Latest / The Dutch Investors / #73 | What 1600 hours of Deep Dives in 2025 taught us | Investing Lessons | Part 2

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#73 | What 1600 hours of Deep Dives in 2025 taught us | Investing Lessons | Part 2 · The Dutch Investors

• 0:00
  SPEAKER_00: Welcome back to the Dutch Investors Podcast, part two of our investing lessons from companies we analyzed in 2025.
• 0:10
  SPEAKER_00: Before we dive in, a brief reminder: these lessons aren't about whether a company is good or bad, it's about what each business taught us, about incentives, capital allocation, modes, customer psychology, the runway, and everything in between.
• 0:27
  SPEAKER_00: Great companies fail for the wrong reasons, average companies succeed for the right reasons, and every so often the most valuable insights come from the businesses you'd never think to analyze in the first place.
• 0:40
  SPEAKER_00: So, without further ado, let's jump into part 2 and learn from the companies we analyzed in 2025.
• 1:09
  SPEAKER_00: Lesson 12.
• 1:13
  SPEAKER_00: Text essay is a perfect example.
• 1:16
  SPEAKER_00: On paper, the business looks like an investor's dream.
• 1:20
  SPEAKER_00: ROIC regularly above 100%, sometimes even as high as 200 to 400%.
• 1:28
  SPEAKER_00: It has margins north of 80%.
• 1:31
  SPEAKER_00: It has almost no capex and a software model that literally prints cash.
• 1:36
  SPEAKER_00: But great returns on capital only matter if the company can reinvest those profits at the same high rate.
• 1:44
  SPEAKER_00: And that's where this story becomes more complicated.
• 1:47
  SPEAKER_00: Text simply does not have enough places to deploy the cash.
• 1:51
  SPEAKER_00: The market is too small.
• 1:54
  SPEAKER_00: Growth is largely tied to ARPOO increases, and acquisitions aren't part of the playbook.
• 2:00
  SPEAKER_00: So the company literally returns 80 to 90% of its profits as dividends because there's nowhere meaningful to put that money to work internally.
• 2:10
  SPEAKER_00: A high ROIC is only half the equation.
• 2:14
  SPEAKER_00: The real magic happens when a company can reinvest those at the same high rates for years, preferably decades.
• 2:23
  SPEAKER_00: Without that runway, it can still be a poor investment.
• 2:27
  SPEAKER_00: A great business prints money, but a great compounder knows how to put it back to work.
• 2:33
  SPEAKER_00: So what Tex taught us was a high return on invested capital doesn't automatically make a company a compounding machine.
• 2:43
  SPEAKER_00: Lesson 13.
• 2:44
  SPEAKER_00: Big fish in a small pond.
• 2:47
  SPEAKER_00: In 2021, the Dutch hardware and software company NADOP made a difficult decision to cut its focus from seven markets down to just four.
• 2:58
  SPEAKER_00: And it's safe to say that it paid off so far.
• 3:02
  SPEAKER_00: By narrowing its scope to healthcare, livestock, retail, and security, NADOP doubled down on the markets where it could build real expertise and defensible niche leadership.
• 3:15
  SPEAKER_00: And that focused turned into niche dominance.
• 3:19
  SPEAKER_00: They have over 60% market share in elderly care software in the Netherlands, about 40% market share in global smart livestock monitoring, and they're the number one RFIT retail player worldwide, with around 35% market share.
• 3:36
  SPEAKER_00: Niches like elderly care or cattle monitoring may not sound glamorous, but they do grow steadily.
• 3:43
  SPEAKER_00: They resist commoditization and reward specialists.
• 3:47
  SPEAKER_00: NADAP shows that when you choose the right ponds and become essential inside of them, you don't need to be everywhere.
• 3:55
  SPEAKER_00: You just need to matter deeply somewhere.
• 3:59
  SPEAKER_00: For those interested in learning more about NADOP, we spoke to the CEO on the Dutch Investors Podcast.
• 4:06
  SPEAKER_00: You can also listen to and read our deep dive of NATOP for free over on the Dutchinvestors.com.
• 4:13
  SPEAKER_00: The lesson we learned from NADOP is that being a big fish in the right pond beats swimming in the open ocean.
