Terry Smith / LVMH

Guru Deep-dives

François Rochon / Alphabet (GOOGL)

Warren Buffett / Berkshire Hathaway (BRK)

Joel Greenblatt / Magnera Corp (MAGN)

Chris Davis / Restaurant Brands International (QSR)

Chuck Akre / CCC Intelligent Solutions (CCC)

Peter Lynch [Book review]

Bill Nygren / Airbnb (ABNB)

Bryan Lawrence / Interactive Brokers (IBKR)

Howard Marks [Book review]

Peter Keefe / Copart (CPRT)

Christopher Tsai / Meta Platforms (META)

Rich Pzena / Baxter (BAX)

John Armitage / Capital One Financial (COF)

Norbert Lou / PayPal (PYPL)

Tom Gayner / Markel (MKL)

Dev Kantesaria / FICO

Bill Ackman / UBER

Chris Hohn / S&P Global (SPGI)

François Rochon / HEICO

Guru Gems Portfolio Updates

Guru Portfolio Updates (13F Filings)

Magic Formula Portfolio Updates

Lessons Learned

Watchlist

Welcome back!

Q1 2026 is behind us, time for a portfolio update.

Start here if you are new to Guru Gems.

No time to read this week’s update? Here is your 2-minute AI summary:

💎 Guru Gems Portfolio update

The broader market had a tough start to the year, and unfortunately the Guru Gems portfolio was no exception.

Perfect storm

It was a bit of a ‘perfect storm’ for the portfolio this quarter. The SaaSpocalypse hammered CSU and CCC (both down more than 30% since I bought them), while LVMH had its worst-ever start to a year as the war in the Middle East added even more pressure on the luxury goods outlook. These are three of the larger positions in the portfolio, so the pain is real.

I won’t lie, it’s not comfortable sitting on drawdowns like these. I would much prefer to come here and tell you I’m crushing it. But unfortunately that’s not the case (yet), and I plan to keep sharing very openly my learning journey with Guru Gems.

Do I still believe in my stock picks? Absolutely.

But have I made some mistakes along the way? Without a doubt.

The full Guru Gems portfolio and all transactions are available in the Guru Master Google Doc.

Looking back

As I approach the one-year anniversary of Guru Gems, it feels like the right time to reflect on what went wrong, and more importantly, what I can learn from it.

And who better to borrow a framework from than François Rochon? Last week I published a deep-dive on Rochon, one of my all-time favorite Gurus, and I’m quite proud of how it turned out, with lots of timeless investing wisdom in there… and it’s all free ;)

One of the traditions Rochon has in his annual letters is a ‘Podium of Errors’, a ranking of his biggest mistakes of the year. I love this idea, so I’m stealing the concept.

Before I share my podium, here is an extract from Rochon’s 2014 letter that feels very appropriate right now:

We have made many times our money with O'Reilly Automotive over 10 years. But after the initial four years of owning O’Reilly, we had not yet made a profit. Just a few years is not a long time in the world of business and investment.

🏆 My Podium of Errors

🥉 Bronze - Magnera (MAGN)

Magnera was my Joel Greenblatt-inspired 'special situation' pick from May 2025. The company was formed by merging Berry Global's Health, Hygiene & Specialties non-wovens division with Glatfelter Corporation in late 2024.

Michael Burry had also started a position in Q4 2024, probably also seeing an interesting ‘special situation’ in this newly formed merger.

With a market cap below $500M, Magnera is a proper small cap and small caps can be wild. The stock surged 30% in Q4 but then dropped 37% in Q1 despite results that were largely in line with expectations.

It's now a <1% position in the portfolio, so the actual damage is minimal. I'll keep it, but I'm not expecting fireworks.

The lesson: Not every good idea belongs in every portfolio. Magnera might be perfectly fine in a more diversified strategy like my Magic Formula portfolio, but in a concentrated portfolio like Guru Gems where the focus is on quality companies, a volatile small cap probably doesn't fit.

🥈 Silver - Restaurant Brands International (QSR)

This one is what François Rochon calls an error of omission.

I came across QSR when I did my deep-dive on Chris Davis. QSR owns and operates Burger King, Tim Hortons, Popeyes and Firehouse Subs.

It was a newer position for Davis, the valuation looked reasonable, and the business was solid. I wrote that QSR had traded as low as $60 in Q1 of 2025 and that this was probably the price at which Davis would have bought it and Seth Klarman would have added to his position. The price came very close to $60 again in September, but I was waiting for it go down a bit more, which didn’t happen, and it is now up around 24% from that September low.

Having a position in physical restaurants, where AI disruption fears don't really apply, would have been a nice buffer during a quarter like the one we just had. (In my Davis post I wrote: “This is definitely not a flashy AI stock nor a high-growth SaaS business.”)

Hindsight is always 20/20, of course. But QSR stays high on my watchlist, especially since it's also a significant holding in Bill Ackman's portfolio. Three great Gurus (Davis, Klarman, Ackman) on the same name is always a signal worth paying attention to.

The lesson: A position in a more defensive, real-world quality business like QSR could have added some balance to the portfolio. Going forward, I want to make sure I also take this into consideration when starting a new position.

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🥇 Gold - Constellation Software (position size)

And here’s the big one.

Constellation Software is my worst performer, down 26% in Q1 alone. But that’s not why it gets the Gold medal. Stocks go down, that happens. The mistake was how much I put in from the start.

When I initiated the position, I went in at 8.5% of the portfolio. Two weeks later, I added more and brought it up to 11%. The stock then proceeded to fall even further. Looking back, it would have been much wiser to start at 3-4% and scale in gradually as the thesis played out (which so far it hasn’t).

I was reminded of this lesson when reading Stock Master Maestros, which I recently wrote about:

A clear pattern from the book is that many of the greatest investors start every new position at around 3% or less, regardless of how convinced they are. The idea is simple: let the position prove itself before you size it up.

“Don’t assume you can add value by sizing your positions based on conviction. Entering every position at a standard size and then letting them run, works.”

The lesson: Conviction is not the same as timing. I still believe I was right to be excited about Constellation Software, but I was wrong to go in heavy from day one. Starting small gives you room to average down if the stock keeps falling, and keeps the pain manageable if it does.

What Rochon says about Constellation

It’s reassuring to read what François Rochon had to say about Constellation in his latest annual letter. Constellation is one of Giverny Capital’s largest holdings, and the stock fell 26% in 2025 and another 25% drop so far in 2026.

But as Rochon pointed out, the decline is completely disconnected from the business: revenue grew 15% in 2025, adjusted EPS climbed 21%, and since Giverny’s initial purchase in 2014, earnings per share have compounded at roughly 20% annually.

Rochon’s argument against the AI disruption narrative is in line with what I had written in my January portfolio update. Constellation owns more than 1,000 niche software businesses, each deeply embedded in its customers’ daily operations and rarely representing a significant cost. As he puts it:

It seems unrealistic to believe that an operator of a dozen mini-golf courses is going to start coding their own AI-powered reservation software to save something like $5,000 in annual fees!

Rochon writes that AI could actually help Constellation, since the software sell-off has dramatically lowered acquisition prices. Cheaper acquisitions mean better returns on invested capital for a company whose entire model is built on buying niche software.

Bottom line: Rochon remains confident and intends to keep his shares. Coming from someone with a 32-year track record of 14.7% annualized returns, that conviction carries weight and reinforces my own decision to hold.

👀 Looking ahead and Watchlist update

It’s not just the Guru Gems portfolio that has been hit hard. Some of the best ‘quality’ investors are sitting on significant drawdowns too.

Here is what the year-to-date (3 Apr 2026) performance looks like for some of the great investors I have covered in earlier editions. As you can see, there’s a lot of red in this table…

Watchlist Update

Last week I covered François Rochon in a deep-dive, and one of the things that caught my eye is that Rochon added a new position in Universal Music Group (UMG).

UMG is the world’s largest music company and home to Taylor Swift, Drake, The Weeknd, BTS, and many others with a catalog of nearly 5 million songs.

The stock has been beaten up pretty badly, trading at around €17, down 40% from its 52-week highs. At roughly 16x forward earnings, it’s trading near its cheapest valuation ever.

UMG is also a significant position in Bill Ackman’s portfolio, which adds another strong Guru signal. Two Gurus owning the same stock at its lowest-ever valuation, that’s the kind of setup that is worth studying more closely.

I’ve added UMG to the watchlist in my Guru Master Google Doc.

That’s it for this week…thanks for reading and I’ll be back next week with a special Guru Gems anniversary edition!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

In today’s edition:

• 🕴️ The Guru: François Rochon

• 📈 The Playbook: The Giverny Way - 32 years of compounding with patience, humility and rationality

• 💎 The Gem: HEICO Corporation (NYSE: HEI.A) — The Quiet Aerospace Compounder

• 🔄 BONUS: The Full Circle: LVMH — How a 14-year mistake finally became a position

2-minute AI version:

Start here if you are new to Guru Gems.

A word on Guru Gems Edition #50

Fifty weeks ago, I published the first Guru Gems newsletter

The idea was simple: study the world’s best long-term investors, understand how they think, find the high-quality companies hiding in their portfolios, and build a real-money portfolio based on their collective wisdom.

One year later, I have covered more than a dozen of the world’s greatest investors — from Terry Smith to Chuck Akre, Chris Hohn to Bill Ackman, Dev Kantesaria to Bryan Lawrence and I have added twelve positions to the Guru Gems portfolio.

For this fiftieth edition, I wanted to dedicate the newsletter to an investor who embodies everything Guru Gems stands for.

A man who has been running the same portfolio, guided by the same principles, for over 32 years. A man who awards himself annual medals for his biggest mistakes. A man who writes to his partners the way he would want to be written to if their roles were reversed.

This is François Rochon. And this is his story.

Guru in the spotlight: François Rochon

François Rochon is the founder and president of Giverny Capital, a Montreal-based investment firm he launched in 1998 after managing his family portfolio for five years.

He is an engineer by training and a self-taught investor who discovered the writings of Warren Buffett, Benjamin Graham, John Templeton, Philip Fisher, and Peter Lynch in the early 1990s and never looked back.

Since July 1, 1993, the Rochon Global Portfolio has compounded at 14.7% annually, versus 9.9% for its benchmark — an annualized outperformance of 4.8% over 32 years. In practical terms, $100,000 invested with Rochon in 1993 would be worth approximately $8.7 million today. The benchmark produced $2.2 million over the same period.

What makes this record remarkable is not just the magnitude, but how it was built. There were no black box strategies and no leverage. Just a portfolio of exceptional businesses, owned patiently and with conviction, managed by someone who treats every partner as he would want to be treated if their roles were reversed.

Rochon’s annual letters (all publicly available at givernycapital.com ) are masterclasses in long-term thinking, intellectual honesty and the art of learning from mistakes. They are essential reading for any serious investor.

“Our goal is to explain in detail the long-term investment philosophy behind the selection process for the companies in our portfolio. Our wish is for our partners to fully understand the nature of our investment process since long-term portfolio returns are the fruits of this philosophy. Over the short term, the stock market is irrational and unpredictable (though some may think otherwise). Over the long term, however, the market adequately reflects the intrinsic value of companies. If the stock selection process is sound and rational, investment returns will eventually follow.”

In a recent post, I shared my favorite investor letters, and it’s probably not surprising that François Rochon was my #1 pick.

If you enjoy this newsletter, please help others discover it by clicking 🤍

And if you learned something useful, consider buying me a virtual coffee ☕

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The Giverny Way

There are many good interviews available with François Rochon, but I believe the best way to learn and study Rochon is to read all his annual letters, and so that is what I did.

Here are the 5 pillars that define how Rochon invests.

1. 🤝 The Alignment Principle

From the very first days of Giverny, Rochon established one non-negotiable rule: he invests his own money in exactly the same securities as his clients.

The Rochon Global Portfolio — his personal family portfolio — serves as the direct model for all client accounts.

“I buy for you what I buy for myself. This doesn’t guarantee results, but it does ensure our interests are aligned.”

He calls his clients “partners” for precisely this reason. When the portfolio does poorly — as it did in 2025, with a 2.7% return against a 13.7% benchmark — Rochon does not hide. He writes “Explanations, Not Excuses” at the top of the relevant section and dissects every mistake in detail.

This level of transparency is quite rare in the fund management industry.

2. 🏰 The Moat Framework

Rochon does not use the word “moat” as frequently as some investors, but his stock selection criteria point to exactly the same thing.

He calls the businesses he likes “self-determined” companies: companies that control their own destiny because of durable competitive advantages. You can read more on this in his 2022 Annual Letter.

In every annual letter, Rochon shares his investment philosophy in an Appendix, aimed for new ‘partners’, and his criteria have not changed:

• High and sustainable margins and high returns on equity

• Good long-term prospects

• Managed by brilliant, honest, dedicated and altruistic people

• Avoid: non-profitable businesses, excessive debt, high cyclicality, ego-driven management

“There can be quite some time before the market recognizes the true value of our companies. But if we’re right on the business, we will eventually be right on the stock.”

3. 📊 The True Scorecard: Owner’s Earnings

Since 1996, Rochon has published a chart showing the growth in the intrinsic value of his portfolio companies.

He arrives at an estimate of the increase in intrinsic value of the companies by adding the growth in earnings per share (EPS) and the average dividend yield of the portfolio. He calls this “owner’s earnings”, borrowed from Buffett.

The lesson from 30 years of data is striking: over the long run, the stock market return of his portfolio has tracked the underlying intrinsic value growth almost perfectly.

“The stock market is irrational in the short term. Over the long term, it always ends up reflecting the intrinsic value of companies.”

In 2025, his companies grew their intrinsic value by approximately 13%, while the stock portfolio returned only 2.7% (7% without currency effects). He takes this calmly. He has seen it many times before. He knows the eventual convergence is inevitable.

4. 🏆 Intellectual Honesty: The Podium of Errors

Perhaps the most distinctive element of the Giverny tradition is the annual ‘Podium of Errors’ (‘Mistake du jour’ in his earlier letters), where Rochon awards Bronze, Silver and Gold medals to his biggest investment mistakes of the year or recent past.

“It is with a constructive attitude, to always improve as investors, that we provide this detailed analysis.”

What’s particularly instructive is how often the Medal goes not to a bad investment that cost money, but to a great investment never made. A company he studied, admired, and then failed to buy.

Netflix (2025 Silver), O’Reilly Auto Parts (2022 Silver), Copart (2019 Gold), Amazon (2015 Bronze), Google (2010 Silver)

Errors from omission (non-purchases), according to Rochon, are often more costly than errors from commission (purchase).

What’s really interesting to see is that when Mr. Market offers him an opportunity to buy these companies at depressed prices, Rochon will not hesitate.

Google (2010 Silver medal) is a great example of this. Rochon knew it was a fantastic business but he was waiting for a good entry price.

In 2011, the opportunity came and Rochon bought Google at a PE of ~15x when Wall Street was worried that Google would not be able to dominate in mobile as they did on desktop. Today, 15 years later, it is one of his largest positions.

LVMH (2022 Gold) is another great example, and I will cover this later in more detail.

5. 🎲 The Three Essential Qualities

In his 2025 annual letter and his recent interview on We Study Billionaires, Rochon named the three qualities he believes are essential for long-term investing success.

Rationality. The ability to look at reality as it is, not as you wish it to be. To leave emotion aside and focus on facts. In a market dominated by hope and fear, this gives a quiet but decisive advantage.

Humility. The recognition that mistakes are inevitable, and that improvement requires the willingness to admit them. His ‘Rule of 3’ is a brilliant example of this:

“One year out of three, the market will go down (by more than 10%). On stock out of three that we will buy will be somewhat disappointing. And one year out of three, we will under perform the indexes.”

Patience. Perhaps the rarest quality of all. In the interview, Rochon recalled asking Philip Carret — who invested for 75 years and died at 101 — what his greatest lesson was. Carret thought about it, then said: “Patience.”

This connects really well with what I learned from Chris Hohn, another investing master, who said that “long-termism in a great company is a free lunch”

The Giverny Capital Portfolio

Here is Giverny Capital’s stock portfolio at the end of Q4 2025:

Note that for non-US positions (Constellation Software, LVMH), these are estimates as they are not reported in 13F filings.

3 companies worth highlighting from this $3+ billion portfolio:

1. Constellation Software: His largest holding at the beginning of 2025 has fallen significantly due to AI-related fears and the CEO's health-related departure. Despite a 26% decline in its stock price during 2025, Rochon notes in his 2025 letter that the business itself remains strong, having grown its earnings per share (EPS) at an annualized rate of 20% since his first purchase

2. Alphabet - As discussed in the previous section, Rochon has held Alphabet for about 15 years. He says the idea to invest in Google came thanks to Charlie Munger

   “Mr. Munger explained at a conference that many companies that historically had wide competitive moats had seen their moats "filled up with sand" (an analogy meaning that their competitive advantage was deteriorating). I then asked him if he saw new companies with a wide moat and, after reflection, he replied Google. His comments did not fall on deaf ears and Jean-Philippe and I started looking at the company from a whole new perspective.”

3. HEICO: Our Gem for this edition has been in Rochon’s portfolio for nearly 10 years and has climbed to become a top-5 position.

💎 The Gem: HEICO Corporation (HEI/HEI.A)

How Rochon Found HEICO

Rochon first acquired shares in HEICO in 2016, introducing the company in that year’s annual letter with characteristic brevity and precision. In just a few sentences, he identified the essence of the business: FAA-approved aftermarket parts, a multi-year catalog built over decades, and a moat created by regulatory complexity.

At the time, HEICO’s Class A shares traded at approximately $23 (adjusted for stock splits). EPS had grown at roughly 19% annually over the preceding decade — a figure Rochon described as “an exceptional performance.” By his 2021 annual letter, the stock had risen more than 200% from that first purchase, and he noted continued admiration for the Mendelson family who run the company.

Today, those same Class A shares trade at ~$208, a 800%+ gain from Rochon’s initial purchase price. HEICO remains a top-5 position in the Giverny portfolio, a core holding of ten years’ standing.

To Buy or Not to Buy

Let’s evaluate HEICO through our Terry Smith inspired framework to decide if I should add it to the Guru Gems portfolio.

1/ Buy good companies

What Does HEICO Do?

HEICO is a Florida-based aerospace and defence company with two main segments.

1. The Flight Support Group manufactures nearly 20,000 different FAA-approved aftermarket replacement parts for commercial and military aircraft, selling them at a 30-50% discount to the original equipment manufacturer (OEM) equivalents.

   

2. The Electronic Technologies Group provides specialized electronic systems and products for defense, space and industrial applications.

   

HEICO is like the generic drug equivalent for aircraft maintenance. Airlines face enormous pressure to cut costs. Aircraft parts are one of their largest expenses. But safety cannot be compromised, every part must meet strict FAA airworthiness standards.

HEICO worked out decades ago that if you invest the time and money to get your parts FAA-certified, you can offer airlines a cheaper alternative that is just as safe and legally compliant. Airlines save money and HEICO earns exceptional returns.

