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Today’s idea is a bet on a Japanese industrial giant that has quietly held its ground through an energy crisis — and looks undervalued enough to reward patient investors: Kawasaki Heavy Industries (Tokyo Stock Exchange: 7012).

Expected Profits

19% profit in 15 months; ~184% profit in 10 years, 11% CAGR, including dividends

Note: Our return expectations include the possibility of spin-offs.

Description of the Business

Kawasaki Heavy Industries (Tokyo Stock Exchange: 7012) is a Japanese industrial conglomerate founded in 1878, spanning motorcycles, defense systems, trains, energy infrastructure, and industrial robotics.

Here’s how Kawasaki Heavy’s revenue was structured in 2024 — the 2025 annual report hasn’t been published yet.

Note: The company doesn’t specify which profit margin metric it reports at the segment level — operating, EBITDA, or otherwise.

1. Powersports & Engine — 28.7%. Motorcycles, off-road utility vehicles and ATVs, personal watercraft, and general-purpose gasoline engines.
   Segment profit margin: 7.9%.

2. Aerospace Systems — 26.7%. A mini-conglomerate within the conglomerate: military aircraft for Japan’s Ministry of Defense, commercial aircraft components, commercial helicopters, missiles, space equipment, aero engines, and aerospace gearboxes.
   Segment profit margin: 9.8%.

3. Energy Solution & Marine Engineering — 18.7%. A broad portfolio ranging from LNG tanks to boiler plants, and industrial energy systems.
   Segment profit margin: 11.1%.

4. Rolling Stock — 10.4%. Train-related products, including locomotives and freight cars.
   Segment profit margin: 3.8%.

5. Precision Machinery & Robot — 11.3%. Industrial and automation equipment — from hydraulic components for construction machinery to medical and pharmaceutical robots.
   Segment profit margin: 2.9%.

By geography, Japan — 40.7%, the Americas — 31.5%, other Asian countries — 12.8%, Europe — 10.3%, other regions — 4.7%.

Kawasaki Heavy is profitable. For the 12-month period ended March 31, 2026: gross margin — 19.21%, operating margin — 5.43%, net margin — 4.78%.

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Pros

Relatively Cheap. At a P/S of 1.19 and a P/E of 24.79, the stock isn’t bargain-bin cheap — but the P/S in particular is low enough to suggest the market hasn’t fully priced in the business’s earnings potential. There’s room for a meaningful re-rating.

A Finger in Every Pie. Kawasaki Heavy is one of those rare industrial conglomerates where diversification actually feels like an advantage. Several segments are sitting squarely in the path of strong structural tailwinds right now.

The Aerospace segment is perhaps the most compelling. Japan’s new prime minister has taken a noticeably more assertive foreign policy stance, and the country has recently lifted most of its longstanding restrictions on defense exports — a watershed shift for one of Asia’s most capable defense manufacturers.

Japan is already among the fastest-growing arms exporters in the world, and for good reason: depending on the category, Japanese military products can run roughly 35% cheaper than their U.S. equivalents. The Iran war has only sharpened the relevance of that cost advantage, exposing the budget strain of deploying expensive U.S.-made missiles against much cheaper enemy drones — a dynamic the Pentagon is reportedly addressing with about $200 billion in war-related funding requests to Congress. Kawasaki Heavy, one of Japan’s largest defense companies, is well-positioned to fill the role of a high-quality, cost-competitive supplier in a world that’s suddenly paying closer attention to price.

The Precision Machinery & Robot segment should also see strong demand over the next two years as manufacturers globally accelerate automation investment. And the remaining segments — with one notable exception covered in the Cons — can reasonably expect steady order flow, supported by ongoing capital expenditure cycles and the need to replace aging infrastructure both in Japan and abroad.

Japan’s Manufacturing Sector Is Holding Up. Japanese industrial activity indicators came in strong in March 2026 — a meaningful signal that the broader manufacturing environment, and likely Kawasaki Heavy’s order book, is weathering current conditions better than many global peers.

Spin-Off Potential. Kawasaki Heavy is a classic sum-of-parts story waiting to happen. If the company were to separate its divisions into standalone businesses, each could plausibly trade at a higher multiple and grow faster than the combined entity currently does. There’s no indication management is moving in that direction — but the optionality is real, and it adds a layer of upside that isn’t captured in the current valuation.

Strong Foreign-Investor Interest. In dollar terms, Kawasaki Heavy is roughly a $17 billion company — modest by U.S. large-cap standards, but a meaningful name in the Japanese market. Foreign investor flows in Japanese equities have remained elevated, and a relatively cheap, high-quality industrial with defense exposure is exactly the kind of name that tends to attract overseas capital when that trend is running.

Cons

Risk of a Stronger Yen. With close to 60% of sales generated outside Japan, Kawasaki Heavy benefits when the yen is weak — foreign-currency revenue converts into more yen on the income statement. The problem is that Japanese policymakers have grown uncomfortable with how far the yen has weakened, partly as a result of war-related currency shocks. A shift toward more hawkish rate policy could strengthen the yen and meaningfully weigh on reported earnings. This is one of the clearer macro risks in the thesis, and worth watching closely.

Oil Supply Repercussions. Japan imports about 95% of the oil it consumes, and its primary suppliers — the UAE, Saudi Arabia, Kuwait, and Qatar — are exactly the countries most exposed to a potential Strait of Hormuz disruption. That’s a concentrated vulnerability. The mitigating factor is Japan’s strategic reserve position: as of December 2025, the country held about 254 days’ worth of oil consumption in reserve. It’s a useful buffer, although not an unlimited one. It’s also worth noting that the latest quarterly report predates the war and the subsequent oil price spike, so the full operational impact on Kawasaki Heavy remains unknown.

Powersports & Engine Segment. If elevated oil prices persist, this segment could face pressure — motorcycles are relatively fuel-efficient, but sustained high energy costs tend to dampen consumer confidence and discretionary spending. Japan’s consumer confidence index has already dipped over the past two consecutive months, and a further softening could weigh on sales in this division.

Debt Load. Total liabilities stand at ¥2.41 trillion, and roughly 80% of that comes due by the end of this fiscal year. Cash on hand is just ¥0.108 trillion. The company can likely manage near-term obligations through receivables (¥0.984 trillion) and inventory (¥0.901 trillion) — but neither is risk-free. Customers can default, receivables can turn into losses, and inventory values can move against you. That balance sheet profile limits how much management can do on dividends: Kawasaki Heavy currently pays ¥30 per share annually — about a 0.59% yield — distributing roughly 28.55% of net profit. A meaningful payout increase would stretch an already tight balance sheet, and rising Japanese interest rates would make debt servicing incrementally more expensive over time.

Verdict

Buy now at ¥3,266. The stock traded around ¥3,651 in February, and that level anchors our upside expectations. Two scenarios from here:

1. ¥3,900 within the next 15 months — 19% profit, excluding dividends.

2. Hold over 10 years and target ~11% CAGR, including dividends.

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Today’s idea is a modestly speculative bet on a software company that governments can’t easily quit: Tyler Technologies (NYSE: TYL). The stock has been cut nearly in half over the past two years, and we think the sell-off has created a real entry point for a business that’s more durable than the market is currently giving it credit for.

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Expected Profits

• 18.5% profit in 14 months

• ~136% profit in 10 years, 9% CAGR

Description of the Business

Tyler Technologies (NYSE: TYL) is a U.S.-based technology company that develops and sells workflow software exclusively for the public sector. Its principal customers are local and state governments, federal agencies, school districts, and education agencies.

Here’s how Tyler’s revenue was structured in 2025:

1. Enterprise Software — 72.95%. The name undersells it: this segment powers core government operations — taxes, courts, education, property records, and more.
   Segment operating margin: 38.96%.

2. Platform Technologies — 27.05%. Online payments, digital government transactions, data platforms, dashboards, and workflow tools.
   Segment operating margin: 16.86%.

