For most of the past two years, the macro script for 2026 seemed written in ink: inflation cools, central banks ease, and every business living off interest income slowly gives back its windfall.

An energy shock tore that script up. In mid-September, the Fed unanimously raised its target range by 25bp to 3.75%–4.00%, its first hike since July 2023, and at its October 28 meeting it held in a 10–2 vote where both dissenters wanted to go higher.

The ECB raised its deposit rate in June and again in September, taking it to 2.50%, and left it there on October 29 even though euro-area inflation is running at 4%.

The Bank of England moved last. Bank Rate had stood at 3.75% since a cut in December 2025, three members of the MPC already voted for a hike in September, and on November 5 the Bank followed through with a 25bp increase to 4.00%, its first since August 2023.

“Higher for longer” is back!

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And with it comes an old question:

Which businesses earn more when money gets more expensive? And which of them aren’t yet being rewarded for it?

Some of the answers are too obvious to be interesting. Banks earn a spread on deposits. Brokers like Interactive Brokers keep a healthy share of the interest on client cash and spell out precisely what every rate move is worth. The market knows how to price those, arguably. We just shared our perspective on IBKR in the analysis below.

What fascinates me more are the companies that became rate beneficiaries almost by accident. Wise is my favorite example. It’s a payments company; it doesn’t lend out a single dollar, and yet its customers had parked $32.1bn on its balance sheet by the end of September. In Q2 FY27 alone, that pile generated $238.2m of interest income.

And the share price? WSE trades at around $11 on November 5, barely above its 52-week low of $10.36, roughly a third below the $15.40 at which it closed on its Nasdaq debut in May.

Rates went up. The stock went down.

One project I have had on my “to do list” for some time is to study Wise’s interest income and the impact a “higher for longer” environment could have on Wise’s earnings power. And I want to flag two things before we begin. First, I own Wise shares, so please read everything that follows with that bias in mind. Second, the story turned out to be far messier than the “hidden rate winner” piece I set out to write. Depending on which central bank moves, the impact on Wise’s bottom line differs by more than a factor of two, and the central bank holding the biggest slice of Wise’s money matters least. Close to half of Wise’s reported pre-tax profit comes from interest it keeps above a 1% yield. And management has said fairly openly that it would prefer to hand a good part of that money back to customers.

So this analysis has a lot of ground to cover.

I’ll start with where the money sits and how it earns a return. Then I’ll explain Wise’s 1% rule and its 80/20 promise, followed by the awkward gap between that promise and what Wise actually pays out. From there, I’ll break the sensitivity down by central bank, stress-test it in both directions, and close with the question that matters most to shareholders: is the market right to shrug all of this off?

Overview of what we will cover:

• Where Wise’s $32bn of customer balances are stored, from money market funds to short-dated government bonds, and why that should be considered in this analysis

• Wise’s 1% rule and its 80/20 promise, and why a listed company would choose to give most of a rate windfall away

• Walk through what Wise earned on customer money in FY26, what it paid back, and how wide the gap between the two turned out to be

• Trace where that gap comes from, region by region, from UK e-money rules to opt-in friction in the US

• Use Wise’s own disclosures to work out what a 25bp move is worth to its pre-tax profit today

• Rebuild the picture currency by currency and central bank by central bank, and rank the Fed, the ECB and the Bank of England by how much each one moves Wise’s earnings

• Test that ranking against the 2026 hiking cycle, including the Bank of England’s November hike

• Build multiple sensitivity tables covering rate moves of up to 300bp in either direction, from today out to three years of balance growth

• Translate every scenario into a share of Wise’s earnings power and into what it means for the valuation at today’s share price

• Close with whether the market is right to shrug all of this off, and what I’ll be watching next

The full analysis starts here!

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

As a member, you get:

• Complete Access: Every deep dive in our library (65+ and counting). The most thorough analyses you will be able to get your hands on (including downloadable models).

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• The Community: Real-time discussion in the various subgroups of the subscriber chart, and networking opportunities with like-minded investors.

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You can find an overview of the companies I shared a deep dive on in the visualization below.

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He rarely speaks in public, and when he does, he tends to say things that take me some time to fully digest.

His conversation with Tano Santos at the 36th Annual Graham & Dodd luncheon hosted by Columbia Business School (the video went up on October 15) was no exception.

Over roughly an hour, the founder of Himalaya Capital covered the core principles of value investing, the strange psychology of today’s AI-driven market, the state of the Chinese economy, the shifting world order and, in the Q&A, crypto, career risk and how to stay sharp at 60.

A quick word on the man for those who don’t know him (I realize the majority of my readers probably do: Li Lu founded Himalaya Capital in 1997, so next year marks 30 years of the firm. He is one of Columbia’s most distinguished alumni, holding a BA, an MBA and a law degree from the university at the same time. Santos joked about that: why settle for one degree when you can get three? He was Charlie Munger’s long-time partner and friend, he brought BYD to Munger’s and later Berkshire’s attention, and he is widely regarded as one of the most thoughtful practitioners of value investing outside the United States.

What follows is my attempt to walk through the key insights in depth, with plenty of his own words sprinkled in between.

Takeaway #1 – Six ideas that have survived a hundred years

Santos opened by asking Li Lu what he has learned about value investing over three decades and what he wishes he had known at the start.

His answer was a neat distillation of the entire discipline into six principles:

• Three come straight from Ben Graham,

• one each from Warren Buffett and Charlie Munger,

• and the sixth is Li Lu’s own addition.

Graham’s three are familiar to anyone who has read The Intelligent Investor:

• A stock is a piece of ownership in a business, so buying a stock is the same as buying a company.

• The market exists to serve you and not to instruct you.

• And because investing is about predicting a future that is inherently unpredictable, you always need a margin of safety.

What struck me is how he framed the second one. He called it a profound insight “if you are really in the midst of the market activities.” Anyone who has watched a position fall 30% in a week knows exactly what he means.

The idea sounds trivial in a lecture hall. It’s anything but trivial at 9:05 on a Monday morning (Reddit falling 30% last Friday is the latest and most prominent example that comes to my mind).

From Buffett comes the “circle of competence principle,” and Li Lu put his emphasis like this – arguably somewhere I think most people overlook:

“The most important concept of a circle of competence is really knowing the edge of it, because most of us really are wired to think a little bit more of ourselves than we actually are. So understanding the edge is as important as understanding what is inside of the edge.”

Personally, and I apologize for adding my own ramblings here, I have always argued that it is critical to respect the edges of your circle of competence, but at the same time, you should remain open-minded about the possibility of widening the edges as you study new businesses and industries, and should not lose that hunger to “grow” your circle of competence.

From Munger, the lifelong fisherman, comes the instruction to fish where the fish are. Some industries, businesses and countries attract enormous attention and therefore competition, which averages out returns. Others attract very few fishermen. Li Lu called this a simple idea that is “amazingly effective” in practice, and given that Himalaya made its name in markets most Western investors ignored for decades, he speaks from experience.

The sixth principle is the one I found most interesting, because it reframes what wealth actually is:

“Wealth in the end is really the percentage ownership of global purchasing power. It isn’t really expressed, especially in the modern economy, in the amount of gold and diamonds or currencies of any kind. With inflation, all of those dissipate over time. What really is important is what you can really buy with it.”

His practical translation of that idea is buying great businesses in the most dynamic economies at advantageous prices, then waiting long enough for value to be created and sharing proportionately in the upside.

Santos picked up on this immediately and noted that keeping an eye on purchasing power may become critical if inflation can’t be controlled amid today’s fiscal challenges. I agree with him. As a German investor, I think about this through the lens of the euro. If your benchmark is your share of what the world produces, a savings account that keeps pace with domestic inflation is still a slow loss of relative wealth whenever the most dynamic parts of the global economy are growing faster than your home market. It’s a quietly radical way to define the goal of investing.

Takeaway #2 – Which game are you playing in the church with a casino attached?

Before getting to AI, Li Lu took a detour that I think is one of the most useful framings in the entire conversation. He divided all market participants into four types:

• There are investors who stay with a company over time to benefit from value creation.

• There are arbitrageurs who correct mispricings, buying from the pessimist and selling to the optimist in Graham’s terms.

• There are speculators, who mostly guess what other people will buy or sell and care neither about the price-to-value gap nor about value creation.

• And then there are the brokers and market makers who facilitate all of the above.

In his telling, Graham was primarily an arbitrageur, while Buffett used the arbitrage price to enter but stayed mostly for value creation.

Most people are not purists and carry a bit of all four types in them, which is exactly what an index represents: the average of all participants.

The part that made me pause a little was his assessment of what each group contributes to society: Speculation, by definition, doesn’t stay long enough for any value to be created, so the gains and losses net out to roughly zero. Add the costs of brokerage and market making and you get a net cost to the functioning of the market.

Why does the casino exist at all, then? Li Lu borrowed one of Buffett’s favorite images to answer that:

“Warren always described the stock market as a church with a casino attached to it. The church is where the values are created, and the casino is almost part of the building permit. It’s part of the necessary cost because of the human condition. 400 years ago, when it was created, this is how you really inspired the animal spirits, and 400 years later it is still doing that.”

His point to the students in the room was that this is a personal choice, and one worth making early in a career.

You can play the zero-sum game or the value-creation game.

Society, in turn, has its own choice to make: it should keep the casino from growing so large that it overwhelms the reason the market exists in the first place, which is channeling savings into productive companies that compound economic growth.

He added that it is “pretty miraculous” that this mechanism has survived 400 years of boom, bust, and giant waste and still functions as a core engine of society.

When I read commentary about markets, I find it helpful to ask which of the four participants is speaking. The answer usually explains the time horizon, the language, and the conclusions – remember that a short-seller and a long-only investor who own/short the same stock can both be right at the same time.

And it’s a reminder that you can’t be all four at once, at least not for long.

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As with all of my deep dives, I close with a companion slide deck that distills the full analysis into a visual format. It covers the 90-second pitch, the key pillars of the thesis and their respective falsification checks, the unit economics against peers, the layers of growth capital behind the ROIIC (which I plan to dedicate a separate post to!), my growth and margin assumptions, and the valuation, all on slides you can flip through in a few minutes.

If you’ve read the full series, think of it as a refresher to come back to before each earnings report, starting with the Q3 results on November 24.

Atour Lifestyle

• 2026-10: Deep Dive: Atour Lifestyle Holdings Ltd. ($ATAT) – Part 3 - ($)

• 2026-10: Deep Dive: Atour Lifestyle Holdings Ltd. ($ATAT) – Part 2 - ($)

• 2026-10: Deep Dive: Atour Lifestyle Holdings Ltd. ($ATAT) – Part 1 - ($)

If you only have ten minutes, it’s the fastest way to decide whether Atour deserves a place on your watchlist.

Quick preview:

Slide 4:

Slide 10:

Download the Full Deck Below:

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That’s quite a statement coming from me, so let me put it into perspective right away: The philosophy I follow treats activity with a good deal of suspicion, because more often than not, activity kills returns. Activity does not equal results in investing.

Hence, it wouldn’t be unusual for me to go six or even twelve months without a single meaningful transaction, apart from adding some capital from my day job here and there.

Some of my best decisions were the ones I never made. “Intelligent holding” is one term that comes to mind here. “Extreme patience” is another.

A post Dimitry Nakhla shared on Thursday captures the point well. Stephen Mandel’s Lone Pine owned roughly 9.2 million shares of Mastercard back in 2008. Since then, the fund has fully exited and re-entered the position six times.

Now here is the catch: Had it simply held on to those original shares, they would be worth about $5.9 billion today, more than a third of the entire fund.

Six round trips. In one of the greatest compounders of the past two decades, executed by one of the most respected stock pickers of his generation. If a professional with Mandel’s resources and track record can’t resist the urge to trade around a winner, what chance do the rest of us have?

So why all the activity in my portfolio over the past few weeks you may ask? As you’ll see throughout this post, I didn’t suddenly discover a passion for trading. Two events left me with a mountain of cash. The first was my (active) decision to sell Edenred. The second was largely out of my hands: Ashtead Technology received a takeover offer, and once the board recommended it, there was little reason left to hold on.

Together, the two positions accounted for roughly a third of my portfolio.

Option value of cash

I’m a big believer in the option value of cash. Cash gives you the ability to act when others are forced to sell, and that ability is worth more in some environments than in others. Right now, I’d argue it’s worth more than in most periods of the 2020s. The exuberance in semis, AI, and big tech has stretched parts of the market to levels that leave little room for error, and the macro backdrop has turned noticeably less friendly.

