TLDR: Most earnings reaffirm our view and increase our confidence in the investment case, but a few raise red flags that we are monitoring and looking into. All prior trades were discussed & announced in our Substack Chat.

We would be happy to hear your thoughts on earnings, we also hold the stocks!

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CNC is the largest holding of our portfolio, the Aurelion Index, with an 8.4% weight vs our 5.7% average weight.

Report following our initial highlight:

On another note, a well-known investing mistake is falling in love with a stock, and it’s especially easy when a CEO tells the story. Part of their job is to market the company to investors. We stay cautious and critical of the story, but we believe this opportunity genuinely stands out.

Key Takeaways from Our CEO Call

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Today, we are adding a new stock to the Aurelion Index.

In a market as uncertain as the one we face today, you may have noticed that we are adding more defensive names to our Index. This does not reflect a preference for lower returns or reduced upside elsewhere. In fact, we believe that as inflation persists and the consumer weakens, the market will increasingly reward defensive plays. We are currently navigating another energy shock driven by the conflict between the US and Iran in the Middle East. While the inflationary impact might not be as severe as the 2022 shock in Ukraine, the effect is already visible.

In this environment, we believe our “defensive” positions are tactical choices designed to capture alpha while the broader market struggles with volatility.

The data confirms our view that defensive stocks can extend beyond a simple safety net, and that, in fact, they can serve as a powerful tool for outperformance when energy costs spike. Looking at the four major energy shocks since 1973, defensive names have consistently beaten the S&P 500. During the 1979 Iran Revolution, these stocks delivered a 43% return.

As you can see above, they outperformed the broader market by 17% as inflation peaked. Even during more recent events such as the 2022 Ukraine invasion, defensive plays protected capital better than the average stock.

Performance in Inflationary Environments

The bottom chart shows that defensive stocks tend to perform better during inflationary shocks. When the economy faces rising prices, defensive names deliver forward 12-month returns of 7.5%. This is a significant increase compared to 4.5% in non-inflationary periods. This gap exists because these companies often have the pricing power to pass costs on to consumers.

As we navigate the current tensions in the Middle East, which appear far from over, history suggests that holding these positions is a smart way to stay ahead. They offer a combination of lower risk and higher relative returns while the rest of the market struggles with a weaker consumer and rising energy bills.

Table of Contents

1. New Position Overview

2. Investment Thesis

3. The Business Model

4. The Supply Gap Is Widening

5. Investment Market Overview

6. Development Monitor

7. Growth Strategy and the 2028 Plan

8. Capital Allocation & Portfolio Quality

9. Debt & Capital Structure Analysis

10. Valuation Analysis

11. Key Risks to Our Thesis

12. Our Final Take

This Real Estate company recently delivered another strong quarter, with margins once again outperforming. It is not a REIT or a pure real estate model, but a differentiated platform that gives it an edge and supports continued performance.

Its new assets are generating healthy margins of ~45%, which we believe reinforces management’s capital allocation ability and the earnings power of recent M&A. We see this as a well-run company that offers investors upside and durable earnings growth, while also providing downside protection supported by a strong net asset value (NAV).

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By 2024, US credit card debt had reached all-time highs and payment delinquencies were trending upward.

Buy Now, Pay Later boomed.

When consumers are financing even everyday purchases like a burrito, it speaks about the underlying health of the economy.

However, the situation was stabilizing. Fed rate cuts began to take effect and the AI boom was fueling optimism of productivity gains.

The new Republican administration was promising affordable homes, lower energy prices, and a growing job market. Consumer health and investor sentiment finally got a breath.

We can see in the data from the charts above and below that consumer health began to improve in late 2024.

2026: Consumer Health Weakens Again

The two factors that have turned the recovery into what we believe is a continued period of weaker consumer health are AI and oil.

AI was supposed to be the “fix”. Productivity gains were expected to lift wages, justify high stock market valuations, and ultimately put money back into consumers’ pockets. That thesis is now under serious pressure.

First, AI driven job loss is looming over white-collar work. While some AI-related job cuts are simply a way for companies to explain broader layoffs aimed at improving margins, the overall trend is clear.

The real damage shows up in decreasing entry-level hiring. Roles that used to absorb hundreds of thousands of new graduates, such as junior analysts, entry-level coders, and compliance work, are now being done by AI tools.

The chart below shows the result: the share of new graduates among new hires has fallen sharply at both large tech firms and startups.

Meanwhile, the stock market continues to price in strong productivity gains. The S&P 500 trades at a forward P/E of 20.9x, elevated versus its long-run average of 16.6x. This premium implies sustained earnings growth, which in turn depends on meaningful productivity gains from AI.

However, the evidence so far points to diminishing near-term returns on AI investment. Companies are committing significant capital to infrastructure, yet the economic payoff at the consumer level has yet to materialize.

And now, disruptions in the Strait of Hormuz are driving oil prices higher, with consumers facing a potential 25–30% increase in fuel costs at the pump.

Despite rate cuts, mortgage rates have stayed higher than expected.

Right now, rising oil prices and inflation concerns are offsetting the mechanical impact of prior Fed rate cuts. This has kept housing in both the US and the broader G7 markets largely unaffordable for most households.

The Setup

We do not expect a significant market crash, but we believe this creates a very attractive setup to invest in companies that benefit from a weakened consumer. Rising debt, weak housing affordability, AI-driven job anxiety, and now a ~$100/barrel oil shock are all compressing real disposable income.

Historically, pawn shops, discount retailers, thrift stores, and dollar stores outperform in these types of environments. Certain defensive names have already started to move. The question is which high-quality names remain undervalued before the market reclassifies them as defensives.

The company we are adding to the Aurelion Index is an under the radar consumer defensive that we believe should trade at a higher, more normalized multiple. It has not received the attention it deserves. It is practically forbidden. That is exactly what makes it attractive to us.

Table of Contents

1. Company Description

2. Investment Thesis

3. Canadian Market Outlook

4. Business Overview

5. The Profit Advantage

6. Strategic Analysis

7. Best-in-Class Value Positioning

8. Macro Environment

9. US Market Overview

10. Operational Margin Pressures

11. Mitigating Factors & Efficiency Gains

12. Valuation & Price-Targets

13. Key Risks

14. Our Final Take

1. Company Description

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We will not add Amazon (AMZN) to the Aurelion Index because it exceeds our $50M to $15bn market cap mandate. That said, we find the current setup highly attractive. We are confident enough in this thesis to buy shares in our personal accounts, something we rarely do for mega-caps, as we typically find more edge in small caps.

Introduction

We almost never analyze mega-cap companies, but today we choose to cover Amazon. You might wonder why we are stepping outside our usual focus.

We believe the setup is favorable for a move higher.

We almost never look at the mega-cap giants, but we make an exception for Amazon today. The current setup looks too good. We believe the market mispriced the stock. Right now, it trades at 10.5x estimated earnings, which sits 44% below its 10-Y average of 18.6x. High-quality returns often happen when a market leader faces such a huge disconnect from its historical value.

Valuation Gap Extends to Retail: AMZN Below Walmart’s Average

We view this as a rare chance to get ahead. For the first time in a long time, Amazon appears significantly cheaper than Walmart. While WMT trades at 20.4x, AMZN sits at just 10.5x.

This rarely happens for a company that dominates tech and cloud computing. Instead of the typical high-growth premium, the market treats Amazon like it has less value than a standard grocery chain. We expect that gap to close as the company hits its stride and proves its earning power.

When you compare Amazon to its internet peers, the valuation looks even more disconnected. At 11.0x projected 2026 EBITDA, the stock trades at a discount to nearly everyone in the group. Companies like Uber, Airbnb, and Google all carry higher multiples. Even DoorDash trades at 18.4x, which is nearly double the valuation of AMZN. This price tells us the market expects a permanent slowdown, but our work suggests a recovery is coming. This low entry point should provide a safety net.

AWS: The Engine of Growth & Profit

AWS remains the most important segment for Amazon.

While the cloud business makes up 18% of the $717B in total sales, we estimate it provides 57% of the company’s operating income. In 2025, AWS generated $45.6B in operating profit with a 35% margin. Revenue for the segment grew 20% for the full year, with growth reaching 24% in the final quarter. As the dominant global cloud provider with a 30% market share, AWS serves as a strategic piece of the world’s AI infrastructure.

