Welcome to The Pond Journal #11, dear reader,
It’s been a while since the last Journal. Most of these weeks went into the part of the job that rarely makes it to the blog: reading annual reports, building models and, more often than not, walking away.
Today’s five-minute read covers three things: two companies I discarded and why, my next deep dive into a name I usually avoid, and a Q3 roundup of Bayer, Forvia & Foraco.
Two discards
I was diving deep into two companies that I ended up discarding. The game is what it is. It’s not wasted time at all; all learning compounds.
Nomad Foods, the frozen food giant in Europe (Findus, Birds Eye, Iglo). The price was tempting and I was expecting to find at least a narrow moat around the cold chain. It didn’t happen. I saw a brand consolidator with a very good strategy around local brands, but too exposed to its biggest weakness: its dependence on supermarkets, its own customers.
Morgan Advanced Materials, a key industrial player in sectors like aerospace and oil & petrochemicals. Good company, but the price didn’t offer enough margin of safety to move forward.
Next in the Pond: PayPal & a live audit model
I’m now in the final phase of an investment thesis on a company that is usually out of my scope. Too crowded, too covered. But interesting. PayPal.
When I first read about the case I thought to myself: I don’t want a binary situation where my chips ride on either ‘the market is wrong’ or the total disruption of the business model. I parked it several times because it wasn’t my game. But to me, the current thesis sounds more like an industrial player navigating competitive pressure through cost containment and good capital allocation. And guys, this is where I want to chip in. So expect the full deep dive soon.
I’m also working on something mandatory for a blog like this: a full, live audit model of every thesis published.
Q3 roundup
Meanwhile, some of the companies in the Pond have reported quarterly results. Overall, I would say all of them are more or less on track, but it’s worth a quick roundup:
Bayer - A better-than-expected Q3 in Pharma drove up guidance for FCF and net debt reduction. Long-term readers know I’ve been committed to the turnaround thesis since late 2023, and now we can say it’s almost done. The litigation settlement is the last piece still pending, but the news from the courts is quite good.
There’s a second phase here: to me, there’s still big potential in Crop Science, either as a standalone company through a spin-off or inside the Group. I will cover this new phase in a future post.
Forvia - Despite declining global vehicle production, Forvia is outperforming and hitting its operating margin target. The Interiors divestiture is on track for Q4 2026, which will help deleverage the company.
I published the first thesis in June 2025. It’s true the stock rose +80% from that price until the Iran war, followed by an abrupt fall, but there’s been no fundamental deterioration at Forvia, and we can see it quarter by quarter. I stand by everything I wrote.
BofA took note of the market’s excessive punishment (driven by leverage in a volatile scenario) and said: “the 2028 strategic plan targets don’t depend on a cyclical market recovery. They rely on levers the group itself controls” (my translation). That’s one of the pillars of the thesis. They upgraded the stock to “Buy”, with a €14 price target.
Foraco - The share price has been quite volatile. Foraco’s beta to gold is currently too high, considering how much copper and other minerals contribute to revenue. The macro environment described in the original thesis holds with gold at either $4k or $5k. Patience and a strong stomach will be needed.
Industry activity is exploding. Rig utilization was 53% (vs 35% in Q3’25), but margins still haven’t taken off, for two reasons: the ramp-up costs of new projects until they start contributing, and cost inflation.
I clearly overestimated Foraco’s ability to pass costs on through higher prices, so the bottom line is coming in well below my 2026e. My take: Foraco’s strategy is conservative, in the sense that it prioritizes difficult (higher value-added) work for major miners. Market capacity for this kind of work, both crews and rigs, will be the first to run out, and that’s when margins will rise.
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