Still no blue checkmark on X (but yeah, I’d love more tweet characters!), still no Substack, still no paywall, still managing a diversified (family office-type) portfolio for the long-term, and still hoping to find & actually hold on to more new high-quality multi-baggers along the way.
So no messing, let’s just dive straight into the numbers – my FY-2025 Benchmark Return is still the same average of the four main indices that best represent my portfolio, and it delivered a glorious +22.2% gain:
Well, it finally had to happen…the S&P 500 was the loser of the bunch, trailing even the STOXX Euro 600, lagging the FTSE 100 by over 5%, and not even delivering half the ISEQ’s spectacular 34%+ gain! The Nasdaq performed a little better, with a +20.4% gain, but still didn’t catch the FTSE, or come anywhere close to the ISEQ. This was very much a large-cap phenomenon, with the FTSE 250 up +9.0% & the AIM All-Share actually up +6.5% (a minor miracle, despite UK FinTwit’s endlessly positive annual returns!?), versus a +11.3% gain for the Russell 2000. But the real action was actually happening in developing markets, with the MSCI Emerging Markets USD Index up an incredible +31%, while the MSCI Frontier Markets USD Index delivered an astonishing +47% gain. Crypto alternated between bull & bear markets all year, and despite a crypto-friendly White House & even (grudgingly) a friendlier FCA, it failed to deliver with Bitcoin down (6.3)% & Ethereum down (11.0)%. [I’d argue the horrendous collapse of the BTC/digital asset treasury company bubble deserves far more blame here than people realise]. The dollar also declined significantly, with the DXY down (9.4)%, reflecting (11.8)% weakness vs. the euro, a (7.1)% drop vs. sterling, albeit this was alleviated by a flat performance vs. the yen.
I know a swallow does not a summer make, but my gut tells me that 2025 outcome might finally herald an extended period of (ex-tech) US equity underperformance to come…and I’d look for further underperformance in 2026 and/or 2027 as definitive confirmation, noting that historical US under/over-performance has tended to occur over decade/two decade-long cycles. [And if so, alas I suspect it will take years for the average US (or even UK) investor to actually respond & overcome their recency/home biases & maybe/finally redeploy their portfolio & embrace global diversification]. And while I continue to consider this potential shift – and it immediately seems kind of silly as I write this – I also have to wonder if the mainstream media’s relentless narrative that the post-WWII world order’s breaking down & America’s slipping into some dystopian/fascist nightmare under Trump is genuinely beginning to affect investor/institutional sentiment & gain traction in the real world!?
But that being said, a 16%+ S&P gain may lag the rest of the world, but it’s obviously the very opposite of dystopian in terms of historical returns! And screaming ‘dollar’s collapsing!’ headlines are meaningless too – zoom out on the DXY & you’ll immediately see the dollar’s just been correcting its post-COVID inflation/rates rally & has basically gone nowhere for the last 5/10/40 years! Frankly, in most countries, who’s in power is ultimately far less important than investors give it credit – my portfolio hasn’t changed an iota because of Trump (or Biden), but it has evolved over the years to specifically limit my US exposure to a (de facto global) bet on technology, and to otherwise diversify my exposure globally & across other sectors/asset classes. And so, despite my disclosed portfolio gain (below), 2025 was a welcome year in terms of my overall portfolio allocations – my top five investment themes being the technology sector, emerging/frontier markets (primarily Asia), the luxury (& experiential) sector, Europe (global compounders & special situations) & alternative assets – and in terms of the potential road ahead.
And again, merging the two together – in terms of individual portfolio return:
And again, KR1’s (solely) to blame here – when will I learn!? Of course, I should invite the haters to revel in this debacle…albeit, while continuing to studiously ignore the +268% return I made, for example, on KR1 in FY-2023 (fueling a 65%+ portfolio gain for the year). But again, it’s still incredibly early in crypto, and it will continue to be horribly volatile, so I always recommend a long-term 3-5% crypto allocation (ideally, including KR1) as perfectly adequate in any portfolio – in fact, that’s actually larger than my original allocation – but since then I’ve obviously played with house money & a much higher allocation, and have again suffered the downside of that continuing volatility in 2025. On the other hand, Alphabet’s not only a much easier/higher conviction bet, it’s also compounded into another large (& now my largest!) portfolio holding – broadly offsetting my KR1 losses & helping me stumble into the black in 2025. But sure, it’s still frustrating to realise that absent KR1, I would have actually blown my benchmark out of the water (& enriched my net worth a LOT more!) with a stunning +34% portfolio gain!?!