Resilience in the Retail Business

Amazon’s position in retail is still strengthening. We estimate the gap between it and competitors is widening. It now accounts for over 40% of the US eCommerce market. This massive scale lets them keep inventory closer to customers than any other player. Most of this logistics advantage now runs on autopilot, with robotics handling about 75% of global delivery volume.

This creates a cycle where higher volumes lead to faster deliveries and lower costs. These improvements naturally attract more shoppers. As they integrate more robots into retail, we project that efficiency will continue to climb.

A Familiar Setup: GOOGL Then, AMZN Now

GOOGL sentiment bottomed in 1Q25 amid “AI loser” concerns and search disruption risks, then re-rated as Gemini progress validated its AI strategy, now trading well above its 10-year average.

We see a similar sentiment and valuation inflection emerging for AMZN.

Amazon’s Moat: Fading or Getting Stronger?

1. Retail Growth Dynamics

Amazon’s dominance in retail is widening rather than merely holding steady. While many traditional moats are being challenged by AI, Amazon is using technology to distance itself from the competition. With more than 40% of the US eCommerce market, the company has reached a level of scale that allows it to position inventory closer to consumers than any other player.

This logistics advantage is now heavily automated, with robotics playing a role in ~75% of global delivery volume. This creates a self reinforcing cycle where higher volumes lead to faster deliveries and lower costs, which in turn attract more customers. As robotics continue to be integrated into processes across the retail operations side, efficiency can continue to increase.

2. Capital Efficiency & ROIC

Amazon looks like a cash hungry machine because retail and AWS cost so much to build. However, the company generated a surprisingly high return on invested capital of 15% in 2025. This proves that the heavy spending on logistics and data centers actually pays off.

Incremental AWS Revenue & Capex

Oppenheimer expects AWS revenue to hit $194.8B by 2027.

By that time, AWS will likely account for 84% of total company spending. Between 2024 and 2027, Oppenheimer estimates that $104.1B in new revenue will outpace $100.9B in new spending. This points to an efficient investment cycle with strong returns. In retail, the setup allows suppliers to effectively fund growth. When revenue grows faster than spending, the infrastructure cycle is maturing and becoming more profitable.

3. The Valuation Anomaly

We find the most compelling part of the thesis in the current valuation disconnect. Applying the trading multiples of physical retailers like Walmart (43.5x NTM P/E) or Costco (48.4x NTM P/E) to Amazon’s retail and advertising segments implies the market assigns little to no value to AWS.

By that logic, anyone buying the stock effectively gets the world’s leading cloud platform and a $68.6B advertising business almost for free.

4. The Data Advantage

Amazon’s competitive edge is further solidified by a data advantage that physical retailers cannot replicate. Beyond knowing the purchase history of every customer, the platform tracks exactly what products were considered and then passed over. This first party data is now being extended beyond Amazon’s own properties through its DSP, allowing advertisers to target consumers across the open web with surgical precision.

How We See It

We view this as a massive dislocation in the market. The valuation gap looks extreme with the stock trading at 10.5x NTM EV/EBITDA.

This sits 43% below the 10-Y average and far below Walmart. While Walmart owns a massive global footprint and continues to build its own delivery networks, the retailer lacks an AWS equivalent. We believe this discount makes no sense. This offers an exceptional entry point for a business in the early stages of an AWS re-acceleration cycle as AI usage grows.

We think the market is offering an opportunity here.

Favorable Set-up for an AWS Re-acceleration Cycle

We believe the setup for AWS looks favorable as the segment enters a clear reacceleration cycle. After hitting a low of 12% growth in mid-2023, the business turned a corner. The trend climbed steadily upward, with growth rates returning to the 20% level as 2025 closed out. This indicates the slowdown has ended and the growth engine is running again.

The backlog growth signals a massive revenue catch-up. The backlog reached $244B at the end of 2025, representing 38% growth. Jefferies projects a surge to $344B in early 2026, especially as major partnerships like OpenAI add to the pile. This pipeline provides a long runway for future revenue.

The profit story appears equally compelling. Operating margins recovered sharply from the lows of early 2023 when they dipped to around 24%.

We saw a strong bounce back with margins hitting record highs of 40% in early 2025. By the end of the year, they achieved a healthy 35%. This level sits comfortably above the long-term average of 32%.

AWS Margin Expands to 35%

Leadership remains confident in AI demand. The CEO notes capital spending follows workloads growing faster than expected. The CFO highlights that margins improved by 0.4% YoY. We believe these factors confirm that the investments in infrastructure already generate strong returns.

AWS Revenue Upside

When we look at Morgan Stanley’s revenue forecast, the estimates imply a yield on Capex that is ~50% below the long term average. This points to meaningful upside surprise potential, and we share that view.

AWS Yield on Capex Below Historical Average

Morgan Stanley’s current model assumes that for every dollar of Capex, the incremental revenue will be far lower than historical trends. Specifically, they project yields between $0.21 and $0.42. This is significantly lower than the long term average, which sits between $0.57 and $0.95. If AWS can deliver efficiency even partially closer to its historical standard, the actual revenue growth will likely exceed Morgan Stanley’s conservative estimates.

Quantifying the Upside of an AWS Separation

Scotia highlights the potential gains from spinning off AWS into its own company. A standalone AWS would likely trade at a higher price than it currently does as part of the consolidated group.

This premium comes from better investor clarity and the removal of retail spending from the valuation. More importantly, it allows AWS to sign cloud partnerships with retail competitors who currently avoid the platform because of conflicts of interest.

The retail business also benefits from a cleaner story. Management becomes directly accountable for how they spend money, and an independent board ensures the focus remains entirely on retail execution.

Historical data from other large-cap tech spinoffs suggests this move could lead to 15-30% in extra returns over the first 24 months. By simply removing the conglomerate discount, the market could surface several hundred billion dollars in total value.

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We are adding this stock to the Aurelion Index today.

This piece covers a small, under-covered Canadian life insurer that we believe is trading at a significant discount to fair value based on peer multiples and our own conservative analysis.

This insurer trades at a modest fraction of peer multiples based on book value per share, despite strong growth across segments (40%+ growth in core earnings to shareholders in 2025) and conservative risk parameters in-line with peers. We think the primary reason for the discount is liquidity constraints, which we think will ease as the company continues to grow and eventually sees more attention from investors and sell-side analysts.

Despite the low liquidity and small size negatively affecting valuation, we believe this company presents a great opportunity for long-term investors.

We think this company will continue to grow book value per share at strong rates, while simultaneously the discount will be addressed as liquidity in the shares slowly increases over time, driven by strong financial performance.

Sporting a dividend yield over 4.5%, we think this is an opportunity for long-term investors to ‘get paid while you wait’ for the discount to close.

Table of Contents

0. Introduction

1. Company Overview

2. Insurance Risk Measures

3. Discount to Intrinsic Value

4. Price-Targets

5. Key risks to the Thesis

6. Our Final Take

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A deep dive into our recent new addition to the Aurelion Index

Stevanato has the hallmarks of a great compounder: a clear moat, strong revenue growth, and an attainable margin expansion story.

We added STVN to the portfolio on March 3rd, and the stock jumped 19% the following day after earnings. Since then, the stock has come down and is back close to previous levels, as discussions during the earnings call were slightly worse than the market expected. However, the main driver was the Iran-US conflict, which led equities down significantly.

This is the full deep dive we promised when we added STVN to the portfolio on March 3rd. It adds our complete financial model, price targets, and valuation framework to the initial note, along with a much deeper look at the industry, the products, and the competitive positioning.

We spoke with investor relations, an IQVIA researcher, and a practicing physician. You will find their insights throughout the report especially on GLP-1s giving us a different perspective than what the market currently reflects.

The mix of earnings growth and business quality is rarely seen in life sciences, and we believe this is the first time STVN has traded at such a discount to peers despite that growth outlook.

We were previously invested in the stock in late 2024, when the company was going through its destocking situation, and successfully exited in mid-2025. In our opinion, the stock often experiences strong swings that are not always warranted.

Table of Contents

1. Business & Operations Overview

2. Industry Overview

3. Geographic Footprint and Customer Proximity

4. GLP-1s: Analysis of the Impact

5. Takeaway of our Discussions with Industry Experts

6. Our view of Q4 2025 Earnings

7. Investment Thesis

8. Forecasts, Valuation & Price Targets

1. Business & Operations Overview

Stevanato Group (NYSE: STVN) is a leading global provider of integrated drug containment, delivery, and diagnostic solutions for the pharmaceutical and biotechnology industries. Founded in 1949 and headquartered in Italy, it serves as a strategic partner to the world’s top 25 pharmaceutical firms.

