Since 2008, Amazon’s stock has compounded at a mid-20s annual rate.

But the harder question is what Amazon looked like before it became obvious.

Around 2008/2009, Amazon was already a large company. It had billions in revenue, a dominant position in U.S. eCommerce, and a founder-CEO with a very long-term mindset. But many of the value drivers that define Amazon today were still either small, invisible, or not fully appreciated by the market. AWS was still early. Advertising was not yet the profit machine it later became. The marketplace was still maturing. Logistics looked expensive before it became a moat. And profitability was not yet the clean, obvious story investors can see in hindsight.

Platform companies often look messy. They invest heavily, profitability is delayed, and the market struggles to decide whether losses are value-destroying expenses or value-creating reinvestments. Only later does it become clear whether the company was simply burning cash or building infrastructure, trust, customer behavior, and network effects that would matter for decades.

Sea Ltd. is not Amazon. And Southeast Asia is not the United States.

But in some ways, Sea reminds me of Amazon around 2008/2009: already large, already relevant, but with much of its long-term earnings power still hidden behind investment, complexity, and market skepticism.

Is Sea just a volatile internet company with hard-to-forecast earnings? Or is it an earlier-stage platform compounder in a region that is still moving through a long digital consumption cycle?

I have followed the company from a distance since around 2020. Back then, Sea Ltd. was almost impossible to ignore. Garena was printing cash, Shopee was scaling at breathtaking speed, SeaMoney was viewed as a powerful fintech option, and the market was willing to dream very far into the future.

Then the story collapsed. The stock fell sharply, Garena normalized, Shopee had to prove that it could become profitable, and Sea was forced to move from growth-at-any-cost to self-funded growth.

I never fully forgot the company. But I also never really put it into the typical Slow Compounding bucket.

Sea is not the classic “boring” compounder I usually like to study. It does not have decades of smooth earnings growth, steadily expanding margins, or a proven playbook that has already worked through multiple cycles. The range of outcomes is wider. The competitive environment is tougher. The moving parts are more complex.

But sometimes the market’s discomfort is exactly where the opportunity begins.

Today, Sea consists of three very different businesses:

🛒 Shopee, the leading eCommerce platform in Southeast Asia and Taiwan (and Brazil), and the core of the long-term investment thesis.

💳 Monee, the fintech layer on top of the Shopee ecosystem, with digital payments, credit products, and financial services.

🎮 Garena, the historical cash flow engine, still profitable and still relevant, even if it is no longer the center of the equity story.

The key question is whether these pieces can compound together.

Shopee already has massive scale, but its mature profitability is still not fully visible. Monee is growing quickly, but brings credit risk. Garena remains highly profitable, but gaming is always hit-driven. None of this is as simple as buying a niche industrial compounder and watching EBITA margins slowly expand for the next decade.

That is also why this is not a full Slow Compounding Deep Dive yet. It is a Company Snapshot. Some Substackers might already call an article like this a Deep Dive, but for Slow Compounding, a real Deep Dive means going much deeper.

So think of this article as the first serious look.

We will walk through:

🌏 Why Southeast Asia matters — and why the region is still structurally underpenetrated

🛒 Why Shopee is the core asset — and why its take rate, GMV growth, and margin potential matter so much

💳 Why Monee could become a second earnings engine — but also the segment where risk management matters most

🎮 Why Garena still matters — even though Sea is no longer mainly a gaming story

📉 Why the stock has been so volatile — and why the market still seems scarred by the 2021/2022 collapse

💰 What the current valuation might imply — especially for Shopee’s long-term earnings power

The more I look at the company, the harder it becomes to ignore. Sea is not boring. It is not easy. But it sits at the intersection of eCommerce, fintech, digital entertainment, and the long-term rise of Southeast Asian (and Latin American) consumption.

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1. Why Sea Ltd. is interesting today

Sea Ltd. is not the kind of classic “boring” compounder I usually look for. There are plenty of reasons not to like Sea at first glance. The company does not have a decades-long history of steadily rising margins or exceptionally smooth earnings development. The stock has behaved more like a roller coaster in recent years, making Sea one of the most volatile large internet stocks of the past few years.

During the last years, the market has placed the company into almost every possible bucket:

Over the past few years, the market has pushed Sea through almost every possible narrative. It was first celebrated as a hypergrowth story, then dismissed as a cash burner. At the bottom, investors worried about insolvency risk, a massive capital raise, and potentially heavy dilution. Then came the turnaround phase. As profitability returned, the narrative shifted again: Sea was no longer just a survival story, but a platform with renewed earnings momentum. Today, the debate is changing once more.

Many investors have therefore already mentally filed Sea away as “too risky,” “too volatile,” or “too difficult to understand.” This is probably reinforced by a simple geographic disconnect: Sea is listed in the U.S., but much of its real story is playing out in Southeast Asia, a region many U.S.-based investors do not follow closely.

That is exactly where the opportunity might lie today.

The share price still carries the scars of the earlier euphoria and the collapse that followed.

Under the surface, Sea has changed significantly over the past few years. What started as a growth story funded by the gaming business has increasingly become a more diversified consumer internet platform. At its core today is Shopee, the leading eCommerce platform in Southeast Asia and Taiwan (and Brazil). At the same time, Monee is emerging as a digital financial services business closely tied to the Shopee ecosystem and could become a second major earnings driver over time. Garena, the gaming business, is no longer the sole engine of the equity story, but it remains an important part of Sea’s history and cash flow profile.

That is what makes the investment case unusual. Sea still offers substantial revenue and earnings growth potential, while the valuation still does not seem to fully reflect the company’s long-term earnings potential. As I will argue toward the end of this article, the setup looks quite compelling to me: the downside appears low, while the upside could be meaningful.

The company is now much larger, more mature, and more profitable than it was during the earlier hypergrowth phase, yet the stock still reflects a lot of skepticism. The market does not seem to value Sea as a stable long-term compounder. Instead, it still looks at the company through the lens of the past: volatile gaming revenues, heavy eCommerce losses, aggressive competition, abrupt strategy shifts, and extreme valuation cycles.

That is what makes Sea interesting to me. The company does not yet look like a perfect quality compounder. It is in its earlier phase of that journey. Shopee addresses a huge eCommerce market that is still underpenetrated and that grows strongly. Monee can build on top of this ecosystem. And Southeast Asia itself provides structural tailwinds from rising purchasing power, increasing digitalization, young demographics, and growing online penetration.

A cautious comparison would be Amazon around 2009. Even then, Amazon was no longer a small company. In 2009, Amazon generated $19.2 billion in revenue, still mostly from eCommerce. Growth was high, but profitability was not yet what later investors would look back on as obvious. Many of today’s value drivers — AWS, advertising, marketplace density, logistics advantages, and structurally higher margins — were already there in some form, but not yet fully visible. Investors who judged Amazon only by its near-term margins or its seemingly high multiple underestimated the long-term economics of the platform.

Since 2008, Amazon’s stock has compounded at roughly 25% per year.

With revenue of $16.6 billion in 2025, Shopee has therefore reached a similar revenue scale to Amazon in 2008/2009, while its margin profile still reflects a platform that is far from fully mature.

Sea is not “the next Amazon,” and Southeast Asia is not the United States. That comparison would be too simplistic.

The parallel lies in the nature of the question: Is this a volatile internet stock with hard-to-forecast earnings, or an early platform whose long-term earnings power is still not fully understood by the market?

Put differently: Investors who missed Amazon around 2010 may not get the same story again with Sea Ltd. But they may get a similar type of opportunity: an already large, yet still not fully mature platform in a structurally growing market, where the long-term profit potential remains hidden behind short-term volatility.

Sea Ltd.’s most important asset is Shopee, the leading eCommerce platform in Southeast Asia and Taiwan, as well as an important platform in Brazil. Alongside it stands Monee, formerly SeaMoney, as a growing digital financial services platform. Garena is the historical origin of the company and was the cash flow engine for a long time. Today, however, it is more of an important stabilizing pillar than the core of the long-term equity story.

Before turning to Sea Ltd. itself in more detail, we will first look at the market to understand why the opportunity is so compelling.

2. Southeast Asia: A fragmented but massive opportunity

Southeast Asia (“SEA”) is the geographical southeastern subregion of Asia, consisting of the areas south of China, southeast of the Indian subcontinent, and northwest of Australia. SEA includes eleven countries. It is commonly divided into Mainland Southeast Asia, comprising Cambodia, Laos, Myanmar, Peninsular Malaysia, Thailand, and Vietnam, and Maritime Southeast Asia, comprising Brunei, East Malaysia, East Timor, Indonesia, the Philippines, and Singapore.

Southeast Asia is not one single, homogeneous market. It is a cluster of countries with very different income levels, languages, regulations, logistics structures, and consumer habits. This fragmentation makes the region operationally more difficult than China or the United States. At the same time, however, it creates a natural advantage for regional platforms that can solve local complexity better than global one-size-fits-all platforms.

The following chart shows the eleven countries of Southeast Asia by population, area, gross domestic product (GDP), and GDP per capita. The most important takeaway is simple: Southeast Asia is not a niche market. The region is home to 700 million people with compelling demographics, and several economies that are already relevant on a standalone basis. Indonesia is by far the largest market, but the Philippines, Vietnam, Thailand, and Malaysia are also large enough to support independent platform ecosystems.

For Sea, this heterogeneity is both a curse and an opportunity. It is a curse because each country has its own requirements when it comes to payments, logistics, regulation, and consumer behavior. But it is also an opportunity because this exact complexity creates a barrier to entry. Anyone who wants to build a pan-regional platform in Southeast Asia has to do more than build software. They need to develop local infrastructure, merchant networks, payment rails, logistics processes, and user trust country by country.

The second chart puts Southeast Asia into a global population context. The comparison with China and India is particularly important. Southeast Asia is smaller than both giants, but large enough to form its own digital consumer region. At the same time, the region remains far less visible to many Western investors than China or India.

Another important point is demographics. Southeast Asia is not only large; in several key countries, it is still young.

The following chart from Asia Partners shows the 15–35-year-old population by country within Southeast Asia. This age cohort matters because it represents the core consumer base for many digital platforms: people who are mobile-first, open to online shopping, comfortable with digital payments, and more likely to adopt new consumer internet habits early.

The chart also shows how different the region is internally. Indonesia remains by far the largest demographic engine and is expected to see its 15–35-year-old population peak only around 2032. The Philippines is even more striking, with its young consumer base expected to continue growing until around 2055. By contrast, Vietnam, Thailand, Malaysia, and Singapore have already passed their respective peaks.

This matters for Sea because the company is not exposed to one single demographic curve. Shopee operates across a region where some markets are already more mature, while others still have many years of young consumer growth ahead. Indonesia and the Philippines, in particular, remain highly important long-term markets because they combine large populations, rising incomes, and still-growing young consumer cohorts (and they are the largest markets for Sea).

The next chart shows the region’s economic catch-up process. Southeast Asia has grown from around $648 billion of nominal GDP in 2000 to more than $4.2 trillion in 2025. Further growth is expected through 2030. The comparison with China, the United States, and India makes clear that Southeast Asia does not reach the absolute scale of the world’s largest economies, but it is still highly relevant as a standalone growth region.

For consumer internet companies, this nominal growth matters a lot. Platforms like Shopee do not only benefit from more users. They also benefit from rising incomes, larger basket sizes, growing digital advertising markets, better payment infrastructure, and increasing merchant professionalization. This is the macroeconomic soil in which platform compounders can emerge.

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3. The “Golden Age” at the consumer level

Southeast Asia is not just a large and growing region. What makes it much more interesting is the specific stage of economic development it is currently going through.

Asia Partners, a private equity firm focused on Asian technology companies, describes Southeast Asia as a region currently moving through the “Golden Age” of per-capita income. What they mean is a particular development phase in which real, inflation-adjusted income per capita reaches a level where consumer behavior begins to change structurally.

This is not just about people becoming a little wealthier. It is about a broad part of the population starting to have meaningfully more discretionary income. And historically, this has often been the phase in which large local consumer internet and platform companies emerge.

The three precedents of China, Korea, and Japan show that each country went through a period in which real per-capita income entered the Golden Age zone of roughly $4,000 to $6,000. When countries move into this income band, the probability increases meaningfully that the future technology and platform winners are founded, scaled, or brought to the public markets during that window.

