The Value Stocks to Watch - 2026

[MUSIC] Welcome to Pazina Perspectives, brought to you by Pazina Investment Management, a global value manager known for our commitment to fundamental research and disciplined value investing. This podcast is presented by Pazina Investment Management LLC, an SEC registered investment advisor, and is intended for institutional investors only. The views expressed reflect the current views of Pazina as of the date hereof and are subject to change. There is no guarantee that any projection forecast or opinion in this material will be realized. Past performance is not indicative of future results. In the UK, this podcast is for professional clients only. This marketing communication is presented by Pazina Investment Management Limited, which is an appointed representative of Vittoria and Partners LLP. Vittoria and Partners LLP is authorized and regulated by the financial conduct authority. My name is Lisa Roth. I'm a partner at Pazina Investment Management and to give you some context for today's episode, we are disciplined value investors. We look for companies with solid long-term prospects, trading at prices substantially below their intrinsic value. On today's episode, I'll be speaking with a number of our portfolio managers, who have each selected a stock to watch, representing an opportunity that they find particularly compelling. Our first guest today is the founder of Pazina Investment Management, our chairman, Co-Chief Investment Officer, a portfolio manager on our US large hub strategies, and in my opinion, just the nicest guy you could ever hope to work for. Mr. Rich Pazina, welcome to the podcast, Ritz. Thanks, Lisa. So as you look at the current environment for value, what company strikes you as a particularly interesting or compelling opportunity as we head into the new year? I'm going to talk about Humana. Humana is one of these businesses that for so many years, people loved. It's Medicare Advantage. It's basically a health and sure, which nobody loves. But it was Medicare Advantage. And Medicare Advantage, having become a senior citizen recently, you're inundated with the decisions you have to make at age 65 about your health care. And what's compelling about Medicare Advantage is that, and most seniors, most people before they reach their 65th birthday, don't really think of Medicare other than something that's going to take care of them when they're old. Exactly. The problem is it's not a complete program. And it doesn't cover 100% of your doctor's bills. It covers 80% of your doctor's bills. And so if there's a catastrophic illness later in your life, it can bankrupt you. Absolutely. So people have bought some kind of a supplemental policy. Medicare Advantage is a policy that covers the other 20% and any deductibles, so deductibles and copays. In exchange for you accepting their narrower network. So you can't go to any doctor you want. You have to go to the one that's in your network. Now most people retiring today have grown up with that kind of corporate insurance policy, so they're used to it. So it's gone from zero to half of all seniors over the last 30 years. And it's been a very nice growth business. Now there's short term issues. So while this is the stock to watch in 2026, that's the question. It's not certain that it's going to be great in 2026 because we don't know. But what we do know is it's great long term because this achieves something that seniors want and it helps control health care costs. So despite the rhetoric or anti insurance company rhetoric, this is a very good business that's selling for as we estimate less than four times what it should earn in a few years. Mostly because it's not earning it this year because there were some excesses in the system. They over earned for a while. They got aggressive on increasing the benefit package. The government got aggressive on trying to control costs. People are afraid of that. And so you get this kind of unique opportunity to buy this kind of business. Yeah. Well, I want to thank you, Rich. I know everyone's always eager to hear your thoughts. So we appreciate your time and are excited to see long term. What happens with humanity? Fantastic. Thank you. My next guest is John Flynn, who has been with the firm for over two decades and is a portfolio manager for most, if not all of our US strategies. He's on small caps, mid cap, large cap and our focus value strategy. John, you've been on the podcast many times. Welcome back. Thanks, Lisa. It's good to be here. And so where are you seeing opportunity that we want to share with us today? I think one interesting area where we've been seeing opportunities in the market today is really in the staffing space. Okay. And there's a number of different names in the portfolio. But one at highlight here that I think is really compelling is Robert Haff. So Robert Haff is a staffing company that's focused on finance and accounting functions. Okay. And that's about two-thirds of their business. And then they've got another third of their business that's a consulting business focused more on regulatory compliance and digital transformation projects for financial institutions. Historically, it's been a very strong business. I would say kind of if you look historically of the financials average operating profits somewhere in the $400 million range. Okay. That's depressed today because staffing turnover across the board, not just in financial functions, has been at historical lows. And really how the company makes money is they place people inside a company for temporary purposes. Maybe sometimes that becomes a full-time role. But that's just not happening right now and that's depressed. And so if you look at the stock today, that the market cap is around $3 billion. They're forecasted this year to do probably I think consensus is in the mid-200s in terms of free cash flow. So off of a very depressed level, that mid-200s historically would be more like 400. But you're getting a high single digit yield on this stock today. The balance sheets net cash, so you're not really taking any balance sheet risk with this. And we think this is indicative of some of the opportunities