journey toward becoming a truly global player.

Of course, this is just the tip of the iceberg. Grab is positioning itself for the future with ambitious plans around autonomous vehicles (AVs) and scaling its financial services. The company is constantly innovating, finding new ways to integrate its services and make the lives of its users easier and more connected.

But what does this mean for investors? Can Grab sustain its growth? What challenges lie ahead? And most importantly, what kind of valuation can you expect as this story unfolds?

As you can tell, Grab is a fascinating business to dive into. So let’s do exactly that and dive deeper into Grab’s history, business model, management team, moat stack, its future, and the growth drivers that will continue to propel this Southeast Asian juggernaut forward.

Are you excited yet? Let’s dive into the first part (11,500 words) of this deep dive.

Leave a comment

Disclaimer: I own Grab shares. The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

High-Level Thesis: “Bam Bam Bam Bam Bam”-90 Second-Hypothesis

As always, in the style of legendary investors like Bill Miller and Peter Lynch, I’m attempting to give you the quick 90-second rundown on Grab Holdings (GRAB) – what’s the investment hypothesis (which we are then going to test throughout this deep dive?

Right now, the stock trades around $3.6, a significant pullback from its 2021 debut. While that might sound concerning, the real story lies in the business transformation that’s been happening under the hood (i.e. not reflected in the share price).

Here are the five reasons why I think Grab is an interesting opportunity:

Via the link below, you get access to a rare 20% discount on the annual plan (limited to the first 5 who take it). The 20% discount is then locked in forever, meaning it applies to all future payments as well.

This is where it gets interesting.

Become a paying subscriber to read the rest of this post and get access to all of my other research, including valuation spreadsheets, deep dives (e.g. well-known mid- and large caps such as LVMH, Duolingo, Meta, Edenred as well as more hidden gems such as Tiger Brokers, Digital Ocean, Ashtead Technologies, InPost, Timee, and MANY more), and powerful investing frameworks.

As a member, you get:

• Complete Access: Every deep dive in our library (65+ and counting).

• The WhatsApp Community: Real-time discussion and networking with like-minded investors.

• Digital Investing Conferences: 3-4 times a year, we also hold digital conferences where members present and share stock ideas, and discuss broader themes, and we’d love for you to join in!

• Incredible Value: Full access to all of this for less than $1/day.

PS: Using the app on iOS? Apple doesn’t allow in-app subscriptions without a big fee. To keep things fair and pay a lower subscription price, I recommend just heading to the site in your browser (desktop or mobile) to subscribe.

Subscribe now

Read more

In my latest video, I dive into this tension. Inspired by a recent Goldman Sachs podcast featuring their quant team, I explore the widening gap between how machines “price” assets and how long-term value is actually built.

The big question I want to pose to you: Is AI making markets more efficient, or is it just making them more reactive?

I’ve shared my full thoughts in the video, but I’d love to hear your take in the comments – are you finding AI to be a net positive for your strategy, or is it just adding noise?

Why join the community, you may ask? Our library is fast approaching 70 comprehensive deep dives, providing institutional-level research on some of the world’s most fascinating businesses. Most recently, we’ve dissected companies like Grab Holdings ($GRAB), Fair Isaac ($FICO), and Topicus.com ($TOI).

As a member, you get:

• Complete Access: Every deep dive in our library

• The WhatsApp Community: Real-time discussion and networking with like-minded investors.

• Incredible Value: Full access to all of this for less than $1/day.

Subscribe now

If you want to see the level of research we provide before committing, the following deep dives are, for instance, free to read:

• InPost ($INPST) - generated an IRR of >400% as an acquisition offer emerged 2-3 months post write-up

• DigitalOcean ($DOCN) - up 5x in less than a year post write-up release

In my view, the primary job of an investor is not to find reasons to buy, but rather to find every possible reason to say no.

The investment landscape is one where the default state is noise – an endless stream of pitches, charts, headlines, CNBC interviews, engagement-bait on social media platforms, and quarterly updates designed to make you feel like you are missing the next great multibagger.

In my experience, the only way to survive this onslaught without diluting your capital into mediocrity is to develop a set of filters so rigid and so uncompromising that they feel almost violent.

The Violent Art of Saying No

I spend the vast majority of my time looking for the exit door on a research project. If I can find one structural flaw, one misaligned incentive, or embedded expectations that require too good an execution, I move on.

It is a superpower.

I was recently listening to an interview with Andrew Hollingworth, the founder of Holland Advisors. He operates with a very similar philosophy, specifically regarding his heavy bias toward owner–operators.

For him, and for me as well, seeing a founder with significant skin in the game is a signal that cuts through the static. It is a filter that allows you to ignore 90% of the public markets immediately. Of course, the risk is that you will brush off a valid idea too quickly. You will watch stocks you passed on at $10 run to $50. That is the price of admission.

However, a strong filter protects your downside and ensures that when you finally do say yes, you are standing on a foundation of high conviction. Your job is to pass. You must try to break the thesis.

Why I Am Selfishly Writing This Post

This leads me to a new mental model I have been grappling with this week. I have my usual list of high–quality signals – e.g. (strong) secular tailwinds, above-average industries, founder–led businesses, share cannibals that aggressively retire their own stock, and “spawners” that have the DNA to create new business lines from scratch.

But while reading a post by a fellow author who goes by the name Unemployed Value Degen, I stumbled upon a concept I had never formally integrated into my framework: the “toehold.”

He is one of the very few writers covering Tiger Brokers, a company I have discussed frequently on this blog and one that I currently own in a significant position in my portfolio. I had to read his take.

I found his analysis of the core thesis excellent, but what really stuck in my mind was his mention of IBKR’s small ownership stake (which I was of course aware of), but the idea that the ownership might be a (strong) predictive signal for superior future performance.

It was a “lightbulb” moment. In the spirit of Mohnish Pabrai, whenever I encounter a new mental model that carries genuine weight, I want to punch it into my brain. I want to do everything humanly possible to ensure it sticks. Thus, this post is, quite frankly, born of a very selfish motivation. I am writing this to force myself to memorize the concept, to test the logic, and to ensure that the next time I see a toehold in a filing, I recognize it as the potentially powerful signal it might be.

The concept of a toehold is deceptively simple, yet it carries implications that most retail investors completely overlook. If we can identify why a larger, more sophisticated competitor is willing to take a minority stake in a smaller peer, we gain access to a level of due diligence that no individual investor could ever hope to replicate. It is a form of validation that goes beyond what any spreadsheet can tell us.

Over the following segments, I want to explore why this happens, look at the historical evidence of outperformance, and understand how we can use this to sharpen our filters even further.

Subscribe now

More Than a Minority Interest: The Anatomy of a Toehold

To understand why this concept carries such weight, we first need to define what we are actually looking at. In the blog post that sparked my curiosity, Unemployed Value Degen laid out the case for UP Fintech (TIGR) by highlighting a specific shareholder:

“UP Fintech holdings is still controlled by its founder, Tianhua Wu, with over 12% of economic ownership, and voting control with class B shares that have 20x voting rights. There are also strategic ownership stakes held by Xiaomi, the mobile phone / automobile manufacturer, and Interactive Brokers. When looking at the Interactive Brokers’ ownership stake in particular, it qualifies as a “toehold” – a small ownership stake by a larger competitor. This is usually accompanied by technology and expertise transfers, indicating a bright future for the smaller company, and sometimes foreshadows an eventual acquisition. Sure enough, Interactive Brokers assisted TIGR with the US compliance and Know Your Client rules. The last time I bought a stock with a toehold, it was VitaCoco at $9, and today it trades at $65. Toeholds were a primary area of research of my former PhD advisor, and whenever I stumble across one, it immediately catches my attention.”

This passage touches on the idea of asymmetrical information. When a large, established player like Interactive Brokers takes a stake in a younger, more nimble competitor, they are frequently doing more than just parking capital. They are performing a level of due diligence that you and I, as outside investors, simply cannot access. They are looking under the hood, so to speak. When they write that check, they are effectively telling the market that this smaller company has passed the most rigorous audit possible – one conducted by its own rivals.

Why Competitors Make the Best Auditors

Most investors spend their time tracking institutional ownership – looking for which superstar investor is buying which stock – everyone gets excited during 13-F season!

And while that can be a useful signal, it is fundamentally different from a toehold. A professional (fundamental-oriented) fund manager is an expert in realms such as business and competitive advantage analysis, portfolio management, valuation, or capital allocation, but a competitor is an expert in the actual field the business operates in. If a dominant player in an industry decides to own a piece of a smaller challenger rather than trying to crush them out of existence, we should pay attention. It suggests that the smaller company possesses something the larger one lacks: perhaps a more efficient tech stack, a better user acquisition strategy, or a specific geographic advantage.

This is a kind of “validation signal” in its purest form. A toehold suggests that the incumbent sees the smaller company as a peer or a future partner rather than a nuisance.

In the case of Tiger Brokers, having Interactive Brokers – the gold standard for discount brokerage infrastructure – assist with US compliance is not just a “nice to have” partnership. It is a massive operational lift. It removes the execution risk that plagues so many high–growth fintechs.

“We currently rely on Interactive Brokers to execute, settle and clear a portion of the trades of the U.S. and Hong Kong stocks and other financial instruments, and to comply with certain federal, state and other laws, as discussed more fully in Item 4.B “Business Overview-Our Core Products and Services-Brokerage Services. ” For the years ended December 31, 2023, 2024 and 2025, 16.6%, 10.6% and 6.6% of our total net revenues were executed and cleared by Interactive Brokers. For consolidated accounts, the information of which is not fully disclosed to Interactive Brokers, we receive commission fees and direct a pre-determined portion to Interactive Brokers.“ - Tiger’s 2025 Annual Report

For us, the filter is simple. If one of the best brokerage businesses, one of the best brokerage infrastructure providers in the world, is betting on their regional competitor’s success, the probability of that competitor being a “fraud” or a “failure” drops meaningfully.

The Call Option on a Future Acquisition

Beyond the operational validation, a toehold represents a very specific type of financial optionality. It is sometimes (or rather often?) the first step in a “creeping takeover” attempt or a pre–negotiated path to an acquisition. When a larger company takes a 5% or 10% stake, they are often buying a seat at the table. They get a front–row view of the financial performance. Possibly a board seat. They build relationships with the management team. Most importantly, they often secure “right of first refusal” or “right of first offer” clauses that give them a massive advantage if the company ever decides to sell.

Leave a comment

As an investor, owning a company with a strategic toehold means you are essentially “piggybacking” on a future M&A event. You are holding a stock that has a built–in floor price because there is a logical, deep–pocketed buyer already sitting on the cap table.

This can create an interesting risk–reward profile. You get the upside of the smaller company’s organic growth, supplemented by the expertise of the larger partner, all while holding a “call option” on an eventual buyout at a premium. It is a powerful combination. It turns a standard equity investment into a strategic play.

Conceptualizing the toehold also requires us to look at it through the lens of signaling. In a world of “pump and dump” schemes and management teams that over-promise and under-deliver, the toehold is a concrete action. It is a “hard” signal. It costs the larger company real money and reputation. They are putting their name next to the smaller company. This isn’t a vague press release about a “strategic partnership” that leads nowhere. This is a real monetary commitment.

A toehold is a vote of confidence in the management’s integrity and the product’s longevity. It serves as a filter that filters out the “wannabes.” It is very rare for a world–class organization to take a minority stake in a mediocre business. They want the best. They want the winners. By identifying these stakes early, we are essentially letting the most successful companies in the world do our screening for us. We are leveraging their vast resources, their industry knowledge, and their strategic foresight to improve our own hit rate.

This is how we move from being “dumb money”, from “retail”, to being “informed.”

Case Studies

If a mental model is to be useful, it must move beyond theory and prove its worth in the cold reality of the tape.

One of the most profound examples in recent history, and one brought up by Unemployed Value Degen in the excerpt below, is the relationship between Keurig Dr Pepper and Vita Coco.

When a massive distributor and manufacturer takes a strategic stake in a category leader, they are not only betting on a trendy product; they are betting on the supply chain, the brand’s resonance with a specific demographic, and the potential to scale that brand through their own superior distribution network.

For the smaller company, it provides an immediate “inflection point” where their operational ceiling is effectively removed. As the stock moved from under $10 to over $60, it became clear that the toehold might have been the early signal for a massive compounding story.

The Constellation Software Playbook: Public Equities as a Lab

When we talk about capital allocation, the conversation among value investors will most likely eventually shift to Mark Leonard (I hope he recovers quickly!) and Constellation Software (CSU) and the accomplishments of Leonard and his team.

I believe a fascinating shift has occurred recently with both Constellation and its spin–off, Topicus. Traditionally, these companies were focused on acquiring 100% of small, “boring” vertical market software (VMS) companies. But lately, they have begun to flex their muscles in the public markets, taking strategic stakes in larger VMS peers.

I see this as a natural evolution of their acquisition approach.

By taking a minority interest in a public competitor, CSU and Topicus are essentially running a real–time laboratory. They get to observe the management’s discipline, the stickiness of the software, and the pricing power of the business from a privileged vantage point. At the same time, they can share their expertise with them. If the company performs well and fits the culture, the toehold might become the foundation for a full acquisition. If it doesn’t, they have still invested in a liquid high–quality asset that they understand better than almost anyone else in the market. It is a “try before you buy” strategy at a multi–million/billion dollar scale.

The Tencent Ecosystem: Minority Stakes as Call Options

Tencent has arguably perfected the “toehold” strategy more than any other firm in history. Instead of trying to build every service themselves, they took a minority stake in companies like Sea Limited, JD.com, and Meituan. They then integrated these companies into the WeChat ecosystem, providing them with a massive firehose of traffic. This didn’t just help the smaller companies grow – it allowed Tencent to build a “synthetic” monopoly where they owned a piece of everything (good) their users touched without the regulatory headache of owning the entire entity.

Tencent eventually divested some of these stakes or, in other cases, deepened them. But the signal was always there: if Tencent is taking a 5% or 10% stake in your business, they are essentially providing you with their “Seal of Approval.” They are saying that your tech, or your product offering, is very good.

More Examples

To give you a sense of just how widespread this phenomenon is, I’ve put together a few more examples where a strategic toehold was the precursor to a massive run or an eventual takeout. Notice how in each case, the “parent” company brought more than just cash to the table – they brought expertise, distribution, or technology.

• Coca–Cola & Monster Beverage: In 2014, Coke took a roughly 17% stake in Monster. They swapped their energy brands for Monster’s non–energy brands and took over global distribution. The stock has been a multi–bagger since, fueled by the “Coke System” acting as a global accelerant.

  

• Disney & BAMTech: Disney initially took a 33% stake in BAMTech – which was never a public company – to power its streaming aspirations. That toehold provided the technical foundation for Disney+, and Disney eventually bought the whole company. The minority stake was the “due diligence” period for their entire future strategy.

• Microsoft & Facebook (2007): Long before Facebook was the giant it is today, Microsoft took a 1.6% stake for $240 million. While small, it was a massive signal to the market that the social graph was the next frontier of computing.

  

• Delivery Hero & Glovo: This started as a 15% minority interest. Delivery Hero used that position to coordinate strategy and eventually moved to take full control.

• Celsius (CELH) & PepsiCo: This is perhaps the most striking modern parallel to the Monster/Coke deal. In 2022, PepsiCo took a strategic minority stake in Celsius – roughly 8.5% – worth about $550 million. On the surface, it may seems as only a capital injection. In reality, it was a total transformation of the business as the deal came with a long–term distribution agreement that plugged Celsius into Pepsi’s massive, world–class logistics machine. For an energy drink company, the ability to get “eyes on the shelf” is the ultimate “moat.” The toehold was possibly a signal that Celsius is graduating from a niche fitness brand to a global contender.

• Amazon & the Warrant Strategy: Amazon has perfected a very aggressive form of the toehold. They often take minority stakes – or warrants that can be converted into stakes – in their most critical infrastructure partners. One notable example is Air Transport Services Group (ATSG).

  

  They have done similar moves with hydrogen fuel cell providers like Plug Power. Here we might also bring up Amazon’s grocery (ad)ventures: While the 100% acquisition of Whole Foods was a massive, headline–grabbing event, Amazon’s quieter moves in the grocery sector are even more indicative of the toehold strategy. I’ve noticed they frequently use warrants and strategic investments to align themselves with essential partners. For example, they secured the right to acquire a minority stake in SpartanNash, a major US grocery distributor and retailer, a move to integrate Amazon’s logistics with a massive, pre-existing food distribution network. They executed a similar strategy in India with Future Retail, where they took a minority position through a subsidiary to navigate complex regulatory environments. In both cases, the investment served as a "backdoor" into a difficult industry where local expertise and existing infrastructure are the primary moats. It allowed Amazon to "learn" the supermarket business from the inside before committing to a full-scale assault on the market.

• Berkshire Hathaway & the Japanese Sogo Shosha: In 2020, Warren Buffett announced that Berkshire had acquired 5% stakes in each of Japan’s five largest trading houses. It was a classic toehold. He signaled to the market that these were high–quality, undervalued “share cannibals.” Since then, he has slowly increased those stakes toward 9%, and the performance has been spectacular. It was a vote of confidence in an entire sector that the rest of the world had ignored.

  

• Volkswagen & XPeng: In the automotive world, the toehold is often a confession of a technological gap. VW recently took a 4.99% stake in the Chinese EV maker XPeng. This wasn’t because VW needed a financial investment; they needed XPeng’s software and E/E architecture for the Chinese market. For an investor, seeing one of the world’s largest legacy manufacturers pay for the “intelligence” of a smaller, younger peer is a massive signal of who actually owns the superior tech stack.

You could continue this list almost indefinitely. What strikes me about these examples is the asymmetry. As an investor, you don’t need to be right about the eventual acquisition to win. You just need to be right that the toehold signals a high–quality business with a long runway. If the acquisition happens, it’s a bonus – a “pop” in valuation that serves as the cherry on top; or sometimes, you might not even want the company to be acquired, as it hinders you from compounding with the company for decades to come.

Subscribe now

So the key benefit of the returns comes from the operational validation that the toehold provides in the first place. It narrows your universe of potential investments down to the ones that have already been vetted by the best in the business.

Putting It Into Practice

To wrap up this piece, we need to move even further from the conceptual theory to the practical side of things. The logical next step is to institutionalize this signal by adding it to your formal investment checklist.

Every time you open a new filing or begin a deep dive into a small–cap name, you now want to find yourself asking a pointed question:

I have looked at the cap table to identify whether a strategic peer or a dominant industry competitor holds a non–controlling interest or warrants that serve as a validation signal for the company’s underlying technology or operational model. When was the position established and was it increased/decreased over time?

You might frame this in a few different ways.

• Is there a sophisticated competitor holding a non–controlling interest that suggests a hidden technology transfer?

• Does the ownership structure reveal an “unspoken” partnership that hasn’t yet hit the income statement?

• Or, perhaps most provocatively: If I were the CEO of the industry leader, what do I see in this smaller challenger that I cannot build myself?

These questions serve as another “violent filter.” They force me to look for the “smart money” that isn’t just looking for a quick trade, but for a structural, long–term advantage, and that may actively contribute to the thesis playing out; it’s a silent vote of confidence before it becomes common knowledge.

In one’s investing routine, this fits perfectly into the “turning over a lot of rocks” philosophy famously championed by Peter Lynch. As he often said, the person who turns over the most rocks wins the game. Your process maybe should include a mandatory stop at the ownership tables for every single company you look at.

I’ve found that tools like Koyfin make this process incredibly frictionless. Instead of wasting ten minutes digging through a dense proxy statement to find the relevant tables, I can pull up the institutional and insider ownership instantly.

I use my common sense. I look for the anomalies. If I see a tier–one competitor or a world–class strategic partner holding a 4.9% stake, my interest is immediately piqued.

I want to know since when and why they are there.

It should become a simple habit, but one that has the potential to reveal massive outliers that the rest of the market is ignoring because they are too busy looking at the quarterly earnings beats.

Another highly effective way to generate new investment ideas is to reverse the process entirely. Instead of searching for the toehold in a vacuum, you may start by identifying companies with what Mohnish Pabrai calls "Spawner DNA" – the rare breed of organizations like Amazon, Tencent, or even Nvidia that are culturally programmed to plant strategic seeds.

Look directly at the publicly traded minority investments these giants have made.

If you share this post with like-minded investors who may find value in this piece, it helps to spread the word 🙏🏻

Share

Subscribe now

On one hand, the latest results in Grab posted (Q1 of FY26) reveal a business that is firing on all cylinders, delivering a massive $120 million profit for the period.

“Q1 is off to a fantastic start for us across all the financial fundamentals of our business.“ - Q1 Earnings Call

On the other hand, a sudden political intervention from Jakarta and a bruising regional oil shock have created near- and medium-term challenges.

President Prabowo Subianto’s announcement of a commission cap on ride-hailing services – effective immediately and specifically targeting the “ojol” motorcycle sector – briefly wiped 7% to 8% off the market capitalization as the news broke. When you combine that with a fuel crisis that saw prices spike sharply across the region in March, the bearish narrative had plenty of ammunition.

Market volatility is nothing new for Grab shareholders. If you look at the historical chart, the story is one of persistent struggle against gravity. We are, in fact, currently hovering around a critical support line that has been tested repeatedly over the last twelve months.

The technical picture remains bleak for long-term holders. A negative five-year CAGR is a tough pill to swallow for anyone who bought into the initial listing hype.

However, price and value are frequently distinct entities. While the stock initially buckled under the weight of the Indonesian news and the fuel headwinds during last week’s trading sessions, today’s pre-market reaction – up roughly 2% – suggests a more nuanced interpretation might be beginning to take hold.

This feels like a defensive posture. It is the sound of investors weighing a localized regulatory headwind and a short-term margin squeeze against a group-level performance that, frankly, exceeded some investors’ expectations.

Before I peel back the layers of this quarterly report, I recommend revisiting my broader thesis. You can find the foundational details in my Grab Holdings Deep Dive Series (four parts), where I explore the business model, the ecosystem’s structural moats, and the long-term unit economics of the superapp model, the management team, and the stock’s valuation.