From my investment framework:

In general, as the expected future return of the market goes down, the option value of money increases. When the market is likely to provide poor long-term returns, this is usually right before it will return good numbers again. Put differently, as market valuations reach very high levels, the chances of a steep drop increase significantly. For example, in 2007 or 2000 investors might have expected very low long-term returns based on fundamental market indicators, but then within 1, 2, or 3 years, all of a sudden investors had very good chances to achieve returns of 15% by simply investing in a broad market

In September, the Fed raised rates for the first time in three years, to a range of 3.75–4%, with headline PCE inflation at 3.8% and oil hovering around $100 a barrel. It held steady at its meeting this week, but markets are already pricing in another hike in December. In that world, dollar cash even pays you a respectable yield while you wait.

That argument comes with a catch, though. An option only creates value if you’re willing to exercise it at some point, and cash that never gets deployed is insurance you paid for and never claimed.

I would argue that the past two weeks offered more chances to exercise than I’ve seen in a long time.

One index, two markets

I believe this is one of the toughest markets for stock pickers I’ve experienced, and at the same time one of the best.

You may wonder why?

Let me start with the tough part. Market breadth is extremely narrow. If you’re a US-focused investor and you haven’t owned the tech and AI names that make up a large chunk of the index, chances are you’re trailing the market. You may well be looking at a negative year while the headline numbers look perfectly fine.

And the headline numbers do look fine. The S&P 500 is up around 10% this year, on top of a strong five-year run, and on a rolling basis the last 15 years rank among the best stretches the index has ever (!) had.

Cullen Roche posted the chart below on Friday. Even at the intraday low of a rough week, the index sat only 3.6% below its all-time high. That’s a rounding error next to the 20% drawdown of 2022, let alone the 44% and 51% collapses of 2002 and 2009.

Now look underneath…

Roughly 82% of the index’s constituents trade more than 10% below their all-time highs. Fully 59% are down more than 20%, the conventional threshold for a bear market. Four in ten have lost more than 30%, and almost one in five has been cut in half. And I believe this chart was created more than two weeks ago. Arguably, there has been more carnage under the hood since.

A single index, then, but effectively two markets. The first is a handful of mega-caps tied to the AI build-out, heavy enough to drag the headline number wherever they go. The second is everything else, and that second market has been in a bear market for a while now.

This is also where the opportunity lies. If you work bottom-up and judge individual businesses on their own cash flows, the second market is where I’m finding high-quality companies at multiples I haven’t seen in years.

Meanwhile, index-level valuations, distorted by the mega-caps, suggest everything is expensive.

With that backdrop, let’s get to the transactions. I won’t turn this into a series of deep dives. For most of these names, I’ve written at length before, and I’ll link to those pieces. What you’ll get here are elevator pitches: what I’m seeing, why I bought or sold, and what makes me uneasy.

Update: overall, the post still ended up being 10,000 words long, so I guess there are (hopefully) some valuable insights or some food for thought for you to find

One more caveat before we start. I’m writing this off the top of my head, without pulling up exact dates and execution prices, so treat any numbers on my own trades as approximate.

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

Sell Decisions

Let me start with the sells, since they set everything else in motion. Both exits were full exits, and both had very different reasons behind them.

Edenred

It all started with Edenred. I sold my entire position somewhere above €29 per share, on Friday, October 16, if memory serves. Edenred made up close to 10% of my portfolio at the time. I bought my initial tranches around €24 and €22 and doubled the position at much lower levels, pretty much at the exact low, so the exit came close to a double on that addition.

My reasoning was simple. Edenred is still cheap in my view, but the IRR profile of a stock looks very different at €29 than at €20 or €16. Underneath the regulatory noise, going forward, the business grows somewhere in the mid-to-high single digits. Management’s targets for 2027 and 2028 call for 8–12% annual EBITDA growth, after a 2026 reset in which EBITDA is guided to decline. That’s a respectable trajectory. I simply preferred to move the capital into businesses compounding intrinsic value at 15% or more, whose long-term trajectory I like better, and that are less dependent on a market rerating.

Then the third-quarter results came out on October 21, five days after I sold. Operating revenue was down 1.2% on a comparable basis. New meal voucher rules in Italy and Brazil, including commission caps and the opening of Brazil’s system to open payment networks, keep eating into the core Benefits business. Excluding those effects, organic growth was 6.6%, and Mobility grew a healthy 10.7%. The market didn’t care. The stock fell 5.5% to around €27.60 that day and has since slipped to roughly €24, about 17% below where I sold.

I’ll be honest. I haven’t studied the release in any depth, and it would be dishonest to claim I saw it coming. I got lucky with the timing. Investors have a nasty habit of judging decisions by their outcomes, something Annie Duke calls “resulting,” and a well-timed exit tempts you to rewrite the story as foresight. I’d rather call it what it was: a reallocation decision that happened to land just before a bad print.

There’s also a less flattering way to look at this trade, and I think you deserve to hear it. At €24, Edenred trades near multi-year lows, management is buying back stock under a program of up to €600 million through November 2027, and the regulatory headwinds will eventually lap themselves. If the 2027–28 targets hold, a patient owner could earn a perfectly decent return from here. By selling, I swapped a cheap, slower-growing business with visible regulatory risk for faster growers at higher multiples, plus a few names (as you’ll see) that are anything but low-risk. Whether that was the right decision won’t be clear for some time.

Ashtead Technology: 1% of upside against 44% of downside

Ashtead was a different story, and the decision was much easier.

For those who haven’t followed the saga: in September, Ashtead confirmed it had received a takeover approach from Ember Infrastructure Management, a US private equity firm. The board unequivocally rejected the first two proposals. On October 21, it announced that it had agreed to Ember’s fourth proposal of 615p per share in cash, valuing the company at around £505 million. That’s an 81% premium to the undisturbed close of 340p on September 22, and the board intends to recommend that shareholders vote in favor. Completion is expected around the turn of the year.

The shares jumped roughly 15% to about 609p that morning, and I sold my entire position the same day. At that price, Ashtead made up about a quarter of my portfolio.

At 609p, the remaining upside to the 615p offer was about 1%. Spread over a few months until completion, that works out to an annualized return of a few percent, roughly what dollar cash pays you right now. The downside, on the other hand, was substantial. Deals of this kind can still fall apart. Financing can wobble, regulators can intervene, the shareholder vote can disappoint, or something can surface during due diligence. If that happened, the stock would likely fall back, maybe even toward the undisturbed level of around 340p, a drop of more than 40%.

You can turn this into an implied probability. To make money holding a stock at 609p that either goes to 615p or falls to 340p, you need to believe the deal closes with more than 97–98% certainty. I’m sure the deal is likely to close. I’m not sure it’s that likely, and even if it is, I’d be taking on a fat tail for a sliver of return.

Merger arbitrage is a perfectly legitimate strategy, but it’s a job for specialists who can diversify across dozens of deals. With a quarter of my portfolio in a single situation, holding made no sense for me.

The part that stings is something else. I’ve argued before that Ashtead’s intrinsic value is above 615p, and I still believe that. Private equity buyers don’t pay full price for businesses out of generosity. They buy when they see more value than the public market is willing to price. Every takeover of a company you own outright caps the compounding you signed up for, it triggers tax payments, and Ashtead is now the fifth company I’ve covered in a deep dive to attract a takeover approach. It’s a nice validation of the work. But it’s also a reminder that the public market keeps handing quality small caps to private buyers at prices that look generous only against a depressed share price.

What do you do with a third of your portfolio in cash?

Normally, I’d be perfectly comfortable sitting on that much cash for a while. After everything I wrote above about the option value of cash, you might expect me to have done exactly that.

I didn’t wait long, though, because I was seeing plenty of opportunities, and I’m not alone in that. Many investors, peers such as , or , superstar investors such as Bill Ackman, and many lesser-known active fund managers whose letters I read, and whose judgment I respect, have been saying the same thing in recent months.

So let’s take a look at what I’ve been buying. I will cover eight different stocks that I either bought for the first time or added to below.

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Two key questions remain, and they decide whether Atour will earn attractive returns for shareholders:

• who controls the cash, and

• what is the business worth? (and how large is the disconnect to the trading price?)

Atour’s founder, Haijun Wang, has run the company for fourteen years and owns almost a fifth of it. He also controls 69% of the votes, chairs the committee that sets executive pay, and holds most of the options it grants, some with an exercise price of one cent. Trip.com, China’s dominant online travel agency, owns another 13.7%.

That’s a curious stake to hold in a company whose strategy rests on needing online travel agencies as little as possible. I look at what all of this means for minority shareholders like you and me.

Then I turn to the numbers that drive the price: how big Atour’s market is (TAM analysis), how fast the company can realistically grow into it, and where margins are likely to settle.

My own revenue forecast lands noticeably below the sell-side consensus, and I explain exactly why.

Let me jump back into this exciting business story.

As a reminder: What this deep dive series covers:

• The 90-second pitch: eight reasons to own Atour

• What went wrong, and why a company growing 40% sits 25% below its high

• The origin story: a budget-hotel veteran, a remote village in Yunnan, a near-bankruptcy at 30 hotels and two aborted IPOs

• How a pillow rewired the business, and the quarter retail gross profit overtook the hotels

• The “zero-CAC” claim under the microscope, and what the margin math says about it

• Unit economics side by side: Atour vs. Ji Hotel vs. Vienna, plus a stress test of what a 10% RevPAR drop does to franchisee payback

• Updating a 2024 valuation framework I came across: why the hotels alone no longer pay for the stock

• 120 million loyalty members vs. roughly 65 million room nights a year

• The customer: an illustrative lifetime value calculation, and why a frequent guest is worth roughly ten times a pillow buyer

• The uncomfortable parts: hygiene complaints, pressure on staff to sell pillows, and a moat critics call “a piece of sponge”

• Ownership stakes

• Industry analysis

• ROIIC calculation

• Growth drivers and forecasting

• Margins outlook

• Valuation (including a downloadable scenario-analysis model)

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If you haven’t read it yet, I’d start there, because this part builds directly on it.

Now comes the part I enjoy most. A pitch is cheap. Anyone can list five reasons to own a stock, and the hard work starts when you try to break them. In this second part, I take a closer look at three of the eight pillars of my hypothesis (the one’s where I felt like I could actually add something meaninful new) and then try to stress-test each one.

• Can a hotel room replace an ad budget, and what does the margin math say about the word “zero” in zero-CAC?

• How does Atour grow with other people’s money, and what happens to that model when franchisees stop making money?

• Why do hotel owners keep choosing Atour over H World’s Ji Hotel, even though an Atour costs more to build?

• Can a hotel chain own a consumer category that critics describe as a piece of sponge?

• And who owns the guest when 120 million loyalty members meet roughly 65 million room nights a year?

I will inevitably have to repeat a couple of points from part 1, whenever they are relevant for the pillar at hand, but this will strengthen your understanding of the business, I think. And then, for every pillar, I spell out the conditions that would prove me wrong and the metrics/numbers I’ll track to find out. Not all of them came out of the exercise unscathed.

PS: Atour was down close to 7% yesterday – and I was buying some more –, and is bouncing back 6% today. I could see this being a volatile stock in the coming weeks, and from a pure chart perspective, there’s more downside than upside in the near-term, I assume (this would deserve its own discussion though).

PSS: Let’s discuss the business in the subscriber chat:

PSSS: This makes me think it’s not the worst of times to look at Chinese stocks again:

The full analysis starts here!

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

As a member, you get:

• Complete Access: Every deep dive in our library (65+ and counting). The most thorough analyses you will be able to get your hands on (including downloadable models).

• Access to my 150+ Global Watchlist: And How To Use It to Outperform the Market!

• Slide Decks: Every deep dive now comes with a companion slide deck. It’s the whole argument in compressed form – the hypothesis, the business, the competitive position, the valuation, and the case against – for the days when you don’t have an hour to spare but still want the shape of the thing. Paid subscribers get both, the long piece and the deck.

• The Community: Real-time discussion in the various subgroups of the subscriber chart, and networking opportunities with like-minded investors.

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

• Downloadable Visual Blueprints: Direct access to high-resolution PDF reference sheets distilling timeless investment classics, insights from my proprietary investing framework, and essential valuation mechanics into structured visual architecture. Print them, save them, and build your own institutional reference binder.