A simple example helps illustrate the role Stevanato plays. In a weight-loss injection pen, such as those used for GLP-1 drugs, Stevanato likely produced the internal glass cartridge, the specialized coating that helps prevent the drug from sticking to the glass, and potentially even the equipment used by the pharma company to fill that cartridge.

The Specced-In Moat

Most people hear “glass manufacturer” and think commodity. This is definitely not the case and important to address before analyzing this business.

The glass Stevanato produce is an engineered, drug-specific containment system, developed and validated in direct partnership with the drug it will carry for its entire commercial life. The business implications are major.

The Lock-In Starts Years Before a Drug Reaches the Market

When a biopharma company develops a new drug, it doesn’t just need to prove the molecule works. It needs to prove the entire delivery system works.

The syringe, the cartridge, the vial, all of it gets tested together with the drug for chemical compatibility, dimensional precision, and sterility integrity across the product’s full shelf life. This process runs through clinical trials, takes years, and costs millions.

Once Spec’d In, Switching Is Typically Irrational

Regulatory approval is tied to a specific manufacturing process, and that includes the primary packaging. Changing the container after approval is a full regulatory event. The biopharma company would need to file new applications, run new compatibility studies, and potentially redo clinical manufacturing batches. That process takes 2-4 years and costs tens of millions of dollars, for a change that often delivers zero clinical or commercial benefit. It is simply not a project that gets approved.

A Revenue Profile With Unusual Visibility

Once a drug launches, Stevanato ships containers for every dose sold, globally, for the entire life of that product. Volume scales directly with the drug’s commercial success. Management can map approved drugs across their customer base to projected dose volumes and model out revenue with a high confidence level. It functions less like traditional backlog and more like recurring demand.

Despite a destocking headwind in 2024 and one of the heaviest capex cycles in its history, Stevanato has grown its revenue base consistently and held margins remarkably well.

The Moat in Plain Terms

A competitor can build a better glass factory and undercut on price. What they cannot easily do is displace Stevanato from an approved drug without asking the customer to spend years and tens of millions of dollars for no tangible benefit.

More Than Just a Container: Engineering Solutions

What makes this business model even more interesting is that the spec-in relationship doesn’t stop at the container. Once a biopharma company has validated a Stevanato container, they still need industrial equipment to fill it at commercial scale. Stevanato builds that equipment too.

Because the machinery is engineered around their own container specifications, a customer using a Stevanato vial is naturally pulled toward using Stevanato’s filling lines. Introducing third-party machinery means new compatibility testing and new regulatory risk, making Stevanato the default choice across the entire production chain.

Not All Containers Are Equal

Stevanato has been steadily shifting its mix toward more sophisticated formats called High-Value Solutions, primarily ready-to-use, pre-sterilized containers that arrive at the pharma customer’s filling line already prepared, eliminating entire steps from their manufacturing process. These products are harder to make, harder to replicate, and are the preferred format for biologics, the fastest-growing class of injectable drugs.

The economics reflect that clearly. Per our management discussion, gross margins on these premium products run at ~55%, compared to ~25% on standard containment. Every percentage point of mix shift toward premium formats has an outsized impact on profitability. In 2019 these premium products represented 17% of revenue. By 2025 they reached 46%.

Customers

Stevanato has high customer concentration.

The top-10 share jumped from 41.7% in 2021 to 53.6% in 2025, and the single largest customer crossed the 12% threshold. We believe this is a direct consequence of the GLP-1 boom concentrating more spend with one or two massive buyers (Novo Nordisk and Eli Lilly).

STVN does not officially disclose its top customers, but we can reasonably assume the following as key customers:

This leads to a simple conclusion we discuss later in the industry overview: STVN health and growth is highly correlated with large Pharma health.

Company Segments

In addition to separating its revenue into 2 segments, Stevanato also reports its high-value solution revenue within the Biopharmaceutical & Diagnostic Solutions segment.

High-Value Solutions (46% of Revenue): The Main Engine

Three things explain the pricing power and the pace of growth:

1) Biologics are the fastest-growing drug class, and they are almost exclusively injectable. GLP-1s like Ozempic and Wegovy get most of the headlines, but the tailwind is broader: monoclonal antibodies, ADCs, biosimilars, and other complex therapies all require the highest-grade packaging that standard formats cannot provide.

2) HVS formats save pharma companies real money. Receiving pre-sterilized, pre-validated containers lets manufacturers eliminate entire steps from their fill-finish process. The higher unit price Stevanato charges is largely offset by cost savings on the customer’s end.

3) Customers rarely leave. Qualifying a new container for an approved drug is a multi-year, multi-million dollar regulatory exercise with no clinical upside. Nobody volunteers to do that twice. HVS formats are often co-developed alongside the drug itself and embedded directly into the customer’s production line, making switching almost unthinkable.

Other Containment & Delivery Solutions (41% of Revenue)

This bucket includes standard bulk vials, low-value syringes, cartridges, and in-vitro diagnostic containers. These are not exciting products, but essential ones.

The flattish to declining revenue in the last 2 years in other containment revenue has been driven partly by a deliberate transition, as the company shifts capacity toward a larger portfolio of high-value projects.

When Stevanato builds a new production line, it is increasingly choosing to fill it with premium formats rather than commodity vials. Some of what looks like “other containment” shrinkage is simply volume that has been upgraded and reclassified into the HVS bucket.

Engineering (12% of Revenue)

As you can see in the chart above, the engineering segment has been the problem child since 2023. However, per our conversations with management and other investors, and with the reaction we have seen in recent quarters, it is almost as if the market does not really care about its short-term performance.

For some quarters revenue misses significantly, but the investor base and, we believe, management have communicated well that revenues can be largely sloppy, and the stock does not move on significant beats or misses in that segment.

What we point out is that in 2023 and 2024 the company entered into a substantial amount of contracts that were not profitable. These contracts helped sign long-term revenue agreements and were positive for that purpose, but management has now decided to exit some of them as they were impacting the bottom line.

We do not put a high weight on this segment when analyzing the financials of the stock. Revenue and profitability will be sloppy. This segment is purely there to enhance the overall offering of the company.

A Word on the Pandemic Impact

Stevanato capitalized on a perfect 2021 IPO window, riding the massive wave of vaccine demand.

However, it’s no longer a 'Covid stock.' We’ve seen those one-time gains be completely replaced by robust, sustainable growth starting in 2023. STVN has successfully moved past its pandemic dependencies and is now growing on the strength of its core business.

The Destocking Situation: Why We Owned the Stock Before

We personally researched the stock significantly in the early 2025 period because for us the destocking situation was very interesting.

The stock came down very significantly in late 2024 as the expectations for sustained >10% revenue growth stopped. The company was now entering a destocking phase with its large customer, simply meaning that large pharma had ordered too much during COVID and would now order less. We saw this as a short-term noise and bought at a cheap price.

Note that this research was done by an analyst on the team, not officially bought through the Aurelion Index portfolio.

Stevanato by the Numbers

Revenue Targets

Management is currently targeting a return to low double-digit revenue growth of 10% to 12% following the weaker periods seen in 2024 and 2025. The main drivers are the continued mix shift toward high-value solutions and the strong growth of that segment.

Margin Evolution

Our take: margins were artificially high in 2022 and 2023, then artificially low in 2024 and 2025, and we are now in recovery and expansion mode.

Here is how we see the evolution:

2022/2023 Inflated baseline: Margins were artificially boosted by COVID-driven vial demand. This was not the true earnings power of the business.

2024/2025 Double headwind: Margins then got hit from three sides at once, creating a trough deeper than the fundamentals deserved.

First, destocking crushed volumes. Large pharma had over-ordered during COVID and simply stopped buying, pushing revenue growth negative for the first time since the IPO.

Second, the engineering segment deteriorated, adding a drag on top of the volume headwind.

Third, Stevanato was mid-way through a massive capex cycle, ramping expensive new facilities before they were generating meaningful revenue. This is the classic trough of a capital-intensive business investing ahead of demand.

By 2025 recovery had already begun as destocking faded and the new facilities started contributing.

The path to 30% is therefore not just high-value solution expansion alone. It is normalization from short term issues (facilities now productive, destocking over) layered on top of the high-value shift.

Management Target: From 25 to 30% EBITDA Margins

Management has previously targeted 30% EBITDA margins by end of 2027.

