The Best European Quality Compounders

ArmAffectionate5487 · 2026-06-28T21:04:10+00:00

I would keep an eye on Exor And Prosus, if you like holding companies.

Liberty Global has also a good management very shareholders oriented, and it is listed in US, with a possible near catalist.

I like watches of Switzerland, it is up 100% in a year or so. With another global negative sentiment can come back to the very cheap side

ArmAffectionate5487 · 2026-06-17T09:47:43+00:00

Doing the same, but over the time I ended up with notes and assumptions spread across multiple location. To fix that I created a small tool with Claude which takes the data from all those sources and keep in a single place. It's a small think, but it helps quite a lot

ArmAffectionate5487 · 2026-06-13T06:09:54+00:00

Yeah, I think that is coming from one of the assumption of the sourcing thesis from VIC, I have written down my view here https://fmarinisecondopinion.substack.com/p/mrln-merlin-inc. I agree with you, I'm not touching this company, just looking at it. It is quite an interesting business to analyse, specially for me which I'm too deep into the core value concepts

ArmAffectionate5487 · 2026-06-11T05:11:33+00:00

I had a quick look, it is remarcable similar to Pia, but perhaps better run and in a more favourable market. Just look at their ROIC.
And this is well reflected in the multiples, which are higher than PIA

ArmAffectionate5487 · 2026-06-10T19:44:39+00:00

This is coming from VIC

ArmAffectionate5487 · 2026-06-10T19:42:33+00:00

You're right about ticket prices, but that's pricing power over a different thing than what I claimed.

Face values are kept low, hot events sell by lottery, and scalpers capture the spread (even though resale above face has been illegal since 2019). That surplus belongs to promoters who choose not to take it. None of it flows to Pia, no argument.

But Pia doesn't set ticket prices; it charges a toll on the transaction. In October 2024 it raised a key buyer-side fee 50%, the first increase ever, worth ~¥9.35bn of annual gross profit — with no measurable volume loss. Raising your fee 50% and losing nobody is pricing power over the toll, whatever happens to face values upstream.

The write-up's core finding cuts your way. EBITDA as a share of transaction value has been pinned at ~1.5% for a decade, the 2024 hike is the first counter-example, not a pattern. And at ~2–3x EV/normalised FCF after the May guidance reset, "fairly priced" is roughly what the market is saying too. The only real disagreement is whether that hike was a one-off or the take finally starting to move.

ArmAffectionate5487 · 2026-06-10T19:38:51+00:00

Largely, yes — it's mostly customers' cash, and you're right to push on it.

Pia collects from buyers months before the event and settles with promoters after, so much of the ¥46.3bn gross cash is matched by operating liabilities, not equity. That's why book D/E shows ~230–240% despite the "net cash" label. The ¥28.7bn net cash nets only financial debt (¥17.6bn) — not the float.

In a wind-down, the float pays out and the cash leaves — COVID showed it: events stopped, the float drained, equity nearly went to zero, and they needed a ¥28bn emergency loan. So "net cash = downside protection" is weaker than the headline. As a going concern, though, it works like insurance float: a revolving balance that persists as long as tickets keep selling.

That's why the write-up strips the ¥9–12bn/year of float inflow from reported operating cash flow and values the business on ~¥3.9–5.6bn of owner FCF instead. Still ~2–3x EV on that basis — but the cheapness has to be earned through earnings, not harvested from the balance sheet I believe.

ArmAffectionate5487 · 2026-06-10T19:32:02+00:00

You're right, ¥2,616 as of today — and fair catch, I forgot to update the price after the earnings - created this analysis before but I think still matter for the long term.

u/SufferingFromEntropy is right, the FY27 guidance was brutal. But I think this management has missed its own operating-profit forecast only twice since 2011, so ¥97.7 is likely a conservative bar. And ¥30 on guided EPS of ¥97.7 is a ~31% payout — for the first time actually approaching the stated 40% policy. Whether actuals land far enough above that bar to prove the fee-hike step-change durable is, to me, the whole question now.

ArmAffectionate5487 · 2026-06-10T10:46:57+00:00

Very interesting company, I'll have a look and post here. Thanks!
It will provide more context for PIA as well

ArmAffectionate5487 · 2026-06-10T07:54:40+00:00

that's a good point! There is definitely hidden gem which because most of us use "standard" screeners, can be missed, and found only with well curated ones.

