In June 2018 David Abrams owned 457,301 shares of Group 1 Automotive. Three months later he owned none. He did not leave the car business. In those same three months he doubled his Lithia Motors, from one million shares to two million.

Eight years later Greg Alexander held the same two stocks. This year he sold every share of Lithia and kept buying Group 1 until he owned 16% of the company.

I own Group 1. So one of these men threw out my stock, and the other bet a sixth of a company on it. I wanted to know who they are before I asked who is right.

Abrams spent ten years at Baupost, next to Seth Klarman, before he started his own firm in 1999. He gives a talk at Columbia every few years and otherwise says nothing. He has owned Lithia for eight years and trimmed it once, in 2019, by 73,932 shares.

Greg Alexander is harder to find. He runs a strategy called Acacia and has run it since June 1996. The firm behind it is Ruane Cunniff. If that name means nothing to you, Sequoia Fund will. Bill Ruane sat next to Warren Buffett in Ben Graham’s class at Columbia. When Buffett closed his partnership in 1969 and sent his investors away, he told them to go to Ruane. Greg has spent forty years inside that house. He gives no interviews and writes no public letters.

So this is not two hedge fund guys. One comes out of Klarman’s shop. The other comes out of Buffett’s.

Both of them have known these two car dealers for years. Greg owned Lithia and Group 1 side by side for at least three and a half years before he picked one. Abrams owned both for years before he picked the other.

And yesterday the market gave its own opinion on one of them. Lithia reported its third quarter, beat the estimate, opened up 6% and closed down 10%.

Abrams made his choice eight years ago, so his trade has a result. I worked it out from his own filings and it surprised me. Greg’s trade has a contract. I read all of it. One line in it names a company that nobody writing about this trade has mentioned, and it is not in America.

Then the duel. Both companies, today’s prices, one picture, and which one I think is the better bet for your money.

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“We believe almost anything can happen in financial markets and the only way smart people can get clobbered, really, is through leverage.” - Warren Buffett

Smart people run Group 1. The question now is whether they get clobbered.

In the spring of 2009, a dollar of Group 1’s debt was valued at 56 cents. That was the market saying it did not expect to be paid back. Americans had stopped buying cars, and General Motors and Chrysler were on their way into bankruptcy.

But Group 1 did not go bankrupt. It did not even break the terms of its bank loans.

The same fear is back. This summer Group 1 agreed to buy ten dealerships in Atlanta for $1.3 billion. In September it borrowed $1.25 billion to pay for them. The buyback that made me call it a cannibal has stopped.

In 2009 Group 1 had 24.5 million shares. Today it has 11.9 million, and you can watch every year of it on Buyback Radar.

See Group 1 on Buyback Radar

The stock was at $480 within the last year. Last week it closed at $232.

I went through the debt line by line. Then I gave Group 1 another 2009 and watched what happened to every loan. Can they pay it? Or can this company go bankrupt?

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Why the debt looks worse than it is

Add up everything Group 1 owed at the end of June and you get about $5.6 billion. And that was before the new $1.25 billion. It looks like a company that is already in trouble. But that number mixes two very different kinds of debt.

The first kind pays for the cars on the lot. When a new Lexus arrives at a Group 1 store, Group 1 does not pay Toyota for it. A lender does. The car stands on the lot for about seven weeks. When a customer buys it, the lender gets its money back. Then the next car arrives.

The industry calls this floorplan financing. It is about $2.2 billion, and it will never be paid off, because there is always a next car. Every dollar of it is tied to a car that is for sale. And the carmakers pay most of the interest, because they want their cars on dealer lots. In the second quarter Group 1 paid $22.0 million of interest on these loans and got $21.9 million back.

The second kind stays when the car is gone. Bonds, bank loans and mortgages on the buildings. After Atlanta it will be about $4.4 billion, once you subtract the cash. The interest is about $250 million a year, and nobody helps Group 1 with it.

This is the debt that can hurt.

I ran the 2009 crisis on today’s Group 1. For two years it sits right at the edge of what its banks allow. And inside those two years, a $750 million bill comes due.

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We are proud to introduce something our Cannibal Stocks team has been working on.

We believe some of the greatest multibaggers, the companies that go 50x, 100x, or even 1,000x, can look very different on the surface. But there is one framework that, for us, is the simplest and easiest to understand.

Cannibals.

Companies that buy back their own shares, often reinvesting nearly all their cash flow, sometimes even more, into buybacks. Keep doing that for decades, and something extraordinary, almost magical and genuinely nonlinear, can happen.

We built Buyback Radar to find these companies.

On Buyback Radar, you can find American companies that have bought back the most shares since 1999. You can see how many shares they have retired, how much money they spent, and at what price. You can also check insider buying and see which superinvestors, including Buffett, Pabrai, Li Lu, Akre, Klarman and many others, own these companies.

All the numbers come directly from SEC filings, with links so you can check everything yourself. Every weekday we look for new buyback programs and insider purchases. Every Monday we update the data from the latest filings.

A Bloomberg Terminal costs $32,000 a year. But finding the greatest cannibals in America shouldn’t require a Bloomberg Terminal. It shouldn’t cost anything.

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We have learned so much from great investors who shared their knowledge freely. This is our way of giving something back.

One honest word. The site is not finished. We are human, and some numbers still need a second check. The list is not final either. Companies will be added, a few will move, some will drop out as we go through them one by one. We are still going through a huge amount of data, checking numbers and making corrections along the way. So please forgive us if something doesn’t look quite right yet. It will take a little more time, but we promise it will only get better from here.

This website was built thanks to your subscriptions. You are the reason it exists.

We built this for you, but we could never have built it without you.

Thank you.

Cheers,
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It is done.

Last night the last signature landed. Brazil’s competition authority approved the Transocean and Valaris combination with no conditions, and with that the list is complete. The Department of Justice signed on September 30, six other jurisdictions before that. Nobody with a government stamp can touch this deal.

What is left is paperwork. The Brazilian approval becomes final after a 15-day waiting period following publication. Both companies vote on November 24. Fredriksen’s Famatown and Oak Hill, 18% of Valaris, promised their votes in February. Perestroika, 9% of Transocean, promised too. Sometime in the first half of December Valaris stops existing.

On that day Transocean owns 68 rigs. Thirty three drillships, seven semisubmersibles, twenty eight jackups. The largest offshore driller in the world. Four of every ten drillships on the planet under one roof, with neither company ordering a new drillship.

It will also have 2.2 billion shares instead of 1.1 billion.

Buffett said investing needs only two courses.

“And I’d tell them I’d only have two courses. One would be how to value a business, and the second would be how to think about markets.”

Today we take both. The market course tells you to be afraid of December. The business course tells you something that should keep every oil major awake.

Course one. What the market does to a buyer who pays with paper

The market has one word for 15.235 Transocean shares per Valaris share.

Dilution.

A billion new shares. If you own Transocean tonight you own all of Transocean. In December you own 53% of something twice the size. The market does not wait to find out what the other 47% earns. Here’s how share prices have historically reacted to major mergers.

Seven famous stock deals. Five of them cost the buyer’s shareholders money and two of them cost nearly everything. T-Mobile and Exxon survived, and for one reason only. The thing they bought earned more than the paper they printed to buy it.

Offshore has its own rows, and I know them by heart.

• September 2018. Transocean buys Ocean Rig for $2.7 billion in cash and shares. The stock falls 6.5% that morning. Two years later it trades below one dollar.

• October 2018. Ensco buys Rowan, all stock. Rowan jumps above $20 on the news and sits at $8 three months later. The new company calls itself Valaris. In August 2020 Valaris files for bankruptcy under $7 billion of debt and the old shareholders walk away with some warrants and a story for dinner parties.

The same Valaris. Born from a stock merger that went to zero. Tonight it dies into another one.