we see across the board where cyclical lows, we maybe Robert Haff just reported earnings last week. They talked about things recovering a bit. And they were sort of green shoots. But it's still very much bouncing along the bottom in the industry. And a name where we just see the evaluation pretty washed out. And for somebody who has a longer term horizon and willing to wait for that cycle to turn, it's a compelling opportunity. Great. Well, it sounds like just the thing that we would be looking for. So again, excited to have you back on the podcast. I'm sure I'll see you here again soon. We love to have you on. All right. Thanks a lot. Bye. Next I want to welcome to the podcast. Someone we have wanted to have on here for a while. Takashi Okamura, who is our portfolio manager for Pazina's Japanese-focused value strategy. Thanks for joining me today. Thanks for having me. Which stock would you like to discuss today? I would like to talk about Olympus, the Magic Company in Japan. Nice. Nice. Okay. Why don't you tell us why we should be watching this stock? Okay. Sure. So Olympus is a pure play medical device company and the clear global leader in GI and Scopey. They have roughly around 70% global share in GI and Scopey. This is a very attractive business because switching is hard. Doctors need planning and comfort with the tools. Hospitals integrate the system into their workflow. And the tower and scope have to work together. So once a hospital adapts Olympus, customers tend to stay. And importantly, the profit pool is not just a one-time tower cell. Olympus earns the carding high margin revenue from scopes and the data products. The GI and Scopey market itself is fluctually stable. It is effectively and adequately led by sleep Japanese players, which keeps the area to entry high. On close, their real tailwinds in the US that recommended starting age for color lactol, concert screening has moved down to 45, which supports procedure volumes over time. Looking ahead, AI should improve image quality and workflow. Olympus advantage is scale. They have a largest install base, which gives them the most real world procedure data. So over time, they can build smarter tools and a better workflow solutions. So why the stock underperformed? Olympus has been going through a long transformation from a diversified company to a focused medtech player. But execution has been uneven. The organization has been complex, overhead has been heavy, and the quality and the legular to leave processes had caps. Those caps led to FDI warning letters, demidation cost and delays in production launches. commercially, the Taiwan-loan slipped first and the pushed out the related scope launches, which hurt the sales momentum, especially in the US. In China, the environment also got tougher, anti-corruption enforcement and the bi-China dynamics, pressured foreign lands, and Olympus was the late-lumping local production versus competitors. Now, we think the setup is improving. The FDI remediation in the late stage, so the temporary quality data cost should roll off. New products are being launched across the key market, which should support the recovery in scope to live in revenue, and local production in China is now uplining. We should improve competitiveness and help normalize sales to that. Finally, leadership has changed. The new CEO Bob White came in June 25 from Meturonic. That matters because Olympus issues operational. Quality system, launch discipline, and global execution. And a company also had a high fixed cost. Their SDA ratio is more than 10% higher than peers, so there's real-loom to slimline cost and improved margins. This is exactly where a seasoned metric operator is higher than fixed. Overall, we see a high-quality franchise with the current economics, near-time earnings normalization, and the potential for structural margin improvement. Yet the stock plays at only about 15-16 times next fiscal year adjusted EPS, which we think still does not fully reflect the upside. We have two ways to win. Unnings normalize a temporary cost rate and multiple derates if cost-serts theme-right. Nice. Well, that makes a lot of sense. It sounds like there's a lot of potential there. So thanks to Kashy for sharing about Olympus today. And for coming on the podcast, I know I've been bothering you to come on the podcast for at least two years now, so I appreciate your time. Thank you. Next, I want to welcome back to our podcast, Jason Doctor, who's a portfolio manager on our International Small Camp Strategy. Jason, thank you for joining us. Elyssa, thanks for having me on again. So what stock would you like to tell the listeners about today? So I would like to talk with you guys about Whiz Air. Whiz Air? Yes. Whiz Air is an Eastern and Central European-based ultra-low cost carrier. Okay. It's a name we own in both the International Small Camp Portfolios and the emerging markets Portfolios. I like to think of it as a good business that has had everything possibly go wrong for it that it possibly could. In the last five years, it has had COVID happen to it, which as I'm sure you know, is hugely disruptive for the aerospace industry. Yes. It has had a material presence in the Ukraine, which was impacted by the invasions there, including three planes trapped on the ground for several months. It has a material and profitable business, shuttling people back and forth from Israel, which was impacted by that conflict there. And then to top it all off and the cherry on top and really the thing that catalyzed us to make it a bigger position across the firm was the Pratt and Whitney Geerturbofan issue. So a Geerturbofan is a particular kind of jet engine that was one of the options on the current generation of the Airbus 320 family. Whiz Air is one of the largest, one of the largest operators of the 320 family in the world. And they chose to use the Pratt and Whitney Geerturbofan on the engine. And unfortunately, new technology, exciting technology, one that has a potential for sort of lower fuel burn, lower CO2 emissions, all the kind of good stuff that you want to see. But it had a problem. It was not able to perform at the level that was promised