Actionable insights — Best Buys: May 2026

1. Underwrite a regulatory shock by asking what a customer would actually have to do

1. Establish exactly what the regulator authorised — permission to use an alternative, or a requirement to stop using the incumbent. They are very different.
2. Walk through the customer's real decision: what systems, models and compliance processes are wired to the incumbent, and what replacing them would cost in time and risk.
3. Ask whether the alternative is additive or substitutive. Adding a second supplier is far more common than switching.
4. Check whether the grievance that drove the change is actually felt by the customer — if the cost is trivial to them, the political pressure has no commercial follower.
5. Wait for evidence in the results, then decide. A price reaction is not evidence.

• The regulator going further — permission today can become a mandate later, and the same agency sets the rules for the entities that buy most US mortgages.
• Declaring victory too fast. "Earlier this week, FICO reported great results. It seems like the investment thesis is not broken after all" is a conclusion drawn two weeks after a structural announcement, on a quarter that pre-dates any behaviour change.

2. Judge a serial consolidator by whether the operator has run the formula before

1. Write down the operator's stated method as steps, not adjectives.
2. Check each step against the current company: is the industry genuinely fragmented and analog; has capital been raised ahead of the deals; is technology actually being deployed?
3. Count prior completions, not prior attempts, and note the industries — a method that transfers across industries is a method; one that worked once is a circumstance.
4. Size the remaining runway (industry size against consolidated share) to see how long the machine can run.
5. Then ask what the formula needs that is not present this time — cheap capital, willing sellers, a benign regulator.

• The capital cost. "Raises massive amounts of capital upfront" is the step that depends on markets cooperating, and it is the one that fails first.
• No valuation anywhere in the spotlight. The entire section is a quality and management case with no multiple, no price and no target — unusual for this archive.

3. Value an acquisition on the margin it imports, not only the revenue it adds

1. Get both companies' margins on the same measure before the deal.
2. Weight them by revenue to get the mechanical combined margin, before any synergies.
3. Compare that to management's stated combined figure — the difference is what they are claiming from integration.
4. Treat the mix effect as high-confidence and the synergies as low-confidence, and date the synergies.
5. Ask why the higher-margin business was for sale.

• $17bn paid for a business whose stock is already "up +444% since 2020" — the mix improvement is real, but so is the price.
• Synergy targets dated far enough out that nobody will check them.

4. Frame a risky expansion as a call option, and check you are not paying for it

1. Value the established business on its own — for a holding company, against NAV or the sum of the parts.
2. Compare that to the market price. If the price is at or below the core value, the new venture is being valued at zero or less.
3. Say what the venture would be worth if it works, and what it costs if it fails (the committed capital, plus management attention).
4. Only call it "free" if the downside is capped at the committed spend and the core value genuinely covers the price.

• Options that are not free because the NAV itself embeds the expansion, or because the discount is a permanent feature of the vehicle.
• Management attention as an uncosted expense — a US launch consumes the people running the profitable European business.

5. Use insider buying as an asymmetric signal, and only as corroboration

1. Check open-market purchases, not option exercises or grants.
2. Size them against the insider's own wealth and salary, not against the company.
3. Remember the asymmetry: selling has many innocent explanations, buying has essentially one.
4. Use it to corroborate a thesis you already hold, never to originate one.

• Insiders at an asset manager knowing the marks on the private book better than you do — informative in both directions.
• Purchases that are small relative to compensation, which are signalling rather than conviction.

6. In asset management, read fundraising in a hard market as the competitive test

1. Look at capital raised in a year when the industry as a whole struggled to raise.
2. Compare to the firm's own history and to peers. Growth in a bad year is a share gain.
3. Check the dry powder — undeployed committed capital — as the forward earnings pipeline and as an option on falling asset prices.
4. Read the two together: raising in a drought and holding cash into a decline is the strongest position an allocator can be in.

• Fee rates falling as size rises — more AUM at a lower rate is not the same as more revenue.
• Dry powder that expires. Commitments have deployment periods, and undeployed capital eventually gets returned.

7. Identify a Veblen good, because it inverts how you read a price increase

1. Ask whether raising the price increases desirability. If so, normal price-elasticity reasoning does not apply.
2. Check the mechanism sustaining it: deliberate under-supply, controlled distribution, and a secondary market trading above retail.
3. Check who owns it — sustained under-supply requires an owner who can ignore quarterly volume pressure.
4. Then model demand off the wealth of the customer base rather than off the consumer cycle.

• The recovery-order claim being testable: if Hermès is first out and LVMH is still struggling, that is a check you can run.
• Volume expansion. The moment supply is loosened to hit a number, the mechanism starts to unwind.

8. Decide whether your "best buys" list includes what you already own, and say which

1. Choose a rule: rank the whole eligible universe, or rank only the names you do not own.
2. State the rule in the issue, every time.
3. Be aware of what the choice hides — excluding holdings means the ranking cannot tell you that a current position is the best available use of new money.
4. Cross-check with a separate list that does rate the holdings, so both questions get answered.