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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.

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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 recently completed a series of four transactions that shifted the posture of my portfolio. This involved three distinct additions and one strategic reduction.

In this post, I want to lay out the rationale behind these moves, as they represent a mix of contrarian value, platform optionality, and opportunistic capital allocation optionality. In some cases, I am leaning into fear where others see structural failure. In others, I am betting on regional dominance and the math of platform ecosystems.

To fund these, I had to make the difficult decision to move on from a holding that had essentially become a cash equivalent. It was a trade-off.

So again, this post is a deep dive into that decision-making process. I want to show you how I weigh regulatory risks against fundamental value and why, sometimes, the best moves are the ones that feel the most difficult to execute. It isn’t always pretty. But it is necessary.

By the end of this update, you should have a clear understanding of how I am positioning myself for the next phase of this market.

Before we dive back in, a quick note…

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On the surface, it could look like a fairly unremarkable decision. Yet for me it was surprisingly revealing, because the reasons for selling had very little to do with what the company achieved in the past quarters and much more to do with how I now view the sector (or more broadly “the business world”) that this business operates in. This post is therefore less a victory lap about getting a trade right and more a window into how my thinking has evolved (I hope you’ve read my perception change framework series) and it applied here.

We are living through one of the most intense debates about software, SaaS, and AI that markets have ever seen.

Hardly a week goes by without new demos, bold claims, and equally bold counterarguments about whether artificial intelligence will supercharge enterprise software, slowly erode it, or upend it entirely (major elevated tail risk).

Prices across large parts of the software universe have already reflected a meaningful shift in sentiment (with Constellation possibly being the most trending case study; on X at least).

But, importantly, not every corner of the market has reacted at the same speed. Some smaller, quieter companies still trade as if the old playbook remains fully intact. Owning one of those businesses forced me to ask myself an uncomfortable question. If the market’s perception of the software landscape is changing (we’l discuss the how any why in this write-up) and has not yet caught up in every niche, should I make a decision now to get ahead of what’s potentially coming in 2026 in terms of a re-rating of this particular stock?

Selling this position was therefore not a statement that the company is broken or doomed. It was a reflection of how I weigh …

• perception change,

• technological acceleration, and

• valuation

… when they pull in different directions.

Sometimes investing is about finding hidden winners. Other times it is about recognizing that your own framework has shifted and acting on it before prices do. In this post, I will walk through the three main reasons that pushed me to exit, but before getting there, I wanted to be transparent about my mindset. This was a modest sale in size, but it marked a meaningful change in how I think about software risk going forward.

This is where it gets interesting!

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Every year when I write this letter, I want to begin in the same place: Appreciation. For the trust you’ve placed in me to manage some of your capital. Your willingness to let me run the process independently means a lot. Thank you for backing the work, the thinking, and the patience that good investing requires.

As you know, I approach each semi-annual update with the same objective: if you read it closely, you should walk away with one idea that improves how you think about business, investing, risk, or company valuation.

This year, I picked two concepts to share. One is probably more intuitive to grasp. The other one is certainly more nuanced, maybe more “advanced.” I’m happy to discuss the concepts further in person. And anyway, you don’t need to memorize either. Just enjoy the intellectual stimulation of thinking this through along with me.

Concept 1: Outcomes follow a power law distribution & practical implications

I recently wrote a blog post about investor Henry Ellenbogen’s appearance on an investing podcast. In this piece, I also wrote about Ellenbogen’s archival work early in his career at the New Horizons Fund, which revealed some fascinating data points: Over rolling 10-year windows, only around 1% of companies – about 40 out of 4,000 – compound at 20% annually or better, crossing the 6x return threshold. These are the extreme right-tail outcomes, the “valedictorians” as he called them. And crucially, nearly 80% of them began their journey as small caps (companies with a relatively small market capitalization, often defined as between $250 million and $2 billion. Nobody recognized them as future “titans” when they were small – think Walmart at store #50 or a tech company product iteration #3 (Ellenbogen might have had Duolingo in mind; which I know you are a heavy user of yourself). They became them (i.e. business titans) later, though. Slowly and steadily. One store after another. One product iteration after another. Winning one customer at a time.

Ellenbogen used Walmart as a prime example of these 1% long-term winners. He shared that had Walmart not been sold early by the fund, it would have mathematically outweighed the sum of everything else the fund managed. Everything else. Think about that! The lesson here is not about Walmart specifically, though. It is rather a lesson about letting your winners run. A lesson about non-interruption. The cost of trimming a real outlier is not visible at the moment you trim it. The bill arrives years later, compounding against you in silence.

When preparing this letter, and thinking more about this subject, I came back to Meb Faber’s 2008 broader market study titled “The Capitalism Distribution: Fat Tails in Action,” which supports the same geometry: over 23 years of U.S. public market data, 39% of stocks delivered negative lifetime returns, 64% underperformed the Russell 3000, 18.5% lost 75% or more, and 25% of all stocks created essentially all net wealth. Even most winners didn’t stay (public) winners forever – 60% of the companies vanished due to acquisitions.

Broadly speaking, the figures support Ellenbogen’s point. So if generally speaking, only 1% of companies increase multi-fold (call it 6x or more) over a decade, the question to ask is:

“How do I increase the odds of holding the 1% long enough without getting bored, scared, or clever at the wrong time?”

That’s where the idea of a so-called “coffee can portfolio” comes in. This concept was first developed by Robert G. Kirby in a paper titled “The Coffee Can Portfolio” in 1984. Kirby, too, recognized that usually investors’ few best-performing investments will represent the vast majority of their returns. As a rule of thumb – maybe that’s easier to memorize –, you can think of it as an 80/20 rule: 20% of your investments are likely to produce 80% of your returns. Based on this observation, Kirby argued that “you can make more money being passively active than actively passive. “

• The active part of this strategy is to make investment decisions.

• The passive part is your behavior - being able to do nothing, not to sell at all, for as long as you possibly can. Investors should simply be sitting on their hands.

Kirby uses the image of a coffee can to illustrate this “passively active” approach. According to him, the name “coffee can portfolio” goes back to the American Old West:

The portfolio structure Kirby proposed was not aiming to predict which company would become the 6x winner. It was rather trying to eliminate the decision that “destroys” the future 6x winner once you find it.

Once you accept that outcomes are skewed, your role as an allocator changes. Your job is no longer to constantly optimize. It becomes protecting. Against impatience. Against randomness. Against your emotions. Against information triggers that sound meaningful in the moment but turn out immaterial to the longer-term trajectory. The biggest long-term risk in any portfolio is adopting a mindset that expects linearity from a system that is mathematically non-linear.

The concept should shape future decisions in two ways:

1. Expect skew, not symmetry. Outcomes will be uneven. Normal. The portfolio will likely concentrate in a few select winners. Normal.

2. Non-interruption is a strategy. We attempt to do very little by choice. Compounding is fragile if you intervene arbitrarily. As the famous Charlie Munger said, "The first rule of compounding is to never interrupt it unnecessarily."

Concept 2: Why the Best Economics Rarely Look Best at First

Generally speaking, I’m drawn to companies that look “unfinished” in their financials while “finishing” something structurally important – a "structural” differentiator protecting future economics – in the background. When a proven core business deliberately funds a younger, more ambitious business, the financial statements look suboptimal. Reported margins may look weak. The business may even be unprofitable. The path towards profitability stretches as management constantly finds new opportunities to deploy capital into – hopefully at attractive rates of course. Setbacks happen, too. The market reaction is often predictable: frustration, impatience, “short-termism,” disappointment, depressed valuation multiples.

But this is a set-up investors should actively look for in my view. It’s a feature of long-term compounders to be understood. And it’s one of my most favorite hunting grounds.

Fred Liu, managing partner at Hayden Capital, recently described it well in a tweet on X – I like the “baby business” framing:

“Since the mature biz throws off cash flow, building the baby biz is non-dilutive to investors – except just lower profits / margins, while the company reinvests. But the public markets hate these set-ups… So you get a free call option, with downside protection from the mature biz.”

His examples – Sea Ltd (Garena funding Shopee), Afterpay (Australia funding the U.S.), AppLovin’s gaming studios masking the rise of its adtech network – all share the same anatomy: the economics were attractive long before text accounting metrics made them look “real.”

That structure is why I like these businesses. You get a working foundation, misunderstood capital intensity, and optionality on a moat still being cemented, often being expanded by stacking new layers on top of already existing competitive advantage layers. I think of them as emerging-moat compounders, or CAP-builders (CAP stands for competitive advantage period; the time during which a company can earn excess returns on reinvestments): firms that intentionally sacrifice near-term profits to expand how long the business can generate high incremental returns. If the company is run by capable managers, the investments are not random. They tend to aim at scale advantages, denser networks, regulatory alignment, or improving unit economics. The payoff only becomes legible later, once reinvestment intensity eases or scale thresholds are crossed. Sometimes both.

Here’s the twist most investors miss. The highest economic returns are often earned when reported returns look rather poor. Companies in heavy build mode can generate extraordinary incremental returns on the capital they deploy, even while GAAP or IFRS accounting refuses to highlight it. They earn high ROIIC when unadjusted textbook ROIC figures are still deeply negative. And when textbook ROIC finally screens as “excellent,” the business has often already passed its most lucrative phase of incremental capital efficiency – and reinvestment opportunities at these returns dry out.

Great returns can be enjoyed when you identify positive inflection points before the market does. And inflection points don’t wait for accounting. The math peaks early, then slopes.

This creates a second decision lens for the future: if you only buy companies once margins are clean and ROIC tables look polished, you are buying after significant increases in intrinsic value already happened. Those tend to be good businesses, relatively stable ones. The downside risk is arguably smaller. But they also tend to be businesses no longer growing their intrinsic value at a rate I find satisfying. And they most certainly won’t be part of the “1% cohort” we discussed above in the segment on concept 1. And if you sell companies because reinvestment temporarily depresses reported margins, you may be selling the very “1%-winners” before the story could fully unfold.