How the Moat Was Built

The origin of HEICO’s dominance is a story of extraordinary persistence. When the Mendelsons took control in 1990, the company had $25 million in sales and was losing money. Eric Mendelson — 24 years old — practically lived in the FAA’s Washington DC headquarters, learning the certification process from the inside out. By 1991, they had their second approved part: a tube used in jet engines.

A pivotal moment came in 1997, when HEICO convinced the chairman of Lufthansa Airlines to invest a 20% stake in the PMA business. Lufthansa gave HEICO direct insight into which parts airlines most urgently needed, provided immediate credibility with other carriers who were still hesitant to buy from non-OEM suppliers, and guaranteed a buyer for each new part from day one.

The result, 35 years on, is a moat with three reinforcing layers:

🔒 Switching Costs. Once an airline integrates HEICO’s parts into its maintenance and supply chain, switching to an alternative means significant re-qualification, regulatory hurdles and operational disruption. Airlines do not do this lightly for critical components. Once integrated, HEICO’s parts stay integrated.

📚 IP and Regulatory Protection. The catalog of 20,000 different PMA (Parts Manufacturer Approval) parts, along with the underlying intellectual property, engineering data and regulatory approvals, constitutes an asset that would be extraordinarily expensive and time-consuming to replicate. Each new PMA approval requires substantial R&D investment, regulatory navigation and technical expertise. HEICO has been building this catalog since the 1980s.

⚙️ The Safety Record. Over the company's lifetime, HEICO has sold over 80 million parts with zero service bulletins, zero airworthiness directives and zero in-flight shutdowns. In a safety-critical industry where airlines need complete confidence in their suppliers, this track record is virtually impossible to replicate and makes switching to an unproven competitor almost unthinkable.

The Mendelson Family — Skin in the Game

The business is run by the Mendelson family, and it shows. Laurans A. Mendelson (Executive Chairman, formerly CEO) and his sons Victor (Co-CEO) and Eric (Co-CEO) together own approximately 7-8% of the company — a stake worth roughly $3.5 billion at current prices. This is not a family collecting a salary. Their interests are entirely, structurally aligned with long-term shareholders.

Rochon noted this explicitly in his 2021 letter: “One of the reasons for our purchase in 2016 was our admiration for the members of the Mendelson family who run the company.”

The Recent Numbers — Still Accelerating

In Q1 2026, HEICO reported record net income and strong increases in net sales:

• Consolidated net sales up 14% year over year

• Consolidated net income up 13% to $190.2 million

• Flight Support Group: 15% organic growth

• Electronic Technologies Group: 12% organic growth

Over the past decade, revenues have grown at nearly 13% CAGR and operating income at a 14.8% CAGR. The company has recently expanded into industrial gas turbine repair through the acquisition of EthosEnergy Group Limited. This is a significant new growth vector, serving the growing global power demand.

The track record since the Mendelsons took over in the late 1980s is truly phenomenal: a 23% compound annual growth rate in share price over 36 years. A $10,000 investment then would be worth over $9 million today. This is one of the greatest compounding records in American corporate history.

Berkshire Hathaway began acquiring a position in HEICO in Q2 2024. When both Rochon and Buffett are independently accumulating the same stock, it merits very serious attention.

For a more in-depth analysis of the company, I would highly recommend the below episode of The Investor’s Podcast.

It goes into great detail of HEICO’s business model and acquisition playbook and how the Mendelsons turned a small parts supplier into an aerospace giant.

I also recommend ’s article which has a mini deep-dive as well as an update on Fiscal 2025 year-end results.

The Pursuit of Compounding

Inside HEICO’s Fiscal 2025

Hi everyone 👋…

Read more

4 months ago · 18 likes · 7 comments · The Pursuit of Compounding

2/ Don’t overpay

HEICO has rarely (never?) been cheap. And despite currently being down 25% from its 52-wk high, it is still not cheap today.

The stock currently trades at a forward P/E of ~48x. While this is a premium valuation, Rochon often reminds us that "wisdom is knowing when to break the rules" and that outstanding companies are often worth paying for.

HEICO is one of those companies that has always looked expensive to the casual observer and always proved justified to the patient long-term investor. Every year since the early 2000s, someone has said HEICO is too expensive. And every year, the business has grown into and beyond its multiple.

The stock is down 15% over the past month on a mix of 1) negative investor sentiment fearing rising competition, and 2) analyst downgrades. A further pullback could be a very interesting entry point for this high-quality compounder.

3/ Final decision

HEICO sits at the intersection of everything Rochon looks for: a wide and durable competitive advantage, family management with full alignment, a long runway for growth, and an exceptional compounding track record.

The fact that both Rochon and Buffett hold it independently is also a powerful signal.

I will be watching for a further pullback from current levels, which has historically occurred during any period of aviation macro weakness. When it comes (and it probably will), I intend to buy.

📌 Adding HEICO Corporation (HEI.A) to the Guru Gems Watch list

❕Just a reminder that you can access the Guru Gems watchlist here at any time

👜BONUS: The Full Circle - LVMH and the Return of Rochon

Those who have followed Guru Gems from the beginning may recognize this passage. I quoted it in my second newsletter, when I introduced François Rochon for the first time and asked, in closing:

“I wonder if, at the current valuation, he is considering to finally including this gem in his portfolio.”

The answer — confirmed in a recent interview — is yes.

After more than 14 years of watching, admiring and awarding himself a Gold Medal for missing it, François Rochon has finally bought LVMH.

The circle that began with our first newsletter is now complete.

Why Now? Rochon in His Own Words

In his interview on We Study Billionaires, Rochon was asked directly why he finally pulled the trigger.

“I’m not that good in timing — I bought it last year and so far it has not produced good results. […] But I think the key factor is that you want the brand to be as strong as it’s ever been. Perhaps people are wary of buying a Louis Vuitton bag right now, but what you really want is a brand that still resonates with clients as quality, something you want to own because it’s of quality and also a symbol of wealth. I think those are intact.”

His five-year earnings thesis is specific:

“I think probably from here, earnings could increase 60 or 70% in the next five years — that’s a 10-11% annual growth rate. You’ve got a 2% dividend. Together, I think we should be able to attain our objective of finding a 13% grower including the dividend.”

He is enthusiastic about specific divisions he knows well: Louis Vuitton and Dior (the two most profitable luxury brands in the world), Tiffany (”a fantastic business — I followed it when it was separately listed”), and Sephora (”probably just 10% of revenues but growing pretty fast ”).

He is transparent about what he does not love: the spirits business (Moët & Chandon, Hennessy), where he sees a more secular challenge from generational shifts in alcohol consumption.

On China (roughly 20% of LVMH’s revenues) he is patient and structurally optimistic:

“Long-term it’s going to be a positive thing. China’s GDP per capita will continue to increase at a higher rate than North America. […] As they get richer, they’ll want to acquire LVMH products and other luxury products. There’ll be ups and downs, but they’re building a business for the next decades, not the next year or two.”

📌 I remain a holder of LVMH in the Guru Gems portfolio. Rochon’s purchase is the most meaningful external validation I could have hoped for.

That’s it for this week’s edition!

Thank you for reading and following along. You can find me on X @guru_gems for more Guru Gems insights.

Until next week!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome to a new edition of Guru Gems, where I study the world’s long-term investing masters and build a portfolio of quality companies based on their wisdom.

In my most recent Guru deep-dive, I covered Chris Hohn, an exceptional investor who has compounded money at more than 18% per year.

In today’s edition:

• 📚 3 lessons from the book Stock Master Maestros, with a spotlight on Greg Padilla

• 📋 Guru Gems Watchlist Update: 5 stocks worth watching after recent sell-offs

Here is the 2 minute AI audio version:

📖 PART 1: 3 Lessons from 'Stock Master Maestros'

There are Stock Market Wizards and then there are Stock Market Maestros.

In my mind, wizards are exceptionally skilled traders who make money by speculating on the movements of stocks, currencies, commodities, bonds and cryptocurrencies. They are typically short-term oriented, and they aren’t necessarily focused on corporate fundamentals.

Maestros, on the other hand, are investors, not traders. They invest based on fundamentals, with reference to valuation and sometimes to technical analysis. They hold their positions for months and years, not hours or days. Maestros are playing a longer game. And they’re doing it on behalf of ordinary investors like you and me, using the same public equities the rest of us use to build our portfolios.

Stock Master Maestros by Lee Freeman-Shor and Clare Flynn Levy is a follow-up to Freeman-Shor’s bestseller The Art of Execution: How the World’s Best Investors Get It Wrong and Still Make Money, which revealed the winning habits of 45 of the world’s top fund managers and categorised them into 5 ‘tribes’: Assassins, Hunters, Rabbits, Raiders and Connoisseurs.

The findings from that book showed that it was how an investor behaved after they had invested in an idea that determined their success or failure (i.e. how much they let winners run and how fast they cut their losses or added to a losing position)

How they reacted to winning and losing mattered more than the stocks they picked to invest in.

This is quite insightful and is something that made me think of what legendary hedge fund manager Stan Druckenmiller has said a few times in interviews:

“Invest, then investigate”

Here is a great interview with Druckenmiller from last month:

So what separates the great investors from the rest is not what they pick but how they behave once they're in it.

With Stock Master Maestros, Freeman-Shor takes this a step further by profiling 12 investors who have been objectively identified — through detailed analysis of their trading data by Essentia Analytics — as true “Maestros” of execution. The book walks through their winning and losing ideas with real case studies.

Today I will highlight one of the featured investors: Greg Padilla.

Who is Greg Padilla?

Greg Padilla is a Portfolio Manager and Managing Partner at Aristotle Capital, a Los Angeles-based investment firm managing over $90 billion in assets.

He was a key contributor to a top ranked global equity fund in 2012, one of the few that outperformed both in the down market of the Global Financial Crisis and in the later bull run.

What makes Greg’s inclusion in the book particularly interesting is the data behind it. Essentia Analytics analysed 12 years of his historical trade data and uncovered some remarkable stats:

• Hit rate: 56% — He gets it right more than half the time (the median for even top-performing fund managers was just 45%)

• Payoff ratio: 216% — His average winner wins 2.16× as much as his average loser loses

That payoff ratio is the key number. It means that when Greg is right, he wins big. And when he’s wrong, he limits the damage. Those are the features of a true ‘Connoisseur’ and ‘Assassin’.

1️⃣ Lesson 1: Look for Catalysts

At Aristotle Capital, every investment must meet three criteria: quality company, attractive valuation, and a compelling catalyst. The first two are principles we’ve seen with virtually every Guru studied so far. But the third is what sets Aristotle apart.

Padilla is very specific about what type of catalysts they are looking for. Catalysts are not short-term events like an earnings revision. They are fundamental changes already underway inside a business: a new management team, a new product line, or a resolution of legal proceedings.

This emphasis on catalysts comes from hard-won experience. Earlier in his career, Padilla bought stocks simply because they were cheap. And he got burned repeatedly. The catalyst requirement is what protects Aristotle from value traps; cheap stocks that stay cheap because nothing is changing.

This lesson also applies in reverse: when a key manager leaves, it can be a catalyst to sell.

My takeaway

When looking at the Guru Gems watchlist (Part 2 of this newsletter), it will be good to ask: What is the catalyst? A cheap stock without a catalyst is just a cheap stock. But the real Gems are quality companies at an attractive valuation with an identifiable catalyst.

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2️⃣ Lesson 2: "Why Are We Idiots?" — The Power of the Pre-Mortem

Before making any new investment, Greg and his team perform what they call a WAWI, short for “Why Are We Idiots?”

It’s essentially a pre-mortem exercise. Before a single dollar is invested, the team asks: “What are the most likely reasons we will NOT make money in this investment? What are our primary concerns?”

By identifying the key risks upfront, the team creates a reference list they can monitor throughout the life of the investment.

‘WAWI’ also helps them in their sell decisions. If one of the risks they have identified for that stock plays out, it’s the team’s cue to strongly consider stepping aside.

My takeaway

I think the WAWI exercise is something every investor can apply. Before adding a stock to your portfolio, it helps to write down: “Why am I an idiot for buying this?” If you can’t identify at least 2-3 clear risks, you probably don’t understand the company well enough.

3️⃣ Lesson 3: Let Winners Run — And Don't Double Down on Losers

This is probably the most important lesson from Greg Padilla’s chapter, and it directly explains that impressive 216% payoff ratio.

When Padilla enters a position, he invests a standard 2-2.5% regardless of the company. No finessing the entry, no higher weight for higher-conviction ideas.

He then lets the position float: if it does well, the weight drifts up. If it doesn’t, the weight drifts down.

“We came across a study that showed that the vast majority of fund managers do not add any value from trading - that is, from adjusting position size and timing their decisions. We know that adding and trimming positions is not part of our edge. People like to trade because it makes them feel good, like they are adding value, but are they?”

The only time Padilla trims, is when a position hits 6% of the portfolio, which is purely for risk control.

But here’s where it gets really interesting: Padilla rarely adds to losers.

“By not adjusting the size of the position after the initial buy, we are making an active decision to manage mistakes. We are avoiding turning a minor mistake into a big mistake. That’s been a big secret of our success: not turning small mistakes into big ones.”

He learned this the hard way during the 2008 financial crisis. Earlier in his career, when running deep-value portfolios, he would throw more money at a losing investment. But the outcomes told a different story. As he puts it: “If I could go back 20 years and give myself some advice, it would be, ‘it’s cheap for a reason, Greg.’”

Combined with the discipline to let winners run, this approach creates a natural asymmetry: big winners more than offset small losers. It’s how you get to a 216% payoff ratio.

My takeaway: This is a powerful lesson and one that I will try to better implement going forward. Alphabet has been a massive winner in my portfolio and so far I have resisted the temptation to trim it, but I have added to some of my losers, which is maybe something I need to stop doing…

👀 PART 2: Guru Gems Watchlist Update

The markets have been going through some turbulence lately, and a number of high-quality companies have seen their share prices decline significantly.

Below are 5 companies I’m keeping a close eye on. For each, I’ll share why the stock has declined and which Gurus own it.

As we just learned from Greg Padilla, a stock that has dropped a lot isn’t necessarily cheap; “it’s cheap for a reason.” So, for each stock, I will also try to identify whether there’s a catalyst for recovery or whether the decline reflects genuine long-term deterioration.

You can access the full Watchlist in the Guru Gems Master Google Doc

1/ Molina Healthcare (MOH) 📉 -55% over past year, -61% below 52-wk high

What happened?

This is the most dramatic decline on the watchlist. Molina reported a catastrophic Q4, posting a loss of $2.75 per share. Even worse, 2026 guidance of just $5.00 EPS was less than half of the consensus.

Surging medical costs in Medicaid, unfavorable premium adjustments in California, and underperformance in Medicare Advantage Part D (which they plan to exit in 2027) were the main drivers for the decline.

The decline has been so severe that Molina is being removed from the S&P 500 and moved to the S&P SmallCap 600.

Which Gurus own it?

Michael Burry, Bill Nygren, and Seth Klarman own the stock and believe it is a long-term opportunity. Michael Burry has written an extensive article about MOH and why he believes MOH is a ‘gem of an insurance company stock’.

Catalyst?

The catalyst identified by Michael Burry is the acquisition strategy. The very industry distress hurting Molina’s margins is simultaneously creating a full pipeline of struggling local health plans that can be acquired, something in which Molina has a proven track record.

I already own Molina in my Magic Formula portfolio, but as I wrote in my 2026 Watchlist post, I may also consider adding it to the Guru Gems portfolio, especially if it keeps declining back to $100/share where it would be a “generational buy” according to Burry.

2/ Fair Isaac Corporation (FICO) 📉 -40% over past year, -49% below 52-wk high

What happened?

FICO, the company behind the FICO credit score, has been hit by a perfect storm.

Earlier in March, the company announced a $1 billion offering of Senior Notes, which triggered negative reactions from investors as it raised potential liquidity concerns and questions about future financial stability.

Additionally, The FHFA (government agency) has pushed for a “Lender Choice” model, allowing alternative credit models like VantageScore 4.0. This would end decades of monopoly status in the mortgage market.

Despite this, Q1 2026 results were solid: revenue up 16% YoY to $512M, with EPS beating estimates.

Which Gurus own it?

Dev Kantesaria, Akre Capital and Lindsell Train.

Dev Kantesaria’s conviction is remarkable, nearly a third of his portfolio is in this single stock.

Catalyst?

FICO’s Platform revenue (growing 33% YoY) is becoming a bigger part of the business, which could help offset scoring pressure.

Also, acceleration of share repurchases is seen as a strong indicator of FICO’s robust free cash flow. But the regulatory picture needs to clarify before this becomes actionable.

Read more about FICO in my deep-dive on Dev Kantesaria

3/ MercadoLibre (MELI) 📉 -22% over past year, -38% below 52-wk high

What happened?

MercadoLibre, the dominant e-commerce and fintech platform in Latin America, spooked the market with a disappointing earnings report, leading to analyst downgrades and reduced price targets.

Revenue growth remained strong at 47% YoY (currency neutral), items sold rose 43%, and the company added 6.4 million new customers in Q4. But operating margin dropped from 13.5% to 10.1%, and EPS missed consensus.

Management says this is deliberate: they’re investing heavily in lowering free shipping thresholds in Brazil, building digital banks in Mexico and Argentina, and launching credit cards to capture market share while the opportunity is wide open.

Which Gurus own it?

Stan Druckenmiller and Miller Value Partners (here is their investment thesis). Michael Burry also highlighted it as a stock on his watchlist (target price ~$1200).

Catalyst?

Ecommerce penetration rates in the region (~14%) are roughly half the levels of more developed countries (27%-32% in US/UK/China), making the structural growth runway very significant.

Additionally, MercadoPago (fintech) has 78% AUM growth and is planning to become the largest digital bank in Mexico and Argentina. At a forward P/E of ~30x with 40%+ revenue growth and a Price/FCF under 9x, this is getting genuinely interesting.

4/ Coupang (CPNG) 📉 -19% over past year, -44% below 52-wk high

What happened?

Coupang, often called the “Amazon of South Korea,” has had a rough stretch. The main reason is a massive data breach affecting 33+ million accounts, followed by the CEO’s resignation and regulatory probes. Nomura slashed its 2026 EPS forecast by 95%, citing potential fines of up to $900 million. Q4 earnings missed estimates (EPS -$0.01 vs. $0.04 expected), and revenue came in light at $8.8B. The Farfetch acquisition has also weighed on profitability.

Which Gurus own it?

Stan Druckenmiller increased his position by 46% in Q4. Miller Value Partners also own it.

Catalyst?

Hard to identify right now. The regulatory fallout and legal challenges create significant uncertainty. The core e-commerce business (24.7M active buyers, dominant logistics) is strong, but the near-term uncertainty is real. As Greg Padilla would say, this is one where you need to “check yourself and be humble.”

5/ Mastercard (MA) 📉 -7% over past year, -18% below 52-wk high

What happened?

Mastercard faced multiple headwinds in early 2026: a proposal to cap credit card interest rates at 10% (which hit all payment stocks), the $1.8B acquisition of stablecoin infrastructure provider BVNK (which spooked some investors), and AI disruption concerns (fueled by the now famous Citrini Research report).