• 4:22
  SPEAKER_00: Lesson 14.
• 4:24
  SPEAKER_00: Ultra wealthy people.
• 4:30
  SPEAKER_00: You might know this already.
• 4:32
  SPEAKER_00: Handbags, cars, fashion, yachts all tap into the same psychology.
• 4:38
  SPEAKER_00: But the economics change drastically depending on who's buying.
• 4:44
  SPEAKER_00: The Italian C Group serves the ultra-rich, the top 0.01% who order$50 to$300 million custom yachts.
• 4:55
  SPEAKER_00: These customers are so wealthy that they pay in non-refundable installments and treat their three-year build cycles like a fun hobby.
• 5:04
  SPEAKER_00: And this matters because their spending doesn't follow the regular economic cycle.
• 5:10
  SPEAKER_00: When COVID-19 crushed most people, crushed most industries, the mega yard market surged.
• 5:18
  SPEAKER_00: If your net worth is 5 billion plus, recessions don't affect your consumption patterns.
• 5:24
  SPEAKER_00: That's precisely why the Italian C Group has such stable demand.
• 5:29
  SPEAKER_00: They operate in a niche, within a niche, with few competitors and high pricing power.
• 5:36
  SPEAKER_00: Charging a couple million more doesn't really matter to the customers.
• 5:41
  SPEAKER_00: The higher up the wealth curve you operate, the more insulated your revenue becomes when the world turns shaky.
• 5:48
  SPEAKER_00: What we learned from the Italian C Group was that, in the luxury world, stability doesn't come from the product.
• 5:55
  SPEAKER_00: It comes from the customer.
• 5:57
  SPEAKER_00: And the higher you go on the wealth ladder, the less fragile and volatile demand becomes.
• 6:04
  SPEAKER_00: Lesson 15.
• 6:05
  SPEAKER_00: Being too conservative.
• 6:08
  SPEAKER_00: Our analyst Bauke has a real love-hate relationship with Shimano.
• 6:14
  SPEAKER_00: He absolutely loves the brand, the stories, and even the quality of the company.
• 6:20
  SPEAKER_00: But at the same time, he has his reasons for not investing in the company.
• 6:25
  SPEAKER_00: In Japan's conservative corporate culture, the fear of making the wrong move often outweighs the desire to make a riskier one.
• 6:34
  SPEAKER_00: Japanese companies tend to build up a massive cash pal for the just-in-case moments.
• 6:40
  SPEAKER_00: For example, Shimano's cash is over 31% of its entire market cap.
• 6:47
  SPEAKER_00: Reputation and harmony matter more than aggressive capital allocation, acquisition bets, or rapid pivots.
• 6:55
  SPEAKER_00: Admirable values, but in global tech-driven markets, they can become liabilities.
• 7:02
  SPEAKER_00: Shimano is now feeling this tension as the e-bike wave accelerates faster than its willingness to adapt.
• 7:09
  SPEAKER_00: Such conservatism, regularly, results in a reluctance to act, even when the opportunity knocks.
• 7:17
  SPEAKER_00: But ironically, doing nothing frequently ends up being the bigger mistake.
• 7:22
  SPEAKER_00: Over time, that inaction slowly erodes shareholder value.
• 7:27
  SPEAKER_00: Shimano earns over 25% ROIC when it reinvests.
• 7:32
  SPEAKER_00: Yet most of its cash, around 31% of its market cap, earns just 4% on interest.
• 7:40
  SPEAKER_00: And that spread between potential and reality is pure opportunity cost.
• 7:46
  SPEAKER_00: And while Japanese firms typically speak of optionality from holding these large cash reserves, optionality that isn't exercised is just inertia dressed up in a nice language.
• 7:58
  SPEAKER_00: Because ultimately, the value of optionality decays the longer it's left in use.
• 8:04
  SPEAKER_00: So what we learned from Shimano was that those who avoid risk eventually inherit greater risk.
• 8:11
  SPEAKER_00: Lesson 16.
• 8:13
  SPEAKER_00: ESG is a mode.
• 8:15
  SPEAKER_00: When Nicholas and I from Heavy Mode Investments came on the Dutch Investors Podcast and analyzed Robert Hay, we realized that ESG is very important to some companies.
