Hidden gems #7; France A-Z
Biorem is one of the success stories of this substack this year. It will be tough to beat its return, but I have been lining up other Hidden Jams...
…and for that I have been Turning over Rocks in several countries. For this post I filtered out interesting stocks from the smallest 250+ French listed companies.
Guess in what MicroCap the most famous French billionaire holds a significant stake!
Before discussing the list of French companies, I lay down desired qualities of a Hidden gem. Finally, I am introducing a new feature; Readers’ requests. In this post, I provide feedback on Sundart Holdings Ltd $1568.hk.
The Eiffel Tower
There’s no feeling like it…
There’s no feeling like it… indeed…
Is it just me who is sticker-shocked by today’s prices for attractions? … Maybe I’m just getting too old…
Luckily, jam_invest prices remain flat for existing paid subscriptions. I cannot make any promises for new paying subscribers, however, certainly not after June…
Hidden gems
What is a Hidden Jam? It’s one thing to have a checklist of characteristics defining an exceptional stock. It’s usually a whole other matter what I’m able to find, even in the best of times. ‘Holy grails’ are rare for a reason. Typically, I will not find all of the desired trademarks (below) in a particular stock… but it’s great fun to try… and luckily it’s not always necessary to ✅ all items on the list. This year, Biorem is the wonderful example of that. Cheap and a positive catalyst usually already does the trick. Still, it is much easier to build conviction on a stock idea when it has more of the following characteristics.
The Hidden Jam Wishlist:
High (incremental) Return On Invested Capital (ROIC)
Strong (incremental) free cash flow (FCF)
Easy-to-understand business
Recurrent customer spending
Value creative capital allocation, preferably by a strong operator with skin-in-the-game (holding a significant shareholding)
Not yet widely-accepted/held
Potential for strong shareholder returns » valuation matters here
Notice, that I value the direction of change (or increments) more than the existing/reported situation. My experience is that it is often better to travel than to arrive, both in investing as well as with other things. The Inka Trail was even more exceptional than Machu Pichu, for instance, but maybe I am just romanticizing almost dying while climbing Death Woman’s Pass.
Preferably, the first two characteristics above are the result of a ‘moat’, a sustainable competitive advantage that is very difficult to overcome. It is after all much easier to build conviction on businesses with a clear strong moat, and much easier to hold on to their shares. Most of the time, it is easier to discover cheap stocks from companies that only temporary boast strong ROIC and FCF due to for instance a) strong operational execution, b) being early on a new demand trend, c) benefiting from an up-cycle where demand exceeds supply.
On this substack, I have already mentioned/discussed quite a number of Hidden gems; Biorem, China Tower, Halyk Bank, Petrobras, Sylogist (🤞 turnaround seems to be on track).
Let’s try to find more!