But the business itself is firing on all cylinders: Q4 revenue of $8.81B beat estimates, EPS of $4.76 was well ahead of the $4.24 consensus (a 12% surprise!), and the company raised its dividend by 14%.

Which Gurus own it?

Many of them…

Dev Kantesaria (~19%), Akre Capital (~13%), Thomas Russo (~10%), Peter Keefe (~6%), John Armitage (~3%), Berkshire Hathaway (~1%), Christopher Tsai (~2%), François Rochon (<1%)

Catalyst?

The shift from cash to digital payments continues to be one of the most powerful global trends. Electronic payments only surpassed cash payments on a global basis a few years ago, so there is still plenty of runway for growth.

Mastercard’s network model (fees on transaction volume) is incredibly durable.

The BVNK acquisition also positions them in stablecoins and tokenized settlements.

With many Gurus owning the stock, long-term growth opportunities and a low valuation (see chart below), this could be a really interesting company to add to the Guru Gems portfolio...

That’s it for this week! Please like or share if you find these insights valuable.

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back!

I’m at Round 7 of constructing my Magic Formula Portfolio.

Here is the 2-minute AI version of today’s post if you’re short on time

As a reminder, while studying investing masters, I’m creating two real-money portfolios to put my learnings into practice.

Last week’s Guru deep-dive got quite a few views and likes, so make sure to check it out if you haven’t yet:

And if you are new to Guru Gems, start here.

Quick refresh on the Magic Formula

In his book “The Little Book that (Still) Beats the Market”, Joel Greenblatt suggests that a regular investor can beat the market averages by buying a group of ‘good’ companies at ‘bargain’ prices.

• ‘Good’ → high return on capital

• ‘Bargain’ → high earnings yield

Since he expects the magic formula to work on average, Greenblatt suggests to own a basket of 20-30 stocks, so you wouldn’t have to worry about a few bad purchases or having to analyze individual stocks in detail.

He also suggests to buy this basket over the course of a year or so, meaning buying a few stocks every month or every other month, which is exactly what I am doing.

You can read more on Joel Greenblatt and his Magic Formula here.

You can also download my Joel Greenblatt e-book for free:

Joel Greenblatt e-book by Guru Gems

494KB ∙ PDF file

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Current Magic Portfolio performance

The overall performance of the Magic Portfolio is currently -4.9%, and on a YTD basis the loss is even higher.

5 stocks (SIGA, CROX, HRMY, RIGL, HALO) went down 20% or more just over the last month.

Not exactly what I was expecting when starting this portfolio…

But I’m not giving up just yet.

Greenblatt originally tested his formula over a 17-year period and found that the formula had underperformed the market averages for some one-year periods and two-year periods (“which is why people will not stick with the formula”, according to Greenblatt)

So I just have to stick to the process for now…

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New Magic Formula Stocks

As I explain in detail in my first Magic Portfolio post, I use Joel Greenblatt’s Magic Formula screener combined with financial ratios data to identify the top stocks in terms of combined rank for Return on Capital (using ROCE) and Earnings Yield (using EV/EBIT).

Here are the 3 companies I will be adding to the Magic Portfolio on Monday:

1. Adobe Inc (ADBE, Market cap $102B)

Adobe is one of the world’s leading software companies, best known for its Creative Cloud suite (Photoshop, Illustrator, Premiere Pro), its Document Cloud (Acrobat, PDF tools), and its growing Experience Cloud for digital marketing and analytics.

Adobe ranks strongly on the Magic Formula with a ROCE of 46% (3yr average of 41%) and an EV/EBIT of 12.3x.

While the EV/EBIT is higher than most other names in the portfolio, the quality of the business more than justifies its inclusion. Very few companies sustain ROCE above 40% over multiple years.

A few things worth noting:

• Adobe has faced investor concern over the potential AI disruption to its creative tools business, which has driven the stock down significantly from its highs and created what the Magic Formula identifies as an attractive entry point

• Despite strong Q1 FY26 earnings, the stock fell significantly earlier this week as the CEO is stepping down, which created further uncertainty

• Despite AI fears, Adobe has been integrating AI deeply into its own products through Firefly and Sensei, and its subscription revenue base remains highly sticky

• At a market cap of approximately $100B, Adobe would be by far the largest company in my Magic Portfolio. Adding some large-cap, high-quality counterweight to what has otherwise been a small and mid-cap focused portfolio is probably not a bad thing

• Finally, Michael Burry initiated a small position in Adobe as he believes it is now trading at a very attractive valuation

Here are a few deep-dives I would recommend to learn more about the investment thesis for Adobe:

The Intrinsic Value Newsletter - Adobe: Designing a Creative Empire? (May 2025)

- Investment Thesis: Adobe, Inc. ($ADBE) (Jan 2026)

- The Adobe Investors Paradox: Narrative vs. Numbers (Jan 2026)

2. Deckers Outdoor Corporation (DECK, Market cap $14B)

Deckers is an American footwear and apparel company behind some well-known shoe brands, including UGG, HOKA, Teva, and Sanuk.

DECK ranks near the top of the Magic Formula ranking with a ROCE of 44% (3yr average of 44.8%) and an EV/EBIT of 9.8x, giving it a rare combination of high, consistent capital efficiency and a reasonable valuation for a company of this quality.

A few things stand out about Deckers:

• HOKA has been one of the fastest-growing performance footwear brands in the world, with strong momentum in running and outdoor categories

• Despite the stock being down 54% (!!) from its Jan 2025 high, the underlying business continues to generate exceptional returns on capital

• The 3yr average ROCE of 44.8% shows this is not a one-year fluke, the business has been consistently excellent

Chris Bloomstran (Semper Augustus), a value investor I covered in my Berkshire post last year, significantly increased his DECK position in Q4. Here is what he wrote in his 2025 Letter:

“We likewise added another new company, Deckers Outdoor, to the portfolio in 2025, gradually at first and then suddenly. The company’s shares were the fourth worst performing S&P 500 component of the year, down 49%. Buying initially near the low, and then meaningfully nearly at the low, our sizable investment earned us a positive 5.6% for the year.”

David Einhorn (Greenlight Capital) also started a small position in DECK during Q4 2025.

It’s great to see Gurus buying the stock, this makes me even more confident to add it to the portfolio.

3. EverQuote Inc (EVER, Market cap $580M)

EverQuote operates one of the largest online insurance marketplaces in the U.S., connecting consumers shopping for auto, home, life, and health insurance with carriers and agents through its data-driven platform.

EVER ranks well on the Magic Formula with a ROCE of 35% and a very attractive EV/EBIT of 6.2x, making it one of the cheapest value propositions on the screener this round.

A few things worth noting:

• EverQuote’s marketplace model is asset-light and highly scalable. It doesn’t underwrite insurance itself but instead earns referral and advertising revenue, which drives strong returns on capital

• The insurance advertising market has recovered meaningfully after a difficult period in 2022-2023 when rising claims costs caused carriers to pull back on marketing spend

• With a market cap of approximately $580M, this is a small-cap name that could benefit from the broader small-cap valuation recovery I have been anticipating across the portfolio

I asked Claude.ai to generate an equity research report on the stock and it is giving it a ‘BUY’ recommendation as well:

EverQuote (EVER) Equity Research Report (Claude)

584KB ∙ PDF file

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On Monday, I’m adding these 3 names to the Magic Formula Portfolio and I will hold them for one year, as Greenblatt prescribes.

That will bring me to 21 stocks in the portfolio. The goal is to get to a full portfolio of ~25 names, so I’m getting very close to being fully invested.

And once built, I’ll let the magic unfold…

That’s it for this week! Please like or share if you enjoy reading Guru Gems.

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

In today’s edition:

👤 The Guru: Sir Christopher Hohn
🏛️ The Philosophy: TCI's fortress business approach
💎 The Gem: S&P Global (SPGI) — a familiar name with a fresh look

2-minute AI version:

👤 Guru in the spotlight: Chris Hohn

Christopher Hohn is one of the most successful - though not very public - investors of the past two decades.

He is the founder of The Children’s Investment Fund Management (TCI), a London-based hedge fund he launched in 2003, with a name that reflects his commitment that investing and purpose could coexist.

His results have been extraordinary. Over more than two decades, TCI has compounded at more than 18% per year. This is roughly nine percentage points ahead of the broader market.

In 2025 alone, the fund generated $18.9 billion in net gains, the single largest annual profit ever recorded by any hedge fund, surpassing Citadel’s previous $16 billion record from 2022.

“Investing is all about risk and return — and the vast majority of investors focus on return. But in my career I focused on risk. Return does matter, of course, but to me, risk was always the first thing that mattered.”

This risk-first framing is the key to understanding Hohn. He is not chasing the next hot thing. He is building a portfolio he can sleep with and hold for a decade.

What makes his record even more striking is that he achieved his results with a concentrated portfolio of 10-15 names, despite managing more than $75 billion.

The average holding period of TCI’s current portfolio is eight years. Some positions have been held for over a decade. This reflects his patient, concentrated ownership of the world’s best businesses.

Beyond investing, Hohn has committed to giving away essentially most of what he earns. The Children’s Investment Fund Foundation — seeded with his $10 million bonus from his first hedge fund job — has grown to over $6.5 billion in assets and donates more than $500 million per year to children’s health and climate change. He was knighted in 2014 for his philanthropy.

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🏛️ TCI’s Fortress Business Model Playbook

Reading across his interviews and public statements, Hohn consistently emphasizes a few key ideas that guide TCI’s investment decisions, all centered around one central obsession: barriers to entry

1. 🏰 Fortress business models — barriers to entry above all else

For Hohn, the most important question about any business is not how fast it grows, but how well it is protected.

“We’re totally focused on fortress business models, where competition is limited and very difficult and so they have very high barriers to entry.”

The types of barriers he hunts for span a wide range:

• Irreplaceable physical assets (airports, toll roads, railroads)

• Intellectual property so complex it cannot be replicated (e.g., aircraft engines)

• Network effects

• Installed base and customer switching costs (e.g., mission-critical software)

• Brand strength

• Regulatory protection

Hohn’s preference is to find businesses with not just one of these, but several at once.

Aircraft engines are the perfect gems which have these multi-layered barriers to entry: IP, contracts, installed base. GE Aerospace (his ‘crown jewel’) and Safran SA (French aerospace and defense company) together make up more than 25% of his portfolio.

And while he loves aircraft engines, airlines on the other hand represent exactly what he avoids: growth without barriers.

“Airlines have been growing for 100 years — maybe 5% a year — fantastic growth. But collectively and cumulatively, the industry never made any money because competition was too strong. Growth without barriers to entry is not a combination you want.”

Pricing power is the ultimate test of a moat

Hohn has found that once you find one of these supercompanies that can dominate their industries, they have something special, which is pricing power.

The clearest test of whether a moat is real is a company’s ability to raise prices above inflation.

“There is a special group of super-companies that can price above inflation — and that’s, as Buffett taught, the test of whether you have the moat. Real pricing power above inflation can be very valuable.”

2. 🔭 Extreme long-termism — time horizon as competitive advantage

Most institutional investors hold a stock for under a year. Hohn holds for eight on average, and happily for twenty if the business warrants it. He calls this a “time horizon arbitrage”: the market systematically undervalues businesses that are great over decades but not exciting quarter to quarter.

“The value of a great company is only really seen over the long term.

This long-term view requires an important character trait: an almost stubborn refusal to sell.

“If you find something good — and it’s going to be good long term — stick with it. Don’t assume newer is always better.”

3. 🎯 Concentration — size your positions with conviction

Hohn holds roughly 10–15 positions, with meaningful stakes of around 10% or more in the top 8. He believes that if you have identified a true fortress business, adding more mediocre companies to ‘diversify’ only dilutes the quality of the portfolio.

“We’ve used concentration to great advantage. But it only makes sense where you have outsized risk/reward and conviction. That’s our formula for how we size positions.”

In one of this interviews he cites George Soros: “It doesn’t matter if you are right or wrong — all that matters is how big you are when you’re right and how big you are when you’re wrong.”

A very long list of industries to avoid

Hohn is quite explicit about what he won’t own. Banks, airlines, telecoms, insurance, utilities, traditional media, auto manufacturers, commodity producers, advertising agencies, traditional asset managers… all these industries are either too competitive, too cyclical, or too prone to disruption.

“We have figured out a lot of industries which have high and sustainable barriers to entry, and we pretty much ignore all other industries.”

Hohn estimates that only around 200 companies worldwide meet its definition of a truly high-quality business.

What the Wirecard short taught Hohn about independent thinking

Hohn's playbook is built around owning great businesses for decades. But one episode from his career stands out as a rare and instructive detour into short selling (i.e. betting against a company): Wirecard.

The German Enron

For years, Munich-based payments company Wirecard was celebrated as Germany's greatest fintech. It was a DAX 30 member valued at over €24 billion, backed by SoftBank, and given a clean audit by EY every year.

Red flags about its accounting had circulated since 2015, when the Financial Times first raised questions about its Asian operations. but Germany's financial regulator sided with Wirecard, banned short selling of the stock, and filed criminal complaints against FT journalists who reported on the fraud.

Hohn entered the picture in early 2020 with a short position, having applied the same accounting pattern recognition he learned at Harvard Business School: small auditor, no verifiable cash flows, empty offices in supposedly booming Asian subsidiaries.

When KPMG's special audit confirmed in April 2020 that it could not verify the existence of over €1 billion in foreign bank accounts, Hohn took the extraordinary step of filing a criminal complaint with Munich prosecutors against Wirecard's management and publicly calling for the CEO's removal.

In June 2020, €1.9 billion in company funds was revealed to be missing. Money that, Wirecard admitted, "probably never existed". The stock collapsed 98% and the company filed for insolvency days later.

What Hohn learned from this period

The lesson Hohn takes from Wirecard is not primarily about the profit. It is that shorting is structurally difficult.

“Over a dinner with Warren Buffett, I asked Buffett about shorting and he said that he and Charlie Munger never did it because they concluded it was too hard and unpredictable because of the investor psychology aspect of it.”

The first short seller to spot the Wirecard fraud, a decade earlier, had been forced to cover his position as the stock kept rising.

The deeper takeaway he applies to his long portfolio: fraud in plain sight is possible when institutions trust authority too much, and independent thinking — being willing to call something wrong even when the establishment says otherwise — is among the most valuable traits an investor can have.

TCI portfolio

Below is an overview of Chris Hohn’s TCI stock portfolio at the end of Q4 2025. Note that the weights are approximations as the information is a combination of 13F filings (US companies) and shareholder reports (non-US companies), which may have different filing dates.

More than 90% of the $79 billion portfolio is concentrated in 10 names. This level of concentration would make most fund managers lose sleep, but for Hohn it is a consequence of his demanding criteria, making his investable universe very small.

The portfolio is a live demonstration of Hohn’s playbook: aircraft engines (GE Aerospace and Safran), payments networks (Visa), enterprise software with switching costs (Microsoft), credit rating duopolies (Moody’s and SPGI), toll roads and airports (Ferrovial, Aena), and railroads (CP and CNR).

In Q4 2025, Hohn added modestly to S&P Global (SPGI) a financial information and analytics company.

In my deep-dive on Dev Kantesaria, SPGI showed up as Valley Forge Capital's second-largest position at over 20% of his portfolio. Kantesaria has held it for years. And Hohn holds it too, at 8% of one of the most concentrated portfolios on earth.

When two of the world's most disciplined quality investors independently land on the same business, it deserves a very close look.

💎 The Gem: S&P Global Inc. (SPGI)

S&P Global is one of those companies that sounds boring but actually operates at the center of the global financial system.

It is the provider of the S&P 500 Index (the most replicated benchmark on earth), the world’s largest credit rating agency, a leading provider of financial data and analytics, and a dominant force in commodity pricing information.

S&P Global operates across five business segments:

• Ratings — Credit ratings for bonds and debt instruments.

• Market Intelligence — Data, analytics, and workflow tools for financial professionals. Subscription-based, ~85% recurring.

• Indices — The S&P Dow Jones family of indices, including the S&P 500

• Commodity Insights — Pricing benchmarks and data for energy and commodities markets (formerly Platts).

• Mobility — Automotive data and analytics (includes former Carfax). Being spun off in 2026 as a standalone company.

2 of S&P Global’s divisions have operating margins above 60%

💰 To Buy or Not to Buy

1/ Buy good companies

There is no doubt that S&P Global is a high quality company. Two of the most respected quality investors in the world — Hohn and Kantesaria — hold it as a top position.

Its moats are historic, its margins are exceptional, and its business grows structurally with the global capital markets it serves.

Here is why SPGI fits the TCI Playbook

🏰 Fortress barriers to entry

S&P and Moody’s together control roughly 80% of the global credit ratings market — a duopoly enforced by regulatory recognition, investor mandates, and decades of institutional trust.

The Indices business is even more entrenched: the S&P 500 is the benchmark, not just a benchmark, with trillions of dollars of passive capital pegged to it. Every inflow to an S&P 500 ETF generates a licensing fee, with essentially zero marginal cost.

Market Intelligence subscribers embed S&P’s data into their daily workflows and compliance processes, creating high switching costs.

This is the multi-layered fortress model that Hohn is looking for.

The moat is confirmed by a real pricing power.

Because the cost of a credit rating is tiny relative to the size of a bond issuance, customers are highly insensitive to price.

If a company is issuing $1 billion in debt, the rating fee is essentially a rounding error.

That gives S&P Global enormous pricing power.

🔭 A business for the next 30 years?

S&P Global was founded in 1917. As long as corporations issue bonds, ratings are needed. As long as passive investing grows, index revenue grows. As long as financial professionals need data, Market Intelligence renews.

Hohn himself noted that Moody’s — his other ratings holding — has compounded revenues at 10% per year for a century. S&P’s upcoming Mobility spin-off simplifies and focuses the business further, leaving only the highest-quality, highest-margin core.

Will this still be in a dominant position in 20-30 years? Quite likely.

2/ Don’t overpay

High quality companies like SPGI rarely come cheap. But here is where it gets interesting. SPGI’s stock has had a difficult 12 months.

As of early March 2026, shares trade around $452, down roughly 22% from their 52-week high.

The market’s concern centers on two things: fears that AI disrupts financial data businesses, and a slightly disappointing 2026 earnings guidance that came in below Wall Street’s prior estimates.

The current forward P/E of ~23x is the cheapest SPGI has looked on a forward basis in many years.

The AI concern is worth examining a bit further.

S&P Global’s data is largely proprietary, structured, and deeply embedded in regulatory and contractual frameworks.

If anything, the AI supermachine needs reliable, trusted data to run on and that’s exactly what SPGI provides.

Case in point: S&P Global has already integrated its Capital IQ datasets directly into Claude, allowing financial professionals to query earnings transcripts, financials, and company intelligence through natural language.

The market appears to be applying a broad “data business = AI risk” discount without distinguishing between generic web content and S&P’s institutionalised, regulated financial intelligence.

Final decision

SPGI seems to tick all the boxes needed to make it into the Guru Gems portfolio.