They have since stopped formally discussing this 2027 goal.

We expect the 30% target to slide toward the 2028 timeframe as new facilities ramp up and the high-value mix continues to improve.

As a reminder, high-value solutions carry ~2x the margins of the rest of the business. We calculate ~1.2% of margin expansion per year through 2030 from mix shift alone, simply as a result of selling more high-margin products.

This driver requires no cost cutting, layoffs, or restructuring, and should meaningfully improve margins over the coming years.

We like setups like this because the execution burden is lower, which gives us greater confidence that the margin improvement will actually materialize.

Most companies talk about margin expansion. In our experience, a large share end up behind schedule or miss those targets entirely.

Cash Flow Generation

The chart below captures the story well. The buildout of new manufacturing facilities required an unusually heavy level of capital spending, which drove negative free cash flow for several years. We now appear to be approaching an inflection point, with the major facility investment cycle largely complete.

Stevanato will finally have cash to distribute to shareholders.

Stevanato’s free cash flow profile is finally starting to improve.

After several years of heavy outflows tied to an intense investment cycle, the company appears to be entering a phase where that spending begins to convert into cash generation. As capex normalizes, financial flexibility should improve, with more room to reinvest, strengthen the balance sheet, and potentially return capital to shareholders.

Management

Skin in the game is substantial. The family controls 93% of the voting rights and 80% of the economic interest, with no evidence of meaningful insider selling. This is a business built over 75 years by a family whose wealth remains tied to the stock.

That long-term alignment shows in the company’s history. Stevanato was founded in Venice in 1949 by Giovanni Stevanato. His son, Sergio, transformed it into a serious industrial company and was later awarded the title of Knight of Labor by the President of Italy, one of the country’s highest business honors.

Today, the business is led by Franco Stevanato, Sergio’s son and the company’s current CEO, who grew up visiting his grandfather’s factory on Saturdays. This is a family that has spent 75 years building deep expertise in a single industry and turning that focus into a world-class business.

2. Industry Overview

End-Markets Driving the Stock

Stevanato is increasingly a biologics-driven business. High-value solutions, which are heavily tied to biologics and GLP-1 delivery formats, accounted for 46% of total company revenue in 2025 and grew 29% year over year.

The company is not evenly exposed across all end markets shown in the chart below. It is disproportionately positioned in the fastest-growing segments, specifically biologics at +15% CAGR and GLP-1s at +30% volume growth.

This is precisely what drives the revenue growth thesis and why Stevanato consistently grows 2 to 3x faster than the broader containment market.

Large Pharma Impact

Large pharma health matters, but less than many investors assume. The more important variable is biologics volume.

It is easy to link Stevanato’s performance to large pharma revenue, but that framing misses the core driver. Stevanato does not get paid when Eli Lilly or Novo Nordisk sells a drug. It gets paid when those companies manufacture and fill vials, syringes, and cartridges. That is ultimately a volume story. A pharma company can post a weak quarter because of pricing pressure or patent expirations and still be producing more units than ever.

For Stevanato, pipeline volume matters more than pharma profitability.

There are over 10,000 drug candidates currently in clinical development globally, with pharma companies spending over $300bn annually on R&D (IQVIA Institute for Human Data Science, 2024).

That pipeline has to be packaged, filled, and delivered. Biologics and gene therapies are forecast to represent over 60% of new drug approvals by 2030 (Deloitte Global Life Sciences Outlook, 2024). Stevanato is precisely positioned for that shift. Even in a world where large pharma margins compress, the volume of injectables being manufactured keeps climbing.

The scenario investors should watch is a prolonged collapse in large pharma R&D spending, which could slow new drug launches and reduce demand for high-value packaging formats. But this would need to be severe and sustained to meaningfully dent Stevanato’s trajectory, given how far ahead of current demand the pipeline is.

Our view is that investors should not spend much time worrying about pharma company’s quarterly earnings. The structural question is whether global biologics volume keeps growing. Every credible forecast says yes, and that is the only datapoint that truly matters for Stevanato’s long-term thesis.

Competitive Space

The competitive landscape is an oligopoly.

The companies capable of producing pharmaceutical-grade syringes and cartridges at commercial scale are essentially four: SCHOTT Pharma, Gerresheimer, Stevanato, and Nipro. Together they produce around 3 billion pharmaceutical syringes per year. This is not a fragmented market where a new entrant can show up and take share. It is a small club of highly specialized manufacturers with decades of regulatory history, validated processes, and deeply embedded customer relationships.

Worth noting: it is standard practice in pharma to qualify two suppliers for any given drug program, typically pairing two members of this oligopoly together, for example Stevanato alongside SCHOTT, to ensure supply chain resilience. This means Stevanato does not need to displace a competitor to win business. It simply needs to be one of the two approved suppliers.

Vertical integration separates Stevanato from the pack. Unlike peers, Stevanato controls around 80% of its supply chain, from glass forming to packaging machinery, enabling customized automation that materially reduces total cost of ownership for customers. Most competitors own one part of the value chain. Stevanato can offer containment, delivery format, and the manufacturing equipment to fill it, all under one roof.

The GLP-1 wave is making the oligopoly tighter. All four players are racing to add capacity simultaneously. SCHOTT Pharma announced a $371M facility in North Carolina targeting GLP-1 containers, expected operational in 2027. Gerresheimer acquired Bormioli Pharma for roughly €800M to consolidate its position. Stevanato is doing the same with its Fishers, Indiana facility.

As you can see above, the capital requirements to compete at this level are enormous, which reinforces the barriers to entry rather than weakening them. A new competitor would need to spend billions and wait a decade before being qualified by a major pharma company.

3. Geographic Footprint & Customer Proximity

Stevanato operates nine manufacturing plants globally. What is striking about this footprint is that the company has quietly built one of the most geographically strategic supplier networks in pharma packaging, with facilities in every major biologics manufacturing hub in the world.

Over the past several years, Stevanato has committed billions in capital to two regions: northern Italy and Fishers, Indiana. When you map those locations against where the world’s largest GLP-1 drug manufacturers are building their own production capacity, the overlap is clear.

Fishers sits 35 miles from Eli Lilly’s Lebanon, Indiana campus, where Lilly is spending up to $27 billion manufacturing Mounjaro and Zepbound.

We infer Lilly is the largest customer. We cannot confirm it, but we are comfortable making that call based on the geography, the product alignment, and the capital commitment timing on both sides.

This brings us to the GLP-1 risk. Stevanato has concentrated a significant portion of its new capacity in facilities that are, by our analysis, heavily oriented toward GLP-1 injectable demand. If that bet is right, Fishers becomes one of the most strategically valuable pharmaceutical packaging facilities in North America. If GLP-1 injectable volumes shrink, the ramp assumptions for that facility come under pressure. We discuss exactly that risk, and why we think it is overstated, in the section that follows.

4. GLP-1s: Analysis of the Impact

GLP-1 oral approval fears are the primary reason the stock has sold off since the start of 2026.

What are GLP-1s and Why do They Matter for Stevanato?

GLP-1s are the blockbuster weight-loss and diabetes drugs you have probably heard of: Ozempic, Wegovy, Mounjaro, Zepbound. They are injected, typically weekly, using a precision glass cartridge or syringe. Stevanato makes those containers. As GLP-1 demand exploded, Stevanato became one of the key beneficiaries, with management confirming that GLP-1 related products represented approximately 19-20% of total company revenue in 2025, growing more than 50% year over year.

Why is the Stock Down?

In late December 2025, the FDA approved an oral version of semaglutide, opening the door for some patients to take a pill instead of an injection. If that shift becomes meaningful, Stevanato would sell fewer glass cartridges. That is the core concern. It is easy to understand, and the stock sold off sharply on the announcement.

From the patient’s perspective, the appeal is also straightforward. Taking a pill is clearly more convenient than a weekly injection, especially for those who prefer to avoid needles.

The market’s question is therefore simple: if GLP-1 therapies move in an oral direction, does Stevanato’s growth story begin to weaken materially?

In short, our view is that this fear is real but significantly overstated, and the IQVIA research we cover in the next section explains why. The short version: orals and injectables serve different patient needs, the injectable volume already locked into approved programs is not going anywhere, and the total GLP-1 market is still in its earliest innings.