What I will discuss in this analysis is that, personally, I view the “Indonesia shock” and the fuel crisis not as terminal blows, but as “Darwinian filters.” The panic selling we saw earlier this week stems from Indonesia’s significant footprint. It accounts for roughly 21% of group revenue, with mobility specifically representing 36% of that total. A mandated drop in platform commissions from 20% to a mere 8% for motorcycle rides is, on the surface, a brutal hit to the top line. But as I’ll explore in the coming segments, the mechanical reality is far more complex.

I am increasingly convinced that we are seeing a “scale economies shared” business in the making. Much like the regulatory shifts that have historically impacted companies like Edenred, these interventions – alongside the exogenous pressure of rising fuel costs – often end up entrenching the dominant player. When margins are squeezed by decree or by the pump, only the most efficient, best-capitalized, and technologically superior operators survive.

The question is whether the market can look past the immediate revenue “shock” and see the reinforced moat being built underneath. I think we are seeing a fundamental decoupling of operating results from share price sentiment.

I find myself surprisingly relaxed. The runway is long. The flywheel is accelerating. And as we transition into the granular details of the Q1 results, I want you to keep one thought in mind: in a world of 8% commission caps and expensive fuel, the only thing that matters is who has the lowest cost of operation. Right now, that is Grab.

Disclaimer: I own Grab shares. The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

Q1 2026 Highlights: Seventeen Quarters of Momentum

Usually, the first quarter in Southeast Asia is a period of “holiday hangovers” where the festivities of Lunar New Year and Ramadan dampen both delivery demand and driver availability.

“… the confluence of Lunar New Year and Ramadan within the first quarter, both in the first quarter this year, creating acute supply pressures as usual during those 2 festive periods.“ - Earnings Call

Yet, the latest Grab results tell a different story.

In Q1, Grab reached an all-time revenue high of $955 million, a 24% leap year-on-year (19% YoY on a constant currency basis) that suggests the platform is still finding new pockets of demand.

Group MTUs increased both YoY (16%) and QoQ to 52 million.

In addition, we are looking at the seventeenth consecutive quarter of Adjusted EBITDA growth. This is a testament to a compounding machine that has finally learned how to generate profits.

“As we look ahead to the rest of the year, we remain committed to delivering durable, profitable growth while standing shoulder-to-shoulder with our communities — leaning deeply into AI to outserve our users with hyper-personalized experiences, while simultaneously unlocking more sustainable earnings opportunities for our ecosystem partners.“ - Anthony Tan

Grab posted $120 million in profit for the period. The business is now self-sustaining. It generated $98 million in Adjusted Free Cash Flow this quarter alone, pushing its trailing twelve–month total to a very healthy $489 million (remember that management aims for $1.2 billion in FCF by 2028, so we’re very well on track).

For those of us who remember the days of billion–dollar annual burn rates, this feels like a historical pivot point.

This profitability is not a result of “starving” the ecosystem. On the contrary, user engagement is at record levels. As mentioned, Monthly Transacting Users (MTUs) grew 16% to 51.6 million, and the On-Demand GMV accelerated to $6.1 billion.

I find the segment–level efficiency particularly revealing. In the Deliveries division, GMV reached $3.9 billion despite the festive season. This was driven by a clever “barbell” strategy. On one end, affordability initiatives like Saver Deliveries and Group Orders brought in the volume. On the other hand, the segment’s Adjusted EBITDA margin improved to 2.3% of GMV (from 2%). It seems like they are capturing the budget–conscious user without sacrificing the overall margin profile.

Mobility followed a similar path, with GMV reaching $2.2 billion. Interestingly, transactions grew faster than GMV at 28%, indicating that the service is becoming more accessible and high–frequency rather than just more expensive.

They are maintaining a steady 8.9% Adjusted EBITDA margin here, even while navigating the sharp regional fuel crisis that could have easily derailed a less efficient operator.

On the autonomous vehicle side of things, Grab is clocking 40,000 autonomous kilometers in a controlled Singapore residential estate, learning how to integrate hybrid fleets of human and AI drivers. They want to be the most experienced operator in Southeast Asia, ready to plug in any AV software player when the technology and the regulators are finally ready. However, as noted on the earnings call,

“… the adoption of AVs in Southeast Asia remains nascent. We see governments and regulators taking a measured approach in implementing AVs, which we believe is the right approach for our region. We will continue to incorporate AVs in our platform at a pace that reflects the trust communities place in us and our emphasis on customer safety. To be clear, we do not expect anyone to be able to deploy impactful disruption to our human driver network in the near future.“

If there was a “shock” this quarter beyond the Indonesian regulation, it was the explosive growth of Financial Services. The $1 billion milestone in quarterly loan disbursals is hard to ignore.

That is a 67% year-on-year increase.

More importantly, the Gross Loan Portfolio has swelled to $1.4 billion – even though QoQ growth was more modest – while credit discipline and credit quality actually improved. They are lending into their own ecosystem – to drivers and merchants, and consumers (app users), all of which they already know – which creates a massive information advantage for their underwriting AI.

According to Grab’s management team, “more than 1/3 of that incremental revenue dropped straight to the bottom line for Financial Services, demonstrating that operating leverage that we've been speaking about.“

So this segment is on a clear trajectory to break even in the second half of 2026.

“We also reiterate our expectations to exit 2026 with a Gross Loan Portfolio of over $2 billion and achieve Segment Adjusted EBITDA breakeven in the second half of 2026 for the overall Financial Services segment.“ - Earnings Call

It is becoming a legitimate third pillar for the group, not just a loss–leading side project.

Furthermore, management is increasingly talking about the “Grab Intelligence Layer” as their ultimate competitive moat – 20 billion transactions of historical data built over 14 years are hard to replicate.

“We capture highly localized real-time data on how over 50 million users and partners interact across 8 markets […] We feed these multimodal signals, from hyperlocal mapping to in-store payment terminals, into our AI Intelligence Layer to optimize our marketplace efficiency, from dynamic pricing to last-mile routing. Crucially, we paired this data advantage with our massive through physical fulfillment network. That closed loop system or ecosystem is our biggest competitive moat, which is why our AI investments translate directly into measurable financial outcomes.“ - Earnings Call

For instance, consider the “Turbo” mode for drivers. Those who opted into this AI–powered optimization saw a 23% uplift in earnings per hour. It is a simple equation: more efficient routing means more jobs per hour, which protects driver livelihoods even when fuel prices are at record highs (here Grab tried to cushion the impact by deploying targeted fuel rebates and proactively engaging with regulators across their markets).

“This has contributed to Mobility transactions growth outpacing Mobility GMV growth, with transactions up 28% YoY.“

On the fuel crisis subject, to provide some more context, management also said the following on the call:

“In the medium term, we are committed to accelerate the EV transition to reduce our driver partners exposure to fuel price volatility. So for example, in Thailand and Philippines, we have a drive-to-own program that connects our drivers with OEMs like BYD and GAC, where we have deals of up to 70,000 vehicles available across 6 markets with accessing to financing so they can own those more easily.

In Vietnam, we have secured preferential charging rates also through our charging network partners, EBOOST and Charge+, which helps our drivers in the transition also. And finally, in Thailand, I am pleased to say that our total fleet supply has crossed 30,000 EVs on the platform and demand for those from consumers is also strong, where they can select that EV option, and that demand has grown by over 35% year-on-year. So this fuel crisis has become an opportunity in the sense that it helps us to accelerate that EV transition.“

For merchants, the AI Assistant is driving a 15% GMV uplift for those who engage with it.

The high-margin ad business is also developing favorably: average advertiser spend grew 44% YoY as merchants see increasing measurable returns. However, as @the_zack_zhu shared on X (see overview below), the number of active advertisers only grew 5%, and it remains to be seen whether Grab has already hit a structural ceiling or whether this is just a temporary slowdown (I’m leaning towards the latter).

Overall, Grab is “winning” because they are out-serving the competition by making the platform more profitable for the people who actually do the work.

The strategic horizon is also expanding. The acquisition of foodpanda’s business in Taiwan is a bold move into a high–ARPU market outside their traditional Southeast Asian stronghold. And importantly, the Q1 figures and the outlook do not include revenue from both the Stash and Foodpanda Taiwan acquisitions.

The outlook remains remarkably steady despite the near-term noise. Grab reiterated its full–year 2026 guidance, targeting revenue up to $4.10 billion and Adjusted EBITDA as high as $720 million.

As readers of my initial deep dive know, they are also putting their money where their mouth is with a $500 million share repurchase agreement.

“In March 2026, we entered into an accelerated share repurchase agreement and a contingent forward purchase agreement to repurchase $250 million and up to $150 million, respectively, worth of Class A ordinary shares, as part of our previously announced $500 million share repurchase programme approved by the Board of Directors in February 2026.“

At the same time, it’s important to note that nonetheless, the basic and diluted shares have increased both year-over-year and quarter-on-quarter.

However, management added some more nuance on this subject during the call:

“So a total of $400 million has been accelerated, which means only in the market for 5 to 5 trading days in Q1 itself. So you can’t look at it in isolation. Now both these programs are expected to be executed over the next 4 months. So I’ll share a lot more in the next quarterly earnings when we look at the Q2 results. Now in terms of share count, it would have amount to roughly around 2% of our total share count, which will more than offset for the dilution from stock-based compensation. So that’s how we’re viewing it. As a reminder, there’s still another $100 million left to go in the share buyback program, and we’ll continue to have discussions around capital allocations with our Board.“

The Indonesia Shock: Regulatory Caps and Its Implications – Is the Grab Thesis Now Broken?

Indonesia, one of Grab’s largest and most important markets, just threw a curveball at investors. In early May, the government introduced price caps on ride-hailing fares through Presidential Decree No. 27/2026, aiming to protect drivers and curb rising ride costs for consumers.

On the earnings call, management clarified that the regulations will specifically target the “ojol” (short for ojek online) motorcycle sector.

Read more

Over the years, it has weathered near-bankruptcy, transformed from a niche card business into the world’s leading entertainment company, and solidified its place as a titan of the gaming industry.

Subscribe now

What’s most striking, though, is how Nintendo continues to reinvent itself while staying true to its core philosophy: long-term survival over short-term gains.

Fast forward to 2025. The Nintendo Switch 2, launched with skepticism from critics, has shattered all expectations. It has become the fastest-selling console in history – 3.5 million units sold within just four days, 15 million in six months.

This is a company that’s not just surviving but thriving, breaking records and pushing boundaries.

And of course Nintendo’s recent success is not just about the recent hardware sales records – if anything, hardware is the enabler of the broader Nintendo thesis –; no, Nintendo has become a self-funding marketing machine. The success of The Super Mario Bros. Movie, which grossed over $1.36 billion, directly boosted game sales, essentially turning its own movies into profit-generating advertisements.

This is the kind of business model that’s rare in any industry.

Perhaps most impressive of all is Nintendo’s $13-14 billion fortress balance sheet. With zero long-term debt and a robust cash position, the company has the freedom to weather any storm and invest in its future, whether that’s through new IP or expanding its already vast gaming ecosystem. Add to that its 400 million Nintendo Accounts, ensuring customer retention across platform generations, and the company is in a much stronger position than it was during the cyclical “boom-bust” hardware cycles of the past.

From a strategic point of view, Nintendo is also positioned well. While Sony and Microsoft continue to duke it out in the performance arms race, Nintendo has carved out a unique niche, competing on intuitive gameplay and portability, not raw hardware specs. This deliberate choice has given Nintendo a near-unassailable lead in the family-friendly gaming space, where it faces little direct competition.

In this post, I’ll explore how Nintendo’s unique approach to business, combined with its world-class intellectual property, gives it an edge that few companies can match. From the fastest-selling hardware in history to a growing digital ecosystem and unparalleled financial stability, Nintendo is shaping up to be one of the more interesting opportunities in the entertainment sector. What makes the setup especially compelling right now is the disconnect between the business and the stock. Despite the strong fundamental backdrop, the shares have recently seen a drawdown of roughly 50%, now trade about 40% below the level around the Switch 2 release, and have effectively round-tripped back to 2020 levels.

To me, that is exactly where things start to get interesting. So stick around – I’ll show you why I believe the market is missing the full potential of this global powerhouse.

High-Level Thesis: “Bam Bam Bam Bam Bam”-90 Second-Hypothesis

Nintendo is currently undergoing a massive growth inflection point that the market is still (or once again?!) mispricing as a standard, legacy hardware cycle.

“Case in point, this is now the fourth time this cycle that false Nintendo narratives have been proven wrong.“ - Ryan O’Connor

Read more

Why join the community, you may ask? Our library is fast approaching 70 comprehensive deep dives, providing institutional-level research on some of the world’s most fascinating businesses. Most recently, we’ve dissected companies like Grab Holdings ($GRAB), Fair Isaac ($FICO), and Topicus.com ($TOI).

As a member, you get:

• Complete Access: Every deep dive in our library (65+ and counting).

• The WhatsApp Community: Real-time discussion and networking with like-minded investors.

• Incredible Value: Full access to all of this for less than $1/day.

If you want to see the level of research we provide before committing, the following deep dives are free to read:

• InPost ($INPST)

• Monday.com ($MNDY)

• DigitalOcean ($DOCN)

• Novo Nordisk ($NVO)

It is finally official. After months of signaling its intentions to expand into the Asia-Pacific region, Robinhood has secured in–principle approval (IPA) from the Monetary Authority of Singapore (MAS) to offer brokerage services.

The news, which broke on April 23, immediately sent ripples through the market, and I noticed that Tiger Brokers’ stock felt the weight of this development almost instantly (ending that day down 6-7%).

For an investor in UP Fintech, who follows the Asian fintech space closely, this wasn’t exactly a surprise, but it certainly represents a fundamental shift in the landscape. I have watched Robinhood carefully navigate the US and European markets, and their arrival in Singapore marks a significant escalation in the war for the retail investor’s wallet in this part of the world.

The immediate reaction from the market was telling. As highlighted, Tiger Brokers was down significantly following the announcement, which is not exactly surprising given the negative momentum of the stock this year.

However, in contrast to prior 1-day -6-10% stock price moves (there have been many recently), I think this was the first time in a while that we saw “major news” that actually required a serious pause for reflection for those invested in brokerage businesses with Asia exposure. While some might dismiss this as mere noise, I believe the arrival of a player with Robinhood’s capital and brand recognition has in fact fundamental significance for the incumbents. This is a company that effectively pioneered commission–free trading in the West and forced some legacy giants to change their entire business models. Now, they are setting up their regional headquarters in the Lion City.

The in–principle approval itself is quite comprehensive. It covers the trading of securities, exchange–traded derivatives, custody services, product financing, and collective investment funds. This is not a limited trial or a niche product launch – it is a full–stack brokerage play. Patrick Chan, who heads Robinhood’s Asia operations, noted that Singapore’s regulatory environment and high digital adoption make it the ideal hub.

I agree. But while the market panicked, I found myself asking whether the threat to existing players is truly as existential as the stock price movements suggest.

From my perspective, the net impact is likely a slight net negative in the short term due to the sheer intensity of the competition. Robinhood isn’t just bringing an app; they are bringing a massive balance sheet and a subsidiary, Bitstamp Asia, which already holds a Major Payment Institution license. This means they are ready to offer a unified ecosystem of traditional securities and digital assets right out of the gate.

However, as I will outline below, I am not losing sleep over this development. I have found that in the world of Asian brokerages, the market often overestimates the speed of disruption while underestimating the stickiness of existing platforms.

I want to dig deeper into why I think the “Robinhood threat” might be more nuanced than the headlines imply.

Disclaimer: I own UP Fintech shares. The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

Why Stickiness and Segmentation Matter

The market’s immediate reaction to the Robinhood news was a classic example of “shoot first, ask questions later” – investors were pricing in a zero–sum war for the Singaporean retail market. But if we pull back the curtain, the competitive threat looks far less existential. The reality is that the digital brokerage space in Asia is not a monolith, and Robinhood is entering a market that has already been carved up by a few very sophisticated incumbents who have spent years moving up the value chain.

One of the most significant reasons I am not concerned about a mass exodus from Tiger or Futu is the strong switching cost embedded in most brokerage business models. Let me just share what I wrote in my deep dive on the industry last year:

“When you open a brokerage account, you’re signing up for a long-term relationship. You link your bank accounts, set up recurring deposits, maybe transfer a pension plan, learn the interface, customize your dashboard, and store your trading history.

All of this creates switching friction. It’s not impossible to leave, but it’s a bit of a hassle.

And humans don’t like hassle.

Most people will endure a slightly worse user interface, a marginally lower interest rate, or a tiny increase in fees if it means they can avoid the administrative nightmare of moving everything elsewhere. It’s the same with bank accounts, and the reluctance to switch is arguably strong in the brokerage business. Transferring assets between brokers can trigger taxable events, delays, or even data loss.

There’s also a trust element: once you’ve entrusted your life savings to a platform, the psychological barrier to switching is higher than most investors admit.

That’s why customer retention in brokerage is off the charts. Nordic brokers like Avanza and Nordnet report retention rates above 97–98%. In the UK, platforms like Hargreaves Lansdown or AJ Bell are typically in the 91–95% range. Even discount platforms like flatexDEGIRO or Futu report similar figures. Annual churn of 2–9% might sound trivial, but in business-model and business economics terms, it’s transformative. It means that for every hundred clients acquired, over ninety are still around a year later – and most of them will still be there five or ten years from now, if not longer.

Here’s an overview of some well-known brokerage businesses and their corresponding churn/retention rates:

Read the full piece here:

Moreover, another reason for not being overly concerned is the stark difference in the actual profile of the users. If you look at Robinhood’s most recent full–year results for 2025, their average assets under custody (AUC) per funded customer sit at approximately $12,000. While that is a record high for them, it pales in comparison to what we see with the Asian leaders. Tiger Brokers has been quite vocal about its focus on higher quality users – depending on the regions, users with account balances of >$40,000.

This is a massive discrepancy. It tells me that while Robinhood is still fundamentally a platform for the mass–market Gen Z retail trader, Tiger and Futu’s Moomoo have successfully “graduated” their user base into the higher–quality, affluent segment.

When I talk to seasoned investors in Singapore, they aren’t looking for just a slick interface; they want deep technical tools, comprehensive wealth management options, and reliable access to Hong Kong and China markets.

I believe that you aren’t going to convince a client with a $70,000 portfolio to switch to a platform designed for $300 trades just because the brand is famous.

The Friction of Success and the Stickiness of Ecosystems

Beyond the AUM numbers, we have to talk about the sheer friction of switching brokers one more time. In the brokerage world, the business model is incredibly sticky. It isn’t like switching from Grab to Gojek; there are real costs and administrative hurdles involved. Moving a portfolio often incurs “share transfer” fees that can range from $20 to $100 per counter. While a new entrant might offer to subsidize these costs, the “tax” on your time and the psychological effort of setting up a new account, re–doing KYC, and learning a new UI is a powerful deterrent.

Furthermore, Tiger and Futu have built deep ecosystems that go far beyond simple stock trading. Their revenue streams are much more diversified today compared to just a few years ago.

For instance, Tiger has been aggressively expanding its ESOP (Employee Stock Ownership Plan) management business and its high–quality “Tiger Vault” for cash management. These are products that entrench a user. If your company’s stock options are managed by Tiger, or if you have your entire emergency fund parked in their wealth management suite, the likelihood of you leaving for a new app is remarkably low.

I suspect that Robinhood will find the Singaporean market far more “picked over” than the US market was in 2013. In the West, they were competing against clunky, expensive legacy brokers. In Singapore, they are competing against 2nd–generation digital natives who are already faster, cheaper, and more feature–rich than anything Robinhood has faced as competition elsewhere early on.

The market may have panicked, but I see two different tiers of players hunting two different types of prey.

The Rising Tide Hypothesis – Could Robinhood Be an Unintentional Ally?

I want to pivot to a theory that some might call a bit of a moonshot – and I do too –, though I find it somewhat plausible the more I look at the history of fintech. There is a possibility that Robinhood’s entry into Singapore will not just take market share, but will actually expand the total addressable market in a way that fundamentally benefits both Robinhood and its competitors. I call this the “Graduation Effect.” In the United States, Robinhood didn’t just steal customers from Charles Schwab or Fidelity – it minted millions of new investors who had previously felt priced out or intimidated by the complexity of the stock market.

If we look at the Singaporean market, digital adoption is already near saturation at over 95%. However, there is still a significant gap between “having an app” and “active investing.” Robinhood is a master at top–of–funnel acquisition. Their interface is designed to lower the psychological barrier to entry, making a first trade feel as simple as sending a text message. By bringing their brand of “democratized” finance to Asia, they are likely to attract a cohort of younger, first–time investors who might have found other brokers’ solutions a bit overwhelming.

But here is where it gets interesting for the incumbents. As an investor matures, their needs change. A casual trader who starts with $500 on Robinhood today will, in three years, likely be looking for more sophisticated instruments – things like advanced options strategies, detailed technical analysis tools, and perhaps the ability to trade across more diverse global markets like Hong Kong or mainland China via Stock Connect. If Tiger and Futu continue to aim for higher-quality users, those are technical capabilities they’ll need to continue developing – even though the current tools are by no means comparable to a platform like IBKR (just to be clear).

However, both have spent years refining a platform that caters to the “prosumer” investor. In this light, Robinhood might act as the primary school of investing, while Tiger serves as the university (and IBKR would be considered your PhD thesis). If Robinhood successfully brings 100,000 new retail participants into the Singaporean ecosystem, a significant percentage of those users will eventually “graduate” to a more robust platform once they outgrow Robinhood’s simplified UX.

The Crypto Synergy and the Quest for the Super App

At the same time, we also cannot ignore the Bitstamp angle. Robinhood’s subsidiary, Bitstamp Asia, already holds a Major Payment Institution license from the MAS. This gives them a massive head start in creating a unified “Super App” experience that bridges the gap between traditional equities and digital assets. In a market like Singapore – which has a very high appetite for crypto but a strict regulatory environment – this could be a major draw for the younger demographic.