But no crying in the casino: Let’s face it, anyone hoping for multi-baggers & superior long-term returns has to accept living with bigger risks & setbacks along the way…and you’ll need to size & diversify your portfolio as needed (emotionally) to acquire a more (extreme) risk tolerance. Fortunately, as an ex-trader, I’ve always been able to fool myself into believing portfolio gains/losses are nothing more than numbers on an Excel spreadsheet (nope, I’m not dead inside, I’d sulk for a week if I lost a twenty IRL!). And big picture, KR1’s still a multi-bagger for me, and was a (mega) multi-bagger for my wife (yeah, I trust my wife!) – and KR1/crypto still offers the same asymmetric risk-reward here, so it’s an (obviously re-sized!) bet that still belongs in my portfolio. And more generally, I recommend limiting the size of your initial holdings, averaging up (not down) if/when buying more (up to a hard % limit, in terms of entry cost), and diversifying your portfolio as much possible but still keep running your winners.
Now let’s proceed with an annual review of my current (disclosed) holdings:
That’s the fourth consecutive (& worst) year of declines in Saga Furs’ stock – albeit, significantly alleviated by a +9.5% dividend yield – which is hard to believe, as FY-2025 results were in line with four year averages across nearly every metric. So let’s summarise: Auction sales were €324 million (10.0M pelts), down slightly year-on-year but offset by a higher 13.0% take-rate, resulting in net revenue of €42M. Operating profit was poor at €1.4M, but the primary earnings driver was €3.1M of net financial income, for a €4.5M pre-tax profit, €1.00 EPS & a proposed €0.72/share FY dividend. Which left Saga trading on a 6.5 P/E & an 11.2% yield as of year-end. No wonder the stock’s up +38% since, as investors finally start realising some sector, market cap & geographic diversification may actually be a good idea!
That said, nothing much has changed in terms of fundamentals, or Saga’s poor capital allocation (management owns NO shares). Average return on equity was 3.5% over the last four years, so no real surprise Saga Furs trades on a 0.35 P/B here, but what’s galling is the increasing level of (net) cash…a 0.6 P/C multiple is astonishing for a profitable business paying an 8.0%+ dividend!? Frankly, I’m amazed all the new value bro’s on X haven’t discovered it…but they will, ideally helping ‘bid it up to €12.00+ & even €17.00+ price levels, at least temporarily’. But real value enhancement/realisation only happens here if Saga Furs winds down (maybe government/EU-mandated, but likely still worth its current NAV/share), finally receives a takeover offer (private equity won’t bite, so perhaps a Chinese buyer?), or the board gets religion re capital allocation (imagine the share buyback impact over the years, from profits/surplus cash, versus the actual dividend!?). A nice challenge for a local activist investor, but the legacy (fur-breeders collective) culture & shareholder base tend to argue against that scenario.
Meanwhile, the stock’s still cheap on a sub-9 P/E & an 8%+ yield. And after a poor H1, it’s worth highlighting H2-2025 EPS was €1.72, so bearing in mind recent H1s (€0.05 & €0.43 in FYs 2024/2023), a €1.77+ EPS run-rate here is entirely possible…despite the usual cautious/negative management outlook. That would suggest Saga Furs is actually trading on a 5 P/E here…
[NB: i) FY-2025 gain reflects a (lower) €17.40 mid-price as of end-25, vs. a higher official ISE close of €18.40 (which reflected a stale Nov-25 last traded price), and ii) year-end holding reflects a new (pre-yearend) 2.2% increase in my position, as I confirmed Jan-1st on X.]
Finally, the year of the deal…
But first, let’s kick off with Donegal Investment Group’s last return of capital, which returned €4.8M & retired another 19.1% of Donegal’s o/s shares in early Feb-2025, via a €16.50/share redemption. [Plus a +1.4% dividend yield since]. With the market effectively valuing the seed potato business at a 0.4 P/S multiple, this looked like an nice opportunity to rebuild a much diminished holding (via successive redemptions & gains elsewhere in my portfolio) before/after this latest redemption. [Unlike other portfolio changes, which I’d normally disclose same day/week, this change was necessarily reported long after the fact]. Fortunately, illiquidity limited the scale of my buying, while patience & prudence ensured I only bought at/near the lowest prices in the last four years (similar to today’s prices). And knowing a majority of my holding would get taken out at a market price (post-sale) also limited my perceived risk here.