5. Takeaway of our Discussions with Industry Experts

IQVIA Researcher

What is IQVIA and why does it matter for this thesis. IQVIA is the gold standard data provider for pharmaceutical market intelligence. Stevanato itself uses IQVIA forecasts to plan capacity investments, meaning the same data shaping their internal decisions is available to us. We had a conversation with a researcher (we are keeping the name private) at the IQVIA Institute and also had access to their latest public report, “The Global Use of Medicines 2025: Outlook to 2029”, available freely on their website.

His take on the current efficacy of Oral GLP-1s. Oral bioavailability for peptides remains below 1% versus more than 50% for injectables. Oral semaglutide also requires ~70x more active pharmaceutical ingredient per dose, creating worse unit economics at scale. The compliance burden of daily oral dosing with strict fasting requirements is a real barrier, and the industry is actually moving toward longer-acting monthly injectables, which only deepens the moat for precision injectable packaging.

The IQVIA researcher was direct about Orals taking share. Orals will take share, particularly among needle-averse patients and those needing only modest weight loss. The pipeline has over 50 oral assets in development, and next-generation small molecule formats will be more competitive than today’s oral semaglutide. If oral penetration accelerates faster than expected, a portion of future injectable volume growth would simply be foregone.

On oral GLP-1 risk to Stevanato specifically, he was relaxed. Even if oral formats gain share over time, the transition would be gradual. The regulatory switching costs alone make a rapid format change essentially irrational for pharma companies mid-lifecycle.

He was also bullish on the biologics pipeline. Obesity drug spending is projected to grow at a 23% to 26% CAGR through 2029, while less than 10% of the obese population has been treated so far. Oncology spending is expected to reach $441bn annually by 2029. His framing was clear: this is not a demand issue, it is a capacity issue.

Practicing Physician

His take was that patients find the oral semaglutide routine genuinely difficult. Empty stomach, then 30 minutes with no food or liquids, every single day. Weekly injections are easier to stick to for older and chronic patients. In his view there is a use case for both. The industry has already acknowledged this, which is why the real innovation is heading toward monthly injectables, not away from injectables altogether.

Our Thoughts on GLP-1s

Let us be clear: oral GLP-1s are a headwind. If they never existed, the injectable volume story would be cleaner and the growth runway longer.

The stock does not currently deserve its $33 peak of 2023. The question is not whether orals create some competitive pressure, they do, but whether they actually displace injectable volume in any meaningful way. Our conclusion, is that they largely do not.

Another IQVIA publication, “Oral Obesity Therapies: Holding the Key to the Future” states that orals are best positioned as maintenance options following injectable induction, not as replacements. The two formats serve different roles in the journey.

On the broader GLP-1 volume story, IQVIA is unambiguously bullish.

In their November 2025 report “GLP-1 Impact: How GLP-1s Are Changing the Diabetes Treatment Paradigm,” IQVIA authors Luke Greenwalt and Jeff Thiesen document GLP-1s reaching $110bn in global sales in 2024. Yet less than 10% of the obese population has been treated by the drug. By May 2025, GLP-1s accounted for 52% of all diabetes prescriptions, up from just 18% in 2020. In our view the runway for volume growth remains enormous.

We believe GLP-1 injectable volumes will continue to grow, supported by expanding global demand, the large share of severe diabetes and obesity cases that still require injectable efficacy, and older or chronic patients who are more likely to remain on injectable therapies.

The stock does not deserve to return to its prior peak, in our view, because this is a real long-term headwind. At the same time, the selloff appears excessive, and we believe the shares are clearly oversold.

To put the oral GLP-1 concern in perspective, even if Stevanato were to lose 50% of its entire GLP-1 revenue tomorrow, the stock would still trade at roughly 13.8x EBITDA. The market was routinely willing to pay a higher multiple than that before GLP-1s were even part of the story.

We will continue to monitor pharmaceutical volume trends across oral and injectable GLP-1s closely as we stress test the thesis.

6. Our view of Q4 2025 Earnings

We added STVN to the portfolio on March 3rd, ahead of earnings, expecting a beat. That is what we got. The stock moved +19% the following day.

The Quarterly Numbers

The quarter was clean across the board. Revenue came in at €347M, ahead of estimates, driven entirely by the core business.

EBITDA came in at €98M, significantly above estimates at €92M.

Free cash flow was + €1.5M, versus estimates of negative €39M.

The engineering segment missed badly at negative 30% revenue growth, but as we discuss in the business overview, the market does not move on engineering and neither do we.

The GLP-1 Disclosure

The most important moment of the call was management finally disclosing their GLP-1 exposure directly. GLP-1 products represented 19 to 20% of total company revenue in 2025 and grew more than 50% YoY. This was the first time management put a specific number on it.

Equally important was management’s commentary on 2026. GLP-1 revenue is guided to grow at a mid-teens rate. Running the math, if GLP-1 represents 20% of revenue and grows 15%, that alone contributes ~3% to total growth.

With management guiding to ~7.5% total revenue growth, the implication is that the other 80% of the business is growing at ~5.6%. Moreover, the number of customers ordering premium syringes for non-GLP-1 biologics increased 40% year over year. The growth story is wider than GLP-1s.

2026 Guidance

2026 guidance came in slightly below expectations. Many investors were anticipating closer to low double-digit revenue growth, but management guided for only 7.5%. Capital expenditure expectations also came in still slightly higher than the market had hoped, with 89% of being growth capex.

Our Takeaway

The beat was broad-based, the GLP-1 disclosure removed a key uncertainty, and the broader contribution from non-GLP biologics came in as a positive surprise. Guidance was slightly softer, however, as GLP-1 is set to contribute less to growth than some had expected. Even so, nothing in the outlook changes our long-term view of the setup or the quality of the business.

7. Investment Thesis

Our conviction on the stock has not changed. The reasons we own it today are the same ones we outlined in our initial report in early 2025.

1. Valuation Does Not Reflect Earnings Power

This impact is clear in the price history. Shares have traded in a wide range since 2021 and currently sit well below previous peaks. This compression happened even as revenue continued to grow and long-term demand remained generally steady. In our view, the market has priced in a permanent state of weakness instead of a temporary return to normal levels.

2. A Strong Free Cash Flow Inflection

At the same time, the financial profile is reaching a turning point. Free cash flow hit its lowest point in 2023 when capital spending peaked at nearly 40% of revenue during a major global expansion. That investment cycle is now largely complete. This shift changes the story of STVN from one that consumes capital to one that generates cash.

3. GLP-1 Fears Are Overblown

The debate around new drug delivery formats also adds to the opportunity. Management has already planned for these shifts by building flexibility into their production. These developments are well understood by the company and are not a surprise.

We see a business moving into a period of higher margins and cash generation while the stock price still reflects peak uncertainty. As spending declines and cash flow rises, we expect the valuation to follow.

8. Forecasts, Valuation & Price Targets

Financial Forecasts

Our revenue forecast is broadly in line with management’s target for low double-digit growth, while also reflecting lower expected growth from GLP-1. The main driver remains the continued expansion of high-value solutions.

We think this forecast appropriately ties revenue growth to the capital spending needed to support it. All of that growth is organic and does not rely on acquisitions. We are also around 1% above Bloomberg’s current revenue growth consensus.

Below is a snapshot of our financial model.

As you can see, our forecast implies a 18.6% earnings CAGR.

This is pretty much one of the highest in scaled life science companies.

Stevanato Financial Model Snapshot

Margins: We forecast margin expansion to come primarily from a richer mix of high-value solutions, with little contribution from other sources of improvement.

Depreciation Expense: Given the heavy capital spending over the past few years, we expect depreciation expense to keep rising and remain a drag on reported earnings.

Free Cash Flow: As noted earlier, FCF should turn positive as capital expenditures normalize. We estimate normalized EBITDA-to-free-cash-flow conversion at ~40% to 50%, which is reflected in our valuation. This remains a business that needs ongoing capital spending to support growth.

Our Valuation of Stevanato

There are important valuation implications to STVN requiring substantial capital investment to grow. The 40-50% cash conversion implies that at an 11.0x EBITDA multiple, we are effectively paying for a 22.0x FCF company. In our view this is warranted, as STVN is a high-growth, high-quality business.

However, a return to the prior 20.0x EBITDA multiple would imply roughly 40x FCF, a level we consider excessive.

As you can see below, historical valuation has averaged ~20x EBITDA, which at normalized free cash flow conversion implies ~40x free cash flow.

We think there are 3 significant drivers that institutional money managers like, that used to drive up the valuation.