How this impacts decisions going forward:

1. A company can be operationally messy, financially messy, optically messy – and economically magnificent (if you can zoom out beyond a quarter). Early. Before the textbook numbers agree.

2. The moment a business looks obvious on a trailing ROIC basis, incremental returns on new invested capital may already be normalizing. Maybe reverting.

3. The biggest portfolio mistakes are rarely analytical mistakes. Timing mistakes. Interruption mistakes (see concept 1).

4. The job of the long-term allocator is to recognize inflection points before consensus.

Business Updates

Investors are conditioned to track price charts the way sports fans track league tables. And it’s somewhat understandable. Prices are always available, constantly updated, emotionally charged, and maybe also convenient. But as we were trying to stress in our inaugural letter, shares in companies are not abstract tokens that wiggle on a screen. They are ownership claims on real businesses. Thus, what ultimately determines long-term outcomes is not the daily verdict of the market, but the actual development of the underlying companies (and the price relative to the real value of the business that you bought your stake at) – their competitive position, growth vectors, unit economics, capital allocation, etc. If you want to judge intrinsic value progress, judge the business, not the stock.

Based on this understanding, in the paragraphs below, I’ll share brief updates on a few select holdings, focusing on some recent events and developments that carry real consequences for the businesses’ future.

Before we start, the current portfolio composition looks like this:

InPost is a new position in the portfolio, and we discussed what the business does privately (it’s the leading out-of-home legostics platform in Europe). InPost is a great case study for the second theoretical concept outlined above: a mature domestic engine (InPost’s Polish business) funds a moat that is still expanding internationally (across a wide range of European countries, with the UK and France representing the two biggest markets). The core business in Poland continues to generate significant cash flow at attractive margins and is financing the network build-out across Europe. This inevitably depresses reported margins, because the investment is front-loaded while the benefits are back-loaded.

Moving on to recent developmens, one such development includes the decision by management to progress with the Yodel integration – a 2025 a £106m acquisition – deliberately rather than hastily, postponing certain integration steps during the Christmas season that management initially wanted to take sooner to avoid operational friction that could compromise customer delight. We think this – focusing on providing customers the best possible consumer experience – was the right one to make. Speaking of InPost’s UK business, CEO Rafal Brzoska recently backed the UK thesis with accelerating adoption metrics: 44% of UK consumers now plan to use parcel machines this holiday season, up from 34% only three months ago. Shipments handled through machines grew from 26% to 36%, return rates climbed from 23% to 39%, and over half of 18–34-year-olds are already active users. These numbers are thesis-confirming because they demonstrate broad behavioral change, which is arguably rather difficult to pull off and normally takes time (many years). Third, the company also secured an important UK High Court ruling confirming the warrant documents of Yodel’s former owner were not genuine, removing a governance overhang and enabling Yodel to continue its restructuring path in 2026 under InPost’s ownership. Beyond that, InPost announced a new eBay partnership, embedding locker-based parcel flows directly into the eBay marketplace for the first time, unlocking optionality for both buyers and sellers. Finally, I came across another insightful data set that highlights how dominant the service perception already is: across pickup convenience, app usability, parcel condition, delivery speed, and tracking reliability, InPost’s Poland business leads every single peer category measured.

Up Fintech Holding operates in a structurally attractive industry, grows incredibly fast (faster than many competitors), and is run by a founder who pursues an ambitious long-term vision. Up Fintech Holding delivered Q3 results that reinforced the thesis that account growth, asset growth, and product expansion are compounding in parallel. The company posted a 27% revenue CAGR over the past three years and grew revenue 73% YoY last quarter alone, with net profit expanding 180% and client assets increasing 49%. The client acquisition strategy already hit the full-year guidance of 150,000 newly funded accounts by the end of Q3, and management implied continued strong funded account additions in Q4 (at least 18,000 incremental accounts beyond Q3’s closing figures). What matters more than the headline growth figures though is the composition of that growth and the increasing account quality: 40% of new funded users now come from Singapore, 35% from Hong Kong, 20% from Australia and New Zealand, only 5% from the U.S. Hong Kong has emerged as a second core growth engine alongside Singapore, contributing over 30% of new funded accounts for the first time, while maintaining consecutive quarter averages of USD 30,000 net inflow per new client and a new Singapore average exceeding USD 60,000 (for comparison, Robinhood's average account size is significantly smaller; somewhere in the range of USD 10,000). Importantly, onshore retail users now represent less than 15% of total client assets, marking a meaningful mix shift toward internationally positioned, higher-quality investors. While the company already produces impressive 27% net income margins, Hong Kong – the region with the highest average net inflows – still contributes disproportionately little to group profit, because management is prioritizing density of products, switching costs, and market share before profit contribution. That means there is likely significant operating leverage left, especially when compared to competitor Futu Holding’s nearly twice as high margins. The company self-clears core products, owns the clearing stack, and is already profitable in Tiger Brokers Hong Kong, even while intentionally reinvesting into product breadth rather than bottom-line optics. Macro fears around tariffs or trade tensions have no real consequence for the business itself, but they do have consequence for investor sentiment: sentiment often misprices companies like this when narratives overshadow incentives.

When you manage capital for the long run, trust in management teams is usually a cornerstone. Lose that trust, and the cleanest rule is often to exit. Brockhaus Technologies has been a tricky case for me this year because the investment sits at the intersection of a trust impairment and a major valuation gap. The material difference between share price and intrinsic value has kept the position alive, even while the narrative, and also tangible developments on the business level, would have made it an easy sell months ago. Now, on December 23, Brockhaus announced the sale of all of its shares in BLS Beteiligungs GmbH (“Bikeleasing”), which it held indirectly via BCM Erste Beteiligungs GmbH, to Decathlon Pulse SAS, part of the French Decathlon Group. The purchase agreement values Bikeleasing at an enterprise value of €525 million. Based on the consolidated figures as of September 30, 2025, the illustrative pro-rata value attributable to Brockhaus’ stake is approximately €240 million. For much of this year – and also prior to the deal announcement – Brockhaus shares traded around €10 per share, implying a market cap of roughly €100 million. On the announcement day, the stock increased by more than 50%, which makes sense if you adjust for cash and debt and translate the deal value into per-share terms. Depending on the adjustments, the transaction alone likely represents around €22–23 per share in value. Brockhaus also owns IHSE, which should reasonably carry a stand-alone value of around €40–50 million. But even after the 50%+ move, the stock still only traded below €16 per share. Why? A few thoughts:

• It is not fully clear whether the deal will be paid entirely in cash or if other instruments or delayed payments are part of the structure. This ambiguity around composition may make market participants cautious.

• There is also a bargaining position problem once a seller is perceived as having to reinvest the proceeds under time pressure, similar to situations in sports where a team must replace a key player and every counterparty knows the budget and the time constraint. Imagine Bayern Munich selling Harry Kane for 80€ million tomorrow. Bayern Munich would need a replacement before the end of the winter break; they are acting under time constraints and everyone knows they have €80 million+ at hand. This puts the team in a bad bargaining position. The market may be anticipating the same regarding Brockhaus.

• On top of this, Brockhaus’ acquisition track record has been mixed.

• Finally, if Brockhaus distributed the proceeds directly to shareholders, the share price would likely reprice higher, but this appears unlikely, because direct distribution would remove management from future incentives, compensation, and control.

In sum, the market is (somewhat rightfully) discounting the proceeds because it assumes redeployment risk remains. I’ll be continuing to track the situation closely.

Wise’s share price has declined about 23% since September. The business itself continues to execute on its long-term mission with consistency, focusing on product improvements, geographic expansion, and customer economics rather than short-term margin improvements. The key metrics to track are all pointing in the right direction:

• Active customers 13.4m (+18%)

• Total cross-border volumes £85bn (+24%)

• Spend on Wise cards £28bn (+27%)

• Customer holdings £25bn (+37%)

• Own cash on the balance sheet £1.6bn (+49%)

• Wise Platform volumes £4.2bn (+55%)

The recent debate around stablecoins disrupting Wise’s model is – in my view – overblown because it lacks a nuanced assessment of true cost advantages, adoption timelines, and real-world switching costs. The regulatory environment, compliance requirements, and consumer behavior suggest that adoption will be uneven, gradual, and unlikely to compress Wise’s core value proposition in the short to medium term. Market narratives around disruption tend to front-run reality, especially when the disruption itself is still searching for mainstream workflows (the majority of stablecoin transactions today are still primarily driven by crypto trading activity, rather than being used in broader financial or commercial contexts).

Next, let’s discuss our investment in Edenred, which is down 24% since our purchase. Edenred has been affected by regulatory headwinds. However, regulation is one of those areas where markets often extrapolate the worst-case instantly and indefinitely, without adopting a probabilistic multi-scenario approach. On top of this, in Edenred’s case, the market is also not adjusting for the parts of the business that aren’t exposed to the same regulatory risk. Edenred has been punished heavily on price – down about 63% over the past three years – even while the business delivered real operating progress, growing operating income roughly 40% at stable EBIT margins of around 31%. The result is a rather dramatic re-rating of the company’s EV/EBIT multiple, from around 24x to roughly 8x. Edenred’s regulatory environment in Brazil has clearly tightened after policy changes on the worker food program (PAT), creating material headwinds for the regulated part of the business in Brazil (and the business is experiencing similar headwinds in a few European countries too). But of course, Edenred is operating globally, and maybe more importantly, another critical detail is often ignored: around 60% of Edenred’s revenue comes from unregulated activities (activities not dependent on government-subsidized programs). The regulated business carries risk, but it still carries value. It is not worthless. The law published recently includes a 3.6% cap on merchant fees (effective immediately), a 15-day redemption period (7 days for smaller transactions), mandatory interoperability effective one year from publication, and fee-free portability for employers with more than 500 employees upon written request. The positive consequence of lower share prices is that every euro spent on buybacks now retires shares at a fraction of the price only a few years ago, creating shareholder value through the simple mechanism of reducing the share count at what I believe is too-cheap of a valuation. Edenred’s core economics are still working, regulatory impacts are meaningful but partial, and the company’s ability to repurchase shares at single-digit earnings multiples is now maybe the most asymmetric consequence.

