Lumine vs Topicus: The Better Company Might Lose
I ran ten rounds between two Constellation spin-offs. By round ten I owed someone an apology — myself.
Last weekend someone asked me a question I could not answer.
If you could only own one for the next ten years, which would it be?
I thought I knew. I have written about both. I have defended both in comments sections at 11pm. I opened a spreadsheet just to confirm what I already believed.
Two hours later I closed the laptop and sat in the dark.
The company I thought was the winner had just lost on paper. And the one I thought was expensive was quietly the better business by almost every measure that matters over twenty years.
I am going to show you exactly what I saw. Ten rounds. Ten metrics. One uncomfortable answer. But before we start, one quote. Read it like your portfolio depends on it. Because it does.
“If the business earns 6% on capital over 40 years and you hold it for that 40 years, you’re not going to make much different than a 6% return—even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you’ll end up with a fine result.”
- Charlie Munger
Over twenty or thirty years, return on capital is signal. Everything else is noise.
That is the fight behind every round that follows.
I own two stocks the market has decided to hate.
Same father. Same playbook. Same incentives. Same culture of managers who buy shares with their own money.
One earns 34% on capital. The other 20%. One trades at 19x cash flow. The other at 25x. One is hated because the market thinks AI will kill its industry. The other sits in a continent about to spend trillions on software.
A compounder growing at 20% doubles your money every 4 years. A compounder growing at 30% doubles your money every 2.5 years.
Right now the market is terrified. The AI selloff has gutted entire sectors. Fear everywhere you look. And in that chaos, Mr. Market is handing out wonderful businesses at fair prices.
Ten rounds. Let’s go.
Round 1. The Industry
Lumine sells telecom and media software. Billing systems. Network management. Content delivery. Streaming platforms. A trillion-dollar industry that is barely growing. Global telecom revenue grows at 2.8% a year. Operators are squeezing suppliers on price. Ericsson, Nokia and AWS are circling.
If you sell software to telecoms, you are selling to customers fighting for their own survival.
Topicus sells to regulated European verticals. Education. Healthcare. Social services. Local government. Financial services. Legal. Real estate. That market is projected to grow from $45.5 billion to $83.4 billion by 2030. A 12.9% CAGR.
And here is the thing about regulated industries. Nobody disrupts them quickly. You cannot move fast and break things when the thing you are breaking is a hospital’s patient database or a municipality’s tax system. The regulations themselves are the moat.
Lumine sells to an industry that is shrinking its vendor list. Topicus sells to industries that are legally required to buy software.
Score. Topicus 1. Lumine 0.Round 2. Return On Capital
This is the round that should decide everything.
If Munger is right, if return on capital really is the whole story over twenty years, then one clear winner here should make the other rounds academic.
Which should make the other eight rounds irrelevant. Should.
Who wins?
