Hidden Investment Treasures

Practical, expert guidance on identifying active investment opportunities in a stock market dominated by passive investors

In Hidden Investment Treasures: How to Find Great Stock Investments as the Investment World Goes Passive, veteran portfolio manager Daniel Gladiš, CFA, delivers a foundational and inspiring new playbook for actively capturing higher returns at lower risk in a market dominated today by passive money.

Gladiš walks you through real investment cases exemplifying how to take advantage of growing inefficiency in the financial markets. He demonstrates specific analytical techniques and strategic reasoning essential to uncovering underpriced securities that can yield superior long-term returns.

Gladiš explains:

• How diligent active investors should dig where passive money fails to flow
• Where value lurks in sectors and firms seen as too boring, little known, unpopular, complicated, or small
• Fundamental metrics, tools, and perspectives for recognizing underpriced stocks
• Applying analysis, discipline, and patience to buy at the right price
• How company managements create—or destroy—shareholder value through capital allocation, acquisitions, and personal temperament

Written for individual investors and professionals, Hidden Investment Treasures is a must-read for stock pickers, value investors, equity analysts, and wealth managers seeking to improve long-term investment returns in today's market.

Foreword xi
by John Mihaljevic

Preface xxi

Acknowledgments xxv

Chapter 1 Why? 1

How We Got to This Point 3

Price Discovery and Market Trends 5

Why? 10

What to Expect in the Remainder of This Book 12

Chapter 2 Berkshire Hathaway: Seeking Treasure in a Company Whose Success Has for Decades Been Playing Out Right in Front of Us 15

From Zero to a Trillion Dollars 16

Is Berkshire Hathaway a Good Business? 19

Berkshire Hathaway’s Intrinsic Value 23

Berkshire’s Future 25

Chapter 3 Asbury Automotive Group: Seeking Treasure Among Cannibals 29

Significant Changes to Our Fund’s Portfolio 30

Abg 32

The Importance of Capital Allocation 35

Chapter 4 Alimentation Couche-Tard: Seeking Treasure Among Acquisition Masters 39

The Winking Owl 40

When Are Acquisitions Beneficial? 42

Chapter 5 Burford Capital: Seeking Treasure in People 47

The Young Litigation Finance Sector 48

Dispute with Argentina over $16 Billion 50

How to Value Burford Capital Shares 53

Chapter 6 Stellantis: Seeking Treasure in a Company That Everybody Underestimates 57

Déjà Vu? 58

The Future of the Automotive Sector 60

Cash Is King 65

Chapter 7 Jungfraubahn: Seeking Treasure Among Tourism Monopolies 69

Tourism’s Diversity 70

Local Monopoly 72

Chapter 8 NVR: Seeking Treasure Among Companies with Low Capital Requirements 77

New Beginnings and Transformation 78

Sources of Competitive Advantage 83

Chapter 9 Japan: Seeking Treasure in a Country Most Investors Ignore 87

Japan’s Break with the Past 88

A Simple and Effective Form for Investing in Japanese Equities 92

Chapter 10 Oil: Seeking Treasure in a Sector That Is Out of Favor 97

Some Alarming Statistics 98

The Likely Increase in Demand Is Frightening 100

Relationship Between Energy Consumption, Energy Availability, and Population Wealth 102

Is the Market Wrong in Estimating Future Oil Prices? 105

How We Can Take Advantage of This 107

Chapter 11 Cenovus Energy: Seeking Treasure in a Sector That Is Out of Favor, Part II 111

Nature of the Oil Market 114

Incentive Price 117

Why We Chose Cenovus Energy 118

Chapter 12 KLA Corporation: Seeking Treasure Among Technology Companies 123

What Exactly Is a Technology Company? 124

Reasons for Caution 127

Invisible Oligopolies 130

Chapter 13 JPMorgan Chase and OSB Group: Seeking Treasure Among Banks 133

Valuation of Banks 134

The Giant and the Dwarf 138

Chapter 14 Markel Group: Seeking Treasure in a Company That Investors Regard as Boring 143

