For the past two years, I’ve been riding the AI coding assistant wave like many other developers and analysts: curious at first, cautiously optimistic later, and then fully onboard when I realized the raw power these models could unlock. When ChatGPT dropped in late 2022, it felt like a revelation. For $20 a month, I could summon a competent copilot who never slept, never got grumpy, and never forgot a semicolon. That subscription might go down as the best ROI in software history — until it wasn’t.

Lately, I’ve been pushing the boundaries of what these models can really do. I’m not talking about “help me write a Python script that sums a list.” I’m talking about building an institutional-grade AI application — parsing SEC filings, storing them cleanly in Postgres, embedding chunks for RAG-powered querying, and eventually surfacing insights that even hedge funds might envy. And when you start operating at that level of ambition, something surprising happens: you outgrow ChatGPT.

Enter Claude.

The AI That Reads Between the Brackets

Two days ago, I decided to pony up for Claude Max. Yes, the $100-per-month tier. I’ll be honest: I winced at the checkout screen. But within hours, that hesitation melted away.

Claude Code, the Claude Max feature tailored for developers, isn’t just better. It’s smarter. Not just in the “here’s how to fix that indentation error” sense, but in the architectural, design-thinking, system-sculpting sense. Where ChatGPT often feels like a power user of Stack Overflow with a polished UI, Claude feels like pairing with a principled senior engineer who cares about correctness, modularity, and long-term maintainability. It doesn't just code, it thinks.

Claude: The Underestimated Contender

Claude didn’t arrive with the same splashy marketing as ChatGPT. It crept in quietly. Most developers I know (of which there are few) didn’t take it seriously until Claude 2. Then whispers started: “Have you tried syncing your repo into Claude?” That’s when the lightbulb went off.

Once I connected Claude to my GitHub repository, the difference was immediate. I wasn’t just copy-pasting files into a chat window anymore — I was collaborating with a tool that could see the full structure of my codebase, understand the interdependencies, and offer smarter, more holistic feedback. When I hit bugs or edge cases, Claude could not only debug them faster but suggest context-aware patches that made sense within the overall architecture.

I refactored an entire pipeline, from ingestion to parsing to storage, in less than half the time it took with my previous workflow. Claude’s reasoning and modular thinking helped untangle complexity that had been slowing me down for weeks.

Even better, Claude integrates naturally into the command line. This means I can stay in flow (write, test, iterate) all without breaking rhythm. It’s not just a coding assistant. It’s a developer co-pilot that plugs into your actual workflow, not just your browser window.

For someone like me — an investor building a serious AI platform around SEC data — this matters. I don’t have time for rewrites and do-overs. I need precision, momentum, and tools that understand not just what I’m doing, but why. Claude delivered that in spades.

The New Developer Hierarchy

Let’s be blunt: these tools change the hierarchy of skill in software development.

Before, you needed to spend years developing the instincts to structure scalable systems. Now? A junior developer, or a motivated investor with Python basics, can build a serious app. Because the LLM can spot issues before they metastasize. It can give you a guided tour of best practices. It can teach you patterns while you build.

Claude didn’t just lower the bar. It put a freight elevator underneath it and said: hop in, I’ll take you to the mezzanine.

That’s what happened to me.

I’m a financial analyst by trade, a developer by compulsion. My goal is to build an AI-first platform that ingests and analyzes SEC filings at a level most platforms don’t touch. Think Form 4 XMLs, Exhibit 99.1 reconciliations, non-GAAP detection, and real-time signal extraction. I want to deliver clarity to investors in a world drowning in filings. And now, thanks to Claude, that goal isn’t just a pipe dream — it’s in flight.

But What About the Price?

Yes, Claude Max costs $100 per month. That’s 5x ChatGPT’s price. But if you’re building serious tools? That’s the wrong metric.

Would you blink at hiring a rockstar contract engineer for $25/hour? Claude is faster than that, better than that, and available 24/7. If you’re doing anything beyond side-project tinkering, the ROI is self-evident. I didn’t just save hours, I upgraded the quality of my codebase. Claude helped me make long-term architectural decisions I might have fumbled without it.

Final Thoughts

ChatGPT deserves credit. It got us started. It made coding feel accessible, even friendly. But for real development — where architecture, inference, and intelligent scaffolding matter — Claude is where the baton passes.

So to all the investors, indie devs, and ambitious builders out there: don’t just ask, “What can I automate?” Ask, “What can I build that scales?”

And maybe, like me, you’ll realize the $100 you spent on Claude wasn’t a luxury.

It was a catalyst.

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

📣 Where I’ve Been (Hint: It Involves Python, AI, and a Lot of Coffee)

The world used to move fast. Now it just blinks past you. It was once said that software ate the world. Well, now AI is eating software: raw, no salt, straight from the GitHub repo.

For the past few months, preparing research for SHS (and myself personally) has been a hands-on, manual grind — filings, earnings calls, spreadsheets, rinse, repeat. But something shifted recently. A month ago, I dove deep (really deep) into Marvell Technology (MRVL), an AI infrastructure company hiding in plain sight. Five thousand words later, I realized two things:

1. The investment case for MRVL is compelling.

2. The way I’ve been doing research? Outdated.

It wasn’t just the nature of Marvell’s business — custom silicon, hyperscaler partnerships, compute offload — that lit the fuse. It was the realization that I was spending hours on tasks that could now be partially or fully automated. If AI is going to eat software, I might as well feed it SEC filings for breakfast.

So, I pressed pause on writing and jumped into building.

🛠️ SHS, Meet the Machine: How I’m Bringing AI to Investment Research

Over the past month, I’ve been waist-deep in Python, VS Code, and various flavors of large language models (LLMs). I’ve been wiring up the SEC’s EDGAR database — the raw filings themselves — into a set of AI-powered tools designed to supercharge how I (and soon you) consume and analyze company data.

Here’s the mission:
Build a research assistant that actually helps. No fluff, no gimmicks. Just real signals, faster workflows, and fewer hours lost reading boilerplate risk factors.

✅ I've already built a pipeline that pulls 8-K filings directly from EDGAR.
✅ It summarizes key events (like earnings releases or M&A) using GPT.
✅ It layers in real-time market reaction and links to the original exhibit.
✅ It stores the summaries in clean Markdown format (ready for SHS posts).

In short, I’ve started to automate the very research muscle I rely on to write SHS, and I’m just getting started.

👥 What This Means for SHS Subscribers

This isn't just a backend upgrade for my own research process. I plan to open up these tools to SHS subscribers via a front-end app — think:

• Real-time filing alerts and summaries

• Event-driven insights from earnings, guidance, and M&A

• A searchable archive of SEC summaries, filtered by company or event type

All powered by open data and custom AI workflows, not expensive third-party apps or terminals.

I’m also toying with launching a new companion Substack thread, a sort of “building in public” mini-newsletter, where I document the AI and software side of SHS in real time. Think of it as the research lab behind the polished deep dives.

🧠 What’s Next: Marvell, Taxes, and Publishing Again

So yes, I went dark for a bit, but not without reason. Between personal taxes (K-1s love to party late) and this AI rabbit hole, I chose to prioritize building over publishing. But I see daylight again, and the next wave of SHS content is lining up — starting with that long-awaited Marvell deep dive.

Thanks for sticking with me through the quiet. What’s coming next is sharper, faster, and powered by more than caffeine.

Talk soon,
—Kris

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

Private equity (PE)-backed initial public offerings (IPOs) offer a unique opportunity for investors who understand the nuances of the market. Like spin-offs, these IPOs often enter the public markets with structural inefficiencies—low analyst coverage, investor uncertainty, and overhang from private equity owners gradually exiting their stakes. However, patient investors can take advantage of these dynamics, waiting for the stock to re-rate as earnings visibility improves.

This approach has been a significant source of alpha in my portfolio, with examples like Marex Group (MRX) and Academy Sports & Outdoors (ASO) delivering strong returns after their initial public listings. In this article, I’ll discuss why PE-backed IPOs can outperform, how they resemble spin-offs, and what to look for in a winning investment.

Why PE-Backed IPOs Can Outperform

While the long-term performance of an IPO depends on the underlying business fundamentals, the pricing of a newly listed stock is influenced by capital market conditions, investor sentiment, and the private equity exit cycle. PE firms typically hold assets for five to seven years, and when exit windows narrow—due to weak IPO markets or a slow M&A environment—sponsors can be forced to sell at more attractive valuations when conditions improve.

We’ve seen this play out in recent years. In the wake of higher interest rates and a weaker IPO market in 2022–2023, PE sponsors faced increasing limited partner (LP) pressure to return capital. As a result, some IPOs were priced conservatively, offering investors a chance to buy into high-quality companies at favorable valuations.

Moreover, PE-backed companies often enter the public markets with disciplined capital structures and strong operational playbooks, a result of years of hands-on private ownership. Sponsors optimize their portfolio companies before going public, leading to:

• Cost efficiencies and margin expansion

• Deleveraging at IPO to create financial flexibility

• An incentive structure that aligns management with long-term shareholders

These factors can drive long-term outperformance, provided the company’s fundamentals remain strong and management executes well.

Marex Group and Academy Sports: Learning from Past Successes

PE-backed IPOs can often resemble spin-offs, as they debut with little analyst coverage, high uncertainty, and discounted valuations. Investors willing to do the work and understand the business before the market catches on can generate significant upside.

Two of my most successful PE-backed IPO investments—Marex Group (MRX) and Academy Sports & Outdoors (ASO)—followed this exact pattern.

Marex Group (MRX): A Classic PE Overhang Play

Marex, a global commodities broker, came public in April 2024 in a PE-backed IPO. The stock was priced conservatively due to a lack of analyst coverage, investor unfamiliarity, and a supply/demand imbalance created by PE owners gradually selling down their stakes.

As I wrote in my Safe Harbor Stocks analysis, Marex had:

• A strong, growing business with deep customer relationships

• A capital-light, high-return model that generated robust free cash flow

• A valuation that reflected uncertainty rather than fundamentals

Early investors benefited as the stock re-rated once earnings visibility improved and more institutions had initiated coverage.

Academy Sports (ASO): A Post-IPO Growth Story

Academy Sports, which went public in 2020 after being owned by KKR, was another mispriced IPO that later delivered outstanding returns. In its first year, ASO traded at a low valuation due to:

• Lingering private ownership overhang

• Low investor awareness compared to larger sporting goods retailers like Dick’s Sporting Goods (DKS)

• Skepticism about its business model despite strong execution

However, as Academy demonstrated consistent earnings growth and shareholder-friendly capital allocation, the market rewarded it with multiple expansion and strong stock performance.

The key lesson from MRX and ASO? Mispricing often occurs due to market inefficiencies rather than business fundamentals.

Identifying Winning PE-Backed IPOs

Not all PE-backed IPOs are created equal. Some firms manage their exits better than others, and some IPOs come with excessive debt, low reinvestment opportunities, or sponsor-driven short-term decision-making.

Here’s what I look for:

1. Quality of the PE Sponsor (But Not Necessarily the Biggest Names)

While large firms like KKR, Blackstone, and Apollo have strong track records, some of the best IPOs come from lesser-known but highly disciplined sponsors.

For example, Marex was backed by BXR Group and Trilantic Europe, not one of the mega-funds, but their strategic guidance and exit approach helped create an attractive opportunity for public market investors.

2. Managing the Private Equity Overhang

• Look for PE firms that stagger their exits, rather than flooding the market with shares immediately.

• Lockup expirations and follow-on sales can create temporary selling pressure—investors who understand these dynamics can take advantage of price weakness.

3. Right-Sizing Debt at IPO

• A healthy balance sheet post-IPO is critical.

• Companies that use IPO proceeds to reduce leverage often perform better in the long run.

4. Capital Allocation Post-IPO

• Share buybacks and dividends can signal management’s confidence in the business.

• Avoid companies where PE firms extract too much cash through dividends or aggressive secondary offerings.

Notable 2025 PE-Backed IPO Candidates

The 2025 IPO pipeline includes several well-known PE-backed firms, some of which have already filed S-1 forms and are preparing to go public. These companies span industries ranging from enterprise software to customer experience AI and automotive data analytics, and each has a unique private equity ownership story.

Here are five IPO candidates worth watching:

1. Panera Bread (BDT & Company, JAB Holding Company)

Panera Bread, now owned by BDT & Company and JAB Holding, is a dominant force in fast-casual dining, known for its bakery-café model emphasizing fresh, healthy ingredients.

• Beyond Panera, the company owns Einstein Bros. Bagels and Caribou Coffee, creating a diversified portfolio in the premium café space.

• Panera previously went public in 1991, then was taken private in 2017 by JAB Holding, a PE firm specializing in consumer brands (also behind Krispy Kreme and Peet’s Coffee).

• If Panera successfully prices its IPO in 2025, it could be a compelling consumer brand play—with strong unit economics and an established customer base.

2. UST Global (Temasek Holdings, Blumberg Capital)

UST Global is a digital transformation and IT services firm headquartered in California, backed by Temasek Holdings, Singapore’s sovereign wealth fund.

• It specializes in AI, cloud computing, and cybersecurity solutions for Fortune 500 companies.

• The firm was founded in 1999 and has grown into a 30,000-employee operation providing mission-critical services across multiple industries.

• Temasek's involvement signals strong institutional backing, and if pricing is reasonable, UST Global could be a solid play on enterprise IT spending and digital transformation.

3. BMC Software (KKR, Acadia Capital, Access Industries)

BMC Software is a legacy IT infrastructure and operations software vendor, with a focus on AI-driven automation and mainframe modernization.

• The company was public for decades before going private in 2013 under Bain Capital, then later acquired by KKR in 2018.

• BMC’s offerings remain essential in data center management, cloud migration, and IT automation, positioning it well in an era of hybrid cloud adoption.

• This IPO will be interesting because BMC operates in a slow-growing but highly profitable niche, making it an attractive steady cash flow business.

4. Genesys (Hellman & Friedman, Permira, BlackRock, Salesforce Ventures, ServiceNow Ventures, Zoom Video Communications, D1 Capital)

Genesys is an AI-powered customer experience (CX) platform, leveraging artificial intelligence and automation to optimize enterprise call centers and digital customer interactions.

• Originally a spinoff from Alcatel-Lucent, the company was taken private in 2012 by Hellman & Friedman and Permira, then later attracted investments from Salesforce Ventures, ServiceNow Ventures, and Zoom Video Communications.

• Genesys has leaned heavily into AI-driven customer service automation, competing with the likes of Five9 and NICE.

• Given the explosive growth in AI-driven enterprise solutions, this IPO has the potential to garner significant investor interest.

5. Solera (CPPIB, Vista Equity Partners)

Solera is an automotive technology and data analytics company, specializing in vehicle lifecycle management, claims automation, and fleet management solutions.

• Originally founded in 2005, Solera was a publicly traded company until 2016, when it was taken private by Vista Equity Partners for $6.5 billion.

• It later attracted investment from Canada Pension Plan Investment Board (CPPIB) and has been actively expanding through acquisitions.

• Why this IPO stands out:

  • Deep industry moat in insurance claims processing, auto repairs, and digital vehicle history tracking.

  • Recurring revenue model with strong pricing power.

  • Potential AI-driven automation tailwinds, as insurers and fleet operators increasingly adopt predictive analytics.

Given my particular interest in automotive-related businesses, Solera is one I’ll be watching closely. If it enters public markets at a reasonable valuation, it could offer a compelling tech-enabled auto industry investment.

My write-up on Genuine Parts (GPC) describes my experience and interest in the automotive space:

Final Thoughts: A Strategy for Patient Investors

PE-backed IPOs offer investors a chance to buy high-quality businesses at attractive valuations—but only if they are willing to understand the nuances of the exit process.

Much like spin-offs, these stocks often debut undervalued due to uncertainty, limited coverage, and private equity selling pressure. However, for investors willing to take a long-term view, the upside can be significant as the market re-rates the business to reflect its true value.

By focusing on market conditions, sponsor quality, and post-IPO capital allocation, investors can position themselves for success in what remains an underappreciated corner of the market.

Below are two spin-offs I recently covered, and own:

If you are interested in deeper coverage of private equity or credit investing, check out and ! It’s an excellent source of insights on private placement investing.

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

For decades, sending money across borders was slow, expensive, and inconvenient. High fees, long wait times, and limited options defined the remittance industry. If you wanted to send money internationally, you often had to rely on cash-based transfer services like Western Union (WU) or MoneyGram, which charged hidden fees and inflated exchange rates while requiring recipients to visit physical locations to pick up funds.