Other holdings deserve only brief updates:

Zalaris remains a high-conviction investment for me. Rumors about a potential acquisition target resurface occasionally, but I hope the company will remain independent and compound for years to come. The market opportunity is large enough to support many years of solid intrinsic value growth.

LVMH is slowly seeing light at the end of the tunnel and could return to higher growth in the quarters ahead. In its last quarter, LVMH was growing across all segments, stopping the multi-quarter revenue declines that started in H2 2023 (and caused the poor stock performance since).

Timee is a new investment. It is a marketplace platform in Japan that connects businesses with flexible hourly workers, handling scheduling, compliance, and staffing workflows. I recently listened to a podcast with the founder, who is the youngest CEO of all CEOs in the portfolio companies, at just 28 years. He strikes me as very ambitious (planning to expand into other industries and internationally), and hopefully, he will continue to compound our capital as the CEO for decades to come (the opportunity in Japan is in my view large enough to justify the current share price). I hope we stick to the coffee can approach here; this will be the toughest challenge).

Evolution Gaming continues to struggle, but the stock looks very cheap to me, and the shareholder yield of almost 10% (a comprehensive measure of how much cash a company returns to its investors, going beyond just dividends to include net share buybacks) pays us while we wait for a re-rating.

Computer Modelling Group and Ashtead Technology trade at what I believe are very attractive prices, and I expect long-term returns to be very satisfying, especially once the oil cycle turns. The sector is ignored and unloved. Temporarily. Both companies aren’t pure commodity producers but rather specialized service, equipment, and/or technology providers. Let me remind you of each company’s business and how they are important during various parts of the cycle:

• Computer Modelling Group operates at the intersection of software and subsurface engineering. When new project sanctioning slows, operators rely more heavily on simulation tools to optimize existing fields. They run enhanced recovery scenarios, model tie-backs, test drilling patterns, evaluate reservoir risk, and push for higher productivity per well. When the cycle turns upward again, and new exploration programs begin, demand for these tools rises even further. The result is a dual-cycle business: one that benefits (or at least the impact is cushioned due to the mission-critical nature of the offering) from the downcycle’s need for efficiency and the upcycle’s need for development.

• Ashtead Technology sits in a different but equally interesting niche. Their equipment and rental solutions power subsea inspections, survey work, and offshore maintenance. When producers delay megaprojects, they still need to maintain what they already have. Offshore wells don’t stop aging just because capex budgets shrink. And when oil prices eventually rise and offshore activity accelerates, demand ramps.

If the thesis plays out, both companies find themselves pulled upward by increased activity. If the thesis takes longer, they keep earning money anyway. And if the thesis is wrong altogether, they still have defensible business models and structural advantages that give them a chance to compound value somewhat independent of the commodity price.

Interactive Brokers and Meta are high-quality long-term compounders, and while we observe Meta's AI capital allocation spent somewhat critically, in the spirit of the Coffee Can, we're not going to sell our stake in a world-class business that we bought below $500/share during the Liberation Day selloff in April. IBKR is simply one of the best businesses in the world with a long runway. It’s not optically cheap anymore (up 70% since our purchase), but I believe the business will grow into its current valuation over time.

Concluding Thoughts

The businesses you own stakes in today are laying foundations at different stages of maturity, and the best future outcomes will come from letting the right ones run their course while sizing them in ways that make patience sustainable. Thank you again for trusting me with this process. The work continues, the puzzle continues, and the real returns will continue to be earned not in the quarterly headline results, but in the incremental improvements that are stacked on top of each other quarter after quarter over multi-year timeframes.

René

This week, I’ve made a few important changes that reflect how my trust in management and my expectations for long-term business performance have shifted. Some of these moves were straightforward; others came with more hesitation and reflection.

In each case, though, the decision process was guided by the same question I always ask: where is my money treated best over the next five years?

This update is less about the mechanics of trading and more about the thought process behind portfolio management – how conviction builds and erodes, how opportunity cost shapes decision-making, and why the difference between liking a business and trusting its stewards can’t be overstated.

In the sections reserved for paying subscribers, I’ll walk through each of the key moves in detail: why I exited one position after growing increasingly skeptical of management, where I reallocated that capital, and how the underlying logic connects to a broader philosophy of staying aligned with exceptional operators and scalable business models.

I’ll also explore a few companies that continue to shape my portfolio – two that I believe are among the clearest examples of long-termism in public markets today, and another where I’m still wrestling with the balance between valuation, quality, and uncertainty.

If you’re a paying subscriber, the rest of the post digs deep into the details, the data, and the reasoning behind every move.

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.

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The biggest move was building a new position in InPost, a company I’ve been studying for a few weeks, and fairly quickly decided to commit to in size. I released my full deep dive on it yesterday, which, at over 25,000 words, …

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Yesterday, I made a trade that forced me to confront exactly that tension: I sold part of my position in one of the high-quality companies in my portfolio – a company I’ve often described as one of the cleanest financial compounders out there – to buy another position.

I’d argue I traded quality for expected return. And that decision says a lot about where I am as an investor right now.

The timing was curious. On Friday evening, U.S. markets stumbled after Donald Trump once again threatened 100% tariffs on Chinese imports, this time over the ongoing rare earth dispute.

Chinese equities sold off sharply. Tech names followed.

And once again, the market punished anything with the faintest connection to China.

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Along the way, I added to two existing positions, bought into a new name that’s been on a tear, and I’m still chewing on another idea that I can’t quite pin down yet – I’ll cover this in a separate post, though.

That mix of conviction, opportunism, and hesitation is the essence of portfolio management. You’re never operating with full clarity – you’re balancing probabilities, weighing tradeoffs, and trying to put capital where it can compound most effectively.

In this post, I want to walk you through three specific ideas and the thinking behind them. Each one has a slightly different flavor.

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. LVMH, Edenred, Digital Ocean, or Ashtead Technologies), and powerful investing frameworks.

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

Choose your level of commitment and unlock your next edge.

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Trimming down forces clarity. You can’t hide behind a long tail of “just in case” stocks when each holding has a meaningful weight.

The trade-off is obvious: when you concentrate, every decision matters more. And that’s where DigitalOcean came in – as an outlier to my usual approach (I’ve always been upfront about that).

It never ticked all my normal boxes. The price wasn’t screaming “back up the truck,” and the balance sheet had a very real $1.5 billion problem sitting in plain sight.

But in this case, I deliberately made an exception. I wanted exposure to a very particular type of growth story in the age of AI, and DigitalOcean was one of the more interesting, under-the-radar ways to get it – and while not screaming cheap, I think it provides decent value if they can successfully deal with the debt situation.

Ultimately, I ended up selling yesterday – selling at a slight profit made it easier. That decision had nothing to do with the company’s operational performance, which has been strong. It had everything to do with the complexity of the financing structure they chose to deal with that $1.5 billion wall of debt which we extensively covered in part 3 of our deep dive into OCN. Before we get to that, it’s worth revisiting why I bought in the first place.

Before we dive back in, a quick note…

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The Thesis: Why I Bought DigitalOcean

When I first added DigitalOcean to the portfolio, it didn’t fit the mold of my typical “obvious” investments – the kind where the valuation feels ridiculously skewed in my favor and the capital structure is boring enough to ignore. Here, the appeal was a mix of product momentum, early-stage AI exposure, and an improving go-to-market strategy under a refreshed management team.

On the product side, their velocity stood out. More than 60 new products and features in a single quarter isn’t something you see every day in this segment of the cloud market. They were moving fast and hitting relevant trends – not just chasing buzzwords, but actually embedding AI/ML capabilities into offerings that mattered to their existing customer base. That’s a key distinction. Chasing the latest AI hype is easy; integrating it in a way that creates durable revenue is harder.

The Scalers+ segment was another reason I paid attention. These higher-spend customers, often scaling start-ups and mid-market companies, are the kind of base that will drive sticky, high-margin growth. Revenue from Scalers+ was up 35% year-over-year in the most recent quarter, and the cohort now accounts for almost a quarter of total revenue. That’s a healthy mix shift in the right direction.

And then there was the AI/ML momentum. Management reported that AI/ML-related revenue more than doubled year-over-year, and they were raising guidance off the back of it.

For a company this size, that’s meaningful. Combine that with net dollar retention ticking up to 99% and average revenue per customer growing double digits, and the operating picture was clearly strengthening.

Management is executing its plan. This was part of my thesus: I liked the fact that there was new blood at the top. The refreshed leadership team struck me as competent and pragmatic during the Investor Day, and they seemed focused on the right levers – unit economics, product-market fit, and operational discipline.

So, even though the debt load made me feel slightly uncomfortable, I was willing to take a measured position. This was never going to be a “core forever” holding, more of a shorter-term trade, but in the right conditions, it could deliver outsized returns. And in the age of AI, with so much investor attention clustered around a handful of mega-cap names, owning a smaller, more nimble player felt like a worthwhile bet.