However, I have noticed that when a platform tries to be everything to everyone, it often loses the specialized edge that seasoned investors crave. Tiger has been very intentional about its pivot toward high–quality users and asset management. By focusing on “K+ users” and sophisticated wealth management solutions, Tiger is positioning itself as a premium alternative. I believe the market is large enough for both a mass–market “entryway” like Robinhood and a specialized “wealth hub” like Tiger. Instead of a zero–sum game where one must die for the other to live, I suspect we are entering an era of market stratification. Robinhood could dominate the “volume” end of the market, while the incumbents will continue to dominate the “value” end.

Subscribe now

The wild hypothesis here is that Robinhood might actually be doing the expensive work of customer education for its rivals. Every dollar Robinhood spends on marketing “investing for all” in Singapore is a dollar that helps normalize stock market participation for the masses. In the long run, those educated investors become the prime targets for Tiger’s more advanced, higher–margin services. It is a bold play, but I’ve seen this pattern repeat across multiple industries: the disruptor expands the market, and the specialist captures the mature demand.

The Valuation Gap and the Final Verdict

When I look at the hard numbers, the disconnect between market sentiment and fundamental reality becomes even more pronounced. Investing is ultimately a game of expectations, and for the current incumbents in the Asian brokerage space, those expectations have been beaten down to a level that I find genuinely remarkable. To justify its current valuation, a business like Tiger Brokers doesn’t need to conquer the world; it doesn’t even need to grow at all, and if it maintains even a modest level of growth, I believe the stock should do very well from here.

To learn more about my latest thoughts in this regard, check out this piece:

In sum, I believe the market is making a classic mistake by treating Robinhood’s entry as a “zero–sum” event. Investors see a large, well–capitalized player entering and assume they will cannibalize the entire pie. But as I’ve noted, the “pie” in Singapore and broader Asia is not only growing, it is also splitting into distinct segments. Robinhood’s focus on the mass market and lower–AUM users means they are essentially fighting for a different pool of capital than Tiger, which more recently has successfully positioned itself as a hub for more affluent, higher–quality users. If Tiger doesn’t even need to growth from these prices, and they are currently at a very solid rate, then Robinhood doesn’t just need to be successful for the thesis to not work out from current levels – they would need to actively destroy Tiger’s existing ecosystem to break the investment thesis.

Given the stickiness of these platforms, I find that scenario highly unlikely.

Disclaimer: I own UP Fintech shares. The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

I always spend a considerable amount of time tracking the prices of some of the world’s most dominant businesses that every once in a while trade at valuations that seem completely disconnected from their long–term earning power trajectories.

This post is a collection of my notes on five specific names that have moved to the very top of my watchlist. For those new here: I’m not interested in chasing temporary bounces or playing for a quick relief rally. Instead, I want to explore why the “competitive advantage period” (CAP) for these firms is likely much longer than a standard discounted cash flow model would ever suggest. If you follow the logic of the recent Mauboussin research on this concept, you know that the true value of an enterprise lies in the “how long” part of the equation – how long a company can maintain its return on capital before the inevitable regression to the mean.

Arguably, the current opportunity set is much broader than many macro and market commentators make it seem. It isn’t often that you get a chance to buy into fortress–like moats when the sentiment is this sour. Whether it is a luxury icon caught in a currency storm, a real estate gateway navigating a cyclical slump, or a mission–critical software provider being repriced as a commodity,

For the five names I’m presenting today, the aforementioned CAP period appears to be significantly underestimated by the current share prices. Hence, I believe the recent drawdowns might be offering a rare window for patient, long–duration capital and deserve your attention too.

Disclaimer: The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

#1 – Boston Omaha ($BOC)

Boston Omaha is a multi-segment holding company and capital allocator that functions like a heavy-duty train powered by three distinct locomotives: outdoor advertising, high-speed broadband, and surety insurance. Founded in 2015 through the recapitalization of a small real estate shell, the company has stayed remarkably disciplined. Its primary mission is simple. It aims to grow intrinsic value per share by deploying capital into asset-heavy businesses that generate durable, predictable cash flows. Think of it as a vehicle designed to compound wealth slowly but surely through essential infrastructure.

The competitive moats here are deeper than the current market price suggests. In the billboard segment, the moat is largely regulatory; getting permits for new signs is notoriously difficult, making existing faces valuable local monopolies. Meanwhile, the broadband division focuses on fiber–to–the–home in underserved markets, creating a “first–in” advantage that is incredibly hard for competitors to displace economically. Despite these defensive qualities, the stock has been hit hard. It currently sits roughly 70% below its all-time highs reached in 2021. For a business focused on long-term compounding, this level of detachment from previous valuations is striking.

Recent developments suggest management is leaning into this disconnect. I’m particularly focused on the $30 million share repurchase program adopted late last year–a significant move for a company that historically preferred using its cash for new acquisitions.

“Our approach will be opportunistic and disciplined: we will only buy back shares when we believe they trade significantly below our conservative estimate of intrinsic value, and when doing so makes more economic sense than deploying capital into our existing businesses or potential acquisitions. Repurchases are also dependent on our excess cash availability at any given time. Shareholders should expect any repurchases to be lumpy in their timing because of the above factors, but also subject to volume and other restrictions on such a program imposed under federal securities laws and our limitations on repurchasing shares during blackout periods.“ - 2024 letter

On the operational side, the broadband segment recently secured approximately $37 million in federal ReConnect and BEAD awards. This non-dilutive capital will significantly accelerate fiber deployment in rural areas. They are also maturing in their asset management arm, showing that the “locomotives” are still gaining steam even if the share price hasn’t followed suit.

What’s dragging the price down?

It is no secret that the market’s relationship with Boston Omaha has soured. If I had to pin down why the stock has struggled to find a floor, I would point to a combination of persistent earnings misses and a sudden lack of operational “cleanliness.” The most recent Q4 2025 results were a punch to the gut for some bulls. While revenue actually beat expectations at $29.71 million, the bottom line was a different story. The company reported a GAAP EPS loss of –$0.22, which was significantly wider than the analyst consensus of –$0.03. This wasn’t a one–off event either; it followed a string of misses throughout 2025, leaving investors wondering when the “locomotives” will actually start contributing to net income instead of just soaking up capital.

Beyond the raw numbers, there are three specific structural pressures weighing on the share price:

• The Surety Slip–up: The General Indemnity Group (GIG) faced unexpected “larger losses” totaling roughly $6.7 million in 2025. For a segment that is supposed to be a steady provider of float and cash, these losses suggest that scaling the business has introduced a level of complexity that management is still learning to navigate.

• The Cost of Growth: While the broadband division is growing, it remains a massive cash sink. The $25.9 million invested into fiber passings last year is a long–term bet, but in a “higher–for–longer” interest rate environment, the market has lost its appetite for businesses that prioritize future infrastructure over immediate free cash flow.

  

• The “Value Trap” Narrative: There is a growing fear that without a clear catalyst or a pivot toward consistent profitability, the stock is becoming a classic value trap. Despite trading at a significant discount to its book value, the lack of near–term guidance or a concrete timeline for GAAP profitability has led many institutional players to move to the sidelines.

The recent sell–off reflects a market that has run out of patience for “potential.” Investors are no longer willing to give management a blank check for capital allocation if it results in widening losses. This skepticism is now baked into the price, creating a scenario where the stock essentially needs to prove its model all over again to regain its former premium.

High-Level BAM-BAM-BAM Hypothesis

Boston Omaha currently sits in that awkward spot the market almost always mishandles. It is a multi–segment holding company with lumpy results and operating businesses that are functionally impossible to value by staring at a single quarterly print. You should care because the market is currently fixated on what it can see today – near–term noise and accounting complexity – while completely underweighting the quietly compounding, asset–heavy platforms maturing in the background. The compelling angle here is the massive gap between the current share price and the embedded, long–duration earning power of its core “locomotives.”

My thesis rests on three specific pillars that I believe the market is missing. First, the business is built on physical infrastructure – billboards and fiber broadband – with unit economics that improve exponentially as utilization rises. Second, there is a massive “complexity discount” at play; the mix of subsidiaries and equity investments makes reported GAAP earnings look far noisier than the actual value being created. Finally, we are witnessing a fundamental segment inflection. The company is shifting from a capital–intensive “build mode” into a “harvest mode,” where incremental revenue carries much higher margins as these platforms reach scale. It is a classic transition from spending money to making it.

The bull case is anchored by Link Media, which has become the sixth–largest owner of billboard faces in the U.S. This is a high–margin, non–consumable business protected by regulatory barriers; once a structure is up, maintenance costs are negligible – roughly $1 million annually for the entire base – letting revenue drop straight to the bottom line. This is mirrored in the broadband segment’s “protected build” model. By focusing on Bulk HOA deals and government–funded projects, they create local utility monopolies with 10–year agreements and 100% take rates. When you add in the niche surety insurance business and management’s aggressive $30 million share repurchase program, you see a team focused on intrinsic value per share rather than cosmetic optics.

Solving for the intrinsic value reveals a potential opportunity that traditional P/E ratios hide. If you subtract the value of the Sky Harbour stake and other minority investments from the total market cap, you are effectively paying roughly $280-300 million for the core operating businesses. Against a normalized steady–state free cash flow of approximately $25 million (my bullish estimate), this implies a forward multiple of just 10-12x, or an 8-10% yield. As the broadband network matures and digital billboard conversions continue through 2026 and 2027, I expect this multiple to compress toward 10x or lower. For a business with utility–like durability and a history of mid–20% revenue–per–share growth, that is a low price to pay.

You can find my detailed analysis of BOC, which I released earlier this year, here:

#2 – Hermès ($RMS)

Hermès is a fortress of artisanal excellence. I view it as the gold standard of vertical integration and scarcity–driven demand. The business model revolves around the uncompromising quality of its leather goods – most notably the legendary Birkin and Kelly bags – which are produced in limited quantities by highly trained craftsmen. The Hermès business model and investment hypothesis does not encompass mass production or trend chasing like some of its fashion “peers”, but instead, Hermès maintains its competitive moat by managing supply so tightly that the waiting list itself becomes a product feature. By controlling almost every step of its production chain and avoiding the trap of discounting, the house has built a level of pricing power that few other companies on Earth can match.

However, it is vital to understand that Hermès does not possess the same type of moat as a traditional industrial giant. While they have intangible assets of an even higher degree–specifically brand power and prestige–they do not rely on massive economies of scale to create cost advantages. They do deliberate scarcity instead. In the luxury goods sector, success operates on this principle of exclusivity.

Beyond just keeping products hard to access, there is a literal scarcity of resources at play. There are simply not that many artisan hands capable of working on these specialized products, and it takes nearly a lifetime to train them to the required standard. A competitor cannot simply scale operations to match this, especially when many of the world’s top–quality leather tanneries are already owned by Hermès, LVMH et. al., creating a physical barrier to entry for any upstart.

In recent years, we have seen a clear divergence among the “Big Four” players: LVMH, Hermès, Richemont, and Chanel. While the sector as a whole is cooling, Hermès has continued to gain market share alongside names like Richemont, Brunello Cucinelli, and Prada. Conversely, Kering has lost significant ground, and Burberry has struggled to maintain its footing. Even LVMH has seen a slight erosion of its dominant share as consumers pivot toward “quiet luxury.”

Despite this relative strength, the stock has not been immune to the broader market malaise. Hermès is currently trading roughly 40% below its recent all-time-high (the biggest drawdown since the GFC), caught in a wave of sector–wide headwinds that as of the recent quarter, even the great Hermès is not immune to.

What’s dragging the price down?

While the brand remains peerless, the stock’s recent performance has hit a significant roadblock, primarily driven by a “optics versus reality” disconnect in the latest financial reports. In the Q1 2026 update, Hermès reported consolidated revenue of €4.1 billion, which represented a 5.6% increase at constant exchange rates. However, the market focused heavily on the published figures, which showed a 1.4% decline in revenue.

This published revenue contraction is a rare sight for a company that usually trades at a significant growth premium, and it suggests that even the most resilient luxury players are not immune to the volatility of global foreign exchange markets.

Beyond the currency pain, a few specific pressure points have emerged that are weighing on investor sentiment and the fundamentals:

• Geopolitical and Tourist Headwinds: Sales in France fell by 3% as slowing tourist flows, particularly in March, were linked to the ongoing tensions in the Middle East. This regional instability also bled directly into the “Other” geographical area, which saw a 13.4% published revenue decline as wholesale activity to concession stores in Middle Eastern airports was significantly affected.

  

• Specific Category Softness: While Leather Goods remained robust with 9.4% constant growth, the Watches métier struggled significantly, posting a 10.3% decline in published revenue and a 3.7% drop at constant exchange rates. This indicates that the “aspirational” or “entry–level” luxury buyer – often the first to pull back in an uncertain economy – is becoming more cautious.

• Market Share and Margin Fears: Although the group maintains a recurring operating margin of 41% , the lack of an EPS beat in the most recent updates and the slight growth deceleration in Asia–Pacific excluding Japan (+2.2% constant) have raised questions. In a market where LVMH and others are also seeing a normalization of growth, investors are penalizing any sign that the post–pandemic luxury “super–cycle” has truly reached its plateau.

I believe the recent sell–off was likely triggered by this cocktail of changing investor sentiment, slowing growth, currency headwinds, and macro-related regional instability. Investors who were used to double–digit top–line growth were clearly rattled by the –1.4% published revenue figure, which likely fell short of consensus expectations for a “stable” published performance.

Furthermore, while management remains confident in its “ambitious goal for revenue growth” (management’s outlook), the formal outlook for 2026 remains couched in language about a “still uncertain economic and geopolitical context.” This lack of specific, upgraded guidance for the back half of the year has allowed the “too richly priced given the slowing growth” narrative to creep in, as the stock’s multiple remains high relative to the broader luxury sector even as growth rates normalize toward mid–single digits

High-Level BAM-BAM-BAM Hypothesis

When I think about how to pitch a stock, I often return to Bill Miller’s philosophy: you need a “Bam–Bam–Bam” thesis – a quick, undeniable sequence of reasons why a business is fundamentally mispriced.

In this spirit, the investment hypothesis goes like this: Hermès is currently the victim of a classic market overreaction to macro noise and short-term challenges (a “problem” that is solvable over the short to medium term). You should care because the market is fixated on a headline –1.4% published revenue decline in Q1 2026 while completely ignoring the long-term pricing power of the brands as well as shorter-term currency headwinds that will eventually lap. The thesis is that the market is missing a “perfect storm” of temporary factors – currency, geopolitical tension, and a specific French tax hike – that are masking the strongest pricing power in the luxury world.

I’ve identified three key pillars that might make this a compelling entry point. First, there is the “Artisan Monopoly” – the physical limit on how many Birkins can exist because it takes a lifetime to train the hands that make them. Second, the resilience of the ultra–high–net–worth client base is being underestimated; while “aspirational” luxury is dying, Hermès’ local client loyalty in places like Japan (+10% growth) and the Americas (+17% growth) remains exceptional. Finally, there is the “Fiscal Normalization” play. LVMH and Hermès might currently be navigating a temporary tax headwind in France, where the corporate rate for giants earning over €1 billion jumped from 28% to 33%. This five–percentage–point drag is a matter of fiscal policy, not brand health, and it might serve as a mechanical catalyst for earnings growth as these measures start diminishing in 2026 and potentially disappear by 2027.

The bull case is further strengthened by a clear path to capacity expansion. The house just inaugurated its twenty–fifth leather goods workshop in Loupes, with three more major facilities planned through 2030. This is a high–margin secondary driver because incremental production of high–demand leather goods (+9% growth) carries significantly higher margins than entry–level métiers like watches.

From a valuation perspective, the stock has historically commanded a P/E multiple near 50x, but the recent sell–off has compressed the Forward P/E toward the mid–30s. When you factor in the €12.2 billion net cash position and a recurring operating margin of 41%, you are paying a “normal” price for an extraordinary business. I see this as a rare opportunity to buy a “scarcity engine” before the tax and currency headwinds shift into tailwinds.

The rationale for Hermès often trading at a 50x earnings multiple – a price I personally would never pay because I’m a “thumb-sucking” value investor – is rooted in the sheer durability of its growth. A standard discounted cash flow model, which typically forces growth down to a 3% terminal rate after ten years, simply cannot capture the weight of a brand with this much heritage. Hermès isn’t just another luxury label – it is a multi-generational compounding machine. When you apply a traditional “fade” to its growth, you are essentially betting against two centuries of evidence that suggests this brand power is anything but temporary, and comes with tremendous pricing power.

If you want to understand the mechanics of this better, I suggest checking out Michael Mauboussin’s recent report on the “Competitive Advantage Period,” or CAP. It is essential reading for anyone serious about quality investing. He makes the case that value creation is a function of how much a company’s return on invested capital exceeds its cost of capital and, crucially, how long it can sustain that positive spread. This “how long” part is what the market consistently misprices. For Hermès, the competitive advantage period isn’t measured in years but in decades, meaning the terminal value assumptions used by most analysts are likely far too conservative.

From a technical analysis perspective, Hermès is interesting as the long-term trend line indicates the stock hasn’t broken its uptrend since the early 1990s, …

… however, if you zoom in a little and consider the last twenty years, the stock of Hermès has already broken through the uptrend, indicating that there may be more downside. As we noted in our perception change framework, “the longer and steeper the uptrend, the more violent the reversion when it finally breaks.”

To follow up on this segment on this luxury powerhouse, I recommend reading this piece I released a few days ago next:

#3 – Hemnet ($HEM)

Over the years, I have spent a significant amount of time studying digital platforms and marketplaces – some of the best business models the world has ever seen –, and Hemnet is structurally just as “elegant.” While global peers like Rightmove or Scout24 often struggle with the inherent price sensitivity of real estate agents, Hemnet has cracked the code by monetizing the home seller directly.

This is a critical distinction because for a homeowner selling an asset worth millions of crowns, a listing fee of a few hundred is practically a rounding error – typically accounting for just 0.1% to 0.2% of the total property value. While Hemnet’s listing fees historically ranged from 1,500 to 10,000 SEK (roughly $150-$1,000), heavily dependent on the chosen package (Basic, Plus, or Premium), the Q4 2025 results show that Average Revenue Per Listing (ARPL) has actually surged to 10,916 SEK more recently.

This roughly 30% year-over-year increase demonstrates that through dynamic pricing and the new high-end Hemnet Max tier, many sellers are now paying well above the traditional 10,000 SEK “ceiling” to secure premium visibility.

This unique position gives the company a level of pricing power that its international counterparts can only envy, underpinned by the fact that nine out of ten homes sold in Sweden are listed on its platform.

Despite this dominant “toll bridge” status, the stock has been caught in a brutal correction, currently sitting roughly 72% below its early 2025 highs as the market has rotated away from high–multiple growth names.

This is where it gets interesting.

Become a paying subscriber to read the rest of this post and get access to all of my other research, including valuation spreadsheets, deep dives (e.g. well-known mid- and large caps such as LVMH, Duolingo, Meta, Edenred as well as more hidden gems such as Tiger Brokers, Digital Ocean, Ashtead Technologies, InPost, Timee, and MANY more), and powerful investing frameworks.

Subscribe now

Annual members also get access to my private WhatsApp groups – daily discussions with like-minded investors, analysis feedback, and direct access to me.

Read more

And who would have guessed, it’s a Chinese company!

The stock is down a staggering 70% from its prior high. At first glance, the numbers appear enticing, but the story is admittedly a little more complex.

While earnings are expected to compress in the short term, there’s a compelling argument that if you look beyond the immediate quarterly turbulence (largely driven by macro factors the company cannot control), the long-term potential could offer attractive rewards. This company’s model is undergoing a significant shift: it’s aiming to become more capital-light, targeting higher-quality users, and is about to pursue international expansion ambitions. And while there are challenges, its low valuation, aggressive capital returns, and unique positioning make it a case worth exploring.

In this piece, I’ll dive into why, despite the near-term pressures, this stock could be a hidden gem.

Keep reading to discover if this opportunity warrants your attention.

High-Level Thesis: “Bam Bam Bam Bam Bam”-90 Second-Hypothesis

As always, we kick things off with Bill Miller’s “pitch framework.” Miller famously said that successful portfolio managers have ultra-short attention spans. When pitching a stock, you need to be punchy, data-driven, and get straight to the point. In the spirit of Peter Lynch’s egg timer challenge, where analysts had just 90 seconds to pitch a stock, I’m going to give you the essential pitch for this company in rapid-fire fashion:

Still unsure whether the subscription is worth it?

Read more

A few days ago, I was listening to an episode of This Week In Intelligent Investing featuring Shaun Heelan, CIO of MAAT Investment Group, and one exchange in particular stuck with me. The show host raised something I’d been noticing for a while: single-stock volatility has been trending meaningfully higher, and since COVID, it has essentially exploded. Double-digit percentage gains or losses after a quarterly update have become the norm – even among mega-caps.

Heelan’s response was characteristically direct. He acknowledged it as “an undeniable fact” – and then said something that I think cuts right to the heart of how serious investors should be thinking about this environment. Whether elevated volatility is a risk or an opportunity, he argued, depends entirely on the structure you operate with and the mindset you bring to the table.

“I think in some ways it’s a positive, depending on what structure you have, it’s a negative. I would take it as a net positive thinking opportunistically.”

That framing resonated with me. Of course it did. I’m a stock picker at heart—operating without restrictions and always willing to bet against the crowd.

I think most investors – even experienced ones – default to treating volatility as the enemy (mostly subconsciously). It’s uncomfortable to watch a position drop 15% in a session. It’s deeply uncomfortable to hold through a 40% drawdown over several months, only to then face another 20% leg down after a disappointing quarterly report.

The instinct is to sell, to reduce exposure, to wait for things to “calm down.” In fact, all of your human instincts will tell you to do the opposite of what you should most likely do. And those instincts, understandable as it is, may be costing you more alpha than almost any other single mistake you can make.

This post is my attempt to argue the opposite case. Elevated single-stock volatility – and we are living through an historically elevated period of it, as I’ll show – is one of the most compelling features of today’s market for the patient, fundamentals-driven investor. Full stop.

