I’m happy to celebrate one month since The Value Pond became a paid publication. For those who are new: I publish institutional-grade research on companies I believe are genuinely mispriced. 7-9 full dossiers per year, Excel models, and complete position disclosure. Quality over quantity.

Reminder: the annual subscription discount ($400/year) is open until May 31st. Link here.

Today's five-minute read covers two things: Japan, a market full of overlooked bargains where I am sharing a free screener, and Primark's parent company, Associated British Foods.

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Next in the Pond

Selecting a new company to analyse is always a complex process. I typically spend 2 to 5 hours on initial research before committing to a deeper dive. Most of the time, the decision to pass is almost immediate. This time I reached two conclusions:

First: I want to analyse a Japanese small or mid cap, so I ran a mini-screener with very strict criteria: below 9x MC/FCF, below 1x Net Debt/EBITDA, FCF margins above 8%, EBIT margins above 10%, and trading below Book Value. Does this exist? Yes, it does.

I am sharing my own screener with 13 companies and updated metrics. The first one is a standout. I have not made a decision yet, but at least one of these 13 will end up in The Value Pond.

Japan Screener

26.4KB ∙ XLSX file

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Second: While exploring the universe of announced spin-offs, I came across an old acquaintance: Associated British Foods. The British company may not ring a bell, but if I say Primark, it probably does. It is one of the giants of fashion retail.

Some of its consumer brands will also be familiar: Kingsmill, Silver Spoon, or Blue Dragon. Spanish readers will recognise Azucarera, also owned by ABF. And to all this is added an agricultural business.

In April 2026, the company announced it is planning a spin-off of the Primark brand, which represents 50% of group sales, to unlock its value and separate it from the rest of the business. The move makes sense.

If you value Primark at multiples comparable to Inditex or H&M, this segment alone supports 70% of ABF's current market capitalisation, leaving aside the other businesses that represent the remaining 50% of sales.

One of Primark's key growth vectors is the United States, where the brand has barely scratched the surface of its commercial expansion potential.

In summary, I believe Associated British Foods is a compelling sum-of-the-parts story, where it may be interesting to build a position even before the spin-off itself. But that is what the full thesis is for.

Thanks for reading the Value Pond🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

We close a disastrous April, where the portfolio's correlation to oil has been strongly negative 😂. Buying Brent puts would have been the most efficient hedge.

That said, it is worth putting things in context: the annualised return stands at 27% despite a negative YTD.

Investing is, most of the time, about facing discomfort. Right now it is tremendously uncomfortable to hold positions in European car manufacturers, airlines (just as it was during Covid), or SaaS companies, for example. But the truth is that most positions that generate good returns are, or have been, very uncomfortable to hold at some point.

And uncomfortable as it may be, this is no less the right moment to review the open theses on the blog. Let's go.

Reminder: the annual subscription discount ($400/year) is open until May 31st. Check your Mail Inbox (suscribers).

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Active ideas

🌱💊Bayer

Bayer has dropped ~6% since the outbreak of the conflict. Here, volatility has been amplified by the start of proceedings at the US Supreme Court on the RoundUp cases.

The next few months are decisive. The Supreme Court's ruling, expected by June, will determine if Bayer can finally cap its liabilities. I expect so.

Q1 2026 results are due on May 12th. We will be watching the pharma portfolio and cash generation closely. Also insider purchases, which were quite active in early March. We will talk more about Bayer then.

🛫Wizz Air

Wizz Air is down 26% since the outbreak of the conflict. Here, the discomfort maxim mentioned above will be applied rigorously: there may still be further downside.

Today, the idea of flights being cancelled due to fuel shortages no longer seems far-fetched. The peak season for European tourism is now beginning (Q2 and Q3), and this would be a significant blow to the sector. Once again, this is cyclical, not structural. I published an update to the original thesis covering the main risks of this scenario:

Recently, aviation analytics firm Cirium, in its Annual Review 2025, ranked Wizz Air #2 globally in passenger CO2/ASK efficiency for 2025 at 52.9g, despite the grounded fleet. It also operates the #2 youngest fleet globally.

The lower fuel consumption, added to the higher seat density of the A321neo makes structural unit cost advantages and margin resilience.

This is not a recommendation, but I have explained to paid subscribers why I decided to increase my position

💺⚙️🔦Forvia

Equally uncomfortable, but for different reasons, Forvia has fallen 19% since the outbreak of the conflict. Here, the risk the market sees is that already fragile vehicle demand could deteriorate further if oil prices drive inflation and, in turn, rate hikes and recession.

For its part, Forvia delivered a more than reasonable Q1 given the circumstances, alongside the definitive announcement of the sale of its Interiors division to French private equity firm Apollo for €1.8 billion. This will help reduce leverage risk and smooth volatility.

I see no reason to change what I said in the last update, which I leave here:

Worth noting: Spanish value manager Horos has opened a position in Forvia bonds through its fixed income fund. Given the reputation and respect I have for their managers, this is a positive signal.

If you enjoy reading fund manager letters, you should not miss Javier Ruiz, their CIO, in his Q1 letter.

⛏️Foraco

Despite Q1 results already showing early signs of what is beginning in the metals drilling cycle, Foraco is down 5%. In the short term, Foraco is reacting directly to gold and copper prices. Whether gold is at $4,000 or $5,000 per ounce, the need for drilling is not going to stop.

This is one of the best picks I have right now. Not only for the upside, but for the catalysts. The cycle momentum, the size and the operating leverage make it one of the best-positioned names for 2026-27.

⚒️⚙️🛻Dauch

Dauch is down 13% since the outbreak of the conflict, for reasons similar to Forvia, although its lower exposure to Europe helps. One of the primary drivers of this decline has been the market's skepticism regarding expected synergies and higher than anticipated restructuring costs. There is also an investor exodus effect in the UK following the cancellation of Dowlais and the subsequent share distribution. I will analyse this more calmly and provide an update soon.

‘Wait & see’ ideas

🛏️🛋️🍽️Dunelm

The British homeware retailer is down 25% since the outbreak of the conflict, 33% YTD. This situation is precisely what drew me to this company, which is undoubtedly high quality and has demonstrated consistency in its growth and margins through difficult periods.

That said, the slowdown in Q2 and its confirmation in Q3 did not convince the market, as Dunelm trades on demanding multiples.

As I said, the company has many positive attributes but lacks the margin of safety I look for. You can draw your own conclusions by reading the full thesis. It may offer a good opportunity in the coming months.

Thanks for reading the Value Pond🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

Since the original publication in September, and up until the outbreak of the conflict, the share price remained flat — but today it trades 20% below that level. That alone warrants an update.

The long-term thesis has not changed materially:

• Airbus and Boeing continue to face production bottlenecks.

• WizzAir’s fleet remains the lowest unit-cost in Europe and is improving in efficiency.

But short-term risks have increased: fuel price and potential shortage, solvency and liquidity concerns, and changes in the shareholder base, all elements worth examining.

In this update we review the fuel crisis, analyse manufacturer bottlenecks, and address one concern about the core thesis. Paid subscribers also get access to the full original dossier and the Excel model.

Content.

1. Fuel crisis: the Ukraine precedent and cost pass-through

2. Demand saturation? Q4 FY26 traffic data shows some warning signs

3. Sale & Leaseback: bottlenecks and debt

4. Summary

5. Disclosure and Full dossier + Excel (🔒)

1. Fuel crisis

The closest mirror for the current fuel crisis is 2022. When Russia invaded Ukraine, jet fuel prices surged dramatically, reaching $180 per barrel and sustaining an average of $140-150. In the current crisis, prices have reached and held $200 per barrel — potentially the worst energy shock ever recorded.

If there is one lesson from that chart — with the Ukraine war still ongoing — it is what I wrote recently in the Pond Journal #9:

Short term, everyone suffers. Medium term, the economy reroutes.

Despite the war continuing, embargoes, and supply difficulties, jet fuel found its way back to $80-100 per barrel before the current shock. If production capacity in the Gulf is not destroyed and the Strait reopens, the medium-term impact could be even more contained than in 2022, despite being a significant short-term disruption.

This is no longer just a price issue. According to the International Energy Agency (IEA), Europe has approximately six weeks of total reserves before airlines would need to start cancelling flights en masse due to kerosene shortages. WizzAir has already had to resort to full tank loading on some aircraft — increasing weight and therefore fuel consumption — due to supply shortages at certain Italian airports.

We are not going to dwell on the worst-case scenario. And if it materialises, it may create Covid-style opportunities in the sector.

The task of any company facing an uncontrollable external input is to pass costs through to customers. Let us briefly examine how WizzAir handled the previous crisis.

Mission: cost pass-through

After the pandemic, WizzAir eliminated its fuel hedging policy to avoid financial losses from grounded aircraft. In FY2023 that decision proved costly:

• Fuel price (average per tonne): $1,218 +54%

• EUR/USD: 1.04 -10%

Fuel costs measured as Fuel per ASK rose from 1.17 € cents to 2.00 € cents, an increase of 0.83 cents per ASK, against a Revenue per Passenger Kilometre increase of 0.68 cents per ASK. Results were partially masked by improved load factor (88% vs 78%), though the FY2022 baseline still included part of the pandemic period.

The following year, Fuel per ASK fell 24%, both from lower fuel prices and a partial Euro recovery, declining to 1.52 cents per ASK, while RPK increased 3% to 4.61 cents, recovering the lost ground.

Comparing FY2024 vs FY2022, WizzAir's cost structure did not lose margin due to the fuel increase.

For a fair comparison with FY2022, two adjustments are applied:

• FY2024 load factor is applied to FY2022 (still affected by the pandemic)

• RPK yield used is from pre-pandemic FY2020, when occupancy was 93.6%.

For context: Ryanair managed to increase its RASK yield by 1.11 cents against a fuel increase of +0.94 cents per ASK, a margin per ASK gain of 0.12 cents. It is worth noting that WizzAir has been growing its ASKs at almost twice the rate.

In WizzAir's favour: the Fuel CASK reflects the competitive advantage of operating a newer, more fuel-efficient fleet with more seats per aircraft. The latest available data (March) shows WizzAir at 50.6 grams CO2 per RPK vs 63g for Ryanair.

FY2027 context

Unlike 2022, the company had learned its lesson this time:

• For Q4 FY26 (January-March 2026), over 80% of consumption was hedged at R749/F681 (Roof/Floor).

• For FY27, approximately 55% of annual consumption is hedged at R716/F650.

Despite this, fuel CASK in Q4 may have increased to approximately 1.50 cents (from 1.40 in Q3), driven not only by higher fuel prices but also by increased EU Emissions Trading Scheme (EU-ETS) costs.

For FY2027, in a scenario with average fuel at $1,086 per tonne (~$136-137/bbl), reflecting de-escalation and subsequent normalisation, Fuel CASK would increase to approximately 1.59 cents vs 1.43 in FY2026.

WizzAir's Revenue per Passenger Kilometre will close FY2026 at approximately 4.84 cents, with an average aircraft stage length of 1,711 km. This implies an average ticket price (including ancillary) of ~€83. To pass through 100% of the additional fuel cost, that ticket would rise to €86 in FY2027, an increase of 3.6%.

Airlines are already passing costs through to fares, with some applying dynamic fuel surcharges that fluctuate up to the day of departure.

2. Demand saturation?

Monthly KPIs show that in FYQ4 2026, load factor was 88.3% vs 89.4% the prior year. With seat capacity up 9.3%, one percentage point less occupancy is reasonable in the weakest quarter of the year with that level of supply growth. So far, so normal.

The concern is the following.

At the end of FYQ3 2026 (calendar Q4 2025), the company had 220 operating aircraft and 209 equivalent operating aircraft (a metric accounting for grounded aircraft and the timing of new deliveries). Entering FYQ4 2026, the weakest demand quarter, with approximately 220+ operating aircraft, and assuming 5 net deliveries (8 in, 3 out) contributing 2.5 equivalent aircraft, we reach approximately 222.5 equivalent aircraft.

The problem: that implies 25% more capacity while seat supply only grew 9.3%. In other words, some aircraft are not flying. The Iran conflict only affects March within FYQ4.

Q4 is admittedly the weakest quarter, but estimated ASKs per equivalent aircraft look low. It is possible the company has sold some of the Airbus aircraft that were due for delivery, which connects directly to the next point and reinforces one of the core thesis arguments: manufacturer bottlenecks.

This is something to monitor in Q1 FY2027 and in the Annual Report when it becomes available.

3. Sale & Leaseback

A brief refresher on WizzAir's growth model:

WizzAir signed a contract with Airbus in 2017 (subsequently updated) committing to a delivery schedule through 2032. Agreed prices are adjusted for Airbus's cost inflation but include significant volume discounts. WizzAir makes advance payments to Airbus during manufacturing (currently approximately €1 billion in prepayments).