• 8:27
  SPEAKER_00: Although we all know that ESG is important for society and the world, it is, to be honest, some of the last things we look at.
• 8:36
  SPEAKER_00: Too often ESG is window dressing.
• 8:40
  SPEAKER_00: It's a neat PDF chapter written for optics.
• 8:43
  SPEAKER_00: But Robert A showed us that in the right business, in the right industry, ESG isn't just fluff.
• 8:51
  SPEAKER_00: In flavors and fragrances, their entire competitive edge comes from being the cleanest, most natural, most traceable operator in the industry.
• 9:02
  SPEAKER_00: Robert A controls its entire supply chain.
• 9:05
  SPEAKER_00: It works directly with farmers and invests heavily in non-toxic extraction methods.
• 9:11
  SPEAKER_00: That structural commitment lets them command premium pricing from beauty brands and luxury food companies that depend on the 100% natural sourcing.
• 9:21
  SPEAKER_00: And in a world shifting away from synthetics, their ESG foundation actually is a huge advantage.
• 9:28
  SPEAKER_00: Robert A taught us that most ESG is fluff, but for some it can be a form of competitive advantage.
• 9:38
  SPEAKER_00: Lesson 17.
• 9:39
  SPEAKER_00: The power of in-house.
• 9:42
  SPEAKER_00: Kincel operates in one of the most commoditized corners of finance, property and casualty insurance.
• 9:49
  SPEAKER_00: In the long run, the cheapest and healthier underwriter with the lowest expense ratio wins.
• 9:56
  SPEAKER_00: While most insurers run on bloated back-office systems stitched together from legacy software, Kincel did something radically, uninsurance-like.
• 10:06
  SPEAKER_00: It built its entire tech stack from scratch.
• 10:10
  SPEAKER_00: A fully integrated, cloud-native underwriting platform that lets them quote, bind, and issue policies faster and with far lower overhead than peers.
• 10:21
  SPEAKER_00: All close to 700 employees work in office, most trained directly on that system.
• 10:30
  SPEAKER_00: The culture is execution first, fast responses, clear expectations, and minimal bureaucracy, and internal promotions over external hires.
• 10:42
  SPEAKER_00: A proprietary platform isn't a mode unless it reshapes your cost structure.
• 10:47
  SPEAKER_00: And even great software itself is useless without people and culture that can use it and scale it.
• 10:54
  SPEAKER_00: Kinzel has both: a 21% expense ratio versus 30-40% at peers, a 76% combined ratio versus around 100% industry average, and a 79% net retention ratio.
• 11:10
  SPEAKER_00: This is what happens when culture, code, and cost discipline all point in the same direction.
• 11:16
  SPEAKER_00: Small operational advantages compound every single day.
• 11:20
  SPEAKER_00: Kinsel taught us that in insurance, everyone sells the same thing.
• 11:25
  SPEAKER_00: But if you can sell it faster, underwrite it better, and price it cheaper, you'll win.
• 11:32
  SPEAKER_00: Lesson 18.
• 11:34
  SPEAKER_00: It's a physics problem.
• 11:36
  SPEAKER_00: TSMC is one of the purest examples of compounding in the physical world.
• 11:42
  SPEAKER_00: The more chips TSMC produces, the better its yields get.
• 11:47
  SPEAKER_00: The better the yields, the lower the cost per waiver.
• 11:50
  SPEAKER_00: Lower costs find more capex.
• 11:53
  SPEAKER_00: More capex buys more leading edge machines, which creates even better yields.
• 11:59
  SPEAKER_00: And the loop continues.
• 12:01
  SPEAKER_00: This is why Intel struggled to catch up, and why Samsung, despite endless government support, still trails in advanced nodes.
• 12:10
  SPEAKER_00: And why Nvidia, Apple, AMD, and Qualcomm all depend on TSMC.
• 12:17
  SPEAKER_00: It's achieving defect rates so low that one dust particle ruins a$20,000 wafer.
• 12:25
  SPEAKER_00: Every node shrinks, the room for error.
• 12:28
  SPEAKER_00: At 2 to 3 nanometers, you're operating at the edge of what's scientifically possible.
