Northern California. The mid 1960s.

A wrecking yard with two thousand dead cars on it. The state is putting a highway through, so everything has to be gone in ninety days. The whole lot goes up for sealed bid.

A farmer sees the ad in the paper. He drives out with his fourteen year old son.

They spend the whole weekend crawling through the trees. The boy marks every car with an X. Complete cars in one count. Stripped ones in another. Two thousand cars. They count them all.

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Monday morning. The bidding room.

The other men arrive in business suits. They spent the weekend at home. The farmer arrives in overalls with a filthy kid beside him.

Everyone drops a sealed envelope into a hat in the middle of the room.

The farmer wins at fifteen thousand dollars. A brand new house cost twelve thousand that year. The men in suits stare at him.

Before he can leave the room, one of them walks over and offers him quick cash to hand over the deal. Real money, for a weekend of walking through a junkyard. The farmer says no.

Outside, the boy asks his father why he turned down easy profit.

He’ll come back tomorrow, the father says. And he’ll pay more.

The man came back the next day. He paid more.

The boy never forgot what he saw in that room. The men in suits were not stupid. They were rich, connected, experienced. They lost because they decided a yard full of wrecks was not worth a weekend of their time. They bid on a hunch and assumed nobody would outwork them.

The boy’s name was Willis Johnson.

He would spend the next sixty years doing the exact same thing, on an exponentially larger scale, until his junkyard covered more land than Manhattan and was worth twenty five billion dollars.

That company is Copart. And right now, the market is bidding on it.

The stock is down 50%. Wall Street has decided that self driving cars will end car crashes, that salvage is a dying industry, and that a debt free business with 36% operating margins should trade at the same multiple somebody paid to take out its weaker competitor.

The market is bidding by hunch.

But a few people counted the cars.

Chuck Akre built one of the great compounding records in American investing. An average holding period of eight years. A philosophy that has not moved an inch since 1989. In the second half of 2025, his firm started selling the positions that made its name. Mastercard. Moody’s. Visa. O’Reilly.

It used the money to buy 8 million shares of a junkyard, at an average cost of $41.42.

The stock trades at $28 today. Akre is sitting on roughly $107 million of paper losses.

In the first quarter of 2026, the firm bought more.

At the same time, the company itself spent $1.6 billion devouring its own stock. The largest buyback in its 43 year history. And on July 31, a man who has worked for a salary of one dollar since 2020 returns as chief executive.

Three buyers who counted. One market bidding by hunch.

What did they count? A fee structure, written in the 1980s, that quietly manufactures this company’s own supply. A land bank assembled before the cities arrived, at prices that no longer exist anywhere on earth. And a twenty year trend that Wall Street believes is weather, but that one man built by hand.

Let me show you the count.

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On February 2, 2016, the company filed for bankruptcy. The stock closed at 11 cents.

Somewhere between those two numbers, Mohnish Pabrai, the man who built his entire reputation on a checklist designed to catch other investors’ mistakes before he could repeat them, rode more than six million shares almost all the way to zero.

He lost roughly $100 million. His flagship fund finished 2015 down 30 percent. When he finally sold, he got 28 cents a share.

This was not a fraud. There was no hidden accounting scandal, no overnight collapse, no lie that only insiders knew. Horsehead told the public it was dying, in official filings, every single quarter, for eighteen months straight. Short sellers called the bankruptcy in writing, with a date on it, four months before it happened. The bond market priced it in October 2015.

So the question of this post is not “how could anyone have known.”

The question is how one of the most disciplined investors alive managed not to know. And what does that say about you and me?

Let me tell you the whole story. It’s the best investing lesson I have ever worked through, and by the end of it you will never look at a “great business with some debt” the same way again.

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The most beautiful story on the market

To understand why smart money died here, you first need to feel why smart money showed up. Because the thesis wasn’t stupid.

The thesis was gorgeous.

When steel mills melt scrap, they produce a toxic dust that is about 20 percent zinc. By law, someone has to dispose of it. Horsehead was the biggest company in America doing exactly that. Steel mills paid Horsehead to haul the dust away, and Horsehead then extracted the zinc and sold it.

Every other zinc producer on the planet pays to dig its raw material out of the ground. Horsehead got paid to receive its raw material. A commodity producer with negative feedstock cost. A real moat in the most moatless industry that exists. Pabrai said it plainly in interviews:

“Commodity businesses are fine to own, as long as you own the lowest cost producer.“

He had first bought Horsehead back in 2008 as a classic Ben Graham cheap stock. It went up more than 400 percent in about a year. The stock had already made him look like a genius once.

Then came the part that turned a good story into an irresistible one. In 2011, Horsehead announced it would shut its ancient 80-year-old smelter and build a brand-new, state-of-the-art plant in North Carolina. Budget: around $350 to $375 million. Promised profit once running: $90 to $110 million of extra EBITDA per year. Projected return on the project: 45 to 50 percent.

New plant, half the production cost, lowest cost zinc producer in the world. Pabrai didn’t just buy it. By late 2013 his funds owned 11.5 percent of the entire company, one of the biggest positions in a portfolio of only six stocks. His close friend Guy Spier bought it too.

Here is what makes this story immortal, and I want you to hold this thought until the very last line of this post. The thesis was largely correct. The moat was real. Horsehead really did get paid to take the waste.

The company still went to zero.

How is that possible? The answer arrived one quarter at a time, in public, while everyone watched. On July 8, 2014, six weeks after the shiny new plant started up, Horsehead issued a press release admitting the plant had produced at about 23 percent of its designed capacity and had already been shut down once for repairs.

That was the first crack. Pabrai didn’t move. It was early, and every new plant has teething problems. Right?

What follows below the line is the full autopsy of what happened, quarter by quarter.

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Except one. Next to his name, the page says simply, “Not Pictured”.

In three decades, that man has never given an interview. No podcast. No conference panel. No investor letter that ever leaked. He runs billions of dollars from an office at 45 Rockefeller Plaza, and the only thing he cannot hide is a quarterly SEC filing.

In 2010, professor Bruce Greenwald told his Columbia class that Warren Buffett had named the three people he would want managing his money after he is gone. The first was Seth Klarman. The third was Li Lu. Both are famous. Books, letters, disciples.

The second name was Greg Alexander. The room had to ask who that was.

Sixteen years later, the ghost has finally made a sound. Not with words. He has never used words. With a filing.

In May 2026, his fund crossed the 5 percent ownership threshold in a Houston car dealership company and was legally forced to reveal itself. Greg Alexander now owns 6.4 percent of Group 1 Automotive. Nearly half of everything he manages in US stocks sits in this one name. And in the first quarter of 2026, while the stock was falling, he sold down one of his other holdings to buy 33 percent more of it, roughly 65 million dollars worth, at prices near 349.

The stock trades at 326 today.

A man Buffett trusts with his money, who has said nothing in public for thirty years, just bet half his fund on a company most investors find too boring to open. This post is about decoding what he sees. And I warn you now, what he sees is not a car dealer.

The bloodline

In 1969, Buffett shut down his partnership. The market was too expensive and he refused to play. But his partners needed somewhere to put their money, and Buffett recommended exactly one man. Bill Ruane, his classmate from Ben Graham’s course at Columbia. Ruane founded the Sequoia Fund to take Buffett’s partners, and over the following decades Sequoia beat its peers in 332 of 333 rolling ten year periods. The fund was closed to new investors for 26 straight years. Single shares traded hands on a black market.

In the mid 1980s a young Yale graduate joined that firm. Ruane introduced him to shareholders with one sentence. He joined us out of Yale where, despite his economics degree, it appears he spent most of his time reading annual reports.

That was Greg Alexander. He has spent the forty years since doing exactly that. Reading. His partnerships beat the S&P 500 for more than 25 years, investing globally, in silence. No letters leak. No trades get discussed. To this day, the Sequoia Fund’s own team page lists every member with a photograph except one. Next to his name it simply says Not Pictured. The Buffett bloodline, one generation removed, running in the dark.

Which means the 13G filed in May is the loudest thing this man has ever said.

So let me tell you what he bought. And why the market is handing it to you 15 percent cheaper than the ghost paid, 30 percent cheaper than the company itself paid, and 40 percent below where the stock stood ten months ago.

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They took the terminal in minutes. Flights stopped. Passengers ran. The biggest airport in Central Asia belonged to the street. In Istanbul, the executives who had just made the largest purchase of their lives watched the news come in.

They had owned that airport for nine months.

They bought it during the pandemic, when it had almost no passengers. Now it had too many. Armed ones.

Any sane investor would call this the worst deal in aviation history. I am going to show you why it might be the best one of the decade. Why Mohnish Pabrai built a position above 5 percent of this company and refuses to sell while the stock bleeds 30 percent in dollars. And why every dollar spent in that terminal is making his investors richer.

Nobody has written a serious analysis of TAV Airports in English. You are reading the first one. And at the end I will do something no newsletter does. I will grade the company and grade the investment separately, and the two grades are not the same.

The word that changes everything

First you need to understand one word. Because this word is the entire thesis.

Almost every privatized airport on Earth works the same way. The government gives you a concession. Build, operate, transfer. You run the airport for 25 or 30 years. You pay for the privilege. And when the clock runs out, you hand the keys back and walk away with nothing.

You are a tenant. A well paid tenant. But a tenant.

Out of every airport on the planet, only 3 percent are privately operated at all. And of those, almost none are actually owned.

Almaty is owned.

When TAV closed the deal in April 2021, they did not sign a concession. They bought the airport. The runways. The terminal. The land. No expiry date. No transfer clause. Their CEO does not have to think about what happens in 2047 because nothing happens in 2047.

The price was 365 million dollars.

Hold that number. At the end of this post I will show you a return calculation I checked three times, because on today’s price the result looked too clean to be true.

Here is what TAV controls today.

Why nobody outbid them

In 2020, Almaty Airport handled 3.6 million passengers. A year earlier it handled 6.4 million. The business had been cut in half by a virus and nobody knew if flying would ever come back.

The infrastructure funds that fight over airports in London and Sydney did not even show up. Who buys an airport with empty runways? Who buys anything in Kazakhstan while the world hides at home?

Pabrai has a line for this. He says investing in these situations is like playing bridge against people who have been told it does no good to look at the cards.

TAV looked at the cards. The cards said Kazakhstan is a landlocked country the size of Western Europe. The cards said Almaty is its front door. The cards said passengers come back after every crisis in aviation history, and monopolies do not stop being monopolies because of a bad year. So while the world was frozen, a Turkish operator bought the front door of Central Asia for less than the price of a single wide body aircraft.

Then the mob came. TAV got the terminal back in one day, patched the damage, and kept building. Riots, then a war starting next door in Ukraine.

They never stopped construction.

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A traveler buys a $100 bottle at the airport

Now let me show you what they actually bought. Forget passenger counts for a second. Follow one bottle of perfume.

Pabrai explains the economics with a simplified 100 dollar duty-free purchase. The product itself costs roughly 30 dollars at the factory gate. The airport operator can collect around 40 dollars as rent for the retail space. What remains pays for inventory, staff, utilities and logistics, leaving the duty-free operator with a much smaller profit.

At Almaty, TAV participates on both sides. The airport vehicle, in which TAV owns 85 percent, collects the rent. ATÜ, the duty-free operator, is 50 percent owned by TAV. Not every dollar reaches TAV shareholders, but the company earns from both the floor beneath the shop and part of the business operating on top of it.

Look at the structure again. The brand manufactures the product. The retailer stocks and sells it. The airport owns the scarce piece of floor that every international passenger must walk past. That floor can earn more than either of the businesses doing the visible work.