Why does this happen?

Because gross savings rates, used as a rough proxy for discretionary income after basic needs have been covered, tend to rise meaningfully during the Golden Age. Once people reach a certain income level, the portion of income they can allocate more flexibly begins to grow.

That is exactly what matters for companies like Sea.

Platforms like Shopee do not thrive because people merely cover their basic needs. They benefit when consumers start to:

• shop online more frequently,

• look for greater selection,

• value convenience,

• use digital payments,

• adopt delivery services,

• and increasingly manage financial services digitally.

When households have little room to spend beyond basic necessities, the addressable market for these services is naturally limited. But once discretionary income starts to rise, consumer habits can change very quickly. Convenience, selection, speed, and digital user experiences suddenly become much more important.

And now, guess what: Southeast Asia has only recently been moving through this Golden Age.

On a real per-capita income basis, Southeast Asia is currently in the Golden Age zone, lagging China by ~15 years. The region is now wealthy enough for mass digital consumption to emerge, but still early enough that many digital categories, especially eCommerce, digital payments, and consumer credit, are far from mature.

That combination is exactly what makes Southeast Asia so interesting for platform companies right now.

4. Sea Ltd.

Sea Ltd. was founded in Singapore in 2009 and has evolved into one of the most important consumer internet companies in Southeast Asia. Today, the group consists of three core businesses: Garena in Digital Entertainment, Shopee in eCommerce, and Monee in digital payments and financial services.

Historically, the story started with Garena. The gaming business was Sea’s original engine and, for a long time, the main source of cash flow. Garena gave the company the financial base, user relationships, and entrepreneurial confidence to expand beyond gaming and build larger consumer internet platforms across Southeast Asia.

But the center of gravity has clearly shifted.

Today, Sea’s equity story is increasingly about Shopee and the financial services ecosystem around it. Shopee has become the group’s most important asset: the leading eCommerce platform in Southeast Asia and Taiwan, and an increasingly relevant platform in Brazil. It is the business that defines Sea’s long-term opportunity, because it sits directly on top of the region’s rising digital consumption, growing merchant base, improving logistics infrastructure, and increasing online penetration.

Monee, formerly SeaMoney, is the natural extension of that ecosystem. As more consumers and merchants transact through Shopee, the opportunity to offer digital payments, wallet services, consumer credit, and merchant financing grows with it. In that sense, Monee is not a random financial services add-on. It is deeply connected to the eCommerce platform and could become a meaningful second earnings engine over time.

Garena remains important, but its role has changed. It is no longer the sole driver of the Sea investment case. Instead, it is best understood as a profitable and cash-generative business that helped fund the group’s expansion and still provides stability to the broader platform.

Sea is not a pure eCommerce company, not a pure gaming company, and not a pure fintech company. For many investors, that lack of focus alone is enough to make the company look too complicated, too messy, or simply too hard to categorize. Sea is a regional consumer internet platform built around three interconnected pieces: entertainment, commerce, and financial services.

5. Garena: The cash cow

Garena is Sea’s oldest segment and the origin of the entire company. The business gives users access to mobile and PC-based online games, which Garena develops, curates, licenses, and localizes for individual markets.

The business model is relatively straightforward. Most games are free to play and monetized through in-game purchases. Players do not necessarily pay for access to the game itself. Instead, they spend money on digital items, upgrades, skins, characters, or other virtual content. As a result, revenue is not only driven by the number of players, but even more by how active and engaged those players are and by what share of the user base actually spends money inside the game.

The most important title remains Free Fire. Free Fire was developed in-house and launched in 2017. For Sea, this was a decisive turning point. Before Free Fire, Garena was mainly a regional publisher and operator of licensed games. With Free Fire, Sea became the developer of a globally successful mobile game. This materially improved the quality of the business model, because self-developed games offer much better long-term control over the product, updates, monetization, and brand value than purely licensed content.

Garena has played an enormous role in Sea’s history. For many years, Shopee required substantial capital to fund growth, logistics, marketing, and international expansion. Garena was the highly profitable cash flow engine that helped finance this expansion. That also explains why Sea was previously viewed much more as a gaming company. During the pandemic, user numbers, engagement, and bookings exploded. Afterwards, the business normalized significantly.

In 2025, however, Garena staged a strong comeback. For the full year, Garena’s bookings increased by 37.3% to $2.9 billion, GAAP revenue grew by 26.1% to $2.4 billion, and Adjusted EBITDA increased by 38.1% to $1.7 billion. In the fourth quarter of 2025, Garena had 633.3 million quarterly active users and 58.0 million quarterly paying users.

The following chart shows Garena’s revenue development:

And the next chart shows Garena’s adjusted EBITDA development:

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7. Shopee: The core of the growth story

Shopee is the growth engine that will largely determine whether Sea can become a true platform compounder over the long run.

Shopee operates the largest eCommerce platform in Southeast Asia and Taiwan and is also one of the leading eCommerce platforms in Brazil. At its core, Shopee is a regional marketplace that connects buyers, sellers, logistics providers, payment providers, including Monee, and increasingly advertisers. In 2025, Shopee connected roughly 400 million active buyers with around 20 million sellers.

The business model is essentially a marketplace model. Shopee brings buyers and sellers together without owning most of the goods itself. The value of the platform comes from enabling transactions, building trust, simplifying payments and logistics, and giving sellers access to millions of potential customers. Sea monetizes Shopee mainly through transaction-based fees, advertising revenue, various value-added services, and logistics-related services.

The simplified arithmetic of an eCommerce platform looks like this:

Number of orders × AOV = GMV

AOV stands for average order value. GMV, or Gross Merchandise Value, refers to the value of orders for products and services on the Shopee marketplace. Sea’s calculation of GMV for its eCommerce platform includes shipping and other charges.

GMV × Take Rate = Marketplace Revenue

The platform provider keeps a percentage of GMV as its take rate. This is the core revenue source of the marketplace.

In addition, platform operators can also act as merchants themselves by buying goods from suppliers, holding them in inventory, and taking full control over processes and pricing. This is called the 1P model, or first-party model. The classic marketplace model, by contrast, is called 3P, or third-party.

Shopee has now grown to around 4 billion orders in Q4 2025:

AOV declined steadily from roughly $18 in early 2017 to around $8–10, where it has stabilized since 2022:

This results in the following GMV development:

GMV increased from $4.1 billion in 2017 to $127.4 billion in 2025. That equals a growth CAGR of roughly 54% over eight years.

Unfortunately, Sea does not disclose the GMV split by country. However, estimates suggest that the 2025 split was roughly as follows:

• ~$83 billion Southeast Asia

• ~$22 billion Taiwan

• ~$13 billion Brazil

• ~$10 billion other markets

According to the e-Conomy SEA 2025 report published by Google, Temasek and Bain & Company, the total non-grocery eCommerce GMV in Southeast Asia reached around $161 billion in 2025. Based on the estimated GMV split above, Shopee would account for roughly 52% of the market.

Its key competitors in the region are Lazada, Alibaba’s Southeast Asian eCommerce platform, TikTok Shop, and Tokopedia, the Indonesian platform acquired by ByteDance, the owner of TikTok.

One of the most important developments at Shopee has been the steady increase in its take rate. In the early years, the take rate was effectively close to zero. Today, it is around 12%. This was part of the strategy.

Shopee first wanted to get the marketplace flywheel spinning as quickly as possible. More sellers create more selection. More selection attracts more buyers. More buyers make the platform more valuable for sellers. And with every additional transaction, the platform becomes more relevant.

• On the seller side, Shopee attracted merchants with no or very low commissions and free shipping.

• On the buyer side, the company used vouchers, discounts, and marketing to get consumers to place their first orders.

This is also visible in the high marketing spend, which we will look at shortly. The goal was not short-term profitability. The goal was liquidity on the platform. Buyers and sellers had to get used to Shopee as their central marketplace.

The following video with Christiano Ronaldo (I’m wondering how much he was paid for that…) captures this consumer behavior in a much more entertaining way than any chart could. It may look funny at first glance, but it points to something important: In many markets, Shopee has become part of everyday consumer behavior. Discounts, vouchers, free shipping, entertainment, and convenience all helped train users to return to the platform again and again.

You could compare these subsidies to pouring fuel on a fire to make it burn faster. Once the fire is hot enough, it can sustain itself.

That is exactly what the take-rate chart above shows. Until 2017, Shopee was barely monetized. The platform first had to prove that it could generate enough demand, enough supply, and enough repeat purchases. Only once a marketplace becomes valuable enough for its users can it begin to raise fees without merchants and buyers immediately switching to competitors.

This is often described as a tipping point: the moment when an ecosystem starts to monetize its participants more aggressively, even though alternatives exist. If buyers and sellers still remain loyal to the platform, it signals confidence in the network effects and the stickiness of the merchant base.

That is why Shopee’s rising take rate matters so much. It shows that Shopee has not merely pushed GMV through the platform. It appears to have built real platform relevance. If Shopee had grown only because of subsidies, higher fees should have quickly led to market share losses. Instead, Shopee was able to increase monetization gradually over many years, from almost zero in the early phase to around 11–12% today.

Importantly, this take rate is not just a simple seller commission. Depending on the calculation, it also includes advertising revenue, transaction-related fees, payment and service revenue, and logistics-related value-added services. That is where the real leverage sits for high-margin revenue:

Merchants buy visibility, run ads, use fulfillment, process payments through the platform, and purchase additional services.

This is also where the profit improvement comes from. As a marketplace matures, two things tend to happen at the same time: take rates rise, while marketing spend per order falls. Most of the take-rate increase drops through to earnings because the variable costs attached to it are relatively low. That creates operating leverage.

The following chart illustrates this very well by showing both the take rate and the gross profit margin. As the take rate increased steadily, shown on the left axis, the gross profit margin, shown on the right axis, also improved. Shopee now earns a gross margin of around 30–35%, compared with only 5–10% revenue margins in a 1P model.

In the early years, Shopee was a deliberately subsidized marketplace. Revenue was still small, while losses increased as the company expanded. It is not visible in the chart bel, but in 2019, the EBIT margin was still -135%. Only in 2025 did Shopee reach positive full-year EBIT margin for the first time, at 3.5%.

This was part of the strategy. Sea invested aggressively in buyer acquisition, seller incentives, free shipping, discounts, marketing, and logistics to get the marketplace flywheel moving, as described above.

We will return to profitability from a broader perspective, as well as Shopee’s future profitability target, shortly.

8. Monee: the fintech lever on top of the Shopee ecosystem

Monee is Sea’s digital financial services segment and the third major building block alongside Shopee and Garena. It is one of the leading digital financial services providers in Southeast Asia, with a growing presence in Latin America. As a result, Monee is increasingly becoming a standalone growth and earnings driver within the group.

Strategically, Monee is particularly interesting because it builds on an advantage that many financial services companies do not have: Shopee already provides a massive user base, transaction history, merchant relationships, and payment data. While traditional banks or pure fintechs have to acquire customers at high cost, Sea can offer financial products directly where consumers and merchants are already active: inside the eCommerce ecosystem.

The business model consists mainly of digital payments, wallets, consumer credit, buy-now-pay-later products, merchant and SME financing, and digital banking offerings. The most important earnings driver today, however, is clearly the credit business.

Monee’s revenue and operating income primarily come from its consumer and SME credit businesses. At the end of 2025, Sea Ltd. reported outstanding loans of $8.0 billion, of which $7.4 billion were classified as short-term loans within current assets.

The numbers show how quickly Monee has developed. Until 2019, the segment was almost irrelevant, but since then it has gained significant importance. In 2025, revenue increased by 60.1% to $3.8 billion. In Q4 2025 alone, Monee generated revenue of $1.13 billion, implying a run-rate of more than $4.5 billion even before assuming any further growth.

Adjusted EBITDA increased by 43% in 2025 to $1.0 billion. Monee is therefore already highly profitable and no longer just a “long-term option.”

The more transactions run through Shopee, the more data is created. This data helps with credit decisions, risk assessment, fraud detection, and product selection. At the same time, buyers and merchants can use financial products directly where they are already active. This reduces friction and increases the likelihood that Monee becomes a natural part of the Shopee ecosystem.