📌 Decision: I’m adding S&P Global (SPGI) to the Guru Gems portfolio as a 3-4% initial position. As for any of my positions, I will be closely monitoring Hohn and Kantesaria’s moves and whether any other super investors may pick up the stock.

Hohn added slightly to his position in Q4, at a price between $475-$525, so at a current price of $452 I can buy it below that price.

That’s it for this week’s edition!

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back!

February is behind us, time for a portfolio update.

I’m currently working on two Guru deep-dives for the coming weeks (François Rochon and Chris Hohn). There is a LOT to learn from these two masters of investing, so stay tuned!

Start here if you are new to Guru Gems.

No time to read this week’s update? Here is your 2-minute AI summary:

💎 Guru Gems Portfolio update

February 2026 will be remembered for the SaaS massacre, and the software companies in the Guru Gems portfolio certainly felt it.

The full portfolio and all transactions are available in the Guru Master Google Doc.

In the next section I will take a closer look at the companies in the Guru Gems portfolio.

I will group them into three clusters, as I explained in my post last week covering the latest 13F moves.

Cluster 1 — Clear Guru signals, strong business fundamentals

🔎 Alphabet

Alphabet continues to lead on AI innovation:

• Gemini 3.1 Pro leads the Artificial Analysis Intelligence Index, ahead of Claude Opus 4.6, while costing less than half as much to run.

• Google just rolled out Nano Banana 2, the upgraded version of its viral image model, now powered by real-time information and images from web search — claiming the #1 spot on text-to-image leaderboards.

Alphabet is still a double in the portfolio and I may trim the position slightly but for now I’m leaving it as is.

🚗 Uber

Uber delivered another outstanding quarter in Q4 2025. Revenue grew 20% to $14.4 billion, gross bookings jumped 22% to $54.1 billion, and full-year free cash flow hit $9.8 billion, up 42%.

The stock dipped ~5% after earnings on an EPS miss and softer Q1 guidance, which is probably more noise than signal.

In their recent Q4 and full year 2025 earnings call, management re-iterated that Uber is strategically positioning itself for a future where autonomous vehicles (AVs) are a significant growth driver, and an opportunity to expand the overall mobility market rather than a direct competitive threat.

Finally, Uber’s newly promoted CFO, Krishnamurthy Balaji, bought $1.6M worth of Uber shares shortly after his appointment. Always a good sign.

I have been buying Uber throughout the past week and it is now a ~9% position. I might buy more if the price drops back under $70.

🏪 Amazon

Following the Gurus’ big Q4 moves, I initiated a position in Amazon. It was the most bought stock by super investors in Q4.

I bought at $204, which is cheaper than what the Gurus have paid for it during Q4. It’s currently ~4% of the portfolio and I may add more over the coming weeks.

Cluster 2 — Guru conviction, business has ‘temporary headwinds’

👜 LVMH

An interesting development this week: CEO Bernard Arnault crossed the 50% ownership threshold in LVMH.

The Arnault family raised its stake from 49.77% at the end of 2025 to 50.01%, formally securing majority control of the group and bringing their voting rights to nearly 66%.

The family spent roughly €407 million buying shares on the market in late January and early February, immediately after LVMH reported weaker-than-expected full-year results.

The stock is down ~15% this year after mixed Q4 earnings, but it is still 7% above my average buying price.

🛌 Airbnb

Airbnb reported mixed results for 2025.

• Revenue grew 10% to $12.2 billion, driven by growth in Nights and Experiences Booked and a modest increase in Average Daily Rate.

• However, net income declined 5% to $2.5 billion, weighed down by higher compensation and marketing expenses as the company invests heavily in new business lines.

It’s a growth-versus-profitability trade-off, with expansion in several international countries and launch of experiences and services hopefully leading to higher profitability in the future.

⚕️ Baxter

Baxter sold off sharply after reporting weaker-than-expected quarterly earnings and adjusted EPS for 2026, but recovered in the following days.

“While the top line exceeds our expectations, adjusted EPS fell short” — Baxter CEO Andrew Hider

The stock is still up ~4% YTD and is back around my average purchase price.

Baxter remains a ‘turnaround play’. There is already a lot of pessimism priced into the stock, and a successful implementation of their new operating model could be a meaningful catalyst.

A few weeks ago, we internally announced the new operating model, and it's designed around simplifying our organization, accelerating innovation, and improving performance.

— Baxter CEO Andrew Hider

🛻 Copart

Copart is another name facing temporary headwinds.

I believe the core thesis remains intact, and Gurus seem to agree.

Here is a great update on Copart’s Q2 2026 results by

Summit Stocks

Copart: Thesis Remains Fully Intact

Read more

2 months ago · 14 likes · Lucas | Summit Stocks

Cluster 3 — Guru conviction, market believes these companies are cooked

Constellation Software (CSU)

Constellation is my worst performer in the portfolio.

The stock is down more than 40% over the last 6 months, driven by fear that AI and agentic tools will completely disrupt its niche vertical market software businesses.

The bull case is straightforward: CSU’s portfolio consists of businesses providing sticky, mission-critical systems in industries like emergency dispatch, hospital billing, and agricultural logistics.

In these niches, customers are driven by operational risk aversion, rather than ease of software replication. And if anything, Constellation can use AI to improve their software rather than be disrupted by it.

Constellation will announce quarterly results on 9 March, giving us much-anticipated insight into whether AI is actually affecting the business.

CCC Intelligent Solution

Another victim of the SaaS massacre. CCC provides software for the property and casualty insurance ecosystem.

Their recent earnings were not bad at all, but the fear of AI disruption is real and is hitting the entire sector.

Here is what CEO Githesh Ramamurthy said on the recent earnings call:

In regulated, multiparty industries like insurance, AI increases the need for trusted data, governed workflows, and platforms that can operate safely at scale. As many of you know, CCC has been an AI pioneer and leader for over a decade.

[…] AI is embedded in our products, our support, and our internal operations. While other companies talk about AI in theory, we have been in production at scale for years.

Akre Capital, Peter Keefe, and Triple Frond Partners all significantly increased their CCC position in Q4.

Bryan Lawrence, one of my favorite Gurus covered so far, also increased his position in Guidewire Software (GWRE), which is a partial competitor of CCC in the insurance technology market.

I believe the market is selling all software companies indiscriminately in a kind of “sell first, ask questions later", while some companies (like CCC) have already been AI-first for a while and may actually be a winner long-term.

I am happy to hold CCC for now and will probably add to the position.

PayPal

PayPal stock crashed 20% after disappointing earnings report, but had a bit of a rebound earlier this week after rumors emerged of a possible takeover.

Hopefully a deal materializes at a price close to what I paid…for now, I'm keeping the position.

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👀 Looking ahead and Watchlist update

It’s not just the Guru Gems portfolio that has been hit hard. Some of the best investors are sitting on significant drawdowns too.

Dev Kantesaria at Valley Forge Capital is a good example.

I’ve covered Kantesaria before: he runs an exceptionally concentrated portfolio of 9 stocks, with over 90% of the fund concentrated in his top five positions: FICO, S&P Global, Mastercard, Moody’s, and Visa. It’s about as high-conviction as it gets, and his long-term track record is excellent.

But February wasn’t kind to him. S&P Global (SPGI), his second-largest position at ~21% of his fund, dropped more than 25% during the first 2 weeks of February. The AI storm was also hitting financial data companies, not just software.

But just like CCC, SPGI may actually be a beneficiary of AI, not a victim of it. The business model is built on selling credibility: credit ratings, benchmark indices, and essential financial data that global markets depend on to function.

If anything, the AI supermachine needs reliable, trusted data to run on and that's exactly what SPGI provides. Case in point: S&P Global has already integrated its Capital IQ datasets directly into Claude, allowing financial professionals to query earnings transcripts, financials, and company intelligence through natural language.

I had already put SPGI on my watchlist after my Kantesaria deep-dive, but after this sell-off, it is now high on the list to make it in the portfolio.

I included my watchlist in the Guru Master Google Doc, so feel free to have a look!

That’s it for this week…thanks for reading and I’ll be back next week with a new Guru deep-dive!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Earlier this week was the deadline for Superinvestors ($100M+) to report their US positions held on 31st December 2025 (13F filings).

Today I’ll share my key takeaways from the latest changes in the portfolios of some of my favorite Gurus.

Here is a 2-minute AI summary:

1️⃣ Alphabet remains the ultimate Guru Gem…

… but Gurus are trimming after the stock increased +38% in Q3 and another 28% in Q4.

Below is a table I put together listing most of the Gurus covered so far in the Guru Gems series as well as some Gurus I plan to cover in the future.

→ For the full table with more names, access the Guru Master Google Doc, which also contains my full portfolio and latest activities

Out of the 15 Gurus listed below, 10 of them hold Alphabet in their portfolio. For 5 of them it is even the #1 or #2 position (‘Gem 1’ or ‘Gem 2’ in the table).

At the same time, Alphabet is also the stock that appears most in the column ‘Largest decrease in Top 10’, meaning that this position is being trimmed significantly, and the Gurus are taking profits after the massive gains this stock had over the past 6-9 months.

Amazon (and Meta) have been added most

If we look at where the Gurus are shifting their attention and investments to, Amazon (and to some extent Meta) is a clear favorite.

Amazon was a laggard in the ‘Magnificent 7’ group in 2025 with just a ~1% stock price increase over full 2025.

Gurus clearly believed that Amazon was undervalued during Q4 and started loading up.

Here are some extracts of what Gurus are saying about Amazon.

“Amazon operates two of the world’s great, category-defining franchises [AWS, Amazon.com]

Both businesses supported by decades-long secular growth trends, occupy dominant market positions, and leverage scale to continually improve their value proposition”

—Bill Ackman

Amazon continues to plow back all of its cash flows into its business, which seems rational given the attractive returns on investment the Company is generating. The Company's returns have regained all-time highs, over 20%, as margins have expanded thanks to advertising, AWS growth, and a sharper focus on retail productivity. Despite these record returns and excellent growth, Amazon's valuation multiples, particularly EV/EBITDA, are trading at historically depressed levels. We started initial positions during the fourth quarter as we expect Amazon's growth, profitability, and valuation present an attractive long-term investment opportunity.

— David Rolfe

This last extract comes from Wedgewood Partners’ Q4 Client Letter, which is well worth reading in full. I always look forward to reading David Rolfe’s letters and I listed it as one of my favorite in a recent post.

Amazon and Meta currently have some of the lowest valuations in the Mag7 group, primarily driven by the market’s fear of the huge Capital Expenditure spending that the hyperscalers are planning for this year.

A few other highlights

• UBER, a core position in Bill Ackman’s portfolio, was also added by John Armitage (Egerton Capital). UBER is the latest stock in my portfolio - read last week’s edition on Bill Ackman if you want to learn more

• Rich Pzena continued to add to Baxter (+19%), making it his largest position as he is convinced that the current pessimism around Baxter is temporary and that “investor confidence is likely to return to this high-quality medtech franchise.”

• David Rolfe significantly reduced his PayPal position (-55%) during Q4

  We trimmed our PayPal positions during the quarter as we believe the combined slowing of transaction volumes and heightened expenses will result in slower profit growth than we previously expected.

  This turned out to be a good call as PayPal is down nearly 30% this year, with the largest part of that decline coming after the poor earnings report and the exit of the CEO.

• Norbert Lou, who stayed true to his Punch Card Capital mindset in Q4, had a significant position in PayPal at the end of Q4. It will be interesting to see if he will give up on the stock or maybe further add to it.

  Another significant position is Crocs which seems to be a better ‘Punch’, especially after the stock jumped 20% after a good earnings report.

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2️⃣ Are software stocks a buy?

An update on super investors’ Q4 portfolios wouldn’t be complete without talking about the SaaS massacre (‘SaaSpocalypse’).

While many software stocks had already been bleeding throughout 2025 (Salesforce, Adobe, ServiceNow …), the real blood bath came earlier this year, when the emergence of AI agentic tools (like Anthropic’s Claude Cowork) caused investors to panic sell anything related to software and data.

It feels like we are now reaching ‘peak fear’ with this software sell-off, and this is usually a time of great buying opportunities if you know where to look. This thinking seems to be confirmed by some of the Gurus:

• On February 6, Akre Capital Management put out a letter to shareholders to address the extreme selloff in many of Akre’s portfolio companies (Constellation, Topicus, CCC, Roper)

  We have spent our time as a research team actively trying to shake our conviction, to understand the vulnerabilities to AI that the market is ascribing. So far, we have failed to do so. Our frustration is high, but dwarfed by our conviction, which we continue to test. Given our conviction, we are doing the only thing that makes sense to us in the face of this fear-driven AI stampede over the dominant businesses we own: leaning in and buying more of these great businesses.

  In addition to increasing their CCC position, they also added Salesforce (CRM) and ServiceNow (NOW) to the portfolio.

• A similar sound came from Bill Nygren’s Harris Oakmark. They put out an article titled ‘Why we’re buying software today’

  In our view, the current fear that AI will displace software incumbents fails to appreciate how large enterprises actually operate.

  They don’t mention specific names yet (their latest 13F is also not yet released), but they were already adding significantly to their Salesforce position in Q3.

• Bryan Lawrence (Oakcliff Capital), who manages a concentrated portfolio of exceptional businesses, usually has very little activity in his portfolio. In Q4, he increased his position of Guidewire Software (Property & Casualty insurance software company), which also got caught in the ‘SaaSpocalypse’. Surely this must reflect his belief that GWRE is an ‘AI-Resilient’ software company.

• Finally, JP Morgan also released an article titled ‘Software Shock: AI’s Broken Logic’ and shared with investors a list of 19 names which they believe are ‘AI resistant’. The list includes Microsoft, CrowdStrike, ServiceNow, … and also Guidewire Software which is the one stock Bryan Lawrence added to.

💎 What this means for the Guru Gems portfolio

There are some clear ‘clusters’ emerging in my portfolio, and this could be a good way to analyze what actions I might consider based on the latest Gurus’ moves.

Cluster 1 — Clear Guru signals, strong business fundamentals

Alphabet, Uber (+ Amazon as a potential add to the portfolio)

• Alphabet has doubled in size in my portfolio, and following the Gurus, I may consider trimming it a bit

• Uber is still a small position but I intend to keep adding until it reaches 8-10% of the portfolio

• I am strongly considering adding Amazon to the portfolio. As discussed in the first section, this is the most bought stock by super investors in Q4. The lowest price during Q4 was around $213, so with the stock currently trading ~$210, I could buy it cheaper than what the Gurus have paid for it.

Cluster 2 — Guru conviction, business has ‘temporary headwinds’

LVMH, Airbnb, Baxter, Copart

• These are companies backed by Gurus, but where the thesis hasn’t fully played out yet

• I’m watching these closely, and may add a bit to Baxter and Copart as these are still small positions in the portfolio.

Cluster 3 — Guru conviction, market believes these companies are cooked

Constellation Software (CSU), CCC Intelligent Solution, PayPal

• CSU and CCC are down 35%(!), not exactly a great feeling. I may add to CCC, following similar moves by Akre Capital and Triple Frond Partners

• PayPal is another one that got crushed. Fortunately, the position was still relatively small. I will keep it for now, but as I get more fully invested, I may consider selling it if I see better opportunities to deploy the funds.

That’s it for this week’s edition!

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back for your weekly dose of timeless investment wisdom from the world’s greatest capital allocators. Start here if you are new to Guru Gems.

In today’s edition:

👤 The Guru: Bill Ackman
🏛️ The Philosophy: Pershing’s concentrated capital allocation strategy
💎 The Gem: Uber Technologies (UBER)

Here is the 2-minute AI version if you’re short on time:

👤 Guru in the spotlight: Bill Ackman

Bill Ackman needs little introduction. He is a very well-known (and sometimes controversial) billionaire investor and the founder and CEO of Pershing Square Capital Management, one of the most closely followed hedge funds in the world.

Founded in 2004, Pershing Square has generated a ~16% compound annual return since inception, despite several high-profile ‘mistakes’ along the way.

Ackman is often labeled an “activist investor”, but over the past decade, his style has evolved.

Here is Pershing’s investing objective (from Pershing’s website):

In 2018, after a difficult stretch (Valeant, Herbalife), Ackman famously declared a “Return to Our Roots”, recommitting to holding fewer positions and of higher quality, with greater predictability and less reliance on financial engineering.

Ackman moved away from the traditional hedge fund model of raising external capital and instead committed to growing permanent capital through investment returns alone, not through asset gathering.

“We focus on growing our permanent capital base through returns, not by growing AUM.”

Since that shift, Pershing Square Holdings (PSH) has delivered a 22.6% annualized return over the last 8 years, significantly outperforming the S&P 500 index over the same period.

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🏛️ Pershing Square’s Core Principles

Ackman calls himself a student of Graham and Buffett. He summarizes his investment approach as following:

“We try to find those rare companies where you can predict what they are going to look like over a very long period of time.”

Here is an interesting clip from an interview with Lex Fridman, where he explains in more detail his investment approach, and why Universal Music Group (UMG) is a perfect illustration of what he is looking for in a company.

In Ackman's most recent Annual Investor Presentation (published just earlier this week), he lays out the clear and simple set of core principles Pershing Square looks for when investing in a company.

1️⃣ Simple, predictable, free-cash-flow-generative businesses

Ackman wants to understand exactly how a business makes money. He prefers companies with straightforward business models and strong, recurring cash generation.

2️⃣ Formidable barriers to entry

Moats matter. Ackman seeks businesses where competition is structurally difficult: Network effects, brand dominance, regulatory moats, switching costs.

3️⃣ Strong financial profile

Low debt and the ability to self-fund growth. Ackman wants his companies to have minimal capital markets dependency.

4️⃣ Exceptional management & governance

Great operators with integrity who treat shareholders as partners.

5️⃣ Attractive valuation

Ackman wants a fair price “as is”, but gets really excited when he sees a substantial discount to what the company could be worth if optimized.

Learning from mistakes: The Netflix episode

One of Ackman’s most recent significant mistakes came in 2022

In January 2022, Ackman made a big, public bet on Netflix. He invested over $1.1 billion in the streaming giant after its stock had dropped significantly on slowing subscriber growth.

In his January 2022 Letter to Investors, Ackman praised Netflix’s management team, calling Netflix a high-quality business with exceptional growth potential trading at a meaningful discount to intrinsic value.

Then came the Q1 2022 earnings report. Netflix revealed it had lost 200,000 subscribers — its first decline in over a decade — and forecast an even steeper drop ahead. The stock crashed more than 25% in a single day.

Ackman sold everything. The very same day. After just three months of ownership, Pershing Square exited the entire position, locking in a $400 million+ loss.

Ackman wrote a letter to his shareholders explaining his decision:

We require a high degree of predictability in the businesses in which we invest due to the highly concentrated nature of our portfolio. While Netflix’s business is fundamentally simple to understand, in light of recent events, we have lost confidence in our ability to predict the company’s future prospects with a sufficient degree of certainty. Based on management’s track record, we would not be surprised to see Netflix continue to be a highly successful company and an excellent investment from its current market value. That said, we believe the dispersion of outcomes has widened to a sufficiently large extent that it is challenging for the company to meet our requirements for a core holding.

