Fairlight Research

The Quickest Path

Fairlight Capital — Thu, 06 Aug 2026 15:02:26 GMT

This post will discuss a less liquid, smaller name than most that we discuss. One for the smaller investor, it lies in an obscure region and sector, largely overlooked even by its home country. It exhibits many characteristics we look for, being cheap, with a growing business, founder-owned, and specializing in a niche business. It also shows hints of business inflection, with several operating segments expanding together.

We will discuss all of that here, some of the technicalities behind their business, as well as the moats they have built up. In some ways it lies parallel to some AI-adjacent businesses in a sector to which it has complementary modalities. The name also hints at other areas where there could be hidden value in the markets.

What Have We Learned?

Fairlight Capital — Fri, 17 Jul 2026 14:36:53 GMT

In this piece we will try and answer the questions that we are always asking about new, potential investments. Is the name cheap in terms of its business fundamentals, growth, and opportunities? Is the growth likely to continue to help drive re-rating and act as a catalyst? And what are the risks to the investment?

Business valuations track the free cash flow and growth in the underlying business, so we want to know how all of the underlying metrics point in terms of those equations. How fast might growth be and so how quickly might a name re-rate, that is, if it is cheap in the first place. And along with this goes a critical question as to the skills and ability of management: what have they done so far, has it worked, have they run the business well?

This one on the face of it does appear to be cheap. Trading at 4.4× earnings, growing well (around 25% per year), having a large pile of cash and investments, with several potential avenues for future growth, new business, and with a very specific moat. Key questions for the company are whether it can grow beyond Korea, can it expand into a potential AI-related business, and can it expand beyond the demographic niche that it currently controls?

A Tale of Two Industries

Fairlight Capital — Fri, 19 Jun 2026 15:08:50 GMT

This post will discuss a special situation idea in South Korea. Two companies that have grown apart, and perhaps were never entirely together, have become increasing mispriced because their opposing dynamics blur the overall picture of two healthy companies.

One is a stable, steadily growing cash cow, generating cash flow in a business in which it is well entrenched. The second is growing much more rapidly in an exciting segment of the tech market, and is now inflecting into a higher level of cash flow. Their de-merger will spotlight the differences in each business, and appeal to different types of investor. Taken together the businesses are already cheap, but apart we believe they will migrate closer to intrinsic value.

And with the Value-Up regulatory push in South Korea, this is another example where the incentive to buyback stock and enhance shareholder value, will be a strong driver. Priced at below 5× earnings, growing, and with distinct moats, they appear to be below most investors’ radars.

East Asia Technology

Fairlight Capital — Thu, 21 May 2026 19:45:40 GMT

There is a technology company (let’s call it Company D) in East Asia that has just ridden up to a new plateau in revenue and profitability. The market is pricing this stock as if this profit level will immediately revert to prior years. There are many business reasons why this tailwind, coupled with diversification into other business lines, using the same technological expertise, mean that this is unlikely to occur.

Furthermore, there is another stock (let’s call it Company S, which is one of the most profitable subsidiaries of the holding company), that is trading closer to fair value. Company D is trading at a 60%–70% discount of its stake in Company S. At current market prices, Company D prices are valuing Company S for 35 cents on the dollar and its own business for zero or even negative value. This is a situation where the business fundamentals show that this technology stock is cheap, and sum of the parts shows that the valuation is far too cheap (even after applying a typical holding company discount in this jurisdiction). Let’s take a more detailed look at why this gap exists and how the new regulatory environment is set to close it.

The convergence of the newly launched IBKR Korea platform and the aggressive "Value-Up" regulatory push in Korea, (see mkind.krx.co.kr/eng-valueup), creates a unique window for discovery. This setup provides a rare entry point into what is our favorite stock in the Korean market, where a massive valuation gap is meeting the regulatory catalysts required to close it. By investing ahead of the mandatory H2 2026 "low-PBR" disclosures, we can capitalize on a name that the domestic market is going to force re-evaluation.

Lost and Found

Fairlight Capital — Sun, 03 May 2026 14:25:52 GMT

An exciting tech company has been set up in Europe that is aiming to establish a niche family IoT ecosystem. Recently growing revenues over 100% in one year from M&A and organic growth, it has made a further acquisition that looks set to make 2026 another year of large growth for the company. Too cheap for this level of growth, this company has an exciting future ahead of it with very strong business tailwinds that look set to benefit the company for many years to come.

Further Adventures in the World of...

Fairlight Capital — Mon, 23 Mar 2026 13:10:53 GMT

Concrete

Flying High

Fairlight Capital — Tue, 10 Mar 2026 12:30:10 GMT

This post discusses a rapidly growing company in an exciting (but non-AI) industry. Creating products that are best in class, their order book is growing, and they are about to launch into a new market that could materially impact revenues in the coming years. Still cheap in spite of this future growth potential, the main question is whether the company can execute through this upcoming growth inflection.