The most interesting point is the flywheel between Shopee and Monee. Shopee brings buyers and sellers onto the platform. Monee makes payments and financing easier. Better financial products can then enable more transactions, because consumers gain additional purchasing power through installments or credit, while merchants can use working-capital solutions. More transactions strengthen Shopee. More Shopee activity gives Monee better data and more customer touchpoints. In the best case, both segments reinforce each other.

At the same time, Monee is also the segment where risk management matters most. Credit growth almost always looks attractive in good times. The key question is whether credit quality remains stable when growth is high or macro conditions become more difficult. So far, reported credit quality looks good: the 90+ days non-performing loan ratio stood at 1.1% at the end of 2025 and was stable compared with the previous quarter.

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8. Why the stock was so volatile

Sea’s share price volatility reflects the market’s constantly changing perception of the company. During the euphoric phase, Sea was seen as the dominant internet winner in Southeast Asia. Garena was highly profitable, Shopee was growing extremely fast, and the market was willing to accept heavy losses as necessary reinvestment to reach the tipping point, fuel the flywheel further, and secure the best market position in a large, underpenetrated, and fast-growing TAM. Once interest rates started to rise and growth-at-any-cost was no longer rewarded, the equation changed abruptly.

Over the past few years, the market has repeatedly put Sea into different narratives: first as a gaming-funded growth machine, then as a pandemic winner, then as a cash-burn risk, then as a profitability turnaround, and most recently as a profitable growth platform that is once again investing more aggressively.

Phase 1: IPO to 2019 — the still-unproven platform case

In the first years after the IPO, Sea was still a relatively small and difficult-to-categorize internet company. Garena was already profitable and generated cash flow, while Shopee was investing heavily and reporting large losses. At that point, the market still had to figure out whether Shopee was just an expensive eCommerce experiment or whether Sea could actually build a regional platform around it.

The narrative at the time was essentially this: Garena funds the option value of Shopee. The share price had already started to rise, but the major re-rating was still ahead. Shopee first had to prove that subsidies could translate into real marketplace liquidity: more buyers, more sellers, more selection, more orders, and eventually higher relevance for merchants.

Phase 2: 2020 to the end of 2021 — the perfect growth story

During the pandemic, all the pieces suddenly seemed to fit together. Free Fire was extremely strong, Garena generated large profits as a result, Shopee accelerated massively, and eCommerce in Southeast Asia received an additional push from lockdowns and changing consumer behavior. In 2021, Garena generated bookings of $4.6 billion and Adjusted EBITDA of $2.8 billion, while Shopee’s gross orders increased by 116.5% to 6.1 billion and revenue grew by 136.4% to $5.1 billion.

The narrative shifted to Garena as the cash cow, Shopee as the dominant eCommerce winner, and SeaMoney as an additional fintech option. In a zero-interest rate world, the market was willing to discount this growth far into the future. The stock rose to almost $370, which at the time implied a market capitalization of roughly $200 billion. Within less than two years, the stock had returned more than 800%.

In hindsight, this was also the most dangerous phase for investors, as the market priced in almost everything at once: permanently strong gaming, uninterrupted eCommerce growth, cheap capital, and a very high probability that Shopee would become highly profitable later on.

Phase 3: 2022 — the collapse and the forced path to self-funding

In 2022, the narrative turned brutally. Higher interest rates made unprofitable growth stocks less attractive, Garena normalized after the pandemic boom, Free Fire was banned in India, and Shopee continued to report large losses. Sea still reported $12.4 billion of revenue for 2022, but also a net loss of $1.7 billion. Shopee’s Adjusted EBITDA was negative $1.7 billion, after negative $2.6 billion in the prior year.

The market was no longer asking: how big can Sea become?

The new question was: can Sea become profitable at all if Garena can no longer fund everything?

Within roughly one year, the stock collapsed by almost 90% from its peak (and even after the recovery from the lows, Sea still trades around 75% below its all-time high today).

This pressure led to what was probably the most important management pivot in the company’s history. Forrest Li, founder, major shareholder, and CEO, made it clear that Sea could no longer rely on capital always being available. Management temporarily gave up cash compensation until the company reached “self-sufficiency.”

At the same time, costs were cut, expansions were scaled back, and the focus on profitability increased dramatically.

This strategic shift was particularly visible in Shopee’s international expansion. During the pandemic, Sea had tried to roll out Shopee very aggressively beyond its core markets of Southeast Asia, Taiwan, and Brazil. Poland, France, Spain, India, Argentina, Mexico, Chile, and Colombia were all part of this phase. The logic was clear: if Shopee’s playbook of low merchant fees, free shipping, promotions, gamification, and aggressive marketing had worked in Southeast Asia, perhaps it could also work in other emerging markets and even in Europe.

But in 2022, this experiment was largely brought to an end.

• In France, Shopee had only launched in October 2021 and already shut down the platform again in March 2022. Shopee itself described France as an initial test market.

• India followed almost immediately afterwards. Shopee had launched there only a few months earlier and exited the retail market again on March 29, 2022. Reuters pointed at the weaker growth outlook and the fact that the withdrawal came shortly after the Free Fire ban in India.

• Spain was also shut down quickly, with the Spanish platform set to stop operations in June 2022.

• In September 2022, the next cut came in Latin America. Shopee fully exited Argentina and stopped local operations in Chile, Colombia, and Mexico. In those three markets, only a cross-border model remained, meaning products from sellers in other countries could still be sold there, but not from local sellers.

• At the beginning of 2023, Poland was also closed. Shopee had launched there in September 2021 as its first European market and ended operations in January 2023.

In effect, Shopee gave up the idea of rolling out the Southeast Asian playbook globally in the short term. The focus shifted back to the markets where Shopee already had strong relevance or a realistic path toward a strong market position: Southeast Asia, Taiwan, and Brazil.

This was the moment when the market forced Sea to make a new promise: we can do more than grow and burn cash: we can fund ourselves.

Phase 4: Early 2023 — Sea proves profitability

In 2023, with the release of Q4 2022 results, the first countermove arrived. Sea showed that the profitability lever was real. Costs had already been reduced, marketing had become more disciplined, unprofitable activities had been scaled back, and Shopee’s unit economics improved significantly.

Only one year earlier, in Q4 2021, Shopee was still fully in growth-at-all-costs mode. Revenue was around $1.6 billion, but the segment lost almost $941 million on an EBIT basis. The EBIT margin was -59%, and the EBITDA margin was -55%. Back then, Shopee was buying growth with high marketing spend, free shipping, subsidies, and aggressive expansion.

One year later, the picture looked completely different. In Q4 2022, revenue had already reached $2.1 billion. Cost of services fell from 75% of revenue to around 58%, while sales and marketing expenses declined from 53% of revenue to only 18%. At the same time, the gross margin jumped from 6% to 32%.

The result was a fundamental break in how the market perceived the business model. A segment that had generated almost $1 billion of EBIT losses in the prior-year quarter became a segment with positive EBIT of $109 million and positive EBITDA of $196 million in Q4 2022.

This was the first concrete proof that Shopee can be profitable.

Forrest Li therefore said:

The narrative shifted again. Sea was no longer just a cash-burning growth stock, but a company that could become profitable.

For the share price, that was initially positive. But the next question immediately appeared: if Sea is now profitable, is the company sacrificing too much growth?

Phase 5: Second half of 2023 — reinvestment and renewed skepticism

After Sea had proven that profitability was possible, management pivoted again. The logic was straightforward: now that the cost base was healthier and the company had become self-funding, Sea could start investing in growth again.

This shift was difficult for the market to digest. In Q2 2023, Sea announced that it would increase investments in the eCommerce business again. Forrest Li said that these investments could cause Shopee and the group to record losses again in certain periods, while also emphasizing that self-sufficiency and cost efficiency would remain central.

This was the second major management pivot:

• 2022 / early 2023: prove profitability.

• From mid-2023 onward: accelerate growth again.

The market reacted nervously because this looked, at least on the surface, like a return to old losses. On top of that came more intense competition, especially from TikTok Shop. As a result, the stock remained volatile despite operational improvements.

This created an almost paradoxical market reaction. When Shopee was still reporting large losses, investors demanded proof that the business model could become profitable. Management delivered that proof: costs were cut, subsidies were reduced, marginal markets were closed, and Shopee turned profitable surprisingly quickly.

But as soon as that proof was delivered, the concern shifted. The market was asking now whether that profitability had been achieved at the expense of growth. Sea had solved the first problem, and by doing so, it triggered the next narrative.

When management then started investing more heavily in growth again, that too was interpreted negatively. Instead of seeing reinvestment as a rational attempt to reaccelerate a stronger platform, the market feared a return to the old cash-burn patterns.

Phase 6: 2024 to the end of 2025 — profitable growth returns

In 2024 and 2025, the picture improved materially again. Sea showed that growth and profitability could potentially coexist.

• For 2024, Sea reported revenue of $16.8 billion, net income of $447.8 million, and Adjusted EBITDA of $2.0 billion.

• In 2025, growth accelerated further. Sea generated revenue of $22.9 billion, up 36.4%, net income of $1.6 billion, and Adjusted EBITDA of $3.4 billion. Shopee reached GMV of $127.4 billion, 13.9 billion orders, revenue of $16.6 billion, and Adjusted EBITDA of $880.6 million.

This created a new narrative. Sea was no longer the old hypergrowth cash-burn case with triple-digit or very high double-digit growth rates. It had become a platform with three functioning earnings engines. Shopee was growing strongly and becoming profitable. Monee was scaling as a fintech segment. And Garena was stabilizing, or even growing again.

The stock recovered significantly as a result, but remained far below its previous highs.

Phase 7: Late 2025 to today — the market wants proof of disciplined reinvestment

The latest share price movement shows that Sea still suffers from a trust problem. Whenever costs rise again or management invests more heavily, the market immediately remembers 2021 and 2022 and punishes the stock.

After the Q4 2025 results, the stock fell sharply because investors reacted negatively to higher operating expenses, rising marketing costs at Shopee, increased investment in Monee, and a slightly more cautious GMV growth outlook.

The 2026 outlook implies higher investment at Shopee, which once again scared investors:

Summary

The following chart summarizes the Adjusted EBITDA contributions across all segments. It captures the Sea story very well in a single image: Garena funded the group for a long time, Shopee burned massive amounts of capital, Monee was initially small, and since 2023/2024, all three segments have increasingly moved toward positive earnings contributions.

In the first phase through 2019, Sea was still a relatively small company. Garena was already generating positive Adjusted EBITDA, while Shopee deliberately reported losses to build the eCommerce flywheel. From 2020 onward, Garena then became an enormous cash flow engine. During the pandemic, the gaming business exploded, and those profits funded the aggressive investments in Shopee and later also Monee.

The critical point came in 2021/2022. Garena remained profitable, but normalized after the COVID boom, while Shopee’s losses became very large at the peak of its expansion. This was exactly when the central market question emerged: can Sea survive and become profitable if Garena can no longer cross-subsidize everything?

From Q4 2022, and especially in 2023, the management reset became visible. Shopee’s losses shrank dramatically and even turned positive for a while. At the same time, Monee increasingly became a real earnings contributor rather than just a fintech option. This changed the quality of the group: Sea was no longer dependent solely on Garena, but was developing multiple earnings sources.

Finally, in 2024 and 2025, the chart shows the new state of the business. Garena remains profitable, Shopee is much closer to sustainable profitability, or already positive depending on the period, and Monee is growing as an additional EBITDA lever.

9. Long-term potential and thoughts on valuation

The big question is simple: how much potential does Sea Ltd. still have, and what is the market currently pricing in?

Sea’s current market capitalization is around $51.9 billion. At the end of 2025, the company had $1.8 billion of financial debt, but also $4.2 billion of cash and $8.3 billion of investments. In other words, Sea had a net cash and investment position of roughly $10.7 billion, which brings the enterprise value to approximately $41.2 billion.

For 2026, I expect EBITDA of around $2.8 billion on a group level (taking into account HQ costs), implying an EV/EBITDA multiple of roughly 14.7x.

Let’s look at Sea through a simple sum-of-the-parts lens to see what the current valuation implies for Shopee.

• Garena: I value Garena at 5x Adjusted EBITDA. Here, I deliberately use Adjusted EBITDA rather than EBITDA, because Adjusted EBITDA better reflects the underlying cash generation of the gaming business. GAAP revenue is affected by revenue recognition, while Adjusted EBITDA is closer to the cash economics of bookings. Based on 2025 Adjusted EBITDA of $1.6 billion, this would imply a value of around $8 billion.