1. The long-term contracts and specced-in moat give significant long-term visibility into the business continuing to exist, meaning we can be more certain applying a high multiple in 5-10 years.

2. A substantial biologics growth story. It is an easy trend to believe. Not only GLP-1, but many biologics require STVN, and STVN is undoubtedly very strong in their specific corner of the container industry.

3. An easy-to-believe margin expansion opportunity. The switch to high-value solutions is an easy sell for investors, as the company doesn’t even need to cut costs to significantly expand margins.

Below, we compare Stevanato with competitors and other companies operating in similar parts of the market. What stands out is that the stock trades at a higher valuation, but that premium is supported by meaningfully stronger revenue and earnings growth than most comparables, which in our view leaves the risk-reward compelling.

Stevanato vs. Peers

We use a long-term multiple of 10.0x EBITDA, reflecting where we think the stock will trade in 2030, implying ~22x free cash flow. We do not expect a sustained 20.0x EBITDA multiple like in the 2022-2023 period.

However, continued revenue growth, stronger cash generation, and a solid moat in the space support our confident use of that 10x multiple. This is also still below larger scaled peers, which is what Stevanato should increasingly resemble over time.

How Much Upside Do We See?

• 1-Year Price Target: $21 (39% upside)

• 5-Year Price Target: $36 (134% upside over a 5 year period)

$14 has been the floor the market has been willing to accept since the IPO in 2021. We are not technical traders, but we believe it is reasonable to say the business would need to deteriorate meaningfully from current levels to break below that threshold.

This is a loved stock among many funds, and we believe investors are simply waiting for perceived headwinds to clear before buying back in. In our view, a return to a $20 stock price is the most likely scenario, with limited downside at $15.

At this point we do not think we are catching a falling knife. The stock appears to have stabilized following the peak of GLP-1 fears.

Importantly, we view this stock as set for a sharp move on a positive catalyst. The most recent earnings were good, not amazing, and the stock still moved +19% in a single day. This is precisely why we like the risk/reward here. If the company misses next quarter we do not expect a similarly sharp decline, but if they beat expectations or raise guidance, we see the upside reaction as disproportionately large.

Current Analyst Recommendations

Analyst recommendations remain broadly unchanged despite the stock being down 28% year to date, with most maintaining Buy or Outperform ratings.

Key Risks

1. Key man risk. Franco Stevanato is both CEO and the embodiment of the family’s long-term vision. A leadership transition would create significant uncertainty around strategy and ownership.

2. US tariff and currency headwinds. Stevanato is an Italian company with significant US revenue exposure, making it vulnerable to both foreign exchange moves and evolving US trade policy.

3. Oral GLP-1 almost completely replaces injectables. If next-generation oral formats gain meaningful share in induction therapy, injectable volume growth would be heavily impaired. This is the risk we monitor most closely.

Our Final Take on STVN

Stevanato is a rare combination of business quality, earnings growth, and a mispriced valuation. The oral GLP-1 fear is real but overstated in our view, the destocking headwind is behind them, and the capex cycle that weighed on cash flow for years is nearly complete. The business is entering a period of higher margins and free cash flow generation for the first time since the IPO.

We hold the stock and will monitor GLP-1 injectable volumes closely as the key variable to stress-test the thesis.

The Aurelion Team

Disclosures & Methodology

All forecasts and estimates are based on publicly available information, management commentary, and our own modeling assumptions. This report reflects independent analysis by Aurelion Research. All opinions and estimates expressed herein reflect the author’s judgment as of the date of publication and are subject to change without notice.

This publication is for informational and educational purposes only and does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. Aurelion Research and its analysts may or may not hold positions in securities discussed. Use only where legally permitted.

CNN quoted our…

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We are adding this stock to the Aurelion Index today.

Today we are diving into a very interesting business, one we think remains too overlooked given how well it has executed since IPO.

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So, you’ve seen the title, today we’re diving into Ecopetrol.

The year 2026 marks a defining moment for Ecopetrol as Colombia enters a critical election cycle that will shape the future of its largest corporations.

The stock has already demonstrated strong momentum, surging over 25% in U.S. dollar terms and outpacing both regional and global competitors. Investors appear willing to look through near-term volatility and focus instead on the possibility of a more market-friendly political outcome.

That shift has not happened yet, but the latest primary result was an encouraging first step. The candidate we believe would give Colombian equities the best chance to perform well, Paloma Valencia, won more than 55% of the vote, which is a strong result.

As David Austerweil, emerging-markets deputy portfolio manager at VanEck, put it, “Having a center-right candidate is much more appealing in a general election.” He also noted that “turnout was very high” and that “the market underestimated potential votes for center-right.” That helps explain why markets may already be starting to price a more constructive political path.

Colombia Bonds Rebound After Presidential Primaries

Following the primary result, Colombian bonds rebounded as investors began to price in the possibility of a more market-friendly political outcome. The market is now watching the election more closely, with growing attention on whether a more traditional administration could improve the outlook for Colombian assets and help restore confidence.

Ecopetrol at a Glance

As a vertically integrated giant, Ecopetrol remains the dominant force in Colombia’s energy sector with operations extending both locally and abroad.

The Colombian government maintains tight control over the organization, holding an 87% stake. The company produces around 750,000 barrels of oil equivalent per day and manages two major refineries with a combined capacity of nearly 400,000 barrels per day. The company’s historical trajectory has shifted significantly over the last two decades.

Following its 2008 listing, Ecopetrol was recognized as one of the fastest growing large cap oil companies in the world for nearly five years. However, that rapid expansion slowed after 2013. In the years since, the company has struggled to regain its momentum due to disappointing exploration results and various operational challenges.

EC Dividends: Why $90 Oil Could Drive an 8% Yield

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We are adding this stock to the Aurelion Index today.

This company is a rare find in the Brazilian financial system. It is a mid-sized bank with high profitability, low volatility, and a specialized model in a niche. We view it as a defensive compounder because it can sustain high returns on equity with a level of predictability that is hard to find elsewhere.

Why a Brazilian Bank Makes Sense Now

“Is it the right time for LatAm? Isn’t Brazil too risky? What about the corruption, the fraud, the political swings, and the credit risk?”

We hear these questions every week and quite frankly we do not care, at least not in the way people expect. In fact, that complexity is exactly what makes investing in Latin America so compelling. For a North American analyst or portfolio manager, analyzing and succeeding in the region is an art form.

The first chart tells the story clearly. Bank stock prices in local currency tend to bottom exactly when provisions peak, a cycle we clearly saw in 2009, 2016, and 2020. Provisions spike first, and equities typically recover well before the headlines actually improve. Today, provisions have already risen significantly and are starting to stabilize while valuations remain compressed.

Historically, this specific combination has marked the most attractive entry points. We love this challenging market because these environments are exactly where mispricing occurs and the best opportunities are found.

The Brazilian Bank Credit Cycle

The second chart reinforces the valuation case. Several Brazilian banks are generating 15% to 30% ROE while trading between 6x and 12x earnings, which is a rare combination globally. High-ROE franchises like ITUB4, BBAS3, and BPAC11 trade at multiples that suggest the market expects a permanent drop in profits or excessive macro risk. Even premium names like NU are not priced at extreme levels relative to their growth and returns.

Brazilian Banks: ROE vs. P/E

You are effectively buying high profitability at discounted valuations, and the gap between that earnings power and current multiples is where the real opportunity sits. This is exactly why Brazilian banks make sense right now.

A Generational Low for Bank Equities

The final chart points to a potential turning point for the banking sector. LatAm bank stocks are testing a level that has historically capped rallies.

A break above it would suggest the long sideways phase is ending and a new up-cycle may be starting. The lower panel compares Latin America to global peers and shows valuations near multi-decade lows.

LatAm Bank Stocks: Breaking Out?

Relative prices are back to levels last seen in the early 2000s, signaling deep underperformance. We see this as a period where pessimism has pushed prices well below underlying earnings power. We love this challenging market, because we believe it is exactly in these environments that the mispricing and the best opportunities are to be found.

Brazil Small Caps: Too Cheap to Ignore

The valuation gap in the Brazilian market is nowhere more apparent than in the small-cap space. As shown in the chart above, the Brazil small-cap index (SMLLBV Index) is currently trading at a 22% discount relative to its historical average. This level of compression places the forward P/E ratio near the -1 standard deviation mark, a zone that has historically preceded significant rallies once macro pressures begin to ease.