Public Equity Compounding Platform

Fairlight Capital — Tue, 17 Feb 2026 14:45:34 GMT

What happens when a moribund, century-old furniture manufacturer is taken over by an activist investor and transformed into a diversified financial holding company? Through a series of equity exchanges and strategic acquisitions, the new CEO has re-engineered this legacy shell to consolidate niche insurance and real estate assets while sheltering new income with millions in legacy tax assets.

Now, having zero debt, recurring income, and aggressive share buybacks, the underlying business is highly profitable yet remains obscured by structural complexity. For investors willing to look past these complications, this micro-cap offers a deeply discounted turnaround thesis with very high insider alignment.

Open For Business

Fairlight Capital — Tue, 13 Jan 2026 17:30:44 GMT

This post discusses a rare type of mining opportunity that has not yet been revalued by the market. A company being treated as a speculative or transitional story that is already operating and generating cash today. The disconnect persists largely because the market remains in an information gap following a late-2025 transaction. That gap is now beginning to close. In the coming weeks, initial operating results should start to reveal the underlying cash-generating power of the business, catalyzing a re-rating. Beyond this near-term recognition, the company also controls substantial, underutilized infrastructure that provides a clear path to operational optimization, alongside embedded growth and exploration upside that the market is currently assigning little to no value.

The Good, the Bad and the Ugly: A Pre-Inflection Setup

Fairlight Capital — Tue, 23 Dec 2025 14:03:04 GMT

This post will discuss a larger company that has fallen from grace. It has a fantastic business and brand, but growth has slowed, although as we shall see not in all segments. Now trading a little above 1× revenue and cheap to historical earnings, if it can turn itself around it may well be one of those names that appears obvious in hindsight. After a recent business turnaround, one more crucial decision needs to be made to restore the company to its former glory. An inflection stock in waiting…

Where Credit Is Due

Fairlight Capital — Tue, 09 Dec 2025 17:11:29 GMT

In this post, we investigate a fintech stock that has gone largely unnoticed. The company has recently achieved a major milestone: crossing into sustained profitability and positive free cash flow. Despite growing at rates above 30% through a series of acquisitions that complement or expand on existing business lines, it remains obscure, partly due to its very recent listing, and partly due to a reputational overhang attached to management.

For the enterprising investor, this creates a potential asymmetry: does history justify the discount, or has it created a window to buy a scaling fintech at less than 5× forward EBITDA? We believe this is an exciting business with an even more compelling valuation. Firstly, we will take a look at the origins and evolution of the company.

Traces and Layers

Fairlight Capital — Sat, 01 Nov 2025 17:35:33 GMT

This post focuses on a small Canadian technology company that has been largely overlooked, with little coverage to date. Over the past two years, it has undergone a major turnaround and reached a clear growth inflection point. Despite achieving significant additional scale, the market has yet to revalue the business accordingly. At trough earnings, the company trades at a mid-single-digit multiple, and as the market rebounds, likely in 2026, we expect its strong revenue and cash-flow growth to become increasingly apparent.

On a forward-looking basis, the company appears extremely undervalued, trading at a low-single-digit EV-to-free-cash-flow multiple. It also contains a strategically valuable cash balance amounting to nearly half its market capitalization. If not deployed for ongoing buybacks, this cash could be used for vertical or horizontal acquisitions within its niche. The company’s current small size is largely a reflection of this undervaluation. When re-rating occurs, possibly within the next two quarters as revenue accelerates and the subsector rallies, the valuation could increase rapidly, closer to intrinsic value.

Twenty Two Captains

Fairlight Capital — Tue, 30 Sep 2025 20:44:24 GMT

This company is likely the cheapest that we’ve written about on Substack to date. At an estimated forward free cash flow valuation of 1.7 times, there are several dimensions to the cheapness of the valuation. The company has a large cash and liquid asset balance that it is using to grow operating assets and generate further cash flow. These liquid assets are currently larger than the market cap of the company. There are several routes for the future value of this company to be many multiples of the current stock value.

The market is valuing it as if there will be huge future dilution, but we believe that this is unlikely to be the case. There are many reasons to believe this: not least of which is that the CEO now owns 37% of the common stock. This is a situation where the business has inflected and dynamics have moved on from just a couple of years ago.

This post will discuss the recent history of the company, how it got to where it is now, various market dynamics that the company has expertly navigated, and then look forward from the current position. With some fairly simple and non-aggressive assumptions, we can project the probable near-term future for the company and what might lie beyond over the next year.