Today, digital-first solutions are reshaping the industry, making it cheaper, faster, and more accessible than ever before. Consumers are moving away from cash-based transactions in favor of digital remittance platforms that offer real exchange rates, lower fees, and instant transfers.

This shift is creating massive investment opportunities in companies that are leading the charge in digital remittances. Wise (WIZEY) and Euronet Worldwide (EEFT) are two of the best-positioned stocks in this space—Wise as a pure-play digital disruptor and Euronet as an omnichannel powerhouse combining cash and digital.

Meanwhile, other players like Intermex (IMXI) and Remitly (RELY) are also battling for market share, but they face unique challenges that make them less attractive investment opportunities right now.

The Digital Transformation of Global Remittances

The remittance industry has been slow to modernize, but the tide has turned. According to Payments & Commerce Market Intelligence (PCMI):

✔ In 2023, digital remittance volume surpassed cash volume globally for the first time (chart below).
✔ 82% of outbound remittances come from high-income countries, while 78% of inbound flows go to low- and middle-income economies.
✔ Remittance costs remain high at 6.3% per transaction, well above the UN’s target of 3%, leaving room for disruptors.
✔ The global remittance market exceeded $850 billion in 2023 and is expected to grow at an 8% CAGR through 2026.

Challenges Remain for Users

Even with digital advancements, many people still face barriers to accessing formal remittance channels. These challenges include:

• Lack of banking access – Many individuals, particularly in developing regions, do not have a bank account, making it difficult to send and receive money digitally.

• Geographic limitations – Those living in remote areas often lack access to financial institutions or reliable internet to use digital platforms.

• Identification barriers – Many users lack formal identification, which can make it impossible to use traditional remittance services.

Why Digital Remittances Are the Future

Despite these challenges, digital remittance services offer significant advantages over cash-based alternatives:
✔ Better user experience – Digital platforms eliminate the need to visit physical locations and offer mobile apps for quick, seamless transfers.
✔ Lower costs – Digital providers operate with lower fees than traditional MTOs, helping users retain more of their money.
✔ Additional services – Many digital remittance platforms now offer bill payments, mobile top-ups, and financial services, improving convenience for users.
✔ Improved security – Digital transactions reduce fraud risks and theft associated with cash pickups.

Regulatory & Regional Disparities

Despite the benefits of digital remittances, adoption varies widely across regions due to financial exclusion, poverty, and political instability:

• Latin America lags in digital adoption – Only 43% of remittance transactions in Latin America are digital, 9% below the global average.

• Mexico relies heavily on cash – Just 30% of remittances to Mexico are received digitally, highlighting the gap in financial access.

As governments and fintechs work to increase financial inclusion, digital remittance services will continue to gain market share, benefiting companies like Wise and Euronet.

Why Wise (WIZEY) and Euronet (EEFT) Stand Out

✔ Wise (WIZEY) is the Amazon of cross-border payments, prioritizing low fees, customer value, and scale over short-term profits.
✔ Euronet (EEFT) is a financial infrastructure giant, leveraging Ria Money Transfer to compete with Western Union, while also building out a strong digital presence.

Each has different strengths, but both are winning in the cross-border payments revolution.

Wise (WIZEY): The Best Pure-Play Digital Remittance Stock

Wise is disrupting cross-border payments much like Amazon disrupted retail—by offering low-cost, transparent solutions while reinvesting for scale.

💡 A Better, Cheaper Model:

• Wise charges as little as 0.4-0.6% per transaction, undercutting Western Union and banks.

• It uses real exchange rates with no hidden fees, unlike traditional MTOs that profit from currency spreads.

• Once users switch to Wise, they rarely leave.

• Wise’s infrastructure claims platform partners as clients including Nu, Google Pay, IBKR and Standard Chartered.

💡 Built for the Future:

• Wise offers multi-currency accounts, allowing users to hold and convert over 40 currencies—a feature that keeps customers sticky.

• The Wise Account is a key differentiator, enabling businesses and consumers to seamlessly manage international finances.

• Wise processes over $100 billion annually, growing at a 30%+ YoY rate.

• Perhaps one of the greatest signs of alignment of interest with shareholders is the company’s reference to Owner Relations instead of Investor Relations.

• Wise is making remarkable progress with its initiatives and expansion with inroads to Japan’s payment system, an Australian Financial Services license and an AD II license for India (removing the $5,000 cap on transfers out of India).

📊 Key Financial Metrics:

• Forward P/E Ratio: 24.7x (reflecting its high growth potential).

• Free Cash Flow (FCF) yield is relatively low at 4.2% due to the stock trading at higher price multiples.

• Strong revenue growth, but reinvesting aggressively to expand global infrastructure so EPS is expected to remain steady in the medium term. The company, however, expects to grow underlying income over the medium-term at approximately 15-20% per year.

🚨 Risks:

• Heavily reliant on transaction volume scaling to maintain profitability.

• Price multiple is a bit on the high side given Wise will intentionally keep EPS growth low due to reinvestment, but it was the same with Amazon.

I will publish a deep dive into Wise later in 2025. I do own this company at a cost basis of $8.49 USD when it traded at a 6% FCF yield. I am hesitant to add shares at $12 USD.

Euronet (EEFT): The Omnichannel Leader in Remittances

While Wise is a pure digital disruptor, Euronet Worldwide (EEFT) is a legacy company that has successfully transformed into an omnichannel player, offering both cash-based and digital remittances through its Ria Money Transfer division.

From One ATM to a Global Financial Network:

• Founded in 1994 with a single ATM in Budapest, Hungary, EEFT has expanded into a diversified global payments company.

• EEFT compounded revenue, operating income, and EPS at a 15% CAGR over the past 30 years.

• In 2024, the company grew revenue by 9%, operating income by 14%, and EPS by 15% YoY.

A Well-Balanced Business Model:

• The Money Transfer segment, including Ria, now accounts for 42% of total revenue and 34% of operating income. EEFT acquired Ria in 2007.

• ATMs are still growing fast (LDD) but now contribute a smaller portion of revenue—19% in 2024, down from 25% in 2019.

💡 Strategic Investments in Digital Infrastructure

EEFT is leveraging its expertise across all three segments (EFT, Money Transfer, and ePay) to expand its digital presence:

• Ren – A digital payments infrastructure that powers EFT transactions and modernizes payment processing.

• Dandelion – A cross-border payment platform that competes with Wise, powering Ria and third-party networks like Walmart2Walmart.

• Integration Across Segments – EEFT incorporates ePay (retail payment solutions), EFT (55,000+ ATMs and 1.1 million terminals), and Money Transfer into a seamless global payments network.

📊 Key Financial Metrics:

• Forward P/E Ratio: 10.1x (a value play in fintech).

• FCF Yield: 13.9%, showing strong cash flow generation.

• Analyst consensus 5-year EPS growth estimate of 15% and company guidance of 12-16% EPS growth in 2025.

• Insiders also own approximately 10% of shares, which I find a big positive and lots of skin in the game. Michael Brown, though a fast talker and salesy, remains CEO after founding the company in 1994 with $4 million. As of the 2024 proxy statement, Brown owns 5.7% of the company.

🚨 Risks:

• Ria competes with fast-growing digital players like Wise and Remitly.

I will publish a deep dive into Euronet later in 2025. I do own this company and am adding shares here in the $100 area.

Final Take: Two Winners in Cross-Border Payments

✔ Wise (WIZEY): Best pure-play digital disruptor, low-cost model, and high customer retention.
✔ Euronet (EEFT): Hybrid omnichannel leader, trading at 10x forward P/E with strong cash flow and 30-year compounded revenue growth of 15% CAGR.
⚠ Intermex (IMXI): Undervalued but must return to growth before it becomes investable. The stock now trades at a 6.1x forward PE (and 10% FCF yield) but it has an uphill battle competing against better positioned competitors having delayed its focus on digital.
⚠ Remitly (RELY): High-growth but high-risk, with marketing-heavy expansion, shareholder dilution concerns and a less sticky platform.

Are You Investing in the Future of Remittances?

Which of these companies do you think will dominate the next decade of cross-border payments? Reply to this email or leave a comment with your thoughts!

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

The Push Toward Fixed-Supply Alternatives

Escalating government deficits, rising debt levels, and sustained spending have prompted many investors to seek assets perceived as immune to monetary dilution—chief among them gold and Bitcoin. Both are touted as finite-supply “safe havens” to escape fiat’s potential collapse. However, a deeper historical and structural analysis of these assets reveals inherent flaws that may diminish their protective appeal. Meanwhile, select stocks (i.e., carefully chosen companies) have consistently shown resilience, adaptability, and superior returns across myriad economic backdrops.

Gold’s Performance: Rare Periods of Outperformance vs. Long-Term Underperformance

Gold’s reputation as a safe haven often hinges on certain timeframes in which it either matches or outperforms the S&P 500 Total Return Index (SPX). However, closer scrutiny (using data from Damodaran) suggests these intervals tend to be cherry-picked:

1. 2005–2024 Comparison:

   • Gold delivered a 9.37% CAGR versus 10.26% for the SPX.

   • A roughly 0.90% annual underperformance by gold may not seem drastic, but the data period conveniently captures the lead-up to the Great Financial Crisis (GFC) and subsequent monetary interventions—an environment favoring gold.

   • It still underperformed equities overall.

2. Historically Unique Gold Outperformance Windows:

   • 1928–1932 (Great Depression): Gold outperformed the SPX by 12.76% CAGR, but this period ended with U.S. government price controls in 1933/1934.

   • 1971–1976 (End of Bretton Woods): Gold outperformed by 17.26% CAGR largely due to the abrupt lifting of decades-long official price controls on gold. By 1976—after the Jamaica Accords—true price discovery had only just emerged.

   • 1999–2009 (Dotcom Bust to GFC): Gold exceeded the SPX by 11.99% CAGR, amid the “Lost Decade” that spanned two major crashes.

   • 2005–2014 (Pre-GFC to Early Recovery): Gold’s outperformance was 3.11% CAGR over the SPX.

Despite these extraordinary pockets, gold generally lags the SPX over longer horizons.

• 1975–present (50 years): With price controls fully removed, the SPX returned 12.26% vs. 5.42% for gold.

• This era included stagflation, double recessions, the 1987 crash, the Dotcom bubble, the GFC, multiple rounds of QE, and the COVID crisis—yet gold still underperformed by a wide margin.

• Even during high-inflation spells (e.g., late 1970s to early 1980s), the SPX sometimes outpaced gold (9.46% CAGR advantage from 1975–1984).

• Just the last 10 years (2015-2024) SPX returned a 12.98% CAGR to gold’s 8.03%.

Inflation vs. Deflation/Recession Hedge

One crucial insight is that gold’s strong runs often align with recessionary or deflationary environments, providing a shorter-term safe haven. Yet in periods of higher inflation, gold’s track record as an inflation hedge is mixed. The historical evidence over the last 96 years does not strongly support gold as a long-term solution to inflationary pressures.

Bitcoin: Decentralized Technology, Centralized Ownership?

Introduced in 2009, Bitcoin promised a fixed supply of 21 million coins, enforced by a decentralized ledger (the blockchain), ostensibly to protect against “reckless” government money printing. Despite this compelling origin story, several risks challenge the idea that Bitcoin is a stable, democratized replacement for fiat:

1. Ownership Concentration

   • Bitcoin’s ledger is decentralized, but its economic interests are not.

   • Elementus estimates 82.69% Gini coefficient for Bitcoin wallets—where 100% would mean total inequality and 0% perfect equality.

   • Another analysis (NBER and University of Limerick, 2021) found 6,952 Bitcoin wallets control 58.21% of the circulating supply—less than 0.01% of BTC holders control nearly 60% of the market.

   • This disparity mirrors the Hunt Brothers’ infamous cornering of the silver market in the 1980s. Large whales can coordinate to influence prices or network governance, undermining the original vision of a currency free from the “heavy hand” of any centralized entity.

2. Potential for Collusion and Manipulation

   • The blockchain’s transparency does not necessarily prevent whale collusion. Pseudonymous addresses make it tough to identify major players, allowing informal “cartels” to form.

   • Derivatives markets add another layer of complexity—giant holders can indirectly impact futures or options prices, in turn shaping spot prices.

   • Significant wealth also makes it feasible for whales to influence or control miners, potentially exerting undue sway over protocol upgrades or transaction censorship.

3. Rigid Supply as a Double-Edged Sword

   • Bitcoin’s finite supply addresses the flaws of “infinite fiat,” but it also lacks moderate flexibility. A small, steady inflation rate can be healthy for a growing economy; Bitcoin’s inelastic supply may cause severe price swings.

   • If supply ever needed to be expanded—say, to stabilize prices or adapt to population growth—Bitcoin would face a contradiction: a handful of large holders might be the ones steering the change, mirroring precisely the sort of centralized decision-making it aimed to avoid.

4. “Now or Never” Mentality and Extreme Volatility

   • Bitcoin’s explosive price gains from near-zero in 2009 are indisputable, but from 2017 onward, it has shown 30–50% annualized returns coupled with extreme volatility.

   • A Sharpe ratio below 1.0 in many periods indicates the risk-adjusted returns are not as favorable as raw price charts might suggest.

   • This volatility makes Bitcoin unreliable as a stable store of value—just as hyperinflation undermines fiat’s stability, massive ups and downs undermine Bitcoin’s use for everyday commerce.

Taken together, these factors argue that Bitcoin is not necessarily the “panacea” many hope for, especially under real-world pressures like cryptographic threats, shifting consensus rules, or unstoppable human incentives to consolidate power over a valuable resource.

Why Responsible Fiat May Still Be the Least Imperfect Option

The shortcomings of both infinite fiat creation and strictly limited supplies (e.g., Bitcoin’s 21 million coins) suggest that a balanced, managed approach might be more sustainable:

• Moderate Inflation vs. Deflation: Absolute scarcity can stifle growth if a currency becomes too valuable to spend; infinite supply leads to hyperinflation. A measured approach, if governed responsibly, can offer a stable environment for commerce.

• Adaptive Governance Over Time: Fiat currencies, for all their flaws, offer policy levers—interest rates, money supply adjustments—that can help an economy absorb shocks. Bitcoin’s inability to adapt might become its Achilles’ heel in a world of fast-evolving technology and demographics.

• Democracy and Fiscal Management: Handing the reins of monetary policy entirely to a 16-year-old technology may risk losing the checks and balances that come with representative governance. While not perfect, a democratic system can still manage expansions and contractions in the money supply—if that power is wielded with true fiscal discipline. And I believe we are seeing offshoots of that much needed discipline now.

Admittedly, modern fiscal policy has often fallen short of “responsible.” However, entrusting monetary sovereignty to a protocol susceptible to whale manipulation (or other unforeseen pitfalls) could prove just as hazardous. Human history repeatedly shows that no system—even those designed to be free from interference—is beyond the reach of human self-interest.

The Core Advantages of Owning Select Stocks

Businesses Generate Returns

• Equities represent real economic activity—unlike gold, which is inert, or Bitcoin, which is primarily a speculative store of value.

• Companies produce cash flow, invest in growth, and can adapt their supply chains, product lines, and pricing to the prevailing currency or medium of exchange.

• Historical returns confirm this adaptability. The SPX alone has delivered around 10% annualized total returns across numerous decades, which trumps gold in most long stretches.

Ownership of Tangible and Intangible Assets

• Corporate balance sheets are not just fiat; they often hold equipment, real estate, intellectual property, and intangible capital like brand value and human expertise.

• These assets can be sold or repriced in any currency, from US dollars to future alternatives like Bitcoin or even something entirely new.

Ability to Evolve with Changing Mediums of Exchange

• If markets gradually adopt Bitcoin or another digital asset, businesses will shift to accept and pay in that currency.

• The transition cost exists—but it’s not necessarily catastrophic. Companies with pricing power can adjust prices, while those with stable margins can handle currency risk over time.

Lower Volatility and More Transparent Governance

• Stocks can be volatile, but typically less so than cryptocurrencies. Their governance structures—boards, shareholders, public disclosures—aren’t perfect, but they can be far more transparent than the behind-the-scenes concentrations in crypto markets.

• If a company holds significant Bitcoin on its balance sheet, that can be riskier for short-term working capital. Many argue any “extra” cash the firm doesn’t need should be returned to shareholders, who can then decide to buy Bitcoin on their own.

Addressing Hyperinflation: Do Stocks Hold Up?