Fast-forward to early-October: The seed potato business is finally being sold to Royal HZPC Group, a market leader in seed potatoes/breeding, for €16.5M cash (€2.5M to be held in escrow for two years) & a contingent deferred consideration of up to €4M dependent on performance over the FYs Sep-2025 to Aug-2027. This was NOT the deal I was expecting – at best, a 0.6 P/S (vs. an 8% operating margin) & a sub-9 P/E deal multiple – particularly vs. management’s excellent deal (price) history over the years, selling Donegal Creameries, An Grianan, Monaghan Mushrooms, Robert Smyth & Sons, and most recently Nomadic Dairy on a 1.8 P/S multiple, which (for similar reasons) seemed like a relevant deal multiple for the seed potato business, ‘accounting for its intellectual property portfolio, its (fully expensed) R&D spending/pipeline & additional cost/revenue synergies in the hands of a larger acquirer’ (Royal HZPC boasts €525M in revenue). Even worse, management only cited FY-24 financials that were already 13-25 months out of date, and expected approval of the sale at an end-October EGM, long before actual FY-25 results would be released by the company (mid-December)!?
An activist campaign seemed obvious here…except the board owned a 6.6% stake (& was voting for the deal), I presumed Pageant Investments/Nick Furlong (with a 13.3% stake) were consulted (with no objections), and I already suspected Pageant might no longer have an appetite for public/activist investments. Noting that, and the legacy shareholder base, a Yes vote seemed likely regardless…and so it proved at the EGM. A month & a half later, FY-2025 results were finally released & it was actually another great year, with seed potato revenue up +24% yoy & operating profit up +10%. So overall, revenue jumped +38% in the last two FYs, while average FY-2024/25 net profit was up +30% vs. FY-23. What price would you put on that kind of momentum?
Except that’s a pointless question, the deal was already approved. And three months later, the deal is now completed, but brought even more egregious news – upfront cash is now €13.9M, escrow is €2.4M, and the board considers any payment of the contingent deferred consideration to be ‘highly unlikely’. Which is astonishing, considering the deal was announced over a month into the two year contingency period, was voted on two months after it begun, and now just five months into the contingency period the deferred consideration’s off the table!? This drops the deal multiple to a 0.4 P/S – perversely, the market prediction a year ago – and a sub-7.5 P/E (vs. average FY-2024/25 PAT). And adding this cash to Donegal’s end-Aug €4.0M net cash, plus a €0.5M investment property sale, less estimated central costs since, should amount to ~€18M of net cash…but actual net cash of €16.4M (after deal fees!?) is another unpleasant surprise.
However, €15 million cash will now be returned to shareholders, via another share redemption to be announced shortly, so as anticipated this should redeem 75-80% of my holding at current market prices. After that, we’ll have a small €4M listed stub equity which looks about break-even vs. €1.4M net cash, €2.4M escrow, a €1.0M loan to Uktal Seeds (a 20% equity stake’s now a zero – as always with India, the challenge is repayment & repatriation of this loan), a 51% stake in Kenyan sub. Kirinyaga Seeds (albeit, the legal history here isn’t promising), and the opportunity to monetise Donegal as a listed cash shell within 12 months (the media’s touting it as Ireland’s first SPAC!?) could arguably be worth another €1/€2/even €5M to shareholders, but likely has a slim chance on the ISE. [Warning: Management will likely seek to delist asap IF a listed shell deal looks unlikely]. All in all, a rather shabby/disappointing coda to this story, but Donegal’s still been a great multi-bagger investment & case history – thanks obviously to management following through & delivering over the years, but also thanks to what I like to think was an original/variant investment thesis on day one.
Another mediocre year for VinaCapital Vietnam shareholders…a +2.4% dividend yield doesn’t compensate for a (literally) flat share price. Currency was a big headwind, with the dollar gaining nearly +3% vs. the dong, and in turn sterling gained +7.6% vs. the dollar – albeit, the NAV discount narrowed marginally from 23% to 21%. But this ignores the elephant in the room…the appalling under-performance of VOF’s NAV vs. the VN Index, which actually rallied +30% last year. Most of the gains came from early-June on, after the index decisively broke the 1,300 resistance zone – which, frustratingly, I’d long flagged as a key inflection point – then blew right through 1,500+ all-time-highs at end-July, adding momentum to hit 1,900+ in January, and taking a breather today around the 1,800 levels we saw as of year-end.