And this time? On February 9 Transocean rose 6% on the announcement. Then it ran to $7.66 in May, fell under five dollars in July, and closed tonight at $5.58, a few cents from where it stood before the deal. Mr. Market cheered, then panicked, then shrugged.

In December a billion new shares land in accounts that bought Valaris, not Transocean. Some of those people will sell. The stock can drop on closing day and keep dropping for a week. Let it. The market prices the paper. It has never priced the farm.

“We do not measure the progress of our investments by what their market prices do during any given year. Instead, we evaluate their performance by two measures - whether their earnings have improved and whether their economic moats have widened.”

— Warren Buffett, Berkshire Hathaway, 2007 Shareholder Letter

The stock will do what stocks do. I don’t care much about that. What I do care about is this.

Is the moat bigger now, and will profits be higher?

And one more thing. They told us the offshore supercycle would arrive in late 2026 or 2027. Did they lie to us again?

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Last week I published my analysis of SED Energy.

Then one thing kept bothering me. I never counted what this company pays after its merger.

SED wants to merge with Ventura, a driller from Brazil. And management shows what would be left for the shareholders of the combined company. Free cash flow of 1.4 to 2.6 kroner per share. The share costs 6.42.

Forty percent. If all of it were paid out, you would have your money back in two and a half years and still own the share.

The risks from last week are still there. SED drills with tender barges, floating rigs that moor next to an oil platform. In September it lost two contract renewals to jackups, cheaper rigs that stand on legs on the seabed. Half of its barge fleet could spend months without work.

So I spent some time on Ventura. I read its annual report, its new loan, the merger presentation, two years of earnings calls and the history of its only real customer, Petrobras, Brazil’s state oil company. I also “went back” to Thailand to understand why a jackup beat a tender barge.

Some of what I found is gold. Some of it is hot air, and the hot air is exactly what the bullish write-ups are built on. Then I did what management did not. I put the idle rigs, the loan and the debt repayments back into their numbers and counted the dividend again.

The number that came out is not the one in the presentation. And after it, I can’t say what I said last week.

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So far, I have found a few such situations.

A company that wants to return all its cash to shareholders through buybacks, and in just a few years has already bought back more than $1.3 billion worth of shares. My assumption is that over its lifetime, it will generate $10 billion, $20 billion, or even $40 billion. Maybe even more. The price Mr. Market offered me? $2 billion for the whole thing. Okay, I’ll pay.

If almost every cent of those earnings goes into buybacks, and it will, the company could buy itself several times over. Of course, that is not possible because the stock price would have to rise first. But that is exactly what makes this situation “strange.”

The second company has some drilling rigs, and everyone knows that a new deepwater rig costs more than $1 billion and that the last one humanity will ever build has probably already been built. Nobody wants to build them anymore. They are expensive, they take a long time to build, and some companies have even gone bankrupt trying, so everyone gets a little “shiver” just hearing the subject mentioned. This company will soon have 73 rigs in total.

Mr. Market was asking $4 billion for it. I said, okay, I’ll pay. And when most of those rigs are working, or dare I say all of them, the economics of this business look truly wonderful. That is what makes this situation “strange.”

The third company is making an acquisition. It is paying $1.3 billion for some car dealerships. With those dealerships, the entire company will have 259 in total. Mr. Market offered me the whole company for $2.8 billion, all 259 dealerships. I said, sure, I’ll pay. And these guys have already bought back 54% of all the shares that once existed. Pretty “strange.”

And there is one more thing that makes all three companies very unusual. They plan to return all that cash to shareholders. And all three are owned by superinvestors who have also found something “strange” in them.

In today’s AI madness, something like this is truly rare to find…

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Then, a few days ago, a reader pointed me to another “strange” situation.

There is an offshore company that runs six of the only sixteen rigs of their kind in the entire world. Nobody is building new ones. It bought three of those rigs for $85 million, and today those three alone bring in $138 million a year. It has almost no debt. It trades for less than four times EBITDA. And it pays its shareholders a 20% annual dividend.

Hated, unknown, ignored, alone. On its website it says it “has an ambition to distribute all excess cash to shareholders quarterly”. Man, so very few companies are willing to write it down.

Is that “strange” enough? For me, it is.

So let’s jump straight down the rabbit hole.

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Why I got excited

The company is SED Energy Holdings. It trades in Oslo under the ticker ENH.

I started with what the company says about itself.

Man, I love that sentence!

And so far they have done what they said. Since May 2025 the company has paid or approved $132.5 million to shareholders, while the whole company is worth about $490 million. For this year management is guiding for $90 to $110 million. At today’s price that is 20%. So the 20% is not something a blogger made up. It comes straight from management.

Then I wanted to understand what they actually own. They own tender rigs.

A normal offshore rig carries everything it needs. A tender rig is basically half a rig. The drilling equipment gets lifted onto the oil company’s own platform, and next to it floats a barge with the crew, the pipes and the power. When the wells are done, everything moves to the next platform.

This only works where you have a lot of small platforms in calm, shallow water, which mostly means the Gulf of Thailand. That is why the whole world has only sixteen of them.

Then I went looking for proof of the number I liked most, and I found it. It is a Seadrill press release from June 21, 2023. Seadrill was selling three tender rigs, and the price for all three together was about $85 million. The buyer is the company that is now part of SED.

So it was true. And I already own offshore drillers, so I wanted all of it to be true.

There are several very good write-ups about this company here on Substack. They call it one of the cheapest dividend stories in offshore. But if this is so obvious, who is selling it to me at this price?

So I opened every stock exchange filing since the merger and put them in order by date. Most of them are boring. But when you read them in order, eight dates stand out, and together they tell a story that the numbers don’t.

Below I go through all eight. One of them is a sentence the company wrote 27 days before its stock fell 13% in a single day. And at the end you get what I answered my reader.

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“Investing is where you find a few great companies and then sit on your ass.” - Charlie Munger.

This poster hangs in Pabrai’s office. It is a bet.

In October 2018 Mohnish told his friend Guy Spier to sell Mastercard. Guy had made twelve times his money on it. Mohnish thought that was the problem. Everybody knows Mastercard is a great business, so everybody pays up for it.

Sell it, he said. Buy Sunteck Realty, a Mumbai developer nobody had heard of.

Guy politely told him to get lost.

So Mohnish had the poster made. Mastercard at $204.22. Sunteck at 355 rupees. Twelve years. The bell rings on October 13, 2030. Eight years are gone. I looked up the score.

Mastercard closed at $552.26 last Friday. Up 170 percent, dividends not counted.

Sunteck closed at 281.55 rupees. Down 21 percent. The rupee fell too, so in dollars the loss is close to 40 percent.

Put $1 million on each side of the poster. Guy’s side is worth $2.7 million. Mohnish’s side is worth about $610,000.

Guy would be the last person to claim he is the better investor. He has been saying the opposite in public for more than ten years.

“The person who has influenced me most as an investor is Mohnish Pabrai.” - The Education of a Value Investor (2014)

“Mohnish Pabrai is a better investor than I am.” - MOI Global Q&A, summer 2015

“In a certain way, I learned more from Mohnish Pabrai than I learned from Warren Buffett.” - Interview with Tilman Versch, recorded in 2019

Guy also explained why. Mohnish has less fear. He can tell what is truly dangerous from what is only uncertain, and when he sees it, he bets big. In 2019 Guy put him on the short list of people he would trust with his own family’s money. But by Guy’s own account, the better investor is losing. Mohnish showed this poster to a room of students in 2019 and told them his plan for Sunteck.

“We just have to sit for a while and just watch the show.”

I kept coming back to that sentence, because sitting is the one thing I do not find in his SEC filings. A new stock usually stays there for about one year before it disappears. And some of the names that came and went are painful to look at today.

Horsehead would still be in there. It went to zero.