Pabrai estimates that an average international flight produces roughly 1,500 dollars of duty-free sales and about 600 dollars of rent for the airport operator. Scale that across thousands of flights, then add passenger fees, ground handling, catering, lounges and parking. In 2025, the group served 113 million passengers. An airport is a toll booth where the cars line up voluntarily and buy perfume while they wait.

The pettiest revenge in aviation

Here is my favorite part. It tells you more about this management team than any annual report.

When TAV took the keys in Almaty, they discovered something absurd. Years earlier, someone had sold the duty free retail space inside the terminal. Not leased. Sold. The shopkeepers owned their square meters inside a building that now belonged to TAV.

TAV owned the airport and earned zero from duty free inside its own terminal. They went to the owners and asked to buy the space back. The owners named a fantasy price. They thought they had TAV trapped. Where else do the passengers go?

TAV said fine. Keep it.

Then they spent 270 million dollars building a brand new international terminal next door. It opened in June 2024. Capacity doubled to 14 million passengers. And on opening day, every international flight moved to the new building. Every international passenger. Every dollar of duty free spending. All of it now flows through 3,400 square meters of shops run by TAV’s own duty free arm.

The old owners still own their space. In what is now a domestic terminal. Where nobody buys hundred dollar perfume. Their monopoly evaporated in one morning, legally, without a single lawsuit.

That is who is running this company.

Built by losing everything twice

This ruthlessness was not learned in business school. It was beaten into them.

TAV was born in 1997 to build the international terminal of Istanbul Ataturk, and Ataturk became its crown jewel. In 2016 a terrorist attack hit that terminal. In 2019 the government moved all traffic to the new Istanbul mega airport and TAV lost its flagship overnight. Compensation and a 49 percent stake in the Sabiha Gokcen operator kept them alive. A year later the pandemic took traffic to zero everywhere at once.

A bombing, the loss of the crown jewel, a global shutdown, an armed mob. Four near death experiences in five years. The response to the last two was to buy Almaty at the bottom and outbid everyone for Antalya through 2051. Capitalism destroys businesses every day. The few that survive are impressive. The ones that use every crisis to become even stronger are exceptionally rare. TAV belongs in that category.

The employee discount called hyperinflation

TAV is listed in Istanbul, and the moment investors hear the word Turkey they close the tab. Lira down more than 80 percent in five years. Inflation that touched 85 percent. Why would anyone go near it?

Because TAV is built backwards, and backwards is exactly right.

Around 75 percent of its revenue arrives in euros and dollars. Passenger fees at its Turkish airports are set in euros. Duty free is hard currency. Almaty charges in dollars. Meanwhile the costs, mostly thousands of salaries, are paid in lira.

So revenue is denominated in currencies that hold. Costs are denominated in a currency that melts. Every year the lira falls, TAV’s workforce gets cheaper in real terms while the toll booth keeps charging in euros. For a normal Turkish company inflation is a death sentence. For TAV it is a permanent discount on labor.

So why is the stock down 30 percent

If this machine is so good, why has it lost a third of its dollar value in two years?

Ask the market and it points at the map. Iran. Israel. Missiles near Turkish routes. War zone, avoid.

Pabrai argues that the three largest structural headwinds have little to do with Iran. Management is more cautious. It acknowledged that geopolitical disruption hurt the first quarter of 2026. Both can be true. War affects traffic today, while the constraints Pabrai describes determine how much traffic TAV can handle when conditions normalize.

Here were his three answers.

One. The planes are in the repair shop. The passengers are there. The demand is there. The planes cannot fly until the engines are fixed. The backlog clears through 2027. Two. Boeing cannot build fast enough. Airlines want to grow. The planes are still in the factory. The delivery queue is finally moving. Three. Kazakhstan took the fuel business. A real loss. But in return, the government is backing higher passenger fees. TAV traded a business the state was likely to reclaim anyway for pricing power that compounds for decades.

Grounded planes fly again. Queues move. Fees compound for decades. The market has taken three problems with deadlines and priced them like a diagnosis.

Meanwhile the business printed records. Revenue up 10 percent to 2 billion dollars in 2025. EBITDA up 14 percent to 600 million dollars, above the pre pandemic peak. Free cash flow up 44 percent. Debt falling.

A price dropping.

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You buy one airport. Fourteen come free.

The equity trades on the Istanbul exchange for about 2 billion dollars.

Now ask a different question. Not what TAV paid for Almaty, but what it would cost to build it today. TAV paid 365 million dollars for the airport and poured roughly another half billion into the new terminal and the projects around it. Try to replicate that from scratch. Industry cost guides put a new international hub for 10 to 15 million annual passengers at 8 to 14 billion dollars. And that buys you concrete, not a monopoly with cargo, rail links and forty years of operating know how already inside.

So the replacement value of Almaty alone is a multiple of what the whole company costs on the Istanbul exchange. The market is selling you the entire fifteen airport company for less than the cost of rebuilding one of them.

Now forget replacement value and count only cash. Almaty ramps toward 110 million dollars of EBITDA a year by 2030 as fees rise and duty free flows into TAV's own hands. Add up the next 15 years and this one airport alone throws off roughly 2 billion dollars of EBITDA, close to the entire equity value of the company. One airport covers what the market is charging for all fifteen.

And then it keeps going, because Almaty is owned, not leased. Year 16 looks like year 15. So does year 50.

Which means the trade on the table is this. You pay about 2 billion dollars for the equity. One asset covers the ticket. And stapled to it come 14 other airports. Antalya, the busiest leisure airport in the Mediterranean, locked until 2051 in a country that just set a tourism record of 64 million visitors. Ankara until 2050. Georgia, Macedonia, Tunisia, Medina, Riga. A management team with a proven ability to win concessions and compound value. Over 100 million passengers a year, priced at zero.

I tried to kill this thesis

I do not trust stories, not even my own. So I built the most hostile DCF I could design and pointed it at TAV.

The rules were simple and cruel. Every concession is worth zero the day it expires, as if the buildings burn down with the keys. Antalya's payments to the Turkish state, more than 110 million dollars a year, come off the top. Discount rate 11 percent. Growth just 5 percent. Only Almaty, the one airport that is actually owned, lives past its horizon.

The result. The cash flows to expiry, minus roughly 1.8 billion dollars of net debt, are worth almost exactly what the equity costs today.

So the market is pricing TAV as if every concession dies on schedule and nothing ever replaces it. Almaty’s cash beyond 2051, which runs forever. The 3 to 5 billion a strategic buyer would pay for it. Any rerating toward peers at 10 to 13 times EBITDA. Every concession this team wins or extends over the next 25 years. All of it sits in the price at zero.

Most stocks fail this test catastrophically. TAV lands exactly on it. The price is the floor. Everything above the floor is a gift.

And the floor is not even the point. The point is what sits on top of it, paid for by nobody.

The realistic case

The kill test was deliberately unfair. It assumed this management team spends 25 years doing nothing. Now let me tell you what actually happens, moderately, without fantasy. This team has spent three decades doing exactly one thing, keeping airports and adding new ones.

So run the moderate scenario. EBITDA follows the path already in motion, 600 million dollars in 2025 toward 750 million by 2028, then grows 6 percent a year. Traffic gives 5 to 7. Almaty fees give more. Inflation keeps melting lira costs against euro revenue. Nothing in that 6 percent requires luck.

By 2040 the company earns around 1.5 billion dollars of EBITDA a year. Along the way it produces roughly 15 billion dollars of cumulative EBITDA and, once the construction decade ends and debt amortizes away, somewhere around 9 to 10 billion dollars of cumulative free cash flow to equity.

The moderate case, no miracles, no new countries, returns the equity value four times over in cash within 15 years, after the debt is served.

The kill test gives you your money back. The realistic case gives it back four times and hands you the company anyway.

And even the realistic case is pessimistic about one thing. This is a management team that turned 365 million dollars into an asset worth 3 to 5 billion in five years. My scenario assumes they never do anything like that again.

What kills it

I do not write fairy tales, so here is the other side.

Net debt is roughly 1.8 billion dollars. Falling, but a 2020 style traffic collapse would turn it into a noose. Governments change rules, and Kazakhstan just demonstrated it with fuel. Groupe ADP of Paris holds 46 percent and controls the board, so minorities ride in the back seat of a French car. Turkish assets carry a permanent fear discount that can widen in any panic no matter how well the business performs.

And there is the winner’s curse. TAV and Fraport committed 7.8 billion dollars for the new Antalya concession, roughly 2 billion upfront and fixed installments until 2051. The state took its share upfront. The operator earns its return only if Turkish tourism grows for 25 years. A lost decade means they overpaid.

You are paid well for carrying these risks. But you are carrying them.

Why this belongs on Cannibal Stocks

One honest note. This newsletter hunts companies that eat their own shares, and TAV does not buy back stock. It pays dividends, half of profits starting now. The amount is small today because net income is buried under the depreciation of three brand new terminals. The payout ratio is fixed. The income is not. Turkish companies rarely repurchase shares at all.

So why write it? Because the cannibal thesis was never really about buybacks. It was about management teams that allocate capital like owners. Buying the front door of Central Asia at the bottom of a pandemic, for a price one competitive round of bidding would have doubled, did more for shareholders than any buyback in the history of Borsa Istanbul. This is the same discipline wearing a different suit.

My honest scorecard

Before the ending, let me drop the storyteller voice and tell you exactly where I land.

The company gets 7.5 out of 10. The monopoly is real, the currency machine is real, and this management team passed tests that kill normal companies. But net income in 2025 was only 55 million dollars on 2 billion of revenue, because the machine still feeds banks and governments before it feeds shareholders. The Antalya obligation of 7.8 billion dollars is a 25 year bet that Turkish tourism never has a lost decade. And Kazakhstan just reminded everyone that a state takes what it wants when it wants. TAV is a very good company in a rough neighborhood, and the neighborhood is part of the price.

The investment at today’s price gets 8 out of 10. The downside is the strongest part, the kill test showed that cash alone covers the ticket and permanent loss requires a traffic collapse and a debt crisis arriving together. The upside is roughly a double in three years if EBITDA simply follows its guided path, and more if the multiple ever moves from 7 toward the 10 to 13 its peers command.

Why not a 9 or a 10. Because part of the upside depends on a rerating that may never arrive. Turkish stocks can stay cheap for a decade, and a value trap does not announce itself, it just wastes your years. And because a temporary 30 or 40 percent drawdown in some emerging market panic is not a risk here, it is practically a promise, and you have to be able to sit through it without blinking.

So the honest summary is this. The downside protects you. The upside makes you wait. The biggest real risk is not Turkey and not war, it is that you spend five years waiting for a rerating that arrives in year ten.

This story isn’t finished.

Everything above came from filings and spreadsheets. But a spreadsheet can’t count the passengers, or tell you if the duty-free queue is real. So I’m doing something I’ve never done here.

I’m flying to Turkey.

To stand in these terminals myself, count the crowds, and watch the tills move — reporting live from the airports, straight into the subscriber chat. Raw notes from the field, as it happens. And when I land, paid subscribers get the one thing no filing can give you: my decision. Whether I’m buying, how big, and the exact price I’ll pay.

The research doesn't end here. It starts when I land.

Come along.

Get 20% off forever

The mob knew

Think back to January 2022 one last time.

Thousands of people rose up in Almaty that week. They could have stormed anything. The parliament. The banks. The television station.

They took the airport.

Because everyone in that city understood what the most valuable thing in Kazakhstan was. The mob knew it. The government that sent soldiers to take it back within a day knew it. The Turks who bought it while the world hid at home knew it. Pabrai, sitting on a twentieth of the company, knows it.