This isn’t new for VOF – its portfolio has tended to lag a market rally, reflecting the mix of listed equities, OTC & pre-IPO stocks, private equity investments, structured loans, directly owned (real estate) assets, etc. in its portfolio over the years. That said, VOF’s obviously evolved over the last two decades+, in line with the market, so its current portfolio (86% equities, 11% private equity) has evolved too…but nearly 80% of the portfolio still originates from private equity, private placement/PIPE & government privatisation investments VOF made over the years, so its portfolio has become more liquid/equity-focused, but is still quite different vs. the index itself. [Whose rally was fueled by incredible gains in Vingroup & Gelex ecosystem stocks, which were mostly shunned by the VOF team]. Also, VOF’s long-respected manager Andy Ho passed away in Jun-2024 – last year, I assumed a relatively seamless transition, but it took VOF nine months to appoint long-standing team member Khanh Vu as lead portfolio manager in Mar-25, followed by substantial portfolio turnover/re-allocation (which did add alpha, VOF insists), so the jury’s out on this transition & the fund’s abysmal under-performance, as I’m sure the entire VinaCapital team are well aware.
This brings us back to a recurring investor debate over VOF vs. its peers – VietNam Holding ($VNH.L) actually did even worse in 2025, while Vietnam Enterprise Investments ($VEIL.L) matched the index. One could arguably choose any/all of them as a ‘winner’, depending on the period(s) you cherry-pick – noting VOF’s the only dividend payer – but it’s VOF’s long-term performance & more diverse/differentiated portfolio that originally attracted me, and granted me the confidence that I could (& actually would) hold it as a long-term multi-bagger. This ‘criteria’ is often forgotten by investors – everyone wants to find/buy compounders at the right price, but all too rarely has the stomach & conviction to actually hold them through thick & thin – whereas my priority is to focus in on stocks that boast the kind of balance sheet, (owner-operator) management team, unique portfolio/business, etc. that will actually allow me to sleep at night & ignore short-term volatility/divergence, knowing my investment can & will continue to compound over time.
So at this point, I have a ‘trust, but verify’ attitude – VOF tends to lag in a hot market, but also tends to catch up over time, via a sustained bull market and/or outperforming in a difficult market – VinaCapital are under the hammer here, they own 3.0% of the fund, and VOF continues to aggressively buy back shares (reducing o/s share count by 10%+ in 2025!). And I’m still pound-the-table bullish on Vietnam – the new China, where investors are actually the primary stakeholders!? – it has a young/educated workforce & a growing middle-class, good trading/political relationships with both China & the US (Trump’s tariffs don’t diminish its obvious wage/cost advantage vs. the US & its Asian peers), it boasts 7%+ GDP growth, the market’s still priced (as of year-end) on a 13 P/E vs. forecast 18% earnings growth, FTSE Russell is planning to upgrade Vietnam to emerging market status in September, and (technically) I see lots of suppressed/untapped momentum & potentially huge upside still ahead for the index.
That’s a fourth consecutive year of gains for Tetragon Financial – not forgetting an additional +2.8% dividend yield (which you should DRIP) – hmmm, may be time for the haters to finally shut up!? [And for retail to stop moaning about KIIDs, put on their big boy pants, do some KYC & finally buy TFG via a full-service broker/trade!] We enjoyed the same three NAV growth-drivers last year: First, we had a stumble – the ongoing Equitix sale process ended without a deal – but fortunately, this was quickly rectified with news of a non-control deal in mid-June, where TFG would sell a 14.6% stake (from its 81.5% controlling stake) at a £1.3 billion enterprise value (vs. £11.7B AUM). This was (again!) welcome confirmation of the veracity & prudence of TFG’s asset management valuations, and triggered a +35% mark-to-market gain in its overall Equitix stake (to $1.355B) & a +8.1% NAV/share gain for June.