When aircraft are delivered, WizzAir can either retain ownership or transfer them to a lessor under an operating lease, the sale & leaseback model. The main advantage: the company recovers all prepayments made to Airbus, funding further growth. The main disadvantage: at lease expiry, the airline does not own the asset.

The company's target is to reduce sale & leaseback to 50% of the fleet, though it currently exceeds 80%. In the current environment, that makes complete sense.

n a normal market, sale prices to lessors tend to equal factory cost plus an availability premium. Aviation is not in a normal market.

Bottlenecks

AerCap's business is buying aircraft to lease, being opportunistic across the cycle. Buy cheap, sell expensive. They do it well: 14% annualised shareholder return over the last 10 years.

What does AerCap's management say about the current situation?

• Structural long-term scarcity: CEO Aengus Kelly views delivery delays and supply shortages as a structural problem that will persist at least through the end of this decade and likely well into the 2030s.

• Availability premiums: Since airlines cannot rely on manufacturers to deliver on time, immediate availability has become invaluable. Aircraft close to delivery or already available command a significant market premium.

• Record sale margins: AerCap sold aircraft from its own portfolio at a 27% gain (equivalent to double book value of equity), a clear reflection of strong demand and the prices buyers are willing to pay.

Returning to WizzAir: as shown in the original thesis, the company was receiving new A321neos at approximately €65 million and delivering them to lessors with an accounting gain of €7-8 million per aircraft. In cash flow terms, the effect is even larger: Upon delivery, the company receives both the gain and all prepayments made during the manufacturing period.

Financial debt

One driver of WizzAir's higher volatility relative to peers is its elevated leverage. On a reported basis, Net Debt / EBITDA stands at just over 4x, high by any measure.

Two clarifications are worth making:

• First, financial debt should be reduced by both short-term deposits (essentially cash) and prepayments (~€1 billion). In the sale & leaseback model, those prepayments convert to cash at the moment of aircraft delivery. Adjusting for both, the ratio falls to 2.93x.

• Second, when WizzAir receives a new aircraft, two simultaneous positive cash effects occur of very different natures.

  • The first is the sale & leaseback gain: WizzAir sells the aircraft to the lessor above catalogue price, generating an immediate premium and indirectly funding growth without tying up capital

  • The second is the capture of the structural negative working capital inherent to the airline model: passengers pay weeks or months before flying, generating a permanent cash float associated with each incremental aircraft added to the fleet. This float is not an accounting profit, it is real cash that WizzAir retains for as long as the aircraft remains operational.

In year one of each new aircraft, WizzAir recovers approximately 20% of the total financed asset value, combining the sale & leaseback gain, the structural negative working capital capture, and operating EBITDA. While bottlenecks persist, the sale & leaseback model makes compelling strategic sense.

4. Summary

Three things stand out from this update:

The fuel shock is real but manageable. WizzAir enters FY2027 with 55% of consumption hedged and a proven track record of passing costs through to fares. A 3.6% ticket price increase covers the modelled fuel increase in full. The precedent from 2022 shows the business can absorb a severe shock without structural margin damage.

The demand signal in Q4 warrants watching. The gap between equivalent aircraft and ASK growth suggests some aircraft are not flying at full utilisation. This is the weakest quarter seasonally, but it is a data point to track in FY2027 Q1 and the upcoming Annual Report.

The sale & leaseback argument has strengthened. AerCap’s commentary confirms that the structural aircraft shortage is not transitory. WizzAir’s locked-in order book at 2017 prices is a genuine competitive advantage, and the cash mechanics of each new delivery remain highly attractive.

The long-term thesis holds. The stock is +20% below September levels and the structural drivers are intact.

5. Full dossier + Excel (🔒)

The full dossier and the Excel model are available for subscribers below the disclaimer.

Full disclosure

WizzAir represents 6% of the total portfolio (Top 4). Several position increases were made during March-April (+2%).

Thanks for reading the Value Pond🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

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The S&P500 closed last Friday at all-time highs. The Fear & Greed index sits at 68, firmly in Greed territory. The Eurostoxx50 is less than 1% from its own historical highs. All of this against a backdrop of a provisional ceasefire riddled with denials, reversals, and noise.

Trump has been playing a peculiar game with this war: agitating on Friday evenings post-close, then calming markets on Sunday pre-open: a juggling act designed to keep 20-year yields below 5%, oil below $100, and the impression that he is winning, winning fast, and conceding nothing. The Iranian regime is running a parallel game internally, but without internet, free press, or institutional/economical counterweights.

The closure of the Strait by the US, while dangerous, has changed the rules of the game by bringing China onto the board. China was among the countries most dependent on the Strait of Hormuz; in fact, the few ships allowed passage were bound for China, and the toll demanded by Iran was paid in Yuan or Bitcoin.

Polymarket has emerged as a 24/7 real-time thermometer, as interesting for reading global market sentiment as for watching the large players move. Right now, the most relevant variable for markets is the Strait of Hormuz, and its most perverse derivative: stagflation.

For its part, the Brent futures curve is already signaling a price only 5% higher for M+6. The market is pricing in this event as a temporary disruption that will eventually normalize. Probably there is too much euphoria for the amount of uncertainty still on the table.

Supply shocks have a cure: price incentives

When Russia invaded Ukraine, the narrative was apocalyptic. Ukraine was one of the world’s largest corn producers, a trigger for meat prices globally. Russian oil and gas supplied most of Europe. The end was near.

It wasn’t.

Supply shocks are painful in the short term. But they are also the most powerful incentive to develop resources elsewhere. Canada accelerated bitumen production. Offshore energy became economically viable again. In our Pond: Bayer was selling corn seeds & pesticides in the US & SA like never before. The same logic applies today.

Iran has shown it is willing to use the Strait as a weapon. But it may be a single-use weapon. Restoring passage through the strait and restoring confidence are two very different things. Gulf countries will seek alternatives and they will find them.

Short term, everyone suffers. Medium term, the economy reroutes.

The cost of being right about the wrong

Imagine you read the macro situation correctly one month ago. You saw the geopolitical risk, you decided to reduce exposure or exit entirely. Unless you have inside information from the Pentagon, you will likely have to stomach the initial, sharpest drop, where everything is uncertain.

Maybe this week was the perfect time to get back into the market. It seems like it’s all over. But what if it’s not? Do you exit again next week?

This is not a hypothetical. It happens to the most investors in the world. The problem with market timing is not that you cannot read the current situation, it is that you cannot read the future. No one knows where the bottom is. We only know that staying invested in good businesses at good prices has worked, consistently, across every crisis in modern history.

Buffett, Lynch, Howard Marks, none of them operated in calm waters. They operated through wars, hyperinflation, financial crises…. The lesson they all drew was the same. It is in moments like these that your conviction in what you’ve read is truly put to the test. It is one thing to read it; it is quite another to feel it.

The only question that matters is go through each position and ask one question: does this business have a future? could them survive? and embrace the volatility as an opportunity.

The risk you actually need to manage

There are two risks in investing:

• The first is drawdown, your portfolio falls in value. This is painful but circumstantial. Markets recover. Good businesses recover faster.

• The second is permanent capital loss, the business itself deteriorates. This is the one that cannot be undone. This is the risk worth obsessing over.

Trying to avoid both simultaneously is impossible. And trying to avoid the first by exiting the market usually just guarantees you miss the recovery.

We have all read the right books. Very few of us are capable of staying the course when it actually matters.

What’s new in the Pond

This past month has been the most active since The Value Pond launched. A few things worth flagging:

The blog has gone paid. Full institutional dossiers, live Excel models, and complete transparency on my own positions are now reserved for paid subscribers. The free tier keeps access to the 5-minute drill teaser for every thesis, plus articles like this one.

Three tiers are available. Paid subscriber at $500/year for the full research. Institutional subscriber at $1,500/year for everything above plus direct Q&A, priority on the research pipeline, and research on demand.

Two full theses are now live. Foraco (TSX:FAR) — a mining driller positioned for the commodity cycle and Dunelm (LON:DNLM) — the UK’s leading homewares retailer at 10-year PE lows with an 8-10% dividend yield.

Both include the full dossier and a live Excel model.

What’s next

• A WizzAir update is coming. The original thesis was published in September 2025. With the stock back near those levels and new fuel price scenarios to model, an updated dossier with Excel model is in progress.

• New full thesis expected around 20th May.

If any of this sounds like the kind of research you were looking for, the Pond is open.

Thanks for reading the Pond Journal🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

5 minute drill

Dunelm is the UK’s market leader retailer in homewares with over 200 stores. Still controlled by its founding family, the company delivered 20 years of sustained sales growth of 9% annualized (except 2020), sustaining operating margins above 12% and with a shareholder remuneration policy via dividend with payouts close to 100% and a very contained financial debt.

The company is currently trading at 10-11x earnings, averaging 15-16x, with a drop of more than 20% YTD, mainly due to two factors:

• A profit warning after a weaker-than-expected Q2 (Black Friday and Christmas), where sales grew only 1.6% vs Q2 2025, leaving FY2026 earnings in the low range of guidance, with wages incremental costs.

• Since the outbreak of the Iran conflict, the market has priced in a potential stagflation scenario in the UK economy that structurally harms discretionary consumption.

Beyond these short-term headwinds, Dunelm faces a genuine structural question in its growth model. Its superstore format in retail parks already covers 60% of the UK population within a 15-minute drive. The remaining addressable market sits in dense urban centres, where the company is experimenting with smaller urban store formats. This model carries meaningful operational risks and brings Dunelm into more direct competition with M&S Home, Next Home, and a growing Amazon.

Dunelm, due to its size and penetration, has acted as a secular consolidator in a highly atomised market such as homeware and furniture, where its ability to maintain low ranges at good prices, its own brand with good value for money, bargaining power with suppliers and low debt allows it to opportunistically face adverse scenarios and end up capturing market share from small fish in a market that is barely growing.

Over the past 10 years, the company has achieved organic growth, expanding at a rate of 5-6 openings per year (including M&A) while increasing its like-for-like sales, gaining market share year after year.

Some of the ingredients of success have been to incorporate furniture product ranges where its market share in some families has doubled, to develop an omnichannel system that already represents 40% of sales, and all this in scenarios of strong price competition, sustaining its margins.

During the inflationary crisis caused by the war in Ukraine, Dunelm was trading at around £7 at 10 times earnings. When the business model showed solvency and continued to gain market share, the stock bounced back to £12-13, offering returns (including dividends) close to 100%.

Then: Dunelm is a high-quality company, excellently managed and prepared for the challenges it must face.

If the company increases its store park in the low range of the guidance (5-10 stores), it would grow in sales at an annualized 4% until 2030. With sustained margins, the company would trade at a multiple of 8.5x versus an average of 15-16x.

Does the company currently deserve such a high output multiple?

The full thesis, valuation, sensitivity analysis and a live Excel model with every assumption exposed are available for paid subscribers. The same research I produce for family offices, now available here. If this is the kind of research you were looking for, this is the moment.

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Thanks for reading the Value Pond🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

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In a market where uncertainty will reward cashflow certainty in the short term, Dunelm is proving, at this stage of the analysis, to be a good place to look.

• 20+ years of uninterrupted sales growth (2020 exception)

• Operating margins consistently above 12%

• Almost zero debt

• Founders and insiders with serious skin in the game

• Heavy dividend policy

Dividends tend to act as a market floor for stock prices. The consistency of Dunelm's earnings and its dividend policy give the current share price of Dunelm (LON:DNLM) an attractive potential dividend yield of >8%.

Additionally, as a first approximation of the margin of safety, we will look at a reverse DCF.

I have initiated a speculative position at current prices. I explain why.

The analysis continues below for paid subscribers.

If you have read Going Paid and Going Serious, you already know what this is about: institutional-grade research, full financial models, transparency on my positions.

If you have not subscribed yet, this is a good moment to reconsider.

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Dunelm Group (XLON: DNLM) — Specialty Retail | GBR A founder-led specialty retailer with a scalable business model, strong insider ownership, and consistent capital returns. In a sector often dismissed as structurally challenged. Dunelm stands out for the right reasons. I would not normally go after a business just because it is scalable, but it appears undervalued on first pass and carries contained debt.

Professional track-record

I am aware of the leap I am asking of my readers: yet another Substack going paid. I do not expect to reach 10,000 paying subscribers. But as I explained, that is not my game.

This is going to be niche. I am trying to scale something I already do for institutional clients, and they do not just want a well-documented thesis and an Excel model. They want to know your experience and your instinct.

Until now, I had never disclosed my annual returns. I only talked about specific companies. Why? A few reasons.

• I never disclosed position sizing, entries or exits, so it felt unfair to talk about returns.

• Some of my investments were theses never formalized on the blog, though I did mention them here or on X: IAG, Semapa, Flatex Degiro, Catalana Occidente, TGS….

• Although my real track record goes further back, the demonstrable and most professional one starts on January 1st, 2023.