So would Berkshire Hathaway, bought in 2011. So would Alphabet, which he owned in 2015. So would Ferrari, handed to him in a spin-off in 2016. So would Micron, bought in 2018.

I rebuilt that account from 69 quarterly filings. Every purchase at the prices of the quarter he bought. Then I let it sit until the end of 2025, zeros included, and put the same dollars into the S&P 500 on the same dates.

Nobody has published this number. I am not sure Mohnish has ever seen it.

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The car is at the curb. He is at the wheel. Daryl Kenningham, 61. Psychology degree from Michigan, which will come in handy, because I am about to ask a man about his own money.

Engine on.

I get in. I am not here to buy a car. I am here to see how it drives. First question before we reach the corner.

Where did you learn to drive?

Nissan, 1988 to 1998, America and Japan. Thirteen years inside Toyota. Then Group 1 in 2011 as a regional vice president, and the long climb. US operations 2017, Brazil 2019, president and COO 2022, CEO on the first day of 2023. A seat on Darden’s board since 2024, on the side.

Why did they give you the keys?

The chairman answered that himself, August 2022, first sentence of the praise in the press release.

“Over the course of his career, Daryl has developed strong relationships with the automotive manufacturers.”

The board hired a Toyota man.

It explains why Toyota might say yes to ten Lexus stores in January. And it explains nothing about the three capital-allocation decisions I want him to explain. Then I checked his pay, his stock sales and the board’s plans for the next CEO. And the filing that landed on September 30 while I was preparing this post.

Keep driving. I have a few more important questions…

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September 8. Hennessy’s adviser sent out a press release.

It was bragging.

Kerrigan Advisors, one of the two firms that broker most dealership sales in America, wrote that the billion dollars of goodwill Group 1 paid:

“… represents the highest blue sky value ever paid on a per-dealership basis for a 10-dealership group.”

A new benchmark, it said. One hundred million dollars per store. The bank that ran the auction told the world, in print, that nobody has ever paid this much. Sellers do not usually put that in writing. This one did.

Now the buyer.

Group 1’s stock was $358 the day before the deal. It is $242 today. For $1.3 billion at today’s price, Group 1 could buy 5.4 million of its own shares, 45% of the company. Instead it bought ten dealerships in Atlanta and borrowed $1.25 billion at 6.5% to pay for them.

Someone asked that question on the call. July 30.

“It still feels like an expensive deal relative to just buying back your stock.”

Daryl Kenningham’s answer.

“We are really happy with what we paid for these stores, especially compared to what we have seen in other transactions that we’ve either been bidding in or have learned about.”

Translate that. We have been bidding on other stores. We lost. This is what Lexus and Porsche cost now.

Group 1 paid twice as much for Hennessy’s Lexus stores as the market will pay you today for Group 1’s own. Below the line, why the deal could disappoint while the stock delivers, why a man with half his fund riding on it bought more after seeing the bill, and what the whole company would fetch if you sold it at the price Group 1 just paid.

The number is not close to $242.

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In my last post I told you we probably would not see Conifer buy again until November.

A new Form 4 landed on Monday. Another 126,000 shares on September 24 and 25, about $32 million at an average of $250 a share. That took the position to around 1.6 million shares, up about 8% in two days. An October 1 filing then showed another roughly 273,000 shares bought, bringing the holding to about 1.9 million shares.

I read the trading restriction as starting when the agreement was signed. It does not. It applies “for so long as the New Director serves as a director on the Board.” Hart joins on November 1. Until then Conifer was free. So it bought.

On June 30, Group 1 was 46 cents of every dollar in Conifer’s fund. At today’s price it is more than half. A man Buffett would trust with his money has half his fund in one car dealer.

This setup is getting crazier. 😅

Now the post.

Data and GPI price of $240 as of September 29, 2026. Conifer ownership updated for the October 1 filing.

Last week I left you with a sentence from a CEO.

“Their deep understanding of our industry and Group 1’s competitive advantages and opportunities.”

Competitive advantages. At a car dealer. I have read a lot of press releases and that phrase is usually where the meaning ends. But Daryl Kenningham was not talking to analysts. He was welcoming a new director, and the director works for Greg Alexander.

If you read my July post you know the name. If not, here is all you need. In 2010 Bruce Greenwald told his Columbia class that Buffett had named three people he would trust with his money when he is gone. Klarman. Li Lu. And Greg Alexander, whom nobody in the room could place. Buffett’s biographer Roger Lowenstein was asked about it a year later and answered in seven words.

“I know Greg. I think Warren is right.”

Alexander has run money at Ruane Cunniff, the firm Buffett sent his own partners to in 1969, for forty years. No interview. No letter. Nothing.

This year he sold every share of Lithia, a car dealer he had held for years, and put the money into Group 1. He kept buying as the stock fell, $300 in June, $250 in September. Then he asked for a seat on the board. In every Conifer filing I could find, on any company, he had never done that before. To get it he gave up the right to trade the stock when he wants. You do not sign that if you plan to leave.

My last post opened with Buffett’s coach who stops when he sees a seven-footer. This is the man who sat down on the bench. So I went looking for what he saw.

I expected a moat. I found a cage.

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The moat everybody has

Every franchised dealer in America sits behind the same wall. State law says a carmaker cannot sell you a car directly, cannot cancel a dealer without cause, and cannot plant a new store next to yours without a fight. Tesla needed a decade of lawsuits to get around it. Rivian sued Ohio. Scout, Volkswagen’s new brand, got stuck in the South Carolina legislature.

And every dealer has a garage. Cars come back for twelve years after they leave the lot, at margins the showroom never sees.

But on the garage, Group 1 is not even the best. AutoNation gets 48% of its gross profit from parts and service. Group 1 got 44% in 2025.

So if the moat belongs to everyone, and the best garage belongs to AutoNation, the CEO’s sentence needs something only Group 1 has. I will get there. But first a number, because it changes how you read everything Conifer signed.

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The number 19

The agreement Conifer signed caps its ownership at 19%.

Group 1’s annual report says its agreements with carmakers contain “change of control provisions related to the ownership of our common stock.” That is all it says now. Six years ago it said more. Carmakers can block any shareholder from going above a set percentage, “ranging from 20% to 50% depending on the particular manufacturer’s restrictions.”

So I went back to 1997, the year Group 1 went public, and pulled the original contracts out of the filing.

• Toyota. The right to approve “any ownership or voting rights of Group 1 of twenty percent (20%) or greater by any individual or entity.” If Toyota objects, Group 1 has ninety days to sell its Toyota and Lexus stores.

• Nissan. Same words.

• GM. If anyone shows more than 20% on a 13D, GM can force a sale of the dealerships to GM “at fair market value.”

Nineteen is one step below Toyota’s line.

The law that keeps Tesla out of the showroom is the same law that decides who is allowed to own Group 1. Toyota does not just protect the franchise. Toyota approves the shareholder list.

Every dealer lives under the same rule. It is a cage, and Alexander walked into it with half his fund. Which raises the only question that matters. Why?

The answer is one paragraph inside the contract. It anticipates what happens if buybacks push Conifer’s stake above the cap before 2030. The October 1 filing brings that possibility closer. Below the line, that paragraph, the three reasons I’d pick Group 1 over Lithia, AutoNation, and Asbury all day long, and the five dollars a share nobody on Wall Street is counting.

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Ken Courtis sits on Alpha’s board. In 2026 he wrote cheques for $26 million of AMR stock with his own money. Greg Alexander runs Conifer Management. His fund now has $400 million sunk into Group 1 Automotive, and about $270 million of that went in this year. The position tripled in nine months.

These are the largest insider buys I have seen since I started this newsletter. The biggest relative to who was buying, how often, and at what prices.