by Pratt and Raytheon. But in addition, the life cycles were much shorter than was expected. So really what's happened over the last few years is those planes have had to go back to the manufacturer to be repaired. And if you think about what running in airlines all about, not knowing how many planes you have, when you're going to have them, where you're going to have them is like hugely disrupted. So you had a couple issues. So you had just how do you schedule an airline when you don't know when a plane is going to be taken out from underneath you? You had an issue where once they were gone, you didn't know how long they were going to be gone for. And you had an issue where you had to lease planes to replace those planes on top of it. So as you can imagine, even an incredible management team is going to have difficulty doing it. And so what ended up happening was, especially in sort of fiscal 2025, costs just really spiral that at control. It really looked like these guys had lost control of their business. And what you realized when she dug under the covers and really thought about things and really spent some time saying, okay, here are the direct costs. How can we think about the indirect costs of this issue of not having your planes? What is the business really done? And when we did that work, what we discovered is actually if you look at the cost performance of the airline without the ski or turbofan issue, who was comparable, if not better than what Ryanair, the other ultra low cost carrier in Europe was doing. But when you looked at what the market was saying, the market was saying, this is just a broken business, right? That's how you get something like trading at five times normal earnings, trading at, sort of a high teens low 20s free cash flow yield. And we remain really firmly of the view that this is not a broken business. It's just a business that's had a lot of bad things going on. We think over time, as we get past the geotobrofan issue, you will see that this is actually one of the two lowest cost airlines in Europe. There is a reasonable market structure where both Ryanair and Wizzair sort of recognize the person they should be attacking isn't one another. Instead, it's the legacy carriers. And finally, sort of really excitingly, Ryanair has really been sort of a winner from Wizzair's issues, but because of Boeing's own issue producing 737s, what you'll see is that Ryanair isn't able to increase capacity over the next few years versus Wizzair will finally be recovering, finally being able to get their act together, and they'll be growing their capacity at a level that we think is reasonable. There was a pretty time where maybe management was a little bit too optimistic on how much capacity they could grow up, but they've sort of pulled things in and we feel better about that. So, it's just like a classic Pazina example, in an industry that's maybe not a classic Pazina industry. Airlines is usually not a place we love to invest in. We felt like airlines are after utilities. Airlines are probably the most commodity-ish business possible. And so usually when you have a chance to buy the guy at the bottom of the cost curve and a commodity industry at what feels like a really cheap multiple, you want to do that. And that's kind of what's here, and when you walk through sort of what's happened to them, you kind of understand how you ended up there. So, it's just an idea that I think as a team we're really excited about. Great. Well, I'm excited to see what happens with Wizzair over the next year, two years, you know, however long it takes, but it sounds like a great opportunity for us. We're excited about it. All right. Thanks Jason, I want to thank you again for taking the time to be here with us. Thanks a lot. All right. Now, I want to introduce Akiel Supermanian, who has been with the firm since 2017 and is a co-portfolio manager for the emerging market strategies. Welcome Akiel. It's always a pleasure to have you on the podcast. Thanks for having me Lisa. Yeah. I think this whole thing was your idea if I remember correctly. You came up with the idea to talk about stocks that the portfolio managers were interested in. Well, if it's going well, then I'm happy to take credit. I'm also happy to take any feedback you guys have. Nice. Nice. Well, so let's get down to it. What stock are you finding the most compelling right now? Okay. Sure. So I'm going to pick PVH as my pick. PVH is a consumer company. It's kind of an odd name, but the core business is two brands that everyone's heard of, which is Calvin Klein and Tommy Hillfiger. So PVH is a global business that operates the two brands of Calvin Klein and Tommy Hillfiger. And this company is facing a lot of headwinds. And I think it's training at a very compelling valuation. Now, as you know, Lisa, everything we do at Pazina is around normalized earnings, thinking five years out, what can happen on a mid cycle basis. But the interesting thing about PVH is in a year like 2025, they faced numerous headwinds. And so you could classify 2025 as a not good year rather than a mid cycle year. And the stock is even compelling on that basis. So after a year like 2025, where the company has faced headwinds from macroeconomic pain, headwinds from implementing and taking on the burden of tariffs, and headwinds from an execution mishap at Calvin Klein, which they're in the process. of fixing, the stock is projected to earn something like $11 a share. The interesting thing is the stock price is only around $60, $62 a share. So after a fairly terrible 2025, the stock is trading at less than six times a bad year's earnings and I'm using inverted commas here. So that's why I think this business is really interesting. On a normalized basis, we obviously think the earnings can be a lot higher, but just taking a terrible year like 2025, the stock is trading at a pretty attractive valuation of last year's earnings. Now, in terms of where we are at the moment, the business is generally considered mature. Calvin Klein and Tommy Hilfiger are not brands that are growing 15, 20% a year. They're growing on a fairly mature basis. They operate around the world. They've more