The only ones who still do not know are the people setting the price in Istanbul.

They will.

Cheers, Sandro

Like and Restack. The airport isn’t the only thing that needs traffic.😂

“You can’t make a good deal with a bad person.” — Warren Buffett

Three men sat in a room at Salomon Brothers in 1991.

The CEO. The president. The general counsel.

They had just learned their trader was faking bids to the US Treasury. One phone call would have ended it. Nobody made the call.

Two weeks later the trader did it again. And a hundred year old firm nearly died. Not from the crime. From the silence. Buffett had to testify before Congress just to keep it breathing.

Salomon’s numbers looked perfect the whole time. Record profits. Rising stock. Clean ratios. The numbers always look perfect right before the fire.

The rot was never in the numbers. It was in the men.

Anyone can screen a stock. Nobody screens the CEO. Your terminal shows ROIC in four seconds. It cannot show you whether the man spending your money is a builder or a thief. That’s the last edge left in this market. It can’t be automated. You have to read. Most people won’t.

Buffett spent sixty years judging managers and boiled it down to two questions.

“How well does he run the business.”

“How well does he treat the owners.”

And he noticed something dark. The answers almost always match. The manager who runs the business badly is the same one picking your pocket. Bad operator, bad partner. Same guy, every time.

Two questions. Five filters. All five you can run from your desk, with nothing but public documents.

One. Follow the dollar. Give a CEO one dollar of free cash and watch what he does. Buys back cheap stock, keep him. Prints shares and overpays for empire, run. A CEO controls more capital in a decade than most fund managers touch in a career, and almost none were hired for that skill.

Two. Read the proxy. Not the investor deck. The deck is makeup. The proxy is the confession. What did he pay himself. What did the owners get. Bad managers always leave fingerprints in the pay table.

Three. Integrity first. Intelligence, energy, integrity. Miss the third and the first two turn against you. A brilliant crook is the most expensive man you will ever own. If your CEO must be dishonest, pray he’s also lazy and stupid.

Four. The money or the game. Some men keep working after the payday because they love the game. Those men outwork everyone on earth. Others love the money, and they’re already gone. They just haven’t told you.

Five. The confession test. Pull up the shareholder letter from the company’s worst year. Does he write “I made a mistake” or does he blame weather, macro, China. A man who lies to you about the past will lie to you about the future.

Five filters. Public documents. One afternoon of reading.

Now the part where it stops being theory.

The four men I’m about to grade control most of my net worth. This isn’t a research exercise. If one of them fails these filters, I have to sell. So I graded them the way you’d grade a surgeon before he opens you up.

Andy Eidson. Walt Scheller. Jeremy Thigpen. Keelan Adamson.

Let’s see who bleeds.

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“When I say I understand a business, I mean I have a reasonable fix on what its earnings power and competitive position will look like in five or ten years.”

— Warren Buffett

Most people lose money because they cannot sit still. That’s it.

Buffett built the greatest fortune in history mostly by waiting. In 1969 he shut down his entire partnership and handed the money back. Not because he was scared, but because nothing was worth buying. He sat in cash and looked like a fool. Then 1973 and 1974 came, the market bled out, and everything he wanted went on sale. He didn’t predict the crash. He just refused to act until the odds were his.

When he finally moves, he doesn’t flinch. He bought The Washington Post and watched it drop 50% in a matter of months. His reaction?

“That was the best thing that could’ve happened; it doesn’t get any better than that.”

Everyone else saw a loss. He saw a sale on a business he already understood. His favorite holding, See’s Candies, loses money eight months out of the year. He sleeps fine.

“We know the seasonal pattern, so we don’t worry in July that somehow Christmas won’t come. We’ve got a couple thousand years on our side.”

That’s the difference between a price and a business. A price is what the screen screams at you this morning. A business is what it becomes while everyone else is panicking.

So what is a business actually worth? Buffett’s answer is the simplest in finance. A business is a bond. It throws off coupons of cash, year after year, until doomsday. The only difference is that the coupons are not printed on the instrument. Your entire job as an investor is to estimate those coupons yourself and never pay more than they are worth today. If you cannot estimate the coupons, you cannot know the value. And if you know the value, the daily price stops being information and becomes an offer. Sometimes a stupid one, in your favor.

The only reason to put cash into anything is to take more cash out later. Not by selling it to the next guy, that is just a game of who beats who, but from what the asset itself produces. Focus on the business and you are an investor. Focus on the price and you are a speculator. That is not my game.

So I spent this quarter estimating coupons. Three businesses, plus a decision about what my cash should look like while it waits. If I am wrong about what follows, I will lose a very large amount of my own money. I am not writing about these companies. I own them. Heavily.

Here are four stories where I’m waiting for Christmas.

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Since the mid 2010s, not a single new drillship has been ordered anywhere in the world. Not one. In a decade.

Now hold that thought, because the world did not stop needing these machines. It needs them more than ever. A fixed fleet meeting rising demand. That collision is the whole story of this post.

Most people carry a picture in their head from 2014. Deepwater oil is the expensive stuff, the first thing that dies in a downturn. That picture is upside down today.

Deepwater is now the cheapest oil on the planet. Well, except for a few fields in Saudi Arabia, where the oil practically pumps itself out of the ground. Guyana produces at a breakeven around 23 dollars a barrel. Namibia sits near 20. Brazil’s pre salt runs about 35. Exxon says most of its deepwater projects earn ten percent returns at 35 dollar oil. US shale needs 56 to 66. The oil three kilometers under the ocean is now cheaper to produce than the oil under Texas. A decade of brutal discipline did that. The downturn killed every weak project, and what survived only drills the best rock on earth.

So the cheapest barrels left are under deep water. And to reach them you need one specific machine. A drillship. A new one costs 1 to 1.2 billion dollars, and here is why nobody orders one.

To earn back a billion dollars, a new drillship needs day rates around 800 thousand dollars, sustained for at least a decade. Today’s rates are 400 to 500 thousand. Whoever builds one today volunteers to lose money for a decade. So nobody volunteers. And even if someone wanted to, the banks left the sector after the last crash, the shipyards are full of LNG carriers for years, and the engineers have retired. The factory itself has been dismantled.

So even at 120 dollar oil, the first new drillship would not touch water for the better part of a decade. For all practical purposes, the fleet is fixed. About 97 drillships exist on earth. That is the supply. It is very likely the maximum supply the world will ever have. From here, the fleet only gets older and, eventually, smaller.

There is one small cushion. During the downturn, owners cold stacked rigs, parked them and shut them down. About 13 drillships and 17 semisubmersibles are sleeping like this today. Waking one costs 85 to 90 million dollars and takes over a year, and no owner does it without a long contract already signed, usually with the customer paying part of the bill upfront. Once those ships are back at work, there is nothing behind them. No newbuilds. No plan B. Nothing.

But honestly, all of that is the easy half of the thesis. Fixed supply was just as true in 2021, and everyone who bought on that idea alone spent three years waiting and doubting. The difference between 2021 and today comes down to one question. Where does the cycle clock stand right now. Demand moves first, then day rates, then asset values, in that exact order, every time. Read the clock right and you know what comes next before the market prices it.

I am not writing this from the sidelines. I own these stocks, and they are among the largest positions in my portfolio. Below the paywall is exactly why, where we are on the clock, and the two risks that could still prove me wrong. Including the single most important paragraph I have written about offshore.

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The Singapore Coking Coal Conference is one of the few times each year when the people who actually move this market are in one room. Traders, producers, the big Indian and Chinese steelmakers, the price agencies. If you want a read on where seaborne met coal is heading, this is about as good a signal as you get. So I went through everything that came out of it, and here are the takeaways that stuck with me.

The one line summary is that met coal is really two markets now, and most headlines miss it.

1. There are two coal markets, not one

There is ordinary coking coal, and there is premium, high quality coal. People lump them together, but they are behaving very differently.

The lower and middle of the market is fine. New supply keeps coming from Mongolia and Indonesia, and prices there are calm. The premium end is the opposite. That is the good coal the big steelmakers cannot substitute, and it keeps getting tighter. When you hear that coal prices jumped this year, that is the premium part. The cheap stuff is not the story.

2. The China accident did not cause the tightness, it exposed it

In late May a gas explosion at a mine in Shanxi killed 82 people, the worst Chinese mining accident since 2009. Inspectors then shut more than a hundred mines. Shanxi makes about a quarter of China’s coal, so this was big.

The interesting part is that the mines did not fully reopen. Before the accident they were running above their official capacity, over a hundred and ten percent. After, the safety crackdown pushed them down to seventy or eighty. One trader thought the lasting loss could be twenty to thirty million tonnes even after restarts. And it hit the good coal hardest, the exact grades you cannot get from Mongolia or Russia. So China went and bought Australian and Canadian premium instead, and prices jumped. The accident just reminded everyone how thin the premium market already was.

3. Australia is not going to grow

This is the big one. Normally when premium prices rise, Australia digs more, since it sells more than half the world’s seaborne met coal. Not this time.

Australian exports are flat, around 150 to 160 million tonnes, and it is structural. Queensland brought in a brutal royalty regime in 2022. You can see it in the decisions. BHP suspended a mine and cut hundreds of jobs, blaming lower prices and higher royalties, and passed on another project. Exploration spending has dropped hard. The line that stuck with me most from Singapore was that only three new met coal mines are confirmed to start anywhere before 2030. Three. For the supplier that carries half the world’s premium coal. So when a shock hits, there is no wave of new Australian tonnes waiting.

4. Mongolia and Indonesia do not fill the gap

The obvious pushback is that Mongolia and Indonesia are growing, so it will ease. Both are growing, and both help less than you would think.

Mongolia is exporting record volumes, but it is landlocked and ships almost everything to China by land. It helps China, not the seaborne market. If you are a mill in India or Japan, a Mongolian tonne is not really available to you. And even that is fragile. Mongolian energy workers are now preparing a nationwide strike, a reminder that this supply rides on a narrow overland chain. Indonesia is growing fast too, but its coal is lower quality and held back by logistics and washing capacity. It fills the bottom of the market, not the premium gap.

5. Demand is moving from China to India

China’s steel output is falling, at a seven year low, yet its coking coal imports were up about twenty percent early this year. Lower steel, higher coal imports. The demand is shifting toward imported premium tonnes, not disappearing.

And the real growth has moved south, to India and Southeast Asia. India is the one I keep coming back to. It is expanding steel capacity in a big way and imports the overwhelming majority of its coking coal. That combination is becoming the most important demand story in the whole market.

6. Why I am bullish from 2028, and why everything depends on India

Now let me put it all together.

Start with supply. New seaborne supply is extremely hard to bring on, and most people underestimate just how hard. When a mine shuts down, the workers leave, the equipment gets sold, and the licenses expire. Restarting is far harder than it sounds. Banks will barely finance coal projects anymore. Skilled miners are hard to find and take years to train. New mining equipment can take years to be delivered. And in most Western countries, permits for coal are slow and political. Once a mine shuts, it stays shut.

That is why global coal investment has fallen roughly two thirds since 2010, and why Wood Mackenzie sees a seaborne met coal supply gap opening as old reserves deplete and almost no new projects get approved. The supply side is not just tight today. It cannot respond for years, no matter what the price does. That is the foundation of why I am bullish on met coal, and specifically why I think 2028 and 2029 is when it shows up in earnest. Any new mine someone decided to build today would not produce a tonne before then anyway.

Now the demand side, and this is where India stops being a slogan and becomes a list of real furnaces.