But now we are playing a different game, and the cards have to go on the table.

My current track record managing the family office stands at 25% annualized with 30% volatility (from 01/01/2023 to 03/27/2026). Note: I have absorbed a drawdown of more than 10% since the Iran conflict began.

What were the main drivers of this performance?

• Concentration in 10-15 picks, overweighting 3-4 high-conviction ideas.

• Margin of safety and long-term horizon.

• Keeping liquidity to be aggressive during drawdowns.

• Fishing for ideas in funds managed by people I trust.

• Continuous learning.

• Acting as a Connoisseur.

Foraco — Full Institutional Report

Beyond the upcoming Dunelm thesis, Foraco is a compelling reason to subscribe. It is one of my highest-conviction positions: the cycle is favorable, the thesis is resilient to the Iran conflict, the 2026 backlog guarantees strong visibility, and the CEO just bought shares. Full disclosure: it is my 4th largest position at 6% and I am currently adding.

I am making the full 14-page institutional report public — the one I produced for an institutional client, which complements the thesis I published here on Substack. The Excel model will be for paid subscribers only, at the bottom of this publication.

Foraco Report En January 2026

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

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The investment theses I publish are financial dossiers, not the narrative storytelling common on this platform. I have tried to adapt, but storytelling is not my craft. I never know where to stop documenting a thesis because I believe here in Substack there is a tend to oversimplify. I would never invest based on a “compelling story,” no matter how attractive it sounds. I prioritize depth over frequency; therefore, I cannot publish two theses a month, and I will never be an account with 10,000 followers.

So, what am I? I am an obsessive analyst. I am capable of locking myself away for hours to scrutinize every detail of a company’s capital cycle, unit economics, or balance sheet.

How does this work? Typically, institutional investors (primarily Family Offices) hire me to analyze a company when they lack the time, the specific team, or the expertise in a particular sector—such as complex cyclicals or special situations. I conduct the analysis, prepare a rigorous PDF report, and build a dynamic Excel model for the client.

I am turning The Value Pond into exactly that.

What to expect

Moving forward, full investment theses will be reserved for paid subscribers. There are three ways to access:

• Free Subscriber: Access to the “5-Minute Drill” (teaser) for every thesis, along with general market commentaries and articles via The Pond Journal.

• Paid Subscriber ($500/year- 50$/month):

  • 7-9 Full Institutional-Grade Theses per year: Comprehensive 15+ page financial dossiers.

  • Live Excel Models: Downloadable and editable models, updated as companies report results.

  • Continuous Coverage: Periodic updates on published theses.

  • Full Disclosure: Complete transparency regarding my own positions and movements in the stocks covered.

  • Substack chat questions

• Institutional Subscriber ($1,500/year):

  • All content included in the Paid tier.

  • Direct Q&A: Private access to discuss theses or technical model assumptions, webcall or mail.

  • Priority on pipeline: Priority voting rights on the research pipeline — your interests shape what gets analyzed next.

  • Research On-Demand: If there is a company you are interested in that I am not currently covering, I can prioritize it in my workflow with a professional discount on bespoke research.

As a token of appreciation to those of you who have followed The Value Pond from the beginning, I want to give free subscribers a voice in what comes next.

Below are three companies from my current watchlist, each with a brief rationale and key metrics. One of them will become the next full thesis — exclusive to paid subscribers.

Capital BM (XLON: CAPD) — Metals & Mining | GBR A natural extension of the drilling sector covered in my Foraco thesis. Capital Limited operates in overlapping geographies and client segments, but with a distinct business model worth analyzing on its own terms. A different angle on the same commodity cycle.

Dunelm Group (XLON: DNLM) — Specialty Retail | GBR A founder-led specialty retailer with a scalable business model, strong insider ownership, and consistent capital returns. In a sector often dismissed as structurally challenged, Dunelm stands out for the right reasons.

Publicis Groupe (XPAR: PUB) — Communication Services | FRA One of the most penalized stocks in the AI narrative — the market fears disruption, but the balance sheet is clean and the business more resilient than the sentiment suggests. A potential case of price disconnected from fundamentals.

Thanks for reading the Value Pond🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

Today, I want to look back at the first point I wrote in January’s Pond Tracker.

Conviction cannot be transmitted in a thesis, no matter how extensive or well-justified it may be. It is only achieved through two paths (or a necessary mix of both): the authority of the source and, above all, doing the hard work yourself. When I speak of conviction, I mean seeing a 20% drop and using it as an opportunity to buy.

And here we are. With the war ongoing, a large portion of the gains reported in some theses has vanished. The 14% drop in Forvia and the 18% slide in Wizz Air are particularly painful. Let's briefly review each of these investment cases.

🌱💊Bayer

Bayer has dropped 11% since the start of the conflict. Following the release of its results, the market reacted negatively to the 2026 litigation payout guidance. However, the investment case remains unchanged; I largely reiterate what I stated in the May 2025 update.

In fact, Bayer is attempting to settle the Roundup case for $7.25 billion, which falls within the range I previously estimated ($6.7–$8.4 billion). If they finally close the books on this, the market may once again value Bayer for what it truly is: a solid Pharma player and an agricultural giant.

Immediately following the results, several insiders stepped in to buy. This marks the first time since March of last year that we’ve seen insider purchases, and they are significant amounts.

• Bill Anderson, the CEO and architect of the turnaround, purchased 21k shares, bringing his total market position to approximately €8 million. This is nearly double the holding requirement mandated by the board.

• udith Hartmann, a member of the Supervisory Board since 2023 and the incoming CFO as of June, purchased 13k shares, an investment of roughly €500k.

• Other board members, such as Norbert Winkeljohann and Lori Schechter, also increased their positions by €100k and €70k, respectively.

As the saying goes: An insider has a thousand reasons to sell, but only one to buy.

🛫Wizz Air

This is where things get serious: down 18% since the start of the conflict. The impact is direct, hitting through two main channels:

• First, approximately 4–5% of sales come from Middle Eastern routes. For now, this will mean a revenue decline. While cyclical, it is certainly not negligible; restoring confidence in international flights to or through the Middle East will take time.

• The worst pressure, however, could come from oil: Jet fuel prices surged 58% in just one week, and they tend to be stickier than Brent crude. The war will eventually end. that is transitory, but what will be the lasting echo on global oil supply and, consequently, fuel costs? It’s hard to say.

Amidst this turbulence, the company has already revised its 2026 guidance downward. The 'fuel effect' hits Wizz twice: currency impact (stronger USD) and the rising price per barrel. We’ll dive into Wizz’s hedging strategy another time.

Although I expect the share price could suffer more in the short term, I believe the company has the capacity to reallocate excess capacity to other routes quickly. In the medium term: people flew again after 9/11, they flew again after COVID-19, and they will fly to the Middle East as a destination or hub again.

This is not for the faint of heart, but no one said this would be easy. Despite the clear execution risks, my long-term thesis remains unchanged.

One of the best investments I’ve made to date was IAG (Iberia, British Airways...) in May 2020. As the pandemic progressed, the thesis worsened. It seemed like the end of international tourism. IAG had to launch a rights issue in July; I subscribed 100%. It ended up doubling the investment with an IRR of >40%.

💺⚙️🔦Forvia

The conflict has wiped out 14% of its value since it began. When a confidence crisis hits the markets, everything drops, but the most leveraged companies suffer the most—and that’s exactly where Forvia stands. It is one of the hardest-hit auto parts stocks these days. I see an opportunity here, as I noted in my recent thesis revision.

The 2025 results and the deleveraging outlook appear positive to me. Furthermore, the definitive announcement of the Interiors business sale will loosen the debt noose.

⛏️Foraco

When panic hits the markets and a flight to liquidity ensues, a Canadian listed small cap is the perfect target for investors looking to slash portfolio risk. And that is exactly what we are seeing.

Our favorite mineral drilling company had the worst possible timing for its earnings release: the very Monday the conflict began. It has dropped 12% since then. Has the investment case for gold or copper changed? Has the need for exploration diminished? I don't believe so.

In The Pond Journal #8, I dedicated a section to the 2026 outlook: the order backlog has surged +83% compared to Q4 2024. This backlog provides visibility for 66% of my 2026 revenue estimates and 41% for 2027, with plenty of commercial upside still on the table.

Tim Brenner, CEO of Foraco, confirmed that in Q1 2026, they have already surpassed 50% rig utilization (compared to a 36% average in 2025) and expect to maintain a steady 67% utilization rate. In my projections, maintaining 50% utilization throughout 2026 alone would imply a revenue increase of more than 30%.

⚒️⚙️🛻Dauch

I saved the most painful case for last: It is true that Dauch hasn’t dropped more than its peers since the start of the conflict (11%), but it was already down 30% since it began trading alongside Dowlais.

One of the primary drivers of this decline has been the market’s skepticism regarding expected synergies and higher than anticipated restructuring costs. There is also an “investor exodus” effect in the UK following the cancellation of Dowlais and the subsequent share distribution. I will analyze this more calmly and provide an update soon.

Thanks for reading the Value Pond🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

Market risk perception is curious, to say the least: Israel’s benchmark TA-125 index surged as much as 6% relative to Friday’s close, while the Eurostoxx dipped over 6%, and the S&P 500 dipped only 1%.

No one knows where these events might lead, but it’s worth remembering that this isn’t the first escalation of tension in the Middle East, and that panics often represent prime investment opportunities.

Last year, the trade war was supposedly set to reshape the world. In April, markets suffered through extreme volatility, and within that chaos, opportunities with highly asymmetric risk-reward profiles emerged.

Two examples:

• Semapa: How could tariffs possibly affect a Portuguese holding company whose core business is producing and selling paper, cardboard, and tissue in Europe? The answer is: not at all. Yet, investors fled toward liquidity. On April 7, 2025, Semapa traded 12% below its prior levels, hitting €13.6. Today, it trades at €24 (ex-dividend 2025).

• Grifols: While the cross-tariff game could have impacted the company,despite its massive plasma production in the US, their pricing power within a virtual oligopoly served as an authentic shield. It traded 20% down at €7.3; today, it stands at €10.5. Still a bargain, but this is another story.

In times like these, “Cash is King”. This is why Berkshire Hathaway, with Buffett’s successor now at the head, is sitting on a $370 billion cash, roughly 30% of total assets. Waiting for the right moment to strike, like a hunter.

So, what should you hunt? Well, if companies you already know, whose fundamentals are consistently improving, correct due to a massive sell-off, that is your moment

In my last post, I updated the Forvia thesis. The stock, which had approached €15, is now hovering around €10.50. The company’s outlook isn't deteriorating; in fact, I recently revised the price target upward, driven by better margins and higher deleveraging.

Wizz Air could also be an interesting play. Only 4.4% of its active routes are in the Middle East, representing less than 5% of its total revenue. If it was compelling, it still is.

Then there is Foraco. As fate would have it, they presented their results this Monday, a day when commodities and miners were on a true roller coaster. The stock price failed to reflect what was, frankly, excellent news.

I’ll dedicate a section of today’s article to briefly analyzing their results. It doesn't require a full update like Forvia, given that the original thesis is less than two months old.

⛏️A promising 2026

The 2025 results are “bad”, but that was already priced in. The real uncertainty was whether we would see a rebound in Q4, a particularly difficult quarter due to the winter season in Canada and the US. And we did: while the quarter in the North was indeed tough, with revenues dropping 13%, South America surged by 95%. Combined with a 15% growth in EMEA, this offset the decline in North America, leading to a total revenue growth of 4%.

The real silver lining comes from the order backlog, which has skyrocketed by 83% to $404 million. Of that total, $228 million is scheduled for execution in FY2026. While a backlog isn't 'carved in stone,' it provides visibility for 66% of our 2026 revenue and 41% of our 2027 revenue based on our thesis estimates, with plenty of commercial upside still on the table.

Tim Brenner, CEO of Foraco, confirmed that in Q1 2026, they have already surpassed 50% rig utilization (compared to a 36% average in 2025) and expect to maintain a steady 67% utilization rate. In my projections, maintaining 50% utilization throughout 2026 alone would imply a revenue increase of more than 30%.

“This year, I can tell you that 67% of the fleet is going to be used at any given time” Tim Brenner CEO. Q4 FY25 earnings call.

The company’s record utilization was 74% back in 2012, and management believes reaching those levels again is possible. But step by step, eyes on Q1 2026 now. This rig occupancy could drive a +43% revenue increase over Q1 2025 lows.

Regarding margins, they have weakened, but this is typical given the additional mobilization costs of preparing the fleet for 2026 orders. Debt has also risen slightly, as they have added five new drillers to the fleet over the last six months. The thesis is accelerating, faster than I anticipated. The question remains: will we get a chance to catch it even cheaper?

I’ll see you soon, likely with an analysis of Bayer’s results. Until then, remember that the stock market is a device for transferring wealth from the impatient to the patient.