• Monee: I value Monee conservatively at the size of its outstanding loan book, or roughly $8 billion. This is approximately 8x 2025 EBITDA. Put simply, Monee could stop writing new loans today and would recover a large part of this amount in cash over the next twelve months.

• Shopee: The remaining value implied for Shopee would therefore be around $25 billion.

Shopee’s GMV is expected to grow by roughly 25% in 2026, while revenue should grow even faster as the take rate continues to increase.

The key question is therefore: what is Shopee worth once it reaches mature profitability?

To put this into context, let’s look at one of the most competitive eCommerce markets in the world: China. Four large players dominate the market:1

• Tmall is Alibaba’s flagship business-to-consumer platform, serving more than one billion buyers and over one million merchants. Launched in 2008 as Taobao Mall, it has grown into China’s largest B2C marketplace. In 2024, the number of new merchants joining Tmall increased by 83% year over year. Supported by powerful marketing tools, data analytics, and deep integration with Alibaba’s wider ecosystem, including Alipay and Cainiao logistics, Tmall’s estimated GMV reached almost $1.11 trillion in 2024.

• JD.com, founded in 1998 as a computer equipment vendor, has grown into one of China’s largest eCommerce platforms, with estimated GMV of $565 billion in 2024. JD is known for its supply-chain capabilities and self-operated model, which gives the company control over inventory, warehousing, and logistics. Its strategic partnership with Tencent, the Chinese technology company behind WeChat, has further expanded JD’s market reach across China.

• Douyin, developed by ByteDance, the company behind TikTok, has become a dominant force in China’s short-video and livestreaming ecosystem. Since introducing shopping features in 2018, Douyin has used its entertainment-driven platform to reach younger, mobile-first consumers. Its algorithm personalizes the shopping experience and blends content with commerce. In 2024, Douyin’s estimated GMV reached $477 billion.

• Pinduoduo (PDD), the owner of Temu, has become one of China’s fastest-growing eCommerce platforms since its launch in 2015. It built its success around group buying, social commerce, and a consumer-to-manufacturer model that allows consumers to influence production through real-time demand. Today, Pinduoduo is also China’s largest direct-to-consumer agriculture platform. In 2024, estimated GMV reached $723 billion.

Alibaba’s Taobao/Tmall ecosystem and PDD are roughly in the range of 2–2.5% EBITDA/GMV, depending on the exact earnings metric and GMV estimate used. JD is lower, but less comparable because of its heavier 1P and logistics model.

Even though Southeast Asia (and Brazil) are highly competitive markets, the underlying market is still growing. Southeast Asian eCommerce is expected to roughly double by 2030.

And as China shows, large eCommerce markets do not necessarily end with only one profitable winner. More than one scaled player can coexist profitably. This is especially relevant because MercadoLibre and TikTok Shop address different users and customer behaviors, which means they are not always competing head-to-head with Shopee in the same way.

Now assume that Shopee doubles its GMV again by 2030 versus 2025, reaching around $250 billion. Given the expected 25% GMV growth in 2026 alone, this does not seem like an overly aggressive assumption.

If Shopee still earned only 0.7% EBITDA/GMV, the 2025 level, EBITDA would reach roughly $1.8 billion by 2030. But if Shopee moved into management’s long-term target range of 2–3% EBITDA/GMV, EBITDA would land somewhere between $5 billion and $7.5 billion.

10. Why Sea might still be misunderstood today

Sea is harder to categorize than a classic quality company. It is earlier in its corporate life cycle, which means the range of possible outcomes is much wider.

The thesis ultimately depends on whether Shopee can defend its market leadership while continuing to improve monetization. If it can, Sea could offer a very rare combination: high structural growth, a leading platform position, multiple monetization levers, and a stock price that is still weighed down by the memory of the difficult years.

That does not automatically make Sea a safe investment. Quite the opposite. The risks are higher than for many classic compounders. Competition, customer behaviour, regulation, credit risk, currency movements, capital allocation, and technological change are all real. But the potential reward is also higher. If Sea truly becomes the leading platform compounder in Southeast Asia, today’s phase may one day look like the early re-rating of a more mature company.

And who knows, by 2030 or 2035, there may even be a fourth major segment. Big Tech companies have repeatedly reinvented themselves by making relatively small investments into new business models with potentially huge TAMs. Sea may or may not do the same, but the possibility of future optionality is part of what makes the company interesting.

11. Risks that should not be ignored

The biggest risk is competition. Shopee is the market leader, but the market is not static. TikTok Shop, Lazada, Temu, local players, and social commerce models could keep profitability under pressure for longer than expected. The most dangerous outcome would be a market where GMV continues to grow, but every platform is forced to buy a large part of that growth through subsidies.

The second risk is Monee. Credit businesses often scale impressively in good times, but the true quality only becomes visible over a full credit cycle. Strong growth rates only create value if underwriting, pricing, and risk management remain robust. NPLs, provisions, and the composition of the loan book should therefore be watched closely.

The third risk is capital allocation. Sea has shown that it can make large bets. In Shopee’s case, that was the right decision. But it could become a problem in the future if new markets, new product categories, or fintech expansion are pursued too aggressively. For Sea, capital discipline is therefore a central part of the thesis.

Fourth, Garena remains a cyclical and hit-driven profit pool. Free Fire has been an extraordinary success, but no game is immortal. Garena either has to preserve the value of its existing franchise or develop new content, without allowing the segment to lose too much relevance for group profitability.

Conclusion

Sea is not the typical “boring” Slow Compounding company I usually look for.

It is more complex, more volatile, and clearly riskier than many of the businesses I normally like to study. Competition is intense, the company operates across very different markets, Monee adds credit risk, and management’s capital allocation discipline will remain important. This is not a simple buy-and-forget compounder.

But that is also why the opportunity exists.

Sea still seems to be viewed through the scars of the past: the pandemic boom, the collapse in Garena, Shopee’s heavy losses, aggressive expansion, abrupt cost cuts, and then renewed reinvestment. Yet underneath that messy history, the company has changed meaningfully. Shopee is now much larger, more relevant, and increasingly monetized. Monee has become a real earnings contributor. Garena is no longer the whole story, but still provides a profitable pillar.

The long-term question is whether Shopee can defend its leading position while moving closer to mature profitability. If it can, the numbers become very interesting. Thinking out to 2030 or even 2035, Sea could still have many years of growth ahead, driven by rising eCommerce penetration, higher take rates, advertising, logistics density, digital payments, and consumer finance.

The valuation does not look demanding for that kind of upside. Based on a simple sum-of-the-parts view, the market does not seem to assign an ambitious value to Shopee. That does not eliminate the risks, but it makes the setup attractive: the downside appears more manageable than the stock’s volatility suggests, while the upside could be substantial if Sea continues to execute.

Never forget, that over the long-term, the stock price will reflect the underlying profitability (and its embedded expectations for future earnings growth).

Never forget: over the long term, the stock price will follow the underlying earnings power of the business — and the market’s expectations for how that earnings power can grow.

I still need to do more research to get deeper into the details, especially around competition, Shopee’s country-level economics, Monee’s loan book, and the sustainability of long-term margins. But the first impression is clear: Sea is too interesting to ignore.

Does Sea Ltd. deserve a full Deep Dive?

This article was only a Company Snapshot.

For many Substackers, this might already count as a Deep Dive. But for Slow Compounding, a real Deep Dive would mean going several layers deeper: country-level competition, Shopee’s unit economics, Monee’s loan book, credit quality, management’s capital allocation, and the long-term earnings power of the whole ecosystem.

Sea is not the typical “boring” compounder I usually write about. It is more complex, more competitive.

But that is also what makes it interesting, as the upside seems quite compelling.

A potential structure could like this:

• Part 1: Southeast Asia and Brazil - the markets behind the opportunity

• Part 2: Garena

• Part 3: Shopee

• Part 4: Monee

• Part 5: Management, capital allocation

• Part 6: The full investment story & valuation

So I would like to hear from you:

That, in one sentence, is the Röko case.

Röko was founded by the former Lifco CEO, one of the key architects behind a business that delivered extraordinary shareholder returns over a very long period. And those returns stood out not only within the Nordic serial acquirer universe, but even relative to Berkshire Hathaway.

That is what makes Röko so interesting. This is not just another Swedish serial acquirer with a decentralized structure and a long list of acquisitions. It is the second act of someone who already helped build one of the best compounding machines in Europe.

The market, of course, is not willing to simply assume that this will work again. Röko is still young, its listed history is short, and the stock has already lost much of the initial excitement that often surrounds a newly public serial acquirer. As so often happens, once the first wave of enthusiasm fades, attention fades with it.

But that is usually where things get interesting.

Because Röko is not trying to copy Lifco in a superficial way. In many ways, it looks like an attempt to build on the most important lesson Lifco taught Fredrik Karlsson: the real strength of the model was never being tied to one specific vertical. It was having the freedom to allocate capital across a much broader opportunity set. That is exactly why Röko appears to have been built as a pure sector-agnostic serial acquirer for from day one.

My view is that this is what makes the setup so compelling. Röko combines a proven playbook, a highly experienced founder, a decentralized model, aligned incentives, and a long runway for acquisitions. The ingredients of a very strong long-term compounder are clearly there.

That is why Röko’s story is so compelling.

In our Quality Growth framework, Röko checks several boxes:

• 🧠 A founder with a rare track record: Fredrik Karlsson already helped turn Lifco into one of Europe’s great compounders

• 🌍 A broader and more sector-agnostic acquisition model: built around the idea that the best opportunities are not confined to one niche

• 🏢 A decentralized structure with permanent-owner DNA: local managers keep responsibility, while HQ stays lean

• 🤝 Aligned incentives after acquisitions: sellers often remain invested, which matters in a people-driven model

• 💰 A capital allocation story first and foremost: the real value driver is disciplined reinvestment, not financial engineering

• 📈 A long runway: Röko is still early in its journey, with plenty of room to scale if quality remains high

• ⚖️ A more interesting setup after the derating: the stock no longer trades as if success were already guaranteed

This Company Snapshot is the quick guided tour. It explains what Röko is, why Fredrik Karlsson’s background matters so much, how the compounding machine is supposed to work, and why the company may be more interesting than its still-short public track record suggests.

And if that resonates, the full three-part Deep Dive (74 pages) picks up from here — moving from the story to the evidence: Lifco’s influence, the acquisition playbook, the economics of the model, the financial profile, the risks, and ultimately the long-term risk/reward.

👔 Company Name: Röko AB (“Röko”)

🔎 ISIN: SE0023950795

🔧 Business model: sector-agnostic serial acquirer

🌍 Geographic exposure: mainly Sweden, UK (sales in Europe)

📈 Stock Price: SEK 1,534

💰 Market Capitalization: SEK 22.4 billion (~$2.4 billion)

👨‍💼 Number of CEOs since foundation: 1

👨‍👩‍👦 Founder-/Owner-operator: Yes

📅 CEO tenure: Since 2019

🥇 Insider ownership: ~21.0% of shares

📊 10Y EPS CAGR: N/A

🔁 Reinvestment profile: High

💸 Capital intensity: Capital-light

🏰 Moat: Seller proposition, Simplicity, experienced management team around Fredrik Karlsson

🧨 Main risks: Execution, macro pressure, key-person risk

🌳 Slow Compounding fit: Yes – high-quality serial acquirer

Business Model in a Nutshell: Röko is a Sweden-based serial acquirer that has completed 33 platform acquisitions and in a variety of industries across Europe. The Company’s ambition is to be the perpetual owner of small and medium-sized businesses. Röko’s organization has more than 100 years of combined experience working with founder- and entrepreneur-led companies in a wide range of industries and the individuals in executive management positions have worked at the Company since its first year of operation (2019).

If you are new to the world of serial acquirers, please check out my fundamental piece before you continue with Röko:

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Refining the Lifco Playbook into a World-Class Compounder

Fredrik Karlsson already built one of Europe’s great compounders once. The natural question now is whether he can do it again.

That, in one sentence, is the Röko case.

Röko was founded by the former Lifco CEO – one of the key architects behind a business that delivered extraordinary shareholder returns over a very long period. And those returns were remarkable not only within the Nordic serial acquirer universe, but even relative to Berkshire Hathaway.

