Beating the S&P by 56.66 % — August Mid-Month Update

Crushing the S&P with small caps.

The Buried Bargains portfolio is up 64.2 % since its inception on 20 January 2025. This means we are beating the S&P by 56.66 % while running a lower beta than the market. We use no leverage and hold only cheap stocks with low expectations baked in—effectively reducing the most important risk: permanent loss of capital.

Undervalued & Undercovered is a research service for professionals who want to save time and still receive deep dives on high-potential small-cap companies. For premium subscribers we also provide this model portfolio, helping them size and select the best theses we publish on the platform.

This month has seen quite a few moves. We have made some changes to our positions and, as always, we have earned substantial returns. In this mid-month portfolio review, we will cover some of the movements we have made in the portfolio and what we are thinking of doing with our current positions, as there is a lot going on. We have started trimming our biggest position after a 2 × in half a year. We will also include two compelling trade ideas—for the next 6–12 months—that we think are worth sharing. One is a distressed debt opportunity, and the other is in an undercovered, high-growth tech company in the beauty industry, growing at incredibly high rates with the possibility of overtaking much larger competitors.

So far, our outperformance is outstanding; the S&P is starting to look like a flat line compared to our portfolio.

Buried Bargains portfolio vs S&P

Monthly returns.

We have outperformed in seven of the last eight months.

Objectives and strategy.

I aim for +30 % annual returns with this portfolio, and so far we are well ahead of that pace. Such a high bar forces us to be exacting about upside (without ever neglecting downside). As a rule of thumb, I want companies that—even under conservative growth forecasts and low exit multiples—can deliver 2 × returns within three years. That target lets us reach 30 % annualised gains without depending on buoyant markets or exuberant growth. I also demand security, either through tangible assets or rock-bottom absolute valuations, so our holdings can perform even in adverse environments. This is our framework and go-to in most situations, but there are exceptions in the portfolio when an opportunity is so good that it would be a shame not to include it. Higher returns can be achieved with this strategy thanks to our focus on catalysts: a wide set of short- and mid-term catalysts can close the valuation gap quickly, leading to fair or even overvaluation and pushing returns above the 30 % base case.

Monthly portfolio update.
It’s time to review every holding and decide whether each still deserves a place—or whether better opportunities await. Full deep dives and updates are on Substack; search there for any thesis that interests you.

First of all, we will discuss a successful trade we made this month.

NCR Atleos (+15 % in one day)
Last week, after a few calls and messages across my network, I came across NCR Atleos, an ATM pure-play that had been spun off with a lot of debt and is undergoing a SaaS transition, with very good margins and a 12.9 % FCF yield. It appeared we had a fantastic catalyst lined up: share buybacks, initially expected by Q3 or Q4. We speculated that, as their main competitor with similar market share had an outstanding quarter, they should have done the same. Strong cash generation would have put the company close to its debt target of >3 × EV/EBITDA; as management said in previous calls, we were expecting great results and buybacks to be announced. If this did not happen, our downside looked limited, and we liked the company for the long term, so I took the small risk and posted the opportunity in the paid subscriber chat. We ended up being right, and the next day we were up 15 %. We are not selling, as we still think the company is a bargain at the current price. The following day we also published the deep dive for people who missed the initial move.

The remainder of this article—including our exact portfolio positioning, two trade ideas, and a review of each of the 10-plus companies we own—is available only to paid subscribers. Subscribers receive instant updates on portfolio moves and three theses each month on undervalued companies with multibagger potential. Since publication, these ideas have delivered an average IRR of 80 %.

The exact current positioning.