Second, also in June, the value of Tetragon’s ~2.2% stake in Ripple took off, jumping over +45% to $350 million (per the private market price), driven by a $175/share Ripple tender offer. A follow-up tender offer at $250/share, a $0.5 billion Fortress-led funding round (at the same $40 billion/$250 a share valuation), and the ever-escalating value of Ripple’s underlying $XRP Treasury (which peaked at $135B+ in late-July), continued to drive TFG’s stake higher again to $0.6B in Sep/Nov. And third, TFG’s natural resources-focused Hawke’s Point unit also struck gold, with its primary holding in Ora Banda Mining ($OBM.AX) riding a gold/metals rally from end-July & doubling the value of its portfolio by year-end.
So little wonder I added more Tetragon in July, at a ~56% NAV discount, increasing my holding by +0.7% from 4.2% (at the time) to 4.9%…and saw new $19.25+ all-time-highs in Sep/Nov. But there’s an obvious reason I did NOT max. out my holding (yet) – remember, I impose a buying limit up to 7.5% of my portfolio, or potentially 10% since TFG’s already a diversified investment company/portfolio – the big inflection point here for me is finally seeing Griffith & Dear seriously focus on enhancing & realising TFG’s NAV/share (via larger tender offers, and/or a sale/wind-down), vs. maintaining AUM & milking an incredibly lucrative (& personally owned) management contract. But we’ve seen NO new tender offer, or change in investment strategy – proceeds from the Equitix sale & both Ripple tender offers were applied to TFG’s net debt, which ended the year at $(316) million, a mere 7.5% of total assets. But management was comfortable with higher levels of debt most of the year, ranging from just under 10% at end-24 to a 13.6% peak, as I’m sure most shareholders were (& are!), so the opportunity to leave higher debt outstanding & launch a highly-accretive $300-$400M tender offer at a huge NAV discount was squandered, and again casts doubt on the ultimate value-realisation timeline here. The only ‘silver lining’ is a reversal in the share price since to $15.40/share (reflecting price retracements in $XRP, Ripple & Ora Banda) & a widening in the NAV discount, presenting an buying opportunity (for both TFG & investors!).
But overall, the investment proposition’s much the same: Management’s delivered a +19.6% total NAV/share return in 2025, a +15.4% return in 2024, and a remarkably consistent +11% pa over the last 5/10/19 years – and no moaning about exorbitant fees, those returns are NET! – where else on the planet can you buy into a diversified investment portfolio on a 63% (fully diluted) NAV discount & earn returns like that, while awaiting an eventual sale/wind-down!?
After a brief opening rally, crypto kicked off another bear market into mid-April. That’s when promoters finally unleashed a global tsunami of digital asset treasury companies – obviously inspired by Saylor’s pioneering Bitcoin treasury company strategy, albeit Strategy ($MSTR) had already peaked six months before & is down well over (75)% since! Not surpisingly, crypto also took off (again) at that point. What ensued is one of the fastest & craziest bubbles I’ve ever seen: Bitcoin/digital asset treasury share prices soared in a reflexive loop, with promoters capitalising on sentiment/higher prices by issuing more & more shares to gullible punters paying 5/10/20+ mNAVs, which raised companies’ NAV/share (‘Bitcoin yield’ per the promoters, ‘infinite money glitch’ per the suckers), which prompted even greedier sentiment & higher valuations/share prices, which…well, you get the idea!
Of course, this is nothing new – promoters have actually been pulling this trick (trading their overvalued scrip for hard assets) for hundreds of years now. It’s Ponzinomics…a business model built on nothing, promising everything, and destined to collapse as soon as it runs out of fresh cash & investors. In this instance, it took just two months to play out, with share prices peaking in late-June…with any underlying ‘value creation’ ultimately proving irrelevant for the average investor who never got in early enough, who paid a ludicrous price (even equivalent to $6 million+ for Bitcoin!), and who has (inevitably) lost a sickening (75)% to (99)% of their money since.
