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Hi, sleep well owners,

I am very excited for this month’s Best Buys. This is the first time since last April that we have seen a broad, indiscriminate market sell-off in our global quality businesses. Last time was due to Trump’s tariffs; this time, it’s the risks AI may pose to software companies. Many call it the ‘SaaS’magedon. I briefly discussed which software companies are most likely to be disrupted during the January SW Portfolio review.

Nevertheless, stock decline in popular names can be unsettling.

• Fico (FICO) is 30% off high,

• Salesforce (CRM) is 43%

• Intuit (INTU) is 46%

• Service Now (NOW) is 53%

• Axon Enterprise (AXON) is 54%

• Constellation Software (CSU.TO) and the many vertical software serial acquirers are >50% off high

• Even Netflix (NFLX) and Microsoft (MSFT) are at 38% and 28%, respectively.

If you are playing the short game, it must be painful. Here, SWI is calm. I see an opportunity to assess which sleep well picks are truly enduring in an AI-first world.

No doubt, AI is disruptive to incumbents. It helps build software much faster and at a lower cost, lowering barriers to entry. However, that’s only 1% of building enterprise software.

The other 99% is scaling, maintaining, iterating, and adding features. These tasks are a whole different ball game. That 99% of the work also requires years of proprietary data, changes to workflows, and an internal team for maintenance, compliance, and audit trails.

Just imagine building another Veeva Systems, which Salesforce has been trying to do for years with IQVIA (a leader in life science data) and has yet to patch up a competing product.

In addition to the points above, you would be closely monitored by regulators for handling sensitive, non-standardized health data. This leads to limited interoperability and poor data quality, which means incorrect or harmful clinical decisions by AI.

In the January portfolio review, I also alluded to the high cost and complexity of switching away from (and/or migrating to) an entrenched cloud solution as an additional layer of protection for some of our picks. For context, Gartner reports 55% of companies encounter data quality issues in system moves.

As such, the first Buy Buy this month is Veeva Systems (VEEV), the 10th SW pick. We have four others. Let’s find out the rest after a brief introduction about the Best Buys series.

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Every month, Best Buys highlight which of my 23 sleep well picks I consider worth adding or trimming. It complements my quarterly thesis-tracking updates, in which I essentially ask, “Is the thesis intact?” for each company.

I also discuss my growing research list of ~40 businesses. In this series, I want to discuss Axon Enterprise (AXON) and General Electric (GE), both leaders in their own industries, and today, I am comfortable sharing my first notes.

Previously, I discussed Rubrik, FILA, and a leader in Food Safety (a direct competitor to SPS Commerce). Particularly, the decision to avoid Rubrik last October when we saw a host of bullish theses about it is very interesting to read again. The stock is now tracking a 50% decline from peak, far steeper than peers (CRWD, FTNT, PANW).

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Best Buys for Jan 2026

1. Life science leader - 5.2% free cash flow yield with a decade of 15% growth

2. Public Safety SaaS leader - 5% yield with at least 20% 3-year forward growth guided

3. Commerce Infrastructure in South East Asia - 7% yield with a decade of 20% growth

4. Global logistics SaaS leader - 3% yield with a decade of growth runway

5. Robotic-assisted surgery leader - 1.5% yield with a decade of guaranteed revenue and many decades of 10% growth

Trimming candidate - none

Before we dive in, please be reminded that the average ‘investors’ holding period has shortened to just a few quarters, from 30 months in the 1990s. My holding period runs until 2037, when the portfolio passes to my daughters. As a result, my decisions are based solely on fundamental reasons.

The endgame of best buys

is to highlight high-quality, enduring businesses that trade at a slight premium to peers (they rarely trade cheaper, unfortunately).

My strategy -

• Add to those with unique anti-fragility for specific events.

• Balance the portfolio with businesses at different life stages.

• Add to the winners who experience short-term setbacks.

For example, I have

• 17% of the portfolio that performs well in ‘security crisis’ [CrowdStrike, Fortinet, and Cellebrite], 27% does well in global logistic complexity [Wisetech, SPS Commerce, and Grab], 7% to buffer the portfolio if we have another health crisis - [Veeva Systems], 32% to navigate the digitalized world [Sea Limited and Mecardo Libre].

• 30% of the portfolio is in a more mature stage of its life cycle, 6/13 are US domiciled, and 12/13 have a net cash balance sheet (average of 6% of market cap).

The list is not based on the positive/negative newsflow for the following quarters. It is also not deliberately trying to be ‘active / beat’ the market; if it does, that’s the icing on the cake. It’s more about building knowledge and positioning in businesses that I think will yield stable and growing returns on capital through 2037.

Hence, best-buy lists are personal; to apply them according to your needs, I encourage you to review the deep dives and updates before taking action.

Disclaimer: As a reader of Sleep Well Investments, you agree to our disclaimer. Full details here.

If you are new to SWI, check out our FAQ and Owner Manual.

Build your Sleep Well Portfolio today

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Build your Sleep Well Portfolio today

Every month, I publish a Best Buys list to highlight which of my 23 sleep well picks I consider worth adding or trimming. It complements my quarterly thesis-tracking updates, in which I essentially ask, “Is the thesis intact?” for each company.