I checked the actual projects, because “India is growing” gets repeated so often it stops meaning anything. They are real and under construction. JSW commissioned a new 4.5 million tonne blast furnace at Vijayanagar and is upgrading another, taking that site toward nineteen million tonnes by late this fiscal year. At Dolvi it is going from ten to fifteen million tonnes with a new furnace by September 2027. AMNS India is taking Hazira from nine to fifteen million tonnes in the first half of 2027. SAIL has clearance for a new furnace that roughly triples its IISCO plant by around 2029. Jindal already doubled hot metal at Angul, commissioning one of India’s largest furnaces in late 2025. Tata is working on a five million tonne furnace at NINL. Add just the clearly executing projects and you get close to thirty million tonnes of new blast furnace capacity between now and 2029.

And the money is committed, not promised. The top four Indian steelmakers just announced a forty percent jump in capital spending for fiscal 2027, around 700 billion rupees. These furnaces are built to run for forty years, not to flex with one price cycle. In February 2026 it even got formal between governments, a US India joint statement where India committed to 500 billion dollars of US energy products over five years, with coking coal named explicitly.

India imports roughly ninety percent of its metallurgical coal, because its own coal is too high in ash to make steel at scale. That dependence is permanent, not temporary. S&P sees India’s met coal imports rising toward 100 million tonnes by 2030. In 2024, India became the single largest destination for US metallurgical coal exports for the first time in history.

So put the two halves side by side. Demand from India is growing on a forty year timeline with committed capital behind it. Supply cannot respond for years even if prices double, because the mines that closed are not coming back and new ones take the better part of a decade. Every furnace India lights is a furnace that will need imported coal for four decades, and the world has quietly stopped building the mines to feed it.

That gap does not close politely. Somewhere around 2028 or 2029, the furnaces will be running and the new tonnes will not exist. That is the setup, and almost nobody is positioned for it.

One last thing

Most investors will read all of this and think what they have always thought. Higher prices will fix it. That is how commodities have always worked. Every boom brings a wave of new supply, the glut arrives, prices crash, repeat. It has happened so many times that people treat it as a law of nature.

This time, in a handful of markets, that law is quietly broken. Not because producers do not want to respond, but because they cannot. The capital will not come, the people are gone, the permits take a decade, and nobody builds a forty year asset for an industry the world has declared dead. It is true in uranium. It is true for rare earth producers. It is true in offshore drilling, especially ultra deepwater. It is true even in DRAM, where higher prices have not produced the flood of new supply that markets have come to expect. And it is true in met coal.

The supply response that everyone is waiting for is not coming. And markets that assume it is coming are mispricing the ones where it is not.

The accident in China was the spark. India is the fire. And this time, there is no fire brigade.

Cheers, Sandro

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The market is paying roughly nothing for it.

That is not a figure of speech. Run the arithmetic. The whole company is worth about 13.3 billion dollars today. Lululemon’s China business alone earned 701 million of operating income last year, growing 28%, at a 40% margin. Put a sober price on that, thirteen times, and China is worth nine billion on its own. The Rest of World business adds three billion more. The balance sheet holds another billion and a half in cash and zero debt.

China plus international plus the cash come to about 13.7 billion dollars. The entire company costs 13.3.

So the math hands you the American business, the single largest premium athletic brand in the United States, the one still throwing off 2.5 billion in operating profit, for less than nothing. The market has not just discounted America. It has assigned it a negative price.

That is the anomaly.

Everyone can see Lululemon fell 78%. Almost no one has done this subtraction, because the segment reporting that makes it visible only started in January 2024. The crowd is still looking at one wounded brand. The numbers say it is three separate businesses moving at three different speeds, and the market is pricing all three as if they were the worst one.

Let me earn that, then tell you why I still might not touch it.

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“The best investors are not investors at all. They are entrepreneurs who never sold.” - Nick Sleep

Between 2001 and 2014, a English fund manager named Nick Sleep wrote letters to the people who trusted him with their money. Twenty five of them. Over two hundred pages. By the time he closed the fund and walked away, it had returned 921 percent and beaten the world index by more than 800 points.

I read every page. Not for the results, those are famous. I read them to learn expensive lessons cheaply.

And the letters do not show a man who already knew. They show a man figuring it out in real time, on the page. You watch him hold the most valuable idea of his generation in his hands and not quite recognize its face. It is like reading a detective novel where you already know who did it, and you are screaming at the detective who is staring straight at the answer and writing down the wrong name.

That is what makes it useful. Not the genius. The slowness of the genius. Because if it took him years to see what was right in front of him, the same blind spot is sitting in your portfolio tonight, and you do not know which holding it is either.

Here is how his mind changed, one turn at a time. (It follows my first piece on how he built the fund, here, but you do not need it to follow this.)

Watch him see.

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One. Selling is the expensive mistake

Sleep starts as a bargain hunter, buying cheap broken things. In late 2002 he buys a wrecked British bus company, Stagecoach, for pennies. It works perfectly. The founder returns, fixes it, the stock recovers, and Sleep sells into the bounce, pleased with himself.

Then he watches it keep climbing for years. Without him.

It nags at him until he finally says it outright.

“Our greatest error was the sale of Stagecoach, not the purchase of Conseco. Mathematically this error is far greater than the equivalent sum invested in a firm that goes bankrupt.”

He owned Conseco, and it lost money. He is saying that selling a winner too early cost him more than the stock that actually went to zero. A loss ends. A winner you sold keeps rising on your screen forever, billing you in regret.

The expensive mistake is rarely the thing that blows up. It is the thing you let go of, that goes on without you.

Two. Culture is what a company does when no one is watching

The company he keeps circling is Costco. What converts him is not a number. It is a story.

Costco lands a once in a lifetime deal on two million pairs of designer jeans, cheap enough to mark up hard and still beat every rival in America. Free money, and no customer would ever know. A buyer suggests exactly that. The founder refuses.

“Sinegal insisted on the standard mark up, arguing that if I let you do it this time, you will do it again. The contract with the customer must not be broken.”

Sleep sees the whole engine in that one moment. Costco hands its scale back to shoppers as lower prices, every day, and they reward it with loyalty that compounds for decades. He names the model, scale economies shared, and it becomes his entire philosophy.

He buys around thirty nine dollars a share and figures it might reach the eighties or nineties over the years.

It trades near nine hundred and fifty today.

Three. He stares at the answer and writes down the wrong one

It is 2004. Sleep reasons it out from scratch. What would the most valuable company on earth look like? He lists the ingredients perfectly. A vast market. Rising barriers. Almost no capital tied up, so cash pours out the bottom.

Then he names the company that fits.

“A business such as eBay could be the most valuable in the world. So no, Costco is not perfect. Perhaps we should own eBay as well.”

eBay.

And here is the knife. He is writing about Amazon in the same letters. He has already noticed it might be walking the exact Costco path he loves. The better answer is on the previous page, in his own handwriting, and one of the sharpest investors alive points at eBay.

Before you judge him, see what he saw. At the end of 2004, eBay was worth 77 billion dollars. Amazon was worth 18. eBay was four times bigger, and the press was full of confident pieces explaining Amazon had no chance against it. Pointing at eBay was the obvious, sensible, consensus answer. He was simply early, and being early looks exactly like being wrong, even from inside your own head.

And the deeper reason he missed it is the most human thing in all the letters. He admits, years later, that Costco and Amazon and even a small insurer he owned all ran on the same engine, and he had filed them under three different industries without ever seeing it.

“My mistake in not recognising that these businesses share similar roots might be termed a framing error.”

The single best idea of his career was in his hands the whole time. He just kept calling it three different names. The genius was never that he saw it. It was that he kept looking until he did.

The lesson I have taped to the inside of my skull. Having the right map does not save you if you circle the wrong city. Listing the ingredients is not the same as recognizing the dish.

Four. His caution was cowardice in disguise

After all that work, Sleep writes a line that his first mistake was not buying Costco. It was not buying enough.

“Already your manager may have made his first mistake investing in Costco. From not buying enough.”

He works through the Kelly criterion, the math of how much to bet when the odds favor you, and the answer is merciless.

“Even if one is, say, 75 percent certain of being right, the correct weighting remains high at 47.5 percent.”

Forty seven percent. In one stock. He sees that all his careful four and five percent positions were never prudence. They were fear wearing the costume of discipline. He had believed in his best ideas too quietly.

So he lets Amazon grow to a sixth of the whole fund, warns his investors the ride will get rougher, and holds anyway.

For a rare business with a low chance of dying, spreading your money thin is not safety. It is cowardice with good manners.

Five. Doing nothing is the hardest job in the world

Then 2008 arrives and tries to kill him.

The fund falls 45.3 percent in a single year. His biggest position is cratering. His peers are dumping shares into the panic. Every nerve is screaming to do something, sell something, save something.

He does nothing. He sits in his chair and lets the businesses compound. And he explains why in what may be the best sentence in the whole collection.

“Buy shares in a great business at a reasonable price and let the business grow. This requires just one decision, to buy the shares, but in reality it requires daily decisions not to sell as well.”

Almost nobody manages it, he notes dryly, because doing nothing is the enemy of high fees. Munger seals it. You make your real money sitting on your assets.

In 2009 the fund rises 71.5 percent.

Hold both numbers a second. Down 45, then up 71, and you are still not back to even. That is the brutal arithmetic of a crash, the hole is always deeper than the climb out feels. He sat through every day of it without flinching, because the daily decision not to touch a great business is harder, and rarer, than any decision to act.

Anyone can buy. Sitting still while the position grows indecently large is the actual skill.

What he was holding the whole time

Look at what was in this man’s hands while he doubted himself.

Berkshire Hathaway, around seven hundred and thirty thousand dollars a share today. Costco, which he wanted at thirty nine, near nine hundred and fifty now. Amazon, which he bought at around thirty dollars, would now be worth roughly fifty five thousand dollars at today's price after four stock splits.

He was holding the future. All of it. And even with it sitting in his account, he spent years circling eBay, sizing his bets too small, filing his best idea under the wrong name, fighting the urge to sell.

None of that was failure. That was the work. The letters are not the record of a man who was always right. They are the record of a man who kept looking until he saw clearly, and then had the nerve to sit still. That is rarer than being right, and it is the only part you can actually copy.

Why this is the only thing that matters

Sleep’s edge was never secret information. He read the same filings everyone read. He just stared at the same few companies long enough to finally see what they were, then had the stomach to hold them when everyone around him was selling.

Remember the line he opened my mind with. The best investors are not investors at all. They are entrepreneurs who never sold.

He built his thesis, and he held it through the doubt, the crashes, the years of being called wrong. Decades later, his entire fortune sits in the same three names he carried out of those letters. Amazon. Costco. Berkshire. He found them, he understood them, and then he simply never let go.

The one time his conviction cracked, he sold half his Amazon because it had grown too large for his comfort, and bought a little ASOS instead. Even he could flinch. The difference is he spent the rest of his life learning not to.

So I will leave you where the letters left me.

Open your portfolio tonight. One of those holdings you have half decided to sell is the one you are meant to hold for the rest of your life. You found it. You understood it. The only question left is whether you have the nerve to do nothing while it works.

The biggest investment mistake is not what you buy. It is what you cannot hold.

Cheers, Sandro

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In 1948 a man climbed a mountain in Pennsylvania to sell televisions.

The problem was nobody could buy them. The valley below his shop sat behind a ridge, and the broadcast signal could not get through. So he put an antenna on top of the mountain and ran a cable down into the town. Suddenly the televisions worked. Suddenly he was selling them.

That cable was the seed. Seventy eight years later that same wire runs into the wall behind your couch. There is a company that owns that wire. And the stock market is treating the company that owns it like it is dying.

It is down sixty five percent from its high. The market acts like the funeral is already scheduled.