Hyperinflation is often presented as the ultimate argument for abandoning fiat in favor of gold or Bitcoin. However, history suggests the impact on companies and asset classes is more complex than a simple “fiat dies, hard assets win” narrative.

Hyperinflation Doesn’t Always Cause Mass Corporate Bankruptcies

Intuitively, one might assume that hyperinflation wipes out businesses alongside fiat. But historical evidence suggests a negative correlation between inflation and bankruptcies in some cases.

• Why? When inflation soars, it erodes the real value of outstanding debt.

• Result: Companies with high nominal debt burdens (fixed-interest loans) often experience relief because their debt obligations shrink in real terms, and interest payments become less burdensome.

• This effect helped many German businesses avoid bankruptcy during the Weimar hyperinflation (1921–1923). Instead of collapsing under debt, some companies saw increased hiring and investment as their real debt burdens disappeared.

However, not all businesses benefit equally. Those that lack pricing power, hold fixed-income assets, or rely on long-term contracts in local currency often collapse in hyperinflationary scenarios.

Interestingly, the Princeton paper linked above, which studied the Weimar inflation, suggests a better equity performance for higher levered non-financial firms than others.

Would Gold or Bitcoin Save Investors?

While hard assets like gold and Bitcoin are often positioned as hyperinflation hedges, they come with their own challenges:

• Gold’s value can be politically compromised. In Weimar Germany, gold surged in value relative to the Mark—but shortly after, the government instituted wealth and capital controls, taxing or outright seizing gold holdings. The U.S. did the same in 1933.

• Bitcoin’s liquidity risk in hyperinflationary economies. While Bitcoin has seen some adoption in countries like Venezuela and Argentina, access to it remains limited under capital controls. Governments can restrict exchanges, and transactional liquidity is often insufficient for daily commerce.

• Government intervention is always a risk. In times of extreme monetary collapse, governments tend to assert control over assets that challenge their authority—whether that’s gold in the 1930s or Bitcoin in modern autocratic regimes.

In short, gold and Bitcoin may provide theoretical protection, but in practice, liquidity issues, taxation, or outright confiscation can undermine their effectiveness.

Why Select Stocks May Be the Best Hedge

The businesses that tend to survive or even benefit during hyperinflation share common traits:

✅ Pricing power: Companies that can adjust prices quickly (e.g., consumer staples, energy, agriculture, industrials) can maintain revenue in real terms.
✅ Nominal debt advantages: Firms with high fixed-interest debt may see real obligations shrink as inflation erodes their liability burden.
✅ Hard assets: Real estate, commodities, and infrastructure-heavy companies often retain intrinsic value, even if currency collapses.
✅ Global revenue streams: Companies with significant foreign sales can earn in stronger currencies while expenses are denominated in weaker local currency.

Industries with fixed-cost structures, long-term contracts, or reliance on fiat-denominated fixed income (e.g., many insurance companies, pension funds) are at greater risk.

Even in extreme hyperinflation, well-positioned companies can maintain value or even appreciate in real terms—not because they’re immune, but because they produce essential goods and services that retain demand, regardless of the medium of exchange.

Balancing the Argument: Scarcity vs. Abundance

There is an intrinsic irony in comparing gold/Bitcoin (scarce) to fiat (potentially infinite). Both extremes can trigger instability:

• Infinite supply undermines trust in the currency and can lead to hyperinflation.

• Absolute scarcity can result in rapid price swings that stifle its reliability as a store of value or medium of exchange.

Somewhere in between is the notion of improved fiat governance—not discarding an entire system that supports global commerce, but refining it to avoid reckless expansions of the money supply.

Conclusion: Why “Select Stocks” May Be the Best Bet

1. Stable Commerce Is More Important Than Any Single Store of Value

   • Neither gold nor Bitcoin functions seamlessly as a medium of exchange across various economic climates.

   • Commerce thrives best under a flexible but responsibly managed currency—one where businesses can plan, invest, and grow.

2. Long-Term Outperformance

   • Equities, especially in well-run firms, have outperformed gold by a wide margin over extended periods and shown lower net volatility compared to Bitcoin in many timeframes.

   • Stocks provide dividends or earnings that can compound, rather than relying solely on price appreciation or scarcity.

3. Adaptive to Shifting Monetary Landscapes

   • As the global economy continues to evolve—whether that means adopting new technologies, new currencies, or facing fiscal reforms—companies have the structural ability to adjust.

   • In contrast, a static-supply asset like Bitcoin may struggle if its rigidity clashes with future economic requirements, just as infinite fiat fails when mismanaged.

4. Mitigating Risk vs. “Cornering”

   • Major holders cannot easily “corner” a diversified stock market the way whales could a single cryptocurrency.

   • Large corporations and ETFs offer deeper liquidity and governance transparency, plus regulatory oversight to mitigate extreme manipulation.

Ultimately, while there is no absolute guarantee against hyperinflation or fiat mismanagement, select stocks remain a strong option to preserve and enhance purchasing power. Their inherent productivity, operational flexibility, and historical track record through deflationary spells, inflationary cycles, and multiple recessions highlight why they may outperform pure store-of-value assets like gold or Bitcoin in the long run.

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

Portfolio Update

I’ve previously expressed my reluctance to share investment performance, both in this newsletter and on social media. The reason is simple: each investor's results will differ due to:

1. Conviction levels—we may hold the same stock, but you might trim while I add.

2. Timing—the exact entry and exit points of trades can make a significant difference.

After further reflection, I’ve decided to share my performance, while strongly emphasizing this disclaimer. Copying trades is not the point—nor is it beneficial to anyone. Mimicking another investor without understanding their strategy can be counterproductive.

So, why share performance at all?

1. Real-time case studies – Learning from live, play-by-play decisions can provide valuable insights. Mistakes and successes alike offer lessons.

2. Better performance tracking – I want to demonstrate a more thoughtful way to track performance with transparency and proper benchmarking.

3. Accountability – By publishing my results, I hope to improve my own discipline in capital allocation.

I’m sure there are other reasons, but let’s move forward.

My Performance and Benchmarking

You’ll notice something missing from my chart below: the S&P 500 index. I don’t benchmark my portfolio against external indices.

“Comparison is the thief of joy [success].” - Theodore Roosevelt

Investing should be measured against your own objectives and risk tolerance—not an arbitrary index. This approach reduces fear, minimizes FOMO, and helps keep emotions in check.

That being said, indices do have value. They serve as useful idea generators for portfolio construction and as benchmarks for passive investors using ETFs. I’ll cover ETF allocation in a separate article, but this series focuses on actively managed portfolios built from individual stocks.

I largely exited the market in early 2022, only making smaller swing trade allocations through mid-2024. The portfolio I’m sharing today represents my re-entry, with fresh capital allocated to individual companies. Performance tracking began in July 2024.

The Hurdle Rate: A Personal Benchmark

In the chart below, my benchmark is a 12% CAGR hurdle rate—not the S&P 500.

Why? Because this is the rate I personally aim for in long-term compounding. Comparing against this benchmark helps me remove emotional biases and focus on allocation and execution rather than short-term fluctuations.

Does this mean I don’t care about monthly volatility? No. But short-term underperformance or outperformance doesn’t concern me—the goal is to be at or above that red line over time.

Portfolio Takeaways

Here are a few key observations from my first 8 months:

• I have held a substantial cash balance (30–60%) for much of this period. Including cash secured by puts, my current cash allocation is 31% (as of 2/28/2025).

• February performance: -3.46%, of which Teleflex (TFX) alone contributed -1.5%.

• The line chart represents VAMI (Value of $1,000 invested at inception on 7/1/2024).

• The red line is my 12% CAGR benchmark—it tracks how a $1,000 investment would grow at that rate over time.

• My holdings are primarily long-term, but I also overlay swing trades and use cash-secured puts to optimize cash yield.

This is the first of my monthly recaps. Even though I’m already 8 months in, I’ll be publishing these updates regularly going forward.

Trades: 2/26/25 - 2/28/25

Here’s a recap of my trades in the final days of February:

• Exited BDC holdings – Sold Morgan Stanley Direct Lending (MSDL) and Kayne Anderson BDC (KBDC). While they’ve provided solid yield, I’m reducing exposure to credit-sensitive assets amid policy shifts in the new administration. For now, I prefer money market funds (MMFs) and strategic use of cash-secured puts.

• Increased Teleflex (TFX) position – After the earnings-driven selloff on Feb 27, I added more TFX shares and continued buying into early March in the low $130s.

• Sold a PYPL put – Sold a $60-strike put on PayPal (PYPL) for a 13% annualized premium on secured cash.

• Reinitiated a position in Intermex (IMXI) – Bought back into Intermex (IMXI) after a 20% post-earnings selloff. I had previously exited at $18.60, but the recent dip makes this a compelling investment again.

Final Thoughts

Tracking performance against your own hurdle rate fosters discipline and keeps you focused on long-term objectives. While short-term fluctuations are inevitable, the key is maintaining a process that leads to consistent compounding over time.

This February recap marks the start of a monthly series, where I’ll continue refining and improving my portfolio strategy. Stay tuned for the next update!

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

I knew I would need to eventually write this article, but I didn’t know the name of the company at the time. Bear with me below as I set the stage, disclose the company, share my experience, and offer my insights.

Value Over Hindsight

Before I begin, let me briefly tell you some responses you may hear to an article such as this. I share these conceived quotes with to remind you to seek actual value rather than dismiss the loss as glaringly obvious - it never is.

• “I always thought the company was uninvestable or overvalued.”

• “This is exactly why I never touch medtech stocks—too much regulatory risk and margin pressure.”

• “Catching falling knives rarely works out. Just look at how this has played out.”

• “Hospitals are getting squeezed, and medical device companies are feeling the pain. Not surprised this one has struggled.”

• “Another classic example of a value trap—cheap for a reason.”

• “At what point do you admit it’s just a bad investment and move on?”

The fact is that hindsight is 20/20 and everyone experiences losing trades. I enjoy going out on a limb here because this type of article is rarely written. I encourage you to process this post thoughtfully and practically for yourself. I’m here to share my investment journey with you - the good and the bad.

Anyone can ascribe a specific reason to said loss after-the-fact, which is not my purpose. We’re here to learn together and apply lessons to our future investing.

Investor Profiles: Which One Are You?

There are three common reactions to a losing trade. Which mindset are you bringing to the table?

1. The Emotional Investor

“I refuse to admit I was wrong.”

Some refuse to reassess, doubling down blindly (“It’s not a loss unless I sell”), while others sell and become bitter (“Glad I got out.”).

Then there’s the Momentum Chaser, who dismisses the stock outright:
“Why bother with this when you could buy [hot stock]?”

These reactions aren’t analysis—they’re just emotion in disguise.

2. The Hindsight Expert

“This was obviously a mistake—should’ve seen it coming.”

They always saw the risks—but only after the stock dropped. Their wisdom comes in broad, empty hindsight:

• “Medtech is dead.”

• “This stock was always a value trap.”

• “This is why I just buy the S&P 500.”

But narratives shift with stock prices. At $180, it was "undervalued." Now at $136, it’s "uninvestable." Which one was true?

3. The Thoughtful Contrarian

“I see the risks, but I also see the opportunity.”

The rare but valuable investor who looks past the price drop and asks:

• Was this bad timing or a fundamental mistake?

• Has the thesis changed, or is the market overreacting?

They separate ego from analysis, recognizing that losses can teach us just as much as wins.

Which Investor Are You?

Every investor falls into one of these categories at times. The key is recognizing when emotion clouds judgment (thanks to for this post). As we dive into the challenges of our specific company below, ask yourself—which mindset are you bringing to the table?

I’ve tried to dissuade you from influence of the Hindsight Expert. It’s important to acknowledge the very fine line between being an Emotional Investor and a Thoughtful Contrarian. I won’t sugar coat this: sometimes you just never know.

I write the above to preempt any reactions you may encounter elsewhere that would conflate the purpose of this article, which is to provide value to you on the losing side of investing without any excuse or defense. I hope you look at this without the effect of someone explaining it away as obvious and irrelevant. No losing trade is ever obvious, especially because human action (e.g., emotion) drives markets.

Skeleton in the Closet

Thanks for your patience - if you read this far. Without further ado, I want to introduce you to Teleflex (TFX), a company that provides single-use medical devices in critical care and surgical applications worldwide.

This is not a dive into TFX. The company has been on my list for a write-up, but I had not gotten around to formalizing my research yet for an article. This article will only discuss the company to the extent it’s useful as a case study for readers.

The Biases of Investing Newsletters

Most newsletters avoid sharing losing trades. Some buffer bad investments with positive spin, while others simply omit them altogether.

The easiest “loss” to share? Selling too early. The hardest? A real capital loss.

Why? Reputation matters. Investors favor transparency—until it makes them uncomfortable. But real investing isn’t just about wins. It’s about learning from mistakes.

I won’t pretend to be free of bias, but I will always aim to share my full investing journey—the good and the bad.

Background

Teleflex experienced an elevated multiple in the late 2010s as it accelerated revenue growth - approaching 20% YoY. Then, beginning in 2021 the share price began a significant decline from a PE ratio near 40x (~$449 per share at its all-time high) dropping nearly 50% through 2022 from its peak.

The correction was attributed to a few factors:

• Multiple compression in 2021 due to pauses in elective surgeries and supply chain disruptions associated with the pandemic, which also affected other medtech companies.

• Cost inflation and customer staffing shortages in 2022.

• Lower guidance in summer 2022 due to UroLift weakness.

Some of the operational challenges noted above were industry wide. Teleflex also experienced some product recalls. Recalls are not uncommon in this industry, but the company had a bit more than usual during the 2022-2023 timeframe.

Historically, TFX has traded between 10-40x as a forward PE multiple since transitioning to a pure-play medical device company in 2007. It’s quite a range below, and you can see now it trades at an all-time low multiple.

My Entry

Teleflex showed on my active radar in November 2024 after the company reported earnings on 10/31/2024. TFX shares dropped 16% the next day and continued to decline further throughout Q4 2024. In December 2024, TFX traded around $180 when I opened my position in the company.

Management reduced its revenue forecast to 3.1% from 3.9% citing disruptions of supplies from the hurricane in North Carolina, doctor shortages in South Korea, and softness in OEM markets.

At this point, the company was trading at a forward PE of 12.1x, which was more than one standard deviation below its entire historical PE going back to the 1990s. It only traded lower during the GFC. The company’s margins remained stable and exhibited sufficient FCF to continue acquisitions and share repurchases.

Margin of Safety

I’ve mentioned the term Margin of Safety across various articles in this newsletter. With Teleflex, I entered my position around $180 because I felt there was a healthy margin of safety based on its current valuation (12x), margin profile (60% GM, 27% operating margin) and nature of its products.

A good lesson here is to remember that Margin of Safety does not equal No Losses. In fact, Seth Klarman often explained how a contrarian must often hold a position for a period of time at a loss before seeing a profit.

I was aware of this risk, but it is worth reiterating for you. The purpose of a margin of safety is to mitigate downside risk, not eliminate it. Seth Klarman’s book of the same title is a great read on this.

Catching a Falling Knife

I was aware of the risks with this company like any other. Let’s take a moment to discuss them now.

• First, management has had some history of being slow to update its guidance. Back in 2022, analysts called out the CEO for remaining too optimistic on UroLift sales growth recovering post-pandemic. A quarter later, management reduced its guidance due to UroLift sales.

• Second, analysts have also been slow to update their own estimates as a consensus. Despite the company lowering revenue guidance for 2024, analyst EPS estimates remained steady as you can see below - until about one week ago after it issued lower 2025 guidance for EPS.

• Third, the company has arguably overpaid for some of its acquisitions although it has shown success in executing those integrations.

• Fourth, the company tends to announce restructuring plans every year or two. This frequency may prompt us to consider these charges as regular expenses, some of which perhaps should not be adjusted for in EPS.

My Response to the Latest Earnings

Teleflex reported FY 2024 earnings on 2/27/2025 which included initial guidance for FY 2025. Guidance on EPS came in at a midpoint of $14.15, about 7.5% lower than the analyst consensus driven by modest sales growth and EPS growth.

The company also announced a plan to spin-off its lower growth segments including interventional urology. The spin-off will not close until mid-2026. This could be a positive for shares by unlocking value however it would take time to realize.

From my perspective, there was nothing that warranted an additional 26% drop in the stock post-earnings down into the $130s. After earnings, the market appeared to have really over-reacted to the downside despite:

• Forward PE (on new guidance) now around 9.5x, which is an all-time low going back to the 1980s.