The chaos is real. The discomfort is real. But so is the opportunity embedded within it – at least, for those a) willing, b) structurally able, and c) behaviorally wired to act in these moments.

Subscribe now

To be clear, I’m not dismissing the risks that volatility brings. Volatility cuts both ways, and I’ll get into that. But I want to make the case that in a market where the traditional edges – informational, analytical – have been largely competed away, the behavioral edge that comes from being able to sit calmly while others panic may be the most powerful source of alpha available to the individual (retail) investor today.

And paradoxically, the more volatile the environment, the wider that gap tends to become.

The Volatility You Don’t See in the Headlines

Look at the S&P 500 today – back to new all-time-highs – and you could be forgiven for thinking markets are in reasonable shape.

The VIX – the so-called “fear gauge” that most financial media reach for when they want to take the market’s temperature – is hovering around its long-term average of around 15 to 20 points (19.7 on average over the past 30 years).

Nothing to see here, right?

Wrong.

The surface calm is one of the most misleading things about today’s market, and I think it deserves a lot more attention than it gets.

Here’s the number that should give you pause: as of last Friday, 74 out of 500 stocks in the S&P 500 are down more than 50% from their five-year highs. The index is near all-time highs, and roughly 15% of its constituents have been cut in half.

Software names have been hammered – 15 of them feature in that cohort – alongside the usual suspects: the over-hyped pandemic darlings that never had the fundamentals to justify their valuations.

But here’s what I find particularly striking. A meaningful chunk of those “halved” stocks aren’t speculative junk. They’re companies that were considered high-quality businesses for years, trading at premium earnings multiples that the market has now simply decided it’s no longer willing to pay, realizing their tail risk may be higher than previously thought, given the exponential progress we’re seeing in the realm of AI. The re-rating has been brutal – and I believe generally speaking, justified –, but, for many holders, completely unexpected.

What this tells you is that the index level is doing a lot of heavy lifting by a very small number of names. The math isn’t hard to figure out: if 74 constituents are down 50% or more from their peaks, something else has to be doing the heavy lifting to keep the index near record territory. What anmes are filling the voide? I believe it is predominantly the mega-cap technology names and semiconductors, which have recovered sharply and are essentially dragging the headline number upward, while a quiet carnage plays out beneath.

This, too, should be a stock picker’s dream.

Single-Stock Dispersion

This divergence between index-level stability and individual stock turbulence isn’t just a recent anecdote. It’s a structural feature of today’s market, and the data behind it is remarkable. According to research from J.P. Morgan Asset Management, the average rolling three-month pairwise correlation among S&P 500 stocks has fallen to just 13% – lower than it has been 98% of the time since 2022. A 13% correlation means that on average, a stock in the S&P 500 moves in the same direction as another random stock in the index only 13% of the time.

For context, dispersion measures how much the returns of individual stocks differ from each other. High dispersion means that stocks are diverging—some are experiencing massive gains while others are seeing significant losses. It indicates a “stock picker’s market” where selecting the right company matters more than just buying the whole index

In plain English: stocks are increasingly moving independently of each other rather than in lockstep with the broader market. The index looks calm precisely because the chaos is so dispersed.

The divergence between index-level volatility and single-stock volatility tells the same story in numbers. The VIX – which measures implied volatility on the index – remains near its long-term average of 15 to 18. Meanwhile, the VIXEQ, which measures implied volatility on the constituent stocks themselves, has shifted upward over the years to a baseline of 35 to 40.

That’s not a minor gap. Pre-pandemic, the VIXEQ averaged around 25.6. The individual parts of the market are experiencing a fundamentally different volatility regime than the whole, and most investors who focus on the headline index number are simply not seeing it.

The Goldman Sachs research team has been particularly vocal about what’s driving this dispersion. In 2024 and 2025, approximately 74% of a typical S&P 500 stock’s returns were explained by company-specific, micro-level factors – up from a 20-year average of 58%. The consequence of that shift shows up starkly in return dispersion figures: in 2024, the gap between the best and worst performers in the S&P 500 reached 70 percentage points, the highest level since 2007 outside of recession years. That is an extraordinary spread.

“Six out of 11 sectors in the S&P 500 registered above-average return dispersion — the highest being Information Technology at 106 percentage points, while Real Estate was the lowest at 39 percentage points.“ – Goldman

It means the difference between owning the right stocks and the wrong ones has rarely mattered more.

There’s a deeper point here worth sitting with. The traditional mental model most investors carry – that “the market” went up or down by X% today – is becoming progressively less meaningful as a description of what’s actually happening. When 74 names are down 50% or more from their highs while the index prints near record levels, the index isn’t really telling you what’s going on. It’s telling you what a handful of mega-cap stocks are doing.

“[...] if you look historically, and this is ironically, it’s true on the debt side as well for corporate debt, if you look at prior periods where one given sector became extremely concentrated, so you mentioned the letter that we wrote, industrials were the go-go companies in the late 60s, consumer staples were in the nifty 50 in the early 70s, energy companies in 1980 or so, technology companies again around 2000, and then financials as a class around 2006, 2007. Anytime they got up to a very high percentage, 25 or higher or 30 or higher, what happened in the following five to 10 years tended to be not pleasant.” - Shaun Heelan, CIO of MAAT Investment Group

This isn’t entirely new. The dominance of a small number of names in cap-weighted indices has been a talking point for the past five years. But the degree to which the index now masks underlying turbulence has reached a level that I think warrants treating it as a qualitatively different environment.

The “Magnificent 7” cohort is a useful illustration: these stocks moved almost in unison through 2023 and 2024 – their average three-month pairwise correlation peaked at 78% in May 2025.

By early 2026, that figure had collapsed to 26%, as investors began differentiating sharply between the long-term winners and those facing disruption from AI or competitive pressures (Source: J.P. Morgan).

Institutional research from firms like Citadel Securities also highlights that single-stock dispersion – again, the difference in performance and volatility between individual stocks – reached the 99th percentile relative to the last 30 years in early 2026.

Why Is This Happening? The Forces Behind the Surge

Understanding that single-stock volatility has structurally shifted higher is one thing. Understanding why it has shifted – and why it’s unlikely to simply revert – is what separates a useful insight from an actionable one. There isn’t a single culprit here. It’s a confluence of structural forces that have been building for years and, in several cases, accelerated dramatically since COVID.

Back to Fundamentals?

For much of the post-2008 era, macro dominated everything. Central bank policy, interest rate expectations, and broad risk-on/risk-off sentiment were the primary drivers of stock returns. In that environment, individual company fundamentals mattered less – a rising tide lifted most boats, and a hawkish Fed statement could sink them all simultaneously. Correlations between stocks were high, and the index was a reasonably faithful representation of what was happening beneath the surface.

That world is largely gone. The macro backdrop still sets the stage, but the performance of individual businesses – their earnings trajectory, competitive positioning, balance sheet resilience, management quality – is doing far more of the work in determining where a stock actually goes. This is a profound shift, and it means that stocks are increasingly being priced on their own merits rather than as interchangeable units of “market exposure.” Naturally, that leads to much greater dispersion in outcomes.

Zero-Day Options

If the macro-to-micro shift is a slow-moving structural force, the explosion of zero-days-to-expiration options – 0DTEs – is a faster and more mechanical amplifier of single-stock volatility. By 2025, total listed options volume reached 15.2 billion contracts, with 0DTE options accounting for 24% of overall US listed volume, up from 21.5% in 2024 and nearly double the 2022 share. In the S&P 500 specifically, 0DTE options now account for nearly half of all trades.

The way these instruments amplify stock moves is worth understanding. When market makers intermediate 0DTE trades, they’re exposed to directional risk and must hedge that exposure by buying or selling shares in the underlying stock. Because 0DTE options have extreme sensitivity to price changes even a modest move in a stock forces market makers to execute large, immediate hedges. That hedging activity itself moves the stock further, which triggers more hedging, which moves the stock further still. It’s a procyclical feedback loop, and it can turn what might otherwise be a contained 3% move into a 7% or 8% swing within a single session. The “Liberation Day” episode in early 2025, during which the VIX repriced from 17.48 to 52.33 in a single session, is an extreme illustration of exactly this dynamic playing out at scale.

High-Frequency Trading

Furthermore, High-frequency trading firms now account for more than half of all US equity trading volume.

“The current market structure is thus highly competitive, highly fragmented, and very fast. It is also dominated by the trading of high frequency traders, who by some estimates make up half or more of all of trading volume. Understanding what high frequency traders do is crucial for comprehending why markets today are so very different from times past.” - Maureen O’Hara: High frequency market microstructure

HFT firms operate with high speed, minimal inventory, and zero interest in company fundamentals. Their business model depends on normal, orderly conditions. The moment a macro announcement hits, a geopolitical shock lands, or a stock starts moving in ways their models don’t expect, they don’t provide liquidity – they consume it, or exit the market entirely. The result is a market that looks extraordinarily liquid in calm periods and becomes dangerously thin precisely when investors most need to execute. This “disappearing liquidity” phenomenon creates sudden imbalances between the available depth in the order book and actual trading demand, amplifying price gaps and exaggerating moves in individual stocks.

It’s one of the more insidious features of modern market structure, because it’s invisible until it isn’t.

Retail, Reddit, and the Sentiment Machine

Then there’s the retail and social media dimension, which has permanently altered the volatility landscape for at least a subset of stocks. The meme stock phenomenon that erupted in 2021 wasn’t just an entertaining footnote – it demonstrated that large numbers of retail investors coordinating on platforms like Reddit’s r/WallStreetBets could overwhelm institutional short positions and cause stocks to move in ways that had nothing to do with fundamental value.

Statistical research has since confirmed a strong bidirectional feedback loop between social media engagement and trading volume, with online sentiment capable of driving short-term price action independently of any underlying business development.

The good news, if you want to call it that, is that by early 2026 there are signs this particular force is cooling somewhat – daily retail equities trading volume fell 11% in February.

But the infrastructure for sentiment-driven volatility is permanent. Commission-free trading, social media coordination tools, and the cultural normalization of speculative trading aren’t going away.

For smaller and mid-cap stocks, especially, where even modest concentrated buying pressure can cause violent moves, this remains a live and meaningful source of idiosyncratic volatility.

AI: Creative Destruction in Real Time

Finally, and perhaps most consequentially for the years ahead, there is artificial intelligence – operating simultaneously as a driver of enormous value creation and as a force of rapid, unpredictable disruption across entire business models. Research suggests that increasing R&D expenditure in periods of technological uncertainty increases stock volatility, because the market is essentially pricing a wide range of outcomes when the winners and losers of a technological transition aren’t yet clear. That is precisely the environment we’re in.

The AI boom has also extended well beyond software into the physical infrastructure layer – the copper, lithium, rare earth minerals, and electricity grid capacity required to actually build and run the data centers that AI depends on. By 2030, global electricity consumption for data centers alone is projected to double. The stocks of companies positioned along this “material layer” are experiencing their own elevated volatility as markets try to price structural supply constraints, permitting timelines, and geopolitical access to critical inputs – none of which are easy to forecast with precision.

In summary, the net result of all these forces operating together is a market where the index-level calm is real but thin, and where, beneath it, individual stocks are navigating a genuinely turbulent set of currents. That turbulence has structural roots. It won’t simply fade because the Fed cuts rates or trade tensions ease.

And that – as I’ll argue in the next chapter – is actually very good news if you’re the right kind of investor.

Leave a comment

The Only Edge Left – And Why Volatility Is Your Friend

Let’s start with a premise that has become increasingly hard to argue against: the traditional sources of investment edge are eroding.

Informational advantage – knowing something the market doesn’t – has been largely commoditized by the speed and breadth of modern information distribution. The moment an earnings report hits, thousands of algorithms have already parsed it.

Analytical advantage still exists, but it too is under pressure. The proliferation of sophisticated quantitative models, AI-assisted financial analysis, and the general raising of the analytical bar across the investment industry means that finding a genuinely differentiated view on a business’s intrinsic value is harder than it has ever been.

This isn’t a controversial observation – it’s something the most thoughtful investors and allocators have been saying with increasing frequency throughout 2025 and into 2026.

What remains – and what I’d argue is increasingly the only durable source of alpha for the individual investor – is behavioral edge.

The ability to think and act differently from the crowd at precisely the moments when doing so is most psychologically difficult. Sitting on your hands while a position drops 20%. Buying more when a stock you own falls 15% on a news event that doesn’t change the long-term thesis. Holding through the kind of volatility that causes most institutional managers to reduce exposure simply because their risk models tell them to.

None of this is intellectually complicated. All of it is extraordinarily hard in practice.

This is where the podcast conversation I referenced at the start of this post becomes directly relevant to how you should be thinking about your own positioning. Shaun Heelan made a point in that podcast that I keep coming back to. Many of the most sophisticated market participants – multi-manager platforms, quant funds, and institutional allocators operating under strict risk mandates – are essentially forced to reduce or exit positions as volatility rises, regardless of whether the underlying business has changed at all. Their risk limits are defined by value-at-risk models with 12 or 24-month lookback periods. As volatility picks up, those models demand position reductions. It’s mechanical, not analytical.

“[…] if I go back to when I was at firms like Bluecrest, DW and Brevin Howard, much like you would see with the multi-manager or podshops today, they have very, very strict risk limits.“ - Shaun Heelan

Heelan described it with a vivid analogy: running a Formula One car with a spike on the steering wheel. Sure, you’ll get around the track, but you’ll be very careful – and there are certain moves you simply cannot make. When volatility spikes, these players don’t ask whether the selloff is rational. They ask whether their VAR budget – VAR stands for Value at Risk and refers to a strategic framework where an organization allocates “risk units” instead of just “dollar amounts” – allows them to stay in the trade. Often it doesn’t. They get knocked out.

For you, as an individual investor without such constraints, without a quarterly redemption cycle, and without an institutional risk committee looking over your shoulder, this is a profound structural advantage – but only if you’ve done the work to have genuine conviction in what you own. The opportunity isn’t just that stocks may get cheap (or overpriced) when volatility spikes. It’s that some palyers in your competitive set are being systematically forced to sell at exactly the moment you’re free to buy. The more volatile the environment, the more competitors get sidelined, and the wider the potential gap between price and value.

There’s a behavioral dynamic at work in high-volatility environments that I think is underappreciated even by experienced investors. Price drives narrative. I’m sure you’ve seen that phrase before. But have you fully comprehended it? I doubt it!

When a stock is down 30% over six months and then falls another 20% on a weak earnings print, the narrative around that business almost universally turns negative. Analysts cut targets and lower “exit multiples.” Financial media produces explainers about structural headwinds. Other investors – seeing the price action and reading the commentary it generates – become incrementally more negative.

The story the market tells about a business is almost always heavily influenced by what its stock has been doing, often with very little reference to whether the underlying business has actually deteriorated in proportion to the move.

This creates a very specific kind of opportunity for the investor who can separate signal from noise. If a stock drops 15% because a recent development (e.g, the CEO stepping down) introduced short-term uncertainty around a business that has a long and durable runway ahead of it, the question worth asking is “has anything actually changed about the next five to ten years?” Most of the time, in a high-volatility environment, the answer is no. The fall reflects positioning, fear, and mechanical selling more than any genuine reassessment of intrinsic value.

Recognizing that – and acting on it (which is the hard part!) – is exactly what behavioral edge looks like in practice.

It takes a particular kind of fortitude, and I won’t pretend otherwise. Buying into sharp drawdowns goes against every instinct that markets cultivate in participants over time. The investor who steps in when a quality business is down 50% from its five-year high – when the narrative is terrible, when consensus is negative, when momentum is firmly against them – is doing something that feels genuinely dangerous in the moment.

But that discomfort is precisely the source of the return. If it were comfortable, the opportunity wouldn’t exist.

Why Capital Allocators Matter More Than Ever

There’s one more dimension to this that I think deserves attention, and it connects to something I’ve written about before in the context of market structure.

In a high-volatility, high-dispersion environment, the quality of the management team running a business – and specifically their capital allocation discipline – matters significantly more than it did in the low-volatility, liquidity-driven era of the 2010s.

Here’s why. If you buy a stock that subsequently falls 30% because of broad market turbulence or sentiment-driven selling, you need a mechanism by which the gap between price and intrinsic value eventually closes. In an ideal world, that mechanism is a management team that recognizes the disconnect and acts on it – aggressively repurchasing shares at a fraction of intrinsic value, for instance, thereby increasing your ownership stake in the business at an attractive price, or returning capital through dividends that reward your patience while you wait for the market to come around.

Leave a comment

A great capital allocator effectively becomes your partner in exploiting the market’s irrationality. They’re doing the arbitrage for you, systematically and at scale, every time Mr. Market has one of his episodes.

This is why, in my view, the elevated volatility environment doesn’t just reward patience in a general sense – it specifically rewards owning businesses run by managers who think like owners, who have a clear-eyed view of intrinsic value, and who have both the mandate and the discipline to act when the market hands them an opportunity. Without that, a cheap stock can stay cheap for a very long time.

Embracing the Turbulence

There's an irony worth acknowledging here. Volatility is, at its core, a neutral phenomenon – it can, however, also be a double-edged sword that simultaneously creates the conditions for outsized gains and the risk of catastrophic losses for existing holders. Depending on your behavioral make-up.

When you look at where most generational wealth has actually been built, it's overwhelmingly in low-volatility assets. Real estate. Private businesses. Assets that don't have a ticker, don't print a daily price, and don't tempt their owners into doing something stupid at the wrong moment. Why is that? Because most “investors” have a terrible temperament. The very absence of a quoted market price is, for most people, a feature rather than a bug – it removes the psychological trigger that causes so much value destruction in public markets.

So while I'd argue that the volatility explosion in single stocks represents a genuine opportunity for the disciplined, long-term oriented investor, it's worth being honest: most people are better served by assets that don't test their behavioral constitution every trading session.

Concluding Thoughts

So where does this leave us? The data is unambiguous: single-stock volatility has structurally shifted higher, the index masks more turbulence than it reveals, and the forces driving this regime – a more micro-driven return environment, 0DTE options mechanics, evaporating HFT liquidity, AI-driven creative destruction – are not transient. They are features of the market we now inhabit.

For the passive investor or the institutionally constrained allocator, much of this is simply noise to be endured.

But despite the US market, on a headline level, seeming incredibly richly valued, for the patient, fundamentally-oriented, global, industry- and size-agnostic stock picker with a genuine long-term time horizon and the psychological constitution to act against the crowd at uncomfortable moments, I’d argue this is arguably the most target-rich environment for active stock selection in a generation. The dispersion between winners and losers is at multi-decade highs. The gap between what the index tells you and what’s actually happening beneath the surface has never been wider.

And your competition – the VAR-constrained, redemption-pressured institutional complex; the Reddit 'investor' operating without a fundamental compass; the Reddit "investor" who lacks a deeper understanding of fundamentals and valuation, and the Buffett-reading average investor who lacks the behavioral wiring to actually lean in when fear takes hold – is structurally and temperamentally prevented from taking full advantage of the mispricings that volatility creates.

Subscribe now

As Shaun Heelan shared on the This Week In Intelligent Investing podcast, the Chinese symbol for crisis contains within it the character for opportunity.

It’s an observation that gets quoted so often it risks becoming a cliché. But in the context of what’s happening in equity markets right now – beneath the surface, away from the index headline – I think it’s the most accurate single-sentence description of the environment available to us.

Leave a comment

Why join the community you may ask? Our library is fast approaching 70 comprehensive deep dives, providing institutional-level research on some of the world’s most fascinating businesses. Most recently, we’ve dissected companies like Grab Holdings ($GRAB), Fair Isaac ($FICO), and Topicus.com ($TOI).

As a member, you get:

• Complete Access: Every deep dive in our library (65+ and counting).

• The WhatsApp Community: Real-time discussion and networking with like-minded investors.

• Incredible Value: Full access to all of this for less than $1/day.

Subscribe now

If you want to see the level of research we provide before committing, the following deep dives are free to read:

• InPost ($INPST)

• Monday.com ($MNDY)

• DigitalOcean ($DOCN)

• Novo Nordisk ($NVO)

• Computer Modelling Group ($CMG.TO)

The recent performance of LVMH stock has been a sobering experience for many investors. As you can see from the current price action, the shares have been trending downward for quite some time now and are now hovering near the €480 mark.

Clearly, this is not just a temporary market fluctuation (depending on how you define "temporary,” of course). Arguably, the share price performance is a reflection of a fundamental trend that has been developing for several – and I mean SEVERAL – quarters now. If you look at the company’s recent financial dashboard, the picture is clear. Both the topline, cash flow, and net profits (all represented on a per share basis) have effectively reached a (temporary?) plateau.

Net income and operating profit have, in fact, been declining.

There has been very little meaningful movement in these key metrics for some time. The post-pandemic surge is over. We are now in a period of grinding stagnation.

The Q1 2026 revenue results were another clear disappointment. Revenue came in at €19.1 billion. This represents an organic growth rate of just 1% (-6% reported). For a company that market participants previously valued for its consistent double-digit growth, this is a stark change in reality.

External factors have certainly played a role in this quarter’s underwhelming print. Management noted that the conflict in the Middle East created a headwind that shaved roughly 1% off the organic growth figure in March alone.

However, the problems appear to be more than just geopolitical. The Fashion & Leather Goods segment – the core of the entire group –, for instance, saw an organic decline of 2% (-9% reported). This suggests a softening in demand for the primary brands that drive the company’s valuation.

In my previous piece from July last year, I discussed the long-term moats of the business. I still believe those brands have value. But the current data shows that even the strongest names are not immune to a broader slowdown. The fundamental business performance is simply not moving forward.

In this post, I want to unpack what this means for the future of the stock. I will start by placing these results in context by comparing them to the latest updates from Hermès and Kering. It is important to see if LVMH is an outlier or if the entire luxury sector is facing a structural shift.