Almost all of Tyler’s sales are generated in the U.S.

For 2025: gross margin — 46.46%, operating margin — 15.34%, net margin — 13.53%.

Why the Stock Is Down

Tyler’s stock has lost nearly half its value over the past two years. The decline appears to reflect a broader reassessment of high-multiple software stocks in an environment where AI is raising real questions about which software categories are defensible — and which aren’t. We think the market has been too aggressive in punishing Tyler, and that the sell-off has opened up a more attractive entry point than this business typically offers.

Pros

Not Obsolete — at Least Not Yet. This is the crux of the Tyler thesis, so it’s worth unpacking carefully. Most software stocks facing AI headwinds make an easy target: their products generate text, summarize content, or handle tasks that a well-prompted language model can replicate for a fraction of the cost. Tyler is different.

Tyler’s core products are record-keeping and workflow systems embedded inside government operations — courts, tax authorities, property records, police and emergency services, ERP platforms, permitting systems, school administration, and payment infrastructure. These aren’t text-generation tools. They carry user permissions, regulatory requirements, audit logs, compliance frameworks, system integrations, and payment rails that have been built up over years of implementation.

A city that adopts ChatGPT or Microsoft Copilot still needs the underlying database, workflow engine, and compliance layer that Tyler provides. AI can help draft a document, classify a record, or automate data entry — but it is not going to calculate municipal taxes, manage court case workflows, process permits, or dispatch emergency services. Tyler operates in a world of compliance obligations that off-the-shelf AI tools simply cannot address yet.

AI Integration Is Actually Happening. Tyler isn’t sitting still on AI — it’s embedding it directly into existing products. In Q1 2026, the company launched an early-adopter pilot adding agentic AI features directly into its applications, developed in collaboration with AWS and various AI model providers. It’s also rolling out agentic coding tools for its roughly 2,000 product-development employees.

Early results are encouraging. Tyler’s Resident AI Assistant is live in six states. In Indiana alone, around 17,000 residents use it monthly, generating almost 50,000 government-services queries. The company also reports that its AI-enabled Document Automation and Priority-Based Budgeting products are delivering productivity and labor-efficiency gains of 10–30%. For now, Tyler looks more like a beneficiary of AI adoption than a casualty of it.

Sticky Revenue. Around two-thirds of Tyler’s revenue comes from subscriptions, and when you add in continuously renewed maintenance contracts and similar items, recurring revenue accounts for roughly 85% of the total. That stickiness isn’t accidental — switching away from Tyler means migrating sensitive government data, retraining public-sector workforces, rebuilding integrations, and navigating procurement cycles that can take years. Bureaucratic inertia is effectively a moat for Tyler. Investors who value predictability tend to pay a premium for businesses that look like this.

Dividend Potential. Tyler doesn’t pay a dividend today, but with earnings of about $7.20 per share annually, there’s a credible case for a meaningful payout. A dividend of $4.00 per share or more is plausible — and initiating one would likely attract a new class of income-oriented investors, giving the share price a lift in the process.

Acquisition Potential. A dominant position in a sticky, high-margin, government-software niche — with a market cap around $14.33 billion — is exactly the profile that attracts acquirers. Private equity in particular tends to gravitate toward businesses like this: predictable cash flows, high switching costs, and a customer base that isn’t going anywhere. A take-private scenario is not difficult to imagine.

Cons

AI Could Still Be a Threat. We’ve made the case that Tyler is more AI-resistant than most. But “more resistant” is not “immune,” and there are several specific ways that AI pressure could show up in the financials over time.

• Lower Services and Add-On Revenue. If AI automates implementation work, document processing, citizen support, budgeting analysis, or back-office administration, Tyler could see demand erode for certain professional services and lower-value software modules. The company itself warns investors that AI tools may be seen as automating functions that have traditionally driven demand for some Tyler products.

• Higher R&D Costs. Staying competitive means keeping up, and keeping up costs money. In 2025, Tyler reported that R&D expenses rose partly due to new product initiatives, including AI-related investments — a line item that is unlikely to shrink.

• Cybersecurity and Data Exposure. Tyler handles sensitive government data at scale, and the company acknowledges in its annual report that AI increases the risk of cyberattacks, data breaches, and accidental exposure of proprietary information. Moving workloads to the cloud adds another layer of potential vulnerability.

• Pressure from Larger Platforms. Microsoft, AWS, OpenAI, Anthropic, and vertical AI startups are all capable of targeting the edges of Tyler’s workflow — resident chatbots, document automation, data search, budgeting tools. If those capabilities become commoditized, some of Tyler’s add-on revenue could lose its differentiation.

• Becoming the “Smaller Partner.” Today, government employees live inside Tyler systems — which means Tyler controls the workflow. But if AI agents become the primary interface between workers and their software (“summarize this case,” “approve this invoice”), some of that control could migrate toward the AI orchestration layer. If Microsoft, AWS, OpenAI, or a vertical AI startup becomes the main interface, Tyler risks being positioned as the underlying database rather than the center of gravity. That probably doesn’t break the business — but it could hurt the valuation multiple, which is already doing a lot of work at current prices.

A Saturated Home Market. The U.S. scores 0.92 out of 1.00 on the e-government development index — meaning most of the obvious digitization work has already been done. There’s limited room for the kind of broad-based government IT expansion that would meaningfully accelerate Tyler’s growth domestically. International markets with lower e-government penetration exist, but breaking into them would require substantial investment, and Tyler has shown little appetite for that kind of geographic expansion so far.

Very Expensive. There’s no sugarcoating this one. Tyler trades at a P/S of 6.39 and a P/E of 47.5 — elevated even by U.S. standards, which are themselves elevated by global standards. At those multiples, the stock is priced for continued strong execution, and there isn’t much margin for error. Any stumble in growth or margins could be met with a disproportionate market reaction.

Verdict

Buy now at $337. The stock is well below its historic peak, and we see two scenarios from here:

1. A bounce to $400 within the next 14 months — 18.5% gain, excluding dividends.

2. Roughly 9% CAGR over the next 10 years.

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Today we have a pretty speculative idea: buy the German software stock Nemetschek SE (Deutsche Börse Xetra: NEM). While it isn’t especially cheap, we think it still has meaningful upside potential.

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Expected profits

• 19% profit in 14 months

• ~159% profit in 10 years (10% CAGR, incl. dividends)

Description of the business

Nemetschek SE is a long-established German company, founded in 1963. Today, it’s a technology player specializing in software for architecture, engineering, and construction (AEC).

Here’s how Nemetschek’s revenue broke down in 2025:

1. Design — 45.42%. Software for architects and engineers used for design, modeling, structural engineering, data management, checking, and visualization.
   Segment EBITDA margin: 28.1%.

2. Build — 40.4%. Solutions for construction companies, developers, suppliers, general contractors, planning offices, and civil engineers. The software supports estimating, tendering, scheduling, cost accounting, construction ERP, digital documentation, collaboration, and on-site workflows.
   Segment EBITDA margin: 35.8%.

3. Media — 9.92%. Creative tools: software for 2D/3D design, motion graphics, visual effects, rendering, sculpting, and visualization.
   Segment EBITDA margin: 33.9%.

4. Manage — 4.35%. Software for real estate, facility, and workplace management — focused on workspace usage, maintenance, efficiency, and broader building operations.
   Segment EBITDA margin: 12%.

The U.S. is Nemetschek’s single biggest market, accounting for 41.8% of sales. Germany is the next largest at 18% of revenue. The rest comes from other (unnamed) countries.

Nemetschek is profitable: in 2025, its gross margin was 51%, its operating margin was 25%, and its net margin was 18.23%.

Pros

The stock is down. In a philosophical sense, every sell-off is an invitation to a bounce. Nemetschek has lost about half of its market cap since July 2025, and much of that decline reflects the fact that the stock was previously overpriced.