Thanks for reading the Pond Journal🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

Forvia is boring; there’s no AI here, no glamorous product. Today, that very smell of metal and welding (asset-heavy) acts as a hedge against the AI-driven disruption currently shaking the markets. This is a pure industrial play: betting on a post-merger restructuring to boost margins and deleverage the balance sheet.

This is the kind of place where you come to roll up your sleeves and do the hard work. Even so, over 1,000 people stopped by to check it out. I’m leaving it here for you, as there are some details I won’t be revisiting today.

The 2025 results and the Capital Markets Day have brought a lot of new information to the table, enough to warrant a full review and a revision of the company’s price target. So, let’s get to it.

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♟️Interiors: The Sacrificed Pawn.

The main and most critical piece of news is the sale of the Interiors division. Having been put up for sale in December, the deal is now considered a given for 2026. The impact on a company’s valuation when facing a divestment is a two-fold dilemma:

• The earnings lost through the sale vs.

• The debt reduction it enables.

In these situations, the timing of the cycle and the urgency to sell heavily dictate the outcome. In Forvia’s case, the need for deleveraging is an undeniable fact. They are offloading a segment where they are a clear leader with a ~13% market share. Is this a negative? Let’s take a look 👁️.

In the original thesis, we saw that Interiors was the division with the lowest Return on Assets (ROA) and the thinnest margins. Furthermore, after Lighting, it was consuming the highest level of CapEx relative to asset value, at around 4%.

Moreover, despite being a market leader, it is a lower value-added segment and is more fragmented among local competitors. We already touched upon this in the original thesis.

The expected Enterprise Value for the sale is estimated at approximately €1.4 billion—so much so that they have already adjusted the impairment loss against book value in the 2025 results.1 This valuation implies an EV/EBIT multiple of around 8x. This multiple is consistent with recent M&A transactions in the sector.

✅ Overall, the decision makes sense. The priority for unlocking value lies in improving margins and reducing debt. The Interiors division was the necessary sacrifice.

💼 Portfolio Redefinition

In its 2028 plan, Forvia has redefined the value proposition of its divisions by splitting them into two groups:

• Growth Cluster: These are the divisions management considers growth drivers, where investment is truly worthwhile.

• Value Cluster: Here, the priorities are margins and cash generation. This makes perfect sense.

I won’t dwell much longer on this topic. If you’d like to learn more about the strategy or the value proposition of each segment, you can consult the Forvia CMD 2026 Presentation.

💰Resultados 2025

We knew top-line growth wouldn't set the world on fire, but we came here for an industrial restructuring play, not a compounder. Yet, they delivered exactly what was required: the guidance was met. Adjusted for currency, sales remained flat year-on-year. (If we include a “tooling” effect2 in Interiors, product sales actually grew by 1.5%).

When compared to global light vehicle production, which grew by 3.9%, Forvia lagged by 4 points. However, if we factor in Forvia’s specific geographic mix, production grew by 1.4%, representing a 1.5-point underperformance.

Chinese OEMs have entered a phase of offshoring production to Southeast Asian countries, and Forvia has been following them, to Thailand with BYD, for instance. Nonetheless, the net effect in Asia remains negative. This will need to be monitored closely.

We’ll discuss specific divisional sales later, but since the two pillars of this thesis are margin improvement and deleveraging, let’s see how they performed.

🔎Margins & Debt

The margin improvement in a flat sales environment has been very positive. Both the EU-FORWARD program and the Hella synergies have outperformed my expectations, with a +20 bps incremental beat over my own estimates.

The thesis goal was to achieve €300 million in savings (compared to the company’s target of €500 million by 2029), and these have practically been reached already in 2025.

Furthermore, if we consider the “new” Forvia (excluding Interiors), the group’s EBIT margin rises to 6%.

Turning to the debt, there is also good news. In 2025, the leverage ratio dropped to 1.71x, or 1.59x if we factor in the Interiors divestment.

Cash generation has improved despite rising restructuring costs, and the company has reduced its reliance on factoring (client advances with financing costs). This is clearly reflected in the Normalized NCF (Net Cash Flow), which excludes restructuring expenses and the contribution from factoring.

The debt maturity profile has improved, clearing the Everest that 2027 once represented. We hope that this, alongside the stronger cash flow generation and the Interiors divestment, will help improve the company's credit profile, which still sits at the lower end of non-investment grade, with no rating revisions since late 2024.

Let’s take a look at the performance of the main segments.

💺 Seating: The Restructuring Paradigm

The Seating segment, responsible for 31% of sales (nearly 40% in the new Forvia), is the textbook example of a restructuring process. The segment’s sales dropped due to the slowdown in the Chinese market—mainly BYD—and the European market, yet margins expanded. The net effect is positive, with a 7% higher EBIT contribution than in 2024.

The underperformance relative to its competitors is primarily explained by its over-representation in Europe, where most of the capacity cuts (under the EU-FORWARD3 program)

The company views the Seating segment (the origin of the former Faurecia) as part of its growth portfolio. This is where management sees the potential for expansion:

• Higher CPV (Content Per Vehicle): The shift toward increased comfort leads to a higher cost per seat: heating, advanced reclining features for autonomous vehicles, and even massage functions.

• Exposure to the Indian market and Japanese/Korean OEMs.

• Growth in the industrial segment: Trucks and machinery.

Let’s not forget that Forvia is the world’s #1 in seat frames and mechanisms, and #3 in complete seats

👌👌 Electronics: The Green Shoot

Particularly satisfying is the performance of Electronics, one of the two segments, alongside Seating, that management has classified as “Growth Clusters” in its medium-term strategy. Sales grew by 12% while margins expanded by +140 bps.

The sales growth relative to its main competitors is highly remarkable.

This segment includes radars for autonomous driving and assisted parking systems, power management controllers, and infotainment electronics, among others. It is a segment with very favorable tailwinds, where Forvia is a top 3 global player. Investing in this segment makes perfect sense.

😅 Lighting: The Laggard

The Hella legacy segment is struggling to find its footing. The expiration of several high-volume programs has coincided with a weakening European market. The sector is currently facing clear overcapacity. As a result, the company has recognized a €270 million impairment charge, writing down its goodwill.

This is precisely why Lighting falls into what they’ve labeled the “Value Cluster”: the focus is now on rationalizing investments and reducing capacity to bring the division back to profitability. I believe this strategy is the correct path forward.

🐄 The Cash Cows

The remaining divisions to discuss are Clean Mobility and Lifecycle Solutions. These segments are relatively small (representing 23% of the “new” Forvia’s sales), but their low capital intensity makes them powerful cash generators. There isn’t much to add here: they are improving margins and showing organic growth.

Clean Mobility is the one “sentenced to death”—the division whose terminal value the market essentially prices at zero. I’m not claiming that catalytic converters for internal combustion engines (ICE) are the future, but 71% of new vehicles registered in Europe in 2025 still featured them. The situation in the US is much the same.

“RBC has significantly lowered its 2030 EV adoption forecast for the U.S. from 35% to 17%”

Perhaps this “cash cow” isn't worth zero; perhaps the very weight holding it back will become the catalyst for its value.

🎯 Price Target Revision

The top-line thesis hasn’t changed much. The industry outlook remains similar: S&P Global Mobility estimates a 1% CAGR (compound annual growth rate) in light vehicle production through 2033. Notable growth is expected in Asia (excluding China) at a 2% CAGR, compared to 0.8% in China. Major Chinese OEMs are currently offshoring their production, and the emergence of India and the ASEAN4 will be key in this process.

Assuming a flat 2026, as guided by management, we are projecting a 1.5% annualized organic growth rate through 2029. This is slightly above the light vehicle production growth in their specific markets (+1.3%).

Management has set operating margin targets above 7%, driven by volume improvements and cost cuts. We won’t be quite as optimistic. Forvia’s 2025 EBIT margin, excluding Interiors, stands at 6%.

While I am confident that by 2029 margins will be closer to 7% than 6%, a margin of safety is paramount. Restructuring expenses will remain high, albeit trending lower. By factoring in these projected restructuring costs and a slightly more conservative contribution from the efficiency programs, we are modeling a 6.5% EBIT margin. Debt is projected to decrease progressively, following a conservative path.

This scenario supports a €3 per share increase in our Price Target, representing a 15% bump over our previous estimate. This revision is consistent with our positive assessment of the margin improvements, stronger cash flow generation, debt reduction, and the Interiors divestment.

Thanks for reading the Value Pond🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

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Remember Liberty Global? Is a complex telecommunications conglomerate and investment holding company geographically diversified across Europe. Known for its opportunistic capital management under John Malone, it focuses on high leverage, tax minimization, and aggressive share buybacks to unlock shareholder value.

A little over a year ago, I wrote a thesis alongside , primarily focused on taking advantage of a special situation involving the Sunrise spinoff, which was set to unlock the value of both the spin-off and Liberty itself.

The value catalyzed, though only on the Sunrise AG leg. In Liberty, there is still around ~70% upside. The funny thing is, this past Friday we saw a very strange market situation, which could be a precursor to further catalysts.

The Anomaly🤔

Liberty Global trades through three share classes: Class A (LBTYA) and Class B (LBTYB) carry voting rights, while Class C (LBTYK) has the same economic rights but no voting power.

Furthermore, there is a massive difference between Class A and B: Class A has one vote per share, whereas Class B has 10 votes per share. In short, the company is controlled through the ownership of Class B shares.

These shares have historically been held by John Malone, the “Cable Cowboy”, and Mike Fries, his right-hand man and successor. Together, they hold ~90% of the Class B shares. This makes Class B highly illiquid, with an average daily volume of just over 1,000 shares, compared to the 3 million shares traded in the other two classes.

Usually, all three classes trade at parity. Until Friday.

Class B shares skyrocketed +100% at the open, hitting $29, while the other two classes remained below $12

Some say this was a short squeeze; honestly, I don't think that theory holds water. Not only is the short interest in this stock practically non-existent (185 shares), but the volume traded during the session tells a different story.

Opening volume was very high, dismissing the idea of sharp price swings on low liquidity: 1.2 million shares were traded against an average of 1,000 shares, with another 1.3 million shares moving throughout the day. This means ~19% of all Class B shares moved. In other words, 8% of the company's control votes changed hands at a roughly 50% premium.

And that, my friends, is no small feat.

The contagion reached Class A shares (1 vote per share), which saw their average volume double to 5.5 million shares, ending the day up 4%.

The company has up to four business days to report these moves to the SEC; only then will we know more. In the meantime, we can only speculate:

• If we assume Malone/Fries haven't sold any of their Class B shares, someone has bet big on snatching up all other existing voting rights to take an active role in catalyzing the company's value.

• If it’s Malone/Fries who have tightened their grip, something big is coming: A take-private bid? A simplification of share classes? Who knows.

Q4 2025 results will be presented this coming February 16th, and we also know that Fries/Malone are very fond of dropping major headlines the week before earnings.

Unreliable sources leaked on Friday that Liberty might be looking to acquire the 50% stake in the VodafoneZiggo joint venture (Netherlands) at an implied valuation of $4.40 billion, subsequently merging it with Telenet (their Belgian subsidiary) to create a Benelux giant. All speculation, nothing official.

What we do know is that Liberty Global is a clear case of undervaluation offering, in a conservative sum of the parts, a very attractive upside. These moves could stir the hornet's nest, forcing the actions needed to finally unlock that value. And if you have an undervalued stock in your sights, along with potential signs of upcoming catalysts, there is only one thing left to do.

An interesting week lies ahead after this strange event; I will be posting updates via X and Notes.

Thanks for reading the Pond Journal🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

Today, I am doing something I haven’t done until now: publishing the performance of the investment theses I’ve shared on this blog. I’ve held back for two main reasons:

1. Conviction cannot be transmitted in a thesis, no matter how extensive or well-justified it may be. It is only achieved through two paths (or a necessary mix of both): the authority of the source and, above all, doing the hard work yourself. When I speak of conviction, I mean seeing a 20% drop and using it as an opportunity to buy. Therefore, this blog only aims to highlight interesting ideas to encourage the latter and, over time, with successful theses and a bit of luck, generate the former.

2. The performance of individual theses can differ greatly from a portfolio’s return. You might have averaged down during dips or trimmed gains, assigned different weights to each idea, or even incorporated stocks without a full thesis.

For me, both reasons remain gospel. However, with 2 years under our belt and nearly 500 subscribers, I hope I’ve earned enough authority to publish this without feeling “imposter syndrome.”

Starting now, I will use Sundays at the end of each month to publish the following dashboard with relevant updates and a brief summary of each thesis’s status.

I’ve included a poll below to see if you find this format interesting. If you have any suggestions for improvement, please leave them in the comments.

Thanks for reading the Value Pond🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

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I will be commenting on the results for WizzAir, Forvia, TGS, Foraco, American Axle, and Bayer on X, and if anything of vital importance arises, I may cover it more extensively in a future Journal.