Most company descriptions start with the usual labels: Swedish serial acquirer, decentralized model, niche businesses, long-term owner. All of that is true, but none of it gets to the heart of why Röko is interesting. Investors should not be looking at Röko because it is just another Nordic acquisition vehicle. They should be looking at Röko because it is the second act of the man who helped turn Lifco into one of the most successful serial acquirers in Europe.

And that matters.

Because if Lifco’s exceptional compounding was not just unique to Lifco, but the result of a repeatable system of capital allocation, decentralization, and a disciplined acquisition engine, then Röko could become one of the most interesting younger compounders in Europe today.

A good place to start is with Lifco. Over the last two decades, Lifco has not merely been a successful acquirer. It has been the standout performer among the major Sweden-based serial acquirers. From 2001 to 2025, Lifco compounded EBITA at 22.5% annually, ahead of Addtech (including AddLife) at 16.7%, Lagercrantz at 13.9%, and Indutrade at 13.1%. That is an extraordinary gap over such a long period.

This is important because the Nordic serial acquirer space is already full of impressive businesses. Beating that group is not the result of financial engineering or a good year or two. It usually reflects something deeper: a better system for sourcing, judging, buying, and holding companies over time.

Lifco built exactly that kind of system. The model was simple, but powerful: acquire profitable niche businesses, keep the group highly decentralized, maintain a very lean headquarters, demand strong cash generation, and avoid the value destruction that often comes from over-integration. The subsidiaries kept their entrepreneurial culture, while the parent company provided capital allocation discipline and a permanent home. In other words, Lifco behaved less like a conventional industrial group and more like a compounding machine.

That machine did not emerge fully formed from day one.

Fredrik Karlsson did not inherit the Lifco investors know today. When he took over in 1998, Lifco was still a much narrower business and first needed restructuring rather than expansion. Karlsson initially focused on improving profitability, simplifying the group, and pushing responsibility down into the organization. After Carl Bennet took Lifco private in 2000, Karlsson sold large parts of the Health & Self-Care operations, refocused the company on dental distribution, and lifted margins from low single digits to high single digits through a decentralized model built on simplicity, local accountability, and a relentless focus on profit and cash flow. But once that turnaround work was done, he recognized that dental alone offered limited growth. The real inflection point came in 2006: with the merger of Lifco and Sorb Industri and a more deliberate push into acquisitions, Karlsson evolved from turnaround manager into capital allocator. That shift laid the foundation for modern Lifco: a diversified, decentralized serial acquirer that compounded EBITA at an exceptional rate for years.

By the time Fredrik Karlsson stepped down as Lifco CEO due to a compensation dispute with majority owner Carl Bennet, Fredrik Karlsson had delivered striking results. Over his full tenure beginning in 1998,

• revenue rose from roughly SEK 600 million to roughly SEK 12 billion in 2018, a CAGR of 16%,

• EBITA increased from roughly SEK 30 million to roughly SEK 2.2 billion, a CAGR of 24%,

The above chart helps illustrate that. Lifco’s current shape is very different from its earlier form. In the beginning, Dental was the dominant segment. Over time, however, the real engine of growth shifted toward a broader and more diversified structure, especially through Demolition & Tools and System Solutions. What makes this so interesting is not just the growth itself, but what it says about Karlsson’s underlying lesson from Lifco: the real source of value creation was never one narrow industry vertical. It was the model.

That distinction matters enormously for Röko.

Fredrik Karlsson’s time at Lifco seems to have taught him one especially important lesson: the biggest limitation in an acquisition model is often self-imposed. Lifco started out as a much narrower dental-focused business, but the strongest profit growth did not come from staying within that original vertical. It came from expanding beyond it. Between 2006 and 2025, Dental grew EBITA by roughly 13.0x, while Systems Solutions – Lifco’s more sector-agnostic segment – increased profits by about 32.9x, compounding at roughly 20.2% annually.

The core of Röko is not simply to replicate Lifco, but to build from day one around the lesson Lifco taught Karlsson: that the real power of the model lies not in being tied to one industry, but in having the freedom to allocate capital wherever the combination of quality, valuation, and management is most attractive. In that sense, Röko is the more deliberate, broader, and more sector-agnostic expression of the same underlying playbook.

And that is where the story shifts from Lifco to Röko.

After Fredrik Karlsson left Lifco in early 2019, he founded Röko 2019 together with Tomas Billing. So this is not an outsider trying to copy the Nordic serial acquirer playbook after admiring it from afar. This is one of the people who helped build the playbook trying to start again from scratch — arguably with a cleaner structure, a wider mandate, and the benefit of hindsight.

The ambition is straightforward: Röko wants to be the permanent home for small and medium-sized niche businesses with strong market positions, healthy margins, attractive cash generation, and capable management teams that want to remain in place. That last point is central. Röko is not offering an exit into a bureaucratic corporate machine. It is offering entrepreneurs continuity, autonomy, and long-term ownership. In that sense, it is much closer to the best serial acquirers than to private equity.

Since inception, Röko has already built a meaningful portfolio across a range of niche businesses. The company is sector-agnostic, but that does not mean it is indiscriminate. Röko is not buying “anything.” It is looking for specific economic characteristics: recurring or resilient demand, strong margins, low capital intensity, solid market positions, and management teams worth backing. The group’s financial targets also reflect that discipline, with a focus on annual earnings growth, EBITA margins above 15%, and leverage that remains manageable.

This is where the investment case gets interesting.

The easiest way to misread Röko is to see it as “Lifco 2.0” and stop there. The more accurate view is that Röko seems designed around the lessons learned from Lifco. It appears broader in scope, more explicitly sector-agnostic, and highly intentional in its organizational philosophy. Röko does not want to centrally optimize its subsidiaries into sameness. It wants to preserve what already works at the local level and simply provide the capital allocation framework, governance, and financial discipline needed to compound over time.

In other words, Röko is not trying to create value through integration. It is trying to create value through selection.

That is the key. In serial acquiring, the real edge rarely comes from heroic post-deal transformation. It usually comes from buying the right businesses, at the right price, with the right people, and then not ruining them afterward. Röko’s model appears built around exactly that principle.

There are a few features that make the setup especially appealing. First, Röko often keeps sellers and managers invested through minority stakes and staged ownership structures. That helps align incentives and reduces the risk of paying everything upfront before long-term performance is proven. Second, the company remains operationally decentralized, which should help preserve entrepreneurial energy inside the subsidiaries. Third, the headquarter is intentionally lean, which matters because bloated headquarters are often the silent killer of decentralized acquisition models.

Just as importantly, Röko does not seem to have pursued growth at any price so far. One of the biggest risks in young serial acquirers is that management becomes overly eager to prove momentum and starts compromising on acquisition quality. That can damage the model before it really scales. So far, however, Röko appears to have added businesses with solid profitability rather than diluting the overall portfolio. If that continues, it would be one of the strongest early indicators that the company is serious about protecting quality.

Of course, none of this means Röko is risk-free.

The company is still young. Its listed history is short. Its public track record is nowhere near as established as Lifco’s, and the model remains heavily tied to key individuals, especially Fredrik Karlsson, Tomas Billing, and Johan Bladh. A decentralized structure also requires an unusual degree of judgment: because the center stays lean, the initial filtering and underwriting of acquisitions matter even more. If the judgment slips, the model can look fine on the surface for quite a while before problems show up. On top of that, acquisition cadence is never perfectly smooth, and embedded obligations tied to minority buyouts are worth watching carefully over time.

Those are real risks. But they are also the kinds of risks one often has to accept when looking at an earlier-stage compounder rather than an already fully proven one.

That brings us to valuation.

The market’s initial enthusiasm has already cooled. Röko no longer trades like a newly listed premium compounder with endless optimism priced in. Instead, the stock now sits at the low end of its peer group on forward earnings. Röko trades around 22.4x forward earnings (2026), compared with roughly 25.9x for Indutrade, 28.8x for Lifco, 31.5x for Lagercrantz, and 35.2x for Addtech.

Röko is younger, less proven, and still needs to demonstrate that its acquisition engine can perform consistently through time and across market conditions. But that is also exactly what makes the current setup more compelling than it would have been at a much richer multiple.

At around the low 20s on forward earnings, the investment case does not require an aggressive rerating to work. If Röko can execute well and continue compounding earnings at a high rate (~15% p.a.), most of the return can come from the business itself rather than from multiple expansion. A rerating toward more mature Nordic peers would be helpful, but it should not be the core of the thesis. The real thesis is simpler: if Röko can reinvest a large share of its cash flows at high incremental returns for a long time, shareholder value should follow.

And that takes us back to the original question.

Was Lifco’s success mainly about Lifco itself? Or was it, to a meaningful degree, about Fredrik Karlsson’s system?

Röko is the live experiment. It is the attempt to prove that the key ingredients behind one of Europe’s great serial acquirers can be rebuilt in a new structure, with a broader opportunity set and the benefit of everything learned the first time around. That does not guarantee success. But it does make Röko far more interesting than the average newly listed acquisition platform.

My view is that Röko already deserves a place on the watchlist of anyone serious about high-quality serial acquirers. It is not yet as proven as Lifco, Indutrade, Addtech, or Lagercrantz. But that is precisely the appeal. Investors are not looking at a finished masterpiece. They are looking at an earlier-stage compounding story that is still being built in public – by someone who has already shown he knows what a great one looks like.

Stay tuned for Part 1 of the upcoming deep-dive!

The last two years weren’t pretty for Teqnion. Execution got harder, the numbers got choppy, and it became easy to write the story off. With cracked fundamentals and a declining stock price, also attention from investors faded.

But a lot has been shifting under the surface: a new structure, new governance and a much higher bar in terms of acquisitions.

My bet is that once Teqnion shows sustainable revenue and EPS growth again, investor interest will return and the stock price will likely reflect that shift as well.

Teqnion’s current phase resembles Lagercrantz roughly fifteen years ago. Lagercrantz, one of Teqnion’s role models, has been through something similar. After a couple of tough cycles, progress looked slow for years and profitability stayed muted. The turnaround didn’t come as a sudden leap—it came gradually, as the business mix improved and the organization got sharper. Results changed cohort by cohort, almost quietly, until the margin profile looked like a different company. Over the years, EBITA margin increased from 5% to 17%.

Lagercrantz’ stock is up 33x since then. Teqnion is in a similar position today.

That’s why Teqnion’s “story” is so compelling.

In our Quality Growth framework, Teqnion checks several boxes:

• 🧩 A decentralized portfolio of niche operators with sustainable cash flows

• 🔧 A reset of the M&A playbook toward higher-quality, higher-margin targets

• 💰 Capital allocation discipline with a clear and reshaped focus on cash returns

• 🧑‍💼 Incentives that matter—alignment at both HQ and subsidiary level

• 📈 A long runway if the group can keep upgrading quality while scaling responsibly

• 🧱 Balance sheet pragmatism—built to keep doing deals through cycles, not just in good years

This Company Snapshot is your quick guided tour: what Teqnion actually is, how the compounding machine is supposed to work, where it broke under scale, and why the recent steps look promising (while the stock has not reflected any of the improvements in my opinion).

If that resonates, the upcoming three-part Deep Dive (77 pages) picks up from here—moving from the story to the evidence: the upgraded playbook, cohort math, margin mix, deal economics, and ultimately the full risk/reward and valuation.

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👔 Company Name: Teqnion AB (“Teqnion”)

🔎 ISIN: SE0012308088

🔧 Business model: niche industrial serial acquirer

🌍 Geographic exposure: Sweden, UK (sales in Europe)

📈 Stock Price: SEK 169

💰 Market Capitalization: SEK 2.9 billion (~$321 million)

👨‍💼 Number of CEOs since foundation: 2

👨‍👩‍👦 Founder-/Owner-operator: Yes

📅 CEO tenure: Since 2009

🥇 Insider ownership: 5.0% of shares

📊 10Y EPS CAGR: ~23%

🔁 Reinvestment profile: High

💸 Capital intensity: Capital-light

🏰 Moat: M&A edge due to size, type of acquisition targets and deal-making approach

🧨 Main risks: Execution, quality drift, M&A engine, key-person risk

🌳 Slow Compounding fit: Yes – high-quality serial acquirer

Business Model in a Nutshell: Teqnion is a small Swedish sector-agnostic serial acquirer that describes itself as a builder of a conglomerate of industrial companies. The company is run as a decentralized group of subsidiaries, with a strong emphasis on culture, cash generation, and M&A.