I also discuss my research list of ~40 businesses. In this series, I want to discuss a leader in Food Safety (a direct competitor to SPS Commerce’s small line of revenue - tracability, partnership with iFoodDs ~$7M annual revenue). It has been doing well but is suffering a temporary setback due to a delay in FSMA 204 becoming law. Prices are becoming very interesting and, if one is patient, this company could be a big winner.

Best Buys for December 2025

1. Public Safety SaaS leader - 4% yield with at least 20% 3-year forward growth guided

2. Commerce Infastructure in South East Asia - 5% yield with a decade of 20% growth

3. Commerce Infastructure in Latin America - 5% yield with a decade of 20% growth

4. Retail Supply Chain SaaS - 5% yield with at least 10%+ growth

Trimming candidate

1. CrowdStrike (CRWD), an 8% position, with a P/FCF of ~120x, is outside my comfort zone.

Before we dive in, please be reminded that the average ‘investors’ holding period has shortened to just a few quarters, from 30 months in the 1990s. In contrast, my holding period runs until 2037, when the portfolio will pass to my daughters. As a result,

The endgame of best buys

is to highlight enduring businesses at reasonable prices and own more shares incrementally.

My strategy -

• Add to those with unique anti-fragility for specific events.

• Balance the portfolio with businesses at different life stages.

• Add to the winners who experience short-term setbacks.

For example, I have

• 17% of the portfolio that performs well in ‘security crisis’ - CrowdStrike, Fortinet, and Cellebrite, 27% does well in global logistic complexity - Wisetech, SPS Commerce, and Grab, 7% to buffer the portfolio if we have another health crisis - Veeva Systems, 32% to navigate the digitalized world - Sea Limited and Mecardo Libre.

• 30% of the portfolio is in a more mature stage of its life cycle, 6/13 are US domiciled, and 12/13 have a net cash balance sheet (average of 6% of market cap).

The list is not based on the positive/negative newsflow for the following quarters. It is also not deliberately trying to be ‘active / beat’ the market (S&P 500); if it does, that’s the icing on the cake. It’s more about building knowledge and positioning in businesses that I think will perform sustainably through 2037.

Hence, best-buy lists are personal; to apply them accordingly to your needs, I encourage you to review the deep dives and updates before taking action.

Disclaimer: As a reader of Sleep Well Investments, you agree to our disclaimer. Full details here.

If you are new to SWI, check out our FAQ and Owner Manual.

Build your Sleep Well Portfolio today

Read more

Build your Sleep Well Portfolio today

November is offering us many opportunities within the sleep-well universe. SaaS, compounders, and even Constellation Software (below) are getting hammered. On the other side is anything related to AI.

With the average ‘investors’ holding period shortened to just a few quarters, from 30 months in the 1990s, corrections are a good time to accumulate shares in good businesses. I will be adding 2 to 3 positions listed in this 2nd Best Buys edition. Just a little bit, but my investing horizon is until 2037 (when my daughter takes over the portfolio), so every add at today's prices will make a big difference.

Let’s explore what's good to add and what's good to research further.

Best buys for November 2025

Aims of best buys

The monthly best buys aim to highlight opportunities to strategically build the portfolio with a clear endgame: ‘starting capital’ for my daughters. I can not draw liquidity from this portfolio, and every dollar invested is a dollar of extra opportunity for them.

My strategy - balance preservation and growth

To achieve the endgame, I prioritize avoiding losses by adding to winners, then diversifying into growth opportunities to ensure a balanced approach across the business lifecycle. Why? Time-tested companies tend to perform well in bear markets, while younger, promising businesses tend to thrive in bull markets.

Additionally, the list is not based on the positive/negative newsflow for the following quarters. It is also not deliberately trying to beat the market (S&P 500); if it does, that’s the icing on the cake. If not, I am entirely okay with it.

Hence, best-buy lists are personal; to apply them to your needs, I encourage you to review the deep dives and updates before taking action.

1. Public Safety SaaS leader - 4% yield with at least 20% 3yr forward growth guided

2. Global logistics SaaS leader - 2.5% yield with a decade of growth runway

3. Commerce Infastructure in South East Asia - 5% yield with a decade of 20% growth

4. Commerce Infastructure in Latin America - 5% yield with a decade of 20% growth

5. Retail Supply Chain SaaS - 5% yield with at least 10%+ growth

Disclaimer: As a reader of Sleep Well Investments, you agree to our disclaimer. Full details here.

If you are new to SWI, check out our FAQ and Owner Manual.

Build your Sleep Well Portfolio today

Read more

Build your Sleep Well Portfolio today

The average ‘investors’ now hold shares for just a few quarters, cut from 30 months in the 1990s. This time frame means very little for most businesses; therefore, to profit, you must be the first to receive newsflow and analyze the impact correctly faster than others.

I can’t do both, so my only solution is to extend my holding period.