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

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

You can find an overview of the companies I shared a deep dive on in the visualization below.

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Luckily, I did not.

Because Rob Vinall had a new position. And I bet almost no one is aware of it. It wasn’t on Dataroma or in his latest 13F, and he hadn’t mentioned it in any of his latest fund letters.

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However, it sat among the top 10 holdings in his fund’s factsheet, a document most people never open. You have to log in on the website (with an account of course) to access it. Nicolas went that extra mile.

The company was Atour Lifestyle Holdings, a Chinese hotel chain I had barely heard of. And I am tempted to think most of you haven’t either.

The fact that this is a new position but already sized to be among the top 10 names … that detail stuck with me. Vinall runs a concentrated portfolio and isn’t known for impulse buys. A new name doesn’t land in his top 10 by accident, so he must have sized it with conviction at cost.

He also knows China far better than most Western investors. He visits the country at least once a year, and his “Postcards from China” posts on his blog are well worth your time if you haven’t read them.

When someone with that kind of on-the-ground experience, someone whose investment philosophy I strongly resonate with – very high quality focus, growth oriented, and unlike many of his “quality peers”, Rob is fairly valuation disciplined – makes a sizable bet on a Chinese consumer business, I pay attention.

As I said, his last 13F, as of June 30, doesn’t show Atour, which suggests he bought in the last few months.

What it does show is H World Group, the Chinese hotel giant and Atour’s largest competitor in its segment. My guess is that Vinall found Atour while studying H World. The more he looked, the more he liked the smaller, faster-growing rival. I can’t prove that, but my hunch is that he’s onto something here (throughout this write-up we will also come back to his H World thesis which he covered in one of his letters).

When Nicolas briefly mentioned the idea, I only heard three words:

• hotels,

• franchise,

• cheap.

That combination was enough to get me intrigued.

Over the years, I’ve studied the big US hotel franchisors like Hilton, which Bill Ackman owned for years, and Marriott. They are some of the best business models in public markets in my view (for reasons to be discussed throughout this write-up). Property owners pay to build the hotels, and the brand collects a fee on every night sold. They need almost no capital to grow, and given that we are in 2026, we might mention that they are about as AI-proof as a business gets (reducing the embedded tail risk), because you can’t download a night’s sleep.

So when someone pointed me to an asset-light hotel franchisor growing revenue at 30–40% at a mid-teens earnings multiple, of course, I had to dig in.

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What I found was stranger (yes, strange) and more interesting than a Chinese Hilton. Atour does run more than 2,100 hotels, almost all of them funded by franchisees. Yet, Atour also sells pillows. Lots of them. More than 12 million units of a single memory foam pillow, sold mostly online to guests who slept on it in an Atour room the night before. That retail business has gone from roughly 4% of revenue in 2019 to about 45% in Q2 2026. By one rough calculation, it now earns more gross profit than the hotels. Atour has turned into a hotel chain where the rooms double as showrooms for a sleep brand, and as far as I know, no hotel company in the world has done that at this scale.

The stock shows how unsure the market is about what to make of it. At around $31-32 per ADS (as I write this), Atour is up about 146% since its listing in late 2022 and has compounded at roughly 19% a year over the past three years.

That’s a decent run by any standard. It’s also down about 25% from its peak, even though Q2 2026 revenue grew 41% and net income 29%.

Something isn’t adding up, and those are the situations I like to study.

The fundamentals have outrun the share price by a wide margin. Over the past three years, revenue has compounded at about 55% a year, EBIT at about 87%, and net income and EPS at roughly 90%.

I’d take those figures with a grain of salt, since they start from a pandemic-depressed base in 2022.

The five-year figures are still impressive though, at about 42% for revenue, 60% for EBIT and 44% for free cash flow.

Meanwhile, the multiples have collapsed. Atour trades at about 15x trailing earnings and 12x forward earnings. Its EV to EBIT is around 8–9x, and price to free cash flow about 13x.

Its own historical averages are 48x earnings and about 32x EV/EBIT. Those averages are inflated by the IPO period, when earnings were still depressed, so I wouldn’t anchor on them.

But even with that caveat, this is the cheapest the stock has been relative to its earnings since it went public. And ATAT has never been cheaper on a sales basis too.

So is the market missing something, or is it seeing something I’m not?

There are reasons for skepticism. RevPAR at mature hotels is falling. Marketing spend is rising faster than revenue. Hotel peers have launched their own copycat pillows. Management’s own guidance implies a sharp slowdown in retail in the second half of the year. The hotel chain at the center of all this sits in a country many global funds simply won’t touch. Q3 results are due on November 24.

As you can tell, there is a lot to unpack! And I hope you are as much looking forward to it as I am.

What this deep dive series covers:

• The 90-second pitch: eight reasons to own Atour

• What went wrong, and why a company growing 40% sits 25% below its high

• The origin story: a budget-hotel veteran, a remote village in Yunnan, a near-bankruptcy at 30 hotels and two aborted IPOs

• How a pillow rewired the business, and the quarter retail gross profit overtook the hotels

• The “zero-CAC” claim under the microscope, and what the margin math says about it

• Unit economics side by side: Atour vs. Ji Hotel vs. Vienna, plus a stress test of what a 10% RevPAR drop does to franchisee payback

• Updating a 2024 valuation framework I came across: why the hotels alone no longer pay for the stock

• 120 million loyalty members vs. roughly 65 million room nights a year

• The customer: an illustrative lifetime value calculation, and why a frequent guest is worth roughly ten times a pillow buyer

• The uncomfortable parts: hygiene complaints, pressure on staff to sell pillows, and a moat critics call “a piece of sponge”

• Ownership stakes

• Industry analysis

• ROIIC calculation

• Growth drivers and forecasting

• Margins outlook

• Valuation, and what I think Atour is worth

The full analysis runs long, as most of my deep dives, and most of it sits behind the paywall. If you’re a free subscriber and the list above makes you curious, this is a good time to upgrade to paid. You get this report in full, along with every other deep dive I publish, access to our community, the digital meetups, my AI tools, etc. etc.

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So again, if you’re not part of my investing community yet, consider joining. Atour is only one of many ideas members like Nicolas bring up there, far more than I could ever cover on the blog.

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Some of my most thorough research never earned me a cent.

A while ago, I spent hours and hours working through DigitalOcean’s filings, and most of that time went into one narrow question: how management had structured its debt and how it restructured it later.

I read the convertible note terms, mapped the maturity schedule, and went through every financing-related footnote and 8-K I could find.

I doubt many investors who own the stock today have done the same. At the end of it all, I couldn’t get comfortable with the balance sheet risk. So I sold the position I had built a few months earlier.

The stock then went on a spectacular run without me.

Ouch! That one stings a little.

I refuse to look up the stock chart of DOCN regularly to avoid the pain it will create in my stomach. After all, I realize investing is a game of constant regret. It’s part of the game. Still, if I held it up to the $150/share point (it peaked above $170), it would probably represent close to 50% of my portfolio today (it was a 10%-ish position back then). Now that I had to pull it up for today’s post, I’m somewhat pleased the share price has come down a little 😉

Read my DigitalOcean deep dive here:

But honestly, I’d still make the same decision today, I think, and regular readers know why. I care more about the quality of the process and the decision than about any single outcome, because outcomes in markets are heavily shaped by luck.

Tiho Brkan recently put this better than I could:

“The issue today, which wasn’t such a big deal during Buffett’s and Munger’s ‘prime time’ period, is the competition level amongst market participants. As everyone’s skill increases, it becomes harder to differentiate yourself (irrespective of competence), and thus, luck instead of skill governs more and more of the outcome.”

If luck explains a growing share of outcomes, the obvious question is what is left for skill. My answer has stayed the same for years. Skill shows up in how you gather information, how you rank it, and most importantly, how honestly and critically you judge what you find.

That is what today’s Blueprint is about.

The material comes from my own investing framework, a three-book series I wrote for myself between 2019 and roughly 2022. I’ve added and cut things along the way, but the core process has barely changed.

What has changed is the speed with which I can process information.

PS: If you want to dig deeper into this topic, I also recommend reading this “classic” I released last year:

Where does an edge come from?

Almost everything you need to analyze a public company costs nothing. Annual reports, quarterly filings, proxy statements, earnings call replays, and investor decks are all a few clicks away.

Compare that with the high-frequency trading world, where firms spend millions to place their servers as physically close to an exchange as possible because a microsecond can decide a trade. By most estimates, these firms account for a large share of U.S. equity volume. What they buy is speed, and that advantage lasts only as long as their infrastructure stays faster than the next firm’s.

That contrast is a good moment to be precise about a word investors use far too loosely. I flinch a little whenever someone says they “have an edge.” What you possess are skills. An edge is an external development, a situational setup, or a behavioral inefficiency that appears in the market for you to exploit. It is an event. And events end. Think of a broad market panic, when the wisdom of the crowd turns into the madness of the crowd and excellent businesses get sold alongside weak ones. That window can close within weeks. You can learn to recognize setups that favor you and lean into them when they appear, but no process lets you store them and pull them out on demand.

Reading primary sources falls on the skill side of that line. It is learnable, repeatable, and free.

If you carefully read one annual report, or better, the last two or three (or more!), you have probably done more homework than most people holding the stock.

It sounds too easy to be true. It isn’t. People compare refrigerators for weeks and then buy a stock on a tip.

That gap in diligence is what lets the prepared investor act when an edge finally appears. When a stock collapses on a headline that one footnote in the 10-K would have put into context, the investor who has read that footnote can move while everyone else is still guessing.

Joel Greenblatt described the alternative memorably:

“Choosing individual stocks without any idea of what you’re looking for is like running through a dynamite factory with a burning match. You may live, but you’re still an idiot.”

The opening slide of the Blueprint frames the mindset that makes the rest of the deck work. A share is a fractional claim on a living business, with customers, competitors, a management team, and a balance sheet.

Once you take that seriously, researching before you buy stops feeling optional.

What is new in 2026 is the friction around reading. Any chatbot can now produce a ten-line summary of a 10-K in seconds.

That is useful, sure. It also tempts investors to outsource the skill itself, and I think that’s a trap.

A summary is someone else’s view of what mattered in a filing, and in my DigitalOcean work the answer was buried in footnotes no summary would have highlighted.

Skills you stop practicing tend to fade, and they tend to fade right before the market offers the setup that would have rewarded them.

Which layer of the onion are you reading?

A mental model I use often is what I call the information onion.

It sorts sources along two dimensions, relevance and trustworthiness, and arranges them in layers.

At the core are 10-Ks, 10-Qs, 8-Ks, and proxy statements. These are documents where management is legally required to give its most complete assessment of the business, and it is accountable for what it writes.

The next layer holds press releases, investor decks, and earnings calls. They still come from the company, but they reflect what management wants to tell you. Further out sit write-ups, articles, blog posts and podcasts, which interpret the core material with varying skill and bias. The outer skin is noise: rumors, social media chatter, analyst price targets and satellite photos of a company’s headquarters.

The structure is easier to remember as a picture, so this is the slide I’d keep within reach whenever I open a new research folder.

The discipline is to work from the inside out. Most investors do the reverse. They start with a thread, a podcast clip or a price target, form an opinion, and then go looking for confirmation. Aswath Damodaran’s advice addresses exactly this habit:

“Confine your background research on the company to information sources rather than opinion sources; in other words, spend more time looking at a company’s financial statements than reading equity research reports about the company.”

When I first wrote this framework, the outer layers looked different. Investors searched for $FB on Twitter. Today Facebook is Meta, Twitter is X, and a new kind of source has entered the onion. An AI summary with no links back to its source documents belongs in the outer layers. It is an opinion about a filing, and it carries an extra risk: it may present invented facts with complete confidence.

This is why I’ve built my process around source-grounded tools. For my deep dives, I load primary documents into NotebookLM, which answers only from the files I give it and links each answer to the passage it came from. I wrote about that process here.

That keeps the AI working at the core of the onion rather than adding another layer of noise. It still makes mistakes, such as attaching a number to the wrong year, so I treat everything it produces as a first draft and check the key figures myself.

The result surprised me. AI has made my research faster per question, yet my total time per deep dive has gone up, often past 40 hours, because I can now go much deeper into the primary material. My latest deep dive shows what that looks like in practice.

Can you understand a business in under an hour?

The second mental model is triage. A full 10-K can run past 150 pages, and few people have time to read every filing of every company on their watchlist.