I will then dig into the specifics of the Q1 earnings and share my takeaways from the earnings call; what are the executives saying? We will also examine the bull case provided by Francois Rochon of Giverny Capital who purchased the stock last year. I want to weigh his optimism against the growing list of concerns regarding management’s recent creative and strategic decisions. Furthermore, I will address a question that is becoming more common among seasoned investors: Has management forgotten how to run the business? And what could this mean for the future? Finally, I raise the question of what the implications of investors fleeing the US could be on LVMH as currency headwinds prove to be more permanent than many may anticipate.

As you can see, there is a lot to cover. Let’s get into the details.

Disclaimer: I own LVMH shares in the portfolio I run for my partens. The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

Quick Q1 High-Level Overview

LVMH recorded revenue of €19.1 billion for the first quarter of 2026. On the surface, the headline figure of 1% organic growth might appear resilient in a volatile climate.

I find this narrative a bit too convenient. When you peel back the layers, the core engine of the group – Fashion & Leather Goods – actually saw an organic decline of 2%.

This is a significant yellow flag for a division that has historically been the bedrock of the company’s valuation. It is the first time in recent memory that we are seeing a sustained period where the brand heat of Louis Vuitton and Dior isn’t translating into growth (excluding the 2020 COVID quarters).

Management was quick to point out that the result was heavily weighed down by the conflict in the Middle East. That specific geopolitical drag shaved roughly 1% off the total organic growth in March. Without it, we would be looking at a 2% print.

“LVMH maintained its powerful innovative momentum and showed good resilience in a geopolitical and economic environment that remained disrupted, amplified by the conflict in the Middle East.” – PR

The geographic data tells a story of shifting dependencies. Asia excluding Japan remains a bright spot with 7% organic growth – the best quarterly performance really since the end of 2023 –, while the United States showed a decent start to the year at 3% (both geographies signaling a reacceleration QoQ).

“[…] it’s the best quarter since 2023. And it’s good because it’s broad-based. One thing to -- maybe to notice is that also Sephora is flat this quarter on the Asia cluster and especially China, which was one of the geographical areas that we were fixing for Sephora. So it’s good to see that it’s rebounding.“ - Earnings Call

However, the picture in Europe and Japan is much more somber, with both regions posting a 3% organic decline.

The culprit here is a significant drop in tourist spending. This highlights a structural vulnerability. If the wealthy globetrotter stays home or spends elsewhere, the European flagship stores suffer. While the top line is struggling, the currency situation made the reported numbers look even worse. A strong euro created a massive 7% headwind, dragging the reported revenue down by 6% year–over–year. This is a purely accounting–driven impact, but it adds to the general sense of a company under pressure.

There were some pockets of strength that deserve mention. Watches & Jewelry grew by 7% organically, driven by what I see as a successful transition at Tiffany and continued momentum for Bulgari.

“The Maison [Tiffany] continued to successfully renovate its store network and strengthen its iconic product lines, with HardWear in particular posting very strong growth. Highlights of the quarter for Tiffany included the launch of a marketing campaign featuring its new global brand ambassador, Natalie Portman, and its latest high jewelry collections being showcased in Gstaad and Beijing.

Bvlgari achieved strong growth and unveiled Eclettica, a new artistic vision of high jewelry and prestige watches. The iconic Serpenti and Tubogas lines performed very well. Chaumet was boosted by the expansion of its Bee de Chaumet collection.”

Selective Retailing, which includes Sephora, also managed 4% growth. These “defensive” segments are currently doing the heavy lifting while the main house is undergoing a period of creative and regional transition.

The contrast between these segments and the core fashion business is stark. It suggests that while the brand equity of the jewelry houses remains intact, the “lifestyle” and high–fashion components are facing a much tougher sell. You have to wonder if the aspirational consumer is finally reaching a breaking point. The numbers suggest that for now, the answer is yes.

Insights From the Earnings Call

I spent a significant amount of time parsing the most recent earnings call, but I’ll be honest: there was no single “aha” moment that fundamentally altered the long–term outlook. The discussion largely revolved around the kind of granular, technical questions that analysts love to use for fine–tuning their quarterly models. While understanding the exact timing of inventory shipments or the perception of social media campaigns is useful for a hedge fund trader, it doesn’t move the needle for a structural thesis. Example?

Real investing requires a different kind of lens. You have to ignore the noise of the quarter and look at the horizon.

Generally, the tone of the Q1 2026 earnings call was one of cautious defense. CFO Cecile Cabanis repeatedly leaned on the word “resilience” to describe a set of numbers that, in any other cycle, would be considered anemic.

“On the EU, actually, the Europeans are resisting and quite resilient, because the European clientele is only slightly negative. But you still have the impact on the touristic clientele because of your currencies. And you might have some disruption also, it’s very difficult to address, on some specific tourism because of the conflict. [...]

On the question on tourist and clients, the best performing local clientele have been American and Chinese on Fashion & Leather Goods. The Japanese is still a bit down. And the Europeans are quite resilient, but slightly negative -- flattish, slightly negative.”

One specific exchange worth highlighting, however, was the way management quantified the fallout from the Middle East. We finally got a clear look at the scale of the impact, which doesn’t fully show up in the quarter yet. During the Q&A, an analyst asked for more specifics on the month of March, and the response was illuminating. Management noted:

Question: “So first of all, coming back to the impact of the Middle East, I think you said down double digit, but is it possible to be a bit more specific on the month of March? Was it down 30, 50? And also, are you seeing a bit of an improvement early in the quarter? And also if minus 1% is the impact from 1 month, do you think that minus 3% would be the impact on the full quarter?“

Answer: “Middle East, maybe I’ll put it simple so that you can have an easy idea of the impact. If you take the group, it’s overall 6% of the mix. I’ve said earlier, there are plus and minuses depending on the division. When the conflict started in the month of March, there was a shortfall and a deterioration of demand between 30% and 70%, depending on the malls, depending on the businesses. So overall, if you take a 50% deterioration, then you can have the overall impact, which would be indeed 3 points in March and 1 point on the quarter. I think the outcome, it’s anybody’s -- probably anybody’s guess. What we have not seen yet is repatriation. And what we know is that the wealth has not evaporated. So there will be a time where we’ll see that coming probably elsewhere and mitigate the impact should the conflict continue.“

Moreover, I found the narrative particularly telling when the discussion shifted to the 1% organic growth figure. Management was quick to isolate the geopolitical noise, stating that “the conflict had a negative impact of around 1% on organic growth for the quarter.” By their math, the underlying business is running at a 2% clip. While I understand the need to strip out one–off events, you have to wonder if this is becoming a convenient shield for a broader slowdown. There is a clear divide between what I see as short–term volatility and more structural, long–term challenges. The short–term pain is obvious: a massive 7% currency headwind and the sudden disruption in Middle Eastern tourist flows. However, the commentary on the United States and China suggests something more permanent is shifting. Cabanis admitted that demand for Wines & Spirits, for instance, in the U.S. “is still soft and that we don’t see moving a lot.” What if this isn’t a temporary dip but rather LVMH reaching a saturation point? As we will discuss below, I generally consider the alcoholic beverages segment to be the more permanent “problem child.”

The Q&A segment also revealed an interesting divergence in how the group views its various “engines.” While the Fashion & Leather Goods division – the crown jewel – is currently contracting, management is pivoting the conversation toward “hard luxury” and selective retailing. They noted that for brands like Tiffany and Bulgari, “the overall response to the icon, the craftsmanship, the high jewelry are very strong.” This might suggest that the ultra–high–net–worth individual is still showing up for €50,000 necklaces, even if the “HENRY” (High Earner, Not Rich Yet) consumer has stopped buying €3,000 handbags (this thesis can only partly be confirmed when looking at Hermès’ results further below, though).

The Broader Black Hole of Luxury Consumption? Looking at LVMH’s Peers

LVMH is not an island. To understand the current stagnation, you have to look at the broader wreckage across the sector. I’d argue that for around three years (mainly during the 2021–2023 period), the luxury industry benefited from a massive pull–forward of demand – a pull-forward demand cycle. We are now witnessing the formation of a consumption “black hole.” This is the natural hangover that follows a period where “aspirational” buying became almost a mania – or a way to cope with Covid and its aftermath? Even the most resilient players – yes, I’m looking at you Hermès – are now showing signs of fatigue.

It seems like this is a sector–wide reset. The tide is (temporarily) going out.

Today’s results from Hermès provided the most shocking evidence of this shift. For years, Hermès has been treated as the ultimate safe haven, a stock supposedly immune to the laws of economic gravity. That illusion shattered this morning. The shares are cratering, down 9% in a single session (-13% at one point).

This is a rare, almost unprecedented move for a company that hasn’t seen a one–day drop of this magnitude in two decades, excluding the literal onset of a global pandemic. While organic growth was 6% (yet negative on a reported basis) – a number most peers would envy in the current environment – it wasn’t enough to hide the cracks. France saw a 3% decline, and the Middle East fell by 6%. The myth of “absolute pricing power” regardless of any macro backdrop is finally being tested. When even the UHNWI Birkin bag crowd starts to hesitate, you know the environment has turned challenging.

The disruption in the Middle East and the escalating conflict in Iran have created a double–sided trap. First, there is the direct loss of regional sales. Second, and perhaps more importantly, is the impact on global tourist flows. High–end travel is the lifeblood of luxury. If flights are more expensive or routes are canceled, the “concession” stores and airport boutiques – which represent a massive chunk of high–margin revenue – simply stop breathing. Management confirmed that their owned stores grew at 7%, but their concession sales dropped by an identical 7%. This tells me that the local, loyal client is still there, but the traveling luxury nomad has disappeared.

It is a structural headwind that LVMH, with its massive global footprint, is feeling just as acutely.

Kering, the industry’s perpetual laggard, also reported yesterday. You could describe the quarter as a period of “stabilization.” There is a massive divergence here though. Jewelry grew by 22%, proving that “hard luxury” is still a preferred store of value for the wealthy.

Meanwhile, fashion was down 3%. Gucci, the heart of the Kering investment case, is still stuck in a mid–turnaround purgatory (sales “down 14% on a reported basis and 8% on a comparable basis year on year“). While Balenciaga showed some signs of life, the overall fashion segment outside of Gucci looks remarkably similar to the flat performance we are seeing at LVMH. The “Gucci stabilization” is taking far longer than Kering bulls anticipated. It shows that once a brand loses its heat in this climate, rekindling it is an expensive and slow process.

“Outlook: In a still uncertain geopolitical and macroeconomic environment, the Group places a strong emphasis on agility and flawless execution, equipping each House with sharper, more sustainable brand strategies and the operational support required to accelerate progress. As Kering progresses through 2026, its objective remains to return to growth and improve margins.“

Looking at the results of these two peers, arguably, what we are seeing is a collective “pause” from the global consumer. The luxury powerhouses are paying the price for the excess of the COVID and post-COVID period. The industry pulled so much demand from the future that there is simply nothing left to harvest in the short term.

The question for investors is who can survive this black hole without diluting their brand or destroying their margins? And when can you reasonably expect a recovery and a return to higher growth (if any growth at all).

Right now, none of the big three look particularly comfortable.

Francois Rochon’s Longer-Term & High–Conviction View

I recently spent some time reviewing Francois Rochon’s discussion on “The Investor’s Podcast” with host Clay Finck (linked below). Rochon is a fund manager I’ve long admired for his ability to filter out the cacophony of the daily ticker and focus on the fundamental trajectory of a business. His perspective on LVMH is particularly valuable right now because it stands in such stark contrast to the prevailing gloom in the market.

He was refreshingly honest about his own position, noting that he bought into the company last year and has yet to see a positive return.

“Well, I’m not that good in timing because I bought it last year and so far has not yielded good results“

But for an investor of his caliber, the immediate price action is almost irrelevant. He is focused on the earning power five years from now. His central argument is that the current slowdown is not a sign of structural decay. Instead, just like I do, he views it as a necessary cooling period after the feverish growth of the pandemic era. He sees this as a return to normal rather than a collapse.

“I think probably the years 21, 22, 23 were very very strong but at some point you know consumers needed a little pause in their purchasing and it’s very hard to predict but I think part of the slowdown is just a return to normal so probably the first years 2021 22 was a little too strong relative to let’s say historical norms. So there’s part of that. Also you know inflation makes those products pretty expensive and it’s been a tougher period for consumer in general.”

This normalization thesis is a powerful counter–narrative to the panic selling we’ve seen recently. It suggests that the double–digit growth some investors grew accustomed to was actually the outlier.

Rochon remains unshaken because he believes the brand equity is intact. To him, the only thing that matters is whether the name Louis Vuitton still signifies unparalleled quality to the global elite. He argues that as long as the brand resonance hasn’t faded, the financial results will eventually catch up. It is a long game. The quarterly fluctuations of 2026 are merely footnotes in a much larger story of brand durability.

“I think the key factor is that you want the brand to be as strong as it ever been. That’s what you want. So perhaps people are a little wary of purchasing Louis Vuitton bags, but what you really want is the brand, the name still resonate to clients as quality, something you want to own because it’s of quality and also it’s been there for 150 years and I think that’s the key thing. If the brand is as strong as it was five years ago, eventually the sales will reflect that. […]

But the rest of the business I believe is more cyclical. So I think at some point earnings will rebound and I think probably from here earnings could increase 60 or 70% in the next 5 years. So let’s say a 10-11% growth rate and you’ve got a two percent dividend. So the two together I think … we should be able to attain our objective of finding a 13% grower including the dividend.”

The second pillar of Rochon’s thesis involves China. While many investors are running for the exits due to geopolitical tensions and the “common prosperity” movement, Rochon remains a dedicated optimist. He views China through a lens of decades, not years. His belief is rooted in the simple math of GDP per capita growth. He expects the Chinese middle and upper classes to continue expanding at a rate that will eventually surpass the Western world in terms of luxury consumption. To Rochon, the current political climate and the trend of “luxury shame” is a temporary headwind. He is betting on the triumph of human aspiration and the universal desire for status.

“As they get richer at a faster rate than North American, I think they’ll want to acquire LVMH products, luxury products. Could also be Hermès bags or Prada bags. But in general, I think the demand for luxury goods in China will increase. There will be ups and downs. Perhaps there will be some periods like you described that the government doesn’t really sponsor showing up your wealth but that’s temporary at some point we’ll be back to normal and as the country improves and continues to improve the GDP per capita it’s going to be a stronger economy and they’ll purchase more luxury goods and I think it’s going to be a good market for perhaps not in one year or two years, five year, 10 years, 15 years, and they’re building a business for the next decade.”

I think many investors also overlook the “hidden” engines within LVMH because they are so focused on the headline leather goods numbers. Keep in mind that LVMH is home to 75 distinguished Maisons rooted in six different sectors and hence, is arguably the most resilient of all the luxury stocks you can purchase on public markets (and yes, more resilient than Hermès, one could argue!).

Rochon’s enthusiasm for Sephora is a perfect example of this. He views it as a “fantastic business” and a “very very strong retailer.” While it only represents about 10% of the group’s total revenue, it is growing at a rapid clip. He even noted that Sephora is now a significant competitive threat in the U.S. market, putting visible pressure on the margins of companies like Ulta Beauty.

“Sephora I think is a fantastic business. And I think people when they talk about LVMH, they don’t talk that much about Sephora, but it’s probably just 10% of revenues, but I think it’s growing pretty fast and it’s a very very strong retailer. We’ve been following also Ulta Beauty, which is a very very well-managed company, but you know there there have been some pressure on margins because in the IM they got more competition from Sephora in the United States.”

One of the most intriguing details Rochon highlighted during the interview – and something I haven’t seen discussed much elsewhere – is the specific tax headwind LVMH is facing in France. He noted that a “temporary increase in the tax rate” has been quietly eating into the reported earnings per share. The corporate tax rate for entities earning over €1 billion jumped from 28% to 33%. This is a five–percentage–point drag that has nothing to do with brand heat or consumer demand. It is purely a matter of fiscal policy. Rochon remains hopeful that this is a temporary measure, and if the rate reverts to 28%, it would serve as an immediate and mechanical catalyst for earnings growth.

What I also found compelling about Rochon’s stance is his focus on the Arnault family’s stewardship. While I have my own concerns about the current creative direction and the headwinds facing the aspirational consumer, Rochon’s thesis provides a necessary anchor. It forces you to look past the immediate carnage and ask if the soul of the business is still healthy. For him, the answer is a resounding yes. It’s a bold bet on the persistence of luxury.

Has Arnault Lost the Midas Touch?

I recently encountered a comment in my investor community that stuck with me. A member asked whether the Arnault family might have forgotten how to run their business properly in recent years?

I’ve given this some thought – and while it’s easy to blame the captain when the ship hits choppy waters (remember how many investors called for Google CEO Pichai to step down during the tough quarters?), the reality is usually far more nuanced.

When a stock is underperforming and the chart looks like a mountain range in descent, our brains often default to System 1 thinking. Price starts affecting the narrative surrounding a stock. Humans’ intuitive, impulsive side of their psychology starts taking over; the part that seeks simple narratives. We see a drawdown and assume management has lost its edge. It is far harder to admit that the forces at play might be entirely outside of their control.

But let’s start by considering what the Arnault family could’ve done better in recent years. If we look at the case against the Arnault family, there are certainly some valid criticisms to be made regarding recent creative and strategic choices.

Read more

In this part, we will:

• Explore Grab’s historical growth

• Dissect the trends that will fuel Grab’s future growth, which collectively create a fertile ground for Grab’s sustained success.

• Provide insights into Grab’s market valuation using different approaches, offering a clearer picture of its true attractiveness at the current share price.

What really sets Grab apart is its strategic vision for the future. The company isn’t just looking at incremental growth; it’s investing in next-gen innovations like autonomous vehicles and AI-driven solutions, making bold moves that signal Grab’s ambition to become the backbone of Southeast Asia’s digital economy. As you’ll see, the runway for growth is vast – and Grab is showing signs of a “spawner DNA” – making this valuation assessment not only relevant but a pivotal guide for anyone looking to understand Grab’s position in the evolving tech landscape.

Part 4 – Valuation

4.1. Past Growth

Grab has managed to scale its revenue significantly in recent years. As discussed in the previous parts, from its humble beginnings as a ride-hailing service, the company evolved into a multi-service “Superapp” offering mobility, delivery services, and financial services. The historical data indicates strong revenue growth fueled by increasing demand across these segments.

Looking at the revenue CAGRs, it’s clear that Grab achieved substantial revenue growth in recent years, with a 3.75-year revenue/share CAGR exceeding >50%.

More recently, topline growth rates have naturally slowed – as Grab matures – to more sustainable levels, but if Grab can continue compounding in the mid- to high-teens, investors are looking at an interesting setup at current price levels (to be discussed further below).

As suggested, I don’t think the slowing growth rates should be of concern – especially as Grab’s management team has deliberately moved into a phase more focused on profitability and self-funded growth, where growth is naturally more measured, but as I said, more sustainable, compared to a high-flying growth-at-all-costs model.

When comparing Grab’s performance against the S&P 500 over the past few years, Grab has underperformed significantly. Since its public listing in 2021, the stock has seen a sharp decline, down about 69.55% as of 2026. Over the past 5 years, Grab’s stock performance translates into a CAGR of -19.94%.

This stark contrast to the S&P 500, which has increased by 81.59% over the same period, highlights how poorly Grab’s stock has performed relative to the broader market, which can largely be attributed to the timing of the IPO (during the Covid and SPAC craze) – as a reminder Grab went public on the Nasdaq on December 2, 2021, via a SPAC merger with Altimeter Growth Corp at a valuation of nearly $40 billion… I’d argue Grab’s case study serves as a stark reminder that IPO actually stands for “it’s probably overpriced” – you can’t really blame management for the listing price (quite the opposite as they did a good job timing the IPO as the IPO raised gross proceeds of $4.5 billion in the largest-ever U.S. public market debut by a Southeast Asian company).

Disclaimer:

I own Grab shares. The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

4.2. Future Growth

Total Addressable Market Analysis

To understand the future growth potential of Grab, we need to first examine its Total Addressable Market (TAM).

Grab is operating in rapidly expanding sectors, including online food delivery, ride-hailing, and digital banking, which collectively form a massive opportunity. Before its IPO, management estimated in the F1 filing that its core TAM – encompassing these services – will exceed $180 billion by 2025.

“There is a tremendous amount of headroom to grow, and Euromonitor estimates our addressable market to be over $180 billion by 2025, consisting of online food delivery, ride-hailing, and e-wallet markets. We are able to address these different market opportunities through our superapp and our Grab ecosystem.“ - F-1

This already represents a significant market, but if we broaden our scope, the numbers become even more impressive. The overall personal consumption expenditure (GMV) for land mobility back then was projected to reach $231.3 billion by 2025, while expenditure on prepared meals is expected to hit $170.5 billion (again GMV).

“Our Addressable Market and Growth Potential: We started out by providing a platform addressing the mobility opportunity in Southeast Asia, with the ride-hailing market estimated to be at $4.5 billion in 2020 according to Euromonitor. We have since expanded our platform to address food and other deliveries and e-wallet opportunities, estimated at $9.4 billion and $38.9 billion in 2020, for the online food delivery and e-wallet markets respectively.

According to Euromonitor, total personal consumption expenditure for prepared meals and land mobility, which includes operation of personal transport equipment, personal consumption expenditure on buses, coaches and taxis, are expected to reach $170.5 billion and $231.3 billion, respectively, by 2025. Cash payments transaction values are expected by Euromonitor to reach $1,356.1 billion by 2025. We expect that digital penetration rates will increase over time as digital alternatives become more popular.“ - F-1

Let me stress that those were the historical, pre-IPO projections. According to the e-Conomy SEA 2025 report by Google, Temasek, and Bain & Company, the region’s total digital economy Gross Merchandise Value (GMV) surpassed $300 billion in 2025.

This expansion was driven by a decisive shift toward deep digital participation, with over 60% of all transactions in the region now occurring digitally.

Here is a breakdown of what drove that expansion and the characteristics of it:

• Video Commerce: One of the biggest drivers has been the rise of “shoppertainment.” Video commerce (buying through live streams and social video apps) now accounts for roughly 25% of the region’s total e-commerce Gross Merchandise Value (GMV).