• 12:35
  SPEAKER_00: Tiny improvements in yield, even a fraction of a percent, translates into billions in savings.
• 12:43
  SPEAKER_00: That's why TSMC is accelerating away.
• 12:46
  SPEAKER_00: That's what makes TSMC such a great business, but also one of the most formidable industrial machines ever built.
• 12:55
  SPEAKER_00: TSMC taught us that a mode is built on physics, skill, and learning curve so steep that even a$100 billion competitor can't bruise force their way in.
• 13:09
  SPEAKER_00: Such a unique and powerful company.
• 13:13
  SPEAKER_00: Lesson 19.
• 13:15
  SPEAKER_00: Network effects are only as strong as the rules that protect them.
• 13:20
  SPEAKER_00: Pluxy runs a beautiful, two-sided network.
• 13:31
  SPEAKER_00: On paper, it's a self-reinforcing flywheel.
• 13:35
  SPEAKER_00: The more businesses join, the more attractive it becomes for merchants.
• 13:39
  SPEAKER_00: The more merchants join, the more valuable it becomes for users, and so the loop continues.
• 13:46
  SPEAKER_00: But in some industries, the modes are protected by regulation, or well, affected by regulation.
• 13:53
  SPEAKER_00: And when regulators decide to open a market or do something drastically, even a strong network effect can suddenly be put on shaky ground.
• 14:02
  SPEAKER_00: And that's exactly the pressure Pluxi is facing in countries like France, Romania, and Brazil.
• 14:09
  SPEAKER_00: This doesn't make Pluxi a bad business.
• 14:11
  SPEAKER_00: It simply means that a network effect isn't invincible.
• 14:15
  SPEAKER_00: It's only as durable as the rules that allow it to exist.
• 14:19
  SPEAKER_00: What Pluxi taught us was that network effects may look unbreakable until the rules change.
• 14:28
  SPEAKER_00: Lesson 20.
• 14:30
  SPEAKER_00: Selling shovels.
• 14:32
  SPEAKER_00: While investors focus on Nvidia, hyperscalers and AI models, OpenAI, and so much more, Texas Instruments operates more in the background, manufacturing the analog semiconductors that power all of it.
• 14:48
  SPEAKER_00: Every AI server, every data center, every rack of GPUs needs power management chips, sensors, converters, and signal conditioning components, and TI is one of the biggest suppliers of those essentials.
• 15:05
  SPEAKER_00: They're selling the shovels, the buckets, and pickaxes to everyone digging for gold.
• 15:13
  SPEAKER_00: What makes this more powerful is that analog semiconductors don't swing with hype cycles in the same way digital chips do.
• 15:22
  SPEAKER_00: They're mission critical and sticky, and because analog chips have 10 to 20 plus years product lifecycles, TI earns decades of returns.
• 15:33
  SPEAKER_00: The AI boom may have its winners and losers, but the companies supplying the foundational components tend to benefit regardless of who comes out on top.
• 15:44
  SPEAKER_00: Texas Instruments taught us that sometimes the biggest beneficiaries of a technological revolution aren't the companies building the breakthrough, but the ones supplying the tools that make it all possible.
• 15:58
  SPEAKER_00: Lesson 21.
• 16:03
  SPEAKER_00: Costco is a massive warehouse chain, primarily operating in North America.
• 16:09
  SPEAKER_00: While the company also has stores in Canada, Mexico, the UK, and even Japan, about 80% of its locations are located in the United States.
• 16:20
  SPEAKER_00: Costco's business model is built on scale economy shared, by passing nearly all purchasing efficiencies back to members through ultra-low gross margins, around 11%.
• 16:32
  SPEAKER_00: Costco doesn't compete by being clever.
• 16:36
  SPEAKER_00: It competes by being highly disciplined.
• 16:39
  SPEAKER_00: While most retailers look to increase margins and optimize revenue per square foot, Costco keeps doing the one thing others don't have the stomach for, giving the savings back to the customer.
• 16:52
  SPEAKER_00: Ultra low markups, a cult-like membership base, 90% plus renewal rates, negative working capital, and industry-leading inventory turns, all compounds into a value engine competitors cannot replicate without destroying their own economics.