But before that, let’s revisit Pond Journal #1, written back in October. At that time, we discussed gold, and I stated the following:

"Gold is at an all-time high against our beloved fiat currencies, but not against real assets like housing or other commodities. There is no bubble here; only a paradigm shift."

Since then, gold has climbed an additional 20%, and research firms like Goldman Sachs are already raising their price targets to $5,500.

Geopolitical tensions, central bank demand, and a complete lack of faith in any government balancing its books without debt-based stimulus are sufficient drivers for gold demand. This remains true whether we see a 10% correction tomorrow or if the price reaches that $5,500 mark.

Miners of Gold

One of the most lucrative ways to gain exposure to gold in 2025 has been investing in miners—for instance, through the VanEck Gold Miners ETF (GDX), which represents the top forty global gold mining companies by market cap. With a 180% return in one year, it has been even more profitable than investing directly in the metal.

However, this hasn't always been the case. Following the peak of the previous cycle (2011-2012), miners went through a profound crisis that forced a sector-wide restructuring and consolidation. This process generated deep disinterest among investors, who began to view mining as a risky, volatile, and extremely cyclical investment. We discussed this in greater detail in the thesis on Foraco (TSX:FAR).

As always, the capital cycle comes into play: disinterest leads to reasonable prices for these assets, and once the price of gold rises again, highly attractive investment opportunities are created.

This opportunity materialized clearly in the Major Miners-to-Gold ratio, which expresses the price of miners relative to the metal.

While gold resumed its upward trend in 2020 due to the pandemic, monetary stimulus, and resulting inflation, miners failed to keep pace. By 2024, the ratio reached levels so low they signaled a clear arbitrage opportunity. Furthermore, the sector is now more concentrated, less leveraged, and allocates capital in a more balanced manner.

As the chart shows, the ratio is approaching resistance. After such a meteoric rise, it is only logical to ask: How much upside is left? Is it time to leave the last penny for the next guy?

These are not easy questions to answer, and one must feel comfortable with how their portfolio is constructed; therefore, I will try to offer the answers that I have applied myself.

Attempting an intrinsic valuation of an ETF with over 40 companies is a nightmare, but we can try to get close. We are going to do a napkin valuation, a method that oversimplifies things but is perfectly valid when backed by a solid macro thesis like the one we have.

The Napkin Math

According to the VanEck report from January 16, 2026, gold miners are trading at an NTM P/E of between 14x and 15x. It is important to note that this relative valuation was calculated with gold at $3,400/oz, while the price currently stands at $4,950/oz.

This implies that there will be a quarter where miners' revenue per ounce will be closer to $5,000 than to the $3,400 reflected in that 14-15x multiple (a 47% difference). To this, we must add operating leverage.

The sector's average All-In Sustaining Cost (AISC) is approximately $1,600/oz. Therefore, every dollar the gold price rises above that implied $3,400 flows almost entirely to the bottom line.

Obviously, costs could rise: gold may become harder to mine, costs could increase due to higher demand for services, or staff shortages... These costs will trend upward in the medium term. We will be conservative with this.

In the following chart, I have overlaid the price of gold onto VanEck’s NTM P/E series. The gold price doesn't have its own scale, but it serves to illustrate the key point: this is a cyclical industry, and as in many others, the highest valuations are reached at the lowest multiples. And that is exactly where we are, except for the fact that gold seems to have no ceiling.

Based on the scenario implied in the VanEck report (12/31/2025), at current gold prices and with costs held ‘ceteris paribus’, the multiple would drop from 14.50 to 9.55 NTM P/E. This implies a potential annual earnings growth of 86%, assuming every ounce is sold at current spot prices.

Adjusting this scenario with a 10% increase in AISC, holding gold at $5,000, and applying a 12x multiple, the ETF would reach a price of $127, providing a potential 21% upside from current prices on a one-year horizon.

Before wrapping up, a note of caution: everyone must find their own comfort level when managing an asset currently trading at all-time highs. It makes sense to try and capture the full potential of this trend, but nobody ever knows exactly when the music will stop. Remember to be greedy when others are fearful, and fearful when others are greedy.

Thanks for reading the Pond Journal🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

The year at The Value Pond started strong, with a full thesis on a small and unknown company where I believe many powerful macro trends are about to catalyze. We took a deep dive into Foraco (TSX:FAR), a mineral drilling services company.

But in today’s article, we are going back to our roots. We return to Bayer, one of the most challenging theses I’ve faced as an analyst and one from which I have learned the most. And I continue to do so.

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It has been just under a year since the last full update of the Bayer thesis. At that time, market pessimism was still widespread, but the first signs of a reversal were beginning to emerge.

Since then, the company seems to have lived up to what I said at the time: “it could also be a pivotal year.” The shares have achieved a 100% upside in one year, with the pharma division delivering positive results both in clinical trials and in the market, signaling that the portfolio could return to growth territory. We can say the turnaround is becoming a reality.

However, in my view, the Crop Science division holds the most unlocked potential. A significant part of this is due to molecular breeding—a fascinating process that builds a moat around accumulated knowledge and genetic data.

My sister who, besides being the best is incredibly sharp, works as a Plant Breeder at a top-tier agricultural firm. I admit I didn't fully grasp what that entailed until this past Christmas, when she told me about her work.

Essentially, she is responsible for developing a viable variety to mass-produce seeds for a specific plant. It is a process of astounding complexity and meticulousness, involving very long development timelines and extremely high costs in both specialized personnel and laboratory equipment.

Time + Money + Trial and error = Moat

In 1798, Thomas Malthus established a theory on the collapse of humanity, positing that population would grow geometrically while food production would only increase arithmetically, limited by available land. This “Maltushian trap” principle was dismantled by numerous agricultural innovations, such as machinery and, in this case, crop species improvements that multiplied productivity per hectare.

The fruits and vegetables in supermarkets haven’t lost their flavor because your grandfather no longer grows them on a small plot while playing Mozart for them; they’ve lost it because, genetically, farmers have prioritized mass production and commercialization traits like shelf-life, homogeneity, and appearance. However, flavor, water consumption, drought resistance, or pest resistance as well as the specific time of year or region of the world where they are planted are also variables that can be modified and are considered in today’s and tomorrow’s agriculture.

This process, which in the past was basically based on trial and error, is still carried out through this same method, only now bolstered and improved by techniques such as genome sequencing.

Imagine Bayer aims to develop a new tomato variety for the pesticide-conscious consumer who refuses to compromise on flavor. Crucially, this seed must also thrive specifically in the greenhouses of southern Spain.

This kicks off a process of sample cultivation, screening, and crossing where, eventually, varieties are sent to a laboratory to detect the genes responsible for desirable or undesirable traits, allowing them to be blended or isolated in the next crop. Viable varieties are tested in farmers’ fields, sometimes with farmers receiving a payment per square meter to conduct these trials. Through trial and error, discarding and selecting, and receiving feedback from labs and farmers, a commercially viable seed is reached.

This process can last more than six years when aiming to commercialize a completely new variety from scratch; furthermore, it requires potential adaptations to different climates or even planting seasons, if the crop allows for multiple harvests in a single year.

This complexity, involving the crossing of billions of genetic data points, creates a "natural patent", a fortress of accumulated knowledge that competitors cannot breach with capital alone.And this is exactly where the acquisition of Monsanto made sense.

Monsanto, there was a reason

In 2018, Bayer acquired Monsanto in what may have been one of the worst M&A deals in history. With the acquisition, the century-old German company faced (and continues to face) hundreds of thousands of lawsuits over the Roundup herbicide.

The cost of litigation, which currently stands at 14 billion euros and could reach 20 billion, could have destroyed the company. However, they also acquired a fundamental piece of the world’s food supply; they became a leader in this incredibly complex industry.

The development of seeds adapted to shifting demand patterns, the need for land productivity, drought and pest resistance, and adaptability to specific ecosystems will be a key driver in the global food system and Bayer’s positioning is a clear advantage.

Scale allows Bayer to double the R&D budget of its two main competitors, granting the company a formidable technological foundation and a strategic position in the most critical crops for global food security.

Seeds account for approximately 50% of Crop Science sales, representing 20% of Bayer’s total revenue. This is a significant weight in a sector with a clear growth vector and a moat built around billions of genetic data points.

For pre-Monsanto shareholders, the merger was undeniably a value destroyer. However, in investing, price is everything. With a long-term horizon and the current valuation, Bayer now presents a compelling opportunity.

Thanks for reading the Pond Journal🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

We are talking about a small-cap company with low liquidity, operating in a highly cyclical sector far removed from the consumer, and generally ignored by financial markets.

Normally, this list would form a checklist of red flags. But in this case, there are so many structural macro aspects and so much backing from global trends that one simply cannot look the other way. If you read the Pond Journal #4 , you have an idea of where this is going. If not, we are about to dive deep.

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First, a short lesson on economics, which I believe is crucial here:

The economist Carl Menger coined the term “first-order goods” for consumer goods, and “goods of a higher order” for those that enable or facilitate the production of consumer goods.

Goods of a higher order have varying degrees. For example: the electrical wiring powering my computer is a higher-order good relative to electricity consumption. This wiring is one step removed from consumption (or two, if I were monetizing this 😂).

But for that wire to reach the wall, a wire-drawing factory had to stretch the metal; one step back, a smelter had to process cathodes; and before that, a flotation plant had to treat crushed rock. Pulling the thread, you eventually reach a mine. But that is not the end.

About ten years before extraction began, a mining company hired the drilling services of our company today to verify if, beneath the surface, there was a copper deposit worth extracting.

This distance from the final consumer is the root cause of the extreme cycles we are about to analyze. In economics, this is known as the Bullwhip Effect: a minor fluctuation in end-consumer demand amplifies as it moves upstream through the supply chain. By the time that signal reaches the very beginning—exploration drilling—it has transformed into a violent swing.

The company is Foraco International SA (TSX:FAR), and its sector is Drilling Services.

Foraco is a company of French origin, based in Ontario, currently offering services in 17 countries, including the world’s major mining companies.

Simply put: they drill the ground, providing the machinery and personnel to do so, charging a price per meter drilled. Typically, miners tender projects, and Foraco and its competitors submit technical and economic bids where price, service quality, and equipment availability play a key role.

The occupation ratio of drilling equipment, measured as rig utilization, determines the level of revenue and profitability in an activity with high operating leverage.

In addition to mining drilling services, Foraco has a powerful segment dedicated to Water : drilling wells for consumption, industry, or services related to the mines themselves.

Demand for drilling services is highly cyclical, fluctuating due to macro dynamics and the individual dynamics of each mineral. Mid-double-digit sales variations for several consecutive years are not uncommon, as seen in Foraco and the sector’s largest listed company, Major Drilling .

Furthermore, depending on the moment in the cycle, the predominant type of exploration and client type changes .

Brownfield projects and other necessary tasks throughout the mine’s life (including closure) are the revenue base, accounting for more than 80% of sales in 2024.

The link between Greenfield exploration appetite and junior clients is very tight, as shown in the chart below.

In other words, the appetite for mining wakes up the capital markets, which in turn decide to finance higher-risk junior projects that may or may not result in a viable mine.

Greenfield projects represent around 8% of Foraco’s sales, but when they grow, they are a powerful vector for sales growth, as they are just one element of a tsunami of Brownfield projects that precede them.

Minerals: The Drivers

The most important component in drilling demand fluctuations is client interest in exploring or intensifying the production of the main commodities to which Foraco is exposed.

For 2025e, the weights are as follows:

Price variations in these commodities—the ultimate indicator of supply/demand imbalance—drive or discourage Capex investment by Foraco's clients. In fact, by generating a synthetic index with commodity price variations (excluding water) weighted by their influence on sales, we can see current prices as a slightly leading indicator of company activity.

Each of these minerals exhibits varying degrees of scarcity, diverse end-uses, and distinct geographic production profiles. Consequently, they warrant an independent analysis of supply and demand fundamentals to assess the potential future demand for Foraco’s services.

In the following table, I have consolidated the supply and demand factors for each commodity, Foraco’s presence in the leading producing countries, and the suitability of Foraco’s services to the current needs of that specific commodity (for example, gold increasingly requires deeper and more technical drilling).

Due to its importance and weight within the thesis, i will focus mainly on two: Copper and Gold, which, together with Water, currently account for 60% of revenues. Why?

1. Foraco doesn't really care where the rig utilization comes from. The catalyst for profitability is a high utilization ratio, regardless of the source.

2. Gold and Copper are the pillar commodities of the thesis. Together, they account for 60-70% of the miners' exploration budgets.

(Note: At the end of the thesis, for the true freaks, I will leave a separate piece explaining Nickel, Iron, Lithium, and Coal).

As a compass for the Gold and Copper momentum, we will use the Capital Cycle, specifically illustrated in this clock.