There was more in the most recent quarterly report that reinforced my conviction – at least on the operating side. Revenue came in at $219 million, up 14% year-over-year, with annual run-rate revenue hitting $875 million. Gross profit rose 15%, margins held at 60%, and net income almost doubled. Adjusted free cash flow was $57 million, good for a 26% margin, up from 19% a year ago. In other words, the business is scaling and doing it with improving efficiency.

There’s also the “agentic cloud” narrative the company has been pushing – essentially building the infrastructure for more autonomous, AI-driven applications. While still early, it’s a logical extension of their positioning as a simpler, more cost-effective alternative to the hyperscalers. And given the cost sensitivity many AI start-ups face, that positioning could matter more as the hype cycle matures and budgets tighten.

The market noticed. After the earnings release, the stock jumped almost 20% in a single day and was up more than 40% over a five-day stretch. That’s the kind of move you get when narrative and numbers line up. Unfortunately, as I’d soon be reminded, narrative alignment can be fragile – especially when a capital structure overhang is lurking in the background.

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The Debt Wall

As much as I liked what DigitalOcean was doing operationally, there was always an elephant in the room – $1.5 billion in convertible notes maturing in December 2026. When you’re running a concentrated portfolio, you don’t get to relegate something like that to the “I’ll worry about it later” pile. It sits there, influencing every decision, because sooner or later the company will have to address it – and how they choose to do that can change the equity story overnight.

These weren’t just any bonds. They were 0% convertible notes – essentially a hybrid between debt and equity. From a cost-of-capital standpoint, 0% debt is about as sweet as it gets. But convertibles come with a catch: they can be swapped for equity if certain conditions are met, which means potential dilution for existing shareholders. And if they aren’t converted, the company has to pay them off in cash. Either way, the maturity date acts like a ticking clock, counting down to a forced decision.

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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. LVMH, Edenred, Digital Ocean, or Ashtead Technologies), and powerful investing frameworks.

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

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In these letters, I want to go beyond performance commentary and use the opportunity to introduce one or two core investing concepts each time. Think of it as a slow, deliberate process of building a shared framework – something that helps make sense of what we’re doing, why we’re doing it this way, and how I believe this approach can lead to long-term outperformance.

In the last letter, I laid the foundation by explaining our investment philosophy: only invest in businesses we truly understand, ideally run by founders or exceptional operators, protected by structural advantages that lead to sustainably high returns on capital. These companies must also have strong balance sheets – and crucially, we only buy them when they’re available at a meaningful discount to what they’re worth. That’s our recipe.

But knowing what to look for is only one part of the puzzle. There are really just three levers that drive long-term investment returns:

• (1) Security selection – the process of identifying great businesses at attractive prices, using the framework above;

• (2) Position sizing – how much capital to allocate to each investment; and

• (3) Market timing – or better said, the ability to exploit behavioral inefficiencies at the right moments, when the wisdom of the crowd gives way to the madness of the crowd.

This time, I want to zoom in on the second lever: position sizing.

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Why Position Sizing Makes or Breaks a Portfolio

Most investors spend nearly all their energy on security selection – and almost none thinking about position sizing. But in reality, how much you invest in a particular idea often matters more than whether the idea is right.

Here’s a simple illustration. Say we invest in two stocks: one is a 10% position that rises 10%, the other is a 1% position that doubles. Despite the 100% return on the smaller bet, both investments generate the same dollar return. So what’s the takeaway? When you find something you truly believe in, you need to let it count.

A blog post I came across recently sharpened this point further. It described two fictional portfolios:

• Portfolio A owns ten stocks, eight of which are small 6.25% positions that all double. The remaining two are large 25% bets that each lose half their value.

• Portfolio B also holds ten names. Nine of them are tiny and each loses 50%. But the final one – a bold 43.75% position – triples.

On the surface, the investor behind Portfolio A looks like a genius, hitting 8 out of 10. The Portfolio B investor looks like an amateur with a 90% failure rate.

But the outcomes tell a different story. Portfolio A returns 25%. Portfolio B? It ends up with a 37.5% gain.

John Burbank once said: "I want to have sizeable positions because if you're right that's how you can do really well, but I know if it's not expected by the market the path isn't linear, so you just have to understand how much you can tolerate." That’s the essence of effective sizing. You don’t get paid for being right often – you get paid for being right big.

Some Lessons I’m Taking to Heart

From everything I’ve read and studied on this topic lately, a few key ideas have stuck with me.

First, I don’t want to size positions based on potential upside. I want to size them based on downside risk. The goal isn’t to bet the farm on moonshots – it’s to scale up the safest, most resilient ideas. The ones with multiple paths to success and few ways to lose permanently.

Second, hit rate doesn’t matter if your sizing is off. You can be right most of the time and still underperform if your largest positions are your worst ones. And vice versa – you can be wrong often and still outperform if your rare winners are given enough room to shine.

Third, concentration itself isn’t dangerous. What you concentrate on is what matters. There’s a world of difference between putting 20% into a speculative biotech stock and putting 20% into a cash-generating market leader with 15 years of reinvestment runway. That’s where edge lies.

But none of this means you should size recklessly. I always want to leave room to be wrong. Position sizing is not just about maximizing returns – it’s about staying in the game. And staying in the game means never letting one loss take you out of it.

Fewer Stocks, More Volatility – But Also More Clarity

Closely linked to the topic of sizing is the question of how many stocks to own in total. In broad terms, the fewer positions you hold, the more your portfolio will swing – up or down – based on the fortunes of just a few companies. That’s the price of focus. But if you want your winners to count, you need to let them breathe. Owning 40 stocks, each weighted at 2.5%, means even a 3x return barely moves the needle.

But there’s a tradeoff here. Fewer positions means greater volatility – and the emotional burden that comes with it. That burden isn’t for everyone. Personally, I believe the sweet spot for most thoughtful investors is somewhere between 5 and 20 holdings. Once you reach the higher end of that spectrum, the benefits of diversification begin to flatten. You’ve lowered the portfolio’s volatility enough to avoid disaster from one bad call – but not so much that your winners get diluted to irrelevance. And the incremental benefits of adding another position diminish.

That said, for your portfolio, I’m deliberately leaning closer to the higher end of that range. You’re still fairly new to investing, and I want to smooth the ride somewhat. Volatility is only your friend once you truly understand the underlying businesses – and are confident in how they’ll behave over time. Until then, I believe it’s wise to trade a bit of upside potential for peace of mind.

Capital Deployment: Progress, Patience, and the Hurdle Rate Mindset

When we first began this journey together, we were sitting on 100% cash. Since then, the portfolio has taken shape slowly – and deliberately. We’re now 66% invested, with 34% still in cash. In other words, we’ve made steady progress, but we haven’t rushed.

That’s by design. At any given time, there simply aren’t 15 exceptional opportunities just lying around – at least not for an individual investor who insists on understanding each business deeply. The process of allocating capital is inherently lumpy. Real opportunities tend to come in clusters. And when they do, they tend to be obvious – not in the sense that everyone sees them, but in the sense that you see them clearly after doing the work.

There’s a useful mental model here around hurdle rates that’s helped guide my thinking. Imagine you’re still sitting on a full cash pile. In that situation, the drag on returns from holding cash is enormous – so your bar for making the first investment should be relatively low. Even a decent idea is better than zero return (or a guaranteed negative real return once you account for inflation). But as that cash pile shrinks, the bar should rise. The marginal dollar becomes more precious. You’re no longer looking for good ideas – you’re looking for truly great ones that can compete with the portfolio you’ve already assembled and that can move the needle.

So, if the hurdle rate for the first 10% of capital might only be 10%, then by the time you’re down to your last 10% of deployable cash, the hurdle rate might be closer to 15–20%. It’s a spectrum, not a fixed threshold.

When we wrote the inaugural letter, we had initiated five positions – LVMH, Interactive Brokers, Wise, Meta Platforms, and Evolution Gaming – and had begun building a position in Computer Modelling Group. Cash was still the portfolio’s largest “holding,” and it still is. But our exposure has meaningfully increased since then, and with it, the breadth and depth of the businesses we now own.

Before I walk through the new holdings, I want to reiterate something important: this is not a collection of ticker symbols. These are businesses. You’re a part owner of each of them. If you haven't already, or it’s been a while, I’d encourage you to go back to the first letter and revisit the reasoning behind the original positions. Understand what each business does, how it makes money, and who runs it. That understanding is what allows you to hold through volatility with confidence. It’s also what makes the process of investing fun – you are an actual owner, an owner of some of the best businesses in the world.

Now let’s turn to the newest additions to the portfolio.

Ashtead Technology: Riding the Subsea Infrastructure Boom (9.1% of the Portfolio)

Ashtead Technology is a specialist provider of subsea equipment and services used in the offshore energy sector. The company serves a mix of oil & gas operators and – increasingly – offshore wind developers. While not a household name, Ashtead plays a critical role in the inspection, maintenance, and repair, and decommission of subsea infrastructure. It rents out highly technical equipment like remotely operated vehicles (ROVs), sensors, and positioning tools, and complements these rentals with expert services.

What drew me to Ashtead is the combination of capital-light business economics (at least more capital light than the business description would make you think), mission-critical solutions, and a secular tailwind: the global build-out of offshore infrastructure and the tendency of Ashtead customers to own less equipment themselves. The management team has also proven itself adept at bolt-on acquisitions that expand Ashtead’s footprint and capabilities without overstretching the balance sheet. Their returns on capital are excellent, and while this business operates in a niche, the niche is growing – and barriers to entry are real – and getting stronger as Ashtead becomes the one-stop shop for subsea rental equipment. Ashtead meets our framework criteria on structural advantages, attractive reinvestment opportunities, and conservative capital allocation.