I do not think it is. But I want to walk you through why.

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Not a Cable Company

The business in three sentences.

Charter owns the physical cable running into fifty seven million American homes, almost forty percent of the country, and sells them internet, TV, phone and mobile over that one wire. The wire already sits in the ground, so every new customer costs almost nothing to add, and every dollar of price increase falls straight to the bottom line. People call it a cable company, but it is more like a utility that delivers data.

That last point matters. Remember it.

The Cannibal Machine

This is why the company ended up on my screener.

Charter does not pay a dividend. It takes every dollar of free cash flow and buys back its own stock. Since 2016 it has eaten almost half its own shares. The business stays the same size, but the number of slices keeps shrinking, so each remaining slice owns more.

For years it worked beautifully. And then it did something that looks, at first glance, insane.

The Day Everything Broke

On the twenty fourth of April 2026, Charter reported it had lost a hundred and twenty thousand internet customers in three months.

The stock fell twenty percent in a single day. The worst day in its history.

I am not going to soften this for you. The bears are right about the present. Charter has now bled broadband subscribers for four straight quarters. Fixed wireless, the 5G home internet sold by Verizon and T Mobile, is stealing customers. Fiber is creeping into half its markets. The growth is gone. New Street Research thinks the big cable companies will not add a single net customer for the next five years.

So before we go further, sit with that. This is not a growth stock. Anyone who tells you Charter is about to boom is lying or hoping.

The $259 Question

Now here is the part that made me stop and stare.

In 2025 Charter spent five point four billion dollars buying back its own stock. Its free cash flow that year was five billion. It spent more than it earned, buying shares.

At what price? An average of two hundred and fifty nine dollars a share.

Today the stock is one hundred and twenty six.

So one of two things is true. Either management lit billions of dollars on fire buying high. Or the market has lost its mind pricing the same asset at half of what insiders thought it was worth months ago.

Which one is it?

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Sitting in that room was a English fund manager named Nick Sleep. Amazon was his largest position. He had just watched a quarter of his clients yank their money out of his fund in fear. That night he called his partner in London and asked the only question that mattered. Are you sure we know what we’re doing, because everyone here is going the other way.

Either we are brilliant, he thought, or we are toast.

He was right. He was brilliant. Over thirteen years his fund returned 921 percent and beat the world index by more than 800 percentage points. Then, with billions under management and the chance to earn enormous fees forever, he gave the money back to his clients and retired at forty-five to give most of his own fortune away.

Nobody tells this story, because the two men at the center of it never wanted it told. They gave almost no interviews. They worked above a Chinese herbal medicine shop. They put their single Bloomberg terminal on a low table with no chair, on purpose, so your back would start hurting and you would walk away and go think.

I read all of it so you don’t have to.

A failed landscape architect and a frustrated meteorologist

Nick Sleep never wanted to work in finance. He studied geography, took an apprenticeship designing parks, and got laid off a few months in. He only looked into fund management because Edinburgh happened to be good at it.

His partner, Zak Zakaria, wanted to be a meteorologist. His parents thought that was stupid. He landed in finance by default after his own father went bankrupt speculating on tip-sheet stocks, an experience that left Zak with a lifelong disgust for salesmen and get rich quick schemes.

Two outsiders who fell into the industry by accident. That is exactly why they could question everything everyone else accepted without thinking.

In 2001 they launched the Nomad Investment Partnership. It began trading on September 10, 2001. One day later the towers fell and markets collapsed. They did not flinch. They started buying the cheapest, most hated businesses on earth.

First they built the cage, then they hunted

Before the money, they built a system designed to protect them from their own worst instincts.

They threw out the sell-side research that floods every fund. They told brokers to stop calling with tips. They put the Bloomberg on that low table so they could not bear to use it. They ignored short-term economic news the way you ignore food past its sell-by date, because most of it would be worthless in twelve weeks anyway.

Then they aligned the money. Most funds charge one or two percent on assets no matter how they perform. Nomad charged a tiny fee that just covered costs, and took a slice of profits only after clearing a six percent annual hurdle. Perform badly and they earned nothing.

And they chose their investors as carefully as their stocks. Anyone joining had to sign a document acknowledging the fund was wrong for them if they had less than a five-year horizon. They favored endowments and foundations, patient money that would not panic, and turned away rich, irritating clients without a second thought.

The cigar butt years: where they actually went and what they paid

With the cage built, they went hunting in the ugliest corners of the planet for businesses the market had left for dead.

In the Philippines they bought Union Cement, the country’s largest cement maker, after the stock fell from thirty cents to under two cents. The market valued the entire business at one quarter of what it would cost just to rebuild its assets.

In Thailand they bought Matichon, a newspaper publisher, after the stock crashed from twelve dollars to one. It traded at 0.75 times revenue and was worth roughly three times what they paid.

In the United States they bought preferred shares of Lucent Technologies after it had lost 98 percent of its value.

Then in 2004 they crossed from South Africa into Zimbabwe, under Mugabe, with the currency collapsing and farms being seized by mobs. They bought a basket of four near-monopoly businesses trading as if they were worthless. One cement producer, Zimcem, sold for one seventieth of the replacement cost of its assets.

Sleep wrote to his investors about Zimbabwe with something close to joy. The clients will hate it. Compliance will hate it. The consultants will hate it. The opportunity is tiny. It is not in the benchmark. Perfect.

Trading on the Zimbabwe exchange stopped entirely for a while, so Nomad simply valued the basket at zero. When they finally sold the last of it in 2013, those positions had risen between three and eight times. As a souvenir, they mailed every shareholder a worthless 100 trillion dollar Zimbabwean banknote.

By the end of 2003 the fund had already doubled.

The mistake that changed everything

In 2002 Nomad made its biggest bet yet on Stagecoach, a debt-loaded British bus company whose stock had crashed from £2.85 to 14 pence. They figured it could be worth 60 pence. The founder, a former bus conductor turned billionaire, came back from semi-retirement to fix it. The plan worked. Sleep and Zakaria sold around 90 pence and congratulated themselves on a six fold gain.

Then they watched the stock climb to £3.68.

They had treated a wonderful business as a cigar butt and thrown it away too early. In Sleep’s words, they felt like a bit of a horse’s arse.

That mistake reshaped everything. Cheap and ugly works once. But when a cheap stock recovers you have to sell it and find another, and one day there is nothing good left to buy. The better game is to find a great business run by someone you trust, and never have to decide to sell again.

They called it destination analysis. Wall Street obsesses over the next quarter. Sleep obsessed over the inputs that would decide the destination.

Costco, and the one idea that took over the whole fund

They found their model in Costco. When they first bought it in 2002, the stock had fallen from 55 dollars to 30 on worries about thin margins.

Wall Street saw weak margins. Sleep and Zakaria saw the opposite. Costco marked goods up no more than 15 percent while a normal supermarket marked up 30. Every time the company got bigger and squeezed a better deal from suppliers, it handed the savings straight back to shoppers as lower prices. Customers rewarded that with loyalty. More revenue, more scale, lower costs, lower prices, more revenue. A flywheel that feeds itself.

They estimated Costco members saved five dollars for every one dollar Costco kept.

Sleep gave the model a name. Scale economies shared. Most companies chase scale and keep the gains. A rare few give the gains away, and that is exactly what makes them almost impossible to compete with. Once they understood it, this single idea took over the entire fund. As Sleep put it, when you have the best thought you may ever have in your life, it has to dominate everything, because you will not get many insights like that.

The Amazon bet that nearly broke them

Sleep first saw Bezos present in London in 1997, when Amazon was just a bookseller about to go public. He ran back to the office and told his boss it could be huge. His boss asked the right question. What are they doing that nobody else can do. It took years to answer.

The answer was that Bezos was running the Costco playbook, and the internet let him run it at impossible speed. When Amazon launched Prime in 2005, Sleep saw it instantly. Amazon suddenly became Costco on speed.

Nomad started buying Amazon aggressively in 2005 at around 30 dollars a share. They put 20 percent of the fund into it and asked shareholders for permission to go beyond even that. And here is the part worth sitting with. A quarter of their clients pulled their money out, terrified of the concentration. They fled right before the single greatest run in the history of the fund. The people who left were not punished by some villain. They were punished by their own impatience.

Then 2008 came, and the scene this story opened with. Soros shorting Amazon. Bill Miller, who held the largest outside stake, forced to dump shares into the panic to meet his own redemptions. Sleep on the phone at night asking if they had lost their minds.

They did not sell. They used the crash to upgrade, concentrating even harder into Amazon, Costco and Berkshire. Amazon fell almost in half that year and Nomad fell 45 percent. They held an emergency meeting in the only suitably grim location they could find, a McDonald’s, to face the possibility that the fund might not survive.

It survived. From 2009 through 2013, Nomad returned 404 percent. Amazon eventually grew to about 40 percent of the entire fund.

The numbers, and the walk away

Over not quite thirteen years, Nomad returned 921 percent before fees against 116.9 percent for the MSCI World Index. One million dollars in the index became 2.17 million. One million in Nomad became 10.21 million.

In early 2014, with three billion under management and the ability to print fees forever, they closed the fund and handed the money back.

Sleep wrote a thank you letter to Buffett. Buffett wrote back:

“You and Zak have made the right choice, I predict you will find life is just beginning.”

In retirement Sleep put almost everything into three stocks. Amazon, Costco, Berkshire. That was the whole portfolio. By 2018 Amazon alone was more than 70 percent of his net worth. It worried him enough that he sold half his stake in a single day at 1,500 dollars a share. How did it feel. I hated it, he said. I am not sure it was a good decision.

He put the cash into a fourth stock, an online retailer called ASOS. He got that one wrong. The stock would later collapse, a reminder that even the patient master is not infallible.

Zakaria went further. He has never sold a single Amazon share. About 70 percent of his money still rides on it, the rest mostly Costco and Berkshire. He says he occasionally looks at his portfolio and asks what Nick would do. The answer is always nothing. Okay, he thinks. That is done for another six months.

What this means for us

Sleep’s biggest gains did not come from what he bought. They came from what he refused to sell. Eighteen years in Costco. Sixteen in Amazon as it ran from 30 dollars to over 3,000.

The clients who walked away in 2005 were not stupid. They were impatient. And impatience cost them the decade of their lives.

That is the horror of this business. The thing that ruins you is not a lack of intelligence. It is the inability to sit still. Smart people watched the same flywheel Sleep watched, ran the same numbers, and still sold, because they could not bear the discomfort of doing nothing while it worked.

At Cannibal Stocks we think the way Sleep thought. In decades, not quarters. Sleep found that in companies that cut prices for customers. We hunt for it in its sharpest form, the relentless buyback, the share count that shrinks every year so your slice of the business grows while you do nothing.

We can hand you the company. We cannot hand you the temperament. That part is yours.

The only question that has ever mattered is whether you can stay in your seat.

Cheers, Sandro

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"Focusing on the price of a stock is dynamite; it really means that you think that the stock market knows more than you do. The stock market may know more than you do, but then you shouldn't be in stocks. The stock market is there to serve you, not to instruct you."

— Warren Buffett

In September of the year 2000, a man boarded a plane to Australia for a honeymoon he had postponed for far too long. He was the CEO of the hottest payments company on the internet. He owned more of it than anyone alive. And by the time his flight landed, he no longer ran it.

While he was somewhere over the Pacific, a group of his own executives gathered in a dim Palo Alto bar called Fanny & Alexander and decided he had to go. They walked into a board meeting with their case already built. The board agreed. They installed a quiet chess prodigy named Peter Thiel in his place and renamed the company. The man who got pushed out was Elon Musk, and the company that fired its largest shareholder midflight was PayPal.