If you are new to the world of serial acquirers, please check out my fundamental piece before you continue with Teqnion:

The “new Teqnion”: Gaining Momentum

As a small Swedish serial acquirer, Teqnion’s fundamental improvements are outpacing the rate at which the market is re-rating its valuation.

The management team has spent the last few months reshaping its internal processes and refining its acquisition strategy. This marks the beginning of a new multi-year era characterized by enhanced portfolio quality and greater resilience. As these improvements translate into expanding EBITA margins, the company is well-positioned for a significant re-rating of its valuation multiple, however, the key driver of shareholder returns is earnings growth.

Teqnion buys niche industrial businesses in Sweden and the UK, across a wide range of technical niches. The model has already proven it can compound at a high rate. Since inception, revenue has grown at ~26% p.a. and EBT at ~35% p.a. over roughly 15 years.

Teqnion appears to be going through a phase that resembles Lagercrantz (the smallest of the successful “Big 4” serial acquirers from Sweden) roughly fifteen years ago. After the dotcom bust and the GFC, Lagercrantz experienced a long period where profit growth was sluggish despite acquisitions, and its margin profile was modest (EBITA around ~5%). Over time, Lagercrantz steadily acquired higher-margin businesses, increased the share of more proprietary products with structurally higher gross margins, and improved its “operating system”. Lagercrantz didn’t jump from ~5% EBITA to >17% overnight; it got there slowly, cohort by cohort, as higher-quality businesses accumulated.

History rhymes: over the past two years, Teqnion went through a rough period, tightened its “operating system”, i.e. its governance and organizational system, and sharpened its capital allocation toward higher-quality companies without giving up on valuation discipline. Management aims to earn back its investment within five years on a free cash flow basis. Teqnion is now at a similar revenue scale to where Lagercrantz was about 15 years ago, has clearly laid out the shift toward higher-quality acquisitions, and is deliberately building the governance infrastructure required to scale a decentralized model.

Over the past two years, the company has been pushed into a “reset” of both its acquisition playbook and its internal operating system: raising the bar on deal quality, tightening governance, and rebuilding the portfolio follow-up discipline that a decentralized model needs once it reaches meaningful scale. The leading indicators are pointing in the right direction: higher-quality acquisitions, improving portfolio control and early signs that the struggling bucket is shrinking, underpinned by a jump in gross margin and EBITA margin and improved cash flow during 2025. I expect this positive development to turn into a trend of sustainable shareholder value creation over many years. The market’s current valuation does not reflect these pivotal changes at all (see below).

There are near-term catalysts that could move the stock, mainly the as profitability steps up over the next few quarters. The real upside, though, is multi-year: Teqnion may be entering a new era: acquiring more profitable businesses that are structurally more resilient and likely to grow faster organically than the legacy portfolio while maintaining valuation discipline and letting the consolidated margin gradually move higher. This kind of change rarely shows up from one quarter to the next. It tends to play out step by step, cohort by cohort, year after year (as will be demonstrated mathematically). But with serial acquirers, those small improvements in acquisition quality and portfolio governance can compound into a very different earnings profile over time, especially when the stock is still priced with a healthy dose of skepticism.

The first hard evidence is the 2025 acquisition cohort. Teqnion completed nine acquisitions in 2025, and the profitability of what it bought is striking: roughly ~24% EBITA margin versus a historical group margin closer to ~10%. It reflects a deliberate shift in what Teqnion is buying: fewer “fixing-heavy” categories, more focus on niche leadership, pricing power, and cash conversion, and a move away from structurally margin-capped business models like typical contract manufacturing or highly cyclical areas such as housing-related businesses. Overall, the 2025 cohort looks like the kind of mix that can lift group profitability over time, as long as underperformers don’t continue to offset the progress.

What surprised me most is that the better mix didn’t come at the expense of valuation discipline. Based on the pro forma earnings of the acquired subsidiaries, my estimate implies a cash-free purchase multiple of roughly ~4.2x EBITA (earn-outs included) and an immediate cash outflow multiple of about ~2.5x (earn-outs excluded). For businesses earning EBITA margins in the 20s, those are extremely attractive numbers.

These changes are now starting to show up in the numbers. Q3 2025 EBITA was up ~63% year over year. That’s an important signal, especially since 2024 was the year when the “process maturity gap” became painfully visible in reported numbers. Management ties the improvements to operational changes made during the year and highlights that the biggest impact has come from improving the Swedish businesses, while the UK operations have continued to progress steadily and the acquired companies were of higher quality. That’s a strong signal in the early stages of a serial acquirer’s “repair cycle”: the struggling bucket stops deteriorating, the portfolio stabilizes, and new cohorts come in with structurally higher profitability.

Despite the improving trajectory, the market is still pricing Teqnion as if it will remain stuck. At roughly ~13.6x P/E (excluding any assumed acquisitions for 2026), the valuation suggests investors have limited confidence in durable margin expansion and in the repeatability of the upgraded acquisition playbook. By contrast, larger Swedish peers such as Lifco, Indutrade, Addtech, and Lagercrantz currently trade in the ~25–35x range.

The valuation gap is so wide that it creates meaningful optionality. If Teqnion keeps improving acquisition quality and the upgraded operating system reduces portfolio volatility, a rerating tailwind becomes plausible, even without heroic growth assumptions. A doubling of the multiple over ten years adds about 7% p.a. to returns; over five years, it adds about 15% p.a., excluding any underlying earnings growth.

Teqnion is still very small relative to its “role models.” By revenue, it is only about ~17% of Lagercrantz and ~8% of Addtech and ~6% of Lifco. That small base matters in two ways. First, Teqnion is still earlier in its compounding journey, with a long runway if it continues to raise the quality of what it buys. Second, it has historically been more exposed to “small portfolio math”: just a handful of underperforming subsidiaries can meaningfully drag down consolidated margins (as seen during 2024).

To explain why Teqnion appears to be at an inflection point, this Deep Dive breaks the company’s evolution into four phases.

Phase 1 (2006–2009) was the capital-constrained founder era. Teqnion started without external capital and could only fund acquisitions with internally generated cash. That constraint shaped the early portfolio: cheaper businesses, often with more operational issues. As a result, the founders had to be deeply hands-on: stepping in as interim CEO, pushing sales, improving efficiency, and turning businesses around. The model worked—until it didn’t. The 2008 crisis exposed how fragile the setup was. High leverage, limited cash buffers, and aggressive reinvestment left the group vulnerable when the cycle turned. Teqnion recorded its first and only loss in that period, and one early subsidiary (UpTech Norden AB) went bankrupt in September 2009.

Phase 2 (2009–2018) was the rebuild and slow compounding phase. Teqnion was essentially restarted at a smaller scale, with Johan Steene staying on as CEO and focusing on rebuilding credibility and stability. Deal flow was constrained by limited capital and by the simple fact that most sellers want cash, which meant Teqnion often had to buy lower-quality companies that it could actually afford. As a result, Johan was frequently pulled too deep into day-to-day operations. For years, the group ran with an extremely lean HQ. That made the model operationally restricted, but it also helped shape the culture: pragmatism, cash flows, and long-term ownership. Importantly, this period also set up the next phase. By around 2017, Johan recognized that a listing and access to external capital could accelerate the acquisition pace and move Teqnion into a new scale regime.

Phase 3 (2019–2024) was the post-IPO acceleration and the period where scaling complexity started to outpace process maturity. The pre-IPO private placement and the IPO brought in meaningful capital and allowed Teqnion to move from one acquisition every year or two to multiple acquisitions per year, which accelerated growth materially. Over time, the M&A capability became more professional and the quality mix improved, including higher-margin and lower-sensitivity acquisitions (notably in the UK).

But this is also where the process maturity gap quietly opened. The portfolio grew into a more complex organism. More subsidiaries, more geographies, more variance in business quality, while the operating system (measurement, trend detection, escalation, and standardized follow-up) did not mature fast enough.

In a decentralized model, the holding company’s job is not to run subsidiaries day-to-day. Yet in 2024, management effectively acknowledged that only about two-thirds of subsidiaries performed as desired. That’s far from a steady-state ambition where perhaps 90% are fine and only 10% need special attention. The problems had accumulated over years, but a benign macro environment and maybe a bit of luck kept them from becoming visible. When interest rates rose and conditions tightened, it was like the tide going out: weaknesses that had been masked by good times became obvious.

Phase 4 (2025–?) is the current era: closing the process maturity gap. The agenda is explicit and has two parts.

• First, Teqnion is tightening governance and follow-up: standardized KPI sheets, a clearer reporting cadence, concrete action plans, faster escalation, more accountability, and a willingness to replace subsidiary CEOs if performance doesn’t improve. In that sense, Teqnion is “more hands-on” again, but in a different way than in Phase 1. It’s not about personally running subsidiaries. It’s about being hands-on in measurement, intervention, and organizational discipline.

• Second, Teqnion is upgrading its acquisition strategy: fewer startups and “turnaround” cases, higher-quality and higher-margin targets, lower macro sensitivity, and more businesses with proprietary products or defensible niche positions. In fact, this shift started a bit earlier, but 2025 is when it was being implemented at full speed and scale.

The combination of fixing the operating system while continuing to acquire at a higher pace and with better quality is what makes this moment feel different. Many serial acquirers either pause M&A to repair the portfolio (and lose compounding momentum), or they keep doing deals while problems build in the background (and eventually it blows up). Teqnion is trying to combine both: tighten the governance, reduce the negative tail, and keep compounding. The outcome is unlikely to be a sudden sustainable margin jump. More realistically, you get a slow but persistent uplift in group profitability as higher-margin cohorts build weight and the struggling bucket stops offsetting the progress.

The shareholder and management setup supports the long-term thesis. Teqnion is founder-led, with meaningful insider ownership and a relatively concentrated shareholder base that includes long-term oriented investors (the largest shareholder is the family office of Spotify founder Daniel Ek).

Serial acquirers need discipline through cycles. The models tend to fail when incentives and time horizons push management toward short-term behavior. Teqnion’s governance and ownership structure increases the odds that management can make the boring but correct decisions: walk away from bad deals, build a resilient “operating system”, intervene earlier, and accept some temporary friction to build a more durable compounding machine.

Putting it all together, the key conclusion is not that every issue has been solved. It’s that the direction of travel is now consistent across the system. Growth is once again driven by M&A, but the signals suggest the acquired cohort is of materially higher quality. Earnings power is stabilizing and improving compared with 2024. Gross margin improvements throughout 2025 support the thesis that the portfolio is gradually becoming structurally better. And while leverage has increased, the path to de-risking is clear: fix the negative tail and let higher-margin acquisitions flow through the P&L.

For an investor, the attractive part is the asymmetry. Teqnion is a small platform that has already proven ~26% p.a. revenue growth and ~35% p.a. earnings growth since inception, and it may now be entering a multi-year quality upgrade, while still trading at a multiple that implies limited confidence in that upgrade. If the “new Teqnion” becomes visible in the consolidated numbers over the next few years, any rerating would simply be the natural by-product of a better business becoming obvious, not the thesis itself. Add attractive earnings growth on top, and you could end up with very solid returns going forward.

“Momentum is back” (Johan Steene, CEO, 2025 Q3 report)

Stay tuned for Part 1 of the upcoming deep-dive!

Kinsale is one of those businesses.

It doesn’t sell code or subscriptions. It underwrites weird, non-standard risks that other insurers don’t want on their books – and still manages to post underwriting margins most peers can only dream of. It’s founder-led, focused on a single niche, and has been executing the same playbook with discipline for more than a decade.

In our Quality Growth framework, Kinsale checks a lot of boxes:

• 🏗 A focused, specialist business in a deregulated niche (E&S) with real pricing power.

• 📈 A long runway for profitable growth, driven by market share gains and E&S migration.

• 💸 Strong, repeatable unit economics with sub-80% combined ratios and attractive float.

• 🧑‍💼 An owner-operator management team with skin in the game and a conservative culture.

• 🧱 A robust balance sheet and conservative reserving, built to survive bad years, not just good ones.

This Company Snapshot is your quick guided tour: what Kinsale actually does, why its economics are different from a typical insurer, and which risks you should care about before you size the position.