You don’t need to. Four sections do most of the work.

• Item 1 explains how the business makes money, who it competes with, and whether it competes on price, selection or convenience.

• Item 1A covers risks. Most of that section is legal boilerplate, so look specifically for the company- and industry-specific risks.

• Item 7, management’s discussion and analysis, is where executives tell you what they think matters.

• Item 8 holds the financial statements, where growth, margins, cash flow and debt reveal the underlying story.

If I’m short on time because I have a busy week or month, I give myself 45 to 60 minutes per reading session, and most of that time goes to the business section. Time pressure helps me focus. Highlighting helps me stay engaged. And if the business doesn’t interest me after Item 1, I stop.

That’s a fair outcome for the session.

Furthermore, owning a company you don’t care about becomes a double burden the moment the stock falls, because you are losing money on something you never wanted to understand in the first place.

On this concept, I have this slide I created years ago stored on my computer:

The triage further above reveals something beyond the numbers. Every annual report tests how clearly management can explain its own business. Glossy versions designed for marketing tend to work against clarity, and my rule of thumb is that the more colorful the page, the less useful the information.

The plain-text 10-K is usually more informative.

But the deeper signal is whether you understand the business better after reading than before. If you don’t, the problem may lie with the authors.

Seth Klarman put it bluntly:

“If you don’t quickly comprehend what a company is doing, then management probably doesn’t either.”

AI has compressed this step for me as well. The hour that once went into finding the right passages now goes into questioning them. The principle hasn’t changed.

Triage tells you where to spend your attention, and it’s the first step of the analysis, never the last.

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

Who gets paid, and for what?

The third model is the one I’d most like more investors to adopt: read the proxy statement before you trust the people running the company.

Filed ahead of the annual meeting, the proxy shows how executives are paid, which targets their bonuses depend on, what the board earns, how the board has changed, and which relationships connect directors and management. It also includes career histories. I generally trust founder-owners and executives who rose through the company more than leaders brought in from an unrelated industry, and the proxy is where that distinction becomes visible.

Pay design is a revealing element too. Management can talk about long-term value creation, but if bonuses depend on short-term earnings per share, you know which goal will win in a difficult year.

Ownership filings round out the picture. Form 4s show insider buying and selling, while Schedules 13D and 13G show who has crossed the 5% threshold. The SEC has since tightened several of these beneficial ownership deadlines, so that data now arrives faster than when I first wrote the framework.

The SEC’s filing system can feel like a maze of letters and numbers, which is why I organized it as a map. The slide below groups the filings by what they tell you: core reporting, ownership and incentives, deals, foreign issuers and IPOs. Once you know which form answers which question, the maze becomes a toolkit.

None of this is exciting reading. That’s exactly why it remains underused. Peter Lynch reminded investors that research is work:

“‘Play’ is the wrong verb for the stock market. This is work.”

Does a good process guarantee a good outcome?

No. DigitalOcean proves that. The research was careful, and the decision was consistent with my framework, and I still missed a big move.

A good process gives you something more durable than any single return: a decision you can explain, defend, and revisit.

That’s why every research process I run ends in writing. I record the date, a one- or two-sentence business description, a pass through my checklist, a concise thesis, and the few variables that drive long-term value creation. Then I review it regularly.

Over time, that record is the only honest way to separate the decisions I got right from the ones where luck carried me.

Before that thesis gets written, I look at the human layer: the unscripted Q&A on earnings calls, years of shareholder letters, critical write-ups, and conversations with people who use the product or work in the industry. A CEO who openly names past mistakes earns a lot of credit with me. A letter full of hype after a bad year earns the opposite.

As competition rises and luck explains more of each individual outcome, the controllable part of the job becomes more valuable. You control which layer of the onion you read. You control whether you check the proxy. You control whether your thesis is written down where you can’t revise it after the fact.

The Blueprint

I distilled the full lesson into a clean visual deck: the case for treating stocks as businesses, the information onion, the one-hour 10-K review, the SEC filing map with its incentive and ownership signals, and the human layer of earnings calls, shareholder letters and conversations with customers, ending with the written thesis.

You’ve seen the cover slide above. I’ll insert the second slide below.

The full series is meant to be the kind of reference you keep open next to a filing.

Downloadable PDF

The complete image series is free to review for everyone who is subscribed to the blog. Simply subscribe below (if you haven’t already), and you can then access and download the Blueprint as a PDF so you can store it – and all old and future Blueprints – nicely on your computer.

Until next time, keep compounding.

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Strictly speaking, I discussed it in “Not All Reinvestment Is the Same: How Two Companies Reinvented Growth Strategies“

Given how much ink I spill on far smaller positions and names that don’t make it into my portfolio, that may strike you as odd.

The explanation has little to do with the company itself, and a lot to do with the kind of attention it asks of me as a shareholder. Or rather, the attention it doesn’t ask for.

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When drafting this post (it’s not my typical deep dive, following my typical structure, but I believe it covers the thesis quite nicely nonetheless), I remember a distinction I drew in a post last year. More specifically, in an update on Wise back in mid-2025, I drew a line between two types of holdings:

“Every portfolio has its needy stocks – the ones that seem to require constant attention, where each earnings call might reveal a twist or signal a derailment. You watch them closely, read between the lines, scrutinize segment margins, and debate strategy with yourself. They’re not necessarily bad businesses, but they often come with more moving parts, more competitive risk, or more volatility in execution (which may have led to an attractive valuation in the first place).

Then there’s the other bucket: the ones you don’t have to babysit. You check in, not out of fear something’s gone wrong, but out of habit and discipline. These companies quietly go about compounding intrinsic value. Wise fits squarely into this category. I still read the full report. I still think critically about what might break the thesis. But the exercise is different. I’m not looking for a story to unravel – I’m tracking the same handful of long-term KPIs I’ve been following for months or sometimes years. And each time I check, I’m reminded why it’s in the portfolio.”

Funnily enough, Wise has since switched buckets. Between the stablecoin debate, mounting regulatory scrutiny, and the denial of its U.S. national trust bank charter, it has run into an almost perfect storm of headwinds that currently dominates the narrative, and I suspect it is clouding a lot of investors’ judgment.

That’s a topic for my next post, which I have planned already. Today, however, belongs to IBKR, which has always been my textbook example of the second bucket.

A few days ago, while reflecting on my first decade as an investor, I tweeted the following:

I meant every word of it. If anything, the business has outrun the expectations I had when I first bought it. Number of accounts, client equity, margin balances, and pretax earnings have all compounded faster than my base case, and the move from a low-teens to a now mid-20s EBT multiple (and higher at the recent peak) came on top of that.

My own contribution was mostly limited to getting in the way twice. Lesson noted.

So why write about it now? I still believe there isn’t a great deal to say about IBKR in any given quarter, and that’s precisely what makes it such a pleasant holding. But the third quarter was a little different. For the first time in a while, a few numbers softened, and trading activity cooled noticeably. The market noticed too. IBKR’s stock is now down close to 17% from its previous high, uncomfortably close to the 20% drawdown that technically marks bear market territory.

At the same time, I did something I hadn’t done since initiating the position in early 2024. I added to my IBKR position for the first time.

On the surface, those facts may seem to pull in opposite directions: a cooling business, a falling stock, and an investor buying more.

The rest of this post explains why I think they fit together. Before I get to the interesting parts, though, let me just very briefly walk you through the quarter itself.

Disclaimer:

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

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Welcome back to my perception change series. If you’re new here, the short version is this. Ember Infrastructure Management made a 615p per share proposal for Ashtead Technology, a company I own and have written about at length, and I started preparing for the possibility of having to redeploy that capital. Instead of letting a deal force my hand, I’m working through the seven highest-ranked companies on my watchlist one by one (in fact, I can think of more ideas that seem interesting, and I might add more to the list I cover in this format), each through the lens of my perception change framework.

So far we’ve covered Grab, Novo Nordisk, LVMH and Hermès - check out my homepage or the Library post to find them.

Idea #5 is a special case. I published my Topicus deep dive in March, when the stock traded at roughly C$94, and I decided to stay on the sidelines. Seven months later, the share price is almost exactly where I left it, while a lot has changed underneath. So I revisited the idea over this weekend and put together an update post.

The stock is optically cheaper (see updated valuation below). Yet, there have been some major developments that I consider net-negatives (even though the weighing of these is a subjective call you have to make). Arguably, the price stood still, and the perception didn’t, so the question is whether the market is now right to keep its distance.

Disclaimer: As of the date of publication the author owns no shares in the company; but that may change. The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

Idea #5: Topicus

Topicus is another idea in this series I have already covered in depth this year. I published my deep dive in March (linked below) – I’m pretty sure the most comprehensive analysis of Topicus on the Internet (and I’d refer you to this deep dive series for the initial hypothesis and all the details regarding this business, its structure, its ownership, how to value it, etc., etc.) –, when the shares traded at roughly C$94, and I ended up on the sidelines.

I liked the business, and I liked the setup, but I had no idle cash at the time, didn’t want to sell anything else, couldn’t get entirely comfortable with the AI risk (which I assess to be much lower compared to other software peers, though), and I wanted a wider margin of safety, ideally somewhere around C$60 to C$65.

My AI disruption risk weights back then were 50% defensible, 30% beneficiary and 20% “vertical market software is cooked,” and I built the overall case on five BAMs:

• a record-low valuation,

• a 2014/15-vintage Constellation,

• European fragmentation,

• experienced CSI-trained leadership, and

• sticky software.

Seven months later, the share price is almost exactly where it was, at C$94 on October 16.

That stability hides a lot of change underneath. The CEO behind my fourth BAM has retired, and Topicus is pushing its decentralized model one level further up by turning its operating groups into autonomous, stand-alone entities – effectively the CSU-playbook.

“Enhanced Decentralization”?

In the September 14, 2026 press release announcing van Poelje’s retirement, Topicus also announced:

“As part of these leadership changes, the Topicus Board plans to implement an enhanced decentralization strategy for its TSS operating groups. Each such operating group will be expected to operate as an autonomous, stand-alone entity, while respecting the rights of the parties to Topicus’ Investor Rights and Governance Agreement.”

“The Total Specific Solutions Public operating group, led by Han Knooren, expects to change its name in the near future, as it transitions into an autonomous, stand-alone operating group, which name change will be publicly announced once complete.”

I’m not entirely sure what this truly means to be fully honest. Topicus has always been built on decentralization. The business units have always been decentralized, so this is about a different layer: the operating groups’ relationship to the top of Topicus. The release doesn’t spell it out, so everything below is just my interpretation.

TSS Public and TSS Blue sit under one TSS umbrella (TSS Europe B.V.). They share a brand and, in practice, have had van Poelje as the single capital allocator and deal approver at the top. Making each group “autonomous, stand-alone” most likely means:

• each group runs its own M&A pipeline, capital allocation and hurdle rates

• capital moves between the groups and the top in a more formalized way, closer to how Volaris, Harris or Jonas work inside Constellation

Dropping “TSS” from TSS Public’s name is the visible sign that the shared umbrella is weakening. Each group becomes its own brand, like the Topicus operating group already is.

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Why now? Zanders is both Topicus CEO and head of TSS Blue. If the umbrella stayed strong, Knooren, who runs TSS Public, would effectively report to the head of a rival group. Giving each group autonomy avoids that, and it means no one has to replace van Poelje as the central allocator.

In other words, the decentralization is the succession plan. This is my read of it at least - what is yours?

As a reminder, Topicus doesn’t own all of the businesses directly. They sit in Topicus Coop, where Joday, Ijssel and Constellation have contractual rights under the Investor Rights and Governance Agreement:

• Joday must approve every acquisition

• deals over US$100M need Constellation board approval

• nomination rights

• the call options, which are defined by holder group

So the clause says the operating groups gain autonomy inside that framework, not by changing it.

Furthermore, Topicus made its first public take-private attempt, in Australia of all places, and was rejected.

Deal activity slowed sharply while the balance sheet was deleveraged.

AI fears haven’t shown up in the numbers, with recurring organic growth steady at 6–7%, and still the stock has missed the software rebound that lifted Constellation about 40% off its lows.

So the questions to ask have shifted slightly since March. This post is a brief update with some fresh thoughts and an emphasis on both quantitative and qualitative perception change analysis.