Even now, NEM still looks relatively expensive (more on that in the “Cons”). Still, we think the upside factors (more on that in the “Pros”) justify expecting a rebound.

Rotation out of the U.S. Surprisingly, U.S. stocks still trade at roughly a 39% premium over the rest of the world. That could push some investors to rotate from the U.S. into other developed markets and pick up strong local tech names like Nemetschek.

The U.S.-peer comparison helps Nemetschek: when you compare it with other engineering software names like Bentley Systems (NASDAQ: BSY), Cadence Design Systems (NASDAQ: CDNS), and Procore (NYSE: PCOR), Nemetschek’s valuation looks somewhat more muted. In other words, NEM can appeal to some U.S. investors as a “cheaper Cadence”.

Degree of stability. Nemetschek is a fairly predictable business, with a large share of revenue coming from recurring sources. That makes the stock attractive to investors who prioritize stability.

What we’re saying is this: while NEM isn’t as cheap as we’d like, it still delivers solid revenue growth and excellent margins — so it arguably deserves some valuation premium.

The market backdrop is supportive. Nemetschek’s sales and profits have grown for years for a simple reason: its software is in high demand, and that demand should remain strong for quite some time. It also helps that the engineering and construction industries still have surprisingly low levels of digitization, which leaves room for further adoption-driven growth. And with massive global engineering demand — from maintaining existing infrastructure to building new data centers — demand for engineering software should stay robust for a long time.

Dividend growth potential. Nemetschek pays €0.68 per share annually, which implies a 0.79% dividend yield — well below the German market average of about 2.5%. That said, dividend-paying tech stocks are relatively rare globally, and NEM’s payout has room to grow.

The company currently pays out about 36.15% of net profit as dividends, so in theory it could double the payout — especially if the long-term outlook continues to improve.

A good fit for M&A hunters. Nemetschek’s market cap is only about €8 billion, and given the company’s quality, it’s plausible it could attract a buyout offer in the foreseeable future. It’s even possible that a player like Cadence could show interest for exactly these reasons.

Cons

AI is an open question. AI tools pose a theoretical threat for two reasons:

1. More price competition. Cheaper (though less functional) AI and “vibe-coding” solutions could lure away some of Nemetschek’s smaller clients. That said, larger firms will still need Nemetschek’s software, especially given its compliance and data-protection standards — something today’s vibe-coded tools typically can’t match.

2. Higher spending to keep up. Nemetschek is effectively forced to invest in AI to stay competitive. The company is already embedding AI capabilities, which is strategically positive, but it can weigh on margins and profits.

For now, both risks remain mostly theoretical: Nemetschek’s margins are still strong, and there’s no clear evidence of customers leaving en masse for cheaper AI alternatives.

Not cheap on traditional multiples. Nemetschek’s P/E is more than 2x the German market average — around 36.81. Its P/S is also high even by U.S. standards, at about 6.84. That makes further upside harder to justify and increases the risk of valuation-driven volatility.

Weaker greenback. Nemetschek generates a little under half of its sales in the U.S., earning dollars — but it reports in euros. With the USD weakening over the past 1.5 years, there’s a real risk the next earnings report could disappoint investors: unless sales growth outpaces currency moves, Nemetschek’s reported revenue in euros may shrink once U.S.-dollar sales are translated.

Recent acquisition. In April 2026, NEM announced it would buy a 72% stake in the U.S. software company Heavy Construction Systems Specialists (HCSS) for $2.4 billion. It raises a bunch of questions.

The first is whether the new acquisition is worth it. HCSS is private, but media reports suggest its annual revenue is around $215 million, and its profitability is not publicly known (though its EBITDA margin is estimated at about 40%). That valuation looks expensive, and it’s fair to question how much of a boost it will deliver — and whether it’s really worth the price.

Another question is how NEM intends to pay for HCSS. The company has only about €0.258 billion in cash, so it’s very likely it will take on additional debt. Management indicated that “the deal won’t change the ownership structure,” meaning NEM does not plan to issue new shares. That implies more leverage, which would also reduce the likelihood of a meaningful dividend increase.

Also, there may be some ownership-related downside due to the deal structure. NEM is buying 72% of HCSS from Thoma Bravo, while the fund will retain a 28% stake. HCSS will be integrated into NEM’s Build segment, which means Thoma Bravo will effectively remain exposed to part of the Build business after the deal closes in the second half of 2026. That creates a theoretical risk that Thoma Bravo could eventually sell its stake, putting pressure on the shares.

On the other hand, there could be an upside: an active U.S. fund like Thoma Bravo could end up playing a meaningful role in shaping the asset and helping drive execution after the acquisition.

Verdict

Buy now at €66.50. The stock is currently far below the €130 level the stock reached in 2025, and that anchors our price expectations. We see two possible scenarios:

1. Bounce case: Hold until the stock to reach €78 within the next 14 months. That would be a 19% gain, excluding dividends.

2. Long-term case: Hold the stock for the next 10 years and target ~10% CAGR, including dividends.

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This week we are looking at a modestly speculative opportunity in a name most investors already know well: Adobe (Nasdaq: ADBE). The setup isn’t flashy, but the valuation is doing most of the work here. At current levels, the stock looks cheap enough that even a modest normalization could deliver meaningful upside.

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Expected Profits

• 20.5% profit in 15 months;

• 45.5% profit in 26 months;

• 178.5% profit in 10 years

Description of the Business

Adobe is, at its core, a cloud company. Its products are delivered through infrastructure it owns and operates — the standard SaaS (software as a service) model — where users access software remotely rather than installing it locally.

That wasn’t always the case. Adobe built its early dominance selling boxed software in the 1990s, then gradually transitioned to the cloud starting in the late 2000s. The shift from one-time purchases to recurring subscriptions is what turned Adobe into the highly predictable, high-margin business it is today.

Here’s how revenue was structured in 2025:

1. Digital Media — 74%. Creative and content tools: Photoshop, After Effects, and the broader Creative Cloud ecosystem that has become an industry standard for designers, video editors, and digital creators.

2. Digital Experience — 25%. Marketing and analytics tools for enterprises, including Audience Manager and Primetime — products designed to help companies understand and target users more effectively.

3. Publishing and Advertising — 1%. Legacy and niche offerings: eLearning tools, document platforms, web conferencing, and high-end publishing solutions.

About three-quarters of revenue comes from individual creators and marketing professionals, with the remainder coming from enterprise clients. The mix gives Adobe both a broad base of sticky individual users and higher-value corporate relationships.

Subscriptions account for 96% of total revenue. That’s the key to the story: recurring revenue, high visibility, and very little cyclicality compared to traditional software models.

Geographically, the business is still anchored in the U.S., which generates 52.71% of revenue, with the rest spread across international markets.

And the margins are exactly what you’d expect from a scaled SaaS leader: 89.4% gross margin, 36.65% operating margin, and 29.48% net margin over the past 12 months.

Pros

Deep Value By Tech Standards. Adobe looks inexpensive almost no matter how you slice it. A P/S of 3.79 and a P/E of 13.13 put it well below typical U.S. tech valuations — even after the broader market’s recent pullback. In a sector where “expensive but justified” is the norm, Adobe stands out for simply being… cheap. That alone is enough to put it on the radar.

AI Fears Haven’t Materialized (Yet). The market punished Adobe when AI tools started looking like potential substitutes for parts of its product suite. That concern wasn’t irrational — if cheaper tools can replicate core functionality, pricing power comes under pressure.

But so far, the feared exodus hasn’t shown up in the numbers. Recent results actually show continued growth, with no sign of users abandoning the platform at scale. More importantly, Adobe isn’t standing still: AI tools like Google’s Gemini/Nano Banana are now integrated directly into its ecosystem (Firefly, Generative Fill, etc.).

In other words, AI is increasingly being absorbed into Adobe’s offering rather than replacing it. If that dynamic holds, the narrative around “AI disruption” could shift quickly — and with it, the stock’s valuation.