If that resonates, the upcoming five-part Deep Dive will take you from this overview into the details of regulation, reinsurance, reserves, and loss triangles—the parts most investors never read, but where the real edge lives.

👔 Company Name: Kinsale Capital Group (“Kinsale”)

🔎 ISIN: US49714P1084

🔧 Business model: Specialty insurer (Excess & Surplus lines)

🌍 Geographic exposure: United States

📈 Stock Price: $393

💰 Market Capitalization: $9.1 billion

👨‍💼 Number of CEOs since foundation: 1

👨‍👩‍👦 Founder-/Owner-operator: Yes

📅 CEO tenure: Since 2009

🥇 Insider ownership: 5.5% of shares

📊 10Y EPS CAGR: ~41%

🔁 Reinvestment profile: High (float-funded growth)

💸 Capital intensity: Capital-light

🏰 Moat: Specialization, Focus, Technology & Cost Advantage

🧨 Main risks: Cyclicality, Broker concentration, Investment risk, Reserve adequacy, Regulatory risk

🌳 Slow Compounding fit: Yes – high-quality underwriting, long growth runway

Business Model in a Nutshell: Kinsale is a U.S. specialty insurer focused 100% on commercial Excess & Surplus Lines, insuring hard-to-place risks that standard carriers decline. The company runs a high-volume, low-hit-rate underwriting model, supported by a proprietary tech platform that lets underwriters quote small and mid-sized accounts quickly and selectively. Economics are driven by disciplined underwriting (combined ratio mid-70s) and float-funded investment income.

Is Kinsale the best insurance business in the world?

An insurance company can be a wonderful business.

An insurance company sells a “Collect Now. Pay later” type of product. This generates the so-called “float”, which the insurance company can use to generate investment income.

An insurance company sells coverage for risks. Customers pay a premium today. The insurance company collects the premiums, while they don’t have to pay a claim right away. The time gap between collecting the policy premium and paying out claims can be significant, especially in certain types of insurances.

During this time gap, the insurance company has a large pool of money—the “float”—sitting in its bank account. The company doesn’t own this money (it’s a liability on their books because they might have to pay it back), but they get to invest it in stocks, bonds, and other assets.

That’s why an insurance company has a double-profit-engine.

• Profit from underwriting: That’s the income from the underlying insurance business.

• Profit from the Investments: The money earned from these investments is a major source of profit for the insurance company.

Think of “float” as an interest-free loan from policyholders that the insurer uses to make more money. As investor Warren Buffett famously explained, this allows an insurer to use “free money” for its own benefit.

Kinsale looks like the kind of stock most investors scroll past: a mid-size U.S. insurer, writing commercial policies in something called the “Excess & Surplus Lines” market. On the surface that sounds like the dusty back room of the insurance world. In reality, Kinsale sits in one of the most attractive corners of U.S. P&C – and has quietly turned it into a compounding machine. Since the IPO in 2016, the share price is up more than 20-fold, powered not by financial engineering but by old-fashioned underwriting profits and disciplined growth.

The niche Kinsale serves is simple to describe: it insures risks that the standard market does not want. Kinsale insures “hard-to-place”-risks, as these insurance coverages are anything but standardized products.

When a retail broker has tried the usual admitted carriers and gets only declines, the file often lands on the desk of an E&S wholesale broker – and from there on Kinsale’s screen. The company wants to see as many of these “hard-to-place” risks as possible, then cherry-pick the ones where the odds are clearly in its favour. It operates exclusively in U.S. commercial lines, with an average policy size of around $15,000, across a broad range of property and casualty classes – from construction liability and small business casualty to catastrophe-exposed property and various niche segments.

Economically, Kinsale’s engine is built on volume, selectivity and cost discipline. Each year the company receives close to 900,000 submissions but binds only a small single-digit percentage of them. That low hit rate is a feature, not a bug: it reflects a model where underwriters are encouraged to focus on the most attractive opportunities. At the same time, retention on existing policies is healthy and average premiums have been rising. The result has been a decade of 20–30%+ premium growth, far ahead of the broader industry.

What makes this more than “just” growth is the quality of the underwriting. In an industry that, on average, barely breaks even on underwriting over a cycle, Kinsale has consistently posted combined ratios in the mid-70s, with an expense ratio in the low 20s.

The combined ratio is a crucial metric in the insurance industry:

In simple terms, these ratios are just ways for an insurance company to measure if it’s making money or losing money on the policies it sells:

• The loss ratio is the “claims” ratio. It answers the question: “For every dollar we collected in premiums, how much did we have to pay out in claims and the paperwork to handle those claims?”

• The expense ratio is the “running the business” ratio. It answers the question: “For every dollar we collected in premiums, how much did we spend on salaries, marketing, office space, and other overhead costs?”

If the combined ratio is below 100 percent, the insurer is generating an underwriting profit from its core business. However, if the ratio exceeds the 100 percent mark, it signifies that the insurance operations are running at a loss, which must be offset by returns from investments.

This key figure thus provides a quick overview of the profitability and financial health of an insurance company.

And guess what:

Kinsale is the most profitable insurance company that I have ever seen in my investment career. Over the last 3 years, Kinsale posted an average combined ratio of ~77%, while the average for the E&S competitors is closer to ~92 %. That’s a huuuuuge difference. (It represents an EBIT-margin of ~23% for Kinsale vs. ~8 % for the competition. Kinsale makes a 3x higher EBIT contribution from every dollar earned in premiums.)

That isn’t a small efficiency tweak, it is a structural gap – driven by a focused portfolio, tight control of underwriting and claims, and a proprietary technology platform that automates the routine work and lets underwriters concentrate on risk selection. The company writes business across all 50 states, uses reinsurance intelligently to shape its risk profile, and converts a large portion of accounting earnings into cash.

Behind the machine is a founder-led management team with real skin in the game: Kinsale has had one CEO since 2009, insider ownership is meaningful, and capital allocation has been refreshingly straightforward – reinvest into the core underwriting engine as long as attractive opportunities are available, keep leverage conservative, and avoid empire building. The business is capital-light, benefits from float, and has grown EPS at ~40% per year over the last decade.

The best is yet to come: Despite its phenomenal success over the last one and a half decades, Kinsale today has a market share of ~1.6 %. The growth runway is huge.

Currently, management views the stock as too cheap, as they announced a $250 million share-buyback program and reiterated the quality of the underlying business model.

This is not a risk-free story (no investment is risk-free): insurance is cyclical, Kinsale is exposed to catastrophe losses and to a concentrated broker base, and the regulatory framework for E&S and reinsurance matters a lot. Valuation also reflects much of the company’s success. But if Kinsale can preserve its underwriting edge and continue to take share in a still-fragmented E&S market, it has the ingredients of a long-term compounder: a focused niche, structural cost and speed advantages, a long runway for reinvestment and owner-operator governance.

The following Deep Dive will unpack each piece of that puzzle – from the plumbing of E&S and reinsurance to Kinsale’s loss triangles, technology stack and runway for growth.

It will be structured in five Parts plus one additional fundamental piece:

• Part 1: Insurance 101 and E&S playground

• Part 2: Regulation: Why E&S looks the way it does

• Part 3: Kinsale’s Business Model

• Part 4: The Kinsale machines: Understanding the Financials

• Part 5: Compounder?

• “The Fundamentals”: Reinsurance 101

This Company Snapshot is the 10,000-foot view. In the Deep Dives, we’ll zoom in on three layers:

1. The basics of the U.S. E&S market and surplus-lines regulation that makes Kinsale’s niche possible;

2. The inner workings of its underwriting machine – from submission funnel and pricing discipline to claims handling, technology stack and reinsurance program;

3. The hard numbers behind the story, including combined ratio drivers, reserve development, capital allocation and valuation.

Along the way we’ll dig into material you’ll rarely see discussed elsewhere: Kinsale’s statutory loss triangles and what they reveal about reserve quality, how reinsurance flows through the P&L and impacts the balance sheet, and much more.

Very few actually build a portfolio that forces them to think in decades.

In this article, I’m opening up my own portfolio – 20 businesses I’m comfortable owning for a very long time. From Nordic serial acquirers like Lifco, Teqnion and Röko to compounders like Novo Nordisk, Copart and Topicus, this is the real-world expression of my investment philosophy: slow compounding, high returns on capital, and management teams that know how to allocate cash.

I’m sharing it because I believe the best way to understand an investor is to look at where their own money lives. This portfolio is my checklist in action:

High ROIIC, reinvestment runways, sensible leverage, and a culture that cares about creating long-term shareholder value rather than pleasing the next quarter.

Think of this article as a trailer for what’s coming next on this Substack.

Every single company you see below will get its own:

• Company Snapshot – a concise, reader-friendly overview of the business model, economics and key metrics.

• Deep-Dive – a more detailed breakdown of the thesis, capital allocation, risks, valuation and how it fits into my “Slow Compounding” and 3-Engines framework.

If you’re curious about why Kinsale dominates a niche part of insurance, how InPost’s parcel lockers can scale, or what makes Lifco’s acquisition machine so powerful, those answers are coming – company by company.

This is the roadmap for the next months of content: I’ll go down the list, explain the logic behind each position, and update you when the facts or valuations change. If you want to follow that journey in real time – and discover the companies that might be worth holding for years, not weeks – now is the perfect moment to subscribe.

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Before we zoom into individual companies, it’s worth taking a step back and looking at the portfolio as a whole.

The Portfolio at 10,000 Feet

(1) Position sizing & concentration:

The first chart shows the weight of each position. Position sizes are deliberately kept in a relatively tight band: the largest holdings – AQ Group, Mader Group, Novo Nordisk, Kinsalte and Medpace – currently sit around 6–7%, most others cluster between 3–5%.

This reflects the way I think about risk: I want every position to be large enough to matter, but I don’t want any single stock to be able to derail the portfolio on its own.

(2) YTD performance - price is noisy

The second chart shows year-to-date stock performance. It’s a good picture of how noisy markets can be in the short term.

TerraVest, Mader and Medpace have had a very strong year so far, while several other holdings – from Novo Nordisk and Copart to Judges Scientific and InPost – are meaningfully down. The underlying businesses did not change that dramatically ytd; sentiment and multiples did. Note that I didn’t own Novo Nordisk and Judges Scientific at the beginning of the year and I only have built the position during summer.

(3) Drawdowns

The third chart shows drawdowns from the respective share price highs. Many holdings are sitting 30–60% below previous peaks; a few have even seen drawdowns of ~70%.

For me, this is the real‐world “cost of admission” for long-term equity returns. If you want to participate in multi-year compounding, you have to accept that even great businesses will periodically look terrible on a price chart.

Of course, it’s painful to see others making a lot of money with Nvidia, Palantir and other AI-related companies right now. The S&P 500 is up more than 17 % YTD. It doesn’t show up in the performance of my holdings this year.

It literally feels like this:

(4) Earnings power - EBIT(A) growing at a blended ~13.7 % this year (taking into account current portfolio weight)

The fourth chart shows EBITA growth over the last twelve months. Here, the picture looks very different from the price action.

Most companies in the portfolio are growing EBITA at healthy single- to double-digit rates, with stand-outs like Medpace, TerraVest, Dino and Topicus posting very strong numbers. A few names are temporarily flat or down – that’s part of the game – but at the portfolio level, earnings are moving up for the portfolio, not down.

This gap between fundamentals (EBITA growth) and market perception (drawdowns) is where I see opportunity. Over time, I expect returns to track earnings power far more closely than they track quarterly mood swings. Aside from Brown & Brown and TerraVest Industries, all growth came without any dilution!

(5) Geographic mix - a Nordic & North American tilt

The fifth chart breaks the portfolio down by country of listing. Roughly:

• ~a third of the portfolio is in Sweden,

• ~a quarter in the US,

• with additional exposure to Canada, Germany, Denmark and Poland,

• plus smaller positions in Australia, the Netherlands and the UK.

This is not a top-down macro call. It’s simply where I currently find the kind of businesses I’m looking for: capital-light compounders, often founder-influenced, with long reinvestment runways.

(6) Geographic mix - a Nordic & North American tilt

The final chart shows the portfolio split by business model:

• roughly half in serial acquirers – decentralised groups like Lifco, Röko, Addtech, Teqnion, Judges, Momentum, TerraVest and Topicus,

• roughly half in other compounders – insurance specialists, healthcare and pharma, logistics and software,

• plus a small cash buffer.