But how is this all relevant? Well, with investor interest/flows totally focused on Bitcoin (& Ethereum), crypto ETFs & Bitcoin/digital asset treasury companies, the expected rotation into #alts never really happened. And as the crypto rally faltered & entered a new bear market – albeit, $BTC did briefly/heroically counter-rally to a new $126K+ all-time-high in early-October – alts fell (much) harder, as did KR1’s portfolio & NAV/share. It’s a reminder how early it still is for crypto, and more specifically crypto-stocks…punters still want the reassurance of buying into the largest crypto-stock (or ETF), ideally fronted by TV talking heads like Saylor, Novo or Tom Lee, or still desperately want to believe in the sleaziest promoters (& their scumbag rampers), the flimsiest of business models, and/or the most ludicrous lottery ticket stonks. And KR1 is neither – they’ve built it into an institutional-grade crypto-stock, but it currently lacks the institutional-grade market cap & IR function to attract the investors it deserves. Hence, it was bizarrely neglected in 2025 – starting & ending the year on a 0.8 mNAV, but mostly trading in a 0.65-0.75 mNAV range, while at the same time BTCTC punters were scrambling to pay 5/10/20+ mNAVs instead – despite boasting a profitable staking operation (on a 95% NET margin), ZERO debt, dilution & taxes, an owner-operator team, and a best-in-class/long-term investment track record.
None of this, however, distracted the KR1 team from their long-term strategy – please revisit my to-do list from previous year(s) – it’s been slow & steady (& sometimes painful) progress to reach the last two final/critical deliverables. First was an up-listing to the London Stock Exchange (from Aquis) – we finally got confirmation this was going ahead – alas, KR1 obviously had to marshal all its time, energy & resources, press pause on new seed round investments, and focus attention solely on its staking operation, to finally win over a previously intransigent FCA & get approval for its end-Nov up-listing. [Which seems to have perversely prompted a complete about-face, with the FCA approving Satsuma Technology’s re-listing & Smarter Web’s up-listing shortly thereafter, despite neither having a meaningful/credible operating business]. Now the up-listing’s out of the way, this should clear the way for complementary new seed, later-stage, and/or open market investments by KR1, which just leaves the second critical deliverable…a professional in-house IR/PR function. Which now looks ready to kick off with a new Head of IR, a new Financial Infrastructure Strategy announced, and the company’s first Investor Meet presentation this Friday.
This ‘new’ strategy reiterates KR1’s commitment to #DeFi – the nexus between #TradFi’s global wealth/payments/money supply & crypto itself, and the largest blockchain TAM opportunity out there – based on the twin pillars of $ETH (already its top holding) & $BTC (a new holding, to be redeployed from income & non-core holdings), current & future #DeFi investments, plus existing & new staking/validator opportunities. And as noted in the recent LSE prospectus, this is backed up with a new placing programme – to raise new funds, onboard new (institutional) shareholders, add new staking opportunities, reduce the expense ratio, and increase the balance sheet/market cap – clearly this is dependent on a successful & sustainable IR/PR function, and a step-change in KR1’s valuation multiple, as beleaguered shareholders obviously WON’T stomach any sub-1.0 mNAV dilution. That being said, the team is ‘clearly differentiating KR1 from the public digital asset treasury company model’, which is to be applauded. Attracting the right kind of smart/long-term oriented investors is just as much about selling what KR1 is NOT, as it is about selling what it actually is today…still a uniquely diversified crypto/DeFi/venture capital investment company & staking operation.
So size your crypto allocation appropriately – as always, I recommend a long-term 3-5% crypto allocation in your portfolio (now in line with my own allocation today, ouch!), ideally via KR1, or KR1 & a $BTC ETF – in due course, this latest Bitcoin-led bear market will inevitably blow over, and hopefully we’ll soon see:
i) KR1’s current staking income run-rate (vs. an average £8.8M+ pa in the last three years) starts growing again with the crypto market & (ideally) with new capital/staking opportunities,
ii) investors (& even eviscerated punters!) with a new-found instinct for & aversion to dodgy promoters, ridiculous comp. schemes, crappy business models & hopeless/non-existent track records, and
iii) a new-found respect for KR1 (given a proper IR/PR function & an LSE listing), and a (locked-in) owner-operator team that eats its own cooking (after buying a ~25% stake), runs a profitable staking operation, and actually boasts the best +44% pa/3,075%+ investment track record on the planet over the past decade!