A coal miner and a car dealer have nothing in common. Except for a few things. Both are aggressive cannibals. Both are hated. Both have floats small enough to count by hand. And in both, insiders are buying while the shorts are selling.

Today, neither man is allowed to buy a single share.

Let me start there.

Why Courtis bought at $230 and ignores $150

AMR traded around $150 this summer and Courtis was not buying. Then the stock ran to $190, $200, $230, and he bought aggressively. Now it is back at $170 and he sits on his hands.

Buy high, ignore low. It looks stupid. So I read Alpha’s insider trading policy.

Alpha has mandatory quarterly blackouts. They begin on March 15, June 15, September 15 and December 15 and run until three trading days after the company reports. During a blackout a director cannot buy.

The Q2 blackout started June 15. For most of the time AMR sat at $150, Courtis was locked out.

After Q2 earnings the door opened. He walked through it on August 20 at $190 and kept walking. Above $200. Around $216. Still buying above $230. Fifty thousand shares in three weeks, about $10.5 million.

He never had the choice between $150 and $210. When he was let in, the stock was already high. He bought anyway. His last purchase was September 8. On September 15 the door closed. That is why he is not buying at $170. He cannot.

Alpha should report Q3 in the first week of November. Three trading days later, Courtis gets his key back.

Why Alexander stopped at 12.7%

Conifer had no such door. Alexander is not a director, and Group 1’s blackout policy only binds directors, officers and employees. Conifer could buy whenever it wanted. And it did, every week from late June to September 18.

On September 21 the rules changed. Group 1 and Conifer signed a Stockholder Agreement. Conifer’s Benjamin Hart joins the board on November 1. In return, Conifer signed one sentence:

“Conifer shall only trade in Common Stock during an Open Window.”

Before every trade Conifer needs clearance from Group 1’s Chief Legal Officer. And unlike Alpha, Group 1 publishes no fixed dates. The CEO or CFO sets the window “from time to time.”

The same agreement caps Conifer at 19%.

Read that as I read it. Conifer did not stop at 12.7% because they were done. They stopped because the door was about to close, and they negotiated room for six more percentage points before it did.

So both buyers are locked out today. Both get their keys back in early November.

The six questions

Every insider buy I look at gets the same six questions. They tell me whether I’m looking at a seven-footer, or a 5-foot-3 guard with a great handle.

1. How much real money is at risk, relative to the buyer?

2. Did they pay cash on the open market, or was it handed to them?

3. One purchase, or a pattern?

4. Did they keep buying after the stock stopped being cheap?

5. What do they know that I do not?

6. And is there any reason to buy other than “this is worth more than I am paying”?

I ran both men through all six. One of them is buying value. The other is buying value and a fight. But there is a seventh question, and it matters more than the other six combined.

7. Who is on the other side?

Short interest on AMR is 12.4% of the float. On Group 1, 11%. You can find those numbers on any free website. Both numbers are correct.

Both are useless.

Below the line I show you why, what it costs to bet against these two companies, and the one thing that made me sit up in September. AMR’s shorts covered. And their situation got worse anyway…

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The US midterms are in November. Nobody wins an election with expensive fuel at the pump. And Washington has one lever it thinks can work fast. Keep American diesel at home. An export ban could pull the price down in the US at first.

It also pulls the floor out from under everyone who was buying that diesel. The barrels don’t disappear. They just stop leaving. Prices in the rest of the world go the other way. On September 22, in New York, the President of the United States said this about American diesel.

“I’ve said let’s not send out the diesel. We make a lot of diesel. I’ve called for it. I’ve called for it within my people.”

Most of Europe scrolled past it. Washington did not. Chuck Grassley, senator from Iowa, on X on September 20.

"If our government can embargo chips to China, it can embargo diesel to help American farmers and truckers."

By September 22 he was saying it on the Senate floor. John Thune, the Senate Majority Leader.

“If we have the supply in this country and we’re exporting it right now, that might be one way of getting at it.”

And Scott Bessent, the Treasury Secretary, standing next to Trump.

“We’re examining that, whether it’s feasible in terms of the overall refining capacity and whether a full or a partial ban would work.”

That is the party of free trade, six weeks before an election, with farm diesel above six dollars in the middle of harvest.

Yes, the other side exists. On September 23, Energy Secretary Chris Wright said the US would not stop diesel exports. The White House also called the report of a 90 day ban “not true.” But on the rumor alone, American diesel futures fell more than 6% and European diesel futures rose as much as 7%. Same day. The market already knows which side of the Atlantic pays for this.

I hope they do not do it. But this is a world where a president says “let’s not send out the diesel” at the UN and the market moves 7%, so who knows.

The world burns roughly 27 million barrels of diesel a day. Almost all of it stays in the country that refined it. Only about seven million barrels a day are traded by sea, and those seven million set the price for everyone.

Russia used to supply about 800,000 barrels a day. Refinery attacks and export restrictions have sharply reduced that flow. The United States used to supply about 1.3 million. In August it shipped a record 1.6 million a day. India supplied about 60% of the 200,000 barrels a day that crossed Bab el Mandeb toward Europe in August. India is also a target of American pressure on countries refining Russian crude.

And Europe? The EU depends on imports for nearly all its crude, arriving by ship and pipeline. So take the seven million barrels traded by sea. Cut Russia. Threaten India. Now restrict the largest supplier of all. The market can still clear. At a price that forces somebody to drive less, haul less or shut down.

Brent is around $100, and that is only half the crisis. Diesel has nearly doubled since the war began while crude is up about 45%. In mid September American diesel reached about $220 a barrel.

That gap exists because crude is only the beginning. Somebody still has to refine it. Refining can be a terrible business for years, and when margins finally get fat, politicians call you a profiteer and threaten to take your exports away. Europe has been closing refineries. The ones left cannot run harder forever. Exxon’s Joliet refinery in Illinois went dark in September because a pump flooded.

When a refinery stops, it buys less crude and produces less fuel. That puts pressure on crude and tightens diesel supply. Oil in a tank does not move a truck until somebody turns it into fuel.

That is why an American ban can make things worse. S&P Global ran the numbers for a full ban. Trap the diesel at home and the storage tanks fill up. Refiners could cut crude runs by nearly two million barrels a day. Then they also make less gasoline and jet fuel, putting pressure on those prices. The bill does not stop at the American border.

If Washington restricts diesel exports, the first move could be cheaper diesel at home and dearer diesel abroad. After that, refiners adjust. Europe, Australia and Latin America would be fighting over fewer available barrels. That raises the cost of moving food and freight. Push it far enough and demand breaks. That is how a fuel shock can feed a recession.

This is a stress test. Not of the world. Of my portfolio.

To be clear, this is the dark scenario, not my forecast. I am running it because a stress test with a mild recession tells you nothing. If the companies survive this version, they survive the real one.

I own two coal miners, one offshore driller, a shoe company and a car dealer. Below the line I run each of them through a recession.

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In part one I proposed to Helene Odfjell.

She has not replied. Her lawyers have not replied either, which I am taking as a yes.

So I did what every sensible man does before marrying a woman with five drilling rigs and 1.35 billion dollars. I read the prenup. All of it. The rig contracts, the bond terms, the related party notes, the depreciation schedule, the part where her relatives send her invoices.

Two things I can tell you already. She earns 15 percent on her price. And every stock screener on earth says she loses money. Both are true, and I will show you why.

Most of the prenup I loved. One page I almost missed. And one page made me put the ring back in my pocket.

Article by article.

Who she is

The Odfjells have been at sea since 1914. Bergen shipping money. In 1979 the family split in two. One branch took the chemical tankers, and that is the Odfjell you see painted on ships today. The other branch, Johan Odvar Odfjell and his son Abraham, took the small tankers and a strange little side business started in 1973. It drilled holes in the seabed.

Abraham ran it for three decades. In 2007 he gave it to his two daughters.