— Pershing Square Letter to Shareholders 20 Apr 2022

And here is where it gets painful…

After bottoming near $175 (pre-split) in mid-2022, Netflix made a very remarkable comeback. The password-sharing crackdown, content strategy adjustment, and ad-supported tier turned out to be massive growth drivers.

The stock rallied over 500% from those lows to its all-time high of $1,340 (pre-split) in June 2025. Netflix did a 10-for-1 stock split in November 2025.

And even now at $77 (Netflix stock is down more than 40% since that June 2025 peak), the stock is still worth nearly 3 times what Ackman had sold it for.

So what are the lessons from this?

First, even the greatest investors make mistakes.

Ironically, Ackman referenced his earlier Valeant Pharmaceuticals disaster (where holding on too long cost his fund billions) as the reason he sold quickly. In his words:

“One of our learnings from past mistakes is to act promptly when we discover new information that is inconsistent with our original thesis.”

Second (and this is the lesson that matters most for the UBER discussion below), being “right” about the quality of a business doesn’t help if you sell too soon. Ackman correctly identified Netflix as a great business. He was right about the management team. He was right that the ad tier and password crackdown were sensible strategies. But he let short-term uncertainty override his long-term conviction.

Pershing Square portfolio

Below is an overview of Pershing’s stock portfolio at the end of Q3 2025 (with some Q4 updates form their Annual Investor Presentation). Full Q4 portfolio should become available in the next few days.

His top 5 positions made up more than 70% of the roughly $16 billion portfolio in Q3.

The biggest news was a significant new stake in Meta Platforms, reflecting Ackman’s belief that the tech giant’s stock is undervalued.

After my deep-dive on Christopher Tsai in August last year, I had already decided to put Meta on the Guru Gems watchlist.

Based on the latest 13F filings, Tsai further increased his Meta position significantly during Q4, and now with Ackman buying the stock as well, I am strongly considering adding Meta to the Guru Gems portfolio…

We believe Meta’s current share price underappreciates the company’s long-term upside potential from AI and represents a deeply discounted valuation for one of the world’s greatest businesses - Pershing Investor Update

💎 The Gem: Uber Technologies (UBER)

In my update last week, I already shared that I initiated a position in UBER, after flagging it also as one of the Guru stocks to watch for 2026

The recent pullback and further drop after earnings were a perfect opportunity to add an impressive business with attractive growth profile and significant cash flow to the portfolio.

Since I already made the decision to purchase the stock, instead of my usual "To Buy or Not to Buy" section, I will focus here on why Ackman is convinced that UBER is such an attractive opportunity.

There are some really good write-ups of UBER on Substack and X. Here are two accounts that I would highly recommend following:

• Fundamentally Sound by (@ManuInvests on X)

• (@CapexAndChill on X)

Now let’s evaluate Uber through the Pershing Square Playbook

1️⃣ Simple, predictable, free-cash-flow-generative businesses

Uber has evolved from a cash-burning disruptor into a global mobility + delivery platform with strong operating leverage and expanding free cash flow.

Ackman states that Uber’s “Near term results are exceptionally strong and accelerating”.

At the same time, he believes the long-term risk to Uber from Autonomous Vehicles (AV) is limited. The biggest bear case for Uber is that AV companies do not need to pay drivers and that AV companies will develop exclusive applications cutting Uber out of the entire market.

Ackman, and with him many others, believe that AV companies are actually likely to partner with Uber over time due to its strong value proposition. If autonomy becomes widespread, Uber can become the dominant demand aggregator.

2️⃣ Formidable barriers to entry

Uber’s business model has strong network effects that reinforce supply and demand growth

• More drivers → shorter wait times → more riders

• More riders → higher utilization → more drivers

Replicating this at global scale is extraordinarily difficult.

In addition, regulatory licenses, brand recognition and data scale have further widened the moat.

3️⃣ Strong financial profile

From Pershing’s presentation:

Uber has generated significant earnings growth since turning profitable in 2023. We believe the company’s rapid earnings growth is likely to continue as it maintains high revenue growth and leverages its fixed cost base

The company has transitioned from “growth at any cost” to disciplined capital allocation.

4️⃣ Exceptional management & governance

From Pershing’s presentation:

Industry-leading management team, led by Dara Khosrowshahi, has vastly improved operational discipline and capital allocation

Management targets imply +30% annual EPS growth over the next several years driven by mid-to-high-teens revenue growth, robust margin expansion, and share repurchases

5️⃣ Attractive valuation

From Pershing’s presentation:

Newly issued non-GAAP earnings disclosure highlights how inexpensive UBER remains at only 21x NTM earnings

Uber seems to be priced for moderate growth due to industry concerns and this mismatch is exactly the opportunity according to Ackman

Final Thought

I've already initiated a position in Uber during the recent pullback, and studying Ackman's thesis has only strengthened my conviction.

The Uber opportunity reminds me of when I bought Alphabet in April last year amid fears that AI would kill Google Search. Instead, Alphabet turned out to be a huge AI winner and the stock has since doubled in my portfolio.

I see a similar setup here with the market saying AVs will kill Uber, but Uber could well become the primary platform through which AVs reach consumers.

That’s it for this week’s edition!

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back!

It was a wild week for the stock markets (not to mention the bloodbath in crypto…)

Alphabet’s earnings were stellar, PayPal’s earnings were dismal (CEO out) and Constellation Software got caught up in the SaaS-meltdown driven by the “AI will kill all software”-narrative (which I’m not 100% buying).

New Gem 💎

Uber was one of the many companies reporting earnings this week, and while a modest EPS miss caused market disappointment, the overall results were strong.

The recent pullback and further drop after earnings were a perfect opportunity to add an impressive business with attractive growth profile and significant cash flow to the portfolio.

I wrote about Uber in my 2026 watchlist post and I’m preparing a deep-dive on Bill Ackman where I will cover the stock in more detail.

For today, I’m sharing 2 interesting insights I came across this week. Here is the 2 minute version if you’re short on time:

New to Guru Gems? Start here.

1️⃣ Howard Marks: “I’ve been risk averse all my life”

Howard Marks is co-founder and co-chair of Oaktree Capital Management. He is famous for his legendary memos on markets, contrarian thinking, and risk management.

A few months ago, I shared my 5 key takeaways from Marks’ investing classic ‘The Most Important Thing’.

Marks was recently invited by Pepperdine University for a fireside chat with Pepperdine’s CIO Jeffrey Rohde.

The interview is packed with investing wisdom, and I'll highlight a few takeaways that stood out to me.

Learning from disaster: The Nifty Fifty bubble

Marks started his career in September 1969, a time when the so-called Nifty Fifty (50 popular growth stocks) became more and more poplar until they reached astronomical valuations.

“If you bought the Nifty Fifty stocks the day I got to work in September of ‘69 and if you held them loyally and faithfully, within five years you lost 95% of your money.”

This experience scarred him early and taught him a fundamental lesson: It’s not what you buy, it’s what you pay.

“Good investing is not just a function of buying good things, but of buying things well.

When he got the chance to move into high-yield bonds in 1978, he embraced an asset class that almost everyone else despised:

“There is no such thing as a bargained-priced asset that everybody loves—that’s an oxymoron. But if they say ‘I hate it,’ [...], sounds good to me. That was my process.”

But Marks admits that this early scarring made him overly conservative:

“I’ve been risk averse all my life. And given that, from 1980 when the inflation was solved, essentially to date, generally speaking, the more optimistic you were, the more money you made. So that was the downside of that.”

Volatility is not risk

When asked how risky an investment is based on its volatility, Marks calls it “a softball question” and explains one of his most important concepts:

“Risk is the probability of an undesirable outcome. It is not the volatility of the asset. Buffett said he would rather have a lumpy 15 than a smooth 12. And if you can survive long enough to enjoy the long-term benefit of the lumpy 15, it beats the hell out of the smooth 12. But you have to survive.”

This distinction is crucial. Many investors confuse volatility (price fluctuations) with risk (permanent loss of capital). A volatile but fundamentally sound investment that returns 15% annually is superior to a smooth but lower-returning investment at 12%.

Current Market Cycle and the Mag7

When asked where we are today in the market cycle, Marks says it is helpful to look at intrinsic value, which grows steadily, and compare it to asset prices, which can fluctuate wildly due to psychology.

In the real world things fluctuate between ‘pretty good’ and ‘not so hot’, but in the mind of investors they go from ‘flawless’ to ‘hopeless’, and so prices fluctuate enormously around the intrinsic value.

He believes that asset prices are currently above intrinsic value, indicating a precarious market that requires an "intelligently prudent" approach.

Asked about the valuation of the Magnificent Seven stocks (now representing close to 40% of the S&P 500), Marks believes the high valuations are somewhat justified given these are “some of the greatest companies I’ve ever seen”.

He drew a comparison to the Nifty Fifty:

“The Nifty Fifty were selling at multiples between 60 and 90 as I recall. So 30 looks like a bargain to me for a truly great company. And I think they’re probably okay.”

But he points out that the problem isn’t necessarily with the Magnificent Seven, it’s with everyone else:

“What I’m a little more troubled about [are] the other 493 companies in the S&P 500 because they’re selling on average at I think 18 or 19 times earnings. Why should the other 493 be selling at a higher multiple than the average historical multiple of the S&P 500 [which is around 16]?”

The interview is well worth watching in full as Marks also discusses Bitcoin, gold, commodities, what he reads daily, and his philosophy on giving back.

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In my latest deep-dive I covered Dev Kantesaria, one of the great quality investors, who runs a very concentrated portfolio with FICO as his largest position.

2️⃣ Software businesses are radioactive

My second learning of the week comes from Giverny Capital Asset Management’s Q4 Letter

A few weeks ago, I wrote about my favorite investor letters and why François Rochon is my absolute favorite.

While I’m still patiently waiting for Rochon to publish his 2025 letter, David Poppe, who runs the US Giverny Capital Asset Management fund (a partnership between Rochon’s Giverny Capital and David Poppe), has just released his Q4 letter.

AI, AI, AI

Like many other value investors, Poppe starts his letter by calling out the continued outperformance by a handful of technology giants relative to all other stocks.

Our companies are performing well in terms of earnings growth and capital returns, but the market is focused on AI players investing hundreds of billions of dollars without a clear sense of what the return on that investment will look like.

I am not smart enough to predict whether those returns will delight or disappoint, much less opine whether we’re in a bubble. But any student of economic history knows that the rapid construction of railroads in the second half of the 19th century and of communications infrastructure at the end of the 20th century did not end well for their investors. Those technologies changed the way Americans live, but the real winners were the users of the new infrastructure, not the builders of it.

For now, the opposite is true. The builders of AI infrastructure are the most valuable companies in the world.

Poppe then goes deeper into the overall performance of his fund, starting with the five most positive contributors in 2025.

Alphabet, the ultimate Guru Gem, was one of their best performing stocks in the portfolio and contributed most to the portfolio’s overall return.

Alphabet obviously benefits from AI enthusiasm, but its earnings also rose about 30% in 2025 and have compounded in the high teens since 2021. It has a portfolio of businesses that are performing well: Internet search and its Gemini AI model, YouTube, Waymo, Google Cloud and others. This is an exceptional collection of assets.

Radioactive software

The next section in the letter is reserved for the bottom 5 contributors.

One of them is Constellation Software, a stock I added to the Guru Gems portfolio in October and which is now my worst performer, as it is one of many software stocks being sold off due to fears of disruption by AI.

Here is what David Poppe wrote:

Constellation declined 22% for the year, even though I believe earnings will rise by nearly 20% for the full year. […] Software businesses are perceived as facing an existential threat from AI models that can write software faster than humans can. AI-written software cannot yet replace existing products, but the market is looking ahead and saying: that day is coming.

But Poppe argues that Constellation is a ‘particular flavor of software company’:

It owns hundreds of small firms that have created bespoke products that customers use to run their operations. Scores of golf courses around the country run on various permutations of Constellation products, as do public transit systems, truck fleets, food service operations, hospitals and medical offices, and many others. No one product or customer represents a hefty amount of revenue. Each customer tends to have a unique operating system, even when they are in a similar enterprise. The software is not necessarily complex, but it is specific to its user. Most users also depend on Constellation for support, as a golf course or city bus system typically lacks sophisticated tech resources in house.

His conclusion:

In sum, Constellation strikes me as one of the last places AI entrepreneurs will target. […] Constellation now trades at the cheapest price relative to earnings that I can recall. We’re very much living in a momentum-based market environment, but if Constellation’s earnings keep growing 15% to 20%, the stock price eventually will reflect that. For now, software businesses are radioactive.

The lesson here

This is a perfect example of how markets can overreact to threats and sell off an entire industry without too much nuance.

Constellation Software is currently down 35% in my Guru Gems portfolio. Not exactly a great feeling, but the market seems to be pricing in a worst-case scenario that I don’t believe will materialize.

As Poppe points out, Constellation’s highly specialized, bespoke software serving fragmented markets may actually be among the most defensible businesses against AI disruption.

The challenge, of course, is having the conviction to hold when everyone else is selling, especially when the stock has fallen 35% and the narrative is overwhelmingly negative.

But as we just learned from Howard Marks: “There is no such thing as a bargained-priced asset that everybody loves.”

Perhaps this is one of those moments when what everyone “hates” might actually sound pretty good…

That’s it for this week! Please like or share if you find these insights valuable.

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back!

Today is Round 6 of building my Magic Formula Portfolio.

Here is the 2-minute AI audio version of today’s post if you’re short on time

If you are new to Guru Gems, start here.

As a reminder, while studying investing masters, I am creating two real-money portfolios to put my learnings into practice.

In last week’s edition, I shared an update on the Guru Gems portfolio:

Quick refresh on the Magic Formula

In his book “The Little Book that Beats the Market”, Joel Greenblatt suggests that a regular investor can beat the market averages by buying a group of ‘good’ companies at ‘bargain’ prices.

• ‘Good’ → high return on capital

• ‘Bargain’ → high earnings yield

When Greenblatt wrote the first edition of his book, he had tested his formula over a 17-year period (until Dec 2004) by selecting 30 stocks from the 1000 largest companies.

While Greenblatt warned that the formula had underperformed the market averages for some one-year periods and two-year periods (which is why people will not stick with the formula according to Greenblatt), his tests showed that following the formula for any three-year period in a row, led to the magic formula beating the market averages 95 percent of the time (160 out of 169 three-year periods tested).

Of the 169 separate three-year periods tested, the worst return for the magic formula was a gain of 11 percent. The worst return over a three-year period for the market averages was a loss of 46 percent. That’s a pretty big difference!

But that’s not all. If one were to pick not just from the largest 1000 companies but instead from the largest 3500 stocks (market values over $50 million), the results were even better.

Every three-year period tested (169 of 169) was positive for the magic formula portfolios, and every three-year period beat the market averages (169 of 169). That’s right. The magic formula beat the market averages in every single period!

Of course, there is no guarantee that this would still be true today, but that’s exactly what I’m testing.

And if I’m serious about finding out whether the Magic Formula still works, I have to stick with it at least for a 3 year period!

You can read more on Joel Greenblatt and his Magic Formula here.

You can also download my Joel Greenblatt e-book for free:

Joel Greenblatt e-book by Guru Gems

494KB ∙ PDF file

Download

Download

Current Magic Portfolio performance

The overall performance of the Magic Portfolio is currently +1.4%, compared to +10.5% for the S&P500 over the same time period (7 months).

Not exactly a great performance…

A few names have taken a serious beating since my last update in December:

• Abercrombie & Fitch (ANF) was up more than 50% at some point, but pulled back heavily after the company issued a business update that disappointed investors

• Rimini Street (RMNI) and Yelp (YELP) both dropped ~10% since the last update

This shows how volatile some of these names can be and why it makes sense to hold a portfolio of ~25 names.

Many companies are reporting earnings over the next few weeks, so I definitely expect more volatility to come.

I need to stick to the formula and as described above, the real test will be a timeframe of 3 years as that is where Greenblatt observed outperformance 100% of the time.

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New Magic Formula Stocks

Here are the 3 companies I will be adding to the Magic Portfolio on Monday:

(Read my first Magic Portfolio post for my step-by-step approach of how I select the companies)

1. OneSpan Inc. (OSPN) - OneSpan provides software and services that secure and facilitate digital transactions and agreements, with a portfolio spanning authentication (including multi-factor authentication and transaction signing), fraud/risk capabilities, identity verification, and e-signature/digital agreement workflows.

   • Market Cap: $448M (Small-Cap)

   • A few insiders have bought shares in August and November last year

   • AI Deep Research report:

     

     OneSpan Deep-Dive Equity Research Report

     72.1KB ∙ PDF file

     Download

     Download

     

2. Halozyme Therapeutics (HALO) - Halozyme is a biopharmaceutical platform company best known for ENHANZE, a proprietary drug-delivery technology that enables subcutaneous administration of large-volume biologics that historically required intravenous infusion.

   • Market Cap: $8.4B (Mid-Cap)

   • AI Deep Research report:

     

     Halozyme Therapeutics Deep-Dive Equity Research Report

     82.6KB ∙ PDF file

     Download

     Download

     

3. The Cigna Group (CI) - The Cigna Group is a large U.S.-centric managed healthcare and insurance company

   • Market Cap: $73B (Large-Cap)

   • Some superinvestors have been adding the stock to their portfolio recently

     

   • AI Deep Research report:

     

     The Cigna Group Deep-Dive Equity Research Report

     72.4KB ∙ PDF file

     Download

     Download

     

On Monday, I’m adding these 3 names to the Magic Formula Portfolio and I will hold them for one year, as Greenblatt prescribes.

That brings me to 18 stocks in the portfolio. The goal is to get to a full portfolio of ~25 names, so I’m getting closer to being fully invested.

And once built, I’ll let the magic unfold…

That’s it for this week! Please like or share if you enjoy reading Guru Gems.

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back!

In today’s edition:

1. 📉 Japan bonds are scaring investors and tariffs are back (nvm, they’re gone again)

2. 🆕 A new Gem: Adding a Guru favorite to the portfolio

3. 💎 Portfolio update: The Good (GOOGL), the Feared (CSU), and the Unloved (PYPL)

Start here if you are new to Guru Gems.

🧧 FINAL REMINDER: last week to win a one-month subscription to Michael Burry’s Substack or a copy of Richer, Wiser, Happier, by referring new subscribers to Guru Gems. 🧧

🎁 Find more details here - Just one successful referral may get you the price!

📉 The Macro Shock: Japan & Tariffs

The past week was quite volatile: Japan bonds are scaring investors and tariffs are back.

With Peter Lynch in mind, here is the 30-seconds version of what happened this week:

The Japan Bond Sell-off

Japanese government bond yields hit record highs after the Prime Minister called a snap election and proposed tax cuts.

Why this matters:

• Japan has the highest debt-to-GDP ratio (235%) of any advanced economy

• A further rise in interest rates could trigger a debt crisis that spills over globally

The Tariff Threat

Adding fuel to the fire, US tariff threats against NATO allies briefly spooked markets before being dropped.

This shows how fragile sentiment currently is.