Every single person in that conspiracy went on to become a billionaire several times over. Thiel built Palantir and wrote the first big check into Facebook. Reid Hoffman built LinkedIn. The engineers down the hall built YouTube. Musk, the man they exiled, took his roughly 165 million dollars from the eBay sale and poured it into two ideas everyone told him were insane, named Tesla and SpaceX. The people who passed through PayPal’s doors in those years went on to create companies worth more than ten trillion dollars combined. They called themselves the PayPal Mafia, and they are arguably the most successful single cluster of human talent in the history of capitalism.

And the company that produced all of them?

It is the one that got left behind.

Today that same PayPal trades around 41 dollars a share. In 2021 it touched 310. The market has erased over three quarters of its value and roughly 300 billion dollars in market capitalization, more wealth vaporized than most countries produce in a year. Wall Street has written the obituary. Apple Pay is eating its lunch at checkout. The board fired its CEO this past February after just twenty eight months, midstride, the same week it admitted growth had nearly stopped. The story writes itself. The mafia got rich. The mothership is dying.

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Except that is not the story.

Because while everyone was watching the stock bleed, PayPal was doing something only a handful of companies in market history have ever pulled off. As the price collapsed, management did not flinch. They kept buying their own stock. Cheaper, then cheaper, then cheaper still, spending over 100 percent of their free cash flow in some years to retire shares at prices the company had never seen as a public company. The lower the market pushed it, the harder they fired the cannon.

The effect of that is something almost nobody on financial television bothers to explain, because it is slow and boring and does not fit the death narrative. The share count is shrinking. The pie is being split among fewer and fewer owners every single year. Even a company whose profit barely moves can quietly make its remaining shareholders richer this way, and PayPal has been doing exactly that, year after year, while the market wrote its funeral. Just how powerful that math gets is the part the obituary skips, and it is the first thing I break down below.

This is the part nobody on financial television wants to explain, because it is boring and slow and it does not fit the death narrative. A company with a net cash balance sheet. A ten percent free cash flow yield. Management aiming a multibillion dollar cannon at its own shrinking float, firing it harder the lower the price falls. There is a name for a creature that consumes itself to grow stronger. There is a reason this newsletter is called what it is called.

So the question is not whether PayPal got left behind. It did. The question is whether being left behind, hated, written off, and trading at one seventh of what it once commanded is the setup for the worst value trap of the decade or the most obvious cannibal hiding in plain sight.

The man they threw off that plane understood something his executioners did not. He told a reporter years later, miming a knife being pulled from his own back, that life is too short for long grudges. He buried the hatchet and moved on to build the future.

The market just threw PayPal off the same plane.

The only thing left to figure out is where it lands.

The full breakdown is below. The buyback math the death narrative ignores. The Venmo number management buried on page nine. Why the CEO really got fired. And the single line in the 2026 guidance that tells you whether this is a trap or a gift. Upgrade to read it all.

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“What we’re looking for is intelligence, energy, and integrity. And if they don’t have the last one, the first two will kill you.”

Warren Buffett, Berkshire Hathaway annual meeting, 2005

Yesterday I read an SEC filing that should not exist.

A company called Nakamoto, ticker NAKA, authorized a buyback of up to 25 million dollars. Sounds ordinary.

FORM 8-K Nakamoto Inc.

Now look at the numbers around it.

On the balance sheet sit 4,467 bitcoin worth about 280 million. Against that stands 165 million of debt and around 35 million of cash. Net liquid assets of roughly 150 million. The stock trades at about half of that. Market cap of roughly 77 million dollars.

It gets better. The company also owns Bitcoin Magazine, the Bitcoin Conference, and an asset management business. At this price you get all of it for free.

It gets better still. The buyback is roughly a third of the entire market cap. The CEO bought a million dollars of stock with his own cash two weeks before the announcement. He owns 18.25 percent of the company. The lender just lowered the interest rate and extended maturities into 2027. Massive discount to net assets. Free operating businesses. A buyback the size of a third of the company. Insider buying. A cooperative lender.

On paper this is the most beautiful cannibal I have seen all year. Every word of that section is true. And yet I spent a full day digging through filings before writing this, because something about this story did not smell right.

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"The value of a business is the present value of the cash it will generate between now and Judgment Day, discounted at the appropriate interest rate."

- Warren Buffett

Every year coal sets a new record.

In 2025 the world burned 8.8 billion tonnes of it. An all time high. Because of the events in the Middle East, 2026 will set another all time record. While the financial press wrote eulogies, the black rock kept showing up to work.

I want to tell you about a company that takes this hated, dying, politically toxic rock and does two things with it that should not be possible. It sells it for enormous profit to a world that cannot get enough of it. And it turns it into parts for fighter jets.

This is Core Natural Resources. Ticker CNR.

Two legends got married

Core is not one company. It is two.

In January 2025 two coal giants merged. CONSOL was the king of cheap thermal coal in Northern Appalachia, with one secret weapon, a marine export terminal in the Port of Baltimore. Arch owned the one of best metallurgical coal mines in America. The kind of coal that is geologically rare and impossible to replace.

Neither one alone had the full picture. Together they do. Core digs up Arch’s premium steelmaking coal and ships it to the world through CONSOL’s port. One business balances the other.

And the people running it are not amateurs. When firms merge they always promise cost savings that never appear. Core did the opposite. They promised 110 million in synergies. Then raised it. Then raised it again. It now sits at 150 to 170 million a year. Management delivered more than it said. Remember that. It tells you who you are betting on.

A coal miner that builds aircraft

Before the coal, let me break the stereotype completely.

Core has a division called Innovations. It takes coal mined in West Virginia and turns it into a special carbon material. That material is used to make the tools and molds needed to build military aircraft and spacecraft. This is not a small experiment. The business serves more than 40 customers. Its products have been used in the F-35 fighter jet, the B-21 bomber, and NASA programs.

Sit with that. The market sees a dying coal miner. Some of that same coal is ending up in fighter jets. Nobody is paying a cent for it.

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Part One. The thermal coal nobody admits they need

The thesis nobody in polite company will say out loud. Demand for thermal coal is not falling. It is rising. And it will keep rising for two decades.

There are 8.3 billion people on this planet. Roughly 750 million have no electricity at all. Billions more have power that cuts out every day. They do not care about your ESG report. They want lights, refrigerators, a fan when it is 45 degrees outside.

By 2050 the world must electrify another 2 billion people, because the world’s population is going to grow. That is building the entire power grid of China and Europe from scratch in 25 years. You do not do that with solar panels.

China burned more coal in 2024 than the rest of the world combined, and has over 200 gigawatts of new coal capacity under construction. India has 1.4 billion people and uses a fraction of the power per head that the West does. Neither has committed to a phase out. None.

Now add a new buyer. Data centers. AI is devouring electricity faster than anyone predicted, and it needs power at three when the sun is not shining. In much of the world that means coal.

That is CONSOL’s world. The crown jewel is the Pennsylvania Mining Complex, three connected mines holding 529 million tons, around 20 years of life. The coal runs near 13,000 BTU, hotter than most American coal, and Core owns 94 percent of it outright instead of leasing. That is an edge by itself.

Why does CONSOL win? Lowest cost plus the port. In commodities the cheapest producer always wins, because when prices fall the expensive mines die first while the cheap one keeps printing cash. And the Baltimore terminal is the only major East Coast export terminal served by two competing railroads, so the railroads cannot squeeze them. The Baltimore terminal throws off around 60 million a year, and Core also owns 35 percent of a second export terminal, DTA, for even more export capacity.

When the home market is weak they export. When export is weak they sell at home. They can sell wherever the better market is.

Part Two. Arch and the rarest rock in the world

Now the second thesis.

Metallurgical coal is not thermal coal. It is a different animal. You do not burn it for power. You use it to make steel. There is no way to make steel in a blast furnace without it.

And here is the key. Unlike thermal coal, which sits under half the planet, high quality metallurgical coal exists in only a handful of places on Earth. The United States and Australia dominate the premium grades. It is geologically scarce. And there is no economic substitute that can scale. The supply of the good stuff is fixed by geology.

That combination, scarce supply and no substitute and steady demand, is the holy grail of commodity investing. Prices spike violently every few years when supply gets tight. So what does Arch bring to the table? One of the best metallurgical coal portfolios in America.

The trophy is the Leer Complex in West Virginia. Three pieces. Leer, with 29 million tons of reserves. Leer South, with 57 million tons. And an undeveloped expansion called Leer West, with another 84 million tons sitting in the ground waiting. Together that is more than 30 years of life. Leer and Leer South produce High-Vol A coal. This is the special stuff, the binding agent that lets steelmakers mix cheaper coals together. It sells at a premium for exactly that reason.

Then there are the supporting mines. Beckley, a premium Low-Vol mine with about 23 million tons. Itmann, another premium Low-Vol operation with 27 million tons. And Mountain Laurel with about 16 million tons.

Let us sell that coal

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"In particular, if you have a corporation where a man has risen to be CEO, and he now has hundreds of millions of dollars in the stock of the company... And then he has his directors vote him a great stock option grant annually to preserve his loyalty and his enthusiasm to the company, I think that's demented. And I also think it's immoral."

- Charlie Munger

I made a mistake.

Cardlytics was my investment before Cannibal Stocks existed. The ticker is CDLX. Most people reading this have never heard of it, and that is the first interesting thing about this company. You have probably used it. You just did not know.

Here is the business in four sentences. You open your banking app and see an offer, twenty percent back at a restaurant you already visit. You tap it, you pay with your card, the cashback lands automatically. Behind that tap sits Cardlytics, the wire connecting the advertiser to your bank, and the bank already knows what you buy. They do not advertise themselves. They have no logo you would recognize. They are already built into the payment systems of some of the largest banks in America, which means millions of people use this company every week and have no idea it exists.

When I bought it, here was my logic, and I want to be honest about every piece of it.

I thought the moat was enormous. Banks will not hand customer transaction data to anyone. Google tried. Facebook tried. Both got told no. Cardlytics got in because the data never leaves the bank. A competitor starting today would have to go bank by bank, contract by contract, for years. That felt unbreakable to me.

The stock was cheap. All-time low cheap. I was buying the whole company for under one times revenue. The math in my head was simple and seductive. The cost base is fixed, somewhere around 250 to 300 million a year, whether revenue is 250 million or a billion. So the moment they become meaningfully profitable, and they are already around breakeven, the market hands a small-cap a high multiple overnight, and you are sitting on a brutal return. That was the entire thesis. And I was buying while everyone else was running for the exits. I cloned the idea from Cliff Sosin, and I was paying less than he did. What could go wrong.

Here is what I got wrong.

It turns out the banks can do this themselves. I do not regret that part. If you do your homework, you think hard, you read everything, and you still get the moat wrong, that happens. It happens to the best investors alive. I am young. I will misjudge a moat again. That is the cost of doing this work, and I am at peace with it.

While I was sitting in this position, watching the stock grind lower, I noticed something else. Something that had nothing to do with banks or moats or competition. Every single quarter, no matter how badly the company performed, no matter how far the stock fell, management got rewarded. More shares. More grants. Again. And again. And again.

So I asked people. Smarter people than me, more experienced people, people who have been doing this longer. I asked them, is this normal? Is this how it is supposed to work? Every one of them told me the same thing. Yes. That is standard. That is just how the industry does it. Stock-based compensation, equity grants, it is normal, do not worry about it.

Bullshit.

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What I Found Underneath

Quick thing first, because the whole post rests on it. A company is a pie. Your shares are your slices. When the company prints new shares for someone else, your slices do not disappear, but the pie now has more slices in it. Your piece got smaller. That is dilution. Nobody reaches into your pocket. You just own less of the same company than you did yesterday.