Serial acquirers are attractive to me because they can reinvest large amounts of cash into small, repeatable deals at high incremental returns (soon a separate post about this will follow). The other compounders often have different engines – pricing power, volume growth, operating leverage, buybacks – but the goal is the same: turn today’s cash flows into a much larger stream of cash flows tomorrow.

Taken together, these charts show what I’m trying to build: not a portfolio that looks good every quarter, but a collection of businesses that can quietly compound value over many years – even if the share prices take a very noisy path to get there.

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The Holdings - 1-Minute Business & Investment Case

AQ Group AB

Business in one sentence
AQ Group manufactures components and systems such as electrical cabinets, inductive components, wiring systems and sheet metal parts for demanding industrial customers around the world.

Why I own it

• Deep integration into customers’ products and processes – switching costs can be meaningful.

• Exposure to long-term trends like electrification, automation and industrial outsourcing.

• Decentralized, engineering-driven culture with a long track record of profitable growth.

• Very well managed serial acquirer flying under the radar of many investors despite their long-term success and high cash-generation.

Mader Group

Business in one sentence
Mader Group is an Australian technical services provider that maintains heavy mobile and fixed equipment for customers in mining, energy, transport and other industrial sectors worldwide.

Why I own it

• Asset-light service model: selling skilled labour and uptime, not building big factories.

• Mission-critical: broken equipment costs clients far more than Mader’s service fees.

• Attractive economics when utilization is high and the installed base of heavy equipment keeps growing.

• They have a >50 % market share in Australia with ~12% EBITDA margin, still growing >15% currently. They entered Canada & U.S. a few years ago. This market is several times bigger than Australia, and penetration is much lower, while EBITDA-margin comes in at ~20% in North America.

• Founder-influenced culture, with the founder Luke Mader owning ~51 % and Non-Executive Board member Craig Burton owning ~18 %.

Novo Nordisk

Business in one sentence
Novo Nordisk is a global leader in diabetes and obesity treatments, driven by its GLP-1 drug franchise (e.g. Ozempic, Wegovy) and a broader cardiometabolic pipeline.

Why I own it

• Enormous secular tailwind: rising global rates of obesity and diabetes.

• Strong R&D engine and manufacturing scale in biologics, difficult for new entrants to replicate.

• Optionality from expanding the GLP-1 platform into cardiovascular and other indications.

• Risks (competition, pricing, political pressure) are real, but the economic engine is very powerful.

• The global market is huge. Despite losing market share to Eli Lilly lately, there should be enough growth for both current duopolists.

Kinsale Capital Group

Business in one sentence
Kinsale is a U.S. specialty insurer focused exclusively on the excess & surplus (E&S) lines market, insuring risks that standard insurers often avoid.

Why I own it

• Underwrites non-standard risks where pricing is more rational and less commoditized.

• Strong underwriting culture with a long history of extremely attractive combined ratios.

• Asset-light business model: most capital sits in the investment portfolio, not in fixed assets.

• Long growth runway as Kinsale’s market share is still tiny, while they are taking ~0.2% in market share every year

Medpace Holdings

Business in one sentence
Medpace is a global contract research organization (CRO) that runs clinical trials for biotech, pharma and medical device companies from Phase I through Phase IV.

Why I own it

• “Picks and shovels” to the biotech and pharma R&D cycle, without betting on individual drugs.

• Focused, mid-sized player – more nimble and aligned than some of the mega-CROs.

• Asset-light, people-and-process business with high margins and strong cash generation.

• Owner operator, as the founder is still involved as CEO.

• Long runway as more development work is outsourced and trial complexity increases.

TerraVest Industries

Business in one sentence
TerraVest is a Canadian serial-acquirer industrial group focused on manufacturing niche equipment like propane and NGL transport and storage vessels, home heating products and energy-processing equipment.

Why I own it

• Strong positioning in small but critical segments of energy and infrastructure.

• Cash-generative, often family-owned businesses rolled into a disciplined capital allocation framework.

• Management with a track record of value-accretive M&A and operational improvement.

• Exposure to replacement demand and safety/regulatory spend, which tends to be less cyclical.

Teqnion AB

Business in one sentence
Teqnion is a Swedish industrial group and serial acquirer that buys and operates small niche technology and industrial companies, run in a decentralized way.

Why I own it

• Typical Nordic serial acquirer playbook: small deals, disciplined pricing, decentralized governance.

• Portfolio of niche businesses with sticky customer relationships and specialized know-how.

• Focus on profitability and cash generation rather than chasing revenue at any price.

• Long runway: the universe of small industrials in Scandinavia and beyond is huge.

• Despite some operational headwinds over the last 24 months, they have refoucsed their M&A activity on higher-quality companies (many in UK lately), with the first impact showing off in Q3/2025. In my opinion, the market does not yet recognize the tremendous improvement in ROIIC profile going forward.

Medios AG

Business in one sentence
Medios is building a leading European Specialty Pharma platform, focusing on the supply and compounding of medicines for complex, chronic and rare diseases.

Why I own it

• Positioned in a structurally growing niche: specialty drugs and personalized medicine.

• Integrated model across wholesale, compounding and related services creates network effects with pharmacies and clinics.

• Regulatory know-how and quality systems are a real competitive moat in this space.

• Scalable platform economics if management continues to execute M&A and integration sensibly.

• The company is transitioning into higher margin-businesses and better cash conversion.

• The Market Capitalization sits at €350 million and the Enterprise Value (EV) comes in at ~€455 million. Over the last 4 quarters, Medios has generated ~€63 million in Free-Cashflow.

Evolution AB

Business in one sentence
Evolution is a B2B provider of live casino and online gaming content, licensing live-dealer tables and game shows to online casinos worldwide.

Why I own it

• Powerful platform economics: studios and game IP can be monetized globally at very high incremental margins.

• Revenue share model aligns Evolution with operators’ success and creates “recurring” income.

• Strong product innovation and brand with a long runway in both live casino and game shows.

• Highly cash-generative business with opportunities for both reinvestment and shareholder returns.

• Evolution has been facing regulatory and operational headwinds over the last 24 months.

Judges Scientific PLC

Business in one sentence
Judges Scientific is an AIM-listed buy-and-build group that acquires and develops niche scientific instrument businesses with strong global reputations.

Why I own it

• High-margin, high-moat products used in research, industry and academia.

• Extremely disciplined acquisition approach with a focus on returns and cash payback.

• Conservative balance sheet and culture – “boring” in the best possible way.

• Many of the acquired companies are founder-led, niche leaders with sticky customer bases.

Dino Polska S.A.

Business in one sentence
Dino Polska operates one of the fastest-growing chains of mid-sized proximity supermarkets across Poland, focused on everyday grocery needs close to where people live.

Why I own it

• Attractive “local discounter” format with strong customer frequency and basket stability.

• Integrated supply chain and own logistics support good margins and execution.

• Inflation and private-label trends can be a tailwind for efficient mid-market grocers.

• High store rollout potential with still-low saturation in many regions. With just 7.8 stores per 100k inhabitants on average country-wide and the most dense voivodship constantly increasing the bar while not showing any signs of a leveling-out with 19.2 stores per 100k inhabitants now, there should remain a long growth runway going forward.

Lagercrantz Group AB

Business in one sentence
Lagercrantz is a Swedish technology group and serial acquirer, owning >100 niche companies that provide value-creating technical solutions in electronics, communications, mechatronics and other segments.

Why I own it

• Classic decentralized serial acquirer in the Nordics with a long history of smart acquisitions and capital allocation.

• Focus on niche B2B markets where small companies can hold very strong positions.

• Strong culture around ROCE, pricing power and cash generation.

• Structural tailwind as industrial customers outsource more specialized technology solutions.

Brown & Brown, Inc.

Business in one sentence
Brown & Brown is one of the world’s largest insurance brokers, earning commissions and fees for arranging coverage and providing risk management services.

Why I own it

• Asset-light, fee-based model: Brown & Brown doesn’t carry the underwriting risk on its own balance sheet.

• Recurring, diversified revenue across industries, geographies and product lines.

• Long acquisition history of buying local agencies and integrating them into a performance-driven culture.

• Rising complexity of risks (cyber, climate, etc.) makes advice more valuable, not less.

Addtech AB

Business in one sentence
Addtech is a Swedish technical solutions group made up of ~150 independent companies selling high-tech products and solutions to industrial and infrastructure customers.

Why I own it

• Proven serial acquirer model: small, disciplined deals in niche technical areas.

• Decentralized structure that keeps entrepreneurship alive at the subsidiary level.

• Exposure to long-term themes like electrification, automation and infrastructure upgrades.

• Strong track record of compounding through a mix of organic growth and acquisitions.

Copart, Inc.

Business in one sentence
Copart runs an online auction platform for salvage and used vehicles, connecting insurers, dealers and buyers across a global network of yards and marketplaces.

Why I own it

• Two-sided marketplace with powerful network effects and data advantages.

• Structural growth in total loss vehicles, used car demand and emerging markets.

• Highly scalable digital platform with attractive incremental margins as volumes grow.

• Substantial real-asset footprint (land and yards) that would be hard to replicate from scratch.

InPost SA

Business in one sentence
InPost is a leading out-of-home e-commerce logistics platform in Europe, best known for its network of automated parcel lockers and pickup points across multiple countries.

Why I own it

• Locker-based last-mile delivery is cheaper, more convenient and provides much superior unit-economics compared to home-delivery.

• Strong first-mover advantage and network density in key markets like Poland and the UK.

• Significant operating leverage as locker utilization rises over time.

• Huge untapped market potential outside of Poland.

(Note: APM stands for Automated Parcel Machine, i.e. self-service parcel lockers)

Momentum Group AB

Business in one sentence
Momentum Group is a Nordic serial acquirer that acquired companies that supply industrial components, maintenance services and related solutions to industrial customers and infrastructure.

Why I own it

• Picks-and-shovels exposure to the health of Nordic industry and infrastructure.

• Recurring demand from MRO (maintenance, repair and operations) activities.

• Decentralized structure with specialist local brands close to the customer.

• Opportunity to roll up more niche distributors and service providers over time.

Lifco AB

Business in one sentence
Lifco is a Swedish serial acquirer that owns a large portfolio of niche businesses across three segments: Dental, Demolition & Tools, and Systems Solutions.

Why I own it

• One of the “blueprint” Nordic serial acquirers with a phenomenal long-term track record.

• Very decentralized, profit-focused culture with minimal bureaucracy.

• Disciplined acquisition criteria and a long runway in European SMEs.

• Strong capital allocation history and a management team that thinks in decades, not quarters.

Topicus.com

Business in one sentence
Topicus.com is a pan-European vertical market software (VMS) group, spun out of Constellation Software, focused on mission-critical software platforms for public and private sector niches.

Why I own it

• Classic VMS economics: high switching costs, sticky customers, recurring SaaS-like revenues.

• Backed by the Constellation playbook and culture of disciplined, decentralized M&A.

• Vast runway in under-penetrated European software niches.

• Strong alignment with long-term compounding through reinvesting free cash flow into acquisitions.

Röko AB

Business in one sentence
Röko is a Swedish serial acquirer and perpetual owner of small, profitable, asset-light businesses across Europe, often buying majority stakes while leaving founders invested.

Why I own it

• Co-Founded and led by former Lifco-CEO Fredrik Karlsson with deep experience in the Lifco model of compounding through acquisitions.

• Focus on high-margin, asset-light niche leaders with strong market positions.

• Minority-retention model keeps founders and managers aligned for the long run.

• Still early in its listed life, with a long runway to compound if discipline is maintained.

• Scaled from 0 to SEK 1,323 million (~$140 million) in EBITA within 6 years.

What to Expect If You Subscribe

On the Substack, my plan is to:

• Publish company snapshots for portfolio companies and for companies on the watchlist (as I seek to further increase the quality of the portfolio)

• Publish deep dives

• Write framework pieces on topics like ROIIC, capital allocation, and the “engines” of long-term shareholder returns (and more).

If you’re interested in discovering the companies worth holding for years, not chasing the story of the week, then this is what you can expect here.

👉 If that resonates with you, consider subscribing to follow the journey and the upcoming deep dives on these businesses.

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