Optionality on Capital Returns. Adobe doesn’t pay a dividend — but it easily could. This is a mature, highly profitable business with predictable cash flows and strong margins. The company earns roughly $17 per share annually, which implies it could, in theory, return around $8.50 per share without straining the business — roughly a 4% yield.

That’s unusually high for a tech company, and it opens the door to a classic catalyst: activist pressure. With the stock still far below its 2021 peak, a dividend or structured capital return program would be one of the simplest ways to re-rate the shares.

Two structural details make that scenario more plausible: no dual-class shares and no controlling shareholder. Management doesn’t have an easy way to ignore investor pressure if it builds.

Cons

AI Competition Is Real — Just Not Immediate. The risk isn’t hypothetical. Adobe’s pricing reflects extremely high margins — north of 90% — which naturally invites competition sooner or later. Cheaper AI-driven alternatives are starting to emerge, and for a certain segment of users, they’re already “good enough”.

The trade-off is straightforward: Adobe offers a deeply integrated, professional-grade ecosystem — but at a price. And as budgets tighten, that price becomes harder to ignore. Many users, especially individuals or smaller teams, now have a clear incentive to experiment with cheaper tools like Nano Banana, which — outside of Adobe’s bundled ecosystem — can be significantly cheaper.

That doesn’t mean users are leaving en masse. So far, they aren’t. Adobe’s tools still set the standard in many categories, and for serious creative work, switching costs — both technical and behavioral — remain high. The company is also moving quickly to integrate AI into its own products, which helps neutralize some of the competitive threat.

But the question isn’t whether pressure exists — it’s how it evolves. Could a meaningful customer shift toward cheaper AI tools happen over time? Absolutely. The more difficult question is timing. Does that shift begin in the next few quarters, or does it take years, as AI tools become more capable, more reliable, and more deeply embedded in creative workflows?

Figma Remains a Structural Competitor. Figma is arguably Adobe’s most credible direct competitor — and importantly, it’s still independent. Adobe’s attempt to acquire the company in 2022 ultimately failed under regulatory pressure, leaving a strong rival firmly in place.

Figma’s growth metrics are hard to ignore. Its reported net retention rate (NRR) of 136% suggests that existing customers are not only staying, but expanding their usage meaningfully over time. Adobe, notably, does not disclose its own NRR — and in most cases, companies highlight that metric when it’s a strength.

Note: Net retention rate (NRR) shows how much the company’s existing customers are spending compared to last year. 100% NRR means no change, less than 100% means customers are shrinking or leaving, and more than 100% means customers are expanding their spending.

There is, however, an important caveat. Figma’s growth comes at a cost — literally. The company reportedly loses about $1.31 for every $1.00 of revenue, which raises questions about how sustainable its current level of customer acquisition and pricing strategy really is. Competing aggressively is easier when profitability isn’t a priority. Even so, Figma doesn’t need to win the entire market to matter. It just needs to keep chipping away at Adobe’s edges — and for now, it’s doing exactly that.

AI Is a Costly Investment. Adobe isn’t just reacting to AI — it’s spending heavily to stay competitive. While the company doesn’t break out AI-specific costs, the direction is clear: over the past three years, annual R&D spending has increased by 43.75%, reaching $4.294 billion.

That aligns with a broader industry trend. Across U.S. tech, a growing share of capital is being funneled into AI — whether for infrastructure, talent, or model development. Adobe is no exception, and it’s reasonable to assume that AI now accounts for a significant portion of its R&D budget.

The challenge is that this kind of investment tends to compound. As more companies compete for the same inputs — engineers, compute, data infrastructure — costs rise. What starts as a necessary investment can gradually become a structural expense.

In other words, even if AI strengthens Adobe’s product offering, it may also weigh on margins over time. That’s the trade-off.

Balance Sheet Constraints. Adobe’s financial position is solid, but not frictionless. The company carries $18.27 billion in total liabilities, with $11.39 billion coming due by the end of February 2027. Against that, it holds approximately $6.89 billion in cash.

This isn’t alarming — Adobe generates strong cash flow and remains highly profitable. But it does limit optionality. When you combine near-term obligations with rising AI-related spending, the likelihood of initiating shareholder payouts becomes lower.

Negative Sentiment. Even strong businesses can underperform when sentiment turns against their sector. Right now, that’s the case for much of tech.

Investors have been rotating toward “hard” asset-heavy — utilities, energy, infrastructure — while keeping relatively lighter exposure to software and other intangible-heavy businesses. Adobe, despite its profitability, is still caught in that shift.

That doesn’t change the fundamentals, but it does affect timing. A stock can remain undervalued longer than expected if the broader market simply isn’t interested.

Verdict

Buy now at $240.11. From there, the path is fairly straightforward:

1. The conservative approach is to target $290 within 15 months — a 20.5% return. That’s a reasonable base case if valuation simply normalizes.

2. A stronger recovery could push the stock to $350 within 26 months, delivering a 45.5% return.

3. And for long-term holders, a return to the 2021 peak of $669 over a 10-year horizon would imply a 178.5% profit.
   

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Today’s idea is a moderately speculative bet on two dominant players in the global music industry that, for now, look mispriced relative to the durability of their underlying businesses. The setup is straightforward: high-quality assets, steady cash flows, and a market narrative that may be leaning too far in one direction.

Issuers

Universal Music Group N.V. (Euronext Amsterdam: UMG) — a Dutch music company

Warner Music Group Corp. (NASDAQ: WMG) — U.S.-based music company

Expected Profits

Universal Music Group (UMG): 23.5% profit in 15 months; 159% profit in 10 years, 10% CAGR (including dividends)

Warner Music Group (WMG): 24% profit in 15 months; 136% profit in 10 years, 9% CAGR (including dividends)

Description of the Business

Universal Music Group N.V. was originally an American business, but over time it passed through multiple owners before ending up under the French media conglomerate Vivendi. In 2021, Universal Music was spun off and listed as a standalone company in Amsterdam, although its operational center of gravity remains in California. That split created a cleaner equity story and made its economics more visible to public market investors.

Here’s how the company’s revenue was structured in 2025:

1. Recorded Music — 75.21%. This segment includes licensing UMG-owned recordings (IP) to distributors and digital platforms. While it may appear passive at first glance, it is anything but: Universal signs artists, funds production, manages promotion, and monetizes recordings across a wide range of channels.
   Segment adjusted EBITDA margin: 25.6%.

2. Music Publishing — 17.75%. Revenue from third-party use of copyrights on musical works owned or administered by the company. This is a steadier, rights-driven business that benefits from long-tail monetization of catalog assets.
   Segment adjusted EBITDA margin: 24.3%.

3. Merchandising and Other — 7.05%. Sales of artist-related merchandise, including apparel, accessories, and various branded goods. While smaller and lower-margin, this segment complements the core music business and deepens fan engagement.
   Segment adjusted EBITDA margin: 2%.

Geographically, the U.S. accounts for 50.46% of Universal’s revenue, followed by the U.K. at 9%. Japan at 6.43% and Germany at 5.1%, with the remainder spread across smaller markets.

Universal Music is profitable: in 2025, its gross margin was 38.92%, operating margin 16.78%, and net margin 12.23%.

Warner Music Group Corp. operates with a similar structure, though with some differences in mix and margins. In 2025, the company’s revenue came from:

1. Recorded Music — 80.63%. This includes the sale, marketing, distribution, and licensing of music produced by Warner’s artists. As with Universal, this is the company’s primary revenue driver, anchored in its catalog and artist relationships.

Here’s a more detailed breakdown of this segment:

• Digital — 53.58%. Revenue from streaming and downloads, which continues to dominate consumption trends.

• Physical — 7.85%. Sales of vinyl, CDs, and DVDs — still relevant, particularly among collectors and niche audiences.

• Artist Services and Expanded Rights — 12.44%. Fees and revenue shares from distribution, marketing, and rights management.