Feel free to read the deep dive we shared on the blog:

More recently, after reporting half-year results that showed strong topline growth driven by two recent acquisitions (but organic revenue decline), the stock dropped by more than 20%. We believe the market is wrong about the long-term outlook of the business, and explained our reasoning also on the blog:

Brockhaus Technologies: A Higher-Risk Bet on German Hidden Champions (4.2% of the Portfolio)

Brockhaus Technologies is a technology holding company listed in Germany. It acquires and grows what it calls “hidden champions” – small, founder-led, high-margin businesses in areas like high-security communications, optical measurement systems, and mobility.

What attracted me here is the quality of the underlying portfolio – which at this point only consists of two companies (Bikeleasing.com and IHSE) –, the operating leverage embedded in the bikeleasing business model, and the fact that the company is still relatively underfollowed.

That said, Brockhaus comes with more risk than our average holding. The accounting irregularities at one subsidiary (IHSE) earlier this year shook investor confidence, and while I believe the issue is contained, it’s something I’m watching closely. I’ve sized the position accordingly – it's smaller, reflecting both the opportunity and the risk. But if Brockhaus executes on its strategy of disciplined M&A and operational improvement, the upside is meaningful.

Today, Brockhaus is primarily a bet on Bikeleasing.de, which has become the centerpiece of the portfolio following the underperformance and impairment of IHSE. Bikeleasing is a platform that enables employees to lease e-bikes and traditional bikes through their employer, using a salary-sacrifice model similar to company car schemes. For employees, this often means 30–40% savings on a high-quality bike. For employers, it's an attractive fringe benefit that costs little but signals modernity and health-consciousness. Bikeleasing takes a cut from financing partners, insurance providers, and service agreements – generating revenue the moment a bike is delivered.

It’s a compelling model, but it’s also facing growing headwinds. The COVID-era bike boom created a massive one-time boost, both in consumer demand and in companies rushing to offer cycling perks to attract talent in a tight labor market. But that tailwind is gone. We’re now moving back to more of an “employer’s market,” and most of the low-hanging fruit – companies new to the idea – have already adopted it. Bikeleasing’s impressive customer growth is harder to replicate going forward, and the company has to rely more heavily on repeat business from existing clients going forward. Meanwhile, it shifted its pricing model in a way that supports margin stability but limits growth – by introducing a variable leasing factor, it effectively excluded a portion of price-sensitive users, reducing total volume.

There’s also a second-order dynamic at play: the bike return cycle. Leasing contracts are usually 3 years long, after which the bikes are returned and resold by Bikeleasing. We’re now in the phase where large volumes of bikes are coming back, generating revenue from resale but little to no margin as it’s a low-margin business. This secondary market activity ties up capital and demands new operational infrastructure – warehousing, refurbishment, resale channels – under the Bike2Future brand and thus compresses profitability. This “return wave” will likely persist for at least two more years before stabilizing.

The idea behind Brockhaus was to use debt-fueled acquisitions to build a diversified portfolio of cash-generative niche players. But for that model to work, the holding company must actually acquire new businesses. And that’s where the criticism begins. Since Bikeleasing, Brockhaus has been mostly inactive. The longer this acquisition drought continues, the more obvious the cost of the holding structure becomes. Investors are now shouldering the overhead of a listed vehicle – a bloated corporate layer – without seeing the scale benefits that should justify it. Operating expenses for the AG structure are estimated at around €6 million annually, a number that looms large when there’s no M&A activity to absorb it and relatively little cash profit to please shareholders.

There’s also the issue of financial engineering and transparency. Brockhaus has a tendency to present adjusted metrics that put the business in the best possible light, while the consolidated financials tell a more sober story. This has been the case for years, but it’s become harder to overlook now that organic growth is slowing and bolt-on acquisitions are absent. The company’s structure – with the CEO and a few anchor shareholders effectively controlling the supervisory board – also raises governance concerns, especially around incentives and accountability.

IHSE adds its own set of complications. Originally sold by Brockhaus Private Equity to the listed AG, the purchase price looks rich with the benefit of hindsight. COVID clearly derailed the original growth story. Competitors caught up, the U.S. now slapped 15% tariffs on IHSE’s core products, and much of the goodwill has now been written off – reflecting permanently lower earnings expectations. A sale of IHSE is a possible future scenario, especially now that the business has been fully impaired and operationally “cleaned up.” If a strategic buyer emerges, a sale could probably yield at least €50 million or more – potentially freeing up capital for a much-needed fresh acquisition.

Given all this, why stay invested?

Because even in a muddled structure, there can still be pockets of value. If Bikeleasing alone can generate €40–50 million in annual cash flow post-deleveraging, and IHSE is sold for a fair price, then the intrinsic value of the parts could well exceed the current market cap. That’s the crux of the sum-of-the-parts thesis. But make no mistake – execution risk is high, and patience is required. This is not a wide-moat compounder. It’s more of a special situation investment, sized accordingly (4% as of the time of writing).

I’ve recently published an open letter to the CEO of Brockhaus Technologies. It outlines my concerns and offers suggestions for course correction. Whether it will be read or considered is another matter. But shareholder pressure has to start somewhere.

Zalaris: Building a Scalable Platform in HR Outsourcing (6.2% of the Portfolio)

Zalaris is a Norwegian-based provider of outsourced payroll and HR services, primarily targeting large companies across the Nordics and the DACH region. Their platform helps large enterprises (usually with thousands of employees) manage employee data, payroll compliance, and HR analytics at scale. It’s a sticky, recurring-revenue business with long-term contracts (5 years on average) and deep integrations into clients’ internal systems.

Again, I shared an in-depth analysis of the company on the blog (as you can tell, there are a lot of (optional) reading assignments). I will link it below. In the post I shared a “90 second pitch.” I’ll share it again here:

“Zalaris is flying under the radar. It’s a niche European payroll and HR outsourcing provider, trading at a modest valuation while quietly compounding revenue, margins, and free cash flow. Over the last 2.5 years, the stock is up around 180% – and it’s still only beginning to rerate.

So why should you care now?

Because Zalaris is transitioning from a steady operator into a potential category leader in multi-country payroll. Organic revenue growth is solid. Margins are expanding. The stock is still barely followed (I couldn’t find a single write-up on the name except a 2015 VIC analysis). And following a recently concluded strategic review, the company made a deliberate decision not to sell – because management believes it’s worth much more if left to compound.

My thesis is simple: the market is underestimating the operating leverage, moat durability, and multi-year growth runway of Zalaris’s model. It’s treating this like a sleepy BPO business in a low-growth region. But what’s really happening is a quiet transformation into a leaner, more tech-enabled payroll platform with secular tailwinds, high switching costs, and a proven land-and-expand strategy.

“… with a more clearly defined land and expand strategy aimed at scaling both within existing accounts and across new geographies. We believe growth will be fueled by a combination of upselling new services to existing clients expanding geographic reach with the goal of establishing operations in all G20 countries and full market coverage in Western Europe as the first step and maximizing utilization of our existing capacity and infrastructure to operator incremental margins.“ Q1 2025 Call

Here’s the pitch:

1. Sticky, mission-critical product – Zalaris runs payroll solutions for over 340,000 employees at blue-chip firms across Europe and serves 1.5 million employees with any of their HR solutions. It’s embedded in its clients’ operations and isn’t easily replaced. Long-term contracts (5 years on average) and compliance complexity drive high switching costs.

2. Founder-led, aligned, and executing – CEO Hans-Petter Mellerud still runs the business after 25 years and owns ~13%. He’s balancing profitable growth with prudent capital allocation and margin expansion.

3. Revenue accelerating, margins inflecting – FY2024 revenue grew 19%, with EBIT margins at 8.5%. Q1 2025 continued the trend: 16% growth and a 11.3% margin (14.1% adj. EBIT margins). Management is now guiding for NOK 2 billion in revenue by 2028 with 13–15% EBIT margins.

4. Secular tailwinds + underpenetrated market – Payroll outsourcing, cloud transitions, and growing compliance burdens all play into Zalaris’s hands. Most large firms still manage payroll in-house or use patchwork solutions. That’s changing.

5. Mispriced optionality and rerating potential – Even after the recent run, Zalaris trades far below its intrinsic value (9.5x EBIT) given the cash flow potential, predictability, and scarcity value of a scaled, independent European payroll platform.

This isn’t a moonshot. It’s a predictable, sticky business that can double earnings power in the next 4–5 years and still be growing. The upside case doesn’t require heroic assumptions – just continued execution and a broader market realization that this is no longer a sleepy Nordic services firm.

Edenred: From Meal Vouchers to a Global Transaction Network (6.4% of the Portfolio)

Edenred started life as a paper-based meal voucher business in France. Today, it operates a global digital payments and benefits platform that serves employers, employees, and merchants. Through prepaid cards, apps, and software systems, Edenred connects millions of users across multiple verticals: employee benefits, fleet and mobility, and corporate payments. Think of it as an “infrastructure layer” for highly specific, high-frequency transactions that need to be tightly controlled and audited.

What’s compelling about Edenred is how it monetizes multiple sides of the network: it charges fees to employers, to merchants, and makes money on the float (i.e. it earns interest on funds kept at Edenred during the time between when funds are loaded and when they’re spent). It’s a beautiful business model – capital-light, recurring, and highly scalable. The business meets our key criteria on almost every front: structural moat, high returns on capital, healthy balance sheet, and a clear growth runway.

However, the last few months (and years) have been more turbulent if you only consider the share price performance. The last year in particular brought turbulence. The French government signaled possible regulatory reforms to the country’s meal voucher system – Edenred’s historical core and still a significant contributor to its bottom line. The initial proposals – particularly talk of capping merchant fees – raised concerns over profitability, prompting a sharp selloff in the stock.