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Disclaimer: The content provided is an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. The stocks and funds discussed are examples only and may not be appropriate for your individual circumstances. Before making any financial or investment decisions, I recommend you consult a financial planner or advisor who can take into account your personal investment objectives, financial situation and individual needs. In no event shall René Sellmann be liable to any viewer for any damages of any kind arising out of the use of any content published on this channel, including, without limitation, investment losses, lost profits, lost opportunity, or special, incidental, indirect, consequential or punitive damages.

Warren Buffett once said that when memos from Howard Marks arrive in his mail, they are the first thing he opens and reads, and that he always learns something from them.

“When I see memos from Howard Marks in my mail, they're the first thing I open and read. I always learn something, and that goes double for his book.”

I understand the impulse. Over the years, I have noticed that Marks’s memos come in two flavors:

• Some revisit timeless principles about risk, psychology, and price, and reading them feels like returning to a favorite book.

• Others are dispatches from the current environment, in which Marks tells you what he sees in the market right now and what worries him about it.

Both are valuable. They are valuable in different ways, though. The first kind sharpens your framework, mental model database, and thinking. The second shows how to apply that mental toolbox to the real world, or it might confirm or challenge your views on the current environment and opportunity set.

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For this Blueprint I went back to the very beginning: thirteen memos written between 1990 and 1998, first at Trust Company of the West (TCW) and then at the newly founded Oaktree.

I expected a pleasant history lesson. What I got was a week of uncomfortable déjà vu, because some of the present-day, 2026 headlines I am reading alongside these memos these days could have been footnotes to them.

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Today, Netflix announced that it will stream every match of the 2030 FIFA World Cup exclusively in Spain and Andorra.

Before I share my thoughts, I want to be upfront about what kind of post/analysis this is: Long-time readers know that I like to test an investment view along three dimensions of good decision-making:

• common sense,

• theory and

• empirical evidence.

The more of these dimensions a view takes into consideration, the higher the quality of the assessment.

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This post leans almost entirely on the first one. It is my common-sense reading of what live sports does to Netflix’s economics, built on a handful of numbers management has shared, with some theory borrowed where it helps. What it lacks is the empirical work – data on retention after live events, on returns from sports rights across the industry, and on how Netflix’s own returns change as live grows – that would turn a hunch into a conclusion.

Please read it as a hypothesis I intend to test further or encourage you to think about critically.

With that caveat, my first reaction was that this is the right strategic move. My second reaction was that it is probably also one of the least attractive dollars Netflix will spend this decade.

I think both can be true at once.

Disclaimer: As of the date of publication the author owns no shares in the company; but that may change. The analysis presented in this blog may be flawed and/or critical information may have been overlooked. The content provided should be considered an educational resource and should not be construed as individualized investment advice, nor as a recommendation to buy or sell specific securities. I may own some of the securities discussed. The stocks, funds, and assets discussed are examples only and may not be appropriate for your individual circumstances. It is the responsibility of the reader to do their own due diligence before investing in any index fund, ETF, asset, or stock mentioned or before making any sell decisions. Also double-check if the comments made are accurate. You should always consult with a financial advisor before purchasing a specific stock and making decisions regarding your portfolio.

The fine print behind the headline

The headline sounds more exclusive than the deal really is. Netflix will make one match a day free to watch in Spain, and a package that includes every Spain match, both semi-finals and the final will be shown on a national free-to-air broadcaster.

In other words, the games most likely to bring in a casual Spanish viewer who would not otherwise subscribe will be available without a subscription. This follows a familiar pattern. When Netflix bought the US rights to the Women’s World Cup, FIFA reportedly agreed to sell only on the condition that some matches were sublicensed to a traditional media company.

"Few events unite people like the World Cup. I was in the stands this year as Spain lifted the trophy and witnessed the passion, the pride, the stories – they all become part of a nation's culture and are remembered for generations. With Spain set to host in 2030, we're thrilled to bring every match to fans across Spain and Andorra on Netflix. For Spanish football fans, welcoming the world as reigning champions on Netflix will make this a moment unlike any other. And, our expanding partnership with FIFA, including the Women’s World Cup in 2027 and 2031 for the U.S. and Canada, reflects our continued commitment to bringing fans closer to the world’s biggest sports moments." -Bela Bajaria, Chief Content Officer, Netflix

FIFA wants reach, and Netflix wants subscribers, so the most valuable inventory ends up shared.

That is the first thing I would hold against the bull case. The exclusivity that justifies the presumably high price is narrower than the press release suggests.

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Five percent of the budget, one percent of the hours

The second issue is one management has been unusually open about. On the Q2 call, Greg Peters said live programming will take about 5% of the content budget this year but deliver only about 1% of view hours. Live events produced six of the ten biggest new-member sign-up days in the past five years, even though Netflix has only done live since 2023.

“Start by saying there is not a linear relationship between view hours and revenue and profit because all hours are not created equal. All hours don’t provide the same kind of value to the business. And a really great example of this is live programming. So live events do a lot of lifting for us for acquisition.

They’re good for monetization. They drive ad revenue, fandom. They’re also a promotional platform, but they do not yield typically as many Raw view hours. So live, we expect will be 5% of our content budget this year, but we think that will only be 1% of view hours. Having said that, 6 out of top 10 new member sign-up days over the past 5 years have come from live events.” - Q2 Call

With annual content spend of around $20bn, that is roughly $1bn a year going into live.

The comparison Peters chose himself is the important one. Kids and family animation takes about the same 5% of spend but produces about 8% of view hours. Per hour watched, live costs about eight times as much as animation and about five times the company average.

Management’s answer is that all hours are not created equal, which I accept.

“And if you compare that to another content category, take animation series, kids family TV, it’s also about 5% of our content spend, so the same amount of spend, but it’s going to drive, we expect 8% of view hours. So same spend and 8x the Raw view hours. You can see the differences there, even though because as indicated by the amount that we’re investing in both those categories being the same, we think they’re doing the same value for the business. So we’re constantly looking to improve across every dimension of engagement. We look at these as 3 dimensions: quality, variety, quantity, because they, taken collectively, drive acquisition, they drive retention, they drive the value that our consumers and our advertising partners ascribe to our service.

We described in the last few earnings calls the progress that we’ve made on quality over the years. We’re not going to go into the details of that quality metrics because, frankly, it’s taken years for us to develop it and vet it and assess it and improve it, and we think that those details are a competitive advantage. We’re also continuing to expand the variety of our entertainment offering. You see us launch new types of content like live, like video podcast, cloud TV games. Those are all doing things, different things in our portfolio to support different needs from our members.” - Q2 Call

I would still note that this is an argument Netflix now needs to make, and companies usually only need to make it when the simpler metric stops looking good.

One analyst put it well, saying the measure management now emphasizes alongside view hours is one the company will not detail. It does not help that Netflix will move its “What We Watched” report from twice a year to once a year starting in 2027, explaining that it wants the focus to stay on revenue and operating profit.

The way I explain the economics to myself is through shelf life. Consider podcasts vs. evergreen music as an analogy. I rarely listen to a podcast episode that is more than a few weeks old. There are exceptions, like Business Breakdowns or a good Acquired episode, but for most podcasts the value falls sharply within days. Music is the opposite. The industry calls it catalog, meaning tracks older than 18 months, and it is the asset that makes a company like Universal Music Group so durable. In 2025, catalog accounted for more than 75% of all US audio streams for the first time. A song recorded once can earn money for fifty years.

A scripted Netflix series falls in between. I might start watching a great show from 2021 tonight, and that is why Netflix’s library works as a moat: every subscriber who joins today gets fifteen years of accumulated content at almost no additional cost to Netflix.

A series is still worse than a song, though, because almost every episode is watched once, while a favourite song is replayed hundreds of times. And the older the series, the less likely it is that people choose it in the library. The shelf life might only be a handful of months for most series, and some years for others.

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Live sport sits at the far end of this range, below even the podcast. The value of a World Cup group match is concentrated in about two hours. A replay the next morning is worth almost nothing, and in four years it has no library value at all.

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Recently I started this series for a very practical reason. Ember Infrastructure Management put a 615p per share proposal on the table for Ashtead Technology, a company I own and have written about at length.

That forced me to think about something most long-term investors prefer to postpone: what would I actually do with the money if I end up selling? I didn’t want a deal to make that decision for me under time pressure. So I decided to work through the seven highest-ranked companies on my watchlist one by one, each through the lens of my perception change framework.

We’ve covered Grab, Novo Nordisk, and LVMH so far. Today is idea #4.

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First: A Quick Update on Ashtead

Before we get there, a quick update on Ashtead, because the situation has become more interesting since my last post. On September 30, Sun Mountain Partners, a Boston-based fund that owns Ashtead shares, published a letter it had sent to the board six days earlier.

The message is blunt. Reject Ember’s offer and keep the company public.

I want to share the main arguments with you. They overlap with my own view, and they’re a textbook example of how a long-term owner thinks about a takeover price.

• The first argument is timing. According to Sun Mountain, Ember’s 615p equates to roughly 8x 2026 adjusted EBITDA, which is about Ashtead’s average historical multiple. Before the proposal surfaced, the stock traded at around 5x, essentially its lowest multiple ever. The fund also believes that earnings were cyclically depressed after the Iran conflict slowed demand. An average multiple on below-mid-cycle earnings is a great deal for the buyer. In the letter’s own words, the headline premium “flatters the proposal only because the starting point is so depressed.”

• The second argument is growth. Ashtead has compounded EBITDA per share at 26.6% a year over the last six years. Sun Mountain runs two simple five-year scenarios with an 8x exit multiple and net debt at 1.5x EBITDA. If the last six years repeat, the shares would be worth about £27, roughly 4.4x the offer. If growth halves to around 13.5%, they would still be worth about £14, more than double the offer. A return toward Ashtead’s historical high multiple of 11.6x would push both numbers higher. The fund supports the case with three land-based rental businesses that have similar economics. Ashtead Group returned 80x on invested capital, United Rentals 38x and Herc 4.7x.

• The third argument is the most pointed. Sun Mountain says it isn’t writing to help the board squeeze a higher price out of Ember. In its view, no price a private equity buyer is realistically willing to pay would beat the value of keeping Ashtead public. It urges the board to stick with its earlier rejections.

I expressed similar views in my update on Ashtead from August before the proposal was made public:

I agree with the core of the letter. As I wrote in my last update, I believe Ashtead’s intrinsic value sits above 615p. Buying a great business at an average multiple on trough earnings is precisely what a patient private buyer wants to do.

A few caveats are worth keeping in mind, though. The scenarios assume growth comes back after a year that included a profit warning. The fund itself revised the “appropriate” exit range from 40x EBITDA in the original letter to 20–30x in the published version. It also admits that the offer would hand it a very high annualized return after a short holding period.

My own stance is where it was. I still believe the offer undervalues the business, and I remain open to selling for opportunity-cost reasons if the share price moves close to the offer level.

The letter also contains a lesson that goes well beyond Ashtead, and it’s why I put it at the top of this post. Ember’s proposal is perception change investing from the buyer’s side. It arrived when Ashtead traded at its lowest multiple ever, earnings were under pressure and sentiment was as bad as it gets.

That’s the kind of moment I’m trying to identify for every idea in this series. It leads directly to today’s company.

Idea #4: Hermès

If you had told the investing community two years ago that Hermès would show up in a series about perception changes, most would have laughed. Hermès was the one stock where perception never seemed to change. It compounded at about 26% a year for 17 years, turning €51 in early 2008 into €2,781 at the February 2025 peak, roughly a 54x.

Every time it looked expensive, it grew into the multiple and then some.

Then 2026 happened. The stock now trades around €1,280, 54% below its peak. That’s the deepest drawdown since my price data begins in 1994, worse than the Asian crisis in 1998 and the financial crisis in 2009. It’s also the first time Hermès has had two losing years in a row over that period. Investors who bought five years ago are roughly flat in nominal terms and behind after inflation.

Hermès is also the natural follow-up to LVMH. Some of LVMH’s problems are self-inflicted, especially around how it managed exclusivity. Hermès is widely seen as the company that got exclusivity right. So if even Hermès gets derated this hard, I need to understand why. It could be the luxury cycle, macro and tourism, the unwind of the quality-momentum trade, or the first crack in a moat that looked untouchable.

In this post, I’ll look at what the price is telling us and which new insights change how I think about the business. Then I’ll place Hermès in my perception buckets and close with a verdict and a concrete plan.