Helene❤️ and Marianne.

In September 2013, at the very top of the last offshore cycle, Marianne’s trust sold 56 million shares in the Oslo IPO at 42 kroner. About 400 million dollars, into her pocket. The company got nothing. Helene kept her 70 percent.

Then oil went from 100 to 30.

By June 2016 the stock was 4.20. Her sister had the cash. Helene, my love, had empty rigs, a wall of bank debt, and several bankers who called more often than I do.

Every big driller went through Chapter 11 in those years. Seadrill twice. Noble. Valaris. Diamond. Pacific Drilling. Shareholders got zero. Only two companies came through without handing the keys to the lenders. Transocean, which printed shares to survive. And Odfjell, which never restructured at all.

What Helene did instead is the whole reason I proposed.

She kept the rigs working for Equinor and Aker BP, at bad prices, because a working rig keeps a bank patient. In 2016 the Norwegian banks let her push repayments back. In 2018, at the bottom, she bought a brand new rig from a Korean yard, built for an owner who never took delivery, for 505 million dollars. A new one costs close to a billion today. She paid for it partly with 75 million of preference shares sold to a stranger, Akastor, because selling common stock at the bottom was the one thing she refused to do. Four years later she bought those preference shares back and closed the book.

In 2021 the family scrapped its oldest rig, the Deepsea Bergen, built in 1983. It had worked for 37 years. Then in December 2025 they bought a rig they had already been operating for three years, the Deepsea Bollsta, for 480 million, and gave it the old name.

That is the woman. Now the contract.

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Article 1. What she brings to the marriage

Five rigs. Part one told you where they drill. Here is what they earn and when each one comes free. The company does not publish exact dates, so this is its own contract chart plus the announcements.

The CEO puts the fleet average near $480,000 a day.

Each rig has a personality.

The Stavanger is the loyal one. Aker BP booked it in 2022, when this market was still on its knees, for five years. It has run at 99 percent six quarters in a row, at the lowest rate in the fleet, and it is locked until 2030. That is the price of the safety you are buying.

The Bergen is the one that paid for itself fastest. Bought for 480 million in December. In its first six months it earned 45 million of EBITDA, about 90 a year. Then Vår Energi signed 518 million for three years starting in 2028. That is what running a rig for three years before you buy it gets you.

The Atlantic is the one that had a bad spring. More on that in a minute.

The Nordkapp is the one you watched in the storm in part one. Newest, highest spec, and before Christmas two independent brokers set its rate for 2028. The number will be public. I promised you my guess. It is at the end of Article 3.

She also manages three rigs for other owners. About 20 million dollars of EBITDA a year. A side dish.

Article 2. What she earns, and why your screener says she loses money

Open any screener and Odfjell shows negative free cash flow. Minus 216 million for 2025. Minus 157 million for the last twelve months. Then you read me claiming 15 percent and you close the tab.

Both numbers are true. Here is what is inside them.

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On April 15, 2023, Germany switched off its last three nuclear plants. They worked fine. There was a war next door. They were switched off anyway.

I have lived in Germany for thirteen years. This September the bill arrived.

German gas storage is at 57 percent, the lowest September on record. On Sunday the chancellor’s party got 4.9 percent in Mecklenburg-Vorpommern and won no seats. The same morning diesel in France hit a record.

The cause fits in two numbers. The EU imports 95 percent of its oil and 88 percent of its gas. And the suppliers are dropping out.

Qatar declared force majeure on LNG in March. On September 10 drones hit the Saudi East-West pipeline, and Aramco told European refiners they get zero crude in October.

This month Ukraine hit the refineries at Ryazan, Saratov and Syzran. Kyiv celebrates every hit and Europe cheers along. Russian seaborne diesel exports are 81 percent below normal. The diesel that still reaches Europe now comes mostly from India, refined from the same Russian crude, and sails past the Houthis to get here. On September 18, Trump signed a law allowing tariffs of up to 100 percent on countries that buy Russian energy. India is Russia’s largest seaborne oil customer.

Europe cheers the fire, then buys the smoke.

And then the cherry on top. In Washington, Senate Majority Leader John Thune says he is “open to exploring” a diesel export ban.

“It is a commodity now that I think we’re exporting, and if we need more supplies in this country, and if that would take pressure off of prices, I’m open to exploring it.”

A ship. A strait. Someone else’s election.

Put every supplier Europe has through those three words. America fails the third. The Gulf fails all three. Russia is Russia.

One country is left. It shares an ocean with the Arctic and a seabed with Germany.

Norway

Norway sold 120 billion cubic meters of gas last year, equal to more than 30 percent of what the EU and the UK consume. Ninety five percent of it goes by pipe. Europipe to Germany. Franpipe to Dunkirk. Langeled to England. No tanker, no strait, no force majeure letter. Germany alone took 58 billion cubic meters.

But a pipe does not make gas. Fields do, and fields decline.

The Norwegian Offshore Directorate says gas can hold near today’s level for three or four more years. After that, every one of its scenarios goes down. The warning in its own report is blunt.

“Failure to invest will lead to rapid dismantling of the petroleum activities.”

Ninety one discoveries on the Norwegian shelf are waiting for a development decision. Somebody has to drill them.

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The rigs

You cannot drill the Norwegian Sea with just any rig. You need a harsh environment semisubmersible, built for forty foot waves and certified by the Norwegian regulator.

The world has 27 modern ones. Westwood says every one of them is committed. The last time that happened was February 2014. Esgian, another rig research house, said this month that the harsh fleet is largely booked from late 2026 into 2028.

And the fleet is leaking out of the North Sea. One harsh rig just finished a campaign for Shell in Namibia. Another leaves Norway for Canada in early 2027.

Nobody is building more. A new one costs close to a billion dollars and takes four years, and no dayrate today pays for it. So the oil companies book early. In June Equinor reserved three Transocean rigs for over a billion dollars, starting in 2027 and 2028. On September 10 Vår Energi signed a rig for three years for 518 million dollars. The work starts in 2028.

Half a billion dollars, paid in September 2026, to hold a machine for 2028.

Vår did not sign that with a country. It signed with an old Bergen shipping family most investors have never heard of.

Now look at where their rigs are this week.

The Deepsea Aberdeen is drilling production wells on Troll, the field that alone covers more than a tenth of Europe’s gas. The Deepsea Bergen is drilling the third phase of Johan Sverdrup, Norway’s largest oil field. When Aramco cancelled October, European refiners ran to Sverdrup crude and reportedly paid a record premium of about $24 a barrel to get it. The Deepsea Stavanger is on Yggdrasil, Aker BP’s big new development. The Deepsea Nordkapp is drilling Symra and Solveig. The fifth, the Deepsea Atlantic, is on Rosebank, west of Shetland.

The gas Germany is short of this winter. The crude Europe is fighting over this month.

Their steel is in both.

Odfjell

Odfjell Drilling has drilled since 1973. It owns five of the 27 rigs. Esgian describes this market as split mostly between two companies. The other is Transocean.

Odfjell came through the offshore crash of 2014 without going bankrupt. The only other driller that can say the same is the one I already own. That is the first sign that something unusual is hiding here.

Helene Odfjell, the founder’s daughter, still controls half the shares. She held in 2016, when the stock fell from 42 kroner to 4.20.

Anyway, back to Odfjell.

All five rigs are booked into late 2027. More than 2 billion dollars of work is signed. The balance sheet was rebuilt last December. Nothing comes due before 2031.

Now the money.

The dividend is $1 a year. With the shares trading around $11, that works out to a yield of just over 9%. That is a dangerously attractive yield for a market that has only just begun to tighten.

One thing you will not find. Odfjell has never bought back a single share. This is not a cannibal. It is a company that sends you the cash and lets you decide.