Staying focused on quality

As mentioned before, I will not be dwelling too much on the global economy with Guru Gems.

My main takeaway of the current situation is that still having half of the portfolio in cash is maybe not a bad thing…

Let me close this section with some wise words from François Rochon:

As always, we remain agnostic regarding the economic and stock market outlook for the coming year.

Our companies continue to navigate the choppy waters of the global economy despite the many sources of worry that create sleeplessness for many investors. The current year will most likely see its share of uncertainties, disappointing economic data and geopolitical (or political) fears.

We remain tooth and nail convinced that our companies should continue to enrich investors at rates above the average over the long run.

Last week I wrote about my 3 favorite investor letters and why Rochon’s letters are my favorite.

And now, back to our Gems!

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🆕 Adding a Guru favorite to the portfolio

On Monday, I’m adding Copart to the Guru Gems portfolio.

Copart runs online vehicle auctions, primarily for salvaged and total-loss cars. Insurance companies rely on Copart to efficiently dispose of vehicles, while buyers around the world compete for inventory through Copart’s digital platform.

Several long-term investors have owned Copart for years, and for good reason: it has compounded capital through multiple cycles without relying on leverage or hype.

Why this is a Guru favorite:

• Network effects: More buyers → higher auction prices → attracts more sellers (insurance companies) → more inventory → attracts more buyers

• Strong balance sheet: With cash piling up, this offers opportunities for buybacks and/or acquisitions

• Long runway: Increasing vehicle complexity and repair costs means more cars are written off

I first wrote about the stock in my review of Peter Keefe and his Rockbridge Capital portfolio.

In his July 2024 Letter, Keefe wrote:

Copart’s business model, its capable and long term oriented management, and an unassailable business franchise add up to a multi-year, possibly multi-decade, compounding opportunity.

I also highlighted the stock earlier this month as one to watch for 2026, as it was down roughly 40% from its 52-week high, driven by revenue & volume misses and economic headwinds.

I wrote:

The stock is currently at $38 which is just 1% above its 52-week low. I will wait until it goes 10-15% above its 52-week low before buying it.

CPRT closed the week at $41.40, which is 10% above its 52-week low. I will initiate a small position (2-3%) and build it up over the next weeks/months.

💎 Guru Gems Portfolio: The Good, the Feared… and the Unloved

The return on the capital invested over 9 months is 11.6%, compared to 27% for the S&P500 over the same period.

I am making my portfolio and its performance accessible to everyone in a Google Sheets document. You can access it here.

Alphabet (GOOGL): the good news keeps coming

Alphabet continues to be the star of the portfolio. It recently joined the $4 trillion market cap club, driven by growing investor optimism about its AI efforts.

Last week, there was an announcement that Apple had entered into an exclusive multi-year partnership with Google to license Gemini and Google Cloud to support their AI models.

After careful evaluation, Apple determined that Google's Al technology provides the most capable foundation for Apple Foundation Models and is excited about the innovative new experiences it will unlock for Apple users.

Another interesting update came from Similarweb, a digital intelligence platform, who released a research report on ‘ The Top 100 Most visited Websites in the World (December 2025)’

Google.com is still taking the top spot. ChatGPT.com is in the top 5, but its web traffic declined for a second consecutive month.

What’s interesting is that Gemini.google.com was one of the fastest-growing sites in the entire top 100, and for the first time, it entered the top 20 most-visited websites in the world, following the launch and expansion of Gemini 3.

Similarweb’s Generative AI traffic share data also shows that Gemini keeps increasing its share at the expense mostly of ChatGPT.

Constellation Software (CSU): the fear is real

Constellation Software acquires and manages vertical market software (VMS) businesses. These are industry specific software businesses providing specialized and mission-critical software solutions.

Constellation Software is down more than 25% since I bought it in October—my worst-performing position.

What went wrong?

The stock has been in freefall since May, driven by two fears:

1. AI disruption - Will AI-powered tools replace Constellation’s niche software?

2. Leadership transition - Legendary founder Mark Leonard stepped down in September due to health reasons

What is really happening?

The AI fear is likely overblown:

• Constellation’s software serves industries where AI adoption will be slow

• Many businesses are sticky, mission-critical systems deeply embedded in operations

• Constellation could use AI to improve their software, not be disrupted by it

The leadership transition looks solid:

• Mark Miller, Leonard’s successor, has been with Constellation for 30 years

• He knows the Constellation playbook inside out

• Nothing has materially changed in how the business operates

It’s obviously not very comfortable to be down nearly 30% on this position, but since nothing fundamental has changed about the business, I’m not panicking. If the business shows actual deterioration (not just sentiment), I'll reassess.

PayPal (PYPL): not very loved

After adding PayPal in November, the stock has struggled to find momentum and a few warning signs have come up:

1. Market sentiment deteriorating

Analyst downgrades and ongoing concerns about competition and declining branded checkout volumes have kept the stock under pressure.

2. Wedgewood Partners trimmed their position

In their Q4 letter, Wedgewood Partners (who have owned PayPal for over a decade) wrote:

“We trimmed our PayPal positions during the quarter as we believe the combined slowing of transaction volumes and heightened expenses will result in slower profit growth than we previously expected.”

When a patient, long-term holder like Wedgewood trims, that's a yellow flag.

3. Michael Burry isn't interested

Burry recently posted a deep-dive on the payments industry and shared that he is not very interested in PayPal.

“PayPal is not interesting to me. I find its owners’ earnings far below reported earnings, and I worry about pricing power and work culture.”

Later in the comments he mentioned he will do an in-depth post on Block (XYZ) and PayPal (PYPL). I will be watching that one closely!

I will also be watching Norbert Lou’s 13F very closely (released in next few weeks) as well as PayPal’s upcoming Q4 2025 Earnings Call on 3 February.

That’s it for this week…thanks for reading and I’ll be back next week with an update on the Magic Portfolio!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

It’s the time of year when many of the investing greats publish their ‘Annual Letter’.

These letters include performance updates, but some of them also include a view on the state of the markets or company analyses.

This last part is what’s really interesting because it gives you a look into how great investors think and analyze companies.

Many of the best investor letters are only shared privately with clients. Michael Burry wrote: “For many years, my Scion Capital investor letters did all my marketing for me”.

Fortunately, a few Gurus make their letters available for anyone to read and learn.

Today I’ll share my three favorite investor letters, and a few takeaways from each that I think every long-term investor can benefit from.

The post is quite long, so if you want the TL;DR here is a short AI-generated podcast of today’s newsletter:

Let’s dive in!

→ Start here if you are new to Guru Gems.

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Last week I covered Dev Kantesaria (the ‘Guru’), one of the great quality investors, who runs a very concentrated portfolio with FICO (the ‘Gem’) as his largest position.

🧧 Don’t forget: you can still win a one-month subscription to Michael Burry’s Substack or a copy of Richer, Wiser, Happier, by referring new subscribers to Guru Gems…2 more weeks to go! 🧧

The Timeless Value of Great Letters

The best letters remain relevant many years later.

The most famous example is probably Warren Buffett’s Berkshire Hathaway letters, which are still worth rereading today. You can find the full collection here, and if you haven’t read one yet, I would highly recommend it.

Here is an extract from the 2000 letter, which feels appropriate, given the multiple ‘AI bubble’ warnings we’re hearing today.

But a pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons: First, many in Wall Street — a community in which quality control is not prized — will sell investors anything they will buy. Second, speculation is most dangerous when it looks easiest.

At Berkshire, we make no attempt to pick the few winners that will emerge from an ocean of unproven enterprises. We’re not smart enough to do that, and we know it. Instead, we try to apply Aesop’s 2,600-year-old equation to opportunities in which we have reasonable confidence as to how many birds are in the bush and when they will emerge (a formulation that my grandsons would probably update to “A girl in a convertible is worth five in the phonebook.”). Obviously, we can never precisely predict the timing of cash flows in and out of a business or their exact amount. We try, therefore, to keep our estimates conservative and to focus on industries where business surprises are unlikely to wreak havoc on owners. Even so, we make many mistakes: I’m the fellow, remember, who thought he understood the future economics of trading stamps, textiles, shoes and second-tier department stores.

This letter, written in early 2001, is now 25 years old, but it may as well have been written this year. That’s the power of a great investor letter.

With that, here are my top three investor letters, ranked in reverse order.

🥉 Terry Smith - Fundsmith

Terry Smith was the very first Guru I covered in Guru Gems.

He is known for his simple three-step investment strategy:

1. Buy good companies

2. Don’t overpay

3. Do nothing

A Challenging 2025

2025 was a difficult year for Fundsmith, with the fund up just 0.8% while the MSCI World Index rose 12.8%.

In fact, the last 4 years have been difficult for Fundsmith.

After delivering very strong returns for a decade (2011-2021), Fundsmith has significantly underperformed the index since 2022. Not coincidentally, this is the period when the Magnificent Seven drove the majority of index returns.

In his latest annual letter, Terry Smith addresses what happened, why it happened, but also why it doesn’t invalidate the strategy.

Index concentration and the growth of index funds

Terry cites ‘index concentration’ and ‘the growth of index funds’ as 2 of the 3 main reasons for his underperformance (a weaker dollar being the third).

1. Smith highlights how a small group of mega-cap tech stocks has driven a disproportionate share of index returns. He warns that previous times when the US market value was this concentrated, it would often lead to a bubble bursting and it would take many years for the S&P to regain its bubble highs.

2. Smith further argues that “the rise of the Magnificent Seven and the AI stocks also had a strong tailwind from the increase in assets held in index funds”

   

   John Bogle, the pioneer of index investing who founded Vanguard, the index fund manager, was asked at the 2017 Berkshire Hathaway annual meeting if there was a level of assets in index funds which would distort markets and he agreed that there was, although he had no method of determining that level. We may already have reached it.

For Terry Smith, index investing behaves like a momentum strategy, mechanically allocating more capital to the biggest winners regardless of valuation or quality.

Bill Nygren has repeatedly made a similar point over the past year. Here is Nygren’s latest Q4 ‘25 update talking about exactly this.

Quality Remains

The fundamental quality of Fundsmith’s portfolio remains very strong:

• 31% Return on Capital Employed (vs 17% for the S&P 500)

• 62% Gross Margin (vs 45% for the S&P 500)

• 16% free cash flow growth in 2025

The quality of our portfolio companies is as high as it has ever been and collectively they continue to grow free cash flow quicker than the historical average of the portfolio. The underlying business performance remains our primary focus. If we get that right then our Fund will emerge with the intrinsic value of its investments maintained or enhanced, as sooner or later, share prices reflect fundamentals, not the other way around.

Based on the portfolio’s fundamental quality, Smith is convinced that continuing to hold good businesses is still the right thing to do.

Whilst we are going to stick to our investment strategy we will of course seek to do it better.

He expects that owning businesses with strong fundamental returns will shine through into superior share price and fund performance over the long term and that “in the interim our fund will prove relatively immune from any shocks which arise if or when the present extraordinary market conditions unwind.”

🥈 David Rolfe - Wedgewood Partners

David Rolfe is Chief Investment Officer and Portfolio Manager at Wedgewood Partners, a focused growth investment firm that I've been following closely.

Their quarterly letters are always packed with detailed company analyses and market insights.

While Wedgewood invests in growth, valuation is still key to generating attractive returns over the long-term: “Unlike most growth investors, Wedgewood is not a momentum investor but rather a contrarian growth investor.”

The Art of Patience

Wedgewood patiently waits for opportunities to purchase what they believe are great businesses at attractive prices.

We tend to buy great companies when they fall out of favor. Perhaps there are controversies surrounding the companies, or temporary issues we firmly believe will dissipate or be quickly corrected. Often, the market just loses interest in a company or industry.

A good example is Zoetis, the global leader in animal healthcare, which they bought in early 2025.

Zoetis is not exactly a hidden gem, but they had done the work to understand the business deeply, and when the market lost interest, they were ready to act.

We have been monitoring Zoetis and other animal healthcare companies for many years. The industry has long boasted healthy and steady growth rates. Critically, Zoetis also boasts high and improving levels of profitability.

We claim to be long-term investors, and our behavior over 30+ years bears this out; therefore, we tend to get excited when we have been monitoring a great business for many years, and the market eventually presents us with an opportunity to buy it at an attractive entry point. […] This has now happened with Zoetis.

Wedgewood’s approach shows the power of maintaining a watchlist of great companies and having the patience to wait for the right price.

This ‘art of patience’ is something I also highlighted in my deep dive on Dev Kantesaria, who studied FICO for 7(!) years before seeing an opportunity to purchase it.

Annus Horribilis

Just like Fundsmith, Wedgewood significantly underperformed the index in 2025.

The year would prove to be our worst relative calendar year since 1993. Horribilis, indeed.

And like Terry Smith, David Rolfe faced the exact same structural headwinds in 2025: index fund momentum, AI mania, and a market that rewarded speculation over quality, especially since ‘Liberation Day’, as can be seen from the chart below.

Concentration Risks

Rolfe highlights the extreme concentration in the market. He points out the absurdity that the top eight stocks in both the S&P 500 and the Nasdaq 100 are now identical.

Despite these risks, he continues to hold companies like Alphabet and Meta because they have been “cloud-native for over a decade” and can fund their AI buildout with internal cash flow, unlike newer entrants who are relying on debt.

Wedgewood believes AI is ‘real’ in the sense that the opportunity is massive, but capital intensity, infrastructure constraints, and returns on invested capital still matter.

The setup for 2026

In their latest letter, Wedgewood Partners warn that the 2025 risks are still very real.

As we enter 2026, the crowded AI trade and historically rich valuations haunt prudent investing. Even most non-Magnificent Seven stocks fail to scream “bargains.” Further, speculative leverage remains historically high. Even the 2026 mid-term political season speaks to curbed enthusiasm.

But despite the difficult year, Wedgewood is optimistic about their positioning going forward.

On the growth front, our portfolio fundamentals, prospective earnings growth rates, profitability measures, and balance sheet strength are notably superior to the S&P 500 Index. […]

We like these odds for a performance reversal in 2026.

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🥇 François Rochon - Giverny Capital

If I had to recommend one investor letter for someone serious about long-term investing, this one would be it.

François Rochon manages the Rochon Global Portfolio, which has achieved a 15.1% annualized return since July 1993. This is a total return of over 8,300% versus 1,800% for his weighted benchmark. 32 years of exceptional performance.

What makes Rochon’s letters special is the combination of transparency, humility, and long-term thinking.

In his letters, he shares a ‘Post-mortem’ of stocks bought 5 years ago, discusses what he believes is the ‘Flavor of the day’ in investing, and highlights his top 3 errors from the past years in his ‘Podium of Errors’.

I’m eagerly waiting for the 2025 letter to be published, but here is the 2024 letter to give you a flavor.

30 Years of Staying the Course

In his 2023 letter (celebrating 30 years of investing), Rochon reflected on his journey:

“I have now been investing in the stock market for over 30 years. I first read the writings of Ben Graham and Peter Lynch in November 1992 and discovered a rational approach to investing in the market. I read all of Warren Buffett’s writings at the beginning of 1993 and discovered a philosophy of selecting quality companies with a very long-term horizon. I decided to try to put Mr. Buffett’s concepts into practice with my own money from that moment on.”

Over those 30 years he hasn’t changed his philosophy and remained committed to his three core principles which he learned from Ben Graham and Warren Buffett:

1. Think of buying stock as the act of owning a business (not speculating)

2. The stock market is manic-depressive - focus on intrinsic value, not price fluctuations

3. Maintain a margin of safety in your business evaluation

Learn more about Ben Graham and The Intelligent Investor in my post below

Why Rochon’s letters are my favorite

Just like Buffett, Rochon’s letters feel timeless.

His letters are a reminder that great investing is simple but not easy:

1. Find high-quality businesses with sustainable competitive advantages

2. Buy them at reasonable prices

3. Hold them for a very long time

4. Never try to predict the market

His 30+ year track record proves that this approach works.

I am currently re-reading all Giverny letters going back to 2010, in preparation of a future post on François Rochon…stay tuned for that one!

🅱️ Bonus

Here are some other investor letters I enjoy reading each year:

• Tom Gayner (Guru Gems) - Markel - Letters to shareholders

• Christopher Tsai (Guru Gems) - Tsai Capital - Investor Letters

• Peter Keefe (Guru Gems) - Rockbridge Capital - Letters

• Akre Capital (Guru Gems) - Commentary

• Chris Bloomstran (Guru Gems) - Semper Augustus - Client Letters

What other letters should I read? Let me know in the comments.

That’s it for this week! Please like or share if you enjoyed this post.

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back for your weekly dose of timeless investment wisdom from the world’s investing masters. Start here if you are new to Guru Gems.

As suggested by a Guru Gems reader, I’m trying something new this week. I included a short AI-generated podcast of today’s newsletter. Let me know what you think and what other suggestions you may have to improve the Guru Gems experience :)

(Note that in Substack you can also listen to the full post by clicking on the audio button in the top right corner.)

In today’s edition:

• 🕴️ The Guru: Dev Kantesaria

• 📈 Valley Forge's concentrated conviction playbook

• 💎 The Gem: Fair Isaac Corporation (FICO) — Kantesaria's largest position

🧧 Quick reminder that you can win a one-month subscription to Michael Burry’s Substack or a copy of Richer, Wiser, Happier by referring new subscribers to Guru Gems!

Refer a friend

Guru in the spotlight: Dev Kantesaria

Devang (‘Dev’) Kantesaria is the founder and portfolio manager of Valley Forge Capital Management, a Miami-based investment firm.

Trained as a medical doctor, Kantesaria spent nearly 20 years in venture capital before launching his own investment firm in 2007.

A big fan of Buffett and Munger, he is considered one of the great quality investors.

Since inception, Valley Forge Capital has delivered very strong returns, outperforming the S&P 500 by a significant margin while managing over $4 billion in assets.

What makes Kantesaria unique is his extraordinary discipline, long-term thinking, and selectivity. He owns a small number of exceptional businesses and lets them compound for a very long time.

The level of concentration in his portfolio reminds me of what I saw in Bryan Lawrence’s Oakcliff portfolio. What’s even more impressive with Kantesaria, is that he brings this level of concentration to a portfolio ten times the size of Oakcliff’s.

There are more overlaps with investors I’ve covered before in Guru Gems (Terry Smith, Chuck Akre, and even Tom Gayner) but Kantesaria may be the purest expression of the “own the compounding machine and do nothing” philosophy.

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Valley Forge’s concentrated conviction playbook

There are a few interviews and podcasts available with Kantesaria where he shares his approach to investing.

Here is one I really enjoyed:

Across interviews and letters, Kantesaria consistently mentions a few key criteria he looks for in a business:

1. 📈 Organic growth & Predictability

“Predictability” is probably the #1 criteria Kantesaria looks for in a business. He would rather sacrifice a few points of growth to ensure he owns a business that won’t blow up in ten years.

“We define quality as finding the perfect intersection between growth and predictability. […] We’re trying to build a portfolio that on a weighted average basis can grow in the high teens to low 20s over the next decade, but can do it in a very predictable way.”

