Gold Standard of Naval Engineering at 6% FCF Yield & 5% Dividend
You will sleep well with a 10-yr 40% FCF margin, 10% growth, 20% CAGR return, ~100% market share, 4-year revenue visibility, net cash, deep moats, 80% ROIC, no viable alternatives, no coverage.
Sleep Well Investments is all about not losing capital.
My track record? My annualized return per pick is ~45%, and since inception on Substack, the Sleep Well Portfolio has outperformed the S&P500 by ~17%.
Flawless decision-making underpins this achievement; 4 of 4 sales and 12 of 13 buy transactions have been correct. The only losing ‘trade’ is the one I bought just before the tariff rhetoric.
The company featured today has been the gold standard in the industry for over half a century and a prime beneficiary of the multi-decade green energy transition.
there is NO viable alternative, NO AI risk.
95%+ gross 40%+ free cash flow margin, consistent for the last 10 years.
customers pay in advance and can’t withdraw from the multi-year contract.
net cash position, 6% dividends, and M&As just starting,
5-year backlog and steadily rising,
Yet, we can buy this quality business at just ~17x free cash flow and ~13x earnings.
It scores 14/20 points in my sleep well scorecard and is the cheapest stock I buy for the portfolio. The quality and reasonable price will protect the downside. The upside may be as high as the 20% CAGR return in the past 10 years and will come from a twin driver of value creation.
The (at least) 10%+ free cash flow growth and
Possible multiple expansions and M&A success.
I am optimistic that, provided the business passes my thesis tracking system each year, we can make a market-beating return.
This company is highly technical, so I will keep the deep dive simple. But regular readers will know that my reports are still very deep compared to what you find elsewhere. You will learn a lot today.
Furthermore, you won’t find a deep dive into this business anywhere on Substack (400+ investment newsletters). If you do, I’ll give you a refund.
If you want to make money and sleep soundly, read on!
We will discuss:
Company History
Why is it a sleep-well business?
Industry tailwinds
Unique business
Resilience in crises
Reinvestment opportunity
Unproven Competition
Minimal Business Risks
Reasonable Valuation
Sleep Well Scorecard
What to Track
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