Brazil Small Caps at a 22% Discount

This mispricing largely reflects the high interest rate environment of the past few years. Small caps are more sensitive to the cost of capital, so as rates begin to move lower, they should benefit first from a domestic recovery.

Fundamentals are starting to stabilize, but valuations remain depressed. For investors seeking exposure to a Brazilian recovery, small caps offer access to solid businesses trading near decade-low multiples.

The stock we are adding to the Aurelion Index today is:

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We are adding this stock to the Aurelion Index today.

We are adding the stock to the Aurelion Index before tomorrow’s earnings. The stock has continued to decrease, and we believe this makes it an amazing entry point into this high-quality compounder.

After discussions with IQVIA researchers, we have confidence in the company’s moat and strong competitive positioning.

We were waiting to initiate after our meeting with management, but the setup is too compelling not to buy before earnings. A full deep dive will come later for our paid subscribers. We believe this is a company set to compound over the next five years, and it also represents a compelling opportunity.

In a few words, this is what we like about the company:

• Long runway for revenue growth above 10%

• Specialized player with a clear moat

• Visibility into margin expansion and inflection point in cash generation

• Overstated impact of GLP-1s

• Extremely attractive entry point ahead of earnings

Table of Contents:

1. Company Overview

2. Investment Thesis

3. Why We are Buying Now Before Earnings

Company Overview

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Introduction : 4Q Operations & 2025 Turnaround

Vale’s fourth-quarter production results showed strong momentum, with volumes across all segments exceeding the revised full-year guidance. While iron ore sales were slightly below consensus, copper was a primary driver of growth, reaching its highest quarterly production levels since 2018. After the operational turnaround in 2025, we’re very optimistic about the stock. Fiscal 2026 guidance remains unchanged from the latest investor update.

1. Iron Ore: Multi-Year Production Highs

Quarterly iron ore production rose 6% YoY, largely meeting market consensus. This performance was supported by strong output at Brucutu and the continued ramp-up of the Capanema and VGR1 projects.

For the full year, iron ore production reached its highest level since 2018, with realized pricing for the quarter at $95.4/t. Operations in the Southern System were recently impacted by a sediment overflow at the Fábrica mine.

There were no injuries, but the local government has suspended operating permits at the Fábrica and Viga units. Guidance has not been updated following this event. Additionally, pellet volumes beat expectations, and annual production met the revised guidance of 31Mt.

2. Copper & Nickel Performance

Copper output surged 19% sequentially in 4Q, reaching a quarterly high not seen since 2018. This performance was driven by record-level operations at Salobo and steady output from Sossego and the Canadian assets. Total copper production significantly exceeded consensus expectations for the period. While nickel production also beat consensus, both output and realized pricing saw sequential declines.

Vale 4Q25 Production Results

Our View: Vale's recent share performance is driven in part by favorable macro tailwinds across the sector. The company's operational standing is also improving as it consistently hits iron ore targets and executes on its copper growth strategy in Brazil. This steady execution is expected to support a higher equity valuation over the long term.

Investment Thesis

The investment case for Vale rests on the premise that it has moved beyond its most difficult operational stretch to prioritize excellence and profitable growth. This shift indicates that the corporate narrative is turning the page on a period of remediation to refocus on core portfolio strengths. Management is now in a position to narrow the valuation gap between the current share price and the intrinsic value of these high-quality assets.

Vale at a Glance

Vale is a global mining leader and a premier supplier to the seaborne iron ore market. As the largest producer of iron ore and pellets, it also holds a significant position in nickel and maintains meaningful copper exposure through its base metals platform. Since its founding in 1943, Vale has operated an integrated business model that combines mining, logistics, and distribution to ensure cost efficiency and reliability of supply.

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We are reiterating our high conviction in this name.

Our favorite French tech holding just delivered a great beat on its revised guidance, signaling a major shift into a high-margin growth phase. The numbers show a business that is finally proving its technology works at a global scale. This is best highlighted by an 83% surge in operating cash flow, yet the market is currently distracted by a targeted short campaign.

We believe this short attack is significantly overdone and has lost touch with the company’s actual operational momentum. For the smart money, this disconnect has created a rare opening. The stock is being pressured just as high-margin recurring revenue is doubling and a major European rollout is beginning. We view this as a gift of an entry point for a business that remains materially undervalued and is backed by a massive net cash position.

Now, let’s dive in and explain why we think this is a must buy. If you’re not reading the rest of this report, you’re missing real alpha.

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Today however the TD Cowen initiation of coverage on four Canadian cannabis operators is a massive development that should provide a significant catalyst for the sector. The specific company we are providing a research update on today is one where we have met management multiple times and visited the production facility and attended investor presentations.

We have a very high level of conviction in this name.

So which one is it? It would be too easy to just name it right away.

Instead, let’s start with TD Insights on the cannabis industry.

We see it as highly relevant for anyone interested in the space and a strong starting point to understand the broader opportunity.

Industry Insights

A substantial disconnect currently exists between equity prices and fundamental performance within the Canadian cannabis landscape.

While the sector remains dominated by retail investors and trades at a significant discount to historical multiples the operational reality has improved significantly. All companies under current coverage are EBITDA positive with strengthened financial positions and leverage levels maintained below the institutional 3.0x hurdle rate. We expect continued execution strength and financial discipline as market growth and share gains accelerate.

A first mover advantage in key categories is driving repeat sales and margin expansion through sticky consumer behavior. This institutional validation highlights specific competitive advantages across industry leaders including retail expertise and scale along with a focus on proprietary genetics and medical cannabis dominance. Furthermore, we believe the sector’s large cash positions and strategic backing from major tobacco players provide meaningful stability, while established leaders maintain strong market share in high-growth categories such as vape and infused pre-rolls.

Market dynamics are further supported by a visible shift away from alcohol consumption as awareness of health risks increases. A 2026 study by the Centre for Addiction and Mental Health identified alcohol as the most harmful psychoactive substance in Canada while cannabis ranked five times less harmful. The sector is now comprised of world class consumer packaged goods companies characterized by high purchase frequency and low costs.

These industry leaders are well positioned for an eventual sector revival as the domestic opportunity becomes better understood. Furthermore the cannabis sector is a massive contributor to national growth contributing over $16B to Canadian GDP and supporting over 227,000 jobs.

So now, let’s take a look at which stock it is and reveal it for those who don’t already know…

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We are adding this stock to the Aurelion Index today.

The company is an undervalued software leader that we believe should trade at a higher and more normalized multiple. It has not received the attention it deserves for its highly profitable business model and rapid AI innovation. This disconnect is exactly what makes it attractive to us.

Introduction

The software industry is maturing fast. Companies are investing heavily in digital tools to compete. Cloud software is now the backbone of business.

While giants like Microsoft and Salesforce led the early charge, the next phase of growth belongs to platforms that merge communication with customer engagement. Organizations are leaving fragmented systems behind for unified solutions that simplify modern business.

Artificial intelligence is also transforming the landscape. We are moving past simple automation to a world of Agentic AI. Intelligent tools now manage entire workflows rather than just repetitive tasks. This shift creates a massive opportunity for providers that can deliver high value intelligence beyond basic transcription. For industry leaders, the competitive edge now relies on product velocity and technical depth.

This year is a turning point for the sector. The way software is delivered and supported is changing. Recent analysis from Rosenblatt suggests the industry is moving away from a brokerage model of simply passing leads. It is shifting toward a framework built on being a Solution Trusted Advisor. In this new pay to perform environment the winners are those who can handle complex deployments while maintaining continuity through the entire sales cycle.

This evolution opens up a significant market opportunity. Bloomberg estimates the combined unified communications and contact center markets were valued at $44.7B in 2025. Projections indicate this figure will reach $59B globally by 2028. The company we analyze today currently holds a market share of ~6% within this space. While other industry evaluations place the current market size above $50B, this company’s management suggests that, adding AI, the total addressable opportunity exceeds $150B annually.

We believe that, given the current penetration rate in the total addressable market, there is still enough room for continued, significant sales growth for the foreseeable future.

The Market Opportunity is Large at ~$150B

In this changing landscape the stock we analyze today stands out as a primary disruptor by prioritizing research and development. Rosenblatt highlights that the company released ~1,600 features in the last year alone.

This aggressive focus on AI driven products like its new autonomous agent solution positions the firm to capture significant value in the intelligence market. Rosenblatt views the initial 2026 revenue guidance of 4% to 4.5% as conservative to account for macroeconomic caution but notes the underlying trend points to exceeding expectations. The firm has set a strategic target of reaching $1B in AI driven annual recurring revenue by 2028.