It was the usual radio silence (or else the usual moaning!) from REC shareholders, but after two bad years a +5.6% share price gain & an average +8.5% dividend yield looks pretty good to me. While the wider UK-listed asset management sector’s been in a bear market for years now – due to relentless outflows for both active managers & UK equity strategies – Record keeps attracting inflows/win new mandates & keeps hitting new AUM all-time-highs. This is pretty much the only sector metric investors care about, but perversely REC hasn’t been rewarded for it…arguably because it enjoys the luxury of focusing on/investing for growth, and doesn’t ‘manage’ its earnings trajectory very well! As I’ve highlighted before, investors would be thrilled with a company compounding EPS +16% pa over the last four years, but NOT one that grew EPS +46% pa for the first two years (FY-2021/23) & then let EPS slip (8)% pa for the last two years (FY-2023/25). But effectively both are Record…
Regardless, in FY-2026, Record’s continued to invest & pursue its transition from currency management to a more diversified (alternative) asset manager, providing a range of services to institutional investors. It added a new CIO (Andreas Danzer), and tapped NED Dr. Othman Boukrami to join the executive team of its Record Currency Management sub…he had a long & successful career at the Currency Exchange Fund, a good indicator REC wants to keep growing its emerging/frontier markets AUM, both in currency management & fixed income/private credit. [It will lose CFO Richard Heading next month, but shouldn’t face any difficulty replacing him…let’s not forget, REC’s successfully navigated the retirement of its founder Chairman & its prior CEO, bringing on a whole new generation of management in recent years]. REC continues to work on planning, raising funds & launching new (higher fee) alternative asset funds – deploying the first €100 million from their €1.1 billion Infrastructure Equity Fund, moving forward with plans to launch a $1B+ Sharia-compliant trade finance fund, and agreeing (non-binding) terms with Kore Potash for a $2.2B project funding facility. And its AUM momentum continues unabated – as of its recent Q3 trading update, total AUM was up 15%+ yoy to a new $116 billion all-time-high, the new/fast-growing Solutions for Asset Managers line of business was up +36% yoy to $17.4B, while high-fee FX Alpha responded to increasing FX volatility with a +58% qoq jump to $2.7B. Performance fees (earned via hedging tenor management/opportunities, not FX volatility) have compressed over the last couple of years, but notably £1.6M in performance fees was earned in Q3, helping bridge the gap vs. FY-25.
Despite that, continued investment & a change in the underlying (fee/AUM) mix of currency hedging/management AUM means it’s another ‘transition’ year for Record, with FY-26 EPS consensus down again at 4.0p – probably about right, looking at H1/LTM numbers, and noting the actual timing/launch of new funds/initiatives is very relevant/significant here. That puts REC on 14 P/E & 2.5 EV/Revenue multiples here (vs. a 25%+ FY operating margin & a potential 60%+ incremental operating margin), which might seem reasonable…but I suspect many potential/current investors don’t fully understand REC’s underlying (sticky/recurring revenue) business – or critically, the ZERO speculative, market & counterparty risk it actually takes – or fully appreciate the actual asymmetric risk-reward here:
i) underlying steady state earnings/operating margin are obviously much higher, but management’s deliberately choosing to re-invest to attract/increase AUM & ultimately higher revenue, margins & profitability,
ii) today’s 8.2% dividend yield is a compelling return meanwhile, and well-supported by underlying EPS & ~6p a share/£11 million+ in net cash (& an additional £4M+ in investments),
iii) ALL of Record’s (somewhat comparable) UK peer companies have been acquired, or bid for, in the last year/two – notably, Alpha Group (with a far less sticky & far more transactional FX business/client base) was acquired by Corpay on 20/50 P/E & 7/12 EV/Revenue deal multiples (depending on how you define its financial metrics!) – not to mention REC’s retired founder & CEO still own a (potentially for sale?) ~33% aggregate stake in the business,
iv) assuming this investment/AUM growth does pay off, the company’s obviously capable of earning far higher average & potentially 60%+ incremental operating margins, vs. its current 25%+ FY operating margin…so yes, I expect REC can & will reach/surpass the £60 million revenue & 40% operating margin targets (vs. £40M revenue & a sub-£100M EV today) originally set by ex-CEO Leslie Hill.
Again, I have to marvel at what an absolute juggernaut Alphabet’s been over the years, and obviously still is today…Google was only founded in 1998, its annual revenue passed $1 billion in 2002, it only went public in 2004, its annual revenue passed $100B in 2017, and last year its quarterly revenue actually passed $100B, while its annual revenue surpassed $400B!