• Licensing — 6.43%. Royalties from third-party use of Warner-owned recordings.

Segment operating margin: 15.71%.

2. Music Publishing — 19.37%. Payments received as the copyright owner or administrator of musical works.

Segment operating margin: 17.15%.

Geographically, 42.85% of Warner Music’s revenue comes from the U.S., 12.78% from the U.K., and 7.68% from Germany, with the rest distributed globally. The mix is slightly less U.S.-heavy than Universal’s but still anchored in developed markets.

Warner Music is also profitable, though margins are thinner: gross margin was 45.87%, operating margin 11.16%, and its net margin was 4.43% in 2025. The gap largely reflects cost structure differences and capital allocation choices.

Why the Stocks Are Down

It’s somewhat puzzling that the market has repriced these companies lower without any obvious deterioration in fundamentals. There are no major red flags — just a shift in sentiment that appears to be driven more by narrative than by numbers.

The dominant concern is AI. Investors worry that if AI-generated music becomes “good enough,” record labels could lose relevance. It’s a clean story, and the market tends to price those in quickly.

We think that concern is overstated. Both Warner and Universal own vast catalogs built over decades of cultural relevance and fan loyalty. Replacing artists like Fleetwood Mac, Madonna, Prince, or The Doors with AI-generated equivalents is not just a technical challenge — it’s a cultural one.

AI-generated music will likely grow as a category. But replacing deeply embedded human artists is a different question entirely, and one that seems far less imminent. In that context, current fears look more like a sentiment overreaction than a structural shift — which is often where opportunities emerge.

Pros

Attractive Yields. Both companies generate relatively stable and predictable cash flows, which support consistent dividend payments. While yields are not extraordinary, they are solid enough to matter in a market where income is back in focus.

Relatively Cheap. Valuations are modest both in absolute terms and relative to the quality of the underlying assets. These are effectively oligopolistic businesses with long-lived intellectual property, yet they are not priced as such.

Attractive Acquisition Targets. Given their scale, cash flows, and asset quality, both companies could draw interest from private equity or strategic buyers. There are relatively few assets of this caliber available, which increases their appeal. Even a possibility of M&A — however theoretical — can act as a valuation floor.

Cons

Corporate Governance Issues. Both companies have dominant shareholders, which creates potential misalignment with minority investors. Warner Music’s dual-class structure gives outsized voting power to entities linked to Len Blavatnik, while Universal is controlled by a Tencent-led consortium. This concentration can influence key decisions in ways that don’t always favor public shareholders.

Balance Sheets. Debt levels at both companies are relatively high, particularly in a higher-rate environment. What looked manageable during more accommodative monetary conditions now carries greater risk, especially if refinancing costs rise. Dividend cuts to prioritize debt repayment are a plausible downside scenario.

AI Could Still Be a Threat. While current fears may be overstated, AI is not irrelevant — and it’s worth taking the risk seriously, even if it’s not immediate. AI-generated music could affect these businesses in two ways, both tied to how content is produced and consumed.

Lower Licensing Sales to Third Parties. Some portion of revenue comes from content creators who pay Universal and Warner for the right to use their music in films, ads, games, and other media. As production costs rise, there’s a growing incentive to cut expenses wherever possible — and music licensing is an obvious target. If AI-generated alternatives become “good enough,” some creators may opt for cheaper, custom-made tracks instead of paying for existing catalogs. That said, licensing revenue is meaningful, but it is not the core driver of either company’s business, which limits the immediate downside.

Proliferation of Fan-Made Music. A more structural risk is a shift in how music is created and consumed. If AI tools become cheap, intuitive, and widely adopted, users may start generating more of their own music — or consuming AI-generated content tailored to their preferences. Over time, that could reduce both listening time and spending on established artists, which would directly impact label revenues. This scenario is still highly hypothetical, but it’s not without precedent: two decades ago, it wasn’t obvious that phone cameras would disrupt standalone digital photography — yet that’s exactly what happened.

That said, none of these risks has materialized in any meaningful way so far. For now, this is less a confirmed threat and more a reminder to stay attentive — perhaps even a bit overly cautious.

Verdict

Universal Music — Buy now at €16.97.

The stock traded at €28 in May 2024, which provides a useful reference point for potential upside. From here, there are two reasonable paths:

1. Wait for a move to €21 in the next 15 months, implying a 23.5% profit excluding dividends.

2. Hold for 10 years and target a 10% CAGR, including dividends.

Warner Music — Buy now at $25.76.

The stock reached $49.99 in October 2021, and that prior level helps frame expectations. Again, there are two main scenarios:

1. Wait for a move to $32 in the next 15 months, implying a 24% profit, excluding dividends.

2. Hold for 10 years and target a 9% CAGR, including dividends.

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Our pick today is a moderately speculative bet on an overlooked corner of the market: shares of commodity trading houses, which we expect to have an exceptional financial year.

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Issuers

Glencore (London Stock Exchange: GLEN) — Swiss commodity trading giant specializing in metals and minerals.

Wilmar International Limited (Singapore Exchange: F34) — Singapore-based firm specializing in feedstock and food trading.

Mitsubishi Corporation (Tokyo Stock Exchange: 8058) — Japanese trading house with a highly diversified portfolio spanning chemicals, fuels, electronics, metals, and IT. The company also provides professional services and consulting. One common mix-up worth clearing up: Mitsubishi Corporation does not make cars — that’s Mitsubishi Motors, a separate company.

Expected Profits

Glencore: 17.5% profit in 18 months; ~318% profit in 15 years, 10% CAGR (including dividends)

Wilmar International: 27% profit in 18 months; ~318% profit in 15 years, 10% CAGR (including dividends)

Mitsubishi Corporation: 16.5% profit in 18 months ~318% profit in 15 years, 10% CAGR (including dividends)

Description of the Business

Trading houses are sometimes just called “traders” — which, stripped of jargon, simply means merchant.

Here’s how it works in practice. A U.S. corn farmer wants to sell his harvest. He doesn’t have time to hunt for buyers halfway around the world, and arranging international delivery on his own would be a logistical nightmare. That’s where a trading house steps in. The trader finds a buyer — say, a supermarket chain in Taiwan — and handles everything in between.

The trader buys the corn from the farmer at $5 per bushel (a bushel is a standard U.S. and U.K. unit of volume; in this context, it equals roughly 38.691 kg) and sells it to the Taiwanese buyer at $6.25. That $1.25 spread sounds attractive — until you see where it goes. The trader is responsible for the entire journey: loading the grain at the farm, moving it into dedicated storage elevators, insuring the cargo at every stage, and then transporting it to port and on to the buyer by sea or air.

Of that $6.25 per bushel, roughly $1.10—$1.15 covers logistics: elevator loading and storage, freight, and insurance. With the corn itself costing $5 and delivery running about $1.15, the trader clears about $0.10 per bushel. And that $0.10 still has to cover staff costs (or agent fees, such as the inspectors who certify quality and volume), taxes, and, finally, profit.

In other words, this is an extremely thin-margin business. Gross margins hover around 1.6% of revenue — a figure that would make any software executive weep. Yet that paper-thin margin is by design, and it’s exactly what makes the model resilient.

So why does commodity trading exist at all? Because for most producers and buyers, managing international logistics and supply chains in-house is either too expensive or too complicated. They’re happy to outsource the work — much like the average PC user doesn’t install Windows themselves. In theory, they could. In practice, it’s not worth the time and frustration, so they pay someone who specializes in exactly that.

That said, at sufficiently large scale, the economics can shift. If a company’s production volumes are massive enough, the savings from running an in-house trading desk can justify the investment. Among major agricultural producers, Archer Daniels Midland (ADM) and Cargill both trade actively. Among oil and gas majors, Shell and ExxonMobil do the same. The pattern holds broadly: the larger the business, the stronger the incentive to manage commodity trading internally. Smaller trading firms might operate in the millions; the largest work at the scale of tens or even hundreds of billions of dollars.