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Sun Mountain argues that you should never sell a great company at an average multiple on depressed earnings. Hermès now trades at about 18x EV/EBIT, below its 25-year average, even though its earnings haven’t fallen.

The question is whether the buyer’s side of that argument applies here too.

I wrote about Hermès before here:

• 2026-04: 5 Quality Names Ready to Turn? - ($)

• 2026-04: LVMH ($MC) – Is the Luxury King Losing Its Crown? - ($)

What is the price trying to tell us?

The long-term trendline broke. And it broke hard. Hermès CAGR-ed at 26.4% for 17 years, which is roughly a 54x, from €51 in early 2008 to the €2,781 peak in February 2025. Incredible stock performance. But that long-term trend line has been broken now.

What makes this break different from the 2022 wobble is that price never came back to retest the line from below. It sliced through it in the spring sell-off and has kept falling since, which is textbook behavior for a long, steep and very clean uptrend that finally gives way. That’s the CSU and Diageo pattern from Part 3 of my perception change framework. The longer and cleaner the trend, the more holders anchor to it, and the harder the unwind once it breaks.

The next support level sits at around 1,135€ per share. We’ve significantly fallen below the initial downtrend with 4-5 touch points. In the shorter term, there is an even steeper trendline that started earlier this year and we are even significantly below that line now too.

There’s a lot of downward momentum for now and no clear indication this will change anytime soon. Price hasn’t touched either line since the summer, so we aren’t anywhere close to the confirmation-from-the-other-side test I’d want to see.

Two things make the €1,135 level more interesting than a random line on a chart. A 60% drawdown from the February 2025 peak lands at roughly €1,113, almost exactly on that support, and 60 to 70% is the zone where my “just buy the puke” exception from my framework starts to apply.

And when UBS downgraded the stock to Sell on October 5, it set its new price target at €1,168. The sell side is now pointing at the same area the chart does. I wouldn’t treat that as a floor, though. If €1,135 gives way, the 2022 low around €935 is the next level I see, which would mean a drawdown of about 66%.

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This post contains no valuation model, no moat analysis, and not a single mention of free cash flow conversion. Twelve days ago my wife and I welcomed our daughter into the world, and I want to write about the first two weeks of being a father.

Before I do, I owe you a short explanation of why a blog called Compound with René suddenly turns into a parenting diary (at least for this post).

Part of the inspiration comes from , the CEO of the Denver-based value shop IMA and someone whose writing I have admired for years (and who I actually briefly chatted to to discuss InPost late last year; the investing world is small).

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His newsletter, The Intellectual Investor, started out as a home for his thoughts on markets and the stocks his firm analyzed. Over time it grew into something broader and now reaches more than 100,000 readers. He has said that fatherhood probably nudged him in that direction, and today you’ll find essays on classical music, travel, parenting and Stoic philosophy sitting right next to his investing pieces.

Somehow, the mix works. Reading one of his essays about a walk through Santa Fe with his son and his father, I never once thought, “I subscribed for stock picks, why is he telling me this?” If anything, it made me trust his investing work more, because I had a better sense of the person producing it.

Why would an investing writer write about diapers?

So why would I, an investing writer, write about diapers? I have two reasons, and the first one is fairly selfish. I enjoy writing. I enjoy the act itself, the slow process of turning a vague feeling into sentences that hold up. And I have noticed a clear pattern in my own output over the years: my best work happens when I feel a strong intrinsic pull to put something on “paper” – well, digital paper I guess.

On the rare occasions when I have forced myself to write about a company I didn’t find interesting, the result was noticeably worse. You can probably tell which posts those were. I certainly can.

And right now nothing in my life pulls harder than the small person sleeping a few meters from my desk, so this is the post that wants to be written.

The second reason has to do with you. Writing is a strange medium for building a relationship. Think back to the early days of the internet, when people recorded vlogs from their bedrooms. You heard their voice, saw their facial expressions and the mess in the background, and after a few videos you felt like you knew them. Text strips most of that away. And stock research as a niche doesn’t help either (it might be more natural in other niches). You see my arguments, my spreadsheets and my charts, but much less of the person who made them.

When I was still more active on YouTube, someone told me that a channel needs three ingredients to blow up: personality, great content and a large addressable market.

I have thought about that framework a lot since. Readers obviously care about the quality of the research, the depth of the analysis, and how it’s packaged. That part is non-negotiable. But many of you, I believe, also care about the person behind the account, and I suspect that matters more than most finance writers realize.

So every once in a while I want to share something more personal (as I did in On The Power of Digital Relationships! in August for instance), a success, a failure, a lesson learned outside the market. Together with the live streams and the podcast, I hope it gives you a better sense of who the author behind these posts actually is.

A BIG Thank You!

Which brings me to the part of the last two weeks that surprised me most.

The day after our daughter was born, I sent you an email explaining that I would go on parental leave for one month and that I had paused billing for paid subscribers during that time. I didn’t expect a single reply. I very rarely get any replies to any posts I sent out as emails.

This time, however, what I got was a flood.

People congratulated us. People told me about the birth of their own children, sometimes decades ago, with a level of detail and warmth that caught me completely off guard. Others simply took a minute out of their day to send a few kind words. One exchange in my DMs made me laugh out loud, for instance, and I’ll share it here without naming the sender, just to illustrate what kind of messages. received:

Reader: Hi Rene, I wanted to send you a quick note to congratulate you and your wife on the arrival of your baby girl. We have 4 kids... I’m not sure I can recommend this amount for you but welcome to parenthood!

Me: Thanks so much for reaching out! Means a lot. Your message made me laugh out loud actually. I’m 36, so I guess the odds that we end up with fewer than four are decent, but who knows.

Reader: Never say never... […] I had my first at 35 which isn’t that different that your age now! But yes, if I had to handicap it I would not bet a lot of $$ on you having 4! Enjoy this time with your family!

Me: Haha love it! And then there’s always the wild card of having twins I guess.

I found all of this incredibly encouraging. I knew there was a strong sense of community among the paying members and especially in the WhatsApp group, which is probably the innermost circle of this little ecosystem. What I hadn’t fully appreciated was that something similar exists beyond that circle too. Readers I had never interacted with before wrote to me as if we had known each other for years.

Maybe the most important effect was a simple reminder. There are actual human beings behind the subscriber count in my Substack analytics tab. That sounds obvious, I know. But writing can be a lonely endeavor. You spend days or weeks on a piece, you hit publish, and then, usually, not much happens. The default number of comments on my posts is zero (I have made my peace with this). Likes and restacks trickle in slowly. I can see how many of you opened the email, but an open rate tells me nothing about who actually read the 7,000 words I sweated over.

Most of the time it feels like writing into a void.

So seeing that so many of you read that particular email, and then took the time to respond, meant the world to me.

I should also apologize. I haven’t managed to reply to everyone yet. Some messages landed in spam, a few DMs slipped through the cracks, my email client displayed some replies in bizarre ways, and, more than anything, life got a lot busier. If you wrote to me and haven’t heard back, please know that I read it and that it mattered. Thank you.

So, how is it?

Honestly? I love it.

I love the diapering (as odd as this may sound). I love the night feedings when it’s my shift, the dim light, the tiny (and weird) sounds. I love changing her clothes, even the third outfit of the day after an incident I’ll spare you the details of. And I love what I have started calling the “showing her the world” part, which means watching all the tiny firsts. The first time outside. The first rain to observe. The first bath. The day the umbilical cord fell off. Today she meets her grandmother, my mom, for the first time, and I am probably more excited about it than anyone else involved.

That joy was also the common thread running through almost every message you sent me. Most of you said some version of the same thing: it is tough, and it is enormously rewarding at the same time.

A very good friend of mine (shoutout to you Daniel!), someone I have known since school for about 25 years, coincidentally became a father just five days before I did. When I talked to him on the phone the other day and asked him how it was going, he said it’s something so special that you can’t compare it to anything else; something incredibly unique. I think that’s the best way to describe the experience.

I also found myself thinking about Charlie Munger, who seems to have figured out most aspects of life, from investing to marriage to how to grow old with your wits intact. Munger raised a large family, nine children across two marriages (7 biological children and 2 stepchildren), and he always spoke about family with an unusual seriousness. In one interview with Becky Quick if I recall correctly (I couldn’t find it when preparing this post), he explained that he never built a fancier house partly because he didn’t think it would be good for the children. That’s the kind of decision you only make when you take the long-term well-being of your kids as seriously as the long-term value of a business. My impression from watching him over the years is that he saw raising children as one of the most fulfilling things a person can do, even when it is hard, and he highly recommended it (despite the challenges).

After only two weeks, I can confirm the fulfilling part (as well as the challenging parts; I’ve rarely been this exhausted at 8pm 😉).

Holding a tiny human being in your arms and knowing you are responsible for her for the rest of your life (and it doesn’t end when she turns 18, does it?) is a feeling I struggle to put into words. It brings me an enormous amount of joy so far.

What I inherited from a doctor who always showed up

My relationship with my own father is complicated. I’d like to think I have a fair amount of clarity about it by now, about his weaknesses, where I need to keep my distance, and about his strengths, which I can draw on as a source of inspiration. One of those strengths has become very visible to me in the past two weeks somehow.

My father is a doctor. He still practices and will retire in a couple of months. Naturally, the job demanded long hours. Yet I don’t remember him as an absent father. It was always a priority for him to be present, to spend time with my sister and me, and to be there whenever he could make it. I can already feel how much that example shapes my own instincts as a father, mostly on a subconscious level. I think I’m wired the same way, and I hope I stay that way.

Katsenelson wrote an essay in 2018 called “Being a Father” that has stuck with me ever since. A client of his had lost her husband to cancer. He had built a fortune of roughly $100 million, and he had done it by working sixteen-hour days, seven days a week, coming up from his basement office for dinner and disappearing again. His son, about to become a father himself, told Vitaliy he had grown up feeling raised by his mother alone, and that he wanted to be there for his own kids. Vitaliy’s conclusion was that what you leave your children in memories matters far more than what you leave them in money. He also admitted that his love for investing could at times compete with his love for his family. As investors, we spend our lives obsessing over compounding.

It’s worth remembering that time with your kids compounds too, and it’s the one asset you can’t buy back later.

Being present will come with its own set of challenges. I work hard, and I’m ambitious about building this blog, the podcast, and everything around it. I also hold myself to high standards as a teacher. The good news is that I’m efficient with my time, and I have already accepted that I will have to deprioritize some hobbies. I simply won’t be able to pursue all of them for a while, and that’s fine.

And sometimes you just have to get a little creative.

Jordan Peterson, who has spoken and written extensively about parenting, too, makes a point I find useful here. He argues that a meaningful life is found in voluntarily taking on responsibility rather than chasing happiness, and he describes parenting as the most challenging and most rewarding thing you’ll ever do, with the highest highs and the lowest lows. One of the rules in his book 12 Rules for Life is that you shouldn’t let your children do anything that makes you dislike them, which sounds harsh at first but is actually about protecting the relationship over the long run. I’m a long way from needing that one. My daughter is currently incapable of doing anything that would make me dislike her, unless you count the 3 a.m. outfit change. Still, the underlying idea resonates with me.

Responsibility, taken on willingly, is a source of meaning, and I have rarely felt that as clearly as I do now.

Your turn: Any tips?

I’d love to end this one with a question, and I hope you’ll break my zero-comment streak.

If you’re a parent, what is the number one piece of advice you’d give a new father? It can be practical, philosophical, or something you wish someone had told you.

Leave it in the comments or reply to this email. I’ll read every single one, even if I probably won’t be able to respond to all of them.

Leave a comment

Thank you for reading, for your messages, and for being part of this community.

René

P.S.: In case you missed it

I published a thematic deep dive on agentic AI yesterday, looking at how AI agents could reshape sectors like travel, e-commerce, search, advertising and payments, and which companies’ terminal values may be more fragile than the market assumes. I put a lot of work into that one, so if you haven’t read it yet, you can find it here:

Agentic.

Agentic “AI,” more specifically.

Chatbots answered our questions. Agents go off and do things for us – book the hotel, compare the insurance quotes, pay the bill, cancel the subscription you forgot about three years ago. They edit videos for you. Etc., etc.

That shift from talking to acting is what has investors nervous, and for once the nervousness has a product attached to it. Three products, to be precise.