or less penetrated most of their geographies. There are some pockets in Europe and some pockets in Asia that each of the brands has further opportunity to go, but on a top-line basis, we think the business can grow low to mid-single digits. Underlying all of that is some scope for margin improvement. Some of that margin improvement will come from lapping the operational mishaps that they had last year, for example, in Calvin Klein. And some of it will just be from the macroeconomic picture of being a little bit brighter than what it has been. And so on a mid-cycle basis, we think the stock is very attractive. And then from a pure capital return and capital allocation policy perspective, the company last year bought back approximately $500 million of stock. And the market cap of the companies are on $3 billion. So what's exciting for us is that this business, which is very modestly levered, has been buying back more than 10% of its shares every year. In fact, depending on the stock price could be almost as much as 15%. So what you have in PVH is a global business operating two brands that are known to pretty much everyone, Calvin Klein and Tommy Huffiger. The brands have growth runway ahead of them. In terms of the operating margins, we see some ways in which there is idiosyncratic company specific improvement. And the management team has very good capital allocation policy where they are retiring almost 10% if not more of the share count every year. So on that basis, I think this is a really interesting setup and that's why I've picked PVH. It sounds like a lot of potential. So I'm excited to see what happens with PVH. And I'm excited to have you on the podcast again soon. I hope. Yes, I hope so too. Thanks, Lisa. Talk to you soon. Bye. Our next guest is on the podcast so often he hardly needs an introduction. But this is John Getz, our Co-Chief Investment Officer and a co-portfolio manager on our global, international, European and Japanese focused value strategies. Thanks for joining me, John. You're welcome. Good to be here. What company are you going to talk about today and why is it interesting? Yeah. I'm going to talk about Dijkin, which is Japanese company, Japanese HVAC, heating, ventilation, and air conditioning company. And the reason I'm going to talk about it is we often say we're deep value, but we also say we're like buying good businesses when they're on sale. And if you look at the HVAC industry globally, it's actually a really good business. Meaning there are some very leading global companies involved. People in the United States are very familiar with this because they either buy Carrier, which is a well-regarded company or a train, which is also well-regarded. So the industry structure has been good historically. And one of the reasons for that is because it's both a technology business. Meaning you have to keep up with increasing demands, regulatory demands, etc. on air conditioning, but also client trust and I call it reliability is critical. No one wants to be without their house, you know, without air conditioning. So it's one of those good industries if you look at it historically. By the way, we wrote this up in our quarterly newsletter. So if the listeners want more on this, they should just go to our letter. But I'll hit the highlights and why I'm picking this. Oftentimes good businesses can have issues or have elements of pain in their reported results. And Dijkin has three major things hurting it right now from a financial optics standpoint. Two of them are related to the company itself. One is really the industry itself, right? Because if you're selling in air conditioning units, the more new houses being built, the more buildings being built, the more units you sell. And if you look across their regions because Dijkin is really big in China, is really big in Europe and is really big in United States as well now, really the fact that all three of those markets have elements of pain in them is one of the reasons why the reported profitability is lower than you might expect. If it was just that alone, you might say, well, we could buy any one of the three. But that really isn't the key to this investment case. Yes, that's in the background. But there's a couple of elements for Dijkin specifically that are painful at the moment. One is they were not highly represented in United States, one of the biggest markets in the world. They decided since they were running a superior technology actually, historically in Asia and Europe, they thought, you know, why shouldn't we win in United States as well? Because there's lots of service in this industry involved in presence of installers, et cetera, you can't just walk in and take over the market. So they actually did it by acquisition. And they actually acquired a couple of weaker players, Goodman being the largest, where you asked anyone, where does Goodman rate relative to train and carry, they'd say, below it. And therefore, there was an investment required to update their technology. They actually built up some vertical integration as well in the business to improve the quality of the offering. So there's been a big investment period here for Dijkin that has raised the capital invested with nothing to show for it really until you start making those sales, which is now happening. And we do think the future involves share gain in the North America market. So one element of pain was all that investment, which made the company look like it's having a declining return on investment. And really, it is a proper investment in the future. And then the second is they stumbled actually in a regulatory shift here, because as soon as the US said, you can't manufacture on the old refrigerant, beginning in 1-1-25, they stopped and immediately began making things to the new regulatory refrigerant standard. Installing is particularly in the consumer market, in the home market. They didn't want to get to the new stuff before you really had to, which is actually 1-1-26, where you can no longer install equipment with the old refrigerant. So they jumped the gun there and lost share. But the reality is they're ready for 2026. So that also looked like, made it