Finding Opportunity in the Market’s Blind Spots!
Uncovering the Hidden Link Between Three Beaten-Down Bets
There’s a certain thrill in buying a stock everyone else seems to have given up on. Not the kind of thrill you get from chasing the latest AI darling that’s making headlines, but the quieter, more stubborn satisfaction of stepping in when the market’s back is turned. Admittedly, you need to be wired in some (weird) way to find pleasure in this mindset.
This year, I’ve done that three times. Two separate industries. Three very different business models. And yet, the deeper I dug, the more I realised they share an almost uncanny common thread.
These aren’t the kinds of companies you brag about at dinner parties – at least not right now. They’re the names people scroll past in their brokerage app because they a) never heard of them, and b) the chart looks like a ski slope.
Each has been through its own rough patch – operational hiccups, cyclical headwinds, strategic missteps – and each has seen its share price punished accordingly. But as I pored over earnings calls, annual reports, and management commentary, I began to see a pattern emerge. A pattern that, if my thesis is right, could set up asymmetric returns for those willing to look past the headlines and the short-term noise.
The truth is, this isn’t a post about one “hot pick” or a get-rich-quick tip. It’s about the discipline of finding value where it’s hardest to see, of weighing the difference between temporary setbacks and structural decline, and of being willing to accept uncomfortable uncertainty in pursuit of outsized long-term gains.
It’s also about the mental balancing act of knowing you might be early – too early – and how to sit with that without losing conviction.
Here’s what we’ll cover in detail:
The surprising capital allocation discipline these companies share – and why redeploying 100% of free cash flow is a good thing.
How deep drawdowns and negative sentiment create both fear and opportunity.
The operational challenges each business is facing today and what’s likely cyclical versus structural.
Why industry cyclicality isn’t always a death sentence – and where secular tailwinds can provide balance.
The differences in management style, communication, and ownership that could shape long-term outcomes.
How insights from Harris Kupperman’s latest letter challenge my own patience and risk discipline.
A sober look at potential catalysts – and the uncomfortable truth that there may be none in the near term.
How I’m position sizing and managing risk for each name given the uncertainty.
If you’ve ever looked at a stock trading at multi-year lows and wondered, “Am I looking at a bargain… or a trap?”, this post should resonate.
The full story starts here:
The rest of this post covers the content outlined above. If you’re serious about sharpening your investing edge, the full post (and all my previous premium content, including valuation spreadsheets, deep dives (e.g. LVMH, Edenred, Digital Ocean, or Ashtead Technologies), and powerful investing frameworks) is just a click away. Upgrade your subscription, support my work, and keep learning.
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Disclaimer: I own all three stocks discussed in this post. 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.