But despite that revenue/growth trajectory, we’ve somehow still experienced three separate bear markets in the last four years!? The first was precipitated by a general bear market in 2022, with the astonishing launch of ChatGPT in Nov-22 coinciding with a (45)% decline…in fact, $GOOGL actually bottomed out before the launch, but then spent an uncomfortable three months with its stock (& Search business) apparently heading straight for zero (a reminder blue checkmark FinTwit’s always the ultimate contra!). The second was in Jul/Sep-24, a near-(25)% decline, prompted by anti-trust & capex spending concerns…the latter triggered by a $13.2B Q2 spend, which seems rather quaint now, in light of Alphabet’s current 2026 capex forecast! The third came in Feb/Apr-25 – the DeepSeek moment – but again, a near-(33)% decline proved a mere blip in the road for the share price, and for Alphabet’s AI spending/domination plans.
All of which is a reminder to continue expecting significant $GOOGL reversals along the way…which could prove challenging when a multi-bagger compounds into a 21%+ portfolio holding!? But face it, learning to live with that risk is the ONLY path to a genuine (mega) multi-bagger – which is why all great/long-term investing is ultimately about EQ, not IQ – and I’ve always viewed Alphabet as THE easy/obvious bet on a unique & existential AI Revolution opportunity, and a necessary ‘hedge’ for the rest of my portfolio & my family’s prospects (so yeah, I still sleep soundly at night with my $GOOGL holding). Not to mention, YouTube (20 billion videos & 20 million more uploaded daily!) is already the largest US TV streamer by far, and will inevitably emerge as another trillion-dollar+ AI opportunity/bet, both for creators…and in terms of increasing leisure time for society!?
This was originally premised on Google already being the biggest & best AI company in the world from day one…we take Search so much for granted today, it’s almost impossible to appreciate the sheer magic of having the world’s information organised & immediately at our disposal, not least in terms of quantifying the total economic value of the time-savings, knowledge & productivity it’s delivered to date for global GDP & society. But today, we can appreciate Alphabet’s full-stack AI platform strategy, delivering enterprise IT infrastructure, AI, data analytics & cyber-security via Google Cloud, while also delivering AI via multiple two billion+ user products/platforms to consumers globally, ideally via Android/Pixel smartphones. All obviously supported by a (visionary) acquisition strategy (I’m still convinced DeepMind is/will prove to be the most valuable acquisition ever), including the Wiz & Intersect acquisitions & multiple data centre/power off-take agreements in the last year. Of course, Waymo’s another AI platform in the real world – with 20 million fully-autonomous rides already clocked up – Alphabet’s just closed/funded a majority of a new $16 billion round, at a $126B valuation.
And who could resist betting on that growth trajectory – Alphabet’s been accelerating every quarter over the last year, with total revenue growing at +18% yoy in Q4 versus +12% in Q1, operating margins steady around 32%, and EPS growing +34% for the year. Notably, Search use has actually been enhanced by AI Overviews (over 1.5 billion users/month) & AI Mode – as I highlighted before, monetisation always was/is limited to specific high-intent search, like travel/shopping/etc, which still lends itself to being monetised in Search, and/or ultimately in agentic/subscription AI – with revenue growth increasing to +17% in Q4 vs. +10% in Q1. As for Google Cloud, revenue growth accelerated to +48% in Q4, reaching what’s now an immensely profitable $70 billion+ pa run-rate, with backlog growing even faster to hit $240B. YouTube Ad revenue growth averaged +12%, while Subs averaged +19%, with YouTube Ads & Subs hitting $60B+ revenue last year, while overall Google now boasts 325M+ paid subscribers. Of course, AI usage/sign-up growth’s even faster – with Alphabet now ‘shipping with speed’, rolling out Gemini 2.5, Veo3, Genie3, Nano Banana & Gemini 3 – with Gemini jumping from 450 million MAUs to 750M MAUs in just the last two quarters, and with tokens processed growing 20x yoy, Alphabet had to switch from a monthly to a per minute metric (now at 10B+ tokens/minute)! And management’s leaning hard into this growth – emphasising supply is the constraint, not demand – with 2025 capex spend hitting $91B (vs. an original $75B estimate, and $32B capex just two years ago), and prompting a new $175B-$185B estimate for 2026. Which spooked investors, who inevitably & perversely always want to focus on/struggle to find a ‘negative’ in blockbuster quarterly results, with $GOOGL now down marginally year-to-date, vs. a $349/share all-time-high just over a week ago.
But as a shareholder, isn’t THIS exactly the reason why you’re betting on Alphabet & its management, especially when this highlights & confirms an obvious conviction that they’re now dominating & winning in the AI race…