Why I think it grows

Most of those contracts were priced before this summer. Before Qatar. Before the Saudi pipeline. Before 27 out of 27. The rates reset one rig at a time. One of the five gets a new rate before Christmas, set by two independent brokers. The number will be public. I already have a guess.

This is Odfjells Deepsea Nordkapp at work in a North Sea storm. For the rig, just another day at the office.

Transocean’s Equinox is drilling in Australia right now at $540,000 a day. Odfjell’s rigs earn less than that today. What happens to the dividend when they don’t is the whole second post. It will not come at once. Contracts roll slowly. That protects the dividend when oil falls. It also slows the upside when rates rise.

But the direction looks clear to me. The fleet cannot grow before 2030. Norway needs more wells, not fewer. Europe has nowhere else to go.

Part two

A 9 percent dividend that has never been cut, on a company Europe cannot replace, run by a family that survived the worst decade in offshore.

Next comes the full autopsy. All five rigs, by name, with the client, the rate, and the exact day each one comes free. What the dividend becomes at $450,000, at $500,000, at $550,000. What a share bought at $11 returns by 2030 if I am right, and what it returns if I am wrong.

There is also one line in the accounts that makes the yield smaller than it looks. I almost missed it. And one trade by the family, two years ago, that I cannot stop thinking about.

I own Transocean. I do not own a single Odfjell share. The next post explains whether that changes. Does this become position number six?

I already know my answer.

Twenty seven rigs in the world. Five of them in one family’s hands. One winter to find out what they are worth.

Like if you think Helene and I belong together. Restack if you think she should call security. 🙂

Cheers, Sandro

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I think about Dillard’s every day. Not the ending. The middle.

The whole thing took more than fifteen years, and for most of them the stock did nothing. If you had owned it, you would have felt like a fool. But because the price stayed low, the family could remove 80 percent of the shares at those prices. The low price was not the problem. The low price was what made it possible. Then, in a short window, the stock went from under 30 to over 600.

I have to be honest with you. I doubt I would have lasted. Fifteen years of a flat stock. Fifteen years of writing to you about a department store and asking you to be patient. It is easy to admire that kind of patience from the finish line. Living through it is a different thing.

The good news is that I do not have to. The market does not know what it owns. It never did. I found two companies that have already bought back half of their shares, and the market still hates them. Still ignores them. Still cheap, still making the same cash, still buying. The slowest and loneliest part is already done.

The price is not at the all time low. I missed that, and I am not going to pretend I didn’t. But when half of the work is behind you, you do not need the low. You need the company to keep doing what it already does, and you need the market to keep not caring. If both hold, the investment can still be phenomenal.

I bought both. On my math, each can get to 80 percent of shares retired in about six years. Not fifteen. Six.

The names, what I paid and what would make me sell are below, for paid subscribers. Founding members also get every buy and every sell the same day I make it. On October 1 the annual price goes from $159 to $199. Join before then and you keep $159 for as long as you stay.

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A company that buys 80 percent of itself while the market looks the other way. Dillard’s did it. 73.9 million shares in 2010, 15.6 million today, revenue flat for twelve years, stock 27 to 624. I wrote that post two weeks ago. It was history.

This one is a hunt.

Three candidates. Crocs. CNX. Group 1. All three eat their own shares. All three are cheap. All three are hated for a reason the market thinks is permanent.

Group 1 has the receipts. In July I asked you which company to add to the list. Seventy of you voted.

Copart took half. An airport in Turkey took a quarter. Group 1 got eight votes. A dealer of new cars lost to a dealer of crashed ones, more than four to one. Kicked out of the Russell growth indexes in June and now voted down by the most contrarian readership on Substack. For a cannibal, hatred is the price of admission.

Group 1 walked in for free. 🙂

I built two screens. One ranked by float, one by cash yield. Two different winners. I threw both out and read the transcripts myself. Eight earnings calls. Every proxy. Every 8-K. What the men said with their mouths and what they did with the checkbook.

The rule

Everything below runs on one sentence.

At a constant multiple, the share of free cash flow that goes to buybacks, divided by price to free cash flow, is the percent of the company that disappears every year.

Ten times cash, all of it into buybacks, and ten percent of the company is gone in a year.

Growth does not change it. Revenue does not change it. Only two things do. The price the market charges, and whether the man in the corner office picks up the phone to buy something else.

Dillard’s passed four tests for sixteen years. Cash. Hatred. Speed. And the phone stayed on the hook. Zero acquisitions from 2010 to 2026. Not small ones. Zero.

How far they have come

Group 1 leads. Crocs next.

CNX last, and its number lies. Last October CNX was at 134.8 million, a forty percent cut, before the convertible notes it sold in 2020 came due and put 12.6 million shares back on the table. It is the only one of the three that has ever gone backwards.

Dillard’s is the line at 79. Two of them are already past the halfway mark. One is not, and its road is longer.

Three companies, three different answers. The math picks one. The man in the corner office picks another. The third looks the most like Dillard’s on paper and the least like it in real life.

When I was done, two of the three went into my portfolio. I am not telling you which two. Not in this post.

Same four tests. Ten points each. Four rounds.

One note before the line. On October 1 the annual price goes from $159 to $199. Join before then and you keep $159 for as long as you stay.

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Part 2 was the numbers.

This is the people.

November 2, 2023. 8:30 in the morning. Third quarter call.

Jonathan Komp from Baird gets the first question.

When you bought HEYDUDE you talked about a billion dollars of revenue in 2024. Is that still realistic, or has it been pushed out?

Andrew Rees answers.

“Yes, I think we’re very confident the brand will be north of $1 billion in 2024.”

Seconds earlier, answering the same question, his CFO had guided HEYDUDE’s fourth quarter down 20 to 25 percent. The company was cancelling wholesale orders and cleaning up inventory at its retail partners.

Everyone on the line heard both things in the same minute.

2024 came in at 824 million. 2025 at 715. In the second quarter of 2025 Crocs wrote off 737 million dollars of the brand.

The consultant

Andrew Rees was born in Carlisle, in the north of England, in 1967. Laura Ashley. Reebok, where he built the retail arm. Then thirteen years at L.E.K. Consulting in Boston, where he founded the retail practice.

In 2013 Crocs was a 1.2 billion dollar company going nowhere, with over 600 stores and a CEO on his way out. Blackstone put in 200 million and took two board seats. Somebody had to write the turnaround plan. L.E.K. got the job. The partner on the account was Rees.

Six months later he was President of the company he had been consulting for. Three years after that, CEO. He was, in effect, the consultant on his own hiring. No filing says Blackstone picked him. The sequence says enough. So does the exit. Blackstone was out by 2019 with the stock at more than double where it came in.

What he built

2014, revenue 1.2 billion, operating income minus 5 million. 2015, minus 72 million. He closed 104 stores in the first year and cut 185 jobs. From 2017 to 2019 the store count went from 558 to 367. By 2019 the same 1.2 billion of revenue produced 129 million of operating income. Then the pandemic and the clog and 2021, 2.3 billion of revenue at a 30 percent margin.

He did not inherit today’s Crocs. He made it. The options he exercised this August were struck at 6.98 dollars. He was there when this was a seven dollar stock, and he is the main reason it is a 140 dollar one.

Hold that thought. Everything below is the other half.

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The deal

December 23, 2021. Two days before Christmas, when nobody is watching. Crocs announces it is buying HEYDUDE for 2.5 billion dollars. Just over two billion in cash, all of it borrowed, plus 2.85 million shares to the founder.

Rees on the call.

“Never say never with regard to an acquisition.” The promise, “a billion dollar plus brand by 2024.” The price, “less than 15 times EBITDA.”

Now the sequence, because the sequence is the case.