That narrative shifted meaningfully in late June. On June 25, French Minister Delegate Véronique Louwagie unveiled the revised policy direction: the government ruled out any cap on merchant fees, at least for now, and instead opted for a transparency charter to guide the relationship between voucher issuers and merchants. Additional reforms include the full transition to digital vouchers by February 2027 (something Edenred is more than ready for), expanding redemption options (permanent supermarket eligibility, Sunday use), and streamlining oversight by transferring regulatory authority from the National Commission to the Banque de France. One slightly negative tweak: unused voucher balances will no longer roll over, though the €25 daily cap will remain. All in, this package is far less punitive than feared – and may even reinforce Edenred’s competitive edge as a digital-first operator.

That said, France isn’t the only jurisdiction under scrutiny. Brazil – another important market for Edenred – is currently mulling reforms that could prove more disruptive. Reports suggest the government is considering a 3.5% cap on merchant rates for meal vouchers, significantly below industry norms.

Still, in the bigger picture, I believe the Edenred thesis remains intact. The regulatory noise, while uncomfortable, is unlikely to undermine the core value proposition of a business that benefits from network effects, switching costs, and rising digital penetration. If anything, these recent developments highlight why vigilance around business models dependent on government frameworks is essential – and why staying close to the facts, rather than market sentiment, remains a key edge for long-term investors.

A Quick Word on the Existing Holdings

Let me briefly touch on the businesses we already discussed in the inaugural letter. LVMH continues to report declining revenues, particularly in fashion and leather goods, as the post-COVID boom normalizes and aspirational consumers pull back. I believe this reveals a truth many ignored during the luxury bull run: the sector is more cyclical than its brand sheen implies. That said, LVMH still owns the most enviable brand portfolio in global luxury in terms of broad diversification, and with long-term pricing power (i.e. increasing prices above the rate of inflation, which by the way, I think may trend upward again in the coming months), modest volume growth, and the kind of balance sheet that allows opportunistic acquisitions when others retrench, we believe the business will ultimately get back on the long-term growth trendline of around 10% annually. Interactive Brokers keeps doing what it does best – onboarding new customers at 20–30% annual rates, expanding its product suite, and benefiting from global account migration toward low-cost, high-functionality platforms. Similarly, Wise continues to gain traction, not just with consumers but increasingly with institutions. The most recent highlight: a major deal with UniCredit, making it the first large European bank to fully integrate Wise’s cross-border payments infrastructure for its retail clients.

Meta Platforms will report earnings later today. I actually exited the position in my personal account, where I’m more aggressive, aim for a slightly higher return, and am willing to accept steep volatility in exchange for these higher expected returns. But for your portfolio, Meta remains a foundational holding – a cash-generating machine led by a founder who understands the magnitude of the AI transition and is willing to play offense. I expect future expected returns to be broadly in line with Meta’s long-term earnings growth (hopefully in the low- to mid-teens range). Evolution Gaming, meanwhile, is quietly shifting its revenue mix, reducing gray market exposure and growing its regulated footprint – a necessary and value-preserving move in the long run. Finally, Computer Modelling Group is set to report earnings in early August. The core business remains solid, and we continue to hope that another, hopefully smart, acquisition under the “CMG 4.0” playbook will be announced in the near future.

Here’s an overview of the current portfolio (in terms of position size and geographic exposure):

Looking Ahead

As we move into the second half of the year, I remain fully committed to the framework we set out from the beginning: own a small number of understandable, resilient businesses led by capable people and bought at attractive prices. But execution is never linear. Some quarters will feel quiet, others frustrating. Sometimes we’ll be patient because the market isn’t offering much. Other times we’ll move quickly because opportunities are obvious. That’s the nature of this game – one of controlled pacing, not constant action.

I also want to take a moment to acknowledge something important: you're doing a great job not checking prices obsessively – as far as I can tell, not checking prices at all. That’s awesome! And that’s more rare than it sounds. Resisting the pull of daily or even monthly market moves, and instead focusing on the quality and trajectory of the underlying businesses – that’s the business owner mindset in action. It’s easy to say, much harder to practice. But the ability to tune out short-term noise is one of the few genuine edges that individual investors can still have.

There’s still dry powder left to deploy, and I’ll continue looking for additions that can strengthen the portfolio without weakening its integrity. The world won’t run out of good businesses or temporary dislocations – but our job is to recognize the difference between noise and signal, to keep studying, and to let the best ideas earn their way into the portfolio.

Thanks again for your trust and interest in the process. As always, I’m happy to discuss anything in more detail if something seems unclear – or if curiosity strikes.

René

But this year? My portfolio activity has been far more active than usual. The turnover rate is higher than my typical rhythm, and it’s not something I want to make a habit of. That said, I do think the decisions I’ve made were grounded in sound reasoning. They weren’t driven by noise or emotions – they were tied to changing opportunity sets, evolving capital allocation dynamics, and a more refined view of long-term risk and return.

The most dramatic move? I sold my entire position in Meta – a stock that’s been my single largest winner over the last few years, both in absolute and relative terms. That wasn’t an easy call. It forced me to reassess not only my conviction in the business, but also how I think about capital allocation, valuation asymmetry, and portfolio fragility at large positions.

But this isn’t just a story about Meta. It’s also a story about what I’m reallocating into – and why. It’s about betting on asymmetry. It’s about holding some cash when the opportunity set doesn’t scream at you. And it’s about shifting the portfolio’s center of gravity away from the U.S., not because I’ve lost faith in American business, but because I think global diversification has become a more rational default.

So in this post, I want to unpack the thinking behind this active portfolio season. We’ll cover:

• Why I sold Meta, despite it being my biggest and most successful position

• How Meta’s capital allocation decisions changed my risk/reward calculus

• Why I believe their massive AI capex push introduces reinvestment fragility

• What expected returns look like at current Meta valuations – and why that matters

• Why I’m deploying capital into other stocks, and how I think about upside asymmetry

• How I’m weighing valuation, quality, and expected return in today’s opportunity set

• Why my portfolio is now more exposed to Europe than the U.S. – and what’s behind that shift

Before we dive back in, a quick note…

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The Meta Sale – My Best Performer, but Time to Move On

Selling Meta was not a decision I took lightly. It’s been, without a doubt, the best investment I’ve ever made in absolute terms. There were quarters where Meta alone made the difference in my overall performance. For most of the past twelve months, it hovered around a 30% portfolio weight – sometimes even exceeding that threshold despite me consistently adding to other positions. That’s not just conviction. That’s concentration.

And it paid off. Meta’s transformation story – from the post-Apple IDFA hangover to Reality Labs CapEx, and then its resurgence through ruthless efficiency and a renewed AI narrative – delivered tremendous shareholder value. So why sell now?

Let me be honest: I wrestled with this for months. I trimmed the position earlier this year by about 30% in two tranches, but I held onto the core. A big reason was taxes. The capital gains hit would be substantial – and mentally, that felt like a brake on my decision-making.

Another reason? Call it cognitive dissonance. I had publicly criticized other investors, like Pat Dorsey, for trimming their Meta exposure too early. Just last August, I posted a thread highlighting how Pat had reduced his Meta stake every quarter since Q1 2023. At the time, I argued that if he’d simply held, he’d still own nearly a million shares, and Meta would represent 62% of his AUM.

But Meta is also up another 40% since I wrote that – imagine Dorsey not selling a single share until today.

And yet, I’ve now fully exited the position.

This wasn’t about losing faith in the business. If anything, I still believe Meta is one of the best businesses in the world. It may very well be a much more valuable company ten years from now. I even wrote a post not long ago with the tongue-in-cheek title “Meta’s Path to a $10 Trillion Market Cap: A Bold Thought Experiment?” And I stand by the core thesis – Meta could get there under the right circumstances – but I’m less certain about the path Meta will follow in the AI race.

Something shifted. Actually, several things did. And once I started stacking them, the sell decision became more rational – even if it remained emotionally difficult.

First, there was capital allocation. I’ll get into the AI capex math in the next section, but the short version is this: Meta’s recent spending spree doesn’t inspire confidence. Not because they’re investing in AI – that part makes sense strategically – but because of the scale, the speed, and the fragility of the returns.

Second, there’s founder risk. This is where Tiho Brkan’s perspective really resonated with me. He’s been vocal about how Meta’s single-threaded reliance on advertising revenue, combined with Zuckerberg’s “all-in” style, introduces a form of fragility that most investors underestimate. His analogy of fragility versus risk stuck with me. Risk, he argues, can be managed or mitigated. It’s like driving through fog – you slow down, you increase your margin of safety. Fragility, on the other hand, is structural. It’s like an old bridge that still carries traffic – until one day, a single truck collapses it. When Tiho talks about Meta, he’s not just pointing to competition or regulation. He’s pointing to that structural fragility that comes from betting the entire strategic direction of a trillion-dollar company on one man’s conviction.

Two years ago, Zuck was 100% convinced the metaverse was the future. He changed the company’s name, poured billions into Reality Labs, and asked investors to trust his vision. That didn’t pan out – at least not yet. Now, he’s equally convinced AI is the future. Again, he’s not hedging. He’s going all-in. Tiho’s point is not that Zuck will fail. It’s that this binary, all-or-nothing approach doesn’t leave much room for error. And when the scale of the bets is $70 billion in capex annually, the consequences of misjudgment are magnified – especially if Meta represents your largest holding.

This is in stark contrast to other great capital allocators. Buffett, Bezos, or even Satya Nadella have all made bold bets, but rarely have they staked the entire narrative of their companies on one initiative. Zuck’s approach, while visionary, carries a kind of fragility that, maybe from Meta’s point of view, is even necessary. It may be the rational thing to do to finally reduce platform dependency. But that doesn’t mean that holding onto Meta in size is the rational thing to do for investors considering the opportunity set available to them.