Easy said than done, so when building the sleep well portfolio, I think of it like I am creating my dream home for my family, where:

Location is the core. They are the top positions of my portfolio that I don’t want to get wrong. [SE, MELI, GRAB, WTC, VEEV, FTNT+CRWD]

Designs are pieces that we take longer to earn a permanent role. They are smaller positions that I gain conviction over time. [DNP, 18th, KNSL, 20th, 21st, 22nd]

To ensure I continue to keep my house in order. Every month, I’ll highlight any positions that are worth reviewing for possible additions or trims.

This is a new format designed to help new readers understand and implement the SWI approach to investing.

Let’s explore.

Best buys for Oct 2025

Aims of best buys

The monthly best buys aim to highlight opportunities to strategically build the portfolio with a clear endgame, which is ‘starting capital’ for my daughters. Hence, I can not draw liquidity from this portfolio.

My strategy - balance preservation and growth

To achieve the endgame, I prioritize avoiding losses by adding to winners (as long as cash flow increases), then diversifying into growth opportunities to ensure a balanced approach across the business lifecycle. Why? Time-tested companies tend to perform well in bear markets, while younger, promising businesses tend to thrive in bull markets.

Additionally, the list is not based on the positive/negative newsflow for the following quarters. It is also not deliberately trying to beat the market (S&P 500); if it does, that’s the icing on the cake. If not, I am entirely okay with it.

Hence, best-buy lists are personal; to apply them to your needs, I encourage you to review the deep dives and updates so you know what to do/not to do when the market swings.

1. Mercado Libre - most impressive execution amid political uncertainties.

• Scored 15/20 points on my sleep well checklist.

• Possesses all four moats: scale/cost, network effects, switching costs, and brand.

• Beaten the best competition you can think of to compound FCF at 44% since IPO.

• On track to grow 20%+ for 5-10 years and available at >14x OCF with a net cash balance sheet.

The current situation in Argentina, headlines about Amazon investing more aggressively, or the rapid growth of Nu Bank and Shopee, are not new. Meli is structurally more advantaged and should maintain its dominant market share. Any significant dip in MELI’s valuation has historically been a good time to add.

[deep dive, Q2’25 & Shopee, CEO transition, Tariff Review, Top pick for 2025, Q4’24, Q3’24, 1st Buy]

My original thesis for the company to triple in size is still valid:

In 10 years, I believe the additional value will come from

1. Advertising, which Meli hasn’t monetized to its full potential. Using Amazon as the north star, Meli’s Ads can reach $20B in revenue (40% CAGR for ten years). I showed my work in the deep dive to conclude that Ads could bring in an additional $6B in revenue or $3B of free cash flow, even at a conservative estimate. That’s a $90B if you value it at 30x FCF multiple, nearly the same size as Meli today.

2. Pago, Mexico alone, 50% of the unpenetrated market in Latin America, can bring in another $4B of revenue. Mexico is also where Pago has a high chance of success, with Libre already strong there. $4B revenue should equate to another $2B free cash flow. If Pago expands in the remaining 50% of the underpenetrated market, we should have $8B in revenue and $4B in free cash flow from Pago. That’s another $100B+ business in 10 years if we apply a 30x FCF multiple.

3. Everything else should continue to grow, making Meli’s ecosystem stickier and more essential to consumers, merchants, and the region’s commerce infrastructure. For example, Envios—logistics (grocery, classified), Credito (loans, investments, buy now pay later, trading, crypto), and Shops (online shop front). See the diagram below by the Generalist.

The probability of Meli tripling in size in 10 years is high, in my humble opinion. Because Meli has proven that it can defend its ability to generate profit (moats) for 25 years against:

• Amazon

• Local competitors (Amercianas, Magazine Luiza, etc..)

• Emerging competitors (NU, Temu, Shein, TikTok, Shopee, etc..)

• Perennial economic and political uncertainties, especially in Argentina

I also have confidence in the current management's ability to execute successfully.

After 26 years at the helm, Founder and CEO Marcos Galperin is stepping down. Commerce head, Ariel Szarfsztejn, will start as the new CEO on January 1, 2026 (SEC filings).

As Ariel Szarfsztejn has already been at the company for 8 years, Meli’s culture, values, and capital allocation framework will remain. He led the logistics expansion between 2018 and 2021, then Commerce since 2022, which I think was the key engine and enabler of growth in the past and will be in the future.

Meli currently trades at ~14x EV/Operating Cash Flow and 5x EV/Sales. It’s not extended at all. Before COVID, Meli was already trading at 20-40x EV/OCF, and during the pandemic, it was trading between 60-120x EV/OCF.

Meli’s value (enterprise value) has grown at a 37% CAGR over the last 10 years. It is reasonable given that revenue, operating cash flow, and free cash flow have grown at 46%, 54%, and 60% CAGR, respectively. That means the stock's performance has been driven purely by exceptional fundamentals, despite experiencing multiple contractions.

Fair?

I don’t think so. Meli’s stock return is lagging significantly behind the underlying fundamentals. Additionally, a BCG study has shown that the valuation multiple accounts for only 5% of stock performance over a 10-year period. The rest is explained by revenue and free cash flow growth.

Hence, my conservative assumption for Meli’s free cash flow expansion by 20% or more per year for 5-10 years [1st buy alert], coupled with a lagging stock performance, supports a strong future stock performance.

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