• Tailwinds of accretive and growing acquisitions which it has yet to lap in 2025/2026.

• Organic sales likely to be troughing.

Given the above, I decided to average down on my TFX shares in the 130s and 140s. Management has a 100% track record of beating analyst estimates for at least 40 consecutive quarters.

Moreover, I built up a 7% position in TFX pre-earnings and gave myself room to add more in a situation like this. Teleflex is now a 12% position, and I own it at a cost basis of $155 per share. My cost basis remains below the historical all-time low for the last 25+ years.

The company has also issued an accelerated share repurchase plan to buy back approximately 4.5% of outstanding shares at today’s valuation. The shares now trade at a FCF yield of ~8%.

Looking Forward: Lessons Learned

It remains to be seen whether TFX shares will bounce back soon (or at all). In the end, as investors we work with incomplete information and imperfect markets. I believe this company simply got cheaper rather than weaker, although the price could languish here still.

I will share my thoughts now on my experience.

More Patience

I could have exhibited more patience in accumulating shares pre-earnings. After reviewing my accumulation, I believe I partly let the already large drawdown influence my eagerness to accumulate TFX sooner rather than later.

As I’ve written before, I try to evaluate my investments on the fundamentals first as best I can but it’s difficult to fully remove historical price. There is something to be said here relating to FOMO. When a stock sells off hard, there is a temptation to get in before it rebounds. Recent years abound with this type of price action exhibiting quick and strong reversals.

Options First

Part of my strategy is to employ cash secured put options to build exposure in stocks with more volatility. I can earn premium income while waiting for an even better entry point. I would have preferred to employ this strategy with TFX but its options didn’t provide enough necessary liquidity.

I went ahead and purchased the shares outright instead. Read more below on my put option strategy.

Time and Concentration

It takes time to invest in a portfolio of individual stocks. It requires much more time than allocating to a few stock ETFs. I currently hold a portfolio of 27 companies, and I am working to prune this down to under 20. I did hold 36 companies at the beginning of 2025.

At a certain number of holdings, for example over 50, simply allocating to an ETF begins to make more sense as you are approaching a Beta of 1 with a more diversified portfolio. In my case, I am concentrating my portfolio, and it requires more focus, research and time.

I failed here in the sense that I had the opportunity to trim my position in TFX going into earnings but didn’t. I was waiting first to see how the stock performed as it approached the earnings release. The stock had closed near my original cost basis of $180 and I honestly lost track of it for a couple of reasons:

• Earnings season is compressed into a few short weeks predominantly. I was also reviewing several other releases.

• My wife was out of town, and I was watching our kids and dog during this time.

Again, these are not excuses but aspects of my investing in which I can rethink and address differently going forward. I could have thought ahead and proactively reviewed my TFX position before my wife’s trip and the bulk of earnings season.

I still would have been holding a bag with TFX shares post-earnings. I would not have sold all the stock and may not have sold any. Nonetheless, I didn’t have the opportunity to review the position going into earnings.

Consequently, I also neglected to give stronger consideration to the accuracy (or lack thereof) regarding forward 2025 analyst estimates. I discussed cases of poor forward analyst coverage with Marex and Amentum, and the same happened here - just on the flip side.

All the above are good reasons why I am working to concentrate my holdings to about 12-15 companies. Earnings season is otherwise unwieldy.

Emotional or Contrarian

The last, but not least, point I want to make carries us back to that fine line of investing. Am I being an Emotional or Contrarian Investor with Teleflex?

I shared the photo above of Paul Tudor Jones because long-term investors can easily fit the mantra: “Losers average losers". PTJ was a shorter-term momentum trader in the 1980s but the meaning holds for long-term investors too.

Honestly, I don’t believe we can ever truly know whether we’re acting as the contrarian or the emotional investor at any given time, or with any given stock. In fact, often we are likely acting a bit of both simultaneously.

The more important takeaway is that we must remain aware and cognizant of this dynamic day by day. Emotional discipline is crucial for investors. And, as I like to say, this discipline is a journey without a destination - meaning we must practice this each and every day. It’s Groundhog Day for investors.

I don’t know if TFX will rebound in the next few months, but I do know this—its valuation is at historic lows, management is aggressively buying back shares, and the company is still generating strong free cash flow. That’s enough for me to stay patient and see this through. Time will tell whether I’m the contrarian or the fool.

That’s all for now. Stay tuned for updates on my Teleflex position when I publish my weekly or monthly recaps.

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

A trading client of mine—an options trader—fell into a psychological trap that many investors unknowingly experience. Because options don’t have hard stops due to delta and time decay, he was uncertain about the exact size of his losses. But he still had control.

His mistake? Holding onto losers too long while his winners experienced huge drawdowns before eventually hitting profit.

He believed this was a sign of patience, thinking he was just “waiting out” the volatility. But patience wasn’t the issue—his approach to trading was too much like investing. He relied on market fundamentals to justify holding his losing trades, assuming they would eventually recover.

This worked—until it didn’t. One day, he took a loss so large he couldn’t recover from it.

Trading is about timing; investing is about the business itself.

And that represents one of the biggest difficulties in investing—it’s a long-term game that requires strong critical thinking about a company’s value, which isn’t always reflected on the chart.

The job of an investor is to identify true value, compare it to the actual market price, and evaluate the gap between them. But this process is often blurred by psychological traps that distort rational decision-making.

In the next section, we’ll analyze 5 most common investment traps, why they happen, and how to avoid them.

Trap #1: “It’s Cheap, So It Must Be a Bargain”

A low price doesn’t mean value. Many fall into the trap of buying a declining company just because it's cheap, rather than because it has strong free cash flow or a durable competitive advantage.

A simple way to test this is asking yourself: If this stock were priced higher, would I still buy it? If the only reason you’re interested is the low price, you may be walking into a value trap.

Cheap doesn’t mean valuable. In both trading and investing, price alone is not a strategy.

Trap #2: “I Can’t Admit I Was Wrong”

When a stock declines, many investors hold onto it just to avoid admitting they made a mistake. The truth is, the more research, time, and energy put into the decision, the harder it is to let go because there’s more ego involved. If traders attach to their trades, investors attach even more strongly.

It isn’t just about valuation—it’s about being willing to change your mind when the fundamentals shift.

Before investing, define clear exit criteria: What would make me reconsider my thesis? If the facts change, your decision should, too.

Trap #3: Storytelling Over Substance

Some investors fall in love with a company’s narrative—the next big thing in AI, electric vehicles, biotech—without analyzing the actual numbers. They buy into hype rather than financials.

Take AI stocks, for example. In the past year, companies with "AI" in their name or investor presentations have surged in valuation, even if they have no real AI-driven revenue model or clear competitive advantage. A prime example is C3.ai (AI).

C3.ai positioned itself as a major AI enterprise software player, riding the wave of investor enthusiasm around artificial intelligence. However, looking beyond the narrative, the fundamentals told a different story—declining revenue growth, heavy reliance on a few large contracts, and unproven scalability. Despite this, the stock soared as retail investors poured in, captivated by the AI boom.

Contrast that with Nvidia (NVDA), which not only benefits from AI hype but has tangible revenue growth, a strong competitive advantage in AI chip production, and substantial cash flow generation.

Every investment should be backed by solid fundamentals.

Separate hype from reality—look at revenue, margins, cash flow, and valuation. If an investment feels too exciting, take a step back and ask, “Is this a good business, or just a good story?”

A good narrative doesn’t mean a good trade or investment. In both cases, research trumps hype.

Trap #4: Fear of Selling at the Bottom

A stock drops, and panic sets in. Investors start questioning if they should sell—not because of new information, but because of fear. They wonder, “What if I sell and it rebounds?”

Investors feel the pain of losses twice as strongly as the pleasure of gains.

To counter this, separate emotions from decision-making. Instead of reacting to price movements, look at the company’s fundamentals. Has anything actually changed?

Trap #5: FOMO Overvaluation

In trading, traders chase a breakout without waiting for a pullback or confirmation, only to see the price reverse right after entering. The parallel in the investing world is that investors buy at extreme valuations just because a stock is running.

But buying into the hype without valuation discipline is a recipe for disaster.

The challenge is distinguishing the hype from reality, which requires you to ignore market noise and focus on what matters.

In the heat of the moment, this distinction is hard to make—emotions are running high, and you enter survival mode, which puts you psychologically and physiologically at a disadvantage. Traders feel an urge to act under these conditions, but the most important thing to realize is that you always have a choice – you don't need to act right now. If you do, you’ll most likely regret it later. So aim to regulate emotion first instead of putting pressure on yourself to do the right thing!

The Key to Long-Term Success: Mastering Your Own Psychology

Your biggest edge isn’t just stock selection—

TL;DR – How to Avoid Investment Traps

• Don’t mistake cheap for valuable—a low price isn’t always a bargain.

• Be willing to change your mind when the facts change.

• Distinguish a great business from a great story—cash flow and fundamentals win long-term.

• Separate emotions from decisions—ask, “Has anything actually changed?”

• Fear overpaying more than missing out—hype fades, valuations matter.

One Last Question to Challenge Your Thinking:

Think about your last investment—was your decision based on fundamentals or did emotion play a role?

If you had to explain your reasoning in one sentence, would it hold up under scrutiny?

If you want to dive deeper into the psychology behind investing and trading, subscribe to The High-Performing Trader.

Thank you, Kris, for the opportunity to share these insights with your audience!

With love,

Sara

My portfolio oscillated from down about 30 bps early this morning to up about 25 bps now. There was a bifurcation in performance of my holdings, as usual, which suggests to me that my portfolio is well diversified by sector/industry at around 27 holdings.

Briefly I will walk through the trades for yesterday (2/24/2025) and today. You can view the actual transaction screenshots below, just like yesterday. I will publish a portfolio breakdown over the weekend if time permits.

PayPal (PYPL)

I purchased quite a bit of Paypal (PYPL) this morning. I began at the open and purchased in smaller lots through the day between $77.10 and $72.78, averaging $74.66 for the day. I know have a $73.45 cost basis.

Paypal management hosted its Investor Day this morning and, after reviewing the materials and listening to some of the call, I decided to purchase more shares. I will publish a write-up soon detailing more of my thoughts as it currently represents 5.7% of my portfolio up from just over 2% yesterday.

Some brief highlights:

• Management launched PayPal One, its consolidated single-branded ecosystem for much of its products and services. The company is incorporating many of its offerings for merchants and clients into PayPal One. I believe it will help drive stickier users on both sides of the transaction as well as increase TPV.

• Better than expected guidance on the 2025 and 2027 projections. Management mentioned that OpEx will grow at less than half of Transaction Margin (TM). This will create excellent operating leverage as it increases revenue and TPV. Perhaps the title of my PayPal write-up when it publishes will be:

PayPal is now more than a Growth Story. It’s an Acceleration Story.

Auna (AUNA)

Yesterday and today, I added to my shares of AUNA. It’s the most difficult stock to accumulate in my portfolio at the moment. I picked up shares this week at an average price of $8.12, now holding it as 1.3% of my portfolio at an average basis of $7.55 per share.

• Nothing new here. Just read the write-up to understand the thesis.

Marex Group (MRX)

MRX is a holding I have not added to in a while because it appreciated in price so quickly. I did add to the holding today at $34.75 as it dipped lower than I expected and fell into a short-term gap which I find helpful to tactically add at near-term support.

I now hold 2.6% of my portfolio in MRX at a cost basis of $28.04 as I have continued to add on dips.

Amentum (AMTM)

This is a stock that has begun to garner more interest this month than I have ever seen, perhaps rather typical of a spin-off in only its fifth month as a public company. The company remains undervalued and under covered, though several firms are now surfacing during February with their own long reports on the company.

Today I added to shares at $19.57 and now hold a cost basis of $21.28 representing 9.6% of my portfolio.

Short Puts

I opened two new short puts so far this week, taking advantage of the higher implied volatility (IV) and lower strikes.

By the way, you can check out for additional research on the theoretical and empirical side of option trading. We also hosted a video discussion on the subject recently.

Wesco (WCC): I sold May 2025 puts at a $155 strike for a 14.6% annualized return before MMF yield. This obligates me to buy WCC shares at a forward PE of 11.4x, which is an excellent price.

• I cannot emphasize enough the value of incorporating a cash secured put option strategy into your portfolio once you understand how to do it. It is a huge yield enhancer and also allows me to exercise better patience and discipline in deploying my capital. Essentially - I am less tempted to chase my buys.

PayPal (PYPL): In addition to the outright share purchases above, I also wrote puts for May 2025 at the $65 strike for an annualized premium of 13.4%. If all my existing short puts are assigned to me I will end up owning nearly 8% of PYPL shares in my portfolio at a marginal cost equivalent to a 13.4x forward PE.

• Remember this company has excellent growth prospects and huge FCF buying back shares at lower multiples.

Trade Screenshots: 2/24/2025-2/25/2025

That’s all for today, I will publish another write-up soon and continue with periodic tactical trading updates on the portfolio. Again, I will publish a portfolio breakdown over the weekend if time permits.

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

Remember that I am a long-term investor, so these are not day-trade or very short-term trade recommendations. The trades are a tactical view of how I execute my longer-term portfolio strategy.

You will see three types of trades:

1. Long-term buys/sells: These are either initial or add-on purchases (or sales) to my portfolio. These trades may include more aggressive allocations for price appreciation or more conservative dividend growth allocations.

2. Cash secured put options: These are short puts I open and close to achieve greater yield on my cash balance (about 45% as of today), and also to accept the obligation to buy great stocks at better prices if they drop far enough.

3. Swing Trades: I have reported a couple of swing trades in group chat from my portfolio such as Comcast (CMCSA) pictured below. These are not day trades but investments I may hold for as little as a week up to becoming a core portfolio holding. A swing trade does not necessarily imply a long-term (core) position.

My Accounts

I invest through three different brokerage accounts, and I will share the tactical trades via screenshots at the end of this post. Each of the three accounts serve no particular purpose on their own. I simply opened each of them over the years for various reasons.

• Schwab: About half my equity book sits here and I use Schwab to execute my cash secured short puts. You can read my article below to learn more about my short put strategy.

• Vanguard: Another half of my portfolio is here, and I only use it for outright stock holdings. No options.

• Interactive Brokers: I have been a client of Interactive Brokers since 2007 - or 18 years now! It’s my favorite and I hold a small portion of my capital here which often includes my international holdings, especially those where foreign currency is required (i.e., no US ADR available).

My Trades (Week of 2/17/25 - 2/21/25)

Without further ado, let’s dive into my trades from last week.

NOTE: Ignore the SCOXX trades. These are simply cash sweeps I must make in/out of the Schwab money market fund (MMF) to maintain my cash yield. Schwab is one of the few brokers who do NOT automatically sweep cash into their MMFs and it is VERY annoying!! If you have a Schwab account and do not manually sweep your cash each day, you are leaving money on the table and letting Schwab effectively borrow your capital for 0% interest!

Genuine Parts (GPC)

I closed my short puts on GPC a few days early prior to the 2/21 expiry. I had a 9.2% annualized return since December on this secured cash. I didn’t want to get greedy, so I closed the position at a cost of 8% of the original premium.

• Despite writing this up for the newsletter and holding short puts, I currently do not own the shares outright. It has been a bit too high for me in the 120s. I had purchased GPC last October at $113 and subsequently sold in the high 126 range. It was a swing trade where I wasn’t sure if I would hold it as a core position back then.

• Rationale: Great Dividend King with nearly 70 years of consecutive annual dividend growth, plus a great industry with necessary products and a successful history of acquisitions and capital allocation.

• Below is a screenshot of my tracking of short put trades filtered for GPC only. You will see I earned a high annualized profit (on secured cash) due to:

  • Closing positions early with at least 50% gain

  • Reducing average hold time

  • Targeting an annualized yield over 10-11% at time of open trade - 15.8% in this case.

North American Contruction Group (NOA)

I added to shares of NOA last Tuesday and Wednesday at an average of $18.74 per share. This increased my position by 62% and now comprises about 2.9% of my total book.

• I have an interview being published by on March 4, 2025, so look out for more details on this rationale. You can also view the NOA article below and my social media posts.

Paypal (PYPL)

Paypal comprises 2.2% of my portfolio but I have also made several short put trades over the last several months to take advantage of cash yield and the opportunity to buy on larger dips if possible.