Signals In The Noise: Deep Value Meets Growth

Fairlight Capital — Thu, 11 Sep 2025 15:02:08 GMT

This is a stock with an already significant amount of cash compared to its valuation, rapid growth (a 366% revenue increase in its largest segment), and large business tailwinds. It trades at a very cheap level even after a large run up in the stock price over the last twelve months. The valuation and growth, combined with price momentum could lead to it becoming a very attractive investment.

The Time Machine

Fairlight Capital — Mon, 01 Sep 2025 20:07:55 GMT

Time Travel

What if I could take you back to April 2020? Not for the reasons you might think. Those were difficult times for many if not all of us. Lockdowns spreading across the globe, a strange, new disease that appeared to be uncurable with an unknown death rate. The future was filled with uncertainty of how we would get past this period, perhaps the disease was overblown, but in the meantime governments and caution held sway and everyone’s lives were temporarily turned upside down.

In the investment world at that point, equities had fallen across the board. Few, if any, had escaped the erosion of capital by a double-digit percentage. But, as Buffett recommended, being greedy when others are fearful, was again a good approach to take at that point. Many stocks were beaten down by even more than the index averages. At the lows for the S&P 500 around April 8 the market had dropped by 18.5% to 4983, from the previous highs of 6111. Certain stocks fell by multiple double-digits including many small caps.

To pick an example, RCI Hospitality fell to a price of $7.23 from a previous high of $25.05, a fall of over 70%. Giving it a market cap of $67 million at that point, a reasonable analysis would put the forward earnings valuation somewhere around 2x–2.5x for a growing business. Rolling up adult entertainment and food venues it looked at that point to be a business that would be critically injured by the shutdown of the physically present economy in 2020. But an investor with an eye to safety would have observed they had enough cash and financial resources to weather even an extended period of shutdowns.

With hindsight, a good investment. How about we set the dial on the time machine back a little further to Feb 1, 2004. At this point RCI Hospitality had about a dozen clubs, was around $50 million market cap and was just starting to prove that its business model worked and that it could roll up local operators. Back then it traded for $2 a share. Investing through the market’s ups and downs since then to the 2022-2023 period would have afforded the investor a 40× return. Or annualized, 20% per annum for a period of over 20 years.

It’s important to look back sometimes to be able to look forwards, so that we can try to switch hindsight into foresight. Out there is a business somewhere that will 40× in the next 20 years, and many others that will do that more quickly. Looking back allows us insights into which ones we may have overlooked or missed. Many have commented (correctly) that small caps and smaller valuation stocks give a rich fishing ground for these kind of ideas. And it is also striking that these kinds of returns are not exclusively found in overlooked, loss-making, turnarounds, or special situations. Often they are businesses that were successful, profitable, and just kept on operating and performing.

Tech Turnaround With Potential For More Than 100% Upside

Fairlight Capital — Sun, 24 Aug 2025 19:12:38 GMT

This post will discuss a tech turnaround which combines many elements of what we look for in an investment set up. A strategic pivot kicked off two years ago, that is now starting to bear fruit. The potential for a very large growth wave to start to impact financials in the coming quarters. And a low valuation compared to the potential sales, EBITDA, and income for the company. With a clean balance sheet and some cash, if it can continue the positive momentum in the business and income statement from last quarter, there could be very interesting times ahead for this company.

Mad Markets: Buffett Partnership Letters (1959)

Fairlight Capital — Thu, 31 Jul 2025 16:03:22 GMT

Would That Be Worth Something To You?

Fairlight Capital — Tue, 22 Jul 2025 14:40:55 GMT

This company is one at the cusp of generating commercialized contracts, having worked in its niche in research and development for many years. It has recently become debt free for the first time in fifteen years and is getting ever close to consistent, positive cash flow generation. A new production facility is now fully online with five times the capacity of the previous operations.

The business lies within an unusual niche of the technology sector, providing products and services on the edges of what was previously possible. We will take a look through the company background, recent history, along with some discussion of the technology itself.

The business is partway through a challenging phase, combined with a transition in the scale of operations. CEOs of other companies that have experience of high growth over an extended period talk about the fact that as they scaled the company would periodically “break” and have to be remade to allow it to forge ahead with the next growth phase. This company could be in the midst of one of these transitions.

Falling 73% in value from its recent peak valuation in the market, the question for us is whether this is cheap enough yet? And can the company grow from here?

Crouching Tiger, Hidden Stock: And It Pays to Be Patient

Fairlight Capital — Mon, 14 Jul 2025 16:56:03 GMT

This company hasn’t caught up yet with the Hong Kong market rally. Still trading at 5x earnings and cashflow with a 10% dividend yield. Founder-family owned with net cash and real-estate providing downside protection. One to patiently hold and collect ongoing dividends while waiting for the rerating.

Mad Markets: Buffett Partnership Letters (1958)

Fairlight Capital — Sun, 06 Jul 2025 21:26:27 GMT