Commodity trading also requires enormous amounts of capital. Traders routinely handle volumes worth hundreds of millions — sometimes billions — of dollars, and very few companies have that kind of cash sitting idle. That’s why trading houses depend on constant access to credit lines.

It’s also why some of the world’s largest banks — Goldman Sachs, Morgan Stanley, JPMorgan Chase, and Barclays, among others — participate in commodity trading directly. Big banks already have the balance sheets for it, along with deep industry relationships built through lending and advisory work.

In short, the core functions of a trading house are: matching sellers with buyers, and organizing the storage and transportation of the commodity from origin to destination. Put simply, commodity traders help keep the global economy moving by ensuring goods actually reach the people who need them.

Pros

A Perfect Storm for Profits. This year is shaping up to be a strong one for commodity traders. Following the start of the latest U.S. military campaign in Iran, markets were thrown into turmoil. Commodity prices surged — and not just oil and gas. Agricultural products, fertilizers, and a wide range of industrial inputs all moved sharply higher.

The 2022 playbook is instructive here. When the war in Eastern Europe sent energy prices soaring, commodity trading houses booked record profits — because when prices rise sharply enough and fast enough, traders can typically negotiate wider margins. We think 2026 could be a repeat.

AI-Proof and Competition-Proof. Could trading house customers handle supply-chain logistics on their own, with the help of AI-powered tools? In principle, yes — but it only makes economic sense at a very large scale, where saving half a percentage point translates into tens or hundreds of millions of dollars in value.

And even then, building an in-house trading operation is no small feat. You could deploy hundreds of AI agents, but a significant portion of this work still requires time on the ground and on the road: commodities are often sourced from dozens of producers, and relationships and execution matter enormously. Once you replace an external trader with an internal solution, you’re committed to running it permanently — with all the overhead that implies.

That’s why we believe commodity trading houses will remain relevant for a long time. They specialize in finding markets and organizing supply chains, and they do it professionally and at scale.

Cheap Enough to Notice. All three stocks are relatively inexpensive — and in today’s market, that’s no small thing. Even after a wave of sell-offs across the broader market, genuinely cheap stocks remain surprisingly hard to find.

Dividend Upside. When commodity trading houses have a standout year, they tend to reward shareholders — either by raising the regular dividend or paying a special one-time distribution. Given our expectation for a strong 2026, these stocks could also attract yield-seeking investors looking for income in a volatile environment.

Built for Chaos. A few years ago, we came across a book that reframed how we think about this industry: World for Sale: Money, Power, and the Traders Who Barter the Earth’s Resources, by Javier Blas and Jack Farchy. It’s a collection of stories about how trading houses go to extraordinary lengths to procure essential resources — often striking deals in war-torn regions or under intense time pressure.

After reading it, you stop thinking of trading houses as mere middlemen. They’re more like corporate fixers — companies that can deliver when delivery is hardest. In a world that’s becoming more volatile, that skill set is increasingly valuable.

In-house supply-chain managers can’t always be expected to keep cargo moving when shipping lanes are disrupted or insurance markets freeze up. Commodity traders, with their expertise, experience, and deep networks, often can — and historically have. That’s why we believe today’s instability could put a premium on their valuations.

Cons

Credit Risk Is Always Lurking. Trading houses operate on borrowed money, essentially around the clock. They often control far more in assets than their equity would suggest — selling goods they don’t yet physically hold, financed by credit from banks and counterparties. When markets are calm, that system hums along. But when volatility spikes, credit can tighten fast — and a trading house can be brought to its knees in a matter of days.

Trafigura’s experience in 2022 is a useful reminder. That year was a record-breaker in terms of revenue and profits, yet few remember that in March 2022, rapid commodity price spikes triggered billions of dollars in margin calls, and Trafigura faced a severe liquidity crunch. The company survived by raising a significant amount of emergency funding, but it was a close call.

The current turmoil in the Middle East could trigger a similar wave of stress — or worse, a wave of insolvencies — that restricts the credit lines available to the companies we’re recommending. In a worst-case scenario, it could mean something more serious. This is a permanent structural risk in the sector, and it should be priced into your thinking accordingly.

The risk is particularly relevant right now. The conflict has lifted inflation expectations, and central banks are talking less about rate cuts and more about potential hikes. Higher borrowing costs can set off a chain reaction: defaults, tighter bank risk appetite, reduced credit availability — exactly the conditions that squeeze commodity traders hardest.

The silver lining: the largest trading houses (including the publicly traded ones we’ve selected) are widely considered “too big to fail.” Without them, supply disruptions could reach a scale severe enough to cause rationing-style outcomes even in wealthy countries. In an extreme scenario, some form of government support might be available. But share prices could take a serious hit before any rescue materializes.

The Same Tailwinds Can Become Headwinds. Traders may outperform financially during periods of crisis — but they’re not immune to the disruptions they’re navigating. Border closures, surging freight rates, transportation shortages, and prohibitively expensive cargo insurance can all compress margins and weigh on profits. The very conditions that create trading opportunities can also make them harder and costlier to execute.

Verdict

Glencore — Buy at 518.2 GBX.

A quick note on the currency: GBX (Penny Sterling) and GBP (Pound Sterling) are both used to quote U.K. stocks. 100 GBX equals 1 GBP, so 518.2 GBX equals 5.18 GBP.

The shares are trading near historic highs, but we still see two viable paths forward:

1. Over the next 18 months, we think Glencore can capitalize on current market volatility and reach 610 GBX — a 17.5% gain, excluding dividends.

2. For long-term holders, the target is 10% CAGR over 15 years, including dividends.

Wilmar International — Buy at 3.77 SGD.

The stock is trading at about two-thirds of its 2021 peak, which gives it meaningful room to recover if our profit thesis plays out. Two ways to approach it:

1. Target 4.80 SGD over the next 18 months — a 27% gain, excluding dividends.

2. Hold for 15 years and target ~10% CAGR, including dividends.

Mitsubishi Corporation — Buy at 5,397 JPY.

The stock is at historic highs, so further upside will require more patience and conviction. That said, the company delivered strong revenue and profits in both 2021 and 2022 — two years defined by supply-chain stress — and we expect a similar dynamic to play out under current conditions. Two ways to play it:

1. Target 6,300 JPY over the next 18 months — a 16.5% gain, excluding dividends.

2. Hold for 15 years and target ~10% CAGR, including dividends.
   

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Today’s idea is a classic “fallen tech stock” setup: buy shares of the U.S. ride-hailing app Lyft (NASDAQ: LYFT) after its steep decline. We expect a bounce in the share price because the stock now looks undervalued relative to its position in the market.

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Expected Profits

29% profit in 17 months;

60% profit in 3 years

Description of the Business

Lyft is a ride-hailing app that connects drivers with passengers and earns a commission from each ride. Since many of our readers may not be based in the U.S. (and Lyft operates almost entirely there), the simplest way to think about the company is as an Uber-like service operating at a smaller scale.

Lyft’s revenue comes from two segments:

1. Rideshare Marketplace — 92.73%. The Lyft app matches riders with drivers, and Lyft takes a commission on each ride.

2. Rental — 7.27%. Car rentals for drivers.

Lyft operates primarily in the United States. Other (unnamed) countries contribute just 0.004% of revenue.

Lyft is still operationally unprofitable, and the company’s headline profitability has mostly come from accounting quirks rather than the underlying business.

In 2025, Lyft reported a gross margin of 41.46%, an operating margin of -2.98%, and an eye-popping net margin of 45.03%. That number looks impressive at first glance — but it’s largely the result of a one-time tax benefit rather than actual operating performance. Strip that out, and Lyft is still firmly in the red.

Why the Stock Is Down

There are plenty of reasons Lyft has lost roughly 84% of its market value since its 2019 IPO: ride-hailing is a brutally low-margin business, competition is intense, growth has slowed, and the company has missed earnings expectations more than once. But the situation can also be summarized in a much simpler way: Lyft has ended up as the “second-place Uber.”