And lastly, there’s opportunity cost. Meta is no longer cheap. It trades at around 28x next-twelve-month earnings, 34x trailing free cash flow, and over 50x if you adjust for stock-based comp. I suspect the SBC-adjusted multiple won’t come down anytime soon, considering Zuck’s ambition to attract the best AI talent out there. And SBC is a very real cost. You cannot deny that. The same can maybe be said about the CapEx. I long-believed Meta’s steady-state margin is structurally higher than LTM numbers would suggest. But today, I’m not so sure what portion of the massive CapEx is actually maintenance-related and how much is pure growth investment.

That doesn’t mean the stock is wildly overvalued – but the future return profile isn’t screaming attractive either. At these multiples, most of the heavy lifting for future returns has to come from topline growth and margin expansion. That’s doable, but it’s also where execution risk starts to matter a lot more.

In contrast, I’m now finding ideas – admittedly lower quality businesses – that are trading at 10x earnings with double-digit growth potential and some re-rating optionality. If those stocks re-rate even modestly while compounding earnings, the forward return math starts to look a lot better than Meta’s from here.

So yes, I sold Meta. Maybe too early. Either way, I think it was the right decision given what I know today – not what I hope will happen.

But to understand the real reason this call tipped over from “hold” to “sell,” we need to talk about capital allocation, return hurdles, and why Meta’s AI investment cycle feels structurally different from the ones that came before.

Capital Allocation and AI – Why I’m Wary of Meta’s $70B Bet

If there’s one thing that finally tipped my decision to sell Meta, it’s this: capital allocation. More specifically, how Meta is choosing to spend its enormous cash flows at this point in its lifecycle. When I say “enormous,” I mean it. We’re talking about a company that generated around $52 billion in free cash flow over the last twelve months.

And instead of letting that capital flow back to shareholders or carefully deploying it into high-confidence growth initiatives, Meta is now embarking on a massive, open-ended spending cycle – one that feels less like investment and more like industrial-scale speculation.

Let’s look at the numbers. Meta expects to spend around $70 billion in capex in 2025. That’s not just high – it’s astronomical, even by Big Tech standards (and all of Big Tech is “going big” on AI CapEx to be fair). And the company has signaled that these levels are not a one-off but will continue “for the foreseeable future” as they double down on AI infrastructure: training, inference, data centers, and internal silicon.

Now, I’m not here to argue that AI is a bad bet. That would be intellectually lazy. There’s clearly a transformation underway – from foundational models to verticalized AI tools – and companies that get it right stand to unlock meaningful value. But here’s the thing: not every bet is equal. And not every environment is conducive to earning high returns on reinvested capital.

To frame this, I’ve found it useful to think about what makes a great reinvestment environment. In an earlier post, I described the ideal conditions like this:

• Low or no competition

• High predictability

• A history of similar investments paying off

• Simple, modular rollout strategies

• Clear, unit-level economics

• Optionality without excessive upfront capital

That’s the dream. That’s what you want when allocating large amounts of capital – clarity, control, and high odds of a positive payoff.

Now let’s hold that against what we’re seeing in AI:

• Competition is fierce – every tech giant is spending aggressively (collectively, the spent HUNDREDS of BILLIONS of dollars)

• The monetization model is still unclear in many cases (for Meta specifically, I think it is actually clearer than for others)

• The pace of innovation makes ROI projections murky at best

• Infrastructure is expensive, complex, and constantly evolving

• And the unit economics of inference and training are volatile, and hard to predict

This isn’t like rolling out another software module or opening a new AWS region. It’s a high-cost, high-uncertainty environment – a so-called “wicked reinvestment environment.” And that’s what makes me uneasy.

Let’s do some math…

Suppose Meta targets a 10% return on this $70 billion investment. That means they need to generate an additional $7 billion in recurring annual earnings, starting effectively now. But that’s not how infrastructure investments work. The payoff is back-loaded. If the return doesn’t materialize until, say, 2026, the required earnings increase due to the time value of money. A two-year delay means they’d need around $7.7 billion annually to justify the same investment. If the returns only show up in 2030? You’re looking at $11.27 billion annually per year. The longer the delay, the steeper the hurdle.

And here’s the kicker: this isn’t a one-time spend. Meta’s capex has been on a steady incline – from around $15–20 billion just a few years ago to $40 billion last year and now $70 billion projected. If they continue at that clip – say, another $70 billion in 2026 – then to merely “stand still” in terms of return on capital, the company needs to produce incremental earnings growth on top of prior years’ targets.

That compounds quickly:

• 2025: $7B in new earnings

• 2026: another $7B – totaling $14B over two years

• 2027: up to $21B in total additional earnings needed

• And so on...

And we haven’t considered Meta hiking the planned CapEx further.

This becomes a reinvestment treadmill. Unless the company can pull off extreme operating leverage or unlock truly new and massive revenue streams, the math starts to work against them. Worse, if the returns come in below that 10% bogey – or arrive too slowly – you’re suddenly talking about dilutive capital allocation (assuming 10% is your hurdle rate you could earn elsewhere). And if you're aiming for a 15% internal rate of return – something most ambitious long-term equity investors would reasonably ask for – the required earnings climb even more steeply. That $70 billion capex now needs to produce $10.5 billion in recurring income at a 15% hurdle. Delayed to year six? Nearly $17.6 billion annually.

The math is cold and unforgiving.

Now, you could argue Meta’s balance sheet can handle this. And that’s true. They’ve also got the cash flow. But that’s not the point. The issue is capital efficiency. Every dollar reinvested at a sub 10% that could have been returned to shareholders – it carries an opportunity cost that compounds over time.

And this gets to the heart of why I think Zuck, brilliant as he is, is showing signs of capital allocation drift. For most of the 2010s, Meta was almost perpetually undervalued relative to peers like Google. Investors flagged the reliance on advertising revenue (tail risk), the regulatory overhang, and what some saw as governance risk. Then, post-2022, that narrative flipped. Meta slashed costs, boosted margins, and the stock rerated. Suddenly, it was the “higher quality” business. But now? We’re back to depending on a single visionary who’s willing to go all-in on massive, uncertain bets. The metaverse didn’t pay off – at least not yet. And now AI is the new frontier.

Again, I’m not anti-AI. But I am pro-return-on-capital. And in this case, the numbers give me pause.

In my mind, this is no longer a “buy it and forget it” kind of stock. The capital allocation questions now sit at the center of the thesis. And when reinvestment starts defining a company’s future intrinsic value compounding rate, you want to be very sure the returns are real, not just hoped for.

Rebalancing Toward Asymmetry

Once I made peace with the decision to exit Meta, the next obvious question was: where should the proceeds go?

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This isn’t about a major portfolio overhaul or a dramatic change in strategy. If anything, it’s the opposite: a continuation of the same process I’ve followed for years – staying patient, sifting through noise, and pulling the trigger when the setup feels asymmetric enough to justify the risk.

Still, four transactions in close succession is unusual for me; but in a way this elevated activity is also reflecting that I was sitting on quite a bit of “dry powder” – more than I usually do.

Each transaction required some serious thinking. Some pushed me outside my typical investment comfort zone. Others are more in line with what I’ve done before, but with new twists worth sharing.

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In the rest of this post, I’ll walk you through these recent decisions: why I reentered a controversial name I’d previously exited, what made me take a swing at a company with growing AI exposure, why I added to a steady compounder at what I think is an attractive multiple, and what led me to buy – and then quickly sell – shares in a fast-scaling IPO story.

Let’s dive into the first one.

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.

1st Transaction: Back in the Saddle – Revisiting Brockhaus After the Storm

In May, I reentered Brockhaus Technologies. It wasn’t a decision I took lightly, and certainly not one I made on impulse. But after stepping away from the stock amid concerns about accounting irregularities earlier this year, I felt the balance of risk and reward had shifted meaningfully – not because the business had become flawless overnight, but because some of the key uncertainties had been addressed in a way that demanded a second look.

I covered the full context of my reentry and laid out the pros and cons in much more detail in a separate write-up on the blog, so I won’t rehash every line here. But the short version is this: while the fog has lifted somewhat (more on this below), this is still a stock that lives and dies by execution. And execution in the face of sector headwinds, not just internal housekeeping.

Let’s start with the elephant in the room: the accounting issues. For a few weeks, the market had been grappling with doubts about transparency and reliability after signs of irregularities at one of Brockhaus’ subsidiaries, IHSE. These casted a shadow over the credibility of the entire group, especially in a structure like Brockhaus’, which relies heavily on a decentralized portfolio of high-margin, cash-generative businesses. If trust breaks down at one node, it can quickly infect the whole system, and after I reached out to the IR team, it wasn’t even clear whether the issues were an isolated IHSE event.

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So why come back now?

The decisive factor for me was clarity. A little later the company confirmed that the problems were contained to IHSE and that the Bikeleasing subgroup – arguably the crown jewel in the portfolio – had not only passed its audit, but had done so with the kind of approval language that gives you confidence:

“As of today, the 2024 statutory financial statements of all three operationally relevant companies within the Bikeleasing sub-group have been audited by the local auditors and received unqualified audit opinions.”

This was a firm signal that one of the most economically significant parts of Brockhaus is still under proper oversight. That doesn’t eliminate risk, of course. But it materially reduces the tail risk of hidden landmines across the group, and that was enough to get me re-engaged.

Of course, an audit opinion is just one piece of the puzzle. The next question was whether the actual fundamentals were holding up – and here, the May 30th update from Brockhaus offered an encouraging data point. The KPI I track most closely for Bikeleasing is the number of connected companies using its digital platform. This figure captures adoption, penetration, and growth in a way that top-line revenue often doesn’t, especially in a segment where customers basically don’t switch.

The latest update showed that the number of corporate clients continues to grow at a healthy clip:

“As of March 31, 2025, the number of companies connected to Bikeleasing's digital platform was approximately 74,000 (+18.9% LTM growth), with around 3.8 million employed staff (+10.8% LTM growth).”