• Infrastructure & QR Codes: The expansion was largely fueled by national unified QR systems (like QRIS in Indonesia or PromptPay in Thailand) and cross-border QR interoperability between ASEAN nations.

• Depth of Adoption: It’s not just about more users; it’s about deeper usage. Roughly three out of five Southeast Asians now shop online, and the focus has shifted from acquiring new users to increasing the frequency and value of transactions from existing ones.

Similarly, within Grab’s core segments, the 2026 Mordor Intelligence Foodservice Market Analysis estimated the total Southeast Asian foodservice market reached $223.8 billion in 2025, well ahead of the $170.5 billion initially expected. The Analysis is projecting a market growth CAGR of 13% throughout 2031.

In the slide deck below, which Grab shared recently after the foodpanda acquisition, Grab itself estimates the current size of the foodservice serviceable market in SEA to be $200 billion+.

Looking ahead, the addressable opportunity is shifting from a “digital decade” of user acquisition to a $1 trillion “intelligent economy.” Analysts from HSBC’s Digital Frontiers 2030 and the e-Conomy SEA 2025 report now project the ASEAN digital economy GMV could reach $1 trillion by 2030, fueled by the integration of AI-driven logistics and the maturation of digital financial services.

“By 2030, Southeast Asia’s digital economy will reach $1 trillion, with the potential to hit $2 trillion as ASEAN implements its Digital Economy Framework Agreement. Growing at double the global rate, GDP in Southeast Asia hit $4.25 trillion in 2025, making it the world’s fourth-largest economy after the US, China, and Germany. With a young, digitally engaged population and pro-innovation policies, Southeast Asia is quickly becoming a global economic powerhouse, leaving its former identity as a modest, developing region decidedly in the past.“ - HSBC

Grab is well-positioned for this next phase. As you should know by now, the company announced its first full year of net profit recently and record Monthly Transacting Users (MTUs) today exceed 50 million.

Moving into 2026, S&P Global Ratings and internal guidance forecast continued momentum, with Grab’s total revenue expected to grow by approximately 20% to $4.1 billion in 2026, supported by a projected 15.8% CAGR in the broader Asia-Pacific fintech market through 2031.

Koyfin’s consensus estimates (consensus earnings estimates compile individual projections from various analysts into an averaged figure) project similar topline growth rates for the next three years.

Looking Ahead!

Over the years, Grab has consistently expanded its TAM, demonstrating its ability to adapt and evolve. What started as a taxi-booking app in 2012 has transformed into a multi-modal platform, adding food delivery and, more recently, digital banking. The company has expanded geographically, with the acquisition of Foodpanda Taiwan marking its first major step out of Southeast Asia. Similarly, its acquisition of Stash signals Grab’s entry into the digital investing space, which could tap into the $5 billion+ AUM market.

The key takeaway here so far shouldn’t really be an exact number of the TAM’s size – most TAM estimates turn out to be wildly off and while I’m referencing some numbers to provide context, there’s really no way to have an informed opinion on the accuracy of any of them – but rather that the runway is significant. But just using common sense suggests that Grab, and the entire SEA region, are early in their respective growth stories.

Grab, for instance, stands to benefit from several secular tailwinds in Southeast Asia that will continue to fuel the expansion of its TAM. These trends include:

1. Accelerated Urbanization: According to the United Nations’ World Urbanization Prospects 2025, the majority of the world’s population now resides in urban areas, with Southeast Asia remaining a primary engine of this growth. Jakarta has emerged as the world’s most populous city-region with nearly 42 million inhabitants, and the broader Asian urban population is projected to exceed 55% by 2030. This densification directly scales the demand for Grab’s localized mobility and delivery infrastructure.

   

2. Near-Universal Mobile Connectivity: The GSMA Intelligence Mobile Economy 2026 report indicates that smartphone penetration in the region has successfully reached the previously forecast 84% benchmark. With a growing number of connections operating on high-speed 3G/4G/5G broadband, the “mobile-first” population has matured into a “mobile-only” consumer base that relies on superapps for daily survival.

   

3. The Persistent “Underbanked” Gap: While the 2024/2025 ASEAN Monitoring Progress Report by the UNCDF highlights that pure financial exclusion (unbanked) has dropped significantly to approximately 20.8%, a massive opportunity remains in the “underbanked” segment. The World Bank’s Global Findex 2025 and the e-Conomy SEA 2025 report note that nearly 70% of adults in Southeast Asia still lack access to credit, insurance, or wealth management tools. This provides Grab’s digital banking and lending arms with a vast, underserved market as the region transitions toward a $1 trillion digital economy.

These trends will provide long-term secular support for Grab’s services, ensuring that the market it operates in continues to expand rapidly.

Historical TAM Expansion

Also, the ability of management to “manufacture” new TAM is often a more reliable predictor of long-term value than the initial size of the market they enter.

Over the years, Grab has consistently expanded its TAM, demonstrating its ability to adapt and evolve. What started as a taxi-booking app in 2012 has transformed into a multi-modal platform, adding food delivery and, more recently, digital banking. The company has expanded geographically, with the acquisition of Foodpanda Taiwan marking its first major step out of Southeast Asia. Similarly, its acquisition of Stash signals Grab’s entry into the digital investing space, which could tap into the $5 billion+ AUM market.

(Almost) Just as Steve Jobs transformed the $91 billion cell phone industry into a multitrillion-dollar mobile economy by redefining the device as a software platform, Grab’s leadership has consistently demonstrated an operational reflex for market creation rather than just market capture.

This “optionality” was embedded in their DNA as far back as the F-1 filing, where they identified the “informal economy” not as a static segment, but as a massive, underserved opportunity for digital infrastructure.

“As we continue to expand our platform and increase the breadth of our offerings over time, our platform is able to address additional consumer and business needs, and grow our addressable market. For example, given the importance of small businesses and the informal economy, we believe there is a large and important opportunity to help such businesses and participants in the informal economy to navigate an increasingly digital world. We leverage our existing reach with our driver- and merchant-partners to provide digital tools and training that are critical to thriving in the increasingly digital economy, helping to lay the foundations for more inclusive growth across the region. With our scale, ecosystem and platform advantages, we believe that we are well-positioned to navigate the complexity of Southeast Asia and address certain key challenges in the region.“ – F-1

The full story starts here:

The rest of this post covers TAM penetration and market share dynamics, the identification of seven key growth drivers going forward, and two valuation approaches. If you’re serious about sharpening your investing edge, the full post (and all my previous premium content, including valuation spreadsheets, deep dives (e.g. well-known mid- and large caps such as LVMH, Duolingo, Meta, Edenred as well as more hidden gems such as Tiger Brokers, Digital Ocean, Ashtead Technologies, InPost, Timee, and MANY more) and powerful investing frameworks are just a click away. Upgrade your subscription, support my work, and keep learning.

Subscribe now

Annual members also get access to my private WhatsApp groups – daily discussions with like-minded investors, analysis feedback, and direct access to me.

PS: Using the app on iOS? Apple doesn’t allow in-app subscriptions without a big fee. To keep things fair and pay a lower subscription price, I recommend just heading to the site in your browser (desktop or mobile) to subscribe.

Read more

Articles:

• New and updated Bessembinder report: “One Hundred Years in the U.S. Stock Markets“

  “Abstract: This study summarizes investment outcomes for 29,754 common stocks listed on the public U.S. stock markets over the 100-year period from 1926 to 2025, reporting on both compound (buy-and-hold) percentage returns and shareholder wealth enhancement measured in dollars. While the cross-stock mean buy-and-hold return is over 30,000%, the median is -6.9%. Shareholders’ wealth was enhanced by $91 trillion over the century, but long-term investors in nearly 60% of stocks incurred wealth reductions. The degree to which wealth creation is concentrated in a few firms has increased sharply in recent years. Over the 1926 to 2016 period studied in Bessembinder (2018), 89 firms accounted for half of the $43 trillion in net wealth creation. After including outcomes for the most recent nine years, just 46 firms account for half of the $91 trillion in net wealth creation over the full century.“

• Q1 letter by SmallValue

“As many of you are aware, the portfolio remains focused on companies outside of the more fashionable sectors, emphasising businesses with straightforward models operating in traditional industries such as cement, food, luxury goods, and glass, among others.“

• Morningstar Software Wide Moat Rating re-adjustments

“The pace of change within the software industry has accelerated in recent months, leading to heightened uncertainty and prompting us to reassess moat ratings.

Why it matters: The capabilities of large language models are rapidly advancing and seem primed to cause at least some disruption within the industry, or at worst drive massive dislocation for many software firms.

After an in-depth review of the software and services firms covered throughout Morningstar, we are downgrading moat ratings, reducing fair value estimates, and increasing uncertainty ratings for our immediate coverage of a variety of companies.“

• In case you are having a tough time so far in 2026: “What to do when you’re underperforming - Thinking straight when you’re on a bad run.“ by

• Great sector analysis of the payment sector: “The Industry That Will Benefit The Most From AI“ by

Podcasts & Videos:

• Interactive Brokers’ founder Thomas Peterffy on the Odd Lots podcast discussing prediction markets.

Some highlights:

“A broker always has to worry about providing leverage. So most brokerage firms, they go bust, because of the leverage they provide, and if you look at the big Wall Street crisis, they all have to do with leverage - always. But eventually, we will have to provide leverage [note: he’s referring to prediction markets]. The question is, how do you structure that? (…) I’m sure there will be some firms that will go bust on leverage in prediction markets, yes.“ […]

“So insider trading has always been an issue. I mean, early on when I started my career, Ilost half my initial capital based on insider trade. So I’m extremely familiar with the damage it can cause. But on the other hand, and in spite of that, I’m in favor of not having any rules against insider trading. I would like all the information out there as soon as it’s available. Because look, as a society, we’re better off knowing as soon as possible anything that is knowable. Right? So why do we have to wait several, first of all, when you face with a merger or acquisition situation where most of the insider trading is happening, right? The secretaries, the lawyers, everybody knows about it. They go home, they tell their wives, their husbands. So it eventually always filters out. So it’s almost impossible to avoid. It’s very, very difficult and cumbersome. Why don’t we just do away with it and let the information come out as soon as possible?“

• Pabrai Wagons ETF Shareholder Call Replay:

• Brett Caughran on markets’ becoming LESS efficient (short video clip):

  “I would very much challenge the premise that these tools will lead to more efficiency.”

• Chris Mayer’s interview on Drew Cohen’s platform:

  • The episode made me think of two things, which I shared on X (attached below). First, the fact that the formula below may be the most important in all of investing:

    a) ROIIC x b) Reinvestment Rate x c) Durability of the combination of a) + b)

  

  • Secondly, VERY high margins and VERY high growth businesses are inherently risky/riskier (and hence shouldn’t necessarily be your favorite hunting ground) – the “middleground” (i.e. above-average margins and growth – but not excessively high) might be the more attractive hunting ground as those tend to be often more sustainable:

Other:

• The Software Sentiment Matrix by J.P. Morgan

  

• If you own luxury (fashion) stocks, you should read this thread:

I hope these resources provided as much food for thought for you as they did for me. If you found this month’s insights valuable and want to stay ahead of shifting industry dynamics, consider subscribing. You’ll get every new edition, and all the other write-ups I produce, delivered straight to your inbox so you never miss it.

Subscribe now

But who are the individuals actually sitting in the cockpit, and can they be trusted with your capital? In this section, we pull back the curtain on the leaders behind the “Superapp” to explore the stories and strategies that most analysts miss:

• The Inheritance Gamble: Why the CEO walked away from a multi-billion dollar family empire – and the personal rift that forced him to build Grab with everything on the line.

• The “Street Fighter” vs. The Giant: The inside story of how local grit outmaneuvered Silicon Valley’s deepest pockets, and why that same mentality is being tested again today.

• The Secret Cultural Code: We look at “The Grab Way” – a rigorous internal framework that dictates who stays and who goes. Is it a visionary philosophy or a high-pressure trap?

• The $1.2 Billion FCF Roadmap: Management has set a massive target for 2028. We break down whether this is a realistic promise to shareholders or a calculated projection to keep the stock afloat.

• The Watcher on the Board: Why the CEO of their biggest former rival is now sitting in their boardroom, and what that means for Grab’s ultimate endgame.

• Founder vs. Professional: We examine the tension between a founder’s vision and the need for corporate discipline. Is the current leadership team a well-oiled machine or a one-man show?

• … and more!

Is the “Street Fighter” at the top still hungry, or has he finally become part of the establishment he once disrupted?

Part 3 – Management

3.1. Management Background

When evaluating a company’s management, understanding the background and operational track record of the leadership team is critical.

For Grab, the company is led by its co-founder, Anthony Tan, who has served as the Group CEO since its inception in 2012. His 14-year tenure provides significant institutional memory and ensures a long-term vision for the company. His journey from Harvard Business School to building Grab from the ground up offers insights into his leadership style and capital allocation approach.

CEO Tenure and Path to Leadership: The Billionaire Heir Who Chose the Trenches

Anthony Tan’s path to leadership is both foundational and experience–driven. He did not rise through the ranks of an unrelated corporation. Instead, he built Grab from scratch to address local challenges – most notably, the safety and reliability issues in Malaysia’s taxi industry.

Tan’s prior experience in his family’s business, Tan Chong Motor, where he worked in supply chain and marketing, gave him a strong operational foundation. He served as the Head of Supply Chain and Marketing, which meant he was responsible for the logistical moving parts and brand positioning of Nissan across Malaysia. This was no vanity role. It gave him a front–row seat to the inefficiencies of regional logistics. However, the move from the family empire to the startup world was far more contentious than a simple career change.

The Patriarch’s Shadow and a Mother’s Silent Rebellion

When you look closer at the early days of MyTeksi, the funding story serves as a window into a massive family rift. You might assume the Tan family wealth simply flowed into the new venture. The opposite is true. Anthony’s father, Tan Heng Chew, was a staunch opponent of the idea. He viewed the taxi booking concept as a distraction. He essentially told Anthony that if he left the family business for this “hobby,” he would be on his own financially. It was a “stay in line or lose the legacy” ultimatum.

The tension was palpable. Anthony chose the exit. The funding did not come from the patriarch. It came from his mother, Rosie Tan. She provided the initial angel investment that allowed him to ignore his father’s warnings.

This internal power struggle is key to understanding his drive. He wasn’t just building an app. He was proving a point to the head of the family.

To really understand the man, you have to look past the wealth and toward the “street fighter” persona he frequently references. Because he was essentially cut off by his father, the safety net was gone. He had to win. I find it fascinating that he often points to his great–grandfather, who started as a humble taxi driver. By launching Grab, Anthony was effectively bypassing his father’s corporate structure to reconnect with those working–class roots. I’m exaggerating a little, but you get the point.

This psychological break created a founder who was willing to spend his nights at taxi stands pitching to drivers in the rain. He had to shed the “silver spoon” stigma. He did it by outworking everyone in the trenches. It worked. The result is a leader who combines high–level supply chain expertise with the desperate urgency of someone who has everything to lose.

Does an Emotional Stake Outperform Financial Skin?

This leads me to a question I asked myself when studying Grab. What is the more powerful force for a CEO: financial skin in the game or an emotional stake in the business?

Often, they overlap. As a founder, your net worth is tied to the stock. Your heart is tied to the mission. But if you have to choose which one keeps you awake at 3 a.m., I’d argue the emotional component wins every time.

What struck me while watching a recent interview (see below; starts at 11:55) was a moment of unexpected vulnerability. Anthony shared that his father still does not speak to him after his decision to leave the family business. It is a remarkable admission. This is especially true in a culture where family harmony and filial piety are often paramount. This is more than a career disagreement. It represents a fundamental break from a legacy that expected him to follow a pre–written script. To me, this openness says a lot about his character. He avoids the trap of projecting a perfect image, choosing instead to acknowledge the scars that came with his independence.

I suspect that proving his father wrong is a significantly more potent motivator than any monetary incentive coming from his compensation packages or his ownership stake in Grab. When you are essentially disowned for your ambitions, the business becomes more than a company. It becomes your identity and your vindication. Subconsciously, every new market Grab enters or every milestone reached, serves as a message sent back to that dinner table in Malaysia. Money is a scoreboard. However, the desire to be seen and validated by a parent is a primal engine. It drives a level of intensity that simple financial gain cannot touch.

Read more

Before we dive in, let me share the 2026 product day, Grab X, below, which introduced a couple of very fascinating products and features, including …

• GrabMaps for Consumers: Enhanced maps featuring indoor mall navigation, real-time parking, EV charger locations, and AI voice cloning for navigation.

• Grab More: Enables users to order from two different nearby merchants in a single delivery order without extra fees.

• Grab Shopping Agent: Allows users to build checkout carts across multiple merchants using photos, voice notes, or text.

• Cash Loan: In-app AI-powered lending for all Grab users with instant approval and customized repayment for users with limited credit history.

• Discover by Grab: An AI-curated feed for local dining recommendations and community-driven content.

• Group Ride: Allows up to four passengers to share a single vehicle with multiple pickups/drop-offs and split fares (up to 40% cheaper).

• Personalised Travel Experience: A centralized travel portal with airport guides, check-in reminders, and baggage belt navigation.

• GrabStays: An in-app hotel booking service offering same-day rates and GrabCoin rewards.

• GrabPay for Travel: Seamless cross-border QR payments using existing saved cards without needing local wallet top-ups.

• Driver AI Assistant: A hands-free voice chatbot to assist drivers with navigation, messaging, and policy queries.

• Tap to Pay: Converts any smartphone into a contactless payment terminal via the GrabMerchant app.

• Carri: A prototype AI robot designed to assist delivery partners by navigating “the last mile” inside malls and office towers.

And this is just my personal selection of highlights. There’s more.

Disclaimer: I own Grab shares. The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

Part 2 – Business Quality

Competitive Advantages Analysis

Grab’s competitive advantages are built on a multi-layered moat that combines digital network effects, physical infrastructure, and regulatory barriers. These advantages make it difficult for competitors to replicate Grab’s success in Southeast Asia.

Brand Moat: Trusted and Embedded in Daily Life

Grab’s brand is one of its most powerful advantages. It has become a household name and trusted brand in Southeast Asia, so much so that in some countries, “Grab” is used as a verb for hailing rides or ordering food. Its strength lies in being the category leader across multiple sectors, from mobility to deliveries to e-wallets. This brand dominance is not about prestige (the type of brand moat companies like Hermés, Ferari, or LVMH lean into) – it’s about trust and reducing search costs.

Grab has positioned itself as a utility-based brand, essential for everyday tasks like commuting and eating.

The company’s brand is also highly habit-driven. For millions, Grab is deeply integrated into the daily rhythm of middle-class life, making it a go-to solution for transportation and food delivery. Customers associate Grab with quality, reliability, safety, and convenience, which, as mentioned, reduces search costs – customers don’t need to look elsewhere for alternative services; it becomes habitual.

Over time, this deep brand loyalty is expected to endure for decades as Grab continues to evolve from a startup into a key part of regional digital infrastructure.

Network Effects: The Grab Ecosystem Flywheel

Arguably, the most powerful competitive advantage Grab possesses is its network effects. As the company expands, its platform becomes increasingly valuable. This is known as the “Grab ecosystem flywheel”.

Here’s how it works: as more drivers join, wait times drop, attracting more consumers. As more merchants join, a wider selection of products and services becomes available. And the more consumers there are, the more orders are placed, which attracts even more drivers and merchants. This virtuous cycle makes the platform increasingly difficult for competitors to disrupt.

The power of Grab’s network is also fueled by data loops. With billions of transactions occurring on the platform, Grab is able to continuously improve its services through AI, driving better routing for drivers and more efficient credit scoring for financial services.

What’s more, because Grab serves daily needs – transportation, food delivery, payments – the frequency of interaction strengthens the network far more than platforms offering less frequent services. There are 50 million MTUs. As of early 2025, Grab recorded 7.8 million DTUs. These daily users represented approximately 16% to 17% of the total Monthly Transacting User (MTU) base at that time. Customers who utilize both GrabFood and GrabMart (groceries) have order frequencies 1.8x higher than those who only use food delivery. And members of the GrabUnlimited paid loyalty program interact far more often, showing 3x to 4x higher order frequency in the food segment compared to non-subscribers

So it seems like once onboarded, users remain on the platform, and over time, increase their purchase frequency and spend more, continuing to contribute to the growth of the flywheel.

The Hyperlocal Nature of the Network

When studying Grab, most investors probably see a regional giant spanning eight (soon nine) countries, but the reality is much more granular. A driver in Bangkok provides zero utility to a commuter in Ho Chi Minh City. This places Grab firmly in the hyperlocal quadrant of the marketplace matrix I always come back to when studying network effect marketplaces and platforms.

Every time Grab enters a new city or even a new neighborhood, they essentially have to restart the flywheel from scratch. They must spend heavily on driver incentives and passenger promos just to reach that critical mass where the wait time drops enough to make the service viable. It can be a grueling, capital–intensive process – especially early on – and it was for Grab, battling for market share with behemoth Uber and local peers. You can see this reflected in their historical burn rates.

Unlike a global network like Airbnb where one listing can attract a traveler from anywhere on Earth, Grab is forced to win thousands of tiny, isolated battles against regional competitors. The network effects don’t cross borders easily. Success in Singapore does not guarantee a win in Jakarta. It never has.

If the geographic limitations weren’t enough of a hurdle, we have to talk about the supply side of the equation. In the ride–hailing and food delivery segments, Grab deals almost exclusively in commoditized supply. A car is a car. A delivery rider is a delivery rider. From your perspective as a user, you likely don’t care who is behind the wheel as long as they arrive in five minutes and don’t overcharge you. This lack of differentiation is a nightmare for defensibility. It leads to the “multi–tenanting” problem where consumers may use multiple apps, opting for the best offer available at any given point in time – price comparison. This may create a permanent ceiling on margins.