In 2021 Crocs spent one billion dollars buying back its own stock at an average of 122. Then it borrowed two billion for a loafer. Then in 2022 the stock fell to 50 dollars, the cheapest it had been since the pandemic, and the company bought zero shares, because the loan agreement forbade buybacks until gross leverage fell below two times.

From the 10-K.

“… we do not expect this to occur in 2022.”

He bought near the top with cash. The covenant locked him out of the bottom. That is the whole capital allocation record in one sentence, written before HEYDUDE sold a single extra pair.

Then Crocs pushed HEYDUDE into every wholesale door it had and reported revenue doubled. In April 2023 the market understood that a large piece of that was shelves being filled for the first time, and the stock fell 16 percent in a day. In July the company put a number on it. 220 million of pipeline fill.

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What he said, in order

April 2023, the brand is “gaining momentum.”

November 2023, the call from the top of this post. “Very confident” of a billion in 2024, while guiding the quarter down 25 percent.

October 29, 2024, the closest he has come. “We definitely grew too fast.” And “in retrospect, we absolutely shipped too much product.” That is a real admission, and it took 34 months.

August 7, 2025, the write off quarter. The 737 million is “non cash.” The cause is “a longer than expected timeline,” “a weaker U.S. consumer,” and “the disproportionate impact of tariffs.” Rees’s own headline that day, “the highest ever gross profit quarter in company history.” Asked who was running the brand he had just written down, “the current leadership for HEYDUDE is myself.”

He said he shipped too much. He never said he paid too much. In seven calls the word mistake does not appear.

One detail from the impairment note. To value what was left, the company assumed HEYDUDE would grow 8 percent a year at a 20 percent EBITDA margin. A brand shrinking 13 percent a year. Even on those assumptions it was 737 million too high. The remaining 1.1 billion trademark sits less than 10 percent above its carrying value. One more bad year and there is a second write off.

Now, who paid for the first one.

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It also happened in a strange week. Brent crude went above $109 because tankers are being attacked in the Persian Gulf and the Strait of Hormuz is half closed. Offshore oil, drilled from floating rigs off Brazil, Africa, Norway and the Gulf of Mexico, does not pass through Hormuz. When the Gulf is blocked, this is the oil the world falls back on.

1. First, what a rig-year is

A quick explanation.

Offshore rigs come in two kinds that matter here. Drillships, which work in very deep water off Brazil and Africa. Harsh environment semis, floating platforms that work in the rough water off Norway. Both are rented by the day, and the price is called a dayrate. A good drillship today earns around $450,000 a day.

When an oil company signs a contract, the industry counts it in rig-years. One rig, one year of work, one rig-year. If you add up all the contracts signed in a year, you get a picture of how much work the customers actually committed to. Not what they said on a panel. What they signed.

That number is the most important thing that came out of Oslo.

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2. The customers came back

Transocean showed a chart I have not seen anywhere else. Floater rig-years awarded worldwide, by year.

Last year the offshore recovery nearly stalled. Customers stopped signing.

Then this year. By September 1, oil companies had already committed to 105 rig-years. That is 42 percent more than all of 2025, with four months still to go. Transocean, using S&P Petrodata, expects the full year to reach 157. That would be the strongest contracting year of the whole cycle, stronger than 2023.

The 105 is a fact. The 157 is a forecast, and rig companies tend to be optimistic. But even if the year ends at 130, the message is the same. Demand is back.

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3. The contracts are getting longer

Fifty-five percent of this year’s new rig-years came from national oil companies. Petrobras in Brazil, ONGC in India, Equinor in Norway. Those companies hold only 45 percent of the rigs under contract today. They are taking more than their share.

National oil companies do not sign for six months. They sign for three years, sometimes five. When Petrobras takes a rig, that rig is gone. Nobody else can rent it. The next customer who calls has one fewer choice.

Long contracts do not just add demand. They remove supply.

4. Three rigs that show it is real

Charts are easy. Here are three contracts, all signed in the last four weeks.

On August 20, Transocean’s Dhirubhai Deepwater KG2 got a two year contract from ONGC in India, starting in the first quarter of 2027, worth about $300 million. Two more years of options are already priced. If ONGC uses them, that ship stays in India until early 2031. One drillship, out of the global market for four years.

On September 15, the day before the conference, Transocean announced the Deepwater Conqueror was hired for two wells in Equatorial Guinea. About $80 million for 170 days, starting in 2027. The important words in the announcement are “in direct continuation.” The rig finishes its current job in the Gulf of Mexico and sails straight to Africa. No idle days. Two continents competing for the same ship.

On September 10, Odfjell Drilling got a three year award from Vår Energi for the Deepsea Bergen, a harsh environment semi in Norway. $518 million. The work starts in early 2028 and runs to the first quarter of 2031.

A customer signed in September 2026 for work that does not begin until 2028. By my rough math, roughly $470,000 a day, before bonuses and escalation. That is what customers do when they know a market is about to run out. They stop shopping and start reserving.

5. The oil companies say the same thing

A rig company telling you rigs are scarce is a butcher recommending steak. So I read the customer side.

Vår Energi, one of the biggest producers in Norway, showed 16 projects in execution, around 30 early stage projects, and a plan to drill 10 to 15 exploration wells every year. Their capital spending averages about $2.5 billion a year from 2027 to 2032. Not all of that is drilling, but the wells are real, and the rigs have to come from somewhere.

BW Energy showed development plans in Brazil and Gabon, and new positions in Angola and Namibia. They want to triple production by 2028.

Even shallow water is full. Borr Drilling has 298 of its 324 rigs under contract. Twenty-six left in the world. And nobody is building. Thirty percent of the global jackup fleet is older than 30 years. The order book is 2 percent of the fleet.

6. Where Transocean stands

Transocean’s model, built on Wood Mackenzie, Fearnley and Westwood data, shows drillship utilization in the mid 90s through 2027. Harsh environment semis go higher. For parts of 2027 the active fleet is essentially full.

Transocean’s own 2027 is now 81 percent contracted. In June it was 73 percent. Backlog is $7.7 billion. The average dayrate across that backlog is $461,000.

The Valaris acquisition is still on. In Oslo they repeated the numbers. $12.3 billion combined backlog, 70 rigs, $200 million in savings, leverage below 1.5x within two years. The Department of Justice sent a second request in May. Nothing in Oslo said it has been cleared, so that risk stays open.

7. What did not happen in Oslo

If I only showed you the bullish slides, I would be just another rig company. So here is the other side.

Dayrates have not moved. Transocean’s backlog averages $461,000. The contracts they signed since May also average about $461,000. The Conqueror job works out to about $471,000. Good numbers. Not a breakout. A year ago Westwood said near-term drillship rates were below $400,000 and that 2027 would tighten. The tightening arrived. The price is still catching up.

The full fleet is a forecast. Nobody has measured 2027. Transocean’s chart includes demand they expect, not demand that is signed.

Rigs can come back. Dolphin Drilling is reactivating the Borgland Dolphin. When the price is right, old rigs come out of the yard. Not many, not fast, but “no rigs left” is never literally true.

And 2025 happened. Contracting fell by nearly half last year. Offshore does not move in a straight line, and oil at $109 raises the odds of a recession as much as it raises drilling budgets.

One last thing

Everyone watching offshore is waiting for the dayrate chart to go up. I think that is the wrong chart.

Offshore contracts are negotiated a year or two before the rig starts working. The oil price this week is not in a single dayrate yet. It cannot be. Those conversations have not happened. They happen in 2027, when the fleet is full and the customers who did not reserve early are looking for the last open slots of the decade.

Transocean should be close to finishing its debt paydown around the same time. That is when it can start retiring shares. The market gets tight, the balance sheet gets clean, and the share count starts to fall, all in roughly the same window.

I do not know what the dayrate will be in 2027. Nobody in Oslo knew either. But the number of good rigs is fixed, the customers have started booking them years ahead, and the price has not noticed yet.