• Last Tuesday I sold short puts on PYPL at $67.50 for the May 2025 contracts. The annualized yield at open was 8.8%, lower than my usual minimum. However, I have a lot of conviction at this price and am okay with the yield since I also get the extra 4.25% from the MMF on top of this - for a 13.1% total cash yield.

• Rationale: Massive FCF and buybacks. I assess fair value in the 90s and so I am a buyer and put writer in the 70s and especially the 60s. My cost basis since starting to purchase this stock in the $57 range is now at $71.43 per share.

• You can also check out and for write-ups while waiting for mine to publish.

• Below is the history of my PYPL put trades for the last couple of quarters:

Comcast (CMCSA)

I had a swing trade on CMCSA which I opened on 1/30/2025 at $32.76 per share. I exited the position last week at $36.55 - an 11.5% gain in about 3 weeks. This was mentioned in the group chat and is pictured above in the intro.

• Rationale: This stock was hammered on earnings but is a very cheap valuation with many strong metrics outside residential broadband. It has great cash flow and is in cannibal mode - repurchasing share very accretively at low valuations. This all provides great margin of safety.

Academy Sports (ASO)

This is another company I have owned off and on over the last several years, having entered at attractive prices (low- to mid-40s) and exited at overvalued prices (> $60). ASO is 1.1% of my book at a $50.95 cost basis.

• Last week I purchased more shares at $51 and also sold puts at $42.50 for June 2025, providing a potential annualized yield of 10.6%.

• I traded the put options extensively on ASO as well writing at a 12.5% potential annualized yield and realizing a 32.1% annualized return.

• Rationale: I love this stock in the 40s given their combination of buybacks, new store development at high 40% ROIC and troughing comparable sales.

Wesco (WCC)

There has been some interesting action on WCC last week and today. WCC reported earnings on February 11th. Since then, the stock increased 8% then proceeded to sell off 11% today trading at $179.33 per share.

• This is a great example of the value in cash secured put selling. I didn’t want to purchase the stock in the 190s so last week I sold puts on WCC for the May 2025 strike of $170, providing a potential 15.4% annualized yield while waiting to have the stock put to me at $170. This trade was executed while the stock traded at $191.58.

• I also bought shares at an average price of $188.41 as the stock sold off. The rationale here is that I could obtain an average purchase price on WCC in the 170s between (1) writing the puts at $170 and buying at $188.

• If the stock is not put to me at $170, I can still retain the option premium and write again, further lowering my cost basis.

• Rationale: I like WCC a lot given their new status as a dividend growth stock (two years in), the redemption of their preferred in June 2025, and buying at a 13.7x forward P/E. The company has a pathway to MDD earnings growth of about 15% over the next couple of years. More in the article below:

Global Payments (GPN)

GPN is one I plan to write up soon in collaboration with . And also has a nice write-up on this one.

• GPN is now 1.3% of my book at a cost basis of $103.21, and I have also wrote puts on this successfully in the $90-100 range over the last several months.

• I purchased GPN when it was $95 per share, after it sold off upon completion of its Investor Day back in October 2024 and subsequently exited.

• I am back in GPN now at $103 and also last week wrote puts for the $95 strike in May 2025 at an annualized yield of 9.2%. I also sold (and subsequently repurchased $95 puts a week prior pre-earnings, holding only one day and retaining more than half the option premium.

• Rationale: GPN is a great company in a very competitive space. It will take some time to write up this company. In the meantime, it trades at a super low PE of 8.3x while guiding to double-digit EPS growth.

Auna (AUNA): This is a stock I really like but it is not as liquid, yet liquid enough for a retail investor like me to build a position of 1.2% of my portfolio while feeling comfortable enough to exit when desired.

• I added 7% to my share balance of AUNA last week. now at a cost basis of $7.51 per share.

• This is an excellent and very fast-growing company. You can read more about my rationale in the post below:

Weekly Trade Screenshots

That’s all my trades from last week. I look forward to hearing your questions or comments below. You can take a look at the trade confirmations in the screenshots below.

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

The Cashless Myth: Why This Business is Thriving

For decades, the rise of digital payments and cryptocurrencies has fueled predictions of a cashless future. With consumers tapping their phones and businesses shifting to digital transactions, many have written off physical currency—and the industry supporting it—as a relic of the past. But what if that assumption is wrong?

Beneath the surface, an often-overlooked company is proving that paper isn't dead—it’s evolving. This firm has taken its deep expertise in securing the most sensitive printed assets in the world and expanded into a much larger opportunity: the fight against counterfeiting, fraud, and digital authentication challenges in a hyperconnected world.

Governments, financial institutions, and global brands aren’t abandoning security measures for physical assets—they’re doubling down. From high-tech currency features to advanced brand protection solutions for luxury goods, pharmaceuticals, and even digital authentication, this company has quietly positioned itself as an indispensable partner in safeguarding trust across industries.

This company represents approximately 3% of my portfolio, making it one of my more significant positions. I believe the market is overlooking a key transition underway that could drive substantial upside in the years ahead. In today’s analysis, I’ll walk through why this opportunity is compelling—and why I’ve allocated real capital to it.

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A Business Model Built for the Long Haul

Unlike many high-growth security firms that rely on volatile technology cycles, this company’s foundation is remarkably stable and resilient. With over 45% of its revenue coming from recurring sources (and growing to 50% in the next year), it benefits from long-term contracts with governments and institutions that must continue investing in security solutions. Its most recent quarterly results reflect this momentum:

• Strong revenue growth of approximately 12% year-over-year (3% organic and 9% from acquisitions), with international markets playing a growing role.

• A free cash flow conversion ratio around 100%, demonstrating operational efficiency and responsible management.

• Operational improvements driving margin expansion (27% EBITDA), thanks to a proprietary system focused on continuous efficiency gains.

And yet, the market is still largely underestimating the transformation happening within this business. The share price sits 25% below the analyst consensus and the street neglects to include in 2025 EPS an important upcoming acquisition that adds 5% to EPS at least. While many investors still associate the company with its historical roots, the reality is that it’s rapidly evolving into a technology-driven security leader, tapping into powerful secular trends in authentication, anti-counterfeiting, and digital security.

A Quiet Yet Powerful Opportunity

This company isn’t chasing headlines with splashy technology hype. Instead, it’s executing a disciplined strategy—leveraging its unmatched reputation in securing physical assets to expand into fast-growing adjacent markets, including:

• Government and currency security: Providing advanced features for banknotes used worldwide.

• Brand authentication: Partnering with global brands to protect against counterfeiting in luxury goods, pharmaceuticals, and industrial applications.

• Digital and smart packaging security: Using cutting-edge solutions that merge physical and digital authentication technologies.

With a strong balance sheet, disciplined capital allocation, and a proven M&A strategy, this company is quietly shaping the future of security—while many investors still see it as just a legacy player.

But here’s the twist: it isn’t standing still. A major transformation is underway, and the market has yet to fully price in its shift toward high-margin, tech-driven security solutions. The company’s roots trace back 224 years - and earlier during the American Revolution! Today’s leadership highly values the founding roots and it’s again showing that it knows how to adapt.

Want to know the name of this company and how its next moves could unlock even greater shareholder value?

Our premium report below provides a deep dive into its financials, strategic positioning, and how investors can capitalize on this overlooked opportunity. Subscribe now for full access. I spend approximately 20 hours on average preparing each of these deep dives and I believe you will find them interesting and helpful.

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Crane NXT: A Misunderstood Leader in Currency and Authentication Technology

A Trough Before the Next Growth Phase?

Crane NXT (NYSE: CXT) is currently navigating a period of temporary headwinds, primarily due to a planned slowdown in its U.S. currency business as it retools its equipment for the next series of banknotes. While the near-term numbers appear muted, the company is actively repositioning itself for a stronger future, driven by strategic acquisitions, an expanding presence in security and authentication solutions, and increasing revenue from recurring sources.

For investors willing to look beyond the short-term dip, Crane NXT offers an interesting opportunity. Its long-standing dominance in currency security technology, bolstered by proprietary micro-optics, is being leveraged into high-growth applications beyond physical cash. Meanwhile, its latest acquisition, De La Rue Authentication Solutions, is expected to be significantly accretive to earnings—a fact that Wall Street estimates appear to be overlooking.

The disconnect between short-term financial noise and long-term fundamental strength presents a compelling case for a closer look.

Short-Term Weakness, Long-Term Strength

At first glance, Crane NXT’s numbers from its fourth quarter and full-year 2024 earnings release don’t look spectacular. While full-year sales grew 7% year-over-year and adjusted EPS came in at $4.26, its U.S. currency segment is set to decline by 20% in 2025 due to temporary downtime. As a result, CXT guided for flat to low-single-digit sales growth in 2025.

This might explain the lukewarm analyst reaction, with consensus estimates settling at $4.21 EPS, on the lower end of the company’s guidance of $4.00 to $4.30, and down from $4.39 just prior to earnings reported last week.

Are FY 2025 Earnings Being Overlooked?

Investors paying attention to the earnings call would have noticed a key detail: this guidance does not yet include any contribution from the De La Rue Authentication acquisition, expected to close in Q2.

Management stated that De La Rue is expected to contribute an implied $0.20 to EPS in the second half of 2025, representing a 4.6% bump (9.2% annualized) to the company’s median guidance of $4.15 per share. I backed into this implied EPS boost by using management’s disclosure late last year of De La Rue’s select financial performance for 2024.

From the earnings call:

Moving now to 2025 guidance on Slide 11. And just a reminder that this guidance does not include the anticipated close of the De La Rue Authentication transaction in Q2 or any impact of potential new tariffs.

This means that unless analysts revise their estimates, the market may be underpricing CXT’s forward earnings potential. Management is perhaps just being conservative given the uncertainty around tariffs, which we can discuss later. Here is the tweet I posted while listening to the CXT earnings call last Thursday.

The temporary impact from the U.S. currency production stoppage, combined with an overlooked earnings boost from acquisitions, creates an opportunity for investors willing to take a longer-term perspective.

The Expanding Moat: Micro-Optics and Authentication Tech

Crane NXT has positioned itself for significant shareholder value creation through a focus on three core pillars: (1) Secure, (2) Detect and (3) Authenticate. The company operates through two business segments.

1. Security & Authentication Technologies (42% of Sales): Provides solutions for securing physical products including banknotes, consumer goods and industrial products. Also provides brand protection and authentication solutions.

2. Crane Payment Innovations (CPI, 58% of Sales): Provides electronic equipment and software with various detection and sensing technologies for applications including verification and authentication of payment transactions.

One of the most overlooked aspects of Crane NXT is its dominance in micro-optics technology, a critical component in high-security applications.

Micro-Optics: More Than Just the $100 Bill

CXT’s proprietary micro-optics security features—which create dynamic visual effects used to prevent counterfeiting—are currently only integrated into the U.S. $100 bill. However, demand for this technology is rising globally.

Management highlighted that in 2024 alone, they secured 13 new currency design wins, incorporating micro-optics into banknotes across multiple countries. This is well within their historical 10–15 new contract wins per year, a trend expected to continue.

The Federal Reserve expects a 3% CAGR of banknotes in circulation through 2030, driven by inflation and demand for physical cash due to natural disasters or global uncertainty. Below this chart from the Federal Reserve shows the trend of currency in circulation over the last 20 years.

Crane has been the sole supplier of US Currency paper since 1879! Moreover, greater than half the revenue from Crane banknotes is derived from foreign governments. Data from Crane shows that countries selecting Crane micro-optic technology for its banknotes increased at a 14% CAGR to more than 50 countries and central banks.

Below is a four-minute video on Crane Currency’s security feature called Motion Surface if you are interested in learning more.

Beyond Physical Cash

Beyond physical cash, CXT is expanding this technology into product authentication and brand protection, a move accelerated by its OpSec Security acquisition. In a recent milestone, Crane NXT landed its first luxury brand client, integrating micro-optic security labels into high-end perfume packaging, along with digital authentication and brand protection services.

This is a major step toward building a more resilient, recurring-revenue business. Crane NXT has more than 130 patents and now more than 1 trillion SKUs protected. Below is a picture and short video animation illustrating some of the technology for consumer brands.

Acquisition Strategy

Let’s introduce CXT’s acquisition strategy with its own M&A Framework to start us off. Management is focused on the authentication technologies market which is growing at mid-single-digits (MSD) or higher. The team targets a 10%+ ROIC by year five but accretive EPS within year one.

Management laid out a 5-year target of $3 billion in sales by 2028, from $1.3 billion in 2023. That’s an 18% CAGR. Two years after the spin-off and announced target, the required revenue CAGR is somewhat higher, but CXT has another big acquisition closing in Q2 2025 plus temporarily suppressed revenue in 2025 due to the US currency equipment retooling.

Crane has grown revenue by 15% CAGR since 2013 accelerated by successful acquisitions, accompanied by margin expansion during the same period. Thus, I have confidence the company can achieve its goals over the next few years. Since 2013, Crane NXT increased its operating margin to 28% from 13%.

Next Acquisition: DeLaRue Authentication Solutions

CXT will close on its next acquisition of DeLaRue in Q2 2025. The company has $130 million of annual sales and a 20% EBITDA margin. It checks all three boxes in Crane’s M&A Framework above, including 95% recurring revenue. DeLaRue offers technology and solutions for identification security, brand protection and traceability of government tax revenue.

DeLaRue is actually a publicly traded company on the London Stock Exchange (LSE: DLAR) so I pulled their financials. DLAR’s authentication segment, which CXT is purchasing, grew revenue 12.5% in its last FY and has strong margins as suggested by CXT. DLAR just renewed the final of four of its significant multi-year authentication contracts with a combined expected contract value over $185 million - or 143% of its annual revenue. The transaction was not cheap at about a 14x EV/EBITDA but CXT has a good history of execution.

De La Rue will be combined with CXT’s most recent acquisition - OpSec Security.

OpSec Security

Coincidentally, OpSec also had 2024 revenue of $130 million and an estimated 15% EBITDA margin. OpSec provides authentication solutions for physical consumer products as well as online brand protection across various end markets.

Another benefit to these adjacent acquisitions is the operational and commercial synergies upon consolidation. The $3 billion authentication technologies market is fragmented, and Crane has shown it can integrate roll-ups like this successfully.

Benefits of M&A: A Resilient Portfolio

One underappreciated aspect of CXT’s robust M&A pipeline is its impact on Crane NXT’s business mix. The company has actively been reducing its reliance on physical cash-related products and increasing its share of recurring revenues. Upon closing of the De La Rue deal next quarter, management expects:

• 35%+ of total revenue to come from non-physical cash businesses.

• 50%+ of revenue to be recurring from long-term authentication contracts.

This transition improves CXT’s business quality and valuation multiple, yet the market has yet to fully price this in.

One final example on the margin expansion record for its acquisitions: CXT has a proven record of purchasing companies, on average, with a pre-acquisition margin of 7% and raising that to 10% within three years, and 24% within 8 years.

Here’s a few examples of execution on their acquisitions:

• MEI: Acquired in 2013 and a 12% ROIC within 5 years

• Crane Currency: Acquired in 2018 with a 12% ROIC within 5 years

• Cummins Allison: Acquired in 2020 with a 27% ROIC by Year 3

Capital Allocation & Shareholder Returns

One of Crane NXT’s strengths is its disciplined capital allocation strategy, balancing:

1. M&A: Strategic bolt-on acquisitions in high margin authentication/security.

2. Dividends: Raised at a10% CAGR over the last two years since the spin-off.

3. Debt Management: Maintaining net leverage under 2.3x post-acquisition.

4. Attractive Debt Profile: Majority of debt is long-term maturity between 2036-2048 at a WACD of 5.0%.

Management invests about 2.5-3.0% of sales per year into organic growth through new product development and added capacity. It pays approximately a 1% dividend (~16% payout ratio) with the remainder going to M&A and opportunistic share repurchases. CXT does have a robust pipeline for authentication technology companies, so it’s largely been allocating to acquisitions.

Return on Invested Capital (ROIC) as calculated by Koyfin has run about 14-15% although I have not conducted my own analysis. There seems to be enough of a track record and execution to render this calculation insignificant.

Furthermore, CXT has exhibited solid free cash flow conversion of around 100% on average for the last several years. I estimate the company’s current FCF yield to be approximately 7-8% based on today’s $59 share price. FY 2024 FCF conversion was a bit lower earlier in the year, but this is expected due to some timing issues around the US Currency equipment cycle.