The real question for any Grab shareholder is whether the “super–app” strategy can actually move the company up the matrix into a more defensible tier. Grab isn’t just trying to be a taxi service. They want to be your digital wallet, your insurer, and your bank. Your everything app. This is an attempt to create a differentiated supply combined with a strong lock-in effect (as to be discussed below). Financial services and loyalty programs like GrabRewards are designed to create this exact “lock–in” that transcends the commoditized nature of a car ride. If you have all your wealth and points stored in one ecosystem, you are far less likely to switch to a competitor for a fifty–cent discount on a laksa delivery. It’s similar to ordering on Amazon: you may know that there may be a cheaper offer available on another ecommerce website, bit Amazon just works, you know the return policy is incredibly consumer oriented, and that the parcel may be at your doorstep in 24 hours.

By layering multiple services, Grab is attempting to build a “horizontal” network effect where the frequency of ride–hailing feeds the data for credit scoring, which in turn fuels the fintech arm. It is an ambitious goals. I believe the success of this determines whether Grab remains a lower-tier utility or becomes a tier–1 powerhouse. They are trying to build a moat where none naturally exists. It’s a bold bet. The jury is still out.

The full story starts here:

The rest of this post covers the remaining pillars of Grab’s moat stack and the trajectory the business is on. If you’re serious about sharpening your investing edge, the full post (and all my previous premium content, including valuation spreadsheets, deep dives (e.g. well-known mid- and large caps such as LVMH, Duolingo, Meta, Edenred as well as more hidden gems such as Tiger Brokers, Digital Ocean, Ashtead Technologies, InPost, Timee, and MANY more) and powerful investing frameworks. is just a click away. Upgrade your subscription, support my work, and keep learning.

Subscribe now

Annual members also get access to my private WhatsApp groups – daily discussions with like-minded investors, analysis feedback, and direct access to me.

PS: Using the app on iOS? Apple doesn’t allow in-app subscriptions without a big fee. To keep things fair and pay a lower subscription price, I recommend just heading to the site in your browser (desktop or mobile) to subscribe.

Read more

But I knew that in the world of investing, critical judgment and nuanced decision-making matter more than anything else. These are things that, at least for now, AI still struggles with.

What AI excels at, I believe, is quickly processing massive amounts of data; basically in real-time. It’s a powerhouse when it comes to retrieving information, cross-referencing details, and delivering results almost instantly. But the question of whether it can truly make informed, strategic decisions – that’s where things get tricky.

At its best, AI isn’t about replacing human thought, but augmenting it. In investing, the value of AI comes not from replacing the decision-maker, but from enhancing their ability to gather, process, and analyze information quickly and thoroughly.

In this post, I’ll take you through how I’ve been using AI – specifically NotebookLM – in my investment research process. I only recently started leaning into NotebookLM I must admit, but over the past few weeks, this tool has been an absolute game-changer, helping me move through the complexities of analyzing businesses faster and with more confidence.

While I wholeheartedly agree with Tiho’s take below, and just like him believe AI can’t replace the critical thinking necessary for assessing the true potential of an investment, it can help me build a much clearer, more detailed picture of the companies I’m interested in, and find answers to the high-quality questions (at least that’s what I hope) I come up with.

At its core, what I’ll show you here is how I leverage NotebookLM to get up to speed with a business more efficiently, to dig deeper into critical factors like a company’s competitive advantages, and to improve the overall quality of my decision-making process.

The Challenge of Getting Up to Speed with a Company

When I first dive into researching a company, the goal is simple: get up to speed as quickly as possible, absorb the relevant details, and make sure I have a deep understanding of what’s going on behind the scenes. In the fast-paced world of investing, time is of the essence.

I encourage you to watch this recent Druckenmiller interview, in which the idea of getting up to speed with a company quickly may be more important than ever before, frequently pops up:

Sure, Druckenmiller is right that time is important (even more important is timing fwiw), but I believe even more critical than time, and timing is accuracy – ensuring that I’m gathering the right information in the right way. What’s the point of forming an opinion quickly, but being wrong? That’s a recipe for losing money very quickly.

Traditionally, this process involved a lot of manual labor. The first step was always to gather the most recent filings – annual reports, quarterly earnings calls, investor day presentations. Then, I’d sift through analyst reports, industry publications, and competitor information. You can imagine how time-consuming that can be. Hours and hours … With the flood of data coming in from every angle, it often felt like I was drowning in information but not necessarily getting any closer to actionable insights.

The challenge wasn’t just about gathering the information – it was about managing it. How do you ensure that you’re not missing any key details? How do you quickly sort through the noise to focus on what’s important? How do you strike that balance? And, with so much to read, how do you avoid spending hours or days without making significant progress?

This is where AI comes in. Most investors quickly realized that AI could be a powerful tool to streamline this process. Instead of spending countless hours sorting through reports, AI could help aggregate, synthesize, and analyze data from multiple sources much more quickly. But I knew it wasn’t just about speed—it had to be accurate too.

That’s where NotebookLM came in.

Before we dive back in, a quick note…

Want to compound your knowledge – and your wealth? Compound with René is for investors who think in decades, not headlines. If you’ve found value here, subscribing is the best way to stay in the loop, sharpen your thinking, avoid costly mistakes, and build long-term success – and to show that this kind of long-term, no-hype investing content is valuable.

Subscribe now

Unlike traditional large language models (LLMs), which can often “hallucinate” (incredibly dangerous in investing!) or provide inaccurate or fabricated information, NotebookLM offers a more reliable approach. While LLMs are powerful at generating text, they sometimes struggle with maintaining accurate context over longer pieces of content or complex queries.

I used prompts such as …

“In this chat, you are only allowed to use the materials I upload. Don’t draw on outside knowledge or your training data.“

… but it never really worked.

This issue is referred to as “context rot” – a concept I only recently heard about. Essentially, the further into a conversation or analysis you go, the more prone the AI becomes to losing track of important details, leading to errors or inconsistencies. Also, LLM can't reliably extract information from the middle of long contexts (which is exactly what I’m doing by providing multiple 50-200-page resources) – i.e. the information is there, but the AI doesn’t access it; without telling you!

NotebookLM, on the other hand, is designed to handle more structured, context-rich data. It can manage multiple layers of information simultaneously and keep everything in context without losing track of key details. This eliminates the problem of hallucinating, ensuring that the insights I get from the AI are grounded in real data and more accurate. This reliability is what makes it such an invaluable tool for serious investment research.

I put together some general attributes of NotebookLM below:

• You can upload PDFs, Google Docs, text files, slide decks, web links, and even YouTube video transcripts into a notebook.

• Each uploaded file (called a source) can be up to 500,000 words or roughly 200 MB in size.

• Free plan (standard NotebookLM on a Google account)

  • Maximum of 100 notebooks total.

  • Up to 50 sources per notebook.

  • Daily usage caps such as 50 chat queries and 3 audio overviews per day.

  • Deep Research reports limited (e.g., ~10 per month under the free tier).

• Paid plans (via Google AI Plus / Pro / Ultra tiers)

  • Notebooks: often up to about 500 total under Pro/Plus.

  • Sources per notebook: up to 300 or more on paid plans.

  • Higher daily chat/query limits (e.g., hundreds instead of tens).

  • More daily audio/video overviews and Deep Research sessions.

My Research Process: Creating a Foundation with AI

When it comes to building a solid foundation for analyzing a company, the research process has to be methodical. For me, that means breaking down a business into its most critical components and diving into each of those areas separately. This isn’t a quick glance at a balance sheet or a snapshot of a quarterly earnings report – it’s a deep dive into the company’s business model, products, customer base, competitive advantages, and so much more.

I’ve always worked with specific checklists for each area of analysis. These pillars of research guide my thinking and help me avoid missing any key details.

The idea is simple: get a comprehensive picture of the company from all angles. These checklists cover everything from the business model to product offerings, competitive advantages, risks, growth drivers, management, and more. This multi-dimensional approach ensures that I’m not simply looking at the company through one lens but understanding it fully in terms of what drives value.

Example of a checklist item:

I can say whether the business has a high customer retention rate (low churn rate; the longer a customer is retained, the more predictable the revenue is, while low retention pressures the company to acquire new customers constantly).

• How long does the average customer stay with the business? (the longer a customer is retained by a business, the more profitable that business becomes and the more predictable a firm’s revenue; in comparison, a company with a low CRR needs to be constantly acquiring new customers with exciting new sales strategies, expensive marketing campaigns, or unique product offers).

• Have I conducted a customer-based corporate valuation (CBCV) analysis?

  • I can say how high the customer acquisition cost is (CAC).

  • I can say what the customer lifetime value is (CLV)

  • I have applied this concept to the business: “The idea of customer lifetime value (CLV) has been around for decades. CLV equals the present value of the cash flows that a customer generates while they are engaged with the firm minus the cost to acquire the customer. The present value of cash flows, in turn, is a function of sales, costs, and customer longevity.” (Michael Mauboussin)

  • What’s the average purchasing frequency of customers?

  • What’s the average basket size – i.e. how large is each order? (“If the first order isn’t profitable, the business needs multiple orders to recoup its CAC and even more orders to produce a profit. When the first order is profitable, additional orders run up the scoreboard. This is why repeat rate matters.”)

But here’s the catch: even with a well-structured research process, the amount of data involved can be overwhelming. This is where AI, and particularly NotebookLM, really starts to shine. AI is fantastic at taking those initial piles of data – whether it’s quarterly reports, annual filings, or industry research – and organizing it in a way that makes it easier to analyze and makes information much more accessible. I’ve found that NotebookLM does an exceptional job of quickly processing and synthesizing all the material I need.

So when I start digging into a company nowadays, the process looks something like this:

1. I start by using more traditional AI tools like Google Gemini or ChatGPT (I haven’t found one or the other model to be clearly superior in terms of deep research quality for whatever it’s worth) to generate deep research reports on each of the pillars (8 in total) I have in my framework (with the help of my checklist). I’ve found that my checklist is so comprehensive that generating separate deep research reports (vs. just one “big” one) leads to a higher quality of the “research.” For example, I might have one report focused solely on the company’s business model, its unit economics, how it generates revenue, etc., another on the competitive landscape and management team, and another on the growth drivers going forward (I’m simplifying things a little here). Each of these reports provides a detailed look at a particular aspect of the company, and from there, I can start drawing connections between them. Once I have these reports, I input them into NotebookLM as my starting base.

   

2. Company filings are a critical next step. I always add recent press releases, quarterly and annual reports, investor presentations, proxy statements, and earnings call transcripts. I’ve found that these documents, which can be time-consuming to read through manually, become much more manageable when fed into NotebookLM. The AI not only helps organize them but also highlights key takeaways, trends, and critical changes over time – something I might have missed if I were reading them all one by one.

   

3. Finally, I round out the research stack by incorporating industry reports, sell-side analyst notes, and any other write-ups that I find valuable. These external perspectives provide context and nuance that help round out the internal view I’m getting from the company’s own filings.

Two Notebooks per Company

To ensure that I’m getting the most objective and relevant information possible, I actually create two separate notebooks for each company I research. The first notebook is dedicated solely to primary sources – things like 10-Ks, 10-Qs, 8-Ks, and proxy statements. This notebook serves as a foundation for the company’s most thorough, official filings – documents that management is legally required to provide. By relying on these primary sources, I can eliminate any subjective opinions or biases that might arise from secondary sources.

The second notebook combines both primary filings and secondary sources. This includes “secondary” materials like the aforementioned deep research reports, blog posts, write-ups, podcast transcripts, or industry articles. While secondary sources can be more subjective or even speculative, they often provide important context or alternative perspectives that can complement the hard data found in primary filings.

Once all of this is in place, I have a solid base of information to start working with. It’s like building a house: you can’t start making decisions on the structure until you have a foundation. In this case, that foundation is built with company-specific filings, industry insights, and deep AI-driven research reports.

From here, I can begin asking more specific, strategic questions that help me get deeper insights into the business’s competitive position, management team, growth potential, and risks.

Next Steps

At this point in the research process, the groundwork has been laid. I’ve gathered the necessary filings, external reports, and deep-dive research on the company. But now comes the real challenge: how do I take this foundational knowledge and apply it to gain a deeper understanding of the most important aspects of the business?

This is where NotebookLM, combined with other AI tools, becomes invaluable – not just as a data organizer, but as a key partner in sharpening my analysis.

The AI excels at refining the way I think about the company. Sure, it can sift through the reports and summarize them, but the true benefit lies in how it helps me think about the information. It becomes a tool for focused inquiry. As investors, we’re always trying to ask the right questions, and AI can significantly improve how I frame those questions. Rather than just passively absorbing information, I engage with NotebookLM to ask pointed, strategic questions about the business.

For example, one area I might want to understand more deeply is a company’s competitive advantage. How does it defend its position in the market? What barriers to entry exist for competitors? These are not trivial questions, and getting the right answer requires looking at multiple facets of the business – from product differentiation to customer loyalty and brand strength. By feeding my initial research into NotebookLM, I can ask the AI to generate deeper insights into these topics, pulling from both internal documents and external market data.

What’s interesting is how AI can help me not just with direct answers, but with exploring different angles. For instance, if I’m digging into a company’s growth drivers, the AI can suggest areas of the business I may have missed. Maybe there’s a regional expansion strategy or a new partnership that’s buried deep in the filings. NotebookLM helps highlight these opportunities by cross-referencing data and pointing me toward potential areas I wouldn’t have considered on my own.

But NotebookLM doesn’t just respond to questions I ask; it can also suggest its own. Sometimes, the AI will offer insights into areas I hadn’t thought to explore. I’ve found these suggestions incredibly valuable at times.

Let’s say I want to analyze the management team. The AI can scan all relevant public information about the leadership, their past performance, and their track record at similar companies. From there, I can ask more specific questions like, “Has the CEO been successful in navigating downturns in the past?” or “How does the company’s leadership style align with its long-term strategy?” This level of targeted inquiry helps me break down the leadership dynamic in a way that’s more granular and less surface-level than a simple bio or background check. Here’s another example from my recent deep dive into the London Stock Exchange Group:

The key here is that NotebookLM isn’t simply a data aggregator – it’s a dynamic tool that fosters a back-and-forth dialogue. As I continue to work through the information, I can adjust my approach, ask deeper questions, and adjust my focus based on new insights. AI is a partner in this process, helping to uncover hidden aspects of a business that might otherwise go unnoticed.

Another powerful aspect of using NotebookLM in my research process is its ability to calculate specific metrics automatically, saving me an enormous amount of time and reducing the risk of mistakes. In the past, calculating business-specific metrics (think of adjusted margins, certain ratios, etc.) would involve manually gathering data points from multiple sources, using calculators, and constantly cross-referencing information. It’s a tedious and error-prone process. However, with NotebookLM, I can input all the relevant data, and the tool will handle the calculations for me. For instance, I recently used this feature to calculate the M&A sales multiple for Topicus, which revealed critical insights about the company’s valuation.

The ease and accuracy of this process allowed me to focus more on the strategic analysis, rather than getting bogged down in number-crunching.

Refining My Understanding

Once I have my foundational research in place and have begun asking the right questions with the help of NotebookLM, the next crucial step is refining the analysis. Investment research is not a one-and-done process – it’s iterative. As new insights emerge, it’s essential to adjust your understanding and reframe your questions to dig even deeper. The beauty of using AI in this context is that it makes this feedback loop faster and more efficient, ultimately leading to a more nuanced and informed investment thesis.

Sometimes, I’ll also grab my phone and chat with a different AI model – usually something like ChatGPT or Google’s Gemini. I’ll ask questions that come to mind on the spot, whether it’s about a company’s recent performance, how a competitor is positioning itself, or even general market trends. This kind of real-time, informal querying helps me stay connected to the flow of information without getting bogged down by formal processes. While NotebookLM offers the deeper, more structured analysis, these casual conversations with other AI tools add another layer to my process and help keep me agile and allow me to stay on top of any emerging questions or ideas that pop up throughout the day.

So again, ultimately, the entire process described so far is not just about gathering more information or arriving at some kind of finish line – no, it’s about continually refining one’s understanding, refining the questions, asking better questions, and digging deeper into the nuances of what’s really driving the business.

For example, if I find that the management team is performing exceptionally well in one region but struggling in another, I’ll ask the AI to explore what factors might be influencing those discrepancies. Is it a leadership issue? Cultural differences? Different CAC/LTV dynamics? Or is the business model not scaling effectively in that region?

What’s key to remember is that this process never stops. The stock market is dynamic, and as new information becomes available, the research process and your judgment must evolve with it. AI plays a crucial role here, allowing me to continuously update and refine my understanding with minimal effort.

Instead of starting from scratch each time I uncover a new piece of data, I just insert it into the already existing nootbook and “chat away.”

AI in the Investor’s Toolbox: It’s Not a Replacement – It’s a Tool

As AI continues to evolve, many investors may find themselves wondering if these tools can truly replace human judgment. After all, in a field as nuanced and unpredictable as investing, the human touch is often seen as irreplaceable. My experience with NotebookLM has confirmed this: AI is not here to replace the investor’s role, but rather to enhance it. AI tools are best understood as assistants, not decision-makers.

I still do the heavy lifting when it comes to critical thinking, intuition, asking the right questions, etc. These are the aspects of investing that require experience, deep industry knowledge, a “feel” for market sentiment, and an understanding of broader economic trends – areas where AI, despite its impressive capabilities, can’t yet compete with human experience and judgment.

It’s my job to analyze the broader context, assess risks, and make the final call. AI simply helps me get there faster and with more clarity.

The real power of AI lies in its ability to sift through vast amounts of information at lightning speed. This allows me to spend less time on the boring grunt work – like gathering and organizing data – and more time on the strategic, high-level analysis.

However, I never let the AI make decisions for me. The responsibility of interpreting the data, asking the right questions, and understanding the broader picture still lies with me. AI can suggest new angles, uncover hidden risks, or offer insights into a company’s operations that I might not have noticed. But in the end, it’s my expertise and judgment that make the final call.

This partnership between human and machine is what makes AI so valuable – it accelerates the research process without diminishing the need for human oversight.

In short, AI is a tool – one that can augment the investor’s capabilities, but not replace them. As long as we remain aware of the limitations of AI, it can serve as a powerful ally in the investment process, helping to unlock new insights, streamline research, and support faster, more informed decision-making.

PS: I’m not using any of the features from the Studio panel btw (they’re fun to play around with, but don’t provide much value for my process).

In 2012, Grab was born from a simple, but ambitious business plan aimed at tackling one of the most unreliable and unsafe taxi systems in the world – Malaysia’s. Fast forward to today, and Grab has evolved from that small idea into effectively the “operating system” for daily life in (most of) Southeast Asia.

And Grab is not just another app. In Southeast Asia, Grab is more than a name – it’s become a verb for many. People say, “It’s raining; let’s just Grab to the mall instead of walking” or “I’m too tired to cook, should we Grab some Thai food?” without thinking twice. And it doesn’t stop there – Grab has mastered the art of creating habits, seamlessly integrating itself into the daily lives of millions of people who now rely on it for everything from getting from point A to point B to paying bills to online shopping.

Grab’s story is also a survival narrative that most tech companies would envy. In 2018, Grab managed to outmaneuver the global giant Uber in its home region and, eventually, when Uber basically gave up, acquired Uber’s Southeast Asian operations in a unique deal. That was a pivotal moment in Grab’s history, solidifying Grab’s dominance and ensuring that Uber’s exit from Southeast Asia would make Grab the undisputed leader in ride-hailing and delivery services.

Fast forward to 2025, and Grab hit a major milestone: profitability. After years of burning through capital in pursuit of growth, Grab reached its first full year of net profit in 2025 – $200 million in the black. This marks a significant inflection point, where the company is transforming from a “growth-at-all-costs” startup-like-business into a more disciplined, profitable growth powerhouse with a clear path to long-term value creation.

But here’s the thing: Grab’s story is far from over. In fact, despite its massive scale already – Grab is a multi-billion-dollar company today –, the company is still just scratching the surface. Grab’s Monthly Transacting Users (MTUs) currently represent just 6% to 7% of the Southeast Asian population. That means there’s a huge growth runway ahead – roughly 94% of the market is still untapped.

What’s even more exciting is Grab’s ecosystem flywheel. About two-thirds of Grab’s users engage with two or more services, and for those using three or more services, the one-year retention rate is an impressive 88%. When customers stay, they not only use more services, but they spend more, too. This is a growth driver that keeps feeding itself.

And then there’s Grab’s cutting-edge use of AI-driven efficiency. By utilizing proprietary AI models, Grab has been able to double its revenue from 2022 to 2024, all while keeping headcount flat. Over 90% of mobility rides are now dispatched using AI, showcasing just how much the company has automated its operations.

On the financial side, Grab has successfully expanded into digital banking. In just three years, Grab amassed 7.4 million deposit customers across its three digital banks, and its loan portfolio crossed the $1 billion mark in 2025 and is expected to exceed $2 billion by 2026 year-end.

And as if all of this wasn’t enough, Grab is setting its sights on global expansion. In early 2026, it completed the $600 million acquisition of foodpanda Taiwan, signaling the company’s intention to push beyond Southeast Asia and tap into new, high-value markets. This marks the first major step in Grab’s journey toward becoming a truly global player.

Of course, this is just the tip of the iceberg. Grab is positioning itself for the future with ambitious plans around autonomous vehicles (AVs) and scaling its financial services. The company is constantly innovating, finding new ways to integrate its services and make the lives of its users easier and more connected.

But what does this mean for investors? Can Grab sustain its growth? What challenges lie ahead? And most importantly, what kind of valuation can you expect as this story unfolds?

As you can tell, Grab is a fascinating business to dive into. So let’s do exactly that and dive deeper into Grab’s history, business model, management team, moat stack, its future, and the growth drivers that will continue to propel this Southeast Asian juggernaut forward.

Are you excited yet? Let’s dive into the first part (11,500 words) of this deep dive.

Leave a comment

Disclaimer: I own Grab shares. The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

High-Level Thesis: “Bam Bam Bam Bam Bam”-90 Second-Hypothesis

As always, in the style of legendary investors like Bill Miller and Peter Lynch, I’m attempting to give you the quick 90-second rundown on Grab Holdings (GRAB) – what’s the investment hypothesis (which we are then going to test throughout this deep dive?