After nearly two decades in the market (Lyft launched in 2007), the company still hasn’t achieved sustained operational profitability. Explaining exactly why would take an entire article, but two structural dynamics are worth highlighting.

First, Lyft has historically built a reputation for treating drivers somewhat better than Uber. Second — and more importantly — it has always operated at a smaller scale. That scale advantage turned out to be critical. Without the same market power, Lyft couldn’t raise prices once it gained customers. Uber, meanwhile, followed the classic platform strategy: compete aggressively on price early, dominate the market, and only then start increasing prices. Unfortunately, Lyft never reached that final stage.

Today, Uber controls close to three-quarters of the U.S. ride-hailing market, while Lyft sits at roughly 24%. That gap matters because Lyft simply doesn’t have the same resources to compete with Uber — either domestically or internationally.

Uber has also expanded aggressively into adjacent businesses such as food delivery and freight brokerage. Lyft, by contrast, remains mostly a ride-hailing intermediary. From a strategic perspective, that leaves Lyft in an awkward position: large enough to matter, but not dominant enough to dictate the market.

Still, we think the stock can bounce — just probably not all the way back to its former highs.

Pros

Very Cheap. Lyft currently trades at about 0.88x P/S with a market cap of roughly $5.25 billion. That’s extremely low for a company that still controls nearly a quarter of the U.S. ride-hailing market. At the same time, U.S. retail investors are sitting on unusually large cash balances. If even a portion of that capital rotates back into beaten-down tech names, stocks like Lyft could benefit from simple mean reversion.

A Credible M&A Story. Lyft actually posts slightly higher gross margins than Uber, while trading at a dramatically lower valuation, both in relative and absolute terms. That valuation gap makes it easy to imagine a private-equity buyer taking a serious look at the company.

Uber could theoretically attempt to acquire Lyft again — it reportedly explored the idea years ago before Lyft rejected it. That said, we’re skeptical regulators would approve such a deal. Buying Lyft would effectively give Uber a near-monopoly in the U.S. ride-hailing market. Even under a more permissive antitrust environment, that would be a very difficult transaction to push through.

A Textbook Activist Setup. Lyft is still far below its 2019 IPO price of $72, making it an obvious candidate for activist involvement.

The timing is also favorable. In August 2025, Lyft eliminated its dual-class share structure — which previously allowed management to outvote other shareholders — and transitioned to a one-share-one-vote system. That opens the door for activist investors to push for changes.

An activist could pursue several levers: pushing for deeper cost cuts, placing a representative on the board, forcing management to present a credible profitability plan, or advocating for a sale of the company. Any of these moves could lift the stock. A coordinated push across several of them could move it even faster.

Cons

Middle East War. The U.S. war with Iran has pushed global oil prices higher. What happens next largely depends on whether the conflict escalates, particularly if shipping disruptions persist. Gasoline prices, however, have already begun creeping up.

That matters for Lyft because higher fuel costs make driving more expensive for drivers and riders alike. Even small increases in gasoline prices can reduce ride demand at the margin.

The AI Threat Is Real. Lyft may also be unusually exposed to AI-driven disruption. Unlike Uber, it lacks a global footprint and operates almost entirely within the U.S. That concentration creates an interesting risk. If margins continue to tighten, drivers in large metropolitan areas could theoretically “vibe-code” their own ride-hailing platform with lower commissions. That might sound far-fetched, but it’s not entirely unrealistic. Lyft’s revenue is concentrated in dense urban markets where large driver networks already exist. In those cities, drivers could pool capital, build a simpler alternative app, and offer rides at lower commissions. Such a grassroots platform could spread through word of mouth, local communities, and even in-car advertising — gradually chipping away at Lyft’s revenue base.

Still Losing Money. Lyft remains operationally unprofitable, and that’s never an especially comforting feature — regardless of whether the Federal Reserve is cutting rates. At the same time, lending conditions in the U.S. are tightening. Oil-supply risks linked to the Middle East conflict have pushed some lenders to reassess risk, making credit somewhat harder to obtain.

Lyft also carries a substantial liability load of about $5.76 billion — more than its current market cap. Of that amount, $4.53 billion comes due by the end of 2026, while the company currently holds only $1.84 billion in cash. Given that Lyft is still burning money, the balance sheet does introduce a real bankruptcy risk.

Robotaxi Uncertainty. Lyft is also behind Uber in the race toward robotaxis. Even though the company is trying to catch up, it simply doesn’t have the financial firepower to compete with Uber head-to-head in developing autonomous fleets. Lyft could eventually strike a partnership with a robotaxi operator — but that outcome would largely depend on external partners rather than Lyft itself.

In the long run, robotaxis threaten the entire human-driver ride-hailing model — not just Lyft. The timeline will depend heavily on regulatory approvals, but the direction is fairly clear.

And yes, the most accurate depiction of this transition may still be the one from Cyberpunk 2077: the Delamain AI system is introduced to assist human drivers, only to end up replacing them entirely.

Current Market Sentiment. Even without AI disruption, the market simply isn’t very friendly to software companies right now. Investors have been rotating toward asset-heavy businesses — companies tied to infrastructure, commodities, or physical products — on the theory that those businesses are harder for AI to disrupt. That preference could stick around for a while, particularly after a year of disappointing returns for tech stocks.

Verdict

Buy now at $13.18. From there, we see two possible scenarios:

1. Bounce case: Given the current valuation, a rebound to $17 within the next 17 months looks reasonable. That would be a 29% profit.

2. Extended case: Over a three-year horizon, the stock could reach $21.10, implying a roughly 60% gain.

That said, we’re hesitant to recommend Lyft as a true long-term holding (unlike many of our other ideas). Over time, lower-commission “vibe-coded” competitors and the rise of robotaxi platforms could eventually make the current business model obsolete.

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If there’s one metal quietly sitting at the center of AI servers, electric vehicles, wind turbines, and power grids, it’s copper. And right now, the red metal is behaving like it knows it’s indispensable. Today we’re looking at a basket of copper-mining stocks positioned to benefit from what may be a structural shift in copper pricing — not just a short-term spike.

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Expected Profits

• 28% profit in 19 months (Central Asia Metals)

• 29.5% profit in 18 months (KGHM Polska Miedź)

• 26.5% profit in 18 months (China Nonferrous Mining Corp.)

• 25% profit in 18 months (Nittetsu Mining)

• 19.5% profit in 18 months (iShares Copper and Metals Mining ETF)

Issuers

Central Asia Metals (London Stock Exchange: CAML) is a UK-based mining company operating primarily in Kazakhstan. Just under 57% of its revenue comes from copper; the rest generated by a zinc-lead mine in North Macedonia.

P/S: 2.6

P/E: 15.45

Market Cap: 394.85 million GBP ($533 million)

Dividend Yield: 5.83% (0.18 GBP per share annually; payout ratio 79.89%)

KGHM Polska Miedź S.A. (Prague Stock Exchange: KGH) is a Polish mining company listed in the Czech Republic. It operates mines in Poland, the U.S. and Chile.

P/S: 1.69

P/E: 22.93

Market Cap: 362.29 billion ‬CZK ($17.7 billion)

Dividend Yield: –

China Nonferrous Mining Corp (Hong Kong Stock Exchange: 1258) is a Chinese holding company focused primarily on copper production.

P/S: 2.21

P/E: 17.83

Market Cap: 61.14 billion ‬HKD ($7.82 billion)

Dividend Yield: 2.15% (0.34 HKD per share a year; payout ratio 41.75%)

Nittetsu Mining (Tokyo Stock Exchange: 1515) is a Japanese copper producer with additional exposure to real estate and other businesses.

P/S: 1.43

P/E: 28.71

Market Cap: 293.08 billion JPY ($1.88 billion)

Dividend Yield: 1.37% (44.8 JPY per share annually; payout ratio 40.97%)

iShares Copper and Metals Mining ETF (NASDAQ: ICOP) provides diversified exposure to major global miners. Large Western producers such as Freeport and Newmont make up a significant share of its holdings.

Pros

The Bullish Case for Copper. Copper has climbed nearly 35% over the past year. That kind of move can look speculative at first glance, but the drivers beneath it are structural rather than emotional.

Start with supply. Major copper discoveries are becoming increasingly rare. Copper has always been considered “abundant,” but economically viable, high-grade deposits are harder to find than many assume. The pipeline of new, large-scale discoveries has thinned meaningfully over the past decade. When new supply struggles to keep up, the long-term risk tilts toward shortages — and markets tend to price that in early.

Now layer in demand. Forecasts suggest global copper demand could be roughly 40% higher by 2040 than it was in 2024. That growth isn’t just coming from traditional sectors like housing and heavy industry. It’s being pulled forward by structural themes that aren’t going away:

• AI data centers require enormous volumes of copper wiring and infrastructure.

• Electric vehicles contain substantially more copper than internal combustion cars.

• Wind, solar, battery storage, and grid modernization are all copper-intensive.

In other words, copper is quietly embedded in every “future-facing” industry investors are excited about. When demand expands structurally and supply responds slowly, price floors tend to reset higher.

Valuations Leave Room for Upside. What makes this setup interesting is that many of the miners haven’t priced in perfection. Despite copper’s strength, most of these stocks are not trading at euphoric multiples or historic highs. That provides breathing room. If copper prices stay elevated or climb further, higher realized prices should translate into stronger revenue, healthier margins, and potentially richer dividends.

Rate Cuts Could Amplify the Move. Central banks globally have been leaning towards easing. Lower policy rates make borrowing cheaper, stimulate consumption, and typically accelerate economic activity. Historically, broad rate-cut cycles have coincided with stronger commodity prices. If that pattern holds, copper may not be done running.

Strategic Optionality Is Real. Several of these companies aren’t enormous in absolute dollar terms. In a world increasingly focused on critical minerals and supply security, overseas buyers or strategic investors may find certain copper assets attractive. We’re not betting the thesis on M&A — but in commodities tied to electrification and AI, strategic value is rarely zero.

Cons

Forecasts Are Catching Up — But Not Fully Bullish Yet. Copper currently trades around $12,800 per ton, already above many published forecasts that sit below $13,000. We expect those projections will gradually adjust upward — similar to what happened with gold last year — but until they do, the lack of overtly bullish analyst targets could weigh on sentiment.

There’s also positioning risk. Commodity allocations have increased as the rally gained momentum. If investors decide to lock in gains simultaneously, price pullbacks can be swift.

Scarcity Cuts Both Ways. The same scarcity story supporting higher prices also forces miners to spend more. New copper projects are capital-intensive, and developing them often requires billions in upfront investment. Meanwhile, older mines tend to see declining ore grades, which makes extraction more complex and expensive. Even in a strong copper market, miners may need to reinvest a substantial portion of cash flow simply to sustain production.

Disruptions Boost Prices — But Increase Volatility. Part of copper’s recent strength was event-driven. In 2025, an earthquake hit the Kamoa–Kakula mine in the DRC, triggering flooding. Another earthquake disrupted Chile’s El Teniente operation. Indonesia’s Grasberg mine — one of the world’s largest — suffered a collapse that halted production. In Peru, strikes temporarily shut down the Constancia mine.

Each event tightened global supply and supported prices. But they also highlight how fragile copper production can be. Mining is exposed to geology, labor disputes, weather, and political instability. The same forces that push prices higher can also inject sharp volatility into the market.

Geography adds another layer. Many new projects are concentrated in regions with rising political and security risk. Regulatory changes, logistics bottlenecks, or social unrest can disrupt output with little warning. In copper, volatility is part of the operating model.

High Prices Invite More Supply. When copper trades near record highs, producers respond. Companies ramp up output, accelerate development, and explore aggressively. That can lead to temporary oversupply cycles — and commodities are famous for sharp reversals when supply catches up.

Copper’s long-term case may be strong, but short-term swings are part of the terrain.

Tariff Headlines Can Move the Market Overnight. Copper’s rally hasn’t been driven solely by supply shortages and electrification demand. Trade-war dynamics have also played a meaningful role.

In the summer of 2025, U.S. President Donald Trump announced plans to impose a 50% tariff on copper imports. That announcement alone triggered a noticeable jump in copper prices, as markets quickly priced in tighter U.S. supply. Ultimately, the tariffs that were implemented applied only to semi-finished copper products — not refined metal or cathodes — which tempered the impact.

However, the story didn’t end there. The U.S. Department of Commerce outlined potential tariffs of 15% in 2027 and 30% in 2028 on refined copper and cathodes. That prospect encouraged U.S. buyers to front-run potential duties by building inventories early, effectively pulling forward demand and supporting prices in the short term.

More recently, the Supreme Court canceled most Trump-era tariffs. Copper-related measures, however, remain in place — and there is still room for escalation. Heavier duties could be introduced going forward, particularly if policymakers attempt to compensate for tariffs struck down by the court. If that happens, U.S. copper consumption could decline. That matters, even though the U.S. represents only about 7.85% of global copper demand — a non-trivial share in a tight market.

At the same time, the opposite risk is equally real. If more aggressive 2027–2028 tariff proposals are ultimately not implemented, copper prices could fall. U.S. inventory-building would likely slow or reverse, and the emotional component of the market could amplify the move. In fact, we’ve already seen how sensitive copper is to policy headlines: in late July 2025, when news broke that tariffs would not apply broadly across all copper categories, prices plunged roughly 20% in a single day — wiping out months of gains.

Rotation and Equity-Specific Risk. Capital flows can shift quickly. The same rotation out of software that has recently benefited “hard asset” sectors like mining could reverse just as fast. If the U.S. tech sector continues to look oversold, investors may decide to buy the dip in software — pulling money out of physical-resource stocks, including copper miners. That dynamic could pressure the space, especially given that most of the individual stocks we cover are listed outside the U.S., which may limit their appeal to domestic investors.

The iShares ETF could be particularly sensitive in such a scenario. Its core holdings are large-cap Western miners that already trade at somewhat elevated multiples, often with P/S ratios above 3. If sentiment cools, those names could compress quickly.

Copper Stocks Are Not Copper Itself. Mining shares carry company-specific risks — leverage, operational risks, cost inflation, execution missteps — and they can lag the metal even in a strong commodity environment. Copper prices may rise, but equity performance depends on discipline, capital allocation, and operational stability. Over time, higher copper prices should translate into strong profits for well-managed producers. But the path from metal price to shareholder return is rarely linear.

Verdict

Central Asia Metals — Buy at 234.5 GBX. We expect a move to 300 GBX within 19 months (still below its 2018 peak of 323 GBX). That would be a 28% gain, excluding dividends.

Note: GBX (Penny Sterling) and GBP (British Pound Sterling) are both used to represent UK currency: 100 GBX equals 1 GBP. So 234.5 GBX = 2.34 GBP.

KGHM Polska Miedź — Buy at 1,694.5 CZK. Our 18-month target is 2,200 CZK, below the 2,280 CZK level last seen in January 2026. That implies a 29.5% gain.

China Nonferrous Mining Corp — Buy at 14.99 HKD. Although the stock trades near historic highs, valuations remain reasonable given copper’s backdrop. We target 19 HKD within 18 months — a 26.5% gain, excluding dividends.

Nittetsu Mining — Buy at 4,160 JPY. Despite trading at all-time highs, its valuation is not stretched. We see potential for 5,200 JPY over the next 18 months — a 25% gain, excluding dividends.

iShares Copper and Metals Mining ETF — Buy at $56.05. We expect the ETF to break above prior highs and reach $67 within 18 months — a 19.5% gain.

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