That’s not the kind of growth you’d expect from a business that’s quietly breaking down behind the scenes. It’s the kind of progress that suggests a strong value proposition still exists and that demand for Bikeleasing’s services remains robust – despite everything else happening in the sector. Moreover, management also indicated that momentum was picking up in April and early May.

And yet, this is not a stock I feel I can own passively.

In fact, if there’s a spectrum between companies you trust to quietly compound and companies you feel the need to babysit, Brockhaus is definitely the latter – and I don’t say that lightly. Contrast it with a name like Wise in my portfolio, where the exercise of reading quarterly updates feels more like confirming a hypothesis than trying to detect a potential blow-up.

I recently wrote the following in my update on Wise:

“Every portfolio has its needy stocks – the ones that seem to require constant attention, where each earnings call might reveal a twist or signal a derailment. You watch them closely, read between the lines, scrutinize segment margins, and debate strategy with yourself. They're not necessarily bad businesses, but they often come with more moving parts, more competitive risk, or more volatility in execution (which may have led to an attractive valuation in the first place). Then there’s the other bucket: the ones you don’t have to babysit. You check in, not out of fear something’s gone wrong, but out of habit and discipline. These companies quietly go about compounding intrinsic value.”

Wise is squarely in that second bucket. Brockhaus? It demands attention. And I’m okay with that – for now.

Finally, the bike industry, where Bikeleasing operates, isn’t exactly riding high at the moment.

In fact, when you zoom out and look at the broader landscape, there’s a very real structural unwind playing out. I came across an article that dissected the current state of companies like Canyon and Bike24 – both of which have strong brand recognition but are now facing what looks like an industry-wide reset. Here's a snapshot from that piece (translated with DeepL):

“Declining sales, covenant breaches, write-downs: Private equity has little fun with bicycle assets at the moment. [...] Groupe Bruxelles Lambert (GBL) wrote down the value of its portfolio company Canyon by almost 200 million euros. [...] Bike24 has also had a challenging few months, marked by declining sales, covenant breaches and an early CFO departure.”

The key takeaway? The boom from 2021 and 2022, driven by COVID-era demand spikes and supply chain paranoia, led to over-ordering, bloated inventories, and now – somewhat predictably – a correction. And while Bikeleasing is a platform business, not a direct bike retailer or manufacturer, it still sits inside the same ecosystem. If leasing demand slows, the impact will ripple through.

Still, not all signals point to doom.

In fact, if you look closely at Bike24, there are signs that the worst may be behind them. Their Q1 numbers were surprisingly solid:

“Group revenue increases by 17.8% to EUR 58.0 million; Double-digit revenue growth in all European regions – very strong core market in Germany, Austria and Switzerland and successful localisation in Poland and Finland.”

And just days ago, they raised guidance for the full year, citing strong market share gains, improving product availability, and favorable weather conditions:

“Bike24 Holding AG is raising its revenue forecast for the current fiscal year in light of continued strong business momentum. [...] The company expects Q2 2025 to deliver the highest quarterly revenue in its history.”

So maybe, the worst is behind the bike industry. That makes me more willing to hold onto Brockhaus – but only conditionally. I still expect the next 12 months to be challenging, and if the management team – particularly Marco Brockhaus – fails to navigate them with transparency and discipline, I’ll have no problem exiting again.

This is where the qualitative matters just as much as the quantitative. A big part of the success of this position will come down to character judgment. Is Marco Brockhaus truly aligned with long-term shareholders? Will the company handle bumps in the road with humility and transparency? I don’t know yet. But I’m watching closely.

For now, the position sits at 8.8% of my portfolio. That’s sizable, but not oversized. It reflects conviction, but also acknowledges risk. I’m not betting the farm, but I’m not hiding either.

This is what it means to manage a dynamic portfolio. You don’t just buy great businesses and disappear for a decade. You listen. You adjust. You pay attention when attention is required.

And in the case of Brockhaus, attention is very much required right now (hopefully, this changes a few years down the line).

The best part is just ahead — unlock the full post to continue.

Investing is the one domain where better thinking compounds. If this intro gave you new insights, the full piece goes even deeper. A paid subscription is an investment in your decision-making process – and your returns.

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It’s my way of distilling key insights, fine-tuning my approach, and sharing a transparent overview of my journey. I plan to make this a yearly routine.

In this post, I’ll delve into a couple of lessons I’ve learned, the biggest mistakes I made, and my proudest decisions.

Lessons Learned in 2024

1. The Joy of Collaborative Learning

One of the most rewarding aspects of 2024 was the deepened connection with fellow investors. Whether through recorded discussions with Andrew, engaging with my growing investing community, or unrecorded yet profound conversations with like-minded individuals like Brandon from the New Money YouTube channel and Thio Brian (who you may know from X), I’ve realized the immense value of shared knowledge.

These interactions don’t just provide me with new perspectives—they also help refine my own understanding.

This year, I also conducted my first full year of mentoring. Seeing others progress in their financial journeys has been profoundly fulfilling, reinforcing the idea that investing isn’t just about personal gains but also about uplifting others.

If you want to learn more about what I have to offer, check out this website.

2. Compounding in Action

This year marked the first time I truly felt the power of compounding. While I’ve always understood it in theory—invest regularly, let time do its magic—2024 showcased the tangible impact.

My portfolio appreciated significantly in the second half of the year, growing in size by a factor of maybe 4-5x my annual savings rate. Seeing the much-talked-about “snowball effect” materialize in real numbers has been nothing short of exhilarating.

Here’s an infographic I once illustrated highlighting how compounding works.

Top Three Mistakes of 2024

Mistakes are inevitable in investing, but they’re also a treasure trove of lessons.

Inspired by Francois Rochon, who emphasizes rigorous reflection on errors, I’ve categorized my top three mistakes this year and created my 2024 ”podium of errors.”

Bronze Medal: Missing the Opportunity with Lululemon

While I identified potential in Lululemon and discussed it in a video on my YT channel, I never acted on the opportunity.

The stock is up 62% from its August lows, an impressive annualized return.

While I remain (ultra-)cautious about apparel stocks, hindsight shows that my hesitance cost me dearly.

Silver Medal: Selling PayPal and Paycom Too Early

I owned both PayPal and Paycom at opportune moments, purchasing them near their lows (Paycom in the low $140s and my average cost basis in PayPal was below $60/share). I also recorded videos on both opportunities and, in fact, my very first Substack post was focused on Paycom (which I then turned into a 3-part series).

However, I sold both positions prematurely to fund other investments. While the reallocation was successful, I missed out on the massive gains these stocks subsequently experienced.

Paycom was up something like 43% from my selling price (it’s only up 21% from that level as of today) and PayPal, too, is up more than 30% since I sold my small stake.

Gold Medal: Endor AG – My First 100% Loss

My investment in Endor AG, a German simracing company, turned into a complete loss as the business faltered.

This experience taught me that even founder-led companies with seemingly attractive valuations are not immune to poor management decisions and external pressures.

Holding onto the investment because of its “cheap” price was a mistake. Read more on my reflections regarding this failed investment here on X.

With hindsight, selling earlier and taking the loss would have been the wiser choice.

Biggest Wins of 2024

1. Holding Meta Through Its Rally

One of my proudest decisions was resisting the temptation to sell Meta Platforms as the stock surged in 2023 and continued to do so in 2024 and delivered impressive returns.

Since hitting its low in 2022, the stock has almost sextupled in value. Despite external advice to "take profits," I stuck with my conviction, and it paid off handsomely.

2. Investing Boldly in Wise

Wise has become one of my top portfolio holdings, representing around 20% of my allocation as of today. I’m confident in the company’s long-term trajectory, bolstered by recent developments like Morgan Stanley adopting Wise’s infrastructure. Starting with a sizable position (and icnreasing it by selling other positions such as Paycom and PayPal) was a decision rooted in conviction, and so far, it has been rewarding with the stock soaring >60% from the lows.

Portfolio Highlights and Concentration

Heading into 2025, my portfolio consists of nine positions, with 83% of the weight concentrated in the top five holdings: Meta Platforms, Wise, Wix.com, Interactive Brokers, and Nintendo.

This high level of concentration reflects my confidence in these companies and aligns with the approach championed by Dev Kantesaria of Valley Forge Capital:

“By the time we get out to our 15th best idea, we’re not really happy with the risk/reward proposition. A portfolio with a limited number of carefully-selected names is the only way to significantly outperform benchmarks over the long term.”

This approach underscores an often-overlooked truth: the better you know a company—its risks, opportunities, and leadership—the lower the actual risk. Truly understanding a business requires focus, and that’s achievable only with a concentrated portfolio.

Market Outlook and Caution for 2025

While 2024 delivered exceptional returns, I’m tempering expectations for 2025. Valuations for many of my holdings have risen, and the broader market exhibits signs of euphoria. While I remain confident in my portfolio’s quality, I may trim positions to increase cash reserves if valuations expand further.

Final Thoughts

Reflecting on 2024 has been an enlightening process and as I highlighted, I plan to make this an annual routine.

From mistakes that sharpened my approach to wins that reinforced the value of patience and conviction, this year has been pivotal in my investing journey.

I’m excited for what 2025 holds and look forward to continuing to share this journey with you!

How was your 2024? I’d love to hear about your lessons, successes, and challenges in the comments below. Let’s learn and grow together as we step into another year of opportunities.

Happy investing, and here’s to a prosperous 2025!

These positions reflect my most concentrated, high-conviction ideas, each with a unique thesis that I believe will continue generating strong returns.

Here’s an overview of my portfolio, with a concise investment case for each position.

Of course, I encourage your feedback—whether it’s critique or affirmation!

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