optically look like they were losing share, even though what had happened was they just hadn't met with the current demand requirements, which were really backward facing rather than forward facing. So what we see here is between the pain in the markets for HVAC in general across the globe, including China, and their own self-inflicted wounds, we would say that over the next five years, which is our horizon, we're looking at earnings that we really do think the earnings can be roughly a double from here. So that's our case. There's a lot of current pain in dyken, and we think at our current valuation, they're trading at somewhere in the eight to nine times our normalized earnings power. Well, as you mentioned, dyken was our highlighted holding in our newsletter, and if anyone wants to really read the full write-up, you can visit our website at prasina.com. Thanks, Sean. I just want to, as always, appreciate you sharing your knowledge and your thoughts. And I hope to have you back on the podcast very soon. I'm sure we will. Thank you for listening. Next up, I want to welcome to the podcast Evan Fox, who has been with the firm 19 years. Is that right? Oh, yeah. 18 and a half. Almost 19 years. So exciting. He is the portfolio manager on our global small cab, US small cab, smid and mid cap strategies. Thanks for joining me, Evan. Yeah, great to be here with you. So what stock do you think that we should be watching right now? One that's really interesting is spectrum brands. This is a company with a pretty complicated history, but that complexity is actually part of what's creating today's opportunities. Over the last several years, management has fundamentally reshaped the business, simplify the portfolio and materially improve the balance sheet. Yet, this stock is still being traded as if none of this progress really matters and people are so focused on what's happening in terms of tariffs. Maybe to go back a few years, it's helpful to set the stage. So you go back and spectrum had owned a home hardware business. Think of locks and remaining and related products. In 2021, they announced plans to sell them to a European competitor at a great valuation. It went through antitrust issues for two years. Keep in mind, this is the prior administration. I feel like in today's administration, this would go through in a week. But this is multiple years of fighting. Led to a lot of distractions, issues, but ultimately it did get sold at the original purchase price that they wanted. 23. Importantly, they didn't just redeploy that capital into another acquisition. Instead, they used the proceeds to buy back over 40% of the shares over the last two years and reduce leverage. So now it's a really strong balance sheet. So now let's talk about what the business actually is today. At this point, it's a much more focused company, cleaner balance sheet, fewer moving parts, and it's centered around three core segments. They have a global pet care, a home and garden business, and a home and personal care business. First is a global pet care, which I'd argue is one of the highest quality parts of the portfolio. This is one that makes aquariums and treats for cats and dogs, a range of other products like that. Pet trends remain pretty favorable, some nice recurring demand here, and this contributes about 40% sales, but actually 55 to 60% of earnings. The second is they have a home and garden business, which has some well-known brands tied to lawn care and insect control. So picture, cutter, bug spray, spectricide weed and insect control for your lawn, pretty good brand loyalty, steady demand. It always moves around a bit based on what the weather is, and you see some normal seasonality and trends, because it's always too wet or too dry in different parts of the countries. But overall, this is a nice business that's about 20% of sales, but 25 to 30% of earnings. The third segment, and the one that everyone was afraid of last year, is the home and personal care business. This actually sells a lot of the products you've probably heard of. They have the black and decker toasters and blenders, the George Foreman grills. I admit I just bought my first one since college. I had a 20-year-old Foreman grill that I was still using, and decided to get one that can do four burgers instead of two. So my son, two burgers is just not enough. They also make, uh, Remington hair care products and arrange up other things. So again, this is really where the fair fear comes in, because they import a significant portion of the products from Asia, which may have exposed to tariffs. And on top of that, management had previously talked openly about wanting to divest this business or put it into JV, because it didn't like it as much. So investors see tariffs on certainty, a business that management doesn't even seem to want for the long term, and they fix it on that. As a result, the stock valuation became increasingly disconnected with the underlying earnings power of the entire company. But here's the key point. The employee and the employee's business is not the whole company. It is about 40% of sales, but only about 15% of earnings, and about three quarters that earnings is from outside the United States, not exposed to those tariffs. But that really dominates how people think about spectrum brands. And so now, we're at this point where even if you assume most of the appliance business goes away, the stock is still at a really depressed valuation. It's really a strong balance sheet. And the market's pricing is though the appliance business is permanently impaired, and the rest of the company doesn't fully matter. So now we look at it after all the buybacks, after reducing the leverage, that it's trading just over five times normal earnings with overbone fears around tariffs. So spectrum brands is really a classic case of fear overwhelming fundamentals. And that's exactly the kind of setup we like going into the year. Yeah, that makes a lot of sense. Well, Evan, thank you for for telling us about spectrum and for being with us today. And I look forward to having you on the podcast again soon. Great to speak with you. Thank you. So our next guest today is