Right now, the stock trades around $3.6, a significant pullback from its 2021 debut. While that might sound concerning, the real story lies in the business transformation that’s been happening under the hood (i.e. not reflected in the share price).

Here are the five reasons why I think Grab is an interesting opportunity:

Read more

You likely think of global ubiquity in terms of the technology in your pocket or the way we travel across borders. But there is a silent sovereign in the American economy that moves more volume than the tech icons we obsess over, and it does so without a single retail storefront.

Every year, Fair Isaac Corporation – better known as FICO – sells over 10 billion scores (which translates to approximately 27 million scores purchased daily).. To put that in perspective, that is roughly 40 times the number of iPhones Apple ships to the entire world in a year and nearly double the total number of passengers who board a commercial flight globally.

It is the de facto passport for financial mobility, used in 90% of all top U.S. lending decisions and serving as the primary measure of risk for over 12 trillion dollars in U.S. mortgage debt.

If you want a mortgage, an auto loan, or even to rent an apartment, you aren’t just a person – you are a three-digit number owned by a company that started in a studio apartment in 1956 with 400 dollars and a radical dream of replacing “handshake-and-vibes” lending with objective algorithms.

In this multi-part deep dive, I want to pull back the curtain on the most efficient toll-bridge in global finance (88% EBIT margins in the Scores segment), and why its supposedly certain downfall was just derailed by a massive regulatory reversal.

I find it fascinating how few people realize the sheer, unchecked pricing power FICO wields. Between 2022 and 2025, the company did something that would be a death sentence for almost any other business – and it brought its fair set of challenges to FICO too, to be fair. It raised the price of its mortgage scores from roughly 0.60 to 4.95 dollars by 2025. That is an 800% increase in just three years. And then again to $10.00 (or $4.95 + $33 Success Fee) for 2026 – another 2x increase.

Imagine your internet provider or utility company jacking up rates by eight times; there would be a congressional inquiry by sunset.

Yet, because FICO is the “universal language” of the mortgage market – cited in 98.8% of all securitizations – lenders simply paid the toll. The financials are the stuff of legend. The company’s core Scores segment operates with 88% operating margins. Even more staggering is the “95% Rule” – for every new dollar of revenue FICO generates through these price hikes, nearly 95 cents drop straight to the bottom line.

As of FY2024, the company turned 1.72 billion dollars in revenue into more 600 million dollars of free cash flow. It is a capital-light compounding machine that requires no factories. It is pure risk math.

For the last 1-2 years, the primary “bear case” for FICO was built on the threat of “Lender Choice” – a regulatory push to break the monopoly by allowing competitors like VantageScore into the ecosystem. The plan was to move from a “tri-merge” (where lenders pull scores from all three bureaus) to a “bi-merge” (where they only pull two). This would have effectively stripped FICO of its guaranteed seat at the table. But everything changed in July 2025. In what some have dubbed the “Pulte Pivot,” FHFA Director Bill Pulte unexpectedly maintained the tri-merge requirement, effectively pulling all three bureaus and slamming the door on the bi-merge transition. This move preserved the existing plumbing of the mortgage market and cemented FICO’s dominance just as the market thought the “invisible engine” was about to be dismantled.

Given the excessive price hikes, this doesn’t mean the regulatory risk is “done” though.

Is the Largest Drawdown Since 2008 an Opportunity?

The world looks significantly more volatile than it did even a few months ago. The ongoing war with Iran has sent geopolitical shockwaves through every asset class, and we are now staring down a macro environment where inflation is expected to skyrocket.

Market sentiment has turned decidedly cold. FICO is currently experiencing its largest drawdown since the Great Financial Crisis, with the stock falling 52.67% from its peak.

I see a market growing increasingly cautious around credit risk, fueled by concerns over debt exposure at firms like Blue Owl ($OWL) and Oracle ($ORCL). This anxiety may have contributed to the drag on FICO’s valuation, down to 25.1x NTM P/E and 18.8x EV/EBIT – well below its five-year mean of 31.5x.

You have to ask yourself: is this a warning of a broader credit event, or a generational buying opportunity for a monopoly?

So in this deep dive series, I’ll explore how FICO is positioned to navigate this era of stagflation and war, and whether the “high beams” of federal regulators are still a threat after the Pulte Pivot.

In this first part, we cover the business’s history, the business model, its products, and competitive environment (11,000 words in total).

Here’s what I will cover in this deep dive series:

• “BAM BAM BAM BAM BAM” 90-Second Pitch – Why Fair Isaac and Why Now?

• 1) Understanding the Business

  • 1.1. Business History

  • 1.2. Product

  • 1.3. Business Operations

  • 1.4. Customers

  • 1.5. Industry & Competitive Landscape

• 2) Business Quality

  • 2.1. Competitive Advantages Analysis

  • 2.2. Other Thoughts on Business Quality

• 3) Management and Governance

  • 3.1. Management Background

  • 3.2. Integrity, Incentives, and Compensation

  • 3.3. Capital Allocation

  • 3.4. Management Roasting

• 4) Financial Health

  • 4.1. Balance Sheet Health

  • 4.2. Operating Perspective

  • 4.3. Off-Balance Sheet Items & Hidden Risks

• 5) Risks

  • 5.1. Inversion

  • 5.2. VantageScore vs. FICO: Is the Credit Scoring Giant Losing Its Grip?

• 6) Other Items

• 7) Valuation

  • 7.1. Past Growth

  • 7.2. Future Growth (including a TAM analysis and identifying key growth drivers)

  • 7.3. Valuation Work

• Fun Fact

• Appendix

Disclaimer: The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

High-Level Thesis: “Bam Bam Bam Bam Bam”-90 Second-Hypothesis

When you think of the stock market, one of the biggest challenges is quickly determining whether a business truly has potential. As my regular readers know, Bill Miller, legendary investor, is known for his “Bam Bam Bam Bam Bam” approach to pitching stocks – which I’ve shamelessly copied.

In essence, it’s a quick pitch that gets straight to the point: Why is this a great business? Miller’s style demands clarity and precision, with just five reasons why an investment could make sense. So, let’s apply this framework to Fair Isaac Corporation (FICO), a company that may not be on everyone’s radar, but absolutely should be.

Here we go …

• BAM #1 – Indispensable Industry Standard: FICO’s scores are the industry standard. In fact, 90% of top U.S. lending decisions use FICO scores. Beyond that, FICO scores dominate the secondary market for securitizations, with 98.8% of U.S. securitizations – a financial process that pools income-generating assets (such as mortgages, auto loans, or credit card debt) and converts them into marketable securities – using FICO to communicate credit risk to investors. This is a business that has become synonymous with credit risk, and replacing FICO would be like changing the engine of a plane mid-flight – a daunting task.

• BAM #2 – Unmatched Pricing Power & Value Gap: FICO is in the midst of a remarkable pricing transformation. After decades of keeping prices flat, FICO raised its wholesale mortgage score price from about $0.60 to $4.95 by 2025 – an eye-popping 800% increase –, and $10 by 2026. Despite this hike, FICO’s fee still represents a negligible 0.2% of average mortgage closing costs. This leaves ample room for further price hikes – at least if you have a long-term view (less so in the near term) – without significantly impacting volume.

• BAM #3 – Elite Margin Profile: FICO’s Scores segment boasts near-monopoly margins, with 88% – yes, you read that right! – operating margins in Q1 2026. The key here is the low incremental cost structure: the core algorithms, developed decades ago (but frequently updated), require minimal investment to scale. That means when FICO raises prices or increases volume, almost every new dollar drops straight to the bottom line.

• BAM #4 – Strategic SaaS Transformation: FICO is transitioning its Software business from legacy on-premises applications to a cloud-native platform. This transformation is paying off, with platform-specific Annual Recurring Revenue (ARR) growing at over 30% in Q1. The company’s “land and expand” strategy is also working well, with existing customers spending significantly more as they adopt new decision-making use cases. This positions FICO for long-term growth in the SaaS space.

• BAM #5 – Aggressive, Shareholder-Aligned Capital Return: FICO has used its cash flows to buy back stock aggressively, reducing its share count by 30% over the past decade, leading to incredibly fast profit per share growth. In fiscal 2025 alone, the company returned $1.4 billion to shareholders via buybacks.

This strategy has led to a stellar 18% EPS CAGR over the last 13 years, far outpacing its 8-9% revenue growth (not per share revenue growth as displayed in the chart below). Simply put, FICO is showing its commitment to delivering value to shareholders.

As we enter 2026, FICO finds itself at a rare entry point. The stock has experienced a 52% price drop from its highs, making it a possibly attractive buy for long-term investors.

So why the drop?

What Went Wrong?

Despite FICO’s strong business fundamentals, the company hasn’t been immune to challenges. The key issues that have weighed on the stock recently are:

• Regulatory Breach of the Monopoly: The FHFA’s formal transition to a “Lender Choice” model has opened the door for VantageScore 4.0 to compete directly with FICO in the market for Fannie Mae and Freddie Mac loans. While this introduces competition and substitution risk, it’s not an existential threat to FICO’s dominance – yet.

• Volume and Revenue Contraction Risks: The potential shift from a “tri-merge” model, requiring three credit scores, to a “bi-merge” model, requiring only two, has the potential to reduce FICO’s score volume by as much as one-third per application. This could directly impact revenue growth in the short term.

• Intensifying Antitrust Scrutiny: FICO is currently defending itself in the “In re FICO Antitrust Litigation” case, which addresses its distribution practices and “transmission fees.” While it’s early in the legal process, the outcome could have implications for FICO’s cost structure.

“On November 24, 2024, the court ruled on FICO’s and the credit bureaus’ motions to dismiss the plaintiffs’ amended complaints. The court dismissed with prejudice all claims in the lawsuit other than a Sherman Act Section 2 claim and accompanying state law claims against FICO, which were allowed to proceed through the discovery stage of the litigation. FICO intends to vigorously defend against the remaining claims in this proceeding.“ - FY25 Annual Report

• Software Segment Growing Pains: FICO’s transition to a SaaS model has not been entirely smooth. Despite strong growth in its Scores business, its Software segment grew a mere 2% in Q1 2026, possibly raising concerns among investors about the potential monetization lag this segment.

Part 1 – Understanding the Business

1.1. History: The Evolution of a Global Risk Standard

The story of Fair Isaac Corporation (FICO) is one of innovation, adaptation, and an unwavering commitment to shaping how credit risk is understood and quantified. From its humble beginnings in a small apartment to becoming a critical part of the global financial ecosystem, FICO has grown into the architect of the pervasive credit risk standard in the United States, serving thousands of businesses across over 100 countries. Let’s take a look at how this company evolved over the years to become a cornerstone of modern financial systems.

Founding and Early Innovations (1956–1980s)

Before we start with FICO itself, it’s worth highlighting how lending decisions were made historically – way back in the day! For most of the twentieth century, the world of credit was remarkably small, intimate, and – by today’s quantitative standards – frustratingly arbitrary. If you needed a loan to buy a home or expand a storefront, you didn’t appeal to an abstract score. You appealed to a person. Usually, this meant sitting across from a local bank manager who, at best, knew your family, your reputation, and perhaps even where you went to church. Decisions were built on a foundation of trust and familiarity that simply doesn’t scale in a modern economy. I find it fascinating how much weight was placed on a simple handshake.

If the manager liked your story, you were in. If he didn’t? You were out.

It was a gatekeeper’s paradise. There was no recourse and no objective data to prove him wrong.

This extreme subjectivity created a massive efficiency problem for the financial system. And because there was no standardized way to measure risk, lending was essentially a binary outcome. You either qualified for the prevailing interest rate or you were rejected entirely.

The concept of risk-based pricing – where you might pay a slightly higher rate because your profile is a bit thinner – simply didn’t exist yet. Everyone who was approved essentially paid the same price for capital. Think about that for a second. A doctor with twenty years of practice and a young baker starting her first shop would receive the same terms, provided they both cleared the manager’s subjective “trust” hurdle. This lack of nuance meant that banks were constantly leaving money on the table. They couldn’t comfortably lend to anyone outside their immediate social or geographic circle because they had no way to price that uncertainty. You were either a known quantity or a total mystery. There was no middle ground. It was an incredibly rigid way to run a national economy.

This brings us to Fair Isaac.

FICO’s journey began in 1956 when engineer Bill Fair and mathematician Earl Isaac – do you see where today’s name is coming from? –, both visionary thinkers, founded the company with a simple but powerful idea: to apply mathematical algorithms to make lending decisions more objective and standardized. The duo met at the Stanford Research Institute, and based on just $400 in personal investments (equivalent to approximately $5,000 today), they set up shop in a studio apartment in San Rafael, California.

In 1958, FICO achieved its first major milestone by selling its first credit scoring system to the American Investment Company (AIC). This was the beginning of a long journey toward mainstream adoption. Early on, these scoring systems were tailored to individual needs and were labor-intensive, often relying on physical paperwork and borrowed computers to process the data. Despite these challenges, it marked the birth of a product that would eventually reshape the credit industry.

The Equal Credit Opportunity Act of 1974 proved to be a pivotal moment in FICO’s growth. The legislation made it illegal to discriminate against applicants based on factors like gender or marital status, creating a powerful incentive for lenders to adopt more objective, data-driven methods of credit evaluation. FICO’s algorithmic scoring models provided a solution, helping lenders demonstrate that their decisions were merit-based and unbiased, thus propelling the company’s growth.

In the 1970s and 1980s, FICO expanded its reach as credit bureaus (nowadays officially known as Consumer Reporting Agencies or CRAs) – essentially, private companies that collect and manage data about your financial behavior – began consolidating. For context, by 1965, at the peak, the trade association for these companies (now known as the Consumer Data Industry Association) had over 2,200 members.

FICO recognized an opportunity to develop models that could be applied universally across different datasets. In 1981, they introduced “PreScore,” the first standardized credit bureau risk score, which laid the groundwork for the universally recognized FICO Score.

The company also went public in 1987 on the NYSE, marking a new chapter in its evolution.

Establishing the “Industry Standard” (1989–2011)

FICO’s true breakthrough came in 1989 with the introduction of the now-famous FICO Score, ranging from 300 to 850.

When researching FICO, I was asking myself why the score doesn’t start at zero. So I’ve looked into the origins of the FICO scale and realized that starting at zero would be a mathematical nightmare for lenders because it implies an absolute certainty of default. Bill Fair and Earl Isaac chose the 300–850 range to provide enough “ticks” on the scale for high–resolution risk assessment. This spread allows for a concept called log–odds, where small point increases represent a doubling of your creditworthiness.

As we’ve learned, before 1989, determining creditworthiness was essentially a Wild West of subjective judgment calls. When FICO finally introduced its standardized 300 – 850 range, it fundamentally rewired the plumbing of the American financial system. FICO’s algorithm effectively turned personal behavior into a quantifiable asset class. It relies on five distinct variables, but the heavy lifting comes from your payment history and total debt levels – accounting for 65% of the total weight. You see, the model prioritizes consistency over sheer net worth. It functions as a track record. One slip-up on a mortgage payment carries more weight than a decade of on-time utility bills.

The remaining fragments of the score – length of history, credit mix, and new inquiries – serve as the fine-tuning for risk assessment. I find it fascinating that the algorithm rewards complexity. If you only hold a single credit card, the system views you as an unproven entity. It wants to see you juggle different types of debt, like an installment loan alongside revolving credit, to prove you can handle diverse financial obligations. Applying for a flurry of new accounts usually triggers a red flag because it signals a sudden, desperate thirst for liquidity. Keep it steady. This balance between the age of your oldest accounts and the freshness of your new ones creates a profile that lenders can actually trade against. It changed everything.

FICO’s standardized score quickly became the go-to method for assessing credit risk. Lenders embraced the simplicity and reliability of this scoring system, and it became a key part of their decision-making process.

Then, FICO reached a watershed moment in 1995 when Fannie Mae and Freddie Mac, the U.S. government-sponsored entities (GSEs), required the use of the FICO Score for all conforming mortgage originations. This move solidified FICO’s position as the industry standard, as it became the “lingua franca” of credit risk, enabling the mass securitization of debt. Investors demanded a consistent and reliable benchmark to assess loan pools, and FICO’s scoring system met that need.

Throughout the 1990s and 2000s, FICO diversified its offerings beyond credit scoring. The company expanded into decision software with the launch of products like Falcon Fraud Manager, a tool that now protects around two-thirds of all credit card transactions worldwide. This diversification helped FICO cement its reputation as not just a score provider, but as a comprehensive risk management partner for businesses.

Leadership Change and Strategic Pivot (2012–Present)

A significant shift occurred in 2012 when William J. Lansing was appointed CEO. Under Lansing’s leadership, FICO embarked on a path of modernization and aggressive monetization. This shift paid off in a big way: by 2023, the company’s stock price had increased approximately sixteen-fold. Lansing’s strategic vision positioned FICO to capitalize on both its legacy business and new growth opportunities in cloud-based software.

Importantly, for nearly three decades, FICO kept its prices largely unchanged, prioritizing widespread adoption. However, in 2018, the company began a strategic pricing shift, particularly in the mortgage sector. The price of wholesale mortgage scores jumped from around $0.60 to nearly $5.00 by 2025 – an 800% increase! This dramatic pricing move, although controversial, is a reflection of FICO’s growing recognition of the immense value it provides in the financial ecosystem.

FICO’s leadership recognized the growing importance of cloud-based technologies and embarked on a massive, multi-year investment to transition from legacy on-premises solutions to the cloud-native FICO Platform. As part of this transformation, FICO also divested non-strategic businesses such as its Cyber Risk Score (2020), Collections and Recovery (2021), and Siron compliance (2023).

This focus on cloud-based software has set the stage for FICO’s future growth, with Annual Recurring Revenue (ARR) from platform-specific offerings growing at over 30% annually.

To align its operations with the new platform-first strategy, FICO merged its Applications and Decision Management Software segments into a unified Software segment in 2021.

This consolidation aimed to streamline operations and improve the company’s focus on its evolving cloud-based platform. In 2022, Stephanie Covert was appointed as the first leader of the newly unified software group, bringing fresh leadership to an increasingly complex and global business.

Challenges and Strategic Controversies

The 2008–2009 financial crisis was a difficult period for FICO, as lenders pulled back on extending credit in the wake of the housing crash. This resulted in a nearly 27% drop in Scores revenue, highlighting the company’s sensitivity to economic downturns. However, FICO’s adaptability and position in the credit risk ecosystem allowed it to rebound in the years following the crisis.

In 2022, the Federal Housing Finance Agency (FHFA) approved the use of VantageScore 4.0 for GSE mortgages, ending FICO’s long-standing monopoly on GSE-originated loans.

This regulatory change, which introduced a “Lender Choice” model, has posed a significant challenge to FICO’s traditional business model. The company has responded by promoting its more predictive FICO 10T model and introducing the Mortgage Direct License Program in 2025 to circumvent traditional credit bureau distribution channels.

FICO’s pricing model has come under increasing scrutiny in recent years. The company’s aggressive price hikes and “transmission fees” – charges imposed on credit bureaus for delivering FICO scores – have led to legal battles, including the ongoing “In re FICO Antitrust Litigation.” Additionally, U.S. lawmakers have raised concerns about potential price gouging in the mortgage market. These legal and regulatory challenges could pose risks to FICO’s growth and profitability.

There’s, of course, more to all of this, and we will discuss the FHFA’s shift and the risk it presents to FICO in depth in part 5 (risks).

Finally, FICO has faced criticism for its models, which some argue may disadvantage groups with limited credit histories. In response, the company has focused on broadening financial inclusion by investing more than 50% of its Scores R&D into products designed to include individuals with limited credit history, such as UltraFICO and FICO Score XD.

1.2. Product

FICO, a leader in credit risk management, operates through two primary reportable segments:

• Scores and

• Software

Both of which can be further subdivided.

These segments, though distinct, are deeply interconnected, with each contributing significantly to the company’s overall growth and profitability.

Below you find the overall revenue contribution of each segment for the last seven fiscal years and the respective YoY growth rates.

Let’s explore the products and services FICO offers, and how they stand out in a competitive market.

The full analysis starts here:

The rest of this post and the follow-up parts of this deep dive series will cover the topics outlined in the table of contents displayed in the introduction. If you’re serious about sharpening your investing edge, the full post (and all my previous premium content, including valuation spreadsheets, deep dives (e.g. well-known mid- and large caps such as LVMH, Duolingo, Meta, Edenred as well as more hidden gems such as Tiger Brokers, Digital Ocean, Ashtead Technologies, InPost, Timee, and MANY more) and powerful investing frameworks. is just a click away. Upgrade your subscription, support my work, and keep learning.

Subscribe now

Annual members also get access to my private WhatsApp groups – daily discussions with like-minded investors, analysis feedback, and direct access to me.

PS: Using the app on iOS? Apple doesn’t allow in-app subscriptions without a big fee. To keep things fair and pay a lower subscription price, I recommend just heading to the site in your browser (desktop or mobile) to subscribe.

Read more

We discuss:

• The “Aha” Moment: Why Trevor shifted his focus to high-quality businesses that can compound for decades.

• Portfolio Forensics: Why Berkshire Hathaway remains his largest anchor and how he differentiates between a temporary narrative shift and a genuine crack in a business’s fundamentals.

• Risk & Reward: We analyze the high-conviction plays in his portfolio – from wide trajectory of outcomes in certain sectors to the steady compounding of names like Constellation Software.

• Impact-Per-Minute: Trevor shares a personal look at the people who left a permanent mark on his life in just a single moment.

This conversation is a masterclass in balancing a demanding professional career with the rigorous research required to find the world’s best durable compounders.

Find the “Pursuit of Comounding” blog and the write-up we discussed towards the end of the episode here:

The Pursuit of Compounding

Tantalus Systems: A Pick-and-Shovel Play on America's Aging Grid

In March 2025, a single transformer failure plunged Heathrow Airport into darkness. Two hundred and fifty thousand passengers stranded. Hundreds of flights cancelled. Billions of dollars in economic disruption. All because one piece of electrical infrastructure - designed in a different era, for a different grid - gave out…

Read more

2 months ago · 6 likes · 1 comment · The Pursuit of Compounding