This means he will exclude businesses with high growth but low predictability, which for Kantesaria includes most of the big tech for example.

Businesses with high predictability but low growth (the Nestlés and P&Gs of this world) are also excluded.

2. 💪 Dominant businesses with Pricing power

Kantesaria looks for very dominant businesses, preferably ‘toll booth’ type monopolies or duopolies in their respective industries.

“The businesses that we buy are so dominant, they are natural monopolies or oligopolies”

And when businesses are dominant, they can more easily raise prices above inflation every single year without losing a single customer.

“If you have control over your pricing, that is an amazing tool to have as a company”

For Kantesaria, “pricing power is the hallmark of a great business.”

3. 🪶 Capital light

Finally, Kantesaria looks for companies that don’t require massive R&D or Capital Expenditures (‘Capex’). He wants businesses that "print cash" which can then be used preferably to cannibalize their own shares via buybacks.

“We love it when a great compounding machine buys back a lot of their stock. That is our preference. I think it also keeps these companies out of trouble.”

Valley Forge Capital Management portfolio

The fact that Kantesaria has such a concentrated portfolio is almost a consequence of the strict criteria described above.

Here is Valley Forge’s stock portfolio at the end of Q3 2025:

A few highlights from this $4 billion portfolio:

1. Highly concentrated → the top 5 stocks represent more than 90% of the portfolio

2. Very few changes to the portfolio → the ‘art of doing nothing’

3. No Mag7 in the portfolio. He used to own Amazon but sold it in 2023.

4. Some stocks have been in portfolio for 10+ years (S&P Global for example, which he bought during the depths of the 2009 financial crisis)

5. The largest position is FICO, which he first purchased in 2018, after studying it for 7(!) years

The Gem: Fair Isaac Corporation (FICO)

Fair Isaac Corporation (FICO) is the crown jewel of Kantesaria’s portfolio.

FICO is the company behind the FICO Score, the credit score used by approximately 90% of top U.S. lenders to evaluate consumer creditworthiness (mortgages, auto loans, credit cards). It is deeply embedded in the systems of US banks, insurers, and regulators.

In addition to the credit scores business (which is a bit more than 55% of the revenue but 75% of the operating income), they also have a software business which provides customers with additional fraud detection and other customer management applications.

To Buy or Not to Buy

Let’s evaluate FICO through our Terry Smith inspired framework to decide if I should add it to the Guru Gems portfolio.

1/ Buy good companies

There is no doubt that FICO is a high quality company. Dev Kantesaria has spent more than 15 years studying this company, and it still meets his high expectations.

Why FICO fits the Valley Forge Playbook:

1. An exceptional moat: FICO operates as a wide-moat “toll booth” business, charging a small fee every time a credit rating is accessed.

   • FICO has established itself as the universal credit scoring, with nine out of ten lending decisions relying on its score

   • A powerful network effect further reinforces the moat: lenders, regulators, and investors all use FICO as a universal standard, making it extremely difficult for the market to move off this standard

2. Pricing power: FICO possesses significant pricing power because its fee is almost a ‘rounding error’ cost compared to the thousands of dollars involved in loan closing costs

   • After maintaining low prices for decades to ensure industry-wide adoption, FICO began raising prices in 2018, resulting in a 725% increase in its wholesale mortgage fee since then

   • FICO could probably keep raising its prices, as lenders are unwilling to risk their business for such a small cost saving

3. Capital-light: FICO is a highly efficient, capital-light business because its core product is a mathematical algorithm developed decades ago

   • FICO requires almost no capital to run (no factories, no significant R&D), resulting in incredible operating profit margins (nearly 90% for the Scores business!)

   • Management is using the free cash flow to buy back shares, which they keep doing consistently (see chart below)

   

For a more in-depth review of the company, I would highly recommend the below episode of The Intrinsic Value Podcast.

It goes into a lot of detail and also highlights the risks (yes, there are in fact risks) and competitive environment.

Finally, FICO isn’t just a Kantesaria holding, it’s also owned by Akre Capital Management, another signal that this is a business that checks a lot of ‘high-quality compounder’ boxes.

2/ Don’t overpay

High quality companies like FICO rarely come cheap.

FICO’s forward P/E is currently around 40 and the stock has historically traded at a premium multiple.

Kantesaria often mentions that getting worked up about whether a company has a P/E (Price to Earnings) of 28 or 32 is far less important than making the right decisions about what companies you buy.

A few months ago, FICO share price faced some volatility due to regulatory scrutiny, competition from VantageScore, as well as some insider selling.

Akre Capital probably took advantage of this price fluctuation in August to significantly increase their position. The lowest price they could have paid is around $1,300, and this is probably a good indication of what Akre Capital considers to be a ‘fair price’ for this business.

3/ Final decision

I am very much convinced that FICO is a wonderful business and a high quality compounder. So I think it belongs in the Guru Gems portfolio. The question is at which price. For now, I’ll go with $1,300 and will be happy to buy it if it comes back down to this price.

As always, I’ll keep monitoring closely what Kantesaria and Akre Capital will be doing and if there is any selling or accumulation.

📌 Adding Fair Isaac Corporation (FICO) to the Guru Gems Watch list

That’s it for this week’s edition!

Thank you for reading and following along. You can find me on X @guru_gems for more Guru Gems insights.

Until next week!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back and Happy New Year!

If you’re new to Guru Gems: I study the world’s best long-term investors and share what I learn.

I wanted to start the new year with an update on the Guru Gems watchlist as some of the names have become more attractive over the past months.

Before we continue…

In my year-end post last week, I introduced a Subscriber referral program.

The main price is a 1-month paid subscription to Michael Burry’s Substack ‘Cassandra Unchained’.

So far, this subscription has really been worth every dollar. Burry has already published some great write-ups and it’s a unique opportunity to read first-hand the thinking process of a great investor.

On the referral leaderboard, there are currently 2 people who made 1 successful referral, so you still have a very good chance of winning!

Refer a friend

Now let’s dive in to the Guru Gems watchlist top 3.

3️⃣ Molina Healthcare

Molina Healthcare is a managed care company that provides health insurance through government programs like Medicaid and Medicare.

It's boring (something Peter Lynch would like), and it’s down 50% from its 52-week high.

It's also one of Michael Burry's largest positions

In his latest post earlier this week, Burry covered the stock in great detail.

Here is how he started his post:

Finding a gem of an insurance company stock is not usually a lucky thing.

If the name Molina rings a bell, that is because I added it to the Magic Formula Portfolio in August. With an EV/EBIT of 6.4 and a 3yr ROIC of ~18%, Molina still ranks high on the Magic Formula screener.

What’s interesting is that Burry is essentially saying: here is a stock that is good and cheap, using similar Magic Formula metrics:

Whenever one can buy a durable double-digit ROIC at a single digit normalized owners’ earnings multiple, one should do so, in my opinion.

Bill Nygren is also a fan

Bill Nygren (Oakmark) has also been a buyer of Molina and highlighted in a recent update that they believe Molina’s challenges are temporary.

We believe [the headwinds] are attributable to temporary factors and expect a meaningful earnings recovery in the coming years

To buy or not to buy?

I already own Molina in my Magic Formula portfolio, but given Burry’s conviction, Nygren’s position and strong Magic Formula metrics, I am considering adding it to the Guru Gems portfolio as well.

When laying out the different stress scenarios for Molina, Michael Burry wrote the following:

[…] This could be what drives Molina common stock down, perhaps even to $100/share, where the shares have had some support years ago.

Molina would be a generational buy at that price.

The stock is currently around $178, so if the stock were to drop another 20-30%, I will add it to the Guru Gems portfolio as well.

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2️⃣ Uber Technologies

Uber probably needs no introduction. It is the world's largest transportation network company, operating in more than 15,000 cities across 70 countries. With over 180 million monthly users and 7 million drivers and couriers, it has become a global force in mobility.

Guru endorsements

Bill Ackman (a legendary activist investor I’ll cover in a future deep-dive) holds Uber as his largest position at Pershing Square.

Ackman is known for his concentrated, high-conviction approach, buying high-quality companies when they are temporarily undervalued.

He believes Uber has significant future earnings growth potential. He is also a big fan of Uber’s management team and believes the risk from autonomous vehicles (AV) is overstated:

We believe the long-term risk from AVs is limited and estimate that Uber’s share price is likely to more than double over the next 3 to 4 years

Hinde Group, an investment firm that has strongly outperformed the market since its 2015 inception, also holds Uber as a top position. When a concentrated fund with a stellar track record makes a stock a core holding, it’s worth paying attention.

In their Q1 2025 letter, which was written when the tariffs were just launched, Hinde Group highlighted that the indirect effects of trade policies on Uber should be limited.

In fact, they note that even in a weaker macro environment, Uber could prove more defensive than many expect

“Uber should prove to be a highly recession-resilient business over time for a variety of reasons and is well positioned to weather any adverse impact on the global economy from the trade war Trump has launched.”

To buy or not to buy?

The stock has pulled back ~20% from its highs in October and early November, and at current levels around $82, it’s getting close to where Ackman bought it.

If it drops further below $80, I’m thinking of adding it to the Guru Gems portfolio.

1️⃣ Copart

My #1 watchlist stock for 2026 is Copart.

Copart is a global leader in online auto auctions, specializing in selling salvage and used vehicles.

The stock is down roughly 40% from its 52-week high, driven by revenue & volume misses and economic headwinds.

At the same time it is a favorite among many ‘Quality’ Gurus. It is held by Akre Capital, Wedgewood Partners, Rockbridge Capital, and Tsai Capital.

Guru endorsements

Peter Keefe wrote extensively about Copart in his inaugural Rockbridge investor letter, calling it a “multi-year, possibly multi-decade compounding opportunity.” He highlighted management’s 20-year thinking and their early bet on online auctions.

You can read more about Peter Keefe and Copart in my August post

Christopher Tsai increased his position in Q3 2025, showing continued conviction despite the pullback.

Finally, Chuck Akre and Wedgewood Partners have owned it for years, treating it as a core long-term holding.

To buy or not to buy?

While it's already down 40%, I want to see it stabilize before initiating a position.

The stock is currently at $38 which is just 1% above its 52-week low. I will wait until it goes 10-15% above its 52-week low before buying it.

2️⃣0️⃣2️⃣6️⃣ My 2026 Resolution

I want to end this first newsletter of the year with a resolution.

In 2025, we saw a lot of FOMO (Fear Of Missing Out) return to the market with the AI boom.

To arm myself against this FOMO, my resolution for 2026 is simple:

Stick to the Checklist.

Guru Gems Intelligent Investor Checklist

205KB ∙ PDF file

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In November, I published the Guru Gems Intelligent Investor Checklist based on the wisdom of Benjamin Graham.

It forces me to go through a list of questions before buying a stock (for example: “Do I understand what could go wrong?”)

I commit to run every potential addition through this checklist before pulling the trigger. I encourage you to do the same.

Here is to finding more Gems in 2026!

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back, and Happy Holidays! Hope you’re enjoying some time off with family and friends.

Writing Guru Gems this year has been an incredible journey. 8 months of studying investing masters, building two portfolios, and sharing everything I learn with this community.

Someone recently asked me why I keep writing every week?

As I mentioned in my very first post, I’m doing this in the first place for myself. Writing updates every week helps me structure my thoughts or capture the insights from articles/books/podcasts/… I’m consuming.

When I come across something interesting, I usually capture it in different ways: highlights on my Kindle, quick notes on my phone, emailing myself articles, creating a playlist on Spotify with the best Guru interviews, etc.

I still do all those things, but writing down and publishing my research helps me to keep myself accountable and to make sure I stick to my rules or decisions.

So as we close the books on 2025, I wanted to say a massive THANK YOU to everyone who started following me and who is getting something out of Guru Gems.

In today’s year-end edition:

• 🎁 Special subscriber referral giveaway

• 📊 Guru Gems Portfolio: 2025 wrap-up & Burry’s view on Alphabet

• 🏁 The ‘Portfolio Race’ Update: Guru Gems vs Magic Formula

Let’s get into it.

🎁 The Guru Gems Referral Giveaway

Before we talk about portfolios, I want to try something new and fun.

I am launching a Subscriber Referral Program!

The idea is very simple: Refer potential subscribers to Guru Gems, and win prizes.

How it works

1. Share Guru Gems. When you use the referral link below, or the “Share” button on any post, you’ll get credit for any new subscribers. Simply send the link in a text, email, or share it on social media with friends, colleagues, or fellow investors.

Refer a friend

2. Earn benefits. When more people use your referral link to subscribe, you’ll receive special benefits.

• Get access to the Guru Gems Watchlist for 5 referrals

• Get access to small-cap ideas write-ups for 15 referrals

• Get a copy of Richer, Wiser, Happier by William Green for 25 referrals

Visit the leaderboard

🎁✨January special ✨🎁

Whoever will be at the top of the leaderboard by 31st of January 2026, will get an additional special price: a one-month paid subscription to Michael Burry’s Substack ‘Cassandra Unchained’. The runner-up will get a copy of Richer, Wiser, Happier.

My subscriber count is still relatively low, so even a few referrals may get you the top spot by the end of January!

My deep-dive on Norbert Lou is my most popular post so far, so this could be a good one to share (Share button is at the end of the article).

💎 Guru Gems portfolio overview

Portfolio Comments

• The return on the capital invested over the first 8 months is 17%, driven primarily by LVMH (+24%) and Alphabet’s phenomenal performance (+99% !!).

• 2025 Winner: Alphabet

  • When I bought Alphabet in April at $157, the narrative was all doom and gloom ("ChatGPT will kill Google" + regulatory threats), but at the same time it was the most held name in Gurus’ portfolios.

  • This validates the entire thesis of Guru Gems: look closely at what long-term investing masters are holding, buy quality when it's unloved, and focus on business fundamentals

• 2025 Detractors: CCC Intelligent Solutions & Constellation Software

  • While the portfolio is up overall, not everything is working. CCC Intelligent Solutions (CCC) is down 8% and Constellation Software (CSU) has pulled back 15%. I am not (yet) worried about either.

  • Constellation has been in a significant drawdown over the past months, driven primarily by a change in leadership and AI disruption fears. It would be impossible to buy at the exact low point, so I am happy to keep holding it through the dip as I believe the business fundamentals are still strong and the stock should recover over time.

• 2026 Gameplan:

  • I’m still sitting on ~50% cash, waiting patiently for the right opportunities.

  • With valuations stretched in many areas and bubble warnings from Ray Dalio and Michael Burry, I’m not in a rush.

  • Several names I’ve added to the watchlist over the past months are starting to look more interesting. In my post next week I will review the watchlist and look more closely at some of these names.

Michael Burry’s view on Alphabet

After getting a reply from Michael Burry on my question about JD and MELI, I tried my luck again asking for his thoughts on Berkshire buying Alphabet.

On a recent podcast with Michael Lewis (author of The Big Short), they touched on this, but only briefly, and I was curious to know if he believes Berkshire made a mistake buying Alphabet:

Unfortunately, no luck this time… but then someone asked a similar question earlier this week and Burry posted a Note with his thoughts on this topic:

Burry points out that with AI search being much more expensive than ‘traditional’ search, profitability will be a key element to watch for Alphabet shareholders.

And as many other Berkshire experts have highlighted, Burry suggests that while Buffett may have given his blessing for the Alphabet purchase, it was probably one of Berkshire’s investment managers (Todd Combs or Ted Weschler) who made the purchase.

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🏁 Guru Gems vs Magic Formula

When I started this journey, I created two separate portfolios to test different approaches:

1. Guru Gems Portfolio: High-conviction positions from studying superinvestors

2. Magic Formula Portfolio: Joel Greenblatt’s quantitative approach (cheap + good, held for one year)

The 2025 Winner? Guru Gems

• Guru Gems Portfolio: +17% (excluding cash)

• Magic Formula Portfolio: +7%

The Guru Gems portfolio was carried by Alphabet, one of the “Magnificent 7” stocks.

My Magic Formula portfolio on the other hand, naturally tilts towards healthcare small-caps, which have been significantly underperforming the S&P 500.

The underperformance shows a lot of resemblance with 1999. From 2000 onwards, small-cap health care beat the market for nearly 20 years.

Of course, there is no guarantee that this will happen again, but as Howard Marks has often pointed out that “just about everything is cyclical” and that “nothing goes in one direction forever”.

🎉 Happy New Year!

Thank you for becoming a Guru Gems subscriber this year, and for being part of this small but growing community.

In 2026, I will stick to the plan: Study the masters, share what I learn, ignore the hype, and buy Gems when they go on sale.

🎁 Don’t forget to share Guru Gems to win the Michael Burry subscription or a copy of Richer, Wiser, Happier!

Share Guru Gems

See you in the new year!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back!

Today is Round 5 of building my Magic Formula Portfolio.

As a reminder, while studying investing masters, I am creating two real-money portfolios to put my learnings into practice:

1. Guru Gems Portfolio - Can I build a portfolio that outperforms over the long term by cloning the best long-term investing masters?

   → This portfolio consists of ‘Gems’ I uncover in Guru portfolios. Read more here.

2. Magic Formula Portfolio - Does Joel Greenblatt’s “Magic Formula” of buying good companies at bargain prices still work?

   → This portfolio will have 20-25 stocks that rank highest on a combination of ‘good’ (high Return on Capital) and ‘cheap’ (high Earnings Yield).

You can read more on Joel Greenblatt and his Magic Formula here.

🎁🎁In the spirit of the festive season, I am happy to gift you my Joel Greenblatt e-book:

Joel Greenblatt e-book by Guru Gems

494KB ∙ PDF file

Download

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Current portfolio performance

My Magic Portfolio has recovered quite a bit since my last update in early November, driven by a few significant winners:

• Abercrombie & Fitch (ANF) stock surged post Q3 earnings, which drove optimism for recovery from tariff impacts. Broker upgrades then gave the stock additional momentum over the past weeks.

• Harmony Biosciences (HRMY) exceeded Q3 earnings estimates, and raised their full-year 2025 revenue guidance

Here is how the portfolio has performed to date:

The overall performance is currently +7.7%, compared to +9.7% for the S&P500 over the same time period.

While going from an underperformance of 12% in my last update to just 2% now is a bit of a relief, it is still underperformance nonetheless.

I need to stick to the formula and the real test will be a timeframe of 3 years as that is where Greenblatt observed outperformance 100% of the time:

If you enjoy this newsletter, please help others discover it by clicking 🤍

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New Magic Formula Stocks

Here are the 3 companies I will be adding to the Magic Portfolio on Monday:

(Read my first Magic Portfolio post for my step-by-step approach of selecting the companies)

1. Rigel Pharmaceuticals (RIGL) - A biotechnology company dedicated to discovering, developing and providing novel therapies to treat hematologic disorders, cancer, and rare immune diseases.

   • RIGL currently ranks highest on the Magic Formula with a 3yr ROCE of 30% and EV/EBIT of 5.6

   • From now on, I will also include an LLM ‘Deep Research’ report for each of the stocks.