We believe this ambition proves it has the technical discipline to build a sophisticated enterprise communications engine in an AI first world.

Why This Opportunity Exists

Current market valuations reflect a level of caution that appears disconnected from the strengthening operational results. While investors have been fixated on the transition from high growth to stability the underlying financial performance continues to exceed expectations.

Independent analysis indicates the stock trades at a significant discount to its intrinsic quality with a price to sales ratio of ~0.90x compared to a software industry average near 4.50x.

This pessimism persists even as the company delivers record operating margins and has raised its FCF outlook to over $525M for the current FY. Management has also decisively addressed capital structure concerns by securing a path to handle its 2026 convertible notes and repurchasing $117M in stock. We believe this behavior actively mitigates the risk of future dilution.

The broader market shift creates a powerful tailwind. As hybrid work becomes permanent, organizations are consolidating their tools. They require the combination of voice, video, and messaging that this platform delivers. By integrating agentic AI, including the new autonomous AIR agent, directly into its core architecture, the company is positioning itself to capture greater revenues from the intelligence layer, alongside its core seat based model.

With a strategic roadmap to reach $1B in AI driven annual recurring revenue by 2028, the firm is evolving into a more profitable innovation leader. The stability of its recurring revenue base supports reinvestment into product development and growth. This creates a compelling entry point for investors focused on the platform’s long term potential.

Investment Thesis

We are initiating coverage of this software provider. The business operates on a strong recurring revenue foundation and trades at a valuation that we believe fails to reflect its powerful FCF and revenue scale.

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We are adding this stock to the Aurelion Index today

The company we are adding to the Aurelion Index today is an under the radar consumer defensive that we believe should trade at a higher, more normalized multiple. It has not received the attention it deserves, which is exactly what makes it attractive to us.

Introduction

This report is a bit different from what we usually publish. Our work often focuses on cyclical businesses, commodities, or technology, though rarely defensive stocks. This time, we are writing about a more straightforward company. These are the businesses we tend to like. They are easier to understand, easier to follow, and often overlooked.

This name still sits outside the spotlight. It’s not widely discussed and does not attract much attention, even within small caps. That is part of the appeal. It is a Canadian consumer staples company we know well, with everyday products people use as part of their routine, which keeps demand simple.

We recently met with the CEO, and the conversation reinforced our view that the market is missing the quality of this story. We came away with a clearer sense of how management is thinking about growth, execution priorities, and capital allocation, and why the business can keep compounding quietly even without headline attention.

Why Consumer Staples Now?

When adding names to the Aurelion Index, we look for the convergence of strong company fundamentals and a favorable sector backdrop. High quality assets can exist even when the market is out of favor, but we think the thesis is strongest when fundamentals and the sector setup align.

Our latest addition fits that profile well. The broader setup in Consumer Staples is supportive, but it has become increasingly selective. As the chart below illustrates, performance within the sector has been uneven.

The cap weighted index is near an all time high, while the equal weight version has trended lower since early 2022, suggesting gains have been driven by a small group of large names.

In this environment, execution outweighs simple sector exposure. The defensive bid helps sentiment, but the market is still rewarding companies that can deliver consistently on demand, margins, and cash flow.

Positioning also warrants caution. BofA data shows net flows into Consumer Staples at record levels. While this supports near term multiples, it elevates the risk of crowding should the macro narrative shift. We prefer stocks where returns are driven by fundamentals. Even if Consumer Staples inflows cool, the upside can still come through as execution continues to deliver.

Record Inflows into Consumer Staples

Finally, the rotation into value has accelerated. The performance gap between Russell 1000 Value and Growth is at its widest since 2022. This backdrop favors durable earnings, reasonable valuations, and clear catalysts. When those pieces are in place, a stock can outperform on fundamentals even if the broader sector trade becomes less supportive.

Value Stocks Outperform Growth by Most Since 2022

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So, you’ve seen the title, today we’re diving into Braskem.

Odds are you’ve already heard the name popping up on X or in the news lately, and usually, it’s not for anything good. There’s a massive amount of controversy and criticism surrounding this company right now, so we’re going to break down what’s actually going on. We’ll also get into our take on the situation and what we expect for the future, even if it’s impossible to perfectly forecast all the qualitative factors and moving parts.

There are currently two sides to the BAK story.

(1) Most are critical and believe Braskem is on life support and could face bankruptcy after the upcoming Brazilian election, as it would be surprising to see the government allow a default during an election year.

(2) Others argue that political incentives, potential support from Petrobras, and the strategic importance of the company could still lead to a restructuring that avoids a full bankruptcy scenario.

What Is Braskem and What Do They Actually Do?

Braskem is the largest petrochemical producer in Latin America and one of the top ten in the world. It was founded in 2002 and is based in São Paulo, Brazil. As of 2026, the company operates 40 industrial plants across Brazil, the United States, Germany, and Mexico.

They specialize in making the raw materials for plastics that you use every single day. For example, they make polyethylene for food containers and milk jugs, polypropylene for car parts and bottle caps, and PVC for things like water pipes and credit cards. Essentially, they provide the raw ingredients that other companies turn into the finished products you find in your kitchen, your car, and even your house. They are pretty much in everything.

The business is split into three main regions: Brazil, Mexico, and a combined segment for the United States and Europe. While their Brazilian operations are the most diverse and cover a wide range of chemicals and electricity, their international plants focus on specific resins that are in high demand. By using different feedstocks like naphtha, natural gas, and even ethanol for their green plastics, Braskem has secured its spot as the leading resin producer in the Americas.

Since we are already on the chemicals theme, you can also find our report on our favorite idea in the space. We believe it offers a significantly lower-risk, higher-quality way to get chemical exposure, and it is currently held in the Aurelion Index. It has performed very well so far, and we expect that to continue.

The Financial Elephant in the Room: BAK's Debt Reality

If you have been following Braskem at all, you already know that their debt is the massive cloud hanging over the company. It is basically the main reason the stock has been hit so hard and why so many investors are wary of it.

We need to look at the actual numbers to see if they are truly on the brink of bankruptcy or if the situation is more manageable than the headlines suggest.

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Description: Global Small-Cap | Infrastructure Operator

We are adding the stock today to the Aurelion Index.

Introduction

If you read our recent article on Japan, published earlier this week, you already know why we believe the time has come to take a closer look at the market. Japanese equity valuations are attractive, sentiment is starting to turn, and the yen still appears undervalued in our view.

If you haven’t had the chance to read it yet, it would be a good idea to do so, as it helps explain why we are bullish on Japan. See below.

Capitalizing on the Recent Pullback

Japanese equities have recently entered a period of outperformance in both local and common currency terms. We share a high conviction view with BCA Research that recent market volatility offers a strategic entry point.

The technical indicator in the chart illustrates that the market has retreated from overbought levels toward an oversold state, representing a healthy correction that sets the stage for further gains. Because the valuation indicator remains well below the 1980s bubble peak, we believe the current trend rests on a solid foundation with significant growth potential and an opportunity to buy the dip.

Mean Reversion & Multi-Decade Value

We are closely monitoring the political landscape following reports that PM Takaichi is weighing a snap general election. While political uncertainty often cause volatility, we view the correlation between the Nikkei 225 and the USD/JPY exchange rate as the more critical factor to watch.

We believe the market is mispricing the potential stability a consolidated administration could bring. We see any dip related to election headlines as a noise event rather than a fundamental deterioration of the thesis.

Nikkei 225 Index & USD/JPY Exchange Rate

We acknowledge that Japan’s equity risk premium has dropped to its lowest level since 2010. While some analysts interpret this decline as a clear sell signal, we think the exact opposite. Buy the Dip!

We view this shift as a structural re-rating of the Japanese market as it exits decades of deflation. In this environment, the premium for holding equities should naturally lower. We believe this dynamic validates our focus on specific high quality names within the broad index.

Japan’s Equity Risk Premium Drops to Lowest Since 2010

We view the industry of today’s new stock addition to the Aurelion Index as having a formidable moat and minimal competition. Barriers to entry are effectively absolute, making this a demand-driven thesis rather than one shaped by competitive dynamics.

This asset class has performed exceptionally well globally in recent years, yet it is distinct from the technology, AI, or semiconductor narratives.

We view the business model of our pick as fundamentally much simpler.

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