Dan Bapkiss, co-portfolio manager for our US large cap and focused value strategies and our global strategies now. Dan, you've been on the podcast before haven't you? Yes. Great. Well, we welcome you back. Always excited to have you. What stock have you chosen to tell us about today? Thanks. You know, today I've decided I'm going to pick cognizant as my stock to watch for for 2026. So cognizant is one of the leading global IT services providers. And this is a really great example of of the types of ideas that we're finding in the current market. So this is a company that has an exceptional history of being one of the market leaders and and it was really a great long term success story. They've had a company specific issue, which is weighed on on the results in more recent history. The valuation derated because of this and presented a really a really unique opportunity for us. And I think today it's just fundamentally mispriced. And I think this is pretty interesting. Even though it's becoming increasingly evident that the company's specific problem is now already in the rearview mirror. So I'll go through a little bit of the history. You know, cognizant, most of their work forces in India. So it was really a wild success story during its early years. And part of that was they had really a better delivery model for IT services. So there's, you know, fun fact there was actually a Harvard Business School case study written about the great success that cognizant had. And effectively what they were doing was providing better customer service. They were outgrowing the industry for years and years and years at a slightly lower margin rate. Okay. Then if I go to the origin of the company's specific problem that got cognizant to be really cheap back in around the 2016 time frame, they had a series of what I would refer to as one off issues that caused cause and execution problems within the company. So one, they had a foreign crop practices act investigation, which caused a reshuffling of their leadership. At the same time they had an activist investor, which wage to campaign against them. And the basic premise around this was they should raise their margins up closer to the peers that they've been outgrowing forever. So they started to manage the business a little bit more with a short term mindset. Got the margins up in the short term, but then the long term growth trajectory started to break down. So fast forward now, they've gone through a couple of leadership transition changes. You'd seen that they'd been underperforming their peers for years. And this used to be the high flying, you know, creamy, multiple stock because it was one of the best performers in the industry. And it's completely derated. So just put it in perspective. Today it's trading about 13 time earnings, 13 times earnings. If you look at the closest peers, some of which are listed in in India but not also the central B1 example, it's listed in the US, the peers are trading at a range of 18 to 22 times earnings. So if they were to trade it up here multiple, you know, pretty massive upside in the stock price. And what's happened is after recent leadership changes, they've basically fixed the execution issues. And we're not just taking their word for that. You can actually see increasingly evidence, increasing evidence in the financial statements that they've turned in the corner. So during the period where they were derating, it was kind of right for the market to trade the stock down because they were growing a lot slower than their peers. And they weren't seeing the same demand signals and they were experiencing a lot more personal turnover than the rest of the industry. And if you look at it today, they're actually out growing the entire space. Plus, they've had to make a series of investments to fix some of the execution issues. So their margins had gone down. They've now turned the corner on that as well. And they're experiencing margin expansion that looks differentiated versus their peers as well. So when you look at it today, from a financial perspective, there's a company that's growing faster, is already expanding margins and has a lot more room for margin expansion. So the combination of that is their earnings outlook is is probably at the very high end of the entire peer group. And yet you're buying it at, you know, 50% plus discount to its closest peers in an industry that has a wonderful long-term history of growth. So the question you're probably asking is how is it possible that it's so evident now in the financial statements that they've turned this around and yet it's still trading at this massive discount? And why do I like it for 2026? So as you know, we're not, we're very long-term focused investors. So my history of this company is more about how it's performed through cycles as opposed to any short-term call. But I do have some logic behind why I like it for next year actually. So in terms of why I think it's trading at a discount, I think it took a while for them to fix their execution issues and frankly took two sets of management teams before they did it. So I think the market takes some time before they're going to start to give credit for what they're seeing in the financials. They just want to see a little bit more sustainability. It's actually one of the reasons I like it for 2026 is I think the longer that their out-performance persists, the more that valuation gap should just continue to narrow. And then I think the company is not going to sit still. I think their board of directors are likely having conversations with the management team about how do we narrow this valuation gap? And I don't know what they're going to do, but one option I could think of for example would be if I have peers in India that are growing slower than me trading at 20 something times earnings, maybe I should dualist in India. So I think there's strategic options that they're likely going to be thinking about if the valuation gap doesn't close on its own. And then the other question probably I think is like why is this opportunity exists? I think the other angle to this is there's a little bit of fear in the market around AI. So is AI going