How Does CXT Stack Up Against Competitors?

Crane NXT operates in a niche but highly defensible space. Its closest competitors include SICPA (private), Authentix (private), and De La Rue (LSE: DLAR, pre-acquisition).

Authentix

Authentix is probably the closest competitor to CXT today in authentication solutions. The company is owned by Bluewater, a private equity group, since 2017. Authentix is attempting to roll up the authentication industry too with its recent acquisition of Nanotech Security Corp, its fifth acquisition since becoming a Bluewater portfolio company.

It is worth noting that the Nanotech acquisition is small by comparison with Currency News reporting the purchase price to be approximately $10 million.

Given the private equity ownership of Authentix, I feel more comfortable owning CXT as PE-backed companies tend to leverage higher and also distribute capital to its LPs sooner. CXT has the benefit of a more permanent investor base in the public market. It is using the majority of its cash flow to acquire strategic companies. Kevin McKenna, the CEO of Authentix, recently conducted an interview with Currency News if you are interested learning more about this competitor.

SICPA

There is not as much information available on SICPA but you can read the transcript of an interview conducted by the ITSA with an executive of the company. It is a Swiss company that specializes more so in provision of the security inks for currency printers. This is good news for CXT investors as SICPA does not appear to be as direct of a competitor. SICPA also works on some integrated security solutions in Europe for labeling related to excise taxes.

Investment Case: What’s the Market Missing?

Given the temporary currency slowdown and DeLaRue earnings boost not fully priced in, Crane NXT appears undervalued.

Key Takeaways

✅ Short-term numbers are temporarily depressed due to the U.S. currency transition, but post-2025 earnings should normalize higher. I expect 2026 EPS to be around $5.20 a share assuming retail stabilizes in the Crane Payment Innovations (CPI) segment in addition to the US Currency printing re-launching for the 2026 series bills.

✅ De La Rue acquisition adds 5% to 2025 EPS and 10% annualized—yet analysts have not fully factored this in. That takes the 2025 EPS to about $4.33 a share - higher than the $4.15 a share midpoint conservatively guided by management.

✅ CXT is shifting to a higher-quality, more recurring-revenue business model, improving its valuation profile. Management expects to maintain, not expand, its company-wide 27-28% EBITDA margin. However, the acquisitions involve margin expansion and become more accretive to EPS.

✅ The stock may be mispriced based on underappreciated tailwinds in authentication, micro-optics, and product security.

Risks to Consider

❌ Delayed integration risks with OpSec and De La Rue. I almost hesitated to put this as a risk because I have great confidence in the team to execute.

❌ U.S. currency business remains cyclical — growth depends on future redesign cycles. CXT is diversifying its business, and these design cycles are long and planned years in advance. The graphic below shows the upcoming new designs and series printing reported by the Bureau of Engraving and Printing (BEP).

❌ Global macroeconomic factors could slow demand in authentication/security segment. I see this as more of a risk in the consumer product markets.

Separately, in the CPI segment, management provided an unfavorable outlook for the retail market projecting a HSD decline in sales for 2025, due to declines in OEM orders. However, retail only comprises 15% of the CPI segment, or 8.5% of company-wide sales. The other markets are expected to experience LSD to MSD growth.

❌ Backlog declined significantly for the CPI segment, down 33% YoY. However, the book-to-bill returned above 1x in Q4, with a sequential 10% increase QoQ. This backlog decline was also expected due to customer destocking in the gaming market. Backlog is now within normal longer-term expectations.

❌ Tariffs were mentioned by management in the earnings call related to 2025 guidance. The company noted that their earnings guidance excludes the positive impact of the DeLaRue acquisition yet also assumes no impacts from tariffs. I don’t think it’s helpful to read into tariffs anyway as an investor.

These companies are far too large with global manufacturing footprints and supply chains to be able to analyze it, plus management teams tend to be good at adapting to such changes in government policy. You can see the slide on CXT’s global footprint. I assume it is balanced enough where tariffs are relatively neutral.

Final Thoughts: A Stock to Watch in 2025

Crane NXT presents a classic case of near-term headwinds masking long-term value. The stock is not necessarily undervalued as it trades at around a 13.9x forward P/E. However, I like this stock here as an opportunity to hold for the long-term at a fair valuation with 10%+ earnings growth potential. Investors willing to look beyond temporary currency-related weakness may find an attractive setup, especially given:

• Underappreciated earnings accretion from De La Rue.

• A strengthening recurring revenue base.

• Technological leadership in authentication and security solutions.

At current valuations, this could be a well-timed entry point ahead of a 2026 rebound.

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

For reference, here’s a link to the original write-up from January 2nd.

Q4 and FY 2024 Results

Wesco reported a decline of 0.6% in FY 2024 comparable (ex-divestiture) sales growth, affected primarily by expected weakness in the Utility segment. However, Q4 sales returned to growth in the fourth quarter of 2.4% YoY driven by data center activity offsetting persistent (and anticipated) Utility weakness.

Sales Drivers

Sales trends continue to diverge between the Communications & Security Solutions (CSS) and Utility & Broadband Solutions (UBS) segments:

• CSS: Strong growth in data centers, bolstered by recent acquisitions, with double-digit growth expected again in 2025 and an increasing backlog.

  • Rahi Systems (2022): Hyperscale solutions

  • entroCIM (2024): Data center building intelligence software

  • Ascent (2024): Data center facility management services

• UBS: Broadband demand remained strong, but utility sales were down high single digits (HSD) in Q4 due to ongoing purchasing delays and public power weakness. UBS backlog also declined due to new project delays and customer destocking. Management expects utility demand to recover in the second half of 2025.

Overall, management guided for organic growth of 2.5-6.5% in 2025, driven by:
✅ Data centers (double-digit growth expected)
✅ Security, OEM, and industrial

Margins

Gross margin percentage remained stable but EBITDA margin decreased 30bps YoY for the fourth quarter, attributable to business/project mix in CSS (data centers). This should prove to be only a temporary headwind as subsequent years in the data center cycle exhibit greater margins.

Wesco continues executing on margin-accretive acquisitions and divestitures, expected to add up to 200 bps in margin expansion over the next few years. For instance, Wesco divested its lower margin Integrated Supply (WIS) business while acquiring companies such as Ascent that bring in higher margin activity.

Wesco is also investing internally in enterprise-wide digitalization to transform operations that will allow margin expansion, better cross-sell opportunity and improved operating leverage.

Working Capital

Our initial analysis highlighted management’s focus on optimizing working capital, and we’re already seeing progress.

• Wesco dropped its net working capital intensity to 19.8% from 21.4% over the course of FY 2024. This bolstered free cash flow due to reduction in Accounts Receivable Days and inventory optimization.

• The company also expects to grow NWC at only half the rate of sales growth in 2025 which will drive even lower intensity - and consequently FCF higher.

Free Cash Flow

Despite an 8.4% YTD price increase, Wesco still trades at an LTM FCF yield of 8.2% (excluding working capital changes). In 2025, management guided to FCF range of $600-800 million, implying a FCF yield of 6.3-8.3%.

This strong FCF generation enabled Wesco to:
✔️ Repurchase nearly 5% of its shares in 2024
✔️ Increase its dividend by 10% for 2025, reinforcing its status as a dividend growth stock

Key Takeaways

Earlier this week I posted some comments in the group chat as I listened to the conference call. There were a few notable positive drivers for shares based on the call. Let’s discuss them now as well as how I am investing in the company.

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While being a full-time investor for more than 15 years now, and investing in general since 1999, I have also acquired and operated a few small businesses in the vehicle services industry. You may have read briefly about this experience in my write-up on Genuine Parts (GPC) where I explain how I now passively own an automotive repair business. I also owned a golf car sales and service business for 7 years.

In 2016, I sold my regional golf cart and electric vehicle sales and service business, but I’ve remained involved as a consultant, staying close to the industry’s developments. During my years in the business, one thing was clear—lead-acid batteries were king. Whether it was golf carts, resort maintenance vehicles, or 18-passenger transport shuttles, everything ran on lead-acid. And that came with a major downside: battery replacements were one of the biggest maintenance costs, accounting for roughly 25-30% of total upkeep.

But over time, I started to see a shift. Lithium-ion, once an expensive and niche alternative, was creeping into the industry. First in high-performance applications, then in everyday fleet operations. Today, the transition to lithium-ion is well underway, not just in golf carts, but in EVs and broader commercial applications. This shift reminds me a lot of what’s happening at EnerSys ($ENS)—a company I encountered often in my days with that business. They’re making a similar transformation, moving from legacy lead-acid batteries to higher-margin, more strategic stored energy solutions. And that’s what makes them worth a closer look today.

Investment Thesis

EnerSys is shifting from lead-acid dominance to advanced lithium-ion and stored energy solutions, positioning itself for long-term success in energy storage, EVs, and commercial applications. But with shifting political winds and potential regulatory risks, the question is: Can it successfully execute this transition?

Business Overview: The Evolution of EnerSys

Ironically EnerSys began to establish the vision for its transformation in 2016, the year I sold my business. Having worked in the golf cart and commercial EV space, I saw firsthand how companies that failed to adapt to lithium-ion lost ground to competitors. Resort and community fleet managers started demanding longer-lasting, lower-maintenance batteries, and those who couldn't deliver lost business. EnerSys seems to understand this shift. Instead of clinging to the old lead-acid model, they’re proactively developing advanced energy solutions that reduce maintenance costs and improve performance—something I know end-users care deeply about.

In 2016, EnerSys primarily sold traditional flooded lead-acid batteries with a narrow set of end markets. With some acquisitions, restructuring of its product offering, and improvement in development and production, the company today offers an integrated set of energy solutions tailored to a diverse set of strategic end markets.

As the slide above highlights, management has put the “Sys” in EnerSys. And the good news is that there is still additional opportunity for growth. The slide below shows the progress, and also potential, for its maintenance-free batteries and other systems and services.

Business Segments

EnerSys identifies four different business segments through which it provides premium energy solutions and services to 7 different end markets.

1. Energy Systems

This segment comprises 44% of revenue counting multi-national blue-chips as customers. This segment has a global installed base of more than 1 million systems in operation. Diverse and important end markets include data centers, communications, and industrial power and utilities.

EnerSys has an estimated 8% share of its Serviceable Addressable Market (SAM).

2. Motive Power

Motive Power comprises another 42% of revenue and claims a 22% global market share. This segment offers solutions that utilize electric forklifts, mining and other commercial electric-powered vehicles. Its comprehensive service includes batteries, charging stations and software and services. Think logistics and warehousing here.

Some drivers for this segment include electrification (e.g., decarbonization) and automation such as maintenance-free solutions and even fully automated warehouses of the future. This segment has the highest operating margins at approximately 14%.

3. Specialty

The Specialty segment represents 15% of revenue primarily serving the transportation and aerospace/defense markets. The transportation market focuses on heavy-duty trucks. The aerospace and defense market focuses on battery solutions for the DoD as well as space and missile defense applications. EnerSys claims about a 30% market share here as a % of SAM.

Regarding the Defense market, EnerSys last year acquired Bren-Tronics for $208 million at an 8.7x EBITDA multiple with all cash in July 2024. This acquisition adds a strong relationship with the DoD and is a leading manufacturer of portable power solutions for military and defense.

4. New Ventures

This is an interesting segment that is accelerating innovation with energy storage and fast charge capabilities. The segment is new (internally developed) and provides systems to manage demand charge reduction, utility backup power and dynamic fast charging of vehicles.

There are many interesting potential end markets here including even commercial real estate and retail operations. In the earnings report from 2/5/2025, management mentioned that it recognized its first revenue from this segment from its Fast Charge & Storage (FC&S) system.

Modular Platform

The company provides its products and services through a set of three modular platforms to add value to customers and provide stickiness with tailored solutions. Think of these three modules as a total solution package applied to each business segment above. Essentially, EnerSys comes in to provide the customer with energy storage, the electronics and the software.

1. Energy Storage: Lithium-ion batteries, Thin Plate Pure Lead (TPPL) batteries and flooded batteries

2. Power Electronics: Power transfer and conversion, wireless power transfer for automated warehouses, fast chargers for EVs, high voltage power transfer (e.g., 5G)

3. Software: Edge computing, asset management software, data collection to the cloud, fleet management with automated service notification, smart batteries, etc.

Political & Regulatory Landscape: Risks and Opportunities

Biden-Era Tailwinds

The Section 45X Advanced Manufacturing Credit (of the Inflation Reduction Act or IRA) is a key source of profitability for lithium-ion production, boosting EnerSys’ earnings by $135-175 million annually (~ 39% of EPS).

IRA tax credits are recorded as a reduction to COGS and not subject to taxation. Currently the company expects about $155 million annually in IRA tax credits through Section 45X, equaling about $3.93 a share of EPS. That is a significant amount. The company will continue to receive increasing amounts of tax credits, based on its volume, through December 31, 2032.

I disagree personally with the Inflation Reduction Act (IRA) yet I find the opportunities it presents for companies like EnerSys to be beneficial as an investor. Additionally, the Section 45X credits, and much else in the IRA, benefits republican-leaning states. So, I do not see a repeal as likely. Section 45X is rather insulated from Congressional scrutiny, as legislators across the country would feel the negative impacts of a repeal in their communities after all the new jobs and community investment. Outright repeal of Section 45X requires an act of Congress.

I do believe the market is undervaluing (through misunderstanding) EnerSys shares due to these 45X credits comprising a large portion of earnings, and this undervaluation allows the company to repurchase shares at lower multiples thereby making accretion to EPS stronger. There is also the potential for the shares to re-rate at some point once more clarity arises from Congressional discussions around the IRA sections. ENS shares sold off more than 10% after Trump’s election and now are back near the point of origin.

Trump Headwinds and Tesla

While government incentives can accelerate adoption, businesses and fleet operators don’t wait around for policy changes. When I was running my company, the shift to lithium wasn’t driven by government tax breaks—it was driven by end users who saw lower total cost of ownership and higher reliability. That’s a key factor that may help EnerSys weather political uncertainty. While policy shifts matter, the bigger question is whether private industry continues the transition to lithium-ion regardless of federal support.

Tesla and private companies continue to invest in EVs and charging networks. Some states (e.g., CA or NY) are maintaining strong EV incentives, keeping demand resilient.

It is important to note that EnerSys is not primarily a retail EV battery supplier. Instead, ENS is building energy systems of the future for applications across many different markets and industries. Thus, risks such as the termination of the $7,500 EV tax credit for consumers conceivably will not have a material impact on the company.

Opportunities Abound

As you read above, ENS serves 7 different key markets and none of them really compete directly with a Tesla or consumer EVs. There is potential risk of the $7,500 EV tax credit being affected by the new administration, though I am not even too confident about this.

As an example, EnerSys serves the commercial and defense markets where the value proposition and adoption are there. Of course, within 8 years EnerSys will need to plan and adapt if Section 45X type credits are not extended. And the company is already working to expand its margins through various strategies.

I have seen the transition to new energy storage technology firsthand in certain markets. Companies like EnerSys are providing tangible benefits financially and operationally to its customers. I will say that, personally again, I do not believe the use of lithium is the best alternative use of resources given factors such as waste pools.

Companies such as EnerSys will target the new technology that provides the most benefit for itself and its customers. Unfortunately, the lithium-ion technology has taken hold.

Department of Energy (DoE) Grant

Last month ENS announced the completion of its negotiation with the DoE award supporting the development of a lithium-ion gigafactory. This 500,000 square-foot factory, with expected completion in 2027-2028, will serve all EnerSys product and service lines including about 10% of capacity dedicated to a contract for Department of Defense (DoD) applications supporting the military’s equipment.

The DoE awarded $199 million to EnerSys to build the plant in Greenville, South Carolina (a republican-leaning state, by the way). The $665 million price tag also includes funding from:

• Local and state incentives totaling $200 million

• $120-160 million of annual IRC 45X tax credits to support development costs

Management projects the IRR on this project to be greater than 20% with a payback less than 3 years after plant completion. This plant secures the company’s own product sourcing and allows it to continue execution of its transformation through conversion of its customers to higher-margin energy solutions.

EnerSys' True Market Positioning

The true market positioning of EnerSys focuses on trends and drivers unrelated to retail EVs - or even predominantly any EVs you see on the streets. The consumer EV tax credit is a retail-focused incentive benefitting companies like Tesla, Ford and GM. EnerSys serves the commercial, industrial and defense markets.

• Defense & Aerospace: ENS supplies mission-critical battery and energy storage solutions to the US military and defense contractors.

