21st Sleep Well - The Market Doesn't Understand This Vertical SaaS
Predictable customers and expanding products into a platform at reasonable prices.
Hi Sleep Well friends,
This is the first paid post in my new ‘HQ’. Below is where patience and discipline will be forged. I moved here for my family, but I hope it will also enhance my focus and independent thinking.
I am excited about the future of Sleep Well Investments' no-losers track record. Currently at a 93% successful rate — 26/28 transactions are green (appendix 1), and with a 52% annualized return per pick (appendix 2).
No Wall Street noise.
No complicated DCFs.
No Twitter’s ‘100x’ thesis.
Before we start reviewing the 21st first update, here is the link to the 21st pick’s deep dive, 1st buy, and the buying plan I have set out.
The purpose of this business update is to decide whether to proceed with the planned purchase. What I look for in the Q2’25 updates is clarity on:
The CEO position.
The latest acquisition’s value accretion.
Timing of contract delays with the US government.
All factors above have contributed to a lower-than-peer multiple (24x EV/FCF vs 30x-50x) and the market’s expectation of just 8% free cash flow per share CAGR vs. 15% that it can deliver by 2037.
By being patient and knowing what’s essential for the business (not the stock), I believe we are owning a high-quality business that is improving, hence a twin engine of value creation at play:
twin engine = multiple expansion + FCF growth
And I firmly believe the 21st pick can outperform the S&P 500 handsomely in the long run.
Thesis brief and Q2’25 key focus
The 21st business was chosen because of its mission-critical nature to governments and public authorities around the world. Most of my Sleep Well Portfolio ownerships are B2B; this business provides added diversity and enhanced ‘predictability’, particularly as these authorities don’t tend to switch solutions as they are slow to change and are non-profit, so cutting costs is less critical than improving public service. Best of all, it’s becoming a platform of multiple solutions, and the market is only focused on the CEO (cleared as of today) and a few contract uncertainties (a tailwind for 2026).
To continue learning, consider joining Sleep Well Investments. My current 93% success rate track record is updated monthly here.
** A favour to ask: Substack is becoming increasingly competitive and more of a ‘marketing’ platform with catchy posts and clickbait. I have now assigned a number to each of my picks to preserve my IP and unique picks. Please help Sleep Well Investments by discussing picks by numbers assigned and sharing my work only with long-term investors.
Let’s continue.