The first to arrive was Grok Bot, which xAI put into beta on August 11 alongside Grok 4.6. It's a persistent agent that runs on its own cloud computer and keeps working while you sleep. xAI hasn't given it a standalone price – access comes bundled with SuperGrok Heavy at $300 a month, or through Cursor at $200 for individuals and $120 per seat for teams – which puts it squarely in power-user and small-business territory.

Around the same time, an invite-only, text-based assistant called Instinct started taking over my feeds. Instinct, an AI agent startup founded by Noah Shinn in 2025, has raised a total of $1.35 billion across major funding rounds, reaching a $10 billion valuation by September 2026.

“It’s only been a month since AI assistant startup Instinct announced a fundraise that valued it at $2.5 billion, and now the company has already raised another $1 billion from investors, including Sequoia Capital, Benchmark Capital, and Coatue, valuing the company at $10 billion.“ - TechCrunch

Early users describe it as unusually proactive. It answers messages, books rides to the airport, shops for insurance and even negotiates bills, and it reportedly crossed 100,000 users by mid-September without ever officially launching.

Then came Muse. Meta released its personal agent on September 8 as a standalone app and inside WhatsApp, with a free tier and paid plans at $20 and $100 a month. Within two weeks it had 2.5 million US downloads and the top spot in the App Store.

Joseph Carlson called Muse one of the best-executed apps he has seen, and I find it hard to disagree. It’s built for people who have never used the word “workflow” in their lives, which is exactly why it matters. Meta’s stock jumped 6.5% the day after the launch.

The rest of the market did what markets always do when a new technology shows up with a credible distribution engine behind it. It went looking for victims. Online travel was first in line. On September 23 alone, Expedia fell 7%, Airbnb 6% and Booking 5%, and Booking now trades roughly 30% below its 52-week high.

Banks, insurers, card networks, subscription businesses and e-commerce platforms have all had their own “are we next?” moment since.

A neat summary of the anxiety I’ve come across came from and listed Search, travel, subscription media, insurance and banking, card networks and online shopping as the categories where disruption is on the table (I think they are planning to release a podcast on that subject too).

That’s sort of my map for this post too. I’ll go sector by sector, name the companies that are discussed as potential agentic winners of losers, and borrow a distinction from Drew Cohen that helped me think this through critically for various sectors: the difference between what can theoretically be built and what is actually likely to be built.

I’ll also point out where I think the defenders of the incumbents are fooling themselves, because there’s plenty of wishful thinking on both sides of this debate.

Here’s what I’ll cover:

1. Why a rounding error can erase a fifth of a company – why terminal value explains the selloff, and what Booking’s current price already assumes

2. What can be built, what will be built, and who will bother to use it – four filters I apply to every sector: product reality, adoption speed, the value of the process, and trust

3. Is Booking the librarian or just another book on the shelf? – the bear case for online travel, my Muse experiment in Florence, and where the bear case still bites

4. What happens to Amazon and MercadoLibre when nobody browses? – the aggregator paradox, the threat to retail media, and whether it’s all just a take rate in disguise

5. Google: will search die, or just change its name? – why the commercial queries that pay the bills are the ones agents target first

6. Bots don’t click on ads. So what happens to advertising? – ads inside agents, ads for machines, and Meta’s awkward double role

7. Payments: who holds the knobs when the buyer is a machine? – Know Your Agent, Visa and Mastercard, stablecoins, and whether agents could be Wise’s best salespeople

8. Banking, insurance and subscriptions: what happens when inertia stops paying? – why the most exposed profit pool may not be the one that sold off hardest

9. The opportunity in B2B.

10. What did we miss? – comparison sites, local delivery, exclusive supply, and the picks and shovels of the bot economy

11. Existential threat or just another risk? – my ranking of who is most exposed, and the signposts I’ll be watching

Why Investors Should Care

First, though, a puzzle.

Booking’s CFO said on the Q2 call that bookings coming from AI chatbots and agents, paid and organic combined, account for well under 1% of the group’s room nights, and that this share has barely moved in recent quarters.

“So if we look at the traffic we’re currently receiving from large language models, so this is not what we are receiving directly in terms of traffic, but from large language models, both on a paid and an unpaid basis that is still significantly below 1% of our room nights. And that hasn’t moved so much recently. So no material change over the last few months or quarters. I’m not saying that, that will never change in the future.

This, of course, at some point, might go in a different trajectory. But at this moment, it’s still very minimal and is not really moving so much.

So how does a rounding error take tens of billions of dollars off a company’s market value in a matter of weeks?

The short answer: the market may be doing exactly what it’s supposed to do.

If you only look at the next four quarters, the selloff makes little sense. Booking is still growing room nights, still converting the bulk of its earnings into free cash flow, and still buying back stock at a pace few companies can match.

Nothing in the 2027 consensus numbers has been rewritten because of Muse. But the next four quarters are not where the value of a business like Booking lives.

Any discounted cash flow model splits a company into two pieces. There’s the explicit forecast period, usually five to ten years, and there’s everything after that, which gets compressed into a single number called the terminal value. For a high-quality, growing business, whose stock is usually trading at a double-digit multiple as a result of that outlook, for it, that second piece is almost always the larger one.

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I ran a simple illustration. Take Booking’s roughly $9.5 billion in trailing free cash flow, grow it at 8% a year for a decade, discount everything at 9%, and assume 3% growth forever after. The first ten years are worth about $90 billion in today’s money. The terminal value is worth about $149 billion. More than 60% of the company’s intrinsic value sits beyond 2036.

Now you can see why investors don’t need to believe Muse will dent next year’s earnings to sell the stock. They only need to become a little less sure that Booking will still own the relationship with the traveler a decade from now. In my illustration, trimming the terminal cash flow by 20% takes about $30 billion off the value.

Assuming the business stops growing after year ten takes off roughly $50 billion.

Not a single number in the next ten years has changed in either scenario. That’s the uncomfortable math behind every “disruption” selloff: the evidence that would settle the debate arrives in the terminal period, so the market has to reprice before the evidence shows up. It can’t wait.

The more interesting exercise, at least for me, is to run the model backwards and ask what today’s price already assumes. At around $160 a share after the 25-for-1 split, Booking’s market value as I write this is roughly $120 billion, and with modest net debt the enterprise value lands near $125 billion (I’m rounding the figures here and just doing some napkin math; see comment below by ).

That’s about 14 times forward earnings.

Using the same 9% discount rate, today’s price is consistent with free cash flow growing around 6% a year for the next decade and then shrinking by about 5% a year forever.

If you’d rather keep the long tail stable, you get to a similar value with growth closer to 4% followed by a slow decline. For comparison, a business that simply kept producing $9.5 billion a year with zero growth, forever, would be worth about $106 billion at that discount rate.

The market is paying only about 20% more than that for one of the best-run platforms on the internet.

There are two ways to read that:

• The optimistic reading says the market has overshot. It’s pricing in a structural decline that the hard data – that sub-1% share of room nights – doesn’t support yet, and patient buyers get paid for exactly this kind of fear.

• The pessimistic reading deserves just as much respect. Disruption has a habit of looking like a rounding error right up until it doesn’t, and history is full of investors who bought newspapers, Yellow Pages publishers and video rental chains at “cheap” multiples while the cash flows kept shrinking faster than anticipated. By the time agentic bookings show up in Booking’s reported numbers at a meaningful scale, the question of the terminal value will already have been answered, and the stock will have moved long before then. Markets are forward-looking.

I should be honest about the limits of my own back-of-the-envelope math here. The 9% discount rate is my assumption, consensus earnings could prove too high or too low, and a reverse DCF frames expectations rather than spitting out a fair value. But it reframes the debate in a useful way.

The question to ask about Booking, or Amazon, or Visa, or Google (names we will come back to further below), isn’t whether agentic AI will change their businesses. Of course it will. The question is whether it damages the economics of their terminal period by more than the current price already assumes.

The same logic also works in reverse, which is why Meta added tens of billions in market value the day after Muse launched. The market didn’t add significant additional dollars to Meta’s 2027 earnings that morning. It added a few years to the ending of its story.

A Helpful Lens Before Looking at Specific Sectors – What Can Be Built & What Will Be Built?

Before I go sector by sector, I want to set out four questions that I’ll keep coming back to. Most of the bear cases I’ve read this autumn fail at least one of them. To be fair, most of the defenses of the incumbents conveniently ignore at least one as well.

• The first question, which I owe to Drew Cohen who articulated it on X. He flagged the distinction between what can theoretically be built and what is likely to be built.

  

  It’s easy to imagine an agent that knows every price, every room, every product, and every insurance policy on earth, and that always picks the best one for you. Imagination is free. Products, on the other hand, live under very unglamorous constraints: compute costs, latency, access to live data, and someone having to pay for all of it. Whoever builds the agent will take the path of least resistance. If that path runs through an incumbent’s inventory and API, the incumbent becomes a supplier to the agent instead of getting bypassed. That’s a much better outcome than extinction, although anyone who has watched online travel agencies pay Google a growing share of their revenue for two decades will know it isn’t necessarily a comfortable one. I also want to flag one caveat right away, because it applies to every sector that follows. The cost of running these models has been falling at a remarkable pace. Something that is too slow and too expensive to build in 2026 may be trivial by 2029.

  

  Thus, this first filter buys incumbents time. It doesn’t give them immunity.

• The second question is how fast people actually change their habits. Markets reprice stocks quickly to process new information, and from my experience, they often overshoot in that attempt. Human behavior on the other hand moves at a crawl. The iPhone launched in 2007, and BlackBerry’s numbers held up for roughly four years before the damage showed; and was still significant.

  

  Amazon started selling books in 1995, and Borders didn’t go bankrupt until 2011. Netflix launched streaming in 2007, needed several years before streaming outgrew the DVD business, and only shut down its DVD-by-mail service in 2023. Even e-commerce as a whole, three decades after the first online orders, still accounts for only around 17% of US retail sales. And just in case you didn’t know, the U.S. is the most penetrated consumer e-commerce market globally by user adoption rate, with roughly 87% to over 90% of its population shopping online.

  Note: While China has the highest total e-commerce revenue and retail market share of e-commerce sales, the U.S. ranks first in terms of individual consumer digital buyer penetration rate among major global economies.

  

  Someone in my community put it well when we discussed this: Google.com will die eventually – this was my reason for selling it last year (which turned out to be a mistake), and I still believe that I will be directionally right –, maybe by being replaced by Gemini or maybe by turning into Gemini, but it won’t happen tomorrow. I still struggle to comprehend how Google’s Search business keeps growing at the rates it is given the scale of this business (see tweet below).

  

  But then again, two caveats: First, sure, distribution today is nothing like it was in 1995. Muse didn’t need to sell anyone a new device. It reached millions of downloads in two weeks because Meta could push it to people who already use WhatsApp multiple times a day.

  

  However, downloads aren’t habits, of course, but the on-ramp has never been shorter. Second, and more importantly for investors, slow adoption protects the earnings of the next few years.

  “So they still very much would like to go to the platform they know and trust and they rely on. But we are working together with all of these LLMs and we are a launch partner with all of these LLM providers because we learn a lot. We learn where they’re moving from a technology perspective. We can observe the behavioral aspects from consumers because we don’t know really what has tractions. And because it doesn’t have a lot of traction today from an Agentic e-commerce perspective, it doesn’t mean it won’t have traction in the future.“ - Booking at the September Goldman conference

  That doesn’t mean an S-curve adoption curve of a new disruptive tech shouldn’t significantly affect (read: lower) a stock’s “fair multiple.” If you’ve read the previous section, you know why.

• The third question is whether people actually value the process that the agent wants to take away from them. Sure, nobody enjoys renewing their car insurance, comparing electricity tariffs or reordering dishwasher tablets. Most people would hand that task to an agent any day of the week. However, for others the process is half the fun. Plenty of people enjoy scrolling through hotels in Lisbon on a Sunday evening, because the anticipation is part of the trip. Ruki from our community, who lives in the UK, shared his experience of grocery shopping, illustrating how stubborn consumer preferences can be. Supermarkets there have offered grocery delivery since the early 2000s, yet on any Saturday the aisles are packed with people pushing trolleys. Convenience was available for two decades. A large share of people simply chose the friction. This distinction between chores and pleasures flips the obvious ranking of who is most exposed. Travel feels like the natural victim because it’s where Muse made its splashiest demos. But booking a holiday is something a lot of people often enjoy, while switching insurers or negotiating a phone bill is something almost everyone hates. If agents win first where the process is a chore, the most vulnerable profit pools may be the boring ones built on inertia, and they aren’t necessarily the ones that sold off hardest in September.