“The Future” is fueled by Copper

Copper demand is expected to double by 2035, driven by green energy, EVs, and the data centers required for Artificial Intelligence.

This physical reality clashes with the needs of tech “hyperscalers,” creating a structural deficit in a metal that was already in deficit before this situation. Mining giants warn that the “new gold” is scarce, with key projects trapped in legal and cultural battles.

The Supply Squeeze: The supply deficit is imminent, and current copper ore grades are falling, forcing the processing of larger rock volumes. Price evolution clearly signals this imbalance: up 114% in 10 years (25% in the last year alone).

Wood Mackenzie notes that Brownfield expansions require 30-50% less Capex and come online faster than Greenfield projects. Given risk aversion and high capital costs, Majors are prioritizing these assets. These explorations are deeper and more technical—exactly where Foraco excels, obtaining superior margins . Foraco is present in all major producers except China.

The clock: Applying the commodity cycle clock, we are between Phase 4 and Phase 6, awaiting Phase 7 (new discoveries).

• Phase 2/3 (Consolidation): Major copper miners have consolidated (BHP+OZ Minerals, Rio Tinto+Turquoise Hill).

• Balance Sheets: Prices are rising, and balance sheets are healthy

• Exploration: Budgets haven't spiked yet, but given the state of existing mines, it is inevitable

What are the miners saying?
Glencore: “Very exciting multi-decade brown and greenfield projects” “1 million tonnes a year by 2028”
BHP Group: “Pursuing more growth in world-class copper basins in South Australia and Chile”

Gold is the New (Old) Gold

Due to its scarcity, gold represents around 40-50% of the global exploration budget of major miners.

Its role as a store of value and a real asset backing central bank balance sheets is driving demand in a world of economic blocs, debt, inflation, and negative real rates.

The Supply Problem: Supply growth is completely stagnant. Existing mines are aging, and large discoveries are rare. Majors are acquiring Juniors with existing projects due to the high cost of exploration. Financing for new ventures has been halted by the cost of capital.

Despite a 76% growth in the last year (270% in 10 years), banks like JP Morgan or Goldman Sachs see gold above $5,000/oz. These sustained high prices will eventually justify exploration and trickle down to Foraco. As surface deposits are depleted, deep diamond drilling (Foraco’s specialty) is required.

The clock: We are in the same phase as copper (4 to 6).

• Mega-mergers have occurred (Barrick+Anglogold, Newmont+Newcrest).

• Balance sheets are solid.

  

• Exploration budgets began to signal a slight trend change in H2 2025.

What are the miners saying?
Agnico Eagle: “Most ambitious exploration program we’ve ever had”
Anglo Gold: “Assign a total of $50 million, an additional $15 million a year to exploration”

The Drilling industry

The drilling sector is highly fragmented, with only ~25% of the market in the hands of global companies. The main competitors with multi-country scale are:

• Major Drilling (TSX:MDI): Global reference. High specialization in copper/gold. Roughly double Foraco’s size .

• Capital Limited (LSE:CAPD): Strong in emerging markets (Africa/Middle East). Divergent strategy: offers integrated mine services (earthmoving, labs) .

• Orbit Garant (TSX:OGD): Half Foraco’s size. Canada/Chile focus. >60% Gold exposure .

• Geodrill (TSX:GEO): Technical competitor highly dependent on Gold (85%), focused on Africa, expanding into South America.

Foraco is #3 by size (or #2 excluding Capital Limited’s integrated services). It has a key differentiator: The Water Segment, which provides stability.

Major miners rely on Foraco and the top players for technical projects due to compliance and safety, whereas they might hire a local competitor for price on a simple job.

Furthermore, there is a whole ecosystem of small local family businesses in the most developed mining economies (Canada, USA, Australia...). However, in less developed economies, small local players cannot compete technically with the major ones on complex projects.

Regarding local competitors, major miners rely on Foraco and the top players due to their size and compliance standards, which provide security and service stability throughout the mine’s life and across different geographies. Conversely, they might hire a local competitor purely on price for a simple exploration task or low-technical work.

The highlight: Foraco operates with greater metal diversification than Orbit, Geodrill, or Capital Limited, and has a more diversified geographic presence, focused mainly on stable jurisdictions.

The Crash That Left a Scar (2012-2016)

The sector went through a deep crisis starting in 2012: revenue collapse, junior bankruptcies, and exploration budgets vanishing.

Companies had been very reactive to the boom years, with high Capex/M&A, but since then, they have prioritized capital returns over investments.

For Foraco, this led to a debt restructuring by Oaktree and a “deep winter” in its share price. Only Major Drilling, due to its size, has managed to reverse the underinvestment trend prioritizing small acquisitions in the last years.

In 2025, there are roughly the same number of drilling rigs available as in 2016. It is not easy to increase supply quickly even if appetite wakes up.

Companies have underinvested for years~~ with small fleet renovations and timid M&A (by Major Drilling) that has not increased available capacity, only reordered it.

The result of a more disciplined sector and the memory of the crisis is visible in margin evolution.

Highlight: The sector represented by these main players is not in overcapacity and could experience an equipment shortage if gold and copper expectations are met. Capital discipline makes them reluctant to invest heavily .

Internal Analysis

So far, we have established how diverse macro factors and commodity cycle dynamics are converging positively for Foraco's clients. Crucially, this coincides with an optimal period of supply scarcity and capital discipline among drilling companies.

Now, let's examine the internal factors to assess Foraco's ability to capture this growth potential. We start with the 2024 and 2025 results, because this sector is highly volatile, and we are coming off two years of double-digit declines.

2024: Junior Collapse

Foraco's year was defined by the weakness of junior clients, with a 60% drop in sales from the 2023 peak (where this client type reached $70 million). The difficulty in accessing financing was the key factor.

According to S&P Global Market Intelligence, the share of Junior companies in the global exploration budget fell in 2024 to its lowest level in decades. While Majors increased spending to secure reserves (Brownfield), capital allocated to Juniors contracted by nearly 13% YoY.

Additional headwinds included the strength of the US Dollar against key operating currencies (CAD, CLP) and the strategic exit from Russia.

Excluding currency effects and the portfolio impact (Russia), the revenue drop in 2024 moderates to 12%, with the Junior pullback accounting for the bulk of it (10%). For context, competitors like Major Drilling reported a 15% sales decline primarily due to this same effect.

2025: Signals of bottom

The first 9 months show a 16% drop in sales (12% adjusted for FX & portfolio), with significant weakness in North America and Canada (-27%). Looking at key competitors, we see a mixed picture that requires nuance:

• Major Drilling: Reported a +24% progression in its H1 2026 (April-Sept), with >100% growth in South America. However, this is a mirage due to an acquisition; on a like-for-like basis, they show declines of 2-4%.

• Orbit Garant: In its Q1 2026 (June-Sept), reported a 3.7% drop, impacted by temporary client delays and the gradual ramp-up of new projects—circumstances mirroring Foraco's situation.

Returning to Foraco, the instability caused by tariffs—which delayed or blocked new investments—was compounded by project completions and a management decision not to enter price wars, betting instead on technical work. Management specifically highlighted a strategic rotation from Nickel to Gold.

In the last two quarters, we have seen a moderation in YoY declines and a reversal in the last two, with positive QoQ variations. (Q2 is exacerbated by stationality effect, but look at Q2 2024).

Turning points: New projects & Junior Green Shoots

During the second half of the year, the company announced the signing of three major contracts, mainly in North America and Chile, with Tier 1 miners for Brownfield projects. These projects have an average duration of 3 years and amount to approximately $240 million. Key among them is a gold project in Nevada, USA.

The last comparable milestone dates back to 2023, for a Water project with Rio Tinto in Australia.

Regarding Junior demand, management began seeing signs of recovery starting in Q2, reaffirmed in Q3 by the reactivation of financing. Competitors share this view.

According to S&P Global, through October, total financing for the mining sector increased 93% YoY:

• Gold: +136%

• Rest of Metals (led by Copper): +31%

• Exploration: This momentum extends even to Greenfield, which rose 27% QoQ and 5% YoY.

The financing trough and the renewed (albeit incipient) momentum can be clearly seen in the TSX Venture Index (dominated by natural resource explorers) and the VanEck Junior Gold Miners ETF (GDXJ) relative to its large-cap sibling.

The Materialization of the Imbalance

Revenues

Following the commodity analysis, two scenarios for annualized sales growth are presented. The base case, considered the most likely, is a position of cautious optimism that reflects the supply-demand imbalances in commodities and the supply-side factors within the drillers. The low case accounts for a slowdown caused by a potential recession, moderating growth without ignoring the major imbalances that will eventually have to be addressed.

The result of combining these projections is a 15% CAGR (annualized) for the base case and nearly 6% for the low case. While the base case may seem ambitious in terms of revenue given recent years, there are strong reasons to project these numbers.

• This sector is characterized by explosive growth: when demand for services arrives, rig rotation multiplies and sales skyrocket. In 2021, they saw 15% growth, followed by 36% in 2022 and 11% in 2023. As we have seen, there are reasons to state that current supply and demand imbalances are more solid than back then, and the sector is in a better position.

• At that same point, price ceases to be a selling point, and the sense of urgency allows for margin expansion. As previously noted, the number of rigs among the main competitors has not grown in the last 10 years. Revenue per rig has increased by about 14% annually since 2020, but this indicator is also influenced by asset turnover, measured by the utilization rate.

With the available data on rig utilization, we can estimate the maximum revenue (at 100% occupancy) per rig as a method of isolating the price effect from the utilization effect. While not a perfect indicator—given the mix of more or less complex jobs—we can see a clear trend: between 2017 and 2020, Major Drilling and Foraco were able to increase prices by 3% annualized, whereas between 2020 and 2024, they increased them by 14% to 18%.

From this, we can conclude that between 2021 and 2022, they were able to pass on cost increases to their customers and increase margins in a medium-high utilization scenario (50-60%). In the base case, the primary driver of sales is the increase in occupancy, supported by price increases above inflation during growth years.

Margins

Approximately 90% of Foraco's expenses are directly attributable to sales (COGS), mainly direct labor (operators), consumables, and machinery depreciation. It is a business with high operating leverage, where the equipment utilization rate—measured as rig utilization or fixed asset turnover—is of paramount importance to the bottom line.

Increases in rig utilization boost the gross margin, following a curve of diminishing returns: beyond a certain level of activity, hiring additional personnel to cover extra shifts can become too expensive (due to training costs, labor shortages, etc.) and/or expose the machinery to over-activity, which could lead to more frequent breakdowns.

In other words, at a 30% utilization rate, a 1% increase results in a 60 basis point expansion of the gross margin due to better absorption of fixed costs. However, above 60% utilization, the same occupancy increase only impacts the margin by 27 basis points.

To estimate the diminishing returns curve of the gross margin as optimal equipment utilization is reached, we have used observations from its main competitor, Major Drilling, for which we were able to obtain utilization rates and gross margins over a long observation period.

These observations are considered relevant given the comparative gross margins between both companies, with the exception of the deep crisis period Foraco experienced between 2010 and 2017, marked by restructurings, layoffs, and low occupancy.

The visualization of the gross margin and utilization rate plot shows the diminishing returns regression model that we will use to model the gross margin, excluding the three outliers in red from the peak of the previous cycle.

The combination of the base case with the margin modeling shows that Foraco could exceed $500 million in revenue, with margins surpassing 26% at the peak of the cycle.

As I anticipated, 90% of the costs are COGS, while the remainder consists of fairly predictable and stable SG&A expenses and financial debt costs. I will elaborate on the financial debt in the ‘The Deep End’ appendix following the conclusions.

The summary of the projections of key financial indicators is as follows:

Valuation

The valuation was conducted using a P/E multiple of 8x, reflecting the risk of non-materialization due to its status as a small-cap, the aforementioned sector disaffection, or the possibility that mining exploration expectations do not fully permeate this industry.

Furthermore, as this is a cyclical industry, the price target is determined by the year representing the mid-cycle, which in this case is 2027.

The valuation shows a 120% upside in the base case and a low-case scenario with a reasonable margin of safety.

Let’s discuss the non-materialization risk, which justifies the low multiple and the choice of 2027 as the mid-cycle point.

Non-materialization risk

In the mining environment of 2019, which extended through the bottlenecks until mid-2023, the stock price was dictated by Major Drilling’s negative results, which anticipated a short cycle.

The market did not reward Foraco with a multiple expansion based on expectations; it was ultimately the real earnings that drove the share price, peaking at CA$2.87 with an EV/EBIT of only 4.3x. This was further compounded by the lack of interest in the sector and Foraco’s market capitalization level.

If institutional capital does not flow into small caps within the sector, earnings may arrive too late in the cycle, potentially signaling a final phase that prevents extracting the full investment potential from Foraco.

Based on an EV/EBIT multiple of 4.5x at the peak of the cycle, the base case maintains a margin of safety with an 80% upside.