• Industrial and Commercial Battery Demand:

  • Large-scale backup power systems for data centers, telecom and critical infrastructure

  • Fleet electrification of buses, logistics, maintenance and utility vehicles

  • Grid-scale energy storage supporting renewable power generation

EnerSys is no longer a battery company, in which I would have no particular interest. Today it’s a company in the midst of a higher-margin transformation to an energy solutions provider and a long-term infrastructure enabler.

Financial Analysis

I need to preface this section with a note on how the IRA / 45X tax credits influence earnings. As mentioned previously, the IRA credits comprise a notable portion of the company’s earnings and it breaks out results with and without the credits.

Latest Earnings (from February 5, 2025)

A look at the latest earnings below helps to illustrate the distinction between “base” earnings and “IRA” credit benefits. Lighter shade colors below denote the IRA benefit while the darker shares represent the base earnings.

Per the image above, this implies a base operating margin of about 8.5% (total 17.1% w/ IRA) and a total net income margin of about 5% (total 13.5% w/ IRA). At first glance the reliance on these credits may seem tenuous for the company’s future performance. However, if you understand the regulations and the industry one can see the longer pathway to growth and margin expansion.

Ex- IRA benefits, ENS reported 13% YoY growth in operating earnings.

• Order rates in the Americas for communications and data centers increased 40% and 25% respectively, partly attributable to AI-driven data demand

• A major customer raised its outlook by 20% for a telecom power project

• Digital lift truck shipment growth in 2025 is forecast to be more than 10%

Margin Expansion

A large driver of price appreciation for an investor can come from margin inflection and expansion stories, especially if caught early on. Margin expansion for ENS is well underway with more progress to come in my opinion.

As its transformation proceeds from lead-acid to maintenance-free systems and value-added energy solutions, the company has seen margins expand materially. The company’s EOS program, aftermarket opportunities, and maximization of its fixed asset base, are all contributors as well.

In the chart below, we see the trend in margins for EnerSys over the past 20 years. The company faced inflationary pressures and supply chain disruptions which impacted margins temporarily. However, the company focused on strategic pricing actions and operational improvements and saw dramatic improvement within only 3 quarters.

The company’s performance above suggests a strong resilience and adaptability to navigating economic challenges. This gives me confidence that management will sustain the current, recent trend of increasing margins depicted in the chart above.

FY 2025 Guidance

Management has guided for the following FY performance through the last quarter of fiscal 2025:

• Net Sales: $3.60-3.64 billion (+1.7% YoY)

• Adjusted EPS: $9.97-10.07 (+19%, and increased due to additional IRA credits)

• IRA Benefits: $135-175 million (~ 39% of earnings)

Capital Allocation

I assess that management has a very good capital allocation policy and history. The company targets a 2x long-term net leverage ratio and currently it stands at 1.5x EBITDA.

Share purchases typically average about 3.5% of market cap the last couple of years, and ENS pays a low (my preference) dividend yielding 0.96% - with three years of consecutive increases now. The remainder of its FCF is put into organic growth capex (e.g., Fast Charge & Store) and strategic M&A (e.g., Bren-Tronics acquisition).

I calculate FCF for EnerSys during the LTM to be $322 million, or an 8.2% yield on market cap, excluding effects from changes in balances of net operating assets.

Financial Risks

• IRA Benefits: There is a fat left tail risk of the government appealing the IRA though I find this extremely improbable. Nonetheless, it is a risk you must consider for yourself.

• Raw Material Costs: The company uses lead and other raw materials as a major input cost and these commodity prices can be volatile. However, management enters into fixed-price contracts and commodity hedging to neutralize this risk.

The above paragraph is a great segue to read my write-up on Marex Group (MRX), which helps producers hedge their commodity price risk:

• Defined Benefit Pension Plan: EnerSys sponsors a defined benefit pension plan both US and internationally, and the company does have a deficit in its funded status of $21.4 million, recorded on its balance sheet. Management de-risked its US plan by moving from 60% equity exposure to an all-cash and fixed-income portfolio last year, and the UK plan is fully insured through an annuity contract. The international plan still has a large exposure to equities.

  • ENS has planned benefit payments of $43 million over the next decade.

  • Note the gains/losses show up in AOCI not the reported EPS.

  • The recent losses have only been in a range of 0-2% of earnings but it’s important for you to be aware of this factor

  • ENS is gradually de-risking and moving away from these DB plans, so I expect this to be less of a factor in the future

• Supply Chain Competition: We all know about Tesla and its gigafactories. EnerSys is purely building new lithium-ion factories to supply its own customer orders rather than compete with Tesla or other suppliers. While competition is fierce in the lithium-ion battery market, ENS is proactively investing in its own production infrastructure to secure its supply chain and meet customer demands effectively. In part, the supply chain disruption from COVID has driven this response.

Conclusion: Is EnerSys a Buy?

I put out some tweets (below) mentioning ENS since mid-December as I built up my position in the low 90s. I didn’t receive any real response. I believe the stock sold off in November/December 2024 due to the Trump election and concerns over the IRA credits. However, reading and researching this, as you have seen, there is quite a low probability of any repeal of these credits for ENS’s business.

Despite the 9% increase in share price since tweeting about this company, there is still an additional 15% of upside potential based on the consensus of 6 analyst price targets, averaging out at $115 a share.

And now we are beginning to see the stronger upward EPS revisions after the latest earnings and guidance increase to $10 a share, giving this stock a current NTM P/E ratio of 9.8x. It’s also possible the FY 2026 and 2027 estimates are still too conservative. Next quarter management will likely release its 2026 guidance but based on management commentary I am optimistic.

Organic revenue has slightly contracted yet we may in fact be troughing and I like the longer-term fundamentals and valuation here. Remember we have a few engines of growth (borrowing from ’s article):

• Earnings Growth: organic troughing, accretive acquisitions and margin expansion

• Share Repurchases: About 3.5% of buybacks per year as a percentage of market cap

• Potential Multiple Expansion: Re-rating higher from a single-digit P/E from clarity of IRA benefits and recognition of margin expansion and the transformation

EnerSys comprises about a 2.5% allocation in my portfolio at a P/E of 9.3x on a forward basis. I would continue to add shares below $100 at this stage, but the lower the better, being patient with additions.

If the overall trend in demand persists across several of the company’s key markets, we could easily see a guide for FY 2026 much higher than the $10.14 per share currently marked by the analyst consensus.

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram | YouTube

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

Magnera reported earnings yesterday and, in this article, I will break down this first official earnings release as a new public company, including how I plan to manage my investment in light of the results. I listened to the earnings call including the Q&A and also reviewed the 10-Q.

Revenue Overview

The company’s earnings presentation provides some new breakdowns of revenue for the company, which now includes Glatfelter’s legacy business and the segments spun off from Berry Global. The revenue is balanced and diversified by geography, market and category.

Management estimates, from data gathered by external consultants, the following anticipated consumption growth by end market through 2027:

• Wipes: 7%

• Home, Food and Beverage: 5%

• Infrastructure: 8%

• Personal Care: 2-3%

Q1 2025 Highlights

This earnings release is particularly challenging to analyze since the merger closed mid-quarter. Magnera is in the process of integrating the merged business segments and executing on the synergies designed in the transaction.

As mentioned above, management anticipates strong organic growth in its infrastructure and hard surface disinfecting categories. Management is taking action on pricing to continue to offset any cost inflation.

On a YoY comparable basis (adjusted for the merger/acquisition), revenue increased 2% to $702 million with Adjusted EBITDA increasing 8% to $84 million. Adding in another $8 million of proforma adjustments, to reflect GLT’s EBITDA for the entire quarter, Magnera generated $92 million of Adjusted EBITDA.

This Q1 EBITDA annualizes out to $368 million for FY 2025, below the FY 2025 guidance of $385-405 million. However, I will reconcile that for you in the next section.

FY 2025 Guidance

Magnera announced the following guidance for FY 2025:

• Adjusted EBITDA: $385-405 million

• Adjusted Free Cash Flow: $75-95 million

• CapEx: $85 million

Capex

Management guided for a near-term Capex Intensity of approximately 2-3% of sales. This capex will intensify in a year or two, in my opinion, to a range of 3-4%, based on the commentary in the prospectus.

Adjusted EBITDA

There have been some conflicting figures floating around for EBITDA that relate to synergies and also timing (2024/2025). I want to provide an accurate accounting for you here of the Adjusted EBITDA, taking into account the acquisition/merger.

Last summer management, via its prospectus and consultation with JP Morgan, estimated $412 million of EBITDA for FY 2024. It appears this number came in lower due to some cost inflation, FX weakness and softer demand in certain regions like Europe generally and Asian healthcare. I read the reporting as about $383 million of LTM EBITDA excluding synergies (expected in the future).

The company guided to a range of $385-405 million of EBITDA for FY 2025 - a 4% decrease over FY 2024 at the midpoint based on that 2024 estimate, but a slight increase over actual 2024 figures. Management did not call this out, but it is there implicitly in the filings.

Magnera guiding to a mid-point of $395 million for 2025 begs the question of how management can achieve this when it just reported annualized Q1 EBITDA of $92 million ($368 million annualized). There are a couple of reasons the estimate is realistic:

1. Magnera will benefit from $55 million of synergies earlier than expected, and a good portion of this will be realized during 2025. So, there is a ramp-up of EBITDA over the next three quarters.

2. The CEO mentioned on the call that the first quarter is also seasonally the weakest for the North American segment.

I would also note that management appears to have quietly reduced its synergy reporting (or perhaps is miscommunicating it) since calling out higher figures like $72 million previously. This leads me to believe there may not be as much synergy as originally thought, and the $55 million is expected over the next 2-3 years gradually.

Net Leverage and EV / EBITDA Consequently

Net Leverage

In the original write-up I mentioned it was too soon to make an educated estimate on 2024 EBITDA so I went with management’s $412 million estimate at the time, not sure if it should have been lower. This yielded a 4.5x net debt-to-EBITDA based on a lower realized EBITDA.

It turns out that net leverage ratio was actually higher, however it’s now down to 4.5x since management has less net debt. I am not so confident, given the recent reporting, that Magnera can achieve a net leverage ratio of 3x within the next 2-3 years. Achieving this depends upon:

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Amentum (NYSE: AMTM) reported its latest earnings results for Q1 2025, followed by its conference call. The company reaffirmed its FY 2025 guidance while showcasing strong bookings, margin expansion, and commercial growth momentum. Below is a structured breakdown of the key takeaways.

I created a YouTube channel for Safe Harbor Stocks and recorded my first video on it today discussing the results in this article. I would be happy to have you subscribe to the channel and hear your feedback.

First, briefly listed below are the latest quarterly results.

Financial Highlights & Debt Strategy

• Net Debt-to-EBITDA improved slightly by 0.1x to 4.0x, driven by EBITDA margin expansion and a slightly higher cash position at quarter-end.

• No debt paydown this quarter, but management reaffirmed its goal to reach 3.0x Net Debt-to-EBITDA by FY 2026. There are contractual principal payments due, and management reiterated its top capital allocation priority to pay down its debt which alone can provide EPS accretion to the tune of about 7-8% CAGR over the next two years.

• Free cash flow (FCF) is expected to be strongest in the back half of the year.

Bookings, Backlog, and Growth Opportunities

• Book-to-Bill Ratio: Reported at 1.1x overall but a stronger 1.5x including unconsolidated JVs, a key contrast to some peers reporting weaker BTB this quarter such as for BAH.

• New Business Wins: Two-thirds of new awards came from new business, rather than recompetes. This is a positive sign for business development.

• Segment Strength: Both Global Engineered Solutions and Digital Solutions reported a book-to-bill ratio above 1x, highlighting solid overall demand.

Key New Awards & Future Pipeline

• $3 billion DOE West Valley JV Award: A 10-year project to decommission nuclear facilities using advanced technology solutions and unmanned robotics. Assuming a 50/50 JV, this single-award IDIQ can add up to ~1% of annual revenue but is not yet in revenue. Remember these IDIQs are also excluded from backlog.

• Private Sector Expansion: Amentum secured over $400 million in awards from Fortune 500 companies in communications and infrastructure modernization. The merger, doubling the size of the company allows AMTM to cross-sell and bid on contracts with a larger scope - and more margin.

• Bidding Activity: Amentum submitted $12 billion in bids during Q1 and targets $35 billion in total bids for FY 2025.

• Enterprise Contract Focus: The company is actively pursuing 15+ opportunities over $1 billion, enabled by cross-sell opportunities from the merger. These projects if awarded will also drive EBITDA margin expansion.

Segment Performance & Profitability

• Digital Solutions grew 5% YoY, excluding the impact of Cytec (previously announced).

• Global Engineering Solutions saw 3% YoY growth.

• Merger Synergies: Management mentioned it sees the company realizing $30 million in annualized run-rate cost savings from integration efforts of the merger for FY 2025 on track with previous guidance.

• EBITDA Margin Outlook:

  • Margins grew from 7.3% to 7.7% in FY 2024.

  • Expecting further expansion to above 8% in 2026+.

  • Larger $1 billion+ awards will help expand margins over time.

FY 2025 Guidance Reaffirmed

Amentum reiterated its FY 2025 guidance (below) from last quarter seeing no material negative impact from the new administration and its initiatives. Based on today’s closing price, the company trades at the following metrics:

• 9.0% FCF Yield

• 10.8x Forward P/E

• 9.0x EV / EBITDA Ratio

Management built into its guidance (below) a 1% negative revenue impact from new administration policies, adding conservatism to the outlook potentially from foreign aid work. Just as important, management excludes any new shorter-term contract opportunities it is seeing from new US government actions, for example in supporting the new administration’s actions around the border and the world.

Key Takeaways from the Earnings Call Q&A

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I collaborated on this article with , a former investment banker and hedge fund analyst, who does an excellent job with charting FactSet data - and you will see his charts featured here. He also writes some fantastic articles of his own covering financial analysis and deep dives. I encourage you to check out his newsletter here: StreetSmarts.

Introduction: A Dividend King with Staying Power

Founded in 1928, Genuine Parts Company (NYSE: GPC) has built a global distribution network spanning 17 countries, serving millions of customers in the automotive and industrial replacement parts markets.

With 68 consecutive years of dividend increases, GPC has earned its place as a Dividend King, making it a staple for income-focused investors.

As a long-time owner—now passive—of an automotive parts distribution and service business, I have a particularly relevant vantage point on GPC’s business model and industry dynamics that gives me additional comfort in this company.

The company operates through two core segments:

• Automotive Parts Group (62% of sales): Anchored by the NAPA brand, supplying repair shops and retailers.

• Industrial Parts Group (38% of sales): Operating under the Motion brand, serving manufacturers, logistics, and critical industries.

GPC has maintained a disciplined capital allocation strategy, balancing strategic acquisitions, operational efficiencies, and shareholder returns.

While recent headwinds—including European demand softness and industrial market weakness—have pressured earnings, GPC’s long-term fundamentals remain strong, supported by a robust balance sheet, free cash flow, and steady demand for replacement parts.

Business Overview

Over the last 5 years GPC transformed its business to streamline its portfolio into two core segments as mentioned above. The company now operates a highly resilient, two-segment business model that supplies essential replacement parts across automotive and industrial markets. This diversified structure provides stability through economic cycles, as demand for replacement parts remains relatively steady regardless of macroeconomic conditions. The graph below reflects the two core segments excluding its divestitures under the transformation.

Automotive Parts Group (62% of Sales) - The Power of NAPA

GPC is a leading distributor of automotive replacement parts, primarily under the NAPA (National Automotive Parts Association) brand, one of the most recognizable names in the industry. The segment serves repair shops, dealerships, fleet operators, and retailers across North America, Europe, and Australasia.

Approximately 80% of its segment sales come from NAPA-branded products. Growth is driven by vehicle aging trends, increasing repair complexity and a fragmented market - where GPC continues to consolidate independent parts suppliers. It serves a large portion (also ~80%) of the Do-It-For-Me (DIFM) market, benefitting from growing repair complexity.

I literally experienced this consolidation dynamic in my parts business about 22 years ago. As a smaller regional player, I experienced firsthand (via ACDelco and Motorcraft parts) how the large parts companies encourage dealer consolidation and roll-up markets. They have it down to a science and are quite successful. Scale matters in this sub-industry.

GPC’s NAPA network includes company-owned and independent stores that provide broad geographic coverage and deep inventory availability. GPC is also investing into its omnichannel platform for B2B & B2C markets.