Now look. In 2018 Cardlytics had about 22 million shares. Today it has about 58 million. They more than doubled the slices. And while they kept printing, the stock fell from about 150 dollars to under one. Price down 99 percent. Slices up 156 percent.

What does that do to you? If you owned one percent in 2018, you own about 0.39 percent today. You sold nothing. Your piece got cut by more than half while you watched.

So where did all these shares go?

A big chunk went to pay the people running the company. From 2018 to 2024, Cardlytics handed out about 251 million dollars worth of stock as pay. The entire company today is worth about 50 million. They paid out five times the value of the whole business in stock. Not with money they earned. With your ownership.

Then the deals. In 2021 they bought two companies for about 856 million combined. Within three years they admitted those companies were nearly worthless and wrote off more than 655 million of it. Hundreds of millions gone, and more shares printed to pay for it.

But the part that got under my skin was the accounting.

Cardlytics reports a number called Adjusted EBITDA. In 2024 the real result was a 189 million dollar loss. Their homemade number was a 2.5 million profit.

How do you flip a 189 million dollar loss into a profit? You take the bad stuff out. Mostly the 40 million in stock they paid themselves. They erase the cost of their own pay, then call the business profitable. Their excuse? Stock is “non-cash.” No money left the building, so it does not count.

That is the trick. If you would feel richer getting salary plus stock than salary alone, then the stock is pay. And pay is a cost. You do not get to call it free just because no cash moved. Somebody paid. You paid, through dilution. Munger had a word for this kind of accounting. Corrupt.

Then the detail that ended my doubt. On January 12, 2026, with the stock around 90 cents, after the collapse, after everything, the company handed a new executive one million fresh shares. They printed more.

Why would anyone be comfortable doing that? Buffett answered it in 1995.

“We have had conversations with managers where they tell us how fortunate they feel because the stock is down and they can issue options cheaper. If they were issuing those to the third parties, I’m not sure whether they’d have exactly the same attitude.”

There it is. A low price is a disaster for you. For a manager paying himself in shares, it is just a cheaper way in. The lower it falls, the more shares it takes to hit the same payday, and the more of your company quietly changes hands. Munger said it plainer, about a manager who thinks printing shares costs nothing:

“Imagine hiring a manager who thinks that way and paying them money to behave like Judas in your very midst.”

I got the moat wrong. I can live with that. But the moat could never have taught me this. The price tells you what the market thinks of the company.

The share count tells you what management thinks of you.

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The Silence of the Lambs

There is a reason for the title.

The shareholders of Cardlytics did what shareholders are trained to do. They held. They trusted. They waited for the next quarter. And every quarter, more shares were printed and handed to the people at the top. They did not scream. They stood quietly in line while their piece got smaller, and smaller, and smaller.

That is what most of us are. Lambs. And the silence is mistaken for consent.

I was one of them.

Not anymore.

Today I put on the mask.

Cheers, Sandro

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Note: After years of dilution, the final act was a reverse split. On June 3, 2026, Cardlytics announced a 1-for-10 reverse split, which will begin trading on a split-adjusted basis on June 8. The main reason is to push the share price higher and remain compliant with Nasdaq listing requirements. It improves the stock's appearance, but it does not improve the underlying business. It simply buys more time.

A reverse split is financial cosmetics. It makes the stock price look higher, which can attract buyers who focus on the price rather than the business itself.

I won’t bombard your inbox every day.

But there are a few things happening behind the scenes that I think are important, and that you should know about. So this time I am making a small exception and writing a short update. Going forward, these smaller updates will be posted in our Substack Chat or Substack Notes instead.

So don’t hold it against me. I promise I am not trying to turn your inbox into CNBC. 🙂

The first update is that over the last few days I have been working on a new tool that analyzes SEC EDGAR filings. The Cannibal Radar.

Every trading day I want to know which companies announce a new buyback program, increase an existing authorization, extend a repurchase program, or do anything else related to share repurchases.

This will become a new source of ideas and future posts.

The Cannibal Radar has already been running for several days. There are still a few things I need to improve and automate, so don’t criticize me if everything isn’t perfect just yet. But even in its current form, it is already proving to be extremely useful and hopefully no cannibal will escape our attention.

Most of the companies showing up on the radar are either just starting their buyback journey or are increasing and extending existing repurchase programs. Those announcements often go unnoticed by the market.

Sometimes they don’t matter. Sometimes they matter a lot.

In fact, one such example appeared today.

This company is actually very familiar to me. I spent a lot of time analyzing Arch and Consol in the past, and CNR is essentially the merger of those two businesses. Because of that, I already have a decent understanding of the company, and a full write-up will probably be coming sometime next week.

But there are even more important developments taking place right now.

Let’s talk about that.

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One year ago I published my first pitch. Twenty ideas later, this is the scoreboard.

Not a victory lap, and not a list of winners cherry-picked after the fact. A ranking. Every idea I put in front of you, sorted from my highest conviction to my biggest mistake — including the ones I actually own, and the ones I only traded and would never marry.

That distinction matters, so let me be clear about it up front. Some of these are companies I hold because I believe in them for the next decade. Some were special situations — Helium, Sable — that I rode hard and sold, brilliant trades built on businesses I have no interest in owning. A good return tells you nothing about which is which. The ranking does.

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How to read this

The tier is my conviction, not the share price. S means highest conviction. A is strong. B is solid. D is a miss. A stock can be up 100% and still sit in D, and another can be down and still sit in A — because price is what happened, and conviction is what I think happens next. Performance is measured since the first pitch. The only companies I currently hold in my portfolio are the S-Tier names.

With that out of the way, from best to worst.

S-Tier — Highest Conviction

This is where I have the least doubt, and it’s no accident that it’s dominated by two industries the market still hates. Met coal and offshore drilling. The setup in both is the same. New supply is brutally hard to bring online, the survivors have cost positions that don’t lose money, and the industry’s ugly history — bankruptcies, dilution, destroyed capital — is precisely what keeps the opportunity alive. Everyone remembers the pain. Almost nobody noticed that the supply side was permanently damaged.

Alpha Metallurgical (AMR) is one half of my met coal core. If prices stay high, it’s probably the better bet than Warrior — cheaper valuation, more aggressive buybacks, better capital allocation. It’s going to return all of its free cash flow to shareholders, and the market still treats it as garbage. If you're a cannibal and Mr. Market treats you like garbage, that's about as good as it gets. The main negative is its dependence on railroads.

Warrior Met Coal (HCC) is the other half. Better margins, a fantastic management team, and a moat most investors underestimate. If everything goes wrong, Warrior is the one that still doesn’t lose money. I genuinely can’t tell you which I prefer between the two, so I own both. The anomaly is that both will return 100% of free cash flow to shareholders. The only knock on Warrior is its preference for dividends. At these prices, buybacks would create far more value over time.

Transocean (RIG) is the offshore thesis in one name. The industry is consolidating fast, and there’s a realistic path where one player controls roughly half the world’s ultra-deepwater fleet. Once the debt comes down, I expect management to start handing cash back — and that’s when the market re-rates the whole thing. The first-year return was already excellent. I think the bigger story is still ahead. On the negative side, the Valaris merger is being financed with shareholder dilution. If management creates more value per share than it gives away, and eventually adopts a met coal-style capital return strategy, returning virtually all free cash flow to shareholders, this could turn into a brutal investment.

Valaris (VAL) is the same trade — the $35 billion fleet nobody wanted — and the market is only now waking up to what it’s worth. I already view these two companies as one position. At this point, I have very little left to add.

A-Tier — Strong

A-tier is where conviction is high but something — size, politics, a single variable — keeps it just short of the top. These companies have a high probability of eventually earning an S-Tier ranking and making their way into my portfolio.

Mongolian Mining (975.HK) has incredibly low production costs, decades of Chinese demand, a railway due in 2028, and a company that has started buying back its own stock. Premium metallurgical coal with more than a billion tonnes of reserves and resources. An asset that I believe will become one of the most sought-after in the world over time. Even India is looking for ways to access this coal, but transportation is challenging because it would have to move overland, making logistics costs significantly higher. The reason it isn’t S-tier is one word: politics. When Mongolia’s Democratic Party was in power, it tried to nearly destroy this company.

Athabasca (ATH.TO) is a genuine cannibal that returns nearly every spare dollar through buybacks, and you can already see it in the share price. A major tailwind is developing right now. Canada wants a new pipeline to the Pacific Coast. If that happens, Alberta can export more oil directly to Asia instead of relying on U.S. buyers.That would narrow the massive discount Canadian oil trades at today. Athabasca wouldn’t need to produce a single extra barrel to benefit. A higher realized price means higher cash flow. Higher cash flow means more buybacks. And the best part is that every dollar goes back to shareholders through a cannibal that almost nobody is paying attention to.

Kaspi (KSPI) isn’t a cannibal, but management acts like one — entirely in shareholders’ interest. An enormous moat, a lot of growth, and the best cloner alive. They don’t reinvent anything, they find what works elsewhere and execute it better inside a platform that already runs millions of daily lives. At around 7x earnings, the valuation makes no sense to me. If management keeps doing what it’s done for a decade, this could end up the single best idea on the list. The only problem? My wife has banned me from investing in Kazakhstan.

Apparently companies that just emerged from bankruptcy are acceptable levels of insanity. 😅

Bitcoin (BTC). I don’t treat it as an investment. I treat it as money. Viewed purely as an asset, the fixed-supply argument honestly puts it alongside met coal and offshore. It’s still down, and it’s still hated. Both of those are features, not bugs. Because here’s the thing I’m certain of: every fiat currency eventually trends toward its intrinsic value, which is zero.

I lived through it. The hyperinflation that destroyed the Yugoslav dinar in the early 1990s wasn’t a chart to me — it was daily life. If you’ve never seen what happens when money dies, watch this. Eighteen minutes will teach you more about why Bitcoin matters than any white paper.

B-Tier — Solid

These are good-to-great businesses where I either expect more modest upside, have an open question, or simply prefer a wider margin of safety before getting excited.

Whitehaven (WHC) has brilliant capital allocation and top-tier thermal coal. My hesitation is that in the great years, a large slice of free cash flow leaks out through royalties and taxes. And some of the mines are not in the best condition.

CNX Resources (CNX) has unbelievably low costs and a massive buyback the market doesn’t appreciate yet. A bigger cannibal than Alpha, even — it just hasn’t shown up in the price. I also think patience makes sense here. Once the situation in the Middle East stabilizes, natural gas prices could come down, giving us a chance to pick up shares at a lower price.

EOG Resources (EOG) is one of the best-run operators on the planet. The only problem is that it’s already a giant, which caps the upside compared to the smaller, more hated names elsewhere on this list.

Sable Offshore (SOC) was the easiest trade of the year for anyone willing to buy when it was hated, and the return shows it. Sable Offshore has a tailwind from California because the state is reducing reliable energy supply while energy demand remains high, increasing the value of local oil production. But the next chapter needs enormous capital, much of it likely from issuing shares, and that dilution is exactly why I can’t fall in love with the long-term story.

Lumine (LMN.V), Constellation Software (CSU.TO), and Topicus (TOI.V) are all fantastic businesses, and I would not be surprised if they are much larger companies ten years from now. They probably belong closer to the A-tier than the B-tier. What cooled me off is that none of them are cannibals. We are unlikely to ever see buybacks. On top of that, after speaking with people close to Topicus, I learned that growth has become a bit more challenging than I originally thought, even in areas where I believed competition was almost nonexistent. That doesn’t break the thesis, but it does change it. These are still excellent businesses. The problem is that they are not extremely cheap, so for now they go into the "too hard" pile.