The non-materialization risk of the thesis is also intrinsically linked to the next one: liquidity risk.

Liquidity risk

As we have discussed in our sector analysis, drilling is an industry overlooked by capital markets. Foraco is illiquid. Monthly trading volume in recent months rarely exceeds $5 million, making it uninvestable for large funds.

The trading volume of Major Drilling, the sector benchmark by size, is approximately five times higher, despite still being low. Its free float stands at 99%, compared to Foraco’s 60%.

Major Drilling trades at a significant premium, as it is the only player exceeding $1 billion in market cap. We can infer that a large portion of the sector’s NTM (Next Twelve Months) expectations has been channeled through them. Over the last year, they have moved from trading at 11x LTM (Last Twelve Months) EV/EBIT to over 30x, reflecting growth expectations with an NTM EV/EBIT of 12x

Conclusion

The thesis—rooted in the supply-demand imbalances of key commodities, the current phase of the mining cycle, and the dynamics of the drilling industry itself—provides a very solid foundation for a sector-wide recovery.

Internal factors also remain favorable: low leverage, significant insider ownership, investment discipline, and a clear focus on profitability. This is further bolstered by the recovery in activity, highlighted by three major drilling contracts secured for 2026.

The valuation has been conducted conservatively, yet it still demonstrates a sufficient margin of safety. While liquidity risk remains a significant hurdle, that is simply part of the game.

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Extra: The Deep End

Other metals

Niquel (16% 2025e sales)

Nickel demand is primarily driven by the stainless steel industry (~70%), high-performance batteries—including those for premium EVs—(~15%), and special alloys (~10%) used in aerospace.

Despite having a single price index, nickel falls into two classes based on quality:

• Nickel Laterite (”Dirty”): Extracted from open-pit mines using earthmoving techniques. Foraco does not operate here.

• Nickel Sulphide (”Green”): Extracted from deeper underground mines. This is Foraco’s terrain.

Laterite nickel, found in low concentrations in soil, was historically expensive to process until Chinese investment flooded Indonesia. The result speaks for itself: In 2015, Indonesia produced less than 10% of the world’s nickel; today, it accounts for almost 60%.

The supply surge from Indonesian laterites has fundamentally altered price dynamics, as shown in the chart.

Although current nickel prices depress general exploration appetite, it is crucial to distinguish between the two underlying markets. Indonesia’s massive supply requires energy-intensive chemical processing to reach battery-grade purity. This generates a carbon footprint incompatible with Western ESG standards and government subsidies (like the US Inflation Reduction Act).

Therefore, the Western supply chain maintains a strategic need to secure “Green” Nickel. This requires deep technical drilling, which effectively decouples Foraco’s activity from the global spot price and sustains demand in key jurisdictions like Canada and Australia.

Iron (15% 2025e sales)

The iron market is transitioning from a volume-based model driven by construction to a quality-based one focused on decarbonization. Although global supply is abundant, the specific need for high-purity ore for “Green Steel” production sustains activity.

Iron does not offer the explosive growth potential of copper exploration, but it provides “Grade Control” contracts. These are long-term agreements that act as defensive and recurring cash flows, vital for amortizing fixed costs.

Iron mining requires significant production drilling (Grade Control) rather than wildcat exploration. It is a constant, high-volume workflow, ideal for securing long-term visibility, albeit with tighter margins than gold.

Lithium (<5% 2025e sales)

The lithium market is maturing, shifting from an exploration frenzy to a phase of selective industrial development. Short-term price volatility has cleared the market of speculative juniors, concentrating capital into quality projects within safe jurisdictions.

Lithium offers valuable technical diversification. It combines traditional hard rock exploration drilling with water management and deep well contracts for brines—a niche with high technical entry barriers.

Furthermore, to reduce geopolitical dependence on China for these materials, the United States and Canada are projecting significant capacity increases in the coming years.

Coal (<5% 2025e sales)

Coal acts as the counter-cyclical anchor and defensive cash flow generator. The structural lack of investment in new projects (driven by global ESG restrictions) compels producers to maximize reserves at operating mines through extension drilling and intensive grade control.

As a “pariah” sector for many competitors, Foraco benefits from a less saturated competitive landscape. This allows the company to secure stable and profitable volume contracts, underpinned specifically by the currently irreplaceable demand for metallurgical coal for the steel industry.

Ownership

Slightly more than 30% of the company is controlled by the holdings of the two founding families, with significant insider weight. The rest of the shareholding is widely dispersed and does not hold positions from relevant financial entities.

In 2023, the original founders gave way to a second generation that remains removed from daily management, relying on external executives.

Tim Brenner has been the CEO since 2023; he was previously Director of Foraco Canada since 2006. His prior experience is also in the sector at Boart Longyear.

Debt & Cost of Capital

Foraco has turned the page on the distress period of 2013-2016, which forced a costly debt restructuring. However, the balance sheet still carries the weight of that legacy. Current gross debt stands at $80 million, with maturities spread between 2026 and 2028. Crucially, half of this principal matures in 2028, with an embedded option to extend for an additional six years.

The risk isn't solvency (the maturity profile is manageable), but efficiency. Foraco bears a heavy cost of debt between 9% and 10%. In stark contrast, its main competitor, Major Drilling, operates with a Net Cash position and a cost of debt in the 5-6% range.

Working Capital

The drilling business is working capital intensive, primarily driven by client financing. The cash cycle presents a structural mismatch: outflows to suppliers (for fuel and consumables) occur much faster than inflows from major miners, who dictate payment terms. While client advances occur occasionally, they are negligible.

Working capital requirements are highly cyclical.

• Low Activity: Requirements can spike to 25% of sales.

• High Activity: Requirements compress to 15%.

  • Why? In peak demand phases, Foraco gains bargaining power—particularly over junior miners—allowing them to demand better terms, such as upfront payments.

Credit risk is ostensibly low, but the 2024 numbers demand attention. At year-end, Foraco reported $10 million in past-due receivables that were not impaired.

As stated in the Annual Report: “These relate to a number of customers for whom there is no recent history of default or with established practices of long payment terms.”

While management cites “standard practice,” the magnitude is notorious:

• This amount represents 30% of total receivables in 2024 (a historically high figure).

• It equates to 4% of revenue (up from 2% in 2023).

• 2025 9M financial statements do not indicate this has been resolved; in fact, the total receivables balance has increased. This is a metric to watch closely.

DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

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In the Pond Journal #1 we discussed gold through the lens of demand: fiscal deficits, central banks, and inflation expectations. But we didn’t talk about supply. So today, let’s talk about mining. And not just gold, but let’s take it step by step.

The Scarcity Reality

Gold is a remarkably scarce mineral in the Earth’s crust. Each year, slightly less than 2% of new supply is added to the total stock of mined gold .

Furthermore, existing mines are aging, and discoveries of large deposits are becoming increasingly rare. As a result, Major miners are acquiring Junior companies with projects already underway given the astronomical cost and risk of starting from zero.

Financing for new ventures in junior companies had been completely halted since 2022-23 due to the high cost of capital, and has only timidly begun to reactivate during the second half of 2025.

Add to this the fact that banks like JP Morgan and Goldman Sachs see gold above $5,000/oz. The supply and demand imbalances are very clear.

“The Future” is fueled by Copper

It’s not just gold. The demand for Copper, essential for electrifying the data centers powering AI, threatens to cause a structural supply deficit.

Mining giants warn that this “new gold,” vital for the green and digital transition, is running out. This physical reality clashes with the needs of tech “hyperscalers,” creating a deficit in a market where ore grades are falling (forcing miners to process more rock for the same output) .

Prices are screaming scarcity: up 114% in 10 years and 25% in the last year alone.

Here is a very important fact: Gold and copper together account for around 60-70% of the major mining companies’ exploration budget. And these could increase enormously.

Gentlemen, it’s time to increase the supply. And the first thing that must be done is to explore and drill holes: As Trump said, copying the previously coined slogan: ‘Drill, baby, drill ⛏️’

How far and how deep is a matter of price

Starting the exploitation of a mine from scratch is a long process, taking more than 10 years from the discovery of a new deposit. These projects are called ‘Greenfield.’ Geopolitical risk, costs, and the fluctuation of commodity prices make the profitability of these projects very difficult to determine, and they are only undertaken in phases of major imbalances between supply and demand.

Although we are approaching that moment, there is another way to increase supply. These are the so-called ‘Brownfield’ projects, which means taking advantage of operational deposits to explore around or at greater depths. These investments start up faster and are the first line of supply when mining companies begin to see clear imbalances in supply and demand.

Appetite for destruction? ⚒️

I have often referenced the concept that Edward Chancellor explains about the capital cycles in his book ‘Capital Returns’ in investment theses and articles. The importance of that book for investors cannot be overstated.

I am going to do it again today, but focusing on the special characteristic of the capital cycle in commodities: To do this, we are going to illustrate the cycle with the following clock, taken from the podcast by @Charlandodminas.

At 3 o’clock , the expected mega-mergers occurred: Barrick+Anglogold (2019), Agnico+Kirkland (2022), Newmont+Newcrest (2023) in gold, and BHP+OZ Minerals (2023) or Rio Tinto+Turquoise Hill (2022) in copper.

We don’t have a clock to tell us the exact time, but based on what we’ve seen so far, we must be somewhere between 4 and 6. Let’s look at the clues the market is giving us, illustrated with some charts:

• ✅Healthy Balance Sheets: The debt ratios of mining companies, for both gold and copper, are historically low or very low. This allows them to consider investing in greenfield exploration.

• ✅Exploration budgets: The years 2023 and 2024 were especially low, in general, and they are expected to increase in 2026. The instability in 2025 caused by tariffs has delayed this dynamic, but the geopolitical risks due to mineral dependency only exacerbate the need.

  

  

• ✅Equity Raisings & M&A: In the commodity cycle, at some point, prices begin to justify IPOs and capital increases for medium-risk projects. One measure of the start of the recovery of this appetite is seen in the financing of junior mining companies, which is timidly beginning to pick up in 2025, although without adjusting for inflation, it remains well below 2012 levels. Additionally, there are some examples of low-risk M&A between 2024 and 2025 in the sector.

  

We have enough evidence that appetite is awakening at a time when the sector has consolidated and is amply healthy (or financially sound).

Before the Supply… The Drillers

Long before the first ton of mineral is extracted from a new mine, even before the project’s feasibility is known, a vital supplier for mining companies comes into play: The Drilling companies.

These companies provide the specialized crews and rigs to extract the samples that confirm a project’s viability. It is a fragmented sector with few listed players. Crucially, their capital cycle reacts not just to commodity prices, but to their clients’ exploration appetite.

They are the “second derivative” of the boom.

And stay tuned, because I will be publishing a full thesis on one of these companies very soon.

Thanks for reading the Pond Journal🦆. If you enjoyed it, don’t forget to leave a like 👍subscribe🖊️ and share🔄 it.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

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I am hunting for value within the oil sector—we have discussed this in previous journals—and recently, a Canadian company crossed my radar: Greenfire Resources (TSX:GFR), which exploits bitumen deposits in Alberta, Canada. On paper, it looks like the perfect deep-value play: small, underfollowed and navigating temporary issues.

Even better, in 2024, the Waterous Energy Fund (WEF) acquired a majority stake and recently launched a rights offering. In this process, the fund has committed to subscribe to all shares that minority shareholders do not take up (effectively backstopping the issue). This move wipes out the company’s expensive debt (currently costing 8.5%).

By 2026, with normalized production and zero interest expense, Greenfire would trade at a P/E of ~6. With oil above $60/barrel, this looks like an easy 2x return or more. Sounds perfect, doesn’t it?

Pull the Thread of Incentives

Allow me to share a perfect example. A friend was recently offered an investment product by a traditional bank: a structured product which, over a five-year horizon, could pay a 6.5% annual coupon and return the principal, return only the principal, or result in capital loss, depending on the performance of the Euro Stoxx.

You read that right: capped upside, unlimited downside.

I told him to run away and apply a simple rule: “Pull the thread of incentives.” Are the seller’s incentives aligned with yours? Do they win when you win, or do they win simply by playing the game?

The Loaded Coin

If a stranger approaches you on the street with a coin and tells you that, in exchange for €10, he will pay you €50 if heads comes up at least 3 out of 10 times, the person proposing the game and setting the scenarios is playing with a loaded coin. There is a clear information asymmetry.

In the best-case scenario—which is quite probable given how it is structured—they will pay you a 6.5% coupon on the principal (from which a 7% upfront fee must be deducted). The result is an annualized return of 4.8%. I assure you, in this favorable scenario, the bank will make more off your money [than you will].

In the base case, they return the principal (minus fees), and you have effectively financed them for free for 5 years.

In the adverse scenario, the loss is unlimited and PERMANENT, since at maturity, the product ceases to exist. This is not a company that could recover its value over time.