   • The LLM report says RIGL “appears to be a convincing BUY for investors with a one-year time frame”:

     

     Rigel Pharmaceuticals (rigl) – Investment Research Analysis

     156KB ∙ PDF file

     Download

     Download

     

2. IDT Corporation (IDT) - IDT is a multinational provider of cloud communications, point of sale systems, unified communications, and financial services foreign exchange services.

   • 3yr ROCE is 32% and EV/EBIT is 10

   • The LLM ‘Deep Research’ report concludes that “IDT Corporation is a compelling BUY”:

     

     IDT Corporation (IDT) Deep Dive Equity Research Report

     339KB ∙ PDF file

     Download

     Download

     

3. Perdoceo Education Corporation (PRDO) - Perdoceo Education Corporation operates for-profit universities that offer postsecondary degree programs (primarily online) to working adult students.

   • 3yr ROCE is 18.4% and EV/EBIT is 6.9

   • The LLM ‘Deep Research’ report concludes that “PRDO represents a compelling value opportunity in the education sector”:

     

     Perdoceo Education Corporation (PRDO) Deep Dive Analysis

     158KB ∙ PDF file

     Download

     Download

     

All three companies are small-cap stocks (<$2B market cap) and RIGL will be the 5th small-cap healthcare company in the portfolio, potentially taking advantage of the extreme valuation gap that currently exists in small caps, especially in healthcare.

Timing a turn in the cycle is never certain, but history shows that extreme valuation gaps (like today’s) have often been followed by multi-year periods of small-cap leadership

— Pzena Third Quarter 2025 Commentary

On Monday, I’ll be adding these 3 names to the Magic Formula Portfolio and hold them for one year, as Greenblatt prescribes.

That brings me to 15 holdings, and the goal is to get to a full 20-25 stock portfolio.

And once built, I’ll let the magic unfold…

That’s it for this week! Please like or share if you enjoy reading Guru Gems.

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back!

Today I’m sharing 2 interesting insights I came across this week.

If you’re new to Guru Gems: I study the world’s best long-term investors and share what I learn.

My latest deep-dive was on Tom Gayner, a highly respected long-term capital allocator who transformed Markel from a small insurance company into a global conglomerate.

I am also building two real-money portfolios based on the Gurus’ wisdom:

• Guru Gems portfolio - Quality companies held for years

• Magic Formula portfolio - ‘Good’ companies at ‘bargain’ prices held for one year

1️⃣ Rich Pzena: “You don’t get to buy what everybody wants at a low price”

Rich Pzena is the founder and co-CIO of Pzena Investment Management, a deep value investment firm he established in 1995.

I wrote about Pzena and his deep-value playbook a few months ago:

Rich Pzena was recently on the Compound Insights podcast. There are a few really interesting pieces in the interview and I will highlight two that stood out to me.

What Pzena learned from the dot-com bubble

The interview starts with Pzena recounting the early days of starting his own firm in 1995 and the role of luck.

They had good returns during the first 2 years, but then came a period of 2.5 years where the only thing that mattered was the internet and where “stocks went up and up and up and we did nothing and nothing and nothing”.

Pzena significantly underperformed the S&P 500 during that period and investors started to redeem their money.

He tells a story which captures really well the thinking at that time:

A woman came into the office, sat down and said to me: “My grandmother is a better investor than you are…all you have to do is buy Cisco…everybody in the world has figured this out except you and you’re just stubborn.”

And so I tried to do arithmetic with her. At the time Cisco was the first company to hit half a trillion dollar valuation, so I said: “If you’re going to buy the whole company and write a check for $500 billion and you want to make 20% per year return, they have to earn $100 billion a year and they currently earn $1 billion a year. Don’t you think there is something wrong with that?”

And she said: “You don’t get it, do you?”

To which I agreed…

Cisco’s stock price peaked in March 2000, then started declining and 2 years later had fallen to 80% of its peak price, making it one of the prime examples of the dot-com bubble.

Despite the painful redemptions, Pzena had managed to keep his cool and he stayed disciplined throughout the bubble.

This made him well positioned to earn stellar returns for 5 years in a row when the bubble burst.

Moral of the story

I like this anecdote as it serves as a good reminder that companies with good fundamentals (Cisco was profitable and its revenues were strongly increasing) can also get caught up in heavy speculation and unrealistic expectations. (fun fact: Cisco closed at a new all-time high for the first time since the dot-com peak just this week)

Is Nvidia the modern-age Cisco?

Michael Burry certainly thinks so.

It’s difficult to say whether Nvidia will meet the same fate as Cisco, but I could easily imagine a modern version of Pzena’s story where the woman says: “My grandmother is a better investor than you are…all you have to do is buy Nvidia…”

How non-professional investors can pick value stocks

At the end of the interview, Pzena is asked about the initial due diligence or checklist a non-professional investor should look at if they want to pursue a value approach to investing and picking stocks:

“The reality is: the quantitative stuff works. You can buy low Price to Book (P/B) stocks, you can screen on low Price to Book and you have a universe that you could start with. And if you screen on low Price to Book and eliminate the ones that have excessively leveraged balance sheets, it’s a good starting point.

The checklist that I would say, beyond the screen, is where the interesting part comes in, and it depends on how much work you want to do, but you could dig into what’s going wrong with the business and read what the company says they’re going to do to fix it and say: does that make sense or not make sense.

You can look and say: is the history of this company a 20% Return on Capital Employed (ROCE) over the last 25 years or a 5% Return on Capital Employed. And so if I could find a 25% that’s selling at a low price, where it sounds sensible what they’re doing, it’s a very good start if you don’t have a giant team of research people, but it’s not work-free.”

Pzena suggests that DIY investors can look for ‘cheap’ (low P/B) and ‘good’ (high ROCE) as a first filter before doing further research on a stock.

This sounds very much like Joel Greenblatt’s Magic Formula and it is indeed the basis for my Magic Formula portfolio. The main difference is that Greenblatt suggests EV/EBIT instead of P/B.

Buying a group of these companies is a way to mitigate having to do much analysis on the individual names as the formula is supposed to work ‘on average’.

Next week’s Guru Gems post will incidentally be Round 5 of the Magic Portfolio, so make sure to subscribe if you don’t want to miss it!

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2️⃣ GMO: “It’s probably a bubble” (But that’s OK)

My second learning of the week comes from GMO’s Quarterly Letter. GMO is the investment firm co-founded by Jeremy Grantham.

Grantham is a British billionaire investor who famously identified the tech bubble of 2000 as well as the global financial crisis of 2008. (Although some would argue that he is often warning for bubbles and therefore bound to be correct occasionally…)

Usually, when people call for a bubble, they imply you should sell everything and hide in cash or gold, but GMO’s Quarterly Letter actually offers some guidance as to what investors could do if they are ‘agnostic’ about whether or not there is a bubble.

Party like it’s 1999

At the end of the nineties and early 2000, the S&P 500 (driven by tech) became incredibly expensive and had negative expected returns.

But almost every other asset class (Small Caps, REITs, Emerging Markets,…) was cheap and priced to deliver strong returns.

“With U.S. large cap stocks trading at their highest valuations ever, their expected return was significantly negative in real terms. But for an investor prepared to look elsewhere, there was plenty to do. Several other risk assets were trading cheaply relative to history and offered better-than-normal expected returns”

The lesson here is that you didn’t need to predict the crash to make money in 2000, but you needed to own what wasn’t in the bubble.

So what about today?

GMO argues that the current market looks very much like the Internet Bubble at the end of the nineties (many others, including Burry, are making the same analogy by the way).

The AI Bubble has inflated US Large Caps to dangerous levels, but just like in 2000, other assets look much more attractive from a Risk/Reward point of view.

According to GMO’s data, an ‘agnostic investor’ can build a portfolio that can win “if the bubble is a bubble and should also do just fine if all is normal”.

The key is to own very little U.S. equities, which is not an easy thing to do for many investors, given U.S. equities have significantly beaten the rest of the world over the last 15 years.

☝️ My Takeaway

For me, the learning from Pzena’s interview as well as GMO’s Letter can be summarized in one sentence:

You need to look where others aren’t looking.

🅱️ Bonus material

While I was writing this week’s update, Howard Marks released his latest ‘Memo’, on the topic of … you guessed it: bubbles!

Howard Marks - Is It A Bubble

636KB ∙ PDF file

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It’s yet again a brilliant memo with lots of food for thought.

If you want to learn more about Howard Marks, I wrote about key lessons from Marks’ book ‘The Most Important Thing’, which many consider to be one of the best investing books of the past two decades:

EDIT: Just as I was about to hit the ‘Publish’ button for this post, I saw that William Green released a new episode of my favorite podcast Richer, Wiser, Happier with none other than Howard Marks!

🕺Super Bonus

I thought it would be nice to end this week’s newsletter on a lighter note…and since we talked about partying like it’s 1999, here’s an iconic song for you :)

That’s it for this week! Please like or share if you find these insights valuable.

You can follow me on X @guru_gems and Substack @gurugems for more insights.

Until next week!

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Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome to a new edition of Guru Gems, where I study the world’s long‑term investing masters and build a portfolio of ‘Gems’ based on the Gurus’ wisdom.

Today’s Guru is one of the most respected long-term capital allocators. Tom Gayner transformed Markel from a small insurance company into a global conglomerate, turning the stock into a 250-bagger along the way.

In today’s edition:

• 🕴️ The Guru: Tom Gayner

• 💎 The Gem: Markel Group (MKL), a 250-bagger(!) since IPO

• 🏛️ The Philosophy: The 4 Pillars behind 35 years of outperformance

If you are new to Guru Gems, start here.

Guru in the spotlight: Tom Gayner

Tom Gayner is the CEO of Markel Group, a Fortune 500 financial holding company.

He started at Markel in 1990 to build their equity portfolio and gradually moved up to lead the entire company.

In a recent interview on the Behind the Balance Sheet podcast, Gayner calls himself a “Plodder”: a slow steady guy.

A recurring theme in all of Gayner’s interviews and Shareholder Letters, is the idea of steady, incremental progress sustained over a long period of time.

When asked to describe the essence of Markel, he replied ‘endurance’, which reflects Markel’s relentless journey to compound capital over the past 4 decades as a public company.

In his 2024 Shareholder Letter, he compares Markel Group to a Redwood Tree to illustrate this long-term focus:

“Redwood trees symbolize enduring growth. […] If you ever cut down a redwood tree, you will see a ring marking each year […] Some rings would be thin and some would be thick. They demonstrate resilience and survival.

[…] Similarly, the 94 rings of Markel Group tell the story of enduring growth.”

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The Gem: Markel Group (MKL)

Usually, in this newsletter, I look for a stock that a Guru owns. Today, I look at the company the Guru runs.

Markel is often compared to Berkshire Hathaway: they use the “float” from their insurance operations to invest in public stocks and to buy private businesses.

Markel’s Three Engines

1. Insurance Operations: Writing specialty insurance policies (and generating “float” which can be invested).

2. Investment Portfolio: These have been managed for decades by Gayner himself, and has compounded at 12.8% over the last five years, with very low turnover (see Q3 screenshot below)

3. Markel Ventures: A collection of private businesses that Markel fully owns (from bakery equipment to houseplants), providing stability and cash generation.

Tom Gayner’s Investment Philosophy

Whether he is buying a stock for the investment portfolio or acquiring a whole company for Markel Ventures, Gayner says he looks for four things:

He calls these his “Four Pillars”:

🏛️ 1. Profitable business with good returns on capital and low debt

Gayner wants companies that are already winning and generating high returns on the money invested.

🏛️ 2. Talented management with integrity

This is non-negotiable. Because Markel operates with a decentralized structure (hands-off), Gayner needs to trust the people running the businesses. He looks for leaders who treat the company’s money as their own.

🏛️ 3. Reinvestment opportunities

Similar to Chuck Akre’s ‘Reinvestment Runway’, Gayner loves businesses that can take their profits and reinvest them at high rates of return to grow the compounding engine.

🏛️ 4. A reasonable price

Unlike deep value investors (like Rich Pzena), Gayner does not need a bargain-basement price. He is willing to pay a “fair” price for a great business.

Here is a snapshot of Markel’s stock portfolio (top 10 positions, end of Q3):

Two things stand out from this $12 billion portfolio:

1. Largest position (13%) is Berkshire, the very first stock Gayner bought when he joined Markel in 1990

2. No changes in the top 10 positions (~40% of the portfolio) during Q3 highlighting the very low turnover

To Buy or Not to Buy

Now let’s evaluate MKL through our Terry Smith inspired checklist to decide if I should add Markel to the Guru Gems portfolio:

1/ Buy good companies

Markel certainly has a lot of strengths making it a very high quality company:

• Compounding engine: The three engines work together to generate consistent growth and diversified earnings which also reduces volatility

• Strong, low-debt balance sheet: “We see our strong capital position and low-debt philosophy as necessary preconditions for long-term thinking.”

• Culture: Gayner often talks about his win-win-win philosophy of service to others (customers, associates, shareholders)

  “The Markel Style, our company’s creed, grounds and guides us.”

• Alignment: Gayner and the management team own a significant amount of stock.

“We believe that you, as shareholders, are our partners and not distant unnamed institutional entities.”

2/ Don’t overpay

As I discussed in my review of Berkshire Hathaway, valuing an insurance conglomerate can be tricky.

‘Price to Book Value’ (P/B) is a common metric, and currently Markel trades at a P/B ratio of 1.43x, which is 10% above its 5-year average:

However, Gayner himself highlights in his Shareholder Letter that “book value per share no longer works as the best metric to evaluate our performance”.

Gayner provides a guidance on what he believes is the intrinsic value of the company and he estimated that on 31st Dec 2024 it was $2,610 compared to a stock price of $1,726.

The stock price has gone up nearly 20% this year and is currently at $2,048. It will be interesting to see in the upcoming 2025 Shareholder Letter what Gayner’s latest estimate of intrinsic value is.

3/ Final decision

Markel is probably not a stock that will deliver excitement or quarterly drama, but the way it has steadily compounded until now, makes it almost a no-brainer to at least consider for a long-term focused portfolio.

“We run marathons, not sprints. Our name is on some marathon trophies, and we try not to lose the focus that got us there or let others’ sprint times distract us.”

📌 Decision: Adding Markel Group (MKL) to the Watchlist

I’m a bit hesitant to actually buy it given the run it had this year, but I am strongly considering to add a 4-5% position on any pullback or period of pessimism.

That’s it for this week’s edition!

If you want to learn more about Tom Gayner, I highly recommend the Richer Wiser Happier podcast (my favorite as you know by now!) episode with Tom Gayner.

As always, thank you for reading and following along. You can find me on X @guru_gems for more Guru Gems insights.

Until next week!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.

Welcome back, and welcome to all new subscribers!

In today’s edition:

1. 📉 Is the market in a bubble?

2. 👀 Adding 2 Michael Burry favorites to the watchlist

3. 💎 Alphabet becomes my first ‘two-bagger’

4. 🆕 A new Gem: Adding PayPal to the portfolio

New to Guru Gems? Start here.

📉 Is the market in a bubble?

Ray Dalio, founder of the world’s largest hedge fund, thinks so. In a recent interview, he stated:

“There is definitely a bubble in the markets […] but a lot can go up before the bubble bursts”

and a bit later also:

“[…] bubbles have to be pricked [….] don’t sell just because there’s a bubble”

Dalio is not the only one seeing an AI mania

Michael Burry (famous from ‘The Big Short’) recently returned to X under the name ‘Cassandra Unchained’ to warn us that “Sometimes, we see bubbles”.

Burry announced the termination of his hedge fund and the start of a Substack newsletter… Welcome to Substack, 😉 (yes, I did subscribe)

Coming back to something he has always loved, he will write about stocks, market and economic trends, special situations, and investment manias.

I’m really excited to read Burry’s thinking process every week.

A few years ago I read his MSN articles from the early 2000s and I remember thinking it would be really cool to get a sequel of this…now we’re getting it!

👀 Adding 2 Michael Burry favorites to the watchlist

Commenting on one of his notes, I asked Burry for his thoughts on 3 names he owned: Magnera (MAGN), MercadoLibre (MELI, Latin America e-commerce company) and JD.Com (JD, Chinese e-commerce company)

MELI and JD are 2 companies I recently started reading about a bit more, so with Burry’s comments, I am adding both to my watchlist!

Guru Gems isn’t about predicting the macro

Regardless of whether we are in a bubble or not, I remain focused on finding Gems at an attractive price and holding them mostly for the long term.

And with more than 50% of the portfolio still in cash, a bursting bubble may actually create some great buying opportunities…

With that, let’s have a look at the Guru Gems portfolio.

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💎 Alphabet is my first “two-bagger”

This month, Alphabet (GOOGL) officially became the first “two-bagger” in the Guru Gems portfolio, up 103% since April.

It’s crazy to think that a 2 trillion dollar company can double over a 7 month period. This is a good illustration of Mr. Market in action (if you don’t know about ‘Mr. Market’, check last week’s post!)

Seven months ago, the narrative was “ChatGPT will kill Google” and when I wrote about Alphabet for the first time, the stock was trading well below its historical EV/EBIT average.

But looking at the portfolios of Superinvestors like François Rochon and others, they weren’t selling. They were holding or buying.

Alphabet is still the most-owned stock among the Gurus I track. Even Berkshire started a position, confirming Alphabet’s status as the ultimate Guru Gem.

I believe Alphabet will be a pillar of the Guru Gems portfolio for many years.

🆕 Adding a new Gem: PayPal

Burry wrote that now is a great time to be looking for “great companies being sold down too far”, and I believe I found one in PayPal (PYPL).

As I wrote in my deep-dive on Norbert Lou, I considered adding PayPal to the portfolio, and after their strong Q3 earnings report, I decided to start a position.

PayPal Q3 25 Earnings Release

712KB ∙ PDF file

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I believe that like Alphabet earlier this year, PayPal is unloved. The market is obsessed with AI and Crypto, leaving “boring” fintech stocks behind.

But looking at the fundamentals, the turnaround promised by CEO Alex Chriss seems to be gaining momentum:

• Strong revenue and earnings growth

• Free cash flow fully used for share buybacks, and a small dividend

• Strategic partnerships with OpenAI and Google, focusing on agentic commerce and AI.

• Trading at 11x forward earnings (well below its historical average)

I bought at $62.5 and added more at $58.5 when the stock further dropped later that week.

Supporting this, Wedgewood Partners (who have owned PayPal for more than a decade) also reaffirmed their conviction, which acts as an additional signal.

PayPal joined the Guru Gems Portfolio as my newest holding, with a current weight of 5.6%.

Guru Gems portfolio overview

Portfolio Comments

• The return on the capital invested so far over the first 7 months is 14.4%, driven primarily by LVMH (+23%) and Alphabet’s phenomenal performance (+103% !!!).

• Magnera, which was my main underperformer until a few weeks ago, is now up 11% after reporting strong Q4 results.

• CCC Intelligent Solutions (CCC; -16%) and Constellation Software (CSU; -13%) are currently my main laggards.

That’s it for this week…thanks for reading and I’ll be back next week with a new edition!

Disclaimer: This newsletter is for informational purposes only and does not constitute financial advice or investment advice. Always do your own research before making any investment decision.