to disrupt the long-term growth rate of IT services companies? So I'll make a couple points around that. Number one, if we accept that premise, which I think that premise is actually not correct, but but let's, I don't know that for a fact. For the sake of argument, let's accept that that's right. If it is, would you rather be invested in the company that's trading in a much higher multiple? Or somebody that has margin expansion opportunity? and would face the same headwind, but seems like it's fundamentally as well positioned. So your starting point evaluation is actually offering you a little bit of protection in a cognizant versus a higher flyer in that industry from evaluation perspective. So I think that's one point. And then two, I think this kind of fundamentally misunderstands what cognizant's business model is. So the biggest fear that people will point to is some of the new tools that have come out, for example, from anthropic that help people code more efficiently, that if coding efficiency increases, that means people are just not gonna hire cognizant or the efficiency's gonna come out of their PNL. I would say first of all, take a step back. Over the last 30 years, the reason this industry grew a lot was because they reduced the cost of implementing technology. That is the core business model. The cognizant did that originally by arbitraging workers in India versus workers in higher cost jurisdiction. In the last 10 years, the industry's been doing that, but also incorporating automation solutions and technology into the way they're constructing their projects. So this isn't really a new concept. It's a new technology that the industry needs to adopt, but it's not a new concept that the cost of deliveries going down and the winner through cycles when you've seen that happen, this has historically been the services companies. The other point I would make is the percentage of the business that's physically coding for cognizant, quite small. So even if we believe that that's gonna be all done by machines in the future, they're actually adding a lot of value that's based on other things that's not just coding. So I think the market's just overstating the amount of revenue that's really at risk from this. And then the last piece of it, I think the way that AI is gonna start to potentially generate economic returns for all the people that are installing these data centers is you need wide-scale enterprise adoption. It's very hard to make the math work that these data centers are gonna sustain themselves without that. And when we speak to companies, and talk to them about their AI journeys, one of the biggest obstacles that everybody has is their data isn't clean. So even if the external tools work, those tools need to be customized for specific companies, specific applications, their tech stack needs to work, and the data needs to be cleaned in a way that the artificial intelligence could actually make sense of it. So getting from here to there is generally gonna require a lot of third-party work from companies like cognizant. So what's been happening in the short term is the industry's slowed down a little bit. We think that's more of a cyclical issue. There was a big boom in COVID, it slowed down. Companies aren't sure yet how to implement AI and some of the new technologies they need. They're not ready for it yet. So we think there's this kind of interesting dynamic in the market right now that companies need these service providers to start installing the technology that people are worried is gonna disrupt the services providers. But they're not ready to spend the money yet because the technology isn't ready. So if you think about the loop of that, it's just a pretty interesting situation. And you are seeing some industries that have kind of come through that cyclical malaise already. So one example of the financial services where the revenue is growing nicely. So there's a lot of proof points to say that this business model is gonna have a very significant and potentially growing role to play in the future. If AI is gonna be more broadly adopted among enterprises. And again, what I like about Cognizant is, it's not price for that. It's price like there's gonna be no growth effectively in the industry. And so I think the risk of reward is really in your favor at this price. - Yeah. Well, Dan, you have definitely made me a believer. So I'm excited to see what happens with Cognizant. And thank you. Thanks for coming on today. - Thank you. - We'll look forward to having you on the podcast again soon. - Thanks. - Thanks. Our final guest today is Miklos Vasarelli, portfolio manager for our European Focus Value Strategy. Miklos, welcome back to the podcast. It's been a minute since you were here. - Yeah, thank you, Lisa. - So what's stocked you wanna talk about today? And why would it be interesting to a long-term value investor like us? - Yeah, so today is a long investment in Barry Calibault with the chocolate processor. - Oh, exciting. Tell us about it. - Yeah, so for those of you who are not familiar with Barry Calibault or Barry, as they'll probably call it, Barry is the world's leading independent chocolate processor. So basically what that means is Barry buys cocoa beans from farmers, primarily in certain geographies with ivory coast and Ghana being the largest growers of cocoa beans. They take those beans and then they process that into chocolate liquid and cocoa butter and then they take those products and then sell them primarily to large FMCG companies like Nestle or Hershey. It's a very high quality business. They really benefit from their scale, just being the largest player in this market and having the number one position. They have very long-term established relationships both with the farmers as well as the companies. And then also they enjoy a great reputation for just being a very reliable supplier of chocolate 'cause this is a difficult industry and a difficult market to navigate. And because of that, historically, Barry's kind of traded on a pedestal and has historically traded about 25 to 30 times earnings, just given the high barriers to entry to this industry as well as the