  

• The fourth question is trust. Letting an agent read your email is one thing. Handing it your card details and the authority to spend your money is a much bigger step, and the legal plumbing hasn’t caught up. Someone in my community who recently attended an agentic payments conference pointed out that under EU rules the user can end up bearing the loss if their agent buys from a fraudulent website. Whoopsie! That has an interesting consequence. In the early years, agents will almost certainly stick to a whitelist of merchants they can trust (just like consumers trust Amazon and are willing to pay a slight premium), and those will be the big, established names like Booking.com and Amazon. The agentic era may well begin by funneling even more volume to incumbents before it does anything else. There’s also the question of who owns the agent. I’ll admit that I’d instruct any agent to buy from Amazon, simply because of the benefits and the trust I’ve built up with the brand over the years. Whether I’d want that agent to be built by Meta and hand it all my data is a different question. Still, I wouldn’t lean too hard on this filter. People were terrified of typing their credit card numbers into websites in the late 1990s, and a few years later they were doing it without a second thought. Privacy concerns tend to lose to convenience. I’d love to tell you otherwise, but trust is only a speed bump on this road, and I don’t see it becoming a wall.

  

These four questions won’t tell me what Booking or Amazon is worth. What they do help me judge is the shape and timing of any disruption, while the terminal-value math from the previous section tells me how much is at stake. Where all four filters point in the same direction, I take the threat seriously. Where they contradict each other, as I’ll argue they do in travel, I think the market is more likely to overreact. Let’s see how travel holds up.

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Thursday was a brutal day for some people in our investing community. Innoscripta, the Bavarian company that helps German businesses claim the government’s research allowance (the Forschungszulage), released an ad-hoc statement disclosing that investigators had searched the premises of several group companies in connection with a criminal tax investigation.

The authorities suspect that the company helped clients obtain tax benefits they were not entitled to. According to management’s preliminary understanding, the matters described in the search warrants concern possible misconduct by individual employees on specific client mandates. The company says it is cooperating with the authorities, that operations continue without restriction, and that a final assessment of any financial consequences isn’t possible at this stage.

The market did not wait for one. The stock fell roughly 57% on Thursday from a prior close of about €89 and slid further on Friday, at one point trading around €33 to €34, down some 63% over two trading days (fwiw the stock is up 40%+ today as the company provided more context on the incidents on Friday). Warburg Research suspended its rating and price target. For perspective, Innoscripta went public in 2025 at €120 a share.

I think several members of our community own the stock, and a few of them own a meaningful amount. I watched the messages come in over the course of the day, and you could feel the gut punch through the screen.

I’m not going to use this post to guess what the investigation means for the business. Nobody knows that yet for sure, and an honest answer is probably that it might take months for outsiders to fully grasp the magnitude of the investigation. Instead, I wanted to use this example as a discussion starter, an event that prompted me to sit down and write this post.

I want to write about the other thing that happened on Thursday, the part that played out inside the heads of everyone holding the stock, because I shared a thought in our community that day that I’d like to expand on here.

What does a high-stakes poker player think about?

A few of us in the community play poker, so let me start there. When I first got into the game in my teens (yes, that’s been a long time ago …), I spent a somewhat unhealthy number of evenings watching high-stakes poker, both on the major TV networks and live on the big online sites, where anyone could rail the nosebleed tables in real time.

Those were the days when a then-anonymous Swede called Isildur1 stormed up the stakes on Full Tilt all the way to $500/$1,000, playing the same relentless, seemingly reckless style at the highest limits that had carried him through the lower ones, while pots worth more than a house swung back and forth on my screen.

Over on High Stakes Poker, a young Tom Dwan was toying with the old guard, thinking in ranges and hunting for theoretically sound plays years before solvers turned GTO into everyday poker vocabulary.

What struck me most, watching both of them, was how little the money seemed to register. Their attention went to ranges, pot odds and the best available move given what they knew. When they lost a monster pot, they shrugged, took the next hand and played it exactly the way they would have played it an hour earlier.

The clip below illustrates the thinking (optimal play (Dwan) vs. outcome-based thinking (Hellmuth)) of the young vs. the old guard back then best (even though it’s not from a high-stakes cash game):

Some of that is temperament. Most of it is training. Some probably DNA. They have learned that the money is a distraction from the one question that matters at the table, and once the dollar amount enters the thought process, decisions start getting made for the wrong reasons. You play scared to protect your stack. Or you chase to win back what you just lost.

Poker players call the second one tilt, and it has ruined more bankrolls than bad cards ever will.

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Why does a bigger portfolio make this harder?

I think managing the behavioral side of investing too gets more difficult as the stakes rise, and in our world the stakes are the size of the portfolio and the individual position within it.

When you start out with a few thousand euros, a 50% drop in a position is annoying. Ten or fifteen years later, the same percentage move in a position of the same weight can equal a new car, a year of a child’s education, or a good chunk of your mortgage.

The percentage is identical, and yet the number attached to it now carries weight in your everyday life.

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Dear compounders,

Who would have thought that LVMH, for years one of the most admired compounders in Europe, could fall this far?

Just like Novo Nordisk, the subject of the previous installment [read it here], LVMH was long perceived as one of the best businesses in the world, and rightfully so. Yet the stock is now in its worst drawdown since the Global Financial Crisis, down about 55% from its peak, and it has lost roughly 41% over the last five years. Ouch.

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That brings me back to my piece on half a lost decade stocks. Five years of going nowhere, or in LVMH’s case going backwards, can do serious damage to a portfolio and to an investor’s conviction.

A full lost decade is still a long way off, though. Over the last ten years, the stock is up around 140%, which tells you how extraordinary the run before the decline was. There is one important difference to the setups I described in that piece. There, I was looking for companies whose share price went sideways while earnings kept compounding underneath. LVMH’s net profit of €10.9bn in 2025 was below the roughly €12bn it earned in 2021, so this drawdown reflects shrinking earnings as well as a shrinking multiple. I also don’t consider LVMH a business that compounds intrinsic value at 15-20%+, so I might look for an entire lost decade, as unfathomable as this may sound …

Read my prior LVMH analyses:

• 2025-07: LVMH ($LVMH) - ($)

• 2026-04: LVMH ($MC) – Is the Luxury King Losing Its Crown? - ($)

I still consider LVMH a world-class business, and investors who paid €900 a share were right about its quality. Where they went astray was in three other assessments. They underestimated how much demand Covid had pulled forward, they extrapolated growth rates the industry could not sustain, and they trusted management to protect the exclusivity of its key brands while chasing volume. Those three mistakes are what the market has been correcting ever since. In short, they were wrong about the embedded expectations at COVID price levels, which LVMH could not achieve.

Further below, I will also introduce you to , who has been short the luxury sector throughout the last few years and, as far as I can tell, still is. Shorting luxury was a deeply contrarian call when he started. Hats off to him for that call!

And with the sector down this much, still being short is beginning to feel contrarian again.

One housekeeping note before we start. Since I wrote this post, the share price has fallen further to €378 as of Friday’s close. I have kept the charts as they were, so keep in mind that they are slightly dated.

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Idea #3: LVMH

What is the price trying to tell us?

LVMH has broken both of its long-term uptrends, the one that started at the GFC low in early 2009 and the steeper one that began in 2016. It is yet another textbook example of the mental model from Part 3 of my framework series: the longer and steeper the uptrend, the more violent the reversion when it finally breaks. The stock now trades well below the downtrend that started in March 2024, which has three touchpoints.

If you zoom in, there is also a shorter-term downtrend that kicked off in January 2026 and already has four touchpoints.

Neither line has been seriously challenged.

When I drafted this section, LVMH had just slipped below the psychologically important €400 level. It has since dropped further to €378, so the break has extended rather than reversed.

In the language of my framework, a true confirmation would come if the stock rallied back toward €400 and got rejected there, turning former support into resistance.

As I wrote in Part 3 of my framework:

“Clean trends have multiple touchpoints. Price interacts with the line repeatedly. Buyers step in near the same level. Sellers emerge where you’d expect them to. Each interaction is a form of confirmation. It tells you that market participants are responding to that level. Supply and demand are being validated in the open.”

Is sentiment bombed out, or is there still some air left to let out?

LVMH is experiencing its worst drawdown since the GFC. At about 53% in the chart above and roughly 55% at €378, it is now approaching the depth of the 2008–2009 decline.

The last five years have been rough for shareholders, with a five-year price CAGR of about minus 9% and a three-year CAGR of about minus 18%. The ten-year CAGR is still close to 10%, though, which again shows how strong the run before the decline was.

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On valuation, LVMH trades at 2.8x EV to trailing sales in the chart, roughly 18% below its long-term mean of 3.4x, and lower still at today’s price. That is cheap relative to its own history, although far from the sub-2x multiples the stock traded at during the GFC.

Volume tells a more ambiguous story than I first thought. There have been several spikes over the past two years, including a cluster in recent weeks at more than twice the mean daily volume of roughly 470,000 shares, and plenty of holders have clearly headed for the exit. None of these spikes has looked like a true capitulation, though, and the largest one came about a year ago, after which the stock kept falling. That matches what I saw with Novo, where volume spikes repeatedly failed to mark the bottom.

I would want to see heavy volume coincide with a low that actually holds before concluding that the sellers are exhausted.

Which new insights change how I think about LVMH?

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In the first part of this series (find it here), I walked through Grab, the first of seven ideas I am lining up as potential homes for the capital that would be freed up if the Ember proposal for Ashtead Technology materializes or if the gap to the offer closes.

Idea number two is a very different animal. It is a former market darling that has lost almost three-quarters of its value in just over two years, and a stock I have passed on for as long as I have been writing about it.

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All my prior Novo Nordisk write-ups:

• 2025-04: Novo Nordisk ($NVO)

• 2025-05: From Reported to Real: The Hidden Economics of Novo Nordisk’s Cash Flow

• 2025-08: Revisiting Novo Nordisk ($NVO) - ($)

• 2025-08: Revisiting Novo Nordisk ($NVO) - ($)

• 2026-02: Revisiting Novo Nordisk ($NVO) - ($)

Idea #2: Novo Nordisk

What is the price trying to tell us?

Novo has been in a downtrend since June 2024. The stock is down 72.6% over roughly 2.2 years, which works out to a CAGR of about minus 44%. That is pretty bad, and yet the most important line on this chart is the black one. For almost two decades, Novo respected a long-term uptrend that started in the mid-2000s, and in 2025 it broke that line decisively.

In Part 3 of my framework series, I wrote that the longer and steeper the uptrend, the more violent the reversion when it finally breaks. Novo is a textbook case, right next to Constellation Software and Diageo (and many other recent ones come to mind such as Rollins or Intuitive Surgical). Of the two downtrend lines, the light red one probably carries the stronger signal. It covers a shorter period than the dark red one, but it has five touchpoints compared with just two, and neither line has been broken.

Clear support is hard to find. The only meaningful reference point on the downside is the March 2026 low at $34.85, roughly 10% below the current share price, and it may well get tested soon.

As I explained in Part 3 of my framework series:

Applied to Novo, the picture is sobering. The stock has traded in heavy volume throughout 2025 and 2026, with daily turnover regularly at several times its long-term average of about 7.5 million shares and multiple clear spikes along the way. More than once, a spike looked like the capitulation that marks a bottom, and more than once Novo went on to make new lows. Investing is tough and technical analysis is just one tool in your toolkit that you need to couple with many other ones and even then you might not perfectly time the lows – but does this mean you shouldn’t try?

Volume has eased somewhat from its early-2026 peaks, but it remains far above pre-selloff levels, and the latest spike in September came on the way down. That tells me the transition in ownership I described in Part 3 of my perception change analysis series (I cannot even pinpoint from whom to whom … long-term owners to those concluding that the embedded expectations at this price make up for the many mistakes of the past?) is not finished yet.

Novo has also been incredibly volatile. Since August 2025, the stock has gone through two full bull and bear cycles, rallying 42% and 46% within a few months each time and then giving back 44% and 25% even faster. Bulls take the stairs, bears ride the elevator, and Novo illustrates the saying almost perfectly.

Interestingly, the stock trades only about 11% below its August 2025 low of $43.54, and for more than a year it has been stuck in a range between roughly $35 and $62.

In the language of my framework, that looks like the early shape of a sideways base, although an unusually wild one.

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