AutoNation (AN) and AutoZone (AZO). I think Mr. Market is making a clear mistake pricing both this cheaply. The fleet keeps aging, cars get more expensive to replace, and lower share prices just let both retire more stock per dollar of buyback. AutoZone is the better company; AutoNation is the better investment. They’re in B only because the explosive growth is mostly behind them. AutoZone has already delivered roughly a 450x return since its IPO. That's what happens when a cannibal retires 9 out of every 10 shares outstanding. Madness.

D-Tier — Miss

The honest part of the list.

Cardlytics (CDLX) was probably the biggest mistake of my investing life — and the most valuable. The real lesson wasn’t that I misunderstood the moat. It was dilution. Good management buys stock when it’s cheap. Bad management pays itself with stock while shareholders get diluted. Buffett called it “sell low, buy high.” Cardlytics followed that playbook perfectly. Roughly $49 million of new shares were issued in 2024 while the company continued losing money. The stock fell from $157 in February 2021 to about $0.65 today, a decline of roughly 99%. Management got richer. Shareholders got poorer. Munger had a line for companies like this.

A colony of rats in a grain warehouse.

Kansai Paint (4613.T) returned a lot of cash, which I liked — until I realized most of it came from selling assets, not recurring free cash flow. That makes the long-term economics genuinely hard to judge, so it lands here by default rather than conviction.

The Helium Basket (Avanti, Helium Evolution, Pulsar) was, alongside Sable, the best trade of the year. I bought early, when nobody was looking, and sold near the top after the crowd arrived. As a trade, it was close to perfect. As businesses, these have weak economics, uncertain paths to profitability, and depend almost entirely on expectations rather than performance. Could one of them work? Sure. But they don’t deserve any more of my time — which is exactly why a great trade still ends in the D-tier.

The Rats Ate the Grain in Those Other Companies

From today, only cannibals live in the portfolio. Everything else was a ride. For a year I showed you what I look for. Now I show you what I hold.

Most companies issue shares. Mine retire them.

The rats ate the grain in those other companies. Mine eat themselves.

Out there, plenty of companies dilute you while their prices keep climbing. Be careful what you own.

Year two begins.

Cheers, Sandro

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“We are not happy when things we're buying go up in price. We want them to go down and down and down."

- Warren Buffett, 2004 Meeting

Two years ago I flew back to the country where I was born. Bosnia. Most people couldn’t find it on a map. It’s famous for “ćevapi”, the second most popular dish on earth. You can’t grill proper “ćevapi” without coal. Strange how coal keeps showing up in my life.

They make “ćevapi” here in Germany too. But restaurants here cannot use charcoal grills because of smoke, smell, ventilation rules, and German bureaucracy, so they cook them on electric grills instead. The result? The “ćevapi“ in Germany taste like shit. 🙂

Anyway.

In Bosnia I was giving a presentation about my new book. Afterwards, I met the director of the Sarajevo Stock Exchange and some great people. Then I started hunting.

What I found was a graveyard. Nobody buys stocks in Bosnia. Nobody. There are trading days with zero volume. Zero. No one in the entire country buys or sells a single share.

It wasn’t always like this. Back in 2008 the Sarajevo Stock Exchange went vertical. Every ticker on the board exploded. People took loans to buy whatever they could grab. Brokers slept in their offices. Pure mania.

Then it cracked.

And to this day the market is dead. Stocks are hated. If you want to buy something, you call your broker on the phone like it’s 1985. Corruption is high. Trading is difficult. But prices are absurd.

I found a company trading at $0.65 per share. It has just 21,182 shares outstanding, giving it a market value of less than $15,000. It is a declining business, but the assets behind the company are worth roughly $5 million. Most of those assets are tangible. Buildings, land, and investment properties.

Price per share is $0.65. Book value per share is $225. Good luck finding that on the New York Stock Exchange. I actually tried to buy the whole thing. There was just one problem. The stock had not traded since 2017. I am fairly sure most of the shareholders are dead.

That was not even the interesting part.

The interesting part was that although everything in Bosnia is dirt cheap, I found a company, a boring cement business. Cyclical. Nothing special. And yet it traded at more than 30 times earnings. The stock is up seven, maybe eight times in few years.

Why?

They started putting shareholders first. Dividends. At first they paid out 20 or 30 percent of profits. Then they kept raising. Today they pay out 100 percent. Every cent. A handful of investors saw what was happening and started fighting for shares. The most boring company on the Bosnian market became the most wanted. The market handed a cement plant a tech multiple.

This is where Alpha enters the story.

If you like to focus only on signals, here is it is. The company is returning 100% of its free cash flow to shareholders. Dividends are nice. But retiring shares is another level.

The rest of this post is the long term thesis and what I believe could realistically happen even this year.

What happens when there are no shares left to buy?

Read more

“Really big effects, lollapalooza effects, will often come only from large combinations of factors.” — Charlie Munger

Munger had a word for those rare moments that make people rich. Lollapalooza. Many forces hit at once, in the same direction, so they don’t add up. They multiply. One plus one becomes eleven.

Think of Coca Cola. It’s not one thing. Sugar, caffeine, cold, the fizz, and a brand you’ve trusted since childhood. Each force small on its own. Stacked together, they make a drink billions of people crave every day. That’s the first lollapalooza, the product itself.

But there’s another side. Charlie Munger didn’t just drink Coca Cola, he invested in it too. And the same thing happened there. For decades the stock paid dividends and bought back its own shares. Marketing built the brand, the brand built sales, sales built profit, and profit flowed back to shareholders. Forces stacking in the bottle, and forces stacking in your pocket.

A lollapalooza is five, six, seven things lining up at once, every one pushing the same way.

I don’t know what happens next. Nobody does. But I know what a setup looks like. I’m staring at one.

Alpha Metallurgical Resources. Ticker AMR. Digs metallurgical coal, the kind that makes steel. No real substitute. No skyscraper, no car, no bridge without it.

Force by force.

One. China

May 22, 2026. A gas explosion tears through the Liushenyu mine in Shanxi. Over 80 dead. China’s worst mining disaster in fifteen years.

China makes more than half the steel on Earth. More than the US, Europe, India, Japan and everyone else combined. Shanxi alone digs about a quarter of all Chinese coal.

After the blast China shut mines across the province for inspections. Roughly 125 million tonnes of annual capacity frozen overnight. To me that’s the biggest event in the met coal market this year.

On May 26 it came out that inspectors found hidden tunnels, fake walls and doors, falsified maps, untracked illegal miners, mines with no gas monitoring at all. When a government finds fraud like this, the crackdown grows. Some mines could stay shut through July and August. If tunnels or ventilation in the good mines were damaged, months or more.

And it lands right as China enters peak summer demand. China has huge reserves, but most isn’t premium hard coking coal. That quality is the bottleneck. When China runs short, it doesn’t sit there. It goes shopping on the seaborne market, the ocean trade where everyone else buys. That market is small and thin next to China’s domestic one. When the biggest steelmaker on Earth shows up in a small pool, you don’t get a ripple. You get a wave.

Two. India

It’s a Muslim holiday right now. Much of India’s steel is idle. India is the largest seaborne met coal buyer in the world, and it’s sitting out.

Normally, when your biggest customer goes quiet, prices fall.

Instead, prices are rising. Read that again. The market climbs while the number one buyer sleeps. That tells you how tight this already is.

Every year the slow season ends around late May and India steps back in June or July. Will it again? I don’t know. But if it does, it walks into a market already stretched, already rattled by Shanxi, already climbing without it. A few extra premium cargoes bought while India buys, and prices jump.

Three. Kingston Wildcat

While this unfolds, Alpha is doing something concrete. Firing up a new mine, Kingston Wildcat.

It produces Low-Vol coal. The highest quality, highest priced met coal there is. Mills pay a premium because it makes the cleanest coke. Summer 2026 futures run around 250 dollars a tonne, and those contracts are being signed right now.

About 500,000 tonnes in 2026. Full capacity from 2027, a million tonnes a year. That one mine, at today’s prices, can add up to 250 million in new annual revenue. Alpha already runs 19 others.

Prices spike exactly as Alpha adds its best coal. You can’t plan that timing.

Four. The company eats itself

This is the heart of what I write about.

Since March 2022 Alpha has aggressively bought back its own shares. About 1.2 billion dollars, roughly 7 million shares, shrinking the company by about 32 percent.

Let that land. Nearly a third of the company is gone. Every share you still hold now owns a much bigger slice of the same business, and you never lifted a finger. That’s a cannibal. A company that uses its own cash to eat itself and makes every remaining owner richer.

Now stack that on rising coal. When met coal climbs, Alpha’s profit doesn’t rise gently. It goes bananas. Costs barely move while the selling price jumps.

Five. Mongolia

The doubters say relax, China will just buy more from Mongolia next door. Cheap, overland, done.

Not that simple. Mongolia is landlocked. Almost all its coal crosses into China by truck and rail through one region, about 90 percent already going that way. The main mine runs at the limit of the current route. The new railway that would add real capacity isn’t done. Construction runs into 2028. You can’t wish a railway into existence this summer.

So Mongolia can’t flood China overnight. And the US? China puts roughly 28 percent tariffs on American coal, so that door is mostly shut. That leaves seaborne, mainly Australia and Canada, the same thin pool. The same one India is walking back into.

Every escape route leads back to the same small pool.

Six. Insiders are buying

Watch what insiders do, not what they say.

Kenneth Courtis, an Alpha director, just bought another 15,000 shares in the open market, spending roughly $2.8 million. He now owns almost one million shares.

Mohnish Pabrai, one of the most respected value investors alive, recently added another 80,000 shares. No interest in selling.

Not traders flipping for a quick gain. People who understand this company better than almost anyone, locking shares away.

Seven. Share supply is absurdly small

Look at the share count. The whole company is 12.71 million shares. Tiny. The float, the shares actually free to trade, is 10.9 million, and maybe less today since those numbers are from May 15. Institutions hold over 91 percent. Insiders nearly 25 percent. The free float is a puddle.

Now the shorts. Around 1.59 million shares sold short in mid-May, over 18 percent of the float betting it falls. Short ratio 6.4, meaning more than six full days of normal volume just to buy back what they owe.

Think about it. A puddle of shares. Seven forces pushing up. A crowd of shorts who eventually must buy back into that same puddle. When they rush the exit at once they have to buy, buying pushes price up, that forces more to buy. Fuel on a fire already lit.

The Lollapalooza Setup

Shanxi rips out supply, maybe for months. India wakes up hungry. Alpha fires its best mine into the spike. The company eats itself through buybacks. Mongolia can’t rescue China in time and US coal is tariffed out. The smartest insiders are buying and refusing to sell. All of it aimed at a company with under 12.7 million shares, a puddle of a float, and a fat pile of shorts who may have to buy it all back.

Seven forces. Every one pointing the same way.

Here’s the thing. Everybody lies in the coal market. The miners lie, the traders lie. And right now the information coming out of China is almost nothing. So don’t listen to the talk. Watch the met coal futures. Price doesn’t lie. In the coming weeks the futures will tell you the truth before anyone says a word.

One thing I’ll watch closely is whether Alpha starts pulling away from Warrior. The two usually move together, both met coal, same industry forces. If Alpha dramatically outperforms while Warrior stays calm, something is moving beneath the surface.

This is one of those moments. I watch it every day. Now you know what to watch too.

Like and restack this post, or I’ll officially appoint the AMR short sellers as your financial advisors. They seem very generous with other people’s money. 😄

Cheers, Sandro

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