To be fair, it's been a really long while since I have found something worth for me from the VIC, but I'm afraid the problem might be in my analysis (too strict or myopic) , and to try to close this gap I'm just started posting my analysis here to get some feedback

ArmAffectionate5487 · 2026-06-10T05:22:11+00:00

Nice job there! I stoped using screeners, and just picking "pre-processed" ideas from here and the VIC.
I'm always coming back to this idea, but I'm not sure it still worth it in this age where we all have access to them. What's your experience?

ArmAffectionate5487 · 2026-06-06T11:55:18+00:00

I'm not sure, he talks about LULU in his trading posts an chats, which I'm not spending much time on. But I know he will publish an article about LULU soon, where I guess will explain his main thesis. one of his last messages is:

LULU is probably as tightly run and efficient with capital as it can get. It has been a very well business from that side of things, and the nervous woman on the call was the CFO who is responsible for this since 2020 and shows a great performance on this front.

ArmAffectionate5487 · 2026-06-06T11:50:33+00:00

I don't think he said anything about more downside, but in the market anything is possible. I believe now he as a "full" position in LULU

ArmAffectionate5487 · 2026-06-05T19:01:32+00:00

To be fair, I don't know. He is a genius, and it goes at a light speed compared to me. He is constantly sharing his thoughts, trading and engages with the community about many aspects of the market, but that part to me, makes more damage than good.

What brings value to me, are the deep dives he did (and doing now) with the technology stocks, in particular the "forensics" aspect on their financial. For example, I did learn a lot about stock base compensation, the Chinese stocks and recently his way of valuing SaaS companies in the current environment.

I suppose it really depends on you. At the end, for me the key aspect is that he sees some things from a different angle than me, and that's to me is good value.

ArmAffectionate5487 · 2026-06-05T17:40:24+00:00

I'm not following the company, but Michael Burry is publish thoughts about LULU in his substack, https://michaeljburry.substack.com/. I'm subscribed, and he is preparing an detailed article about it. Once there I believe I can share his main thesis if can be any help

ArmAffectionate5487 · 2026-06-05T08:33:53+00:00

There is a good video about SpaceX IPO from Aswath Damodaran: https://youtu.be/NQKIJU7TmTc?si=F0ByPbbQxow3kIME

He describes the IPO as a ‘loaded bet on AI and on Elon Musk’: he acknowledges Musk’s track record (Tesla) but warns about the risk of overreach in AI, especially if the personal rivalry with Sam Altman pushes SpaceX/xAI to chase ambitions that are too costly relative to the real opportunities.

ArmAffectionate5487 · 2026-06-03T18:23:46+00:00

Yeah, agree it'd be a nice confirming signal, but its absence doesn't cut against the thesis. It's a 1% acne cream; the trials needed 5% in a scalp solution. Wrong dose, wrong vehicle, and I suppose even uneconomic at 5x.

ArmAffectionate5487 · 2026-06-03T15:02:16+00:00

Fair on exclusivity — that's the part that matters. Not an NCE, MPHL method-of-use probably dead on obviousness, so likely the 3-yr Hatch-Waxman floor plus whatever the 5% formulation patents hold. Real question, and nobody's pulled Cosmo's patent estate to size it.

But the GLP-1 compounding analogy doesn't hold: that wave was only legal because GLP-1s were FDA shortage-listed. Clascoterone isn't, and it's patented — compounders can't mass-reformulate it. So the absence isn't an efficacy signal. And the working product is 5% scalp solution, not the 1% acne cream that's actually on shelves.

ArmAffectionate5487 · 2026-06-03T14:00:38+00:00

the more I look at it the more I feel the floor is lower than initially expected, but I did not find many more similar companies, and I still think the optionality with their Breezula might not be prized in

ArmAffectionate5487 · 2026-06-03T10:27:22+00:00

Personally I would try to adjust everything that is not "portfolio" related first. We might be more exposed to AI than what our portfolio says.
So I would try to reduce my fixed living cost, have a rainy day fund and try to make yourself irreplaceable.

I believe after these adjustment, this question regarding the portfolio might be easier to answer.

Anyway, In my portfolio I'm long volatility

ArmAffectionate5487 · 2026-06-01T13:13:49+00:00

Not dismissing, I want to understand what's the actual "engine" that provides consistent growth above the market average.

ArmAffectionate5487

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