The rigs go first. The price follows.

Cheers, Sandro

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Go on Amazon right now and search for foam shoes with holes in them.

Ten dollars. Same mold, same holes, same strap. Nobody will know the difference from six feet away.

Crocs sells the same shoe for fifty, and the Crocs brand keeps 63 cents of every dollar as gross profit. On and Hoka need a 160 dollar sneaker to get close. Crocs does it on a piece of foam a Chinese factory will copy for you by Thursday.

The easiest product on earth to copy, and in 24 years nobody has copied the business.

Because in 2002 a foam shoe was not a brand. It was a boat shoe. It was the thing you bought at a gas station. Three guys at a Fort Lauderdale boat show sold 24,000 dollars of them that year. Five years later, 847 million. A year after that the company nearly died, because it grew like a fad and was run like one. Too many styles. Mountains of shoes nobody wanted. A 185 million dollar loss. Stock from 75 dollars to 94 cents.

Then it came back, and this time the shoe had a name.

Half the world thinks it is the ugliest thing ever made. The other half owns four pairs. That argument is the moat. Nobody argues about Skechers.

And it is rare. Crocs itself spent 2.5 billion dollars trying to build a second brand in casual footwear. It failed and wrote off 737 million. The company that owns the only brand in foam could not buy another one. Brands like this do not get built twice. Not by competitors, not even by Crocs.

Li Lu looked at all of this and bought.

So did Norbert Lou of Punch Card, who runs one of the most concentrated funds alive and does not buy things that need to grow. Crocs is his second largest position. Only Berkshire is bigger. He trimmed it three percent last quarter, which I mention so nobody has to email me about it. 🙂

His page

Fourth quarter 2025, Himalaya Capital opens the position. 628,159 shares. The stock touched 73 dollars that November. First quarter 2026, he adds 41 percent. Second quarter, six names leave his filing. Bank of America, H&R Block, Occidental, S&P Global, Moody’s, MSCI. PDD more than doubles. This one stays, every share. 887,093 on June 30.

One honest line first. It is 3 percent of his American book. Alphabet, PDD and Berkshire are 85 percent. Timberland was a bet. This is a page he is still writing.

What did he pay? The filings show what he holds, not what he paid. The stock spent most of that winter in the eighties. Call it 85.

At 85 the whole company cost about 4.3 billion dollars. In 2025 it produced 660 million of free cash. Six and a half times cash. A 15 percent cash yield. For the only brand in foam.

Why cash and not profit? Because the profit line for 2025 says Crocs lost 81 million dollars. It did not. That is the HEYDUDE write-off, 737 million of accounting for money that actually left the building in 2022. So I ignore profit and follow the cash. Cash left after paying suppliers, staff, interest and taxes, minus what goes into stores, factories and software. In 2025 that was 710 million in, 51 million out. 660 million left over. Cash does not care about goodwill.

Cash can lie too. It gets flattered when a company sells down inventory or skips investment. Stock comp, 37 million a year, quietly leaks out the side. And 660 is the worst year of the last three. In 2024 it was over 900. Tariffs and HEYDUDE ate the difference. I use 660 anyway. Everything below runs on the worst year.

Why the room walked past

Three reasons. All true.

1. The chart. Declared a fad in 2008 when it nearly died, in 2022 when it bought HEYDUDE at the top and fell 75 percent, in 2025 when it wrote HEYDUDE down.

2. The deal. HEYDUDE, a canvas loafer brand, bought in February 2022 for 2.5 billion dollars. Its sales are down a quarter since 2023. Write-off of 737 million. Shareholders are suing over stuffed wholesalers. Allegations, for now. And the FTC made HEYDUDE pay two million for burying its bad reviews. A good brand does not need to hide its reviews.

3. The tariffs. Forty five percent of Crocs brand production comes out of Vietnam. Tariffs took 300 basis points off the gross margin last winter and 160 in the second quarter.

And a fourth reason, six weeks old. On July 30 Crocs reported a record quarter and raised its outlook for the year. The stock fell anyway. The margin is bleeding tariffs and the next quarter is guided flat. It is down about 15 percent since.

I use 110 dollars in this post, roughly where it trades as I write. Forty eight million shares. 5.3 billion dollars for the whole company. Eight times last year’s free cash. A 12.5 percent cash yield. Almost 14 dollars of cash per share.

Fad, bad deal, lawsuits, tariffs, and a chart that just broke. Pass. That is the note a normal fund manager writes.

Li Lu wrote down homework.

While I was writing this

On September 14 a Form 4 landed on EDGAR. Thomas Smach, chairman of the Crocs board since 2011 and a director since 2005, bought 4,000 shares on September 10. Average price 109 dollars. Almost half a million dollars of his own money, at the same price I use in this post.

Receipts, honestly. He sold 10,000 shares in February at 98 and 100. Now he buys 4,000 back at 109. It is his first purchase since 2023, when he was buying at the same prices. He still owns about 210,000 shares, so this is two percent added, not the house.

I would not build a thesis on 4,000 shares. But this is the man who sat in that boardroom through 2008, through HEYDUDE, through the write-off. He read the same flat guidance you did. And he wrote a check. A data point, not a thesis. Li Lu would have written it down.

Share Cannibal Stocks

The stores

Li Lu walked into shoe stores in 1998 and heard that kids wanted Timberlands and nobody had stock.

Walk in today.

The Crocs brand just did a billion dollars in one quarter for the first time ever. Direct to consumer up 13 percent. International up 8. China, India and Japan growing double digits while North America sits flat.

HEYDUDE is 18 percent of revenue and shrinking. The clog is doing the work. Below the line, how fast this company can eat itself, and what that means for every share that is left.

Then the real question. That chart is Dillard’s. Same revenue for twelve years, a stock that went from under 30 to 624, and a 30 dollar dividend this January.

Whether Crocs can do that is what I am really trying to find out…

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I have written posts that thousands of people read. I have never written one to you. There are only a few of you, and you supported this work early on. William Gazonas was the first. I remember seeing the name and not knowing what to do with it. Somebody I had never met had paid for a newsletter about coal and offshore rigs, written by someone still finding his voice, in a language that was not his own. Then more of you came. I have shared a few updates in the chat, but I have not properly thanked you. So let me say the thing I never said. It mattered. It still does.

I want to tell you how I invest, because you should hear it from me and not work it out from the numbers.

On Substack there are many writers who show that they beat the market every year, beat the professionals, beat the S&P by a lot. I do not know if it is true and I do not really care. I am less eager to see my share prices rise while the companies are buying back stock. As long as the businesses keep generating cash and use it to retire shares, low prices can work in my favour for years. I own cannibals, and a cannibal eats fastest when its price is low.

This year my portfolio is very green. I know that sounds like something to be happy about. For the companies buying back shares, lower prices could actually work better for me, provided the businesses remain healthy. The one exception is Transocean. It is not a cannibal yet. I expect it to become one once the debt is paid down, and that is probably two more years. Until then I would rather it did not go deep into red, because a lower price does not give me the same buyback benefit when the company is not repurchasing shares.

I think about the Dillard’s case study every day. Not the ending, the middle. The stock did nothing for years, and because the price stayed low, the family was able to remove 80 percent of the shares at those prices. The low price was not the problem. The low price was what made it possible. Then, in a short window, the stock went to over 650. But for most of that time, if you had owned it, you would have felt like a fool.

So now, when I look at a company, I only ask a few things. Can it eventually retire 80 percent of its shares? Is the multiple low enough that every dollar buys a lot of stock? Can it keep generating at least as much cash as it does today? Is it hated, and is there a reason it might stay hated for years? And does management put the cash into shares rather than other people’s companies?

I think I found it. Actually, I found two. This is my portfolio update. Before those, I wanted to explain my decisions to you directly.

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