Pebbles Digest #1

"Amidst the waves and whispers of the tide, true treasures lie hidden waiting for the brave to dive." - From an old drunk sailor I talked to once.

In the past couple of years, one could easily come to believe that baggers grow on trees. Just get on the Stack or X, buy the attention-grabbing names and voilà.

After all, riding winners is all that matters in our game so why bother doing the work if others are doing it for you and (mostly) for free?

Well, the last few days showed us that most things get flushed when markets truly shake and that “turning over rocks” has perhaps more merits than only finding your next bagger.

Hear me out…
Finding your next great idea is a mere consequence. An event that goes from lucky anomaly to provoked felicity as you train over and over again your eyes and brain on pattern recognition.
And there is no need for 20+ hours on every single name or pay for expert calls to do so (leave that to the underperforming “pros”).

The goal here is two-fold:

• Be exposed to a wide variety of company profiles and filter out what you do and do not want to spend your time on.

• Walk away from borrowed conviction. Borrowing ideas is normal and origination have to start somewhere but refining your own due diligence is mandatory if one wants to make fast, decisive and - ultimately - lucrative calls whenever markets offer opportunities.

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Now, without further ado, here is a quick summary of what I looked at recently:

Companies assessed this month: 38

Hard passes (folded under 3min): 24

Companies further evaluated: 14

Companies added to watchlists: 4

Starter position initiated: 0

Lots of overvalued or uninteresting names took very little time before being canned (as it should be) but here is a little color on the ones that caught my attention:

1. QIPT Home $QIPT.TO- Moved to secondary watchlist

   A provider of home medical equipment and supplies in the United States. Cheap on valuation and the cybersecurity incident they faced seems to be in the rearview mirror but I’m not a big fan of their acquisition idleness, the muted growth (below market comps) and margins being weakish and fluctuating.
   That said, a couple of moving parts kept my curiosity alive: a clear change of tone in communications +activists trying to push for better capital allocation… thing that could turn this sleeping frog into an OK prince down the line.

2. Smarcraft SA $SMCRT.OL - Moved to primary watchlist

   A 400m$ Norwegian company offering a suite of SaaS solutions for the construction/renovation industry in the Nordics.
   Their track record is excellent (40% CAGR on the topline, EBIT margins north of 30%) and combines organic growth with targeted acquisitions. Capital allocation (using correctly the whole range of tools, including buybacks - a rare feat in EU) is shrewd and indicates long-term thinking. I’m just a little too greedy on valuation to trigger a starter but good things come to those who wait.

3. Sanuwave Health $SNWV - Moved to primary watchlist

   A US-based medtech company delivering non-invasive wound care solutions. Lots happened in the past few months but the main event was in late October when they completely cleaned the capital stack through a reverse split, warrants/notes conversion and a PIPE offering.
   The stage seems finally set for significant profitable growth from 2025 on for a company with a high-quality product offer and sound leadership.
   Might initiate a starter in the next few days/weeks on the next price action weakness.

4. Geopark $GPRK - Moved to secondary watchlist

   An intriguing one: it gets you exposed to some of the best acreages in the Vaca Muerta area in anticipation of the coming shale boom there. Nice capital returns to shareholders too, through dividend (~6% yield) and buybacks, but the debt load and its refinancing is a question mark - likely causing interest expenses to jump 2 to 3pp higher vs current levels.
   All in all, this one might certainly move upwards but it is not without risks so I am willing to let it play out a little before deciding on a potential entry.

The not-so honorable mentions (i.e. the ones that didn’t make the second cut) were:

Melexis ($MELE.BR), Amadeus IT Group ($AMS.MC) Alfen ($ALFEN.AS), Barco ($BAR.BR), Allfunds Group ($ALLFG.AS), BluMetric ($BLM.V), Borr Drilling ($BORR), Legend Power Systems ($LPS.V), Unibap ($UNIBAP.ST) and Total Telcom ($TTZ.V).

I will be publishing pebbles digests every month as it simply forces me to transparently share what I recently looked at.
If just a couple of these ideas turns out to be a good investment for me (or for you) every year, it will be worth it.
And if you want to rant in the comments because I passed on your favorite holding, I guess that’d be fun too.

Until next time,

Silence

PS: Some of the names that made it on to my watchlists might deserve a few more lines outlining the opportunity at hand.
I’ll toy with a few short formats in the next few weeks (like the one I did for Cipher Pharmaceuticals) to get to the essence of their potential without blabbing as much as I do when writing longer pieces.