Industrial Parts Group (38% of Sales) - Strength in Motion

The Motion brand makes GPC a leading distributor of industrial replacement parts, serving manufacturing, mining, logistics, and energy sectors. These mission-critical components keep factories, warehouses, and infrastructure running smoothly.

Revenue drivers for this segment include:

• Maintenance, Repair & Operations (MRO) services for industrial plants

• Mission-critical components such as bearings and other smaller industrial supplies

• Healthy end market diversification across industries such as aerospace, utilities, transportation, etc

GPC continues to expand its industrial offerings, including e-commerce channels, value-added solutions and network optimization.

Financial Strength and Dividend Profile

GPC has built a reputation for financial resilience, underpinned by strong cash flow generation, disciplined capital allocation, and a shareholder-friendly dividend policy. Its 10.3% CAGR in revenue since 1945 alone is rather impressive. Think of all the wars and recessions this company has endured.

Free Cash Flow

GPC's ability to generate stable free cash flow (FCF) allows it to fund acquisitions, reinvest in operations, and return capital to shareholders without compromising its balance sheet strength. The company has healthy debt levels and ample liquidity.

Net debt-to-EBITDA is 3.2x, which is slightly higher than I prefer. I accept this net leverage ratio because:

• GPC carries a low WACD of 3.49%

• Remains withing its own target at gross debt-to-EBITA of 2.2x.

• Holds $2.6 billion of liquidity including $1.1 billion of cash and an additional revolver about equal to its market cap

• Exhibits very disciplined net working capital management at 7% of sales and an average CCC of 27 days

Read more about the Cash Conversion Cycle (CCC) and NWC Intensity here:

GPC, however, is not necessarily undervalued. The TTM and FY 2024 company guidance for its free cash flow (FCF) is $900 million, which yields a current FCF yield of 5.6% on the current market cap. This figure already excludes capex for growth such as acquisitions.

A Dividend King

GPC’s 68-year streak of annual dividend increases places it among the elite Dividend Kings, a distinction achieved by only a handful of companies. And GPC’s more recent dividend growth is maintaining its reputation.

The company has grown dividends at a 6.7% CAGR over the last 14 years and currently sports its highest dividend yield in the same time period at about 3.5%. Furthermore, it is important to note that the company still only has a payout ratio of 22% in 2024 and 31% over the last 5 years.

Recent Performance and Challenges

Despite short-term earnings pressures from industrial market softness and European demand challenges, GPC’s overall fundamentals provide a strong foundation for continued dividend growth and long-term value creation for shareholders. However, I would be remiss if I didn’t share the more prominent risks facing the company.

In its last earnings release on October 22, 2024, management reduced its FY 2024 guidance to $8.10 from $9.40, a 14% drop. That’s material and the share price reacted accordingly. The Q3 numbers below illustrate the story below.

However, there are silver linings if you peek beneath the surface. GPC has steadily increased its gross margins since 2017 due to the strategic transformation from 2019 and its continued focus on optimizing NWC management exemplified in the chart below. Even its latest gross margin in Q3 2024 increased another 60bps to just under 37%.

In its last earnings call management acknowledged the weaker demand environment along with ongoing cost pressures. The company stated that it is remaining focused on extending its competitive advantages and maintaining its disciplined strategy. Despite gross margins increasing, GPC has suffered from SG&A cost inflation and sales deleveraging.

Regarding sales deleveraging, the weakness manifested in the industrial segment with global comparable sales down 2.4%. Consequently, the segment margin decreased 100bps to 11.9% from 12.9%. Management noted we’ve seen the largest contraction of PMI in 33 years. However, management reiterated that it is prepared to capitalize on the eventual improvement in the manufacturing economy.

• Nearshoring, automation and infrastructure investment provide tailwinds for the industrial segment

• Global EV market growth presents a long-term revenue growth driver for the automotive segment

Strategic Growth Through M&A

GPC has a long history of using acquisitions to build its franchise. The last five years the company has allocated 40-50% of FCF to acquisitions. It has already acquired $954 million through Q3 YTD with more in the pipeline ready to close in Q4.

The company has a very disciplined approach to acquisitions:

• Accretive to EPS within first year

• ROIC > GPC cost of capital

• Post-purchase price multiple below GPC’s multiple

• Keen eye to strategic operational filters such as market expansions and operating synergies

One final point is the vast opportunity facing GPC in its very fragmented markets. The company has an 8% and 6% market share, respectively, in the automotive and industrial segments, which together represent a global TAM of $350 billion.

Valuation and Investment Case

GPC currently trades at a 13.7x P/E for 2025 analyst estimates of $8.52 per share. And this P/E is based on dramatically lowered 2025 estimates since the October 2024 earnings guidance revision downward. On a historical basis, GPC also trades at a 20% discount to its average 5-year forward P/E of 17x.

To support the case for relative undervaluation, GPC trades at a significantly lower P/E multiple than its closest peers, such as O'Reilly Automotive (ORLY), despite only a modest difference in expected revenue growth. Analysts project 3.1% annual revenue growth for GPC over the next three years, compared to 5.7% for ORLY, yet GPC trades at roughly half ORLY’s valuation on a P/E basis.

Conclusion: A Dividend King with Long-Term Potential

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Yield Chasing and the Legacy of Easy Money

Years of low interest rates created a dangerous environment for investors. The search for yield led many to venture into high-risk assets, often with minimal margin of safety. From speculative tech stocks to unproven cryptocurrencies, the allure of quick gains made it easy to ignore fundamentals. Back in 2017, I joined an investment group of Accredited Investors, for the purpose of allocating to private real estate debt funds to enhance my own cash yields, and I saw in action how FOMO can take hold.

Today’s market correction is a stark reminder that chasing returns without discipline can result in painful losses.

At Safe Harbor Stocks, we aim to identify individual companies with:

• Durable growth

• Strong fundamentals

• Limited downside

These three focal points represent a stark contrast to the groupthink that pervades markets during speculative manias. And, yes, I would call the last several years a speculative mania, but only in certain facets of the market. There are always good opportunities, but they likely aren’t the ones that flash onto your news feed. You need to search for them and disengage from other temptation.

The Power of Groupthink and Herd Mentality

Remembers investors are social creatures, and herd mentality can be hard to resist. When everyone is buying into a hot stock or trend, the pressure to follow the crowd is immense. Unfortunately, this behavior often leads to bubbles, like the dot-com era or meme stock frenzy, where fundamentals take a backseat to hype.

Instead, it pays to look inward rather than outward. Emotional discipline involves breaking free from the noise and making decisions based on your unique financial goals and risk tolerance.

I can almost anticipate the rebuttal that AI will reduce these biases but remember we as human beings are pulling the strings behind this technology - and we will always have the ability to override it. Imagine 10 years from now riding in your new fully autonomous vehicle becoming frustrated with the car not passing or speeding up to arrive at your destination. People will likely override this technology if at all possible.

Recognizing and Overcoming Key Psychological Biases

I could write a single article about all the psychological biases that challenge us as investors on a daily basis. And perhaps I will write an article on them at some point. Importantly, none of us will ever shake them. It’s simple to understand yet not easy to put into practice. And it is a journey without a destination, meaning so long as you are human you will need to combat your biases each and every day. Here are three of them:

FOMO

Fear of missing out is one of the most common biases. It can drive investors to buy at the top of the market, chasing trends rather than evaluating intrinsic value. Perfect example is the chase of the Magnificent 7 stocks. Case in point below:

Sunk Cost Fallacy

The sunk cost fallacy occurs when investors cling to losing positions, believing they must hold on to “get their money back.” Instead, it’s crucial to reassess the investment’s future potential rather than dwelling on past losses. This is “water under the bridge” so to speak. Focus on looking forward here not backward. You want to look at the margin and your opportunity cost. If you can re-allocate that capital to another company with better appreciation potential, just do it.

Confirmation Bias

Investors often seek out information that reinforces their existing beliefs, ignoring evidence to the contrary. This can lead to overconfidence and poor decision-making. Be mindful of each piece of information you allow your mind to process. Question it. Are you accepting it for its convincing content or is it the product of a search that simply seeks validation of your own holding.

Fighting FOMO: Practical Steps for Emotional Discipline

This can be another endless list but here are a few actionable steps I practice fighting the FOMO and stay ground in a more realistic investing mindset.

1. Review Companies Objectively Before Price Charts

When analyzing a stock, start with the business fundamentals. Evaluate its competitive position, cash flow, and long-term prospects before glancing at its historical price chart. Fundamental data apps like TIKR and Fast Graphs actually have a feature to toggle off the price chart or market price while conducting your analysis. This helps prevent anchoring your expectations to prior highs or lows.

2. Read SEC Filings First

Before diving into management’s earnings calls or press releases, review the company’s SEC filings, such as the 10-K or 10-Q. These documents provide unfiltered insights into the business and its financial health, free from marketing spin. Navigate to the company’s Investor Relations portal or SEC’s Edgar itself to view the company’s SEC filings.

3. Use the 1-Hour or 1-Day Rule

I learned this one from helping my daughter manage her impulse to buy stuff. If you feel an emotional urge to make a trade, wait. Take an hour or even a full day to reflect. This cooling-off period often reveals whether the decision was driven by reason or impulse.

4. Build a Framework for Decision-Making

Create a checklist or framework for evaluating investments. For example, I use the following high-level framework:

• Margin of Safety: Is the stock trading at a discount to intrinsic value?

• Growth Potential: Are there clear durable/sustainable drivers for future earnings or cash flow growth?

• Risks: What are the major downside scenarios?

5. Reflect on Past Mistakes

Keep an investing journal to document your decisions and their outcomes. Over time, patterns may emerge, helping you identify and address emotional tendencies. Guess what!? The initial reason I started this newsletter, outside finding other investors to interact with, is to serve as my personal investment journal. And making it public actually helps with two important factors:

1. Accountability: I tend to hold myself more accountable if others are involved. This is similar to why some of us find it easier to continue an exercise regimen in the gym or in a group class.

2. Better Due Diligence: I conduct deeper and more thorough due diligence on my investments when I need to report my thoughts to others. I can account for more than one instance, in the less than two months of writing here, where I discovered information about the company that I otherwise would have missed had I not been writing for you - my fellow investors.

Why Safe Harbor Stocks Was Created

The volatility and emotion of today’s markets exemplify why I founded Safe Harbor Stocks. My goal is to help investors focus on stocks with strong fundamentals and a margin of safety. My first write-up on Marex, a company that combines growth potential with resilience, exemplifies this. You can read that write-up here:

By emphasizing research, education, and emotional discipline, we can navigate market corrections with confidence and avoid the pitfalls of FOMO.

Conclusion

Investing is as much a psychological game as it is a financial one. In fact, I like to say investing is 90% emotional / psychological. And as Buffet or Munger would say:

“Investing is simple but not easy.”

FOMO, sunk cost fallacies, and confirmation bias are powerful forces, but they can be overcome with awareness and discipline. By focusing on fundamentals, building a decision-making framework, and reflecting on past mistakes, you can separate emotion from strategy. Remember, the key to long-term success isn’t chasing trends—it’s fighting FOMO and staying grounded in your convictions.

If you find this article, or my others, interesting, please consider sharing this with others and subscribing below. At some point this newsletter will convert to paid status however my plan is to keep much of the article content like this free regardless.

Thanks for being part of the Safe Harbor community! Follow me for more insights: LinkedIn | X (formerly Twitter) | Instagram

Disclosure: This information is provided for informational purposes only and should not be considered a solicitation or recommendation to buy or sell any securities. The author or entity providing this information may hold positions in the securities discussed. This is not investment advice.

• Significant Valuation Upside: Magnera trades at an estimated EV/EBITDA multiple of ~6x, significantly below JPMorgan’s fair value multiple of 7x and the peer average for Berry Global (BERY) and Mativ Holdings (MATV). This implies a 16%–33% upside potential, excluding synergies, growth or deleveraging.

• Synergy-Driven Growth: The merger is expected to deliver $80 million in annualized synergies, valued at approximately $600 million (7.5x). These synergies could double earnings and the stock price over the next few years if realized.

• Robust Free Cash Flow: I expect the combined company to generate $82 million in levered Free Cash Flow (FCF) for 2024, translating to a 13% levered FCF yield on the current market cap of $632 million. JPMorgan’s earlier analysis appears outdated, as lower interest rates and additional debt restructuring support stronger cash flow.

• Deleveraging Potential: With $2.08 billion in gross debt and a weighted average cost of debt currently at 6.7%, Magnera plans to reduce net debt-to-EBITDA from 4.0-4.5x to 3.0–3.5x within three years, improving financial flexibility and driving EPS accretion.

• Attractive Market Dynamics: Supported by secular trends in sustainability, hygiene, and filtration, Magnera is poised for a 3.5% revenue CAGR and 9.7% EBITDA CAGR through 2028. Key customer relationships with P&G, Kimberly-Clark, and Keurig Dr Pepper further reinforce stability and growth.

• Inflection Point in Sales: After facing sales declines in 2022 and 2023 due to macroeconomic headwinds and destocking, Magnera has shown an upward inflection in recent quarters. This recovery aligns with secular tailwinds and repositioned capacity for growth.

• Early Analyst Coverage: Wells Fargo very recently initiated coverage with a $22 price target, highlighting Magnera’s attractive valuation and potential. The stock currently trades (as of publication date) under $18, providing an opportunistic entry point.

Company Overview

Business Model

Magnera (NYSE: MAGN) produces nonwoven and engineered materials serving diverse end-markets, including hygiene, healthcare, and industrial applications. Key products include filtration media, hygiene materials, and specialty papers. Think disposable items such as diapers and Keurig coffee filters.

Formation Through Spin-Off and Merger

Magnera was formed in November 2024 through the spin-off of Berry Global’s Health, Hygiene, and Specialties (HHNF) segment, which subsequently merged with Glatfelter Corporation’s engineered materials business. This strategic combination created a newly listed specialty materials leader with enhanced scale, diversified markets, and a compelling synergy opportunity.

Key Segments

• Hygiene and Healthcare Materials: Nonwoven fabrics for personal hygiene, medical wipes, and incontinence products.

• Industrial Applications: Specialty papers and materials for construction, filtration, and packaging.

Competitive Position: Magnera is a leader in the specialty materials industry, leveraging economies of scale, established customer relationships, and a strong innovation pipeline.

Investment Thesis

Core Growth Drivers

1. Secular Tailwinds: Increasing demand for sustainable materials, hygiene products, and filtration solutions supports consistent revenue growth.

2. Customer Relationships: Major clients like P&G, Kimberly-Clark, and Keurig Dr Pepper provide stable demand and long-term contracts.

3. Post-Merger Synergies: $80M in annualized synergies will drive EBITDA growth and enhance margins.

4. Excess Capacity: Russia and Ukraine accounted for 7% of Glatfelter’s sales in 2021 before the war broke out. It’s repurposed some of this, but excess capacity remains available, minimizing new capex for near-term sales growth.

Competitive Advantages

• Scale and Scope: The combined entity has a diversified customer base and operates across high-growth markets.

• Resilient Free Cash Flow: SpinCo maintained a 7.5% FCF margin in 2023 despite sales declines, highlighting operational efficiency.

• Innovation: Focus on sustainable, bio-based materials aligns with evolving customer preferences.

Capital Allocation

Management is prioritizing synergies, debt reduction, and reinvestment in R&D to support future growth. Deleveraging to a 3x net debt-to-EBITDA ratio within three years is expected to drive EPS accretion and valuation re-rating.

Management plans to target a 3x net debt-to-EBITDA ratio within three years, down from about 4.0-4.5x today depending on your EBITDA estimate. It also has a $350 unused revolver and no debt maturities until 2029.

Risks to Thesis

• Integration challenges in realizing synergies.

• Revenue concentration risk with large customers in markets that experienced COVID tailwinds, though I believe we have far lapped those base effects.

• Sensitivity to raw material costs and macroeconomic headwinds. Sales declined in 2022 and 2023 but have now seen an inflection upward in recent quarters.

Net Sales Trends

The latest prospectus dated September 20, 2024, mentions modest YTD revenue declines and this is true on a 9-month basis. However, I spent some time digging into the quarterly releases for each of GLT and HHNF - and we have an interesting inflection in sales growth illustrated by the chart below on a YoY quarterly basis. Note below that I could not obtain sufficient data for the December 2023 quarter for GLT YoY.

Financial Analysis

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