One piece of advice, and let’s move on.

Avoid binary bets disguised as “guaranteed” products. Seek skin in the game. There are investment funds where the manager and their team have their entire personal net worth invested alongside yours. They win if you win; they lose if you lose.

The Carnivorous Plant

Let’s revisit Greenfire Resources (TSX:GFR), the promising multibagger, to apply the two principles we discussed earlier: following the incentives and considering information asymmetry.

We saw that the majority shareholder (WEF) is willing to put up all the capital that minority shareholders do not contribute, in order to reduce the substantial debt load and financial expenses. Sounds fantastic. Let’s trace the line of incentives by investigating the track record of the Waterous Energy Fund:

In 2017, this fund began consolidating small and distressed assets in Canada, creating the company Strathcona. In late 2020, they launched a hostile takeover bid for a private company, Osum Oil Sands Corporation. It was initially rejected but finally approved in 2021 with a bid 25% higher, acquiring 87% of the share capital. Shortly after, having secured absolute control, they approved a merger with Strathcona, creating Strathcona Resources, and squeezed out the remaining minority shareholders of Osum at the same price as the accepted offer.

In 2023, they took Strathcona Resources (TSX:SCR) public on the Canadian exchange, and following subsequent mergers, it has become one of Canada’s large heavy crude producers. Strathcona is ~10 times larger than Greenfire itself in terms of daily barrel production.

The success of this producer consolidation strategy is evident and has delivered strong stock market performance. Furthermore, they recently divested ~7% of Strathcona Resources, raising approximately CAD 400–500 million, though they retain a stake of over 70%.

The playbook used with Osum Oil Sands is familiar territory for WEF, as they opted for a similar approach with Greenfire in 2024. They persuaded minority shareholders and, through a hostile takeover bid, wrested control from the previous owners, ousting the management team.

Waterous Energy Fund currently controls 60% of the company ( Q3 2025 Financial Statements), while the remaining shareholding is highly fragmented following the exit of the previous anchor shareholders.

Under Canadian law, a supermajority of 66⅔% of shareholder votes is required at the meeting. While WEF’s current stake falls slightly short, the pending rights offering—where WEF has committed to a backstop—changes the math. They only need 40% of minority shareholders not to subscribe to the offering for WEF’s stake to exceed 68%.

The risk for minority shareholders from that point on is clear: Osum 2.0. With the stock price depressed, WEF could merge Greenfire into Strathcona for pennies on the dollar. Let’s not forget that WEF owns 70% of it.

For Strathcona, Greenfire would be a sweet deal. Easy to integrate, debt-free, and cheap. Furthermore, in an article from this year, a WEF manager stated:

“It’s very difficult, in Canada, for small, subscale oil companies to be able to attract capital. By consolidating them together, we’ve been able to take advantage of operating cost synergies,” Waterous said of Strathcona. He sees similar acquisition opportunities for Greenfire in Athabasca, a region in Western Canada in which Strathcona isn’t present, he added.”

Who do you believe WEF’s incentives are aligned with: their own participants and clients, or Greenfire’s minority shareholders?

WEF is doing a magnificent job compounding capital for its investors. But in this scenario, Greenfire is the carnivorous plant. The cheap valuation is the nectar. And we are the fly.

Thanks for reading the Pond Journal👍. If you enjoyed it, don’t forget to subscribe and share your thoughts in the comments ⬇️

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

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We are in earnings season, and although a single quarter does not determine a long-term investment thesis, the market is currently looking for reasons to either panic or “keep the party going” after every earnings call. As we discussed in the last issue, there are reasons to believe there is an AI bubble, but when and how it will burst remains unknown.

Right now, CNN’s Fear & Greed Index places us in “Extreme Fear.” It is time (as it always is) to review our convictions and ask ourselves which assets we would be willing to hold for 5 years while accepting big drawdowns.
I’ll just drop an idea in the following chart here, and if there is interest, we will expand on it in the next issue.

Getting back to earnings, from our ecosystem, Dowlais (LSE:DWL)—whose merger with American Axle (NYSE:AXL) is imminent—will report this week. Next week, we have results from Bayer (XETRA:BAYN) and Wizz Air (LSE:WIZZ), so we will likely dedicate a section to these matters in the next issue.

Biesse (BIT:BSS), the company that is the focus of today’s first section, reported last week.

Biesse: A falling knife?

In October 2024, I published a full thesis on Biesse SpA (🔗), an Italian small-cap and a global leader in high-tech machinery for processing wood, glass, and stone. Despite the potential, I saw wait-and-see strategy was the best approach. This is due to the anticipated decline in sales in 2025 and significant uncertainties.

The scenario has played out, perhaps slightly worse than expected, and the stock plummeted 20% last week, caused by weaker Q3 order intake and resulting in a setback to ‘April tariff’ levels. Sales started to show signs of bottoming, down -3% in Q3, bringing the 9M (nine-month) total to -14%. The CFO mentioned, for the first time, a “reversal of the trend in order intake” and “First signs of reversal in Q4.”

The situation this year has been turbulent, with the departure of the CEO in 2024 and the CFO in recent months. The new CEO is Roberto Selci, son of the founder and the largest shareholder through the family holding company.

It is true that the overcapacity in the wood industry is also being seen among its competitors, such as Homag (Durr Group), although Biesse has been particularly hard-hit this past year.

This situation could represent an opportunity; after all, this family-owned company has navigated worse cycles, and furthermore, it does so with a solid net cash position (debt-free). I will soon publish an update where I will focus on analyzing Biesse’s demand drivers, primarily capital expenditure spending in the furniture industry.

And we move from a capital goods industry suffering from overcapacity, whose customers are not investing, to another where a duopoly is overwhelmed with orders.

Capital Cycle: The Airlines Squeeze

In issue #1, we discussed oil and the imbalance that arises when producers underinvest while demand remains stable or increases. But this dynamic is not unique to oil; it presents significant opportunities across sectors.

In this issue, we will discuss this dynamic as it also unfolds in the airline industry. I covered this in the investment thesis on WizzAir (🔗), which I invite you to read, but I want to summarize and expand upon those comments here.

Supply squeeze

✈️Manufacturer Delays: Airbus and Boeing have an order backlog of over 17,000 aircraft, equivalent to 14 years of deliveries. This is creating an acute shortage of new aircraft in the short to medium term.

♻️ Accelerated Fleet Retirements: The aircraft retirement rate is set to increase from 2-3% to 4% annually by 2043, driven by aging aircraft and environmental targets, further reducing available capacity.

Relentless Demand

📈 Demand: Global demand remains very strong. Global commercial flight volume is already 16% YTD above 2019 levels and 4% above 2024 YTD. Remember, in 2020, some certified the death of aviation, just as they did in 2001.

In Europe, Ryanair reported results in November showing a load factor of 95%, consistent with the 95% from the previous year, and a 3% increase in passengers for the first half of its fiscal year (H1 FY, April-October). In the same period, Wizz Air reported a load factor of 92.5% (vs. 92.5% prior year) with a 10% increase in passengers. New fleet additions are being absorbed.

The Outlook: IATA projects passenger demand will continue growing by 8% while capacity grows by only 7%, reinforcing the pressure from limited supply in an expanding market.

Thanks for reading the Pond Journal. If you enjoyed it, don’t forget to subscribe and share your thoughts in the comments.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com

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A Market at Record Highs, a World in Transition

We live in strange times. Some say we are on the edge of a cycle change—geopolitical and social—provoked by globalism, fiat currency, or capitalism. Everyone can choose their favorite guilty.

And on the eve of this “great moment”, liquidity continues to flood the markets, pushing indices to new highs while gold also reaches new historic highs, surpassing US Treasuries as the reserve asset of Central Banks.

While it’s undeniable that not every ‘all-time high’ (ATH) is a bubble, the current market situation shows several signs of being one. Let’s take a look.

Valuation highs

The current Price/Earnings (P/E) ratio of the S&P 500 is 31. Excluding the “Magnificent Seven” (Mag-7) which trade at 45-50 times, this leaves us a ratio of 20-21 times, or, put differently, an implied return of 5% with US debt yielding 3.5%. And one additional consideration: the index’s P/E is calculated based on the earnings of the last twelve months, where many companies have achieved peak profits.

The Shiller $P/E$ (CAPE ratio) measures how many times the market pays for the average inflation-adjusted earnings of the last decade, allowing the multiple to be normalized across the business cycle. The ratio stands at 40 times earnings, which has not reached the levels of the dot-com bubble but indicates clear overvaluation levels.

It is undeniable that AI is going to change the world, just as the internet did. It is also true that there is currently an AI bubble.

Bubble signals

A common element in all bubbles is that expectations inflate asset prices, and at the same time, these higher prices allow for the financing of investments that, in turn, reinflate expectations and prices. This is what we’ve recently seen with the purchase agreements between AMD and OpenAI, where OpenAI ends up as a partial owner of its supplier. The market rewarded the announcement with a 24% upside. Announcements, not tangible results. The interdependencies are multiplying, as we can see in the graph published by the WSJ.

(I recommend the masterful quarterly letter on this topic by Javier Ruiz, manager of the Horos Value Internacional fund (🔗) )

But the bubble isn’t just overstating the big names such AMD or NVIDIA. An entire chain of component suppliers, data center construction, industrial energy and cooling, and services to these companies is expanding its structure with investment and employment, all sheltered by expectations for cash flows that may not materialize—or at least not at the necessary rate.
In a powder keg like this, a single match is enough for everything to go up in smoke.

A clear example of this is the company AST SpaceMobile. The American company is setting up a low-Earth orbit satellite constellation that could revolutionize global telecommunications. The shares are currently trading at 150 times sales, and the company is not yet generating profits.

Let’s imagine that AST manages to grow its revenue at an impressive 20% annually for a decade and obtain seemingly unreal profit margins of 60%. At current prices, AST’s P/E ratio in Year 10 would still be 40 times earnings, 2.5% yield.

A week ago, it was trading with a market cap close to that of Kellogg’s—a company that generates USD 13 billion in sales (vs. USD 120 million for AST).

There are more signals. The appetite for risk is insatiable.

Appetite for Risk

Beyond Meat is a plant-based meat company that had great success in its 2019 IPO, supported by figures like Bill Gates and Leonardo DiCaprio. Expectations became so inflated that they were impossible to meet, causing the stock to drop from trading around $150 to the current $2.50. The company, operating since 2016, still has not generated profits and has even seen its sales stagnate. Furthermore, it is highly leveraged.

Merely an announcement of distribution plans in Walmart stores and the appetite for risk were enough for the market to turn it into a meme stock, inciting thousands of investors to execute a short-squeeze (forcing short sellers to buy, by buying massively, which in turn causes a further increase in price). Shares rose by 1,100% to $7.6 in 2 days, only to fall by more than 50% afterward, with daily volumes 1,000 times higher than usual.

Compared to this craziness, gold’s all-time high makes much more sense.

Not All-Time Highs Are a Bubble

High public debt, combined with the inability or disinterest of politicians to adjust the deficit, creates expectations of further fiat currency degradation. At the same time, Central Banks are buying gold to back their currencies against this degradation and the new geopolitical game.

Gold is at an all-time high against our beloved fiat currencies, but not against real assets like housing or other commodities. There is no bubble here, only a paradigm shift.

There’s always value somewhere

Despite being in a market at all-time highs, there’s always hidden value. For instance, look at the oil cycle: The Brent barrel is currently near $60, and once again, it seems like the end of crude oil.

It is true that growth in crude demand has slowed, but it will still account for 30% of energy production in 2050, with India and other emerging countries maintaining or driving demand. Estimates from the International Energy Agency (IEA) project demand growth of 0.4% annually until 2030.

But the biggest imbalance may not occur on the demand side, but on the supply side. The expectation of lower demand has led to chronic underinvestment in new fields while existing ones are depleting.

The lack of investment will cause a decrease in supply and an imbalance with demand, boosting prices. Prices will spur exploration, and companies like TGS ASA (TGS), dedicated to sea-floor mapping, or drilling companies like Foraco International SA (FAR) will experience increases in demand. This is the capital cycle, over and over again.

But opportunities aren’t only in oil; here’s the link to the last two theses I’ve published.

And now I pass the question to you: Are there other sectors or geographies where you are currently finding opportunities?

Thanks for reading the Pond Journal. If you enjoyed it, don’t forget to subscribe and share your thoughts in the comments.

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DISCLAIMER: All the information provided in this document is purely informative and does not constitute a buying recommendation (according to Spanish Law Article 63 of Law 24/1988, of July 28, on the Stock Market Regulator, and Article 5.1 of Royal Decree 217/2008, of February 15). DuckPond Value Research is not responsible for the use of this information. Before investing in a real account, it is necessary to have the appropriate training or delegate the task to a duly authorized professional.

Reach us on duckpond@duckpondvr.com