• 17:11
  SPEAKER_00: Real long-term value creation sometimes means not raising prices.
• 17:17
  SPEAKER_00: Costco taught us that price is a mode when you build your entire identity around it.
• 17:24
  SPEAKER_00: Lesson 22.
• 17:25
  SPEAKER_00: Monopoly-like behavior in disguise.
• 17:29
  SPEAKER_00: Copart is active in handling salvage vehicles, sells through their auction platform.
• 17:35
  SPEAKER_00: Copart also takes care of additional services, like transportation and storage of vehicles.
• 17:42
  SPEAKER_00: Copart acts as the middleman between sellers, mostly insurance companies, and buyers.
• 17:48
  SPEAKER_00: It collects fees on both the sellers and the buyers, but the majority of fee income, about 70%, is related to selfage car buyers.
• 17:58
  SPEAKER_00: Its real mode isn't the land itself, the yards or even the software.
• 18:03
  SPEAKER_00: It's mostly about the liquidity.
• 18:05
  SPEAKER_00: More buyers attract more sellers, more sellers attract more buyers, and over time this creates a flywheel that becomes very hard to displace by competitors.
• 18:16
  SPEAKER_00: It's a classic two-sided marketplace dynamic, but executed with ruthless operational excellence.
• 18:24
  SPEAKER_00: In the United States, Copart basically acts as a duopoly with IAA.
• 18:29
  SPEAKER_00: A big difference is that Copart owns the land, whereas IAA mostly leases the land.
• 18:35
  SPEAKER_00: Add zoning restrictions, I mean you can't just open a 200-acre salvage art anywhere, and landownership, and you get a business that behaves like a natural monopoly without ever calling itself one.
• 18:49
  SPEAKER_00: And the lesson we took away from Copart is that some modes are reinforced every single day through market liquidity.
• 18:58
  SPEAKER_00: Lesson 23.
• 19:00
  SPEAKER_00: Profitability is a choice.
• 19:03
  SPEAKER_00: WICE is a highly specialized business in sending money cross-border.
• 19:08
  SPEAKER_00: Although this may seem like an easy activity, due to different currencies and local rules and legislation, and because banks were making big bucks on currency exchanges, this system has never really changed.
• 19:22
  SPEAKER_00: No other company on Earth is as specialized and focused on currency exchange as WISE is.
• 19:29
  SPEAKER_00: WISE is one of the rare fintechs where margins are pressed down not because they can't be higher, but because management is playing a different game.
• 19:38
  SPEAKER_00: They deliberately reinvest in lowering the take rate, thus trading short-term earnings for long-term power.
• 19:46
  SPEAKER_00: Their take rate is declining, and their efficiency upgrades, AI-driven servicing, smarter routing, more local balances, consistently pull costs down.
• 19:56
  SPEAKER_00: We showed us that one of the strongest financial signals is the profitability a company deliberately chooses not to take.
• 20:06
  SPEAKER_00: Reminds you of anyone?
• 20:11
  SPEAKER_00: It takes real discipline and a long-term vision of the management to hold back on near-term profits to strengthen the mode, and we love seeing that kind of restraint.
• 20:23
  SPEAKER_00: Wise taught us that when a company could be far more profitable today, but chooses not to be, pay attention.
• 20:32
  SPEAKER_00: Every business leaves a trail in the numbers, in the strategy, in its people, the history, in the way it treats customers, or allocates capital.
• 20:42
  SPEAKER_00: There's always something to learn.
• 20:45
  SPEAKER_00: Our job is to study them like detectives, to trace the incentives, understand the mechanics, question the assumptions, and then act with conviction when the puzzle makes sense.
• 20:58
  SPEAKER_00: Some companies teach us what to do, others teach us what to avoid.
• 21:02
  SPEAKER_00: But if you're paying attention, every business is a case study.
• 21:07
  SPEAKER_00: We hope you learn something new.
• 21:09
  SPEAKER_00: And if you're ready to invest in yourself, consider joining the Dutch Investor Premium.
• 21:14
  SPEAKER_00: You can find more information heading to thedutchinvestors.com and we hope to welcome you soon.
• 21:21
  SPEAKER_00: Have a wonderful day and would love to see you in part three.