Markel’s Three Engines 145

Baby Berkshire 148

Chapter 15 Quálitas Controladora: Seeking Treasure in Emerging Markets 151

Investing in Emerging Markets 152

Mexican Beauty 156

Chapter 16 Teekay Energy Partners: Seeking Treasure in the Pockets of Passive Investors 161

The Coronavirus Poured Sand into the ETF Gears 164

Chapter 17 CVS and Microsoft: Two Examples of Different Investment Mistakes 169

CVS: A Stock We Never Should Have Bought 171

Microsoft: A Share We Should Never Have Sold 174

Chapter 18 Berkshire Park 179

Risk 183

Bibliography 189

About the Author 191

Index 193

DANIEL GLADIŠ is the founder of and a portfolio manager at Vltava Fund, a global equity fund. He has over 30 years' experience in investing and is a bestselling author and a leading figure in the Czech capital markets.

In Hidden Investment Treasures: How to Find Great Stock Investments as the Investment World Goes Passive, veteran portfolio manager and investor, Daniel Gladiš, CFA, delivers an exciting and practical playbook for investors interested in capturing higher risk-adjusted returns in financial markets overwhelmingly dominated by passive money.

Gladiš offers real-world investment case studies that highlight how to take advantage of the growing inefficiency of financial markets that are increasingly populated by investors who focus on passively managed index funds. He explores useful analytic techniques and strategic reasoning you can deploy immediately to help you uncover underpriced securities that yield superior long-term results.

Hidden Investment Treasures explains the parts of the market that passive money has failed to penetrate and how you can invest in those areas to great effect. It demonstrates where value silently lurks in sectors and firms that are superficially uninteresting, unpopular, complicated, or relatively small. The book also provides you with the metrics, tools, and perspectives you need to recognize when stocks are underpriced so you can benefit from the bargain.

The author walks you through the effective and ineffective strategies that company managers use to create and destroy shareholder value. You'll learn about capital allocation techniques, acquisition strategies, and manager temperaments that bolster or impair the worth of companies, and how to accurately assess a company’s likely performance based on those characteristics.

Perfect for individual investors and finance professionals, Hidden Investment Treasures is a must-read for stock pickers, value investors, equity analysts, and wealth managers looking for long-term investment opportunities in contemporary financial markets.

Praise for hidden investment treasures

"Hidden Investment Treasures is itself a treasure. Fundamental investment analysis the way it's supposed to be done, the book offers a marvelously educational series of business and investing case studies. Required reading for any investor determined to improve their own analytical process."
—CHRISTOPHER P. BLOOMSTRAN, Semper Augustus Investments Group

"Daniel Gladiš, the Czech author of Hidden Investment Treasures, named his fund after the Vltava. Also known as the Moldau, it is Bohemia's longest river and was immortalized in Bedrich Smetana's symphonic poem Má vlast ('My Homeland'). When it comes to investing, Gladiš is well worth your attention. He has an excellent track record. Moreover, he stands in a long tradition of fiercely independent Czech thinkers, stretching back to Jan Hus, whose reformation challenged entrenched dogma more than a century before Martin Luther. Czechia later resisted domination by both the Austro-Hungarian and Soviet empires. Gladiš, who grew up under communism, witnessed his country's shift to a market economy and forged his perspective as a global investor.

In his book, Gladiš offers incisive analysis of a series of investment case studies. I particularly enjoyed his case studies of lesser-known companies, like Jungfraubahn, a monopoly Swiss mountain railway with hidden real estate and pricing power, and Quálitas, the profitable, conservative 'GEICO of Mexico.' But his book also takes an outsider, independent Czech view of companies like Berkshire Hathaway, Markel and Stellantis, an underappreciated auto conglomerate chaired by John Elkann, who also oversees Ferrari through his family office, Exor, in Turin. Gladiš's book is well worth reading and should be on every investor's bookshelf."
—GUY SPIER, Aquamarine Capital Management LLC