historical stability of the earnings. - So outside of our quintile. - Exactly. So what's really gone wrong with Barry and what's created the value opportunity for us is that going back to the middle of 2022 to Barry's stock price trough in the middle of 2025, Barry's share price was down over 65% in this period and that's because of an unprecedented spike in cocoa bean prices. So just to give you some historical context for that. So for the 20 plus years leading up to 2023, global cocoa bean prices averaged about $2,500 a ton and generally kind of traded between a range of $1,500 a ton to $3,000 a ton. However, starting in 2023, cocoa bean prices spiked and actually went up over four to five X to peak of $12,000 a ton. And the main driver of that was, you know, there are a couple factors, but the main driver that was just poor crop conditions a bad harvest in some of those key markets like Ghana and the Ivory Coast. So the result of those bean prices, that higher bean prices really weighed on Barry's share price and it's weighed on Barry twofold. So the first is Barry, you know, they buy the beans, they process that into chocolate liquid and cocoa butter and they sell it, but as a result, they're holding on to that inventory for a number of months. So basically it's really holding on to that higher cost inventory. It used to cost you $2,000 a ton to buy this ton of beans. Now you're spending $12,000 a ton to hold that ton of beans. So Barry, they don't take any commodity risk themselves. It's purely hedged, but they still have to carry that inventory for several months. And as a result of that, that's put a lot of pressure on Barry's balance sheet. So basically their leverage has gone up significantly just to carry that working capital. So that's the first headwind that Barry's faced. And then the second headwind, not surprisingly, is the higher cocoa bean prices also resulted in higher chocolate prices. So that's impacted overall chocolate demand and volumes, both twofold. So first, consumers dealing with inflation and going to their local supermarkets. You're seeing higher chocolate prices. So maybe you're rethinking that decision on a Hershey chocolate bar or Kit Kat. And then secondly, their customers, like the Nestleys or Hershey's or Denon's of the world, have also been aware of this. So they've been trying to, at the margin, reformulate some of their products to use a little bit less chocolate. So that's also weighed on demand. So our view, with this in the rear view mirror and why we're really excited about Barry as an investment, is that we think that over time, cocoa bean prices are going to normalize back to their pre-crisis levels. And that's really driven by crops. You have a good year, you have a bad year. Unfortunately for Barry, but fortunately for us, because it's given us this opportunity. It's been kind of three consecutive bad crop seasons. So we think that eventually that will recover. And then also, Barry and the industry has been reacting to this by trying to encourage farmers in other markets, like Brazil or other countries close to the equator, to grow new supplies of cocoa trees. And this is an industry where there's a little bit of a lag. Because if you plant a new cocoa tree, it actually takes two to three years, usually kind of three years, for that tree to actually start producing beans. So there's a lag in the supply response. So our view is that this may take a little while, but we think that the supply will recover. And in fact, it's looking-- looking like this year is actually going to be a good year for cocoa bean supply. So what we've seen is cocoa bean prices have gradually been coming down and now they're back down to about $4,000 a ton from that peak of 12k and that pre-kind of crisis level of around $2,500 a ton. And so this decline in the cocoa bean prices already started being reflected on Barry's balance sheet. And then we think that Barry's earnings are going to gradually improve because Barry, as I said, it's a pure pass through on that higher cost but the flip side is as volume has come down, there's extra cost and as well as you have that financing cost of having more debt to supply that inventory. So they've been slowly passing that on to their customers. So they are actually seeing an improvement in kind of EBIT per ton which is kind of the key metric that people in this industry focus on for profitability. And then lastly as chocolate prices or cocoa bean prices come down, that'll help end consumers as well. And I think that'll help end consumers in twofold. So first it'll probably result in either flat or potentially even declining chocolate prices. And then secondly, the industry, the customers like a Nestle or Hershey, they seldom actually like cut prices for their products. But if they're all of a sudden their input or raw material prices, so the cheaper chocolate prices come through, they're making more money on that product. So what they'll do is they'll increase promotion. So they'll start discounting or trying to push that product because all of a sudden it's gotten more profitable. So we think that over time that'll really help drive a recovery in chocolate demand. And I think one thing that's important to understand here is chocolate demand is historically it's grown two or three percent per annum. Children eat a lot of chocolate. Ever in like chocolate. It's okay. We think it's going to continue to grow as there's a nice tailwind as people in lower income or developing countries get wealthier. Chocolate is a luxury in the treat that they'll have. Nice. Well, I'm excited to see what happens with Barry and cocoa bean prices. I certainly do understand that why that sounds compelling. And I want to thank you so much, Nicholas. And really thanks to all of our portfolio managers who participated today in what has become an annual fan favorite episode of Pazina Perspectives. Yeah, thank you, Lisa. Thanks. Thank you for joining us for today's episode of Pazina Perspectives. If you'd like to hear more, be sure to subscribe to this podcast. And for more insights on value investing, visit our website at www.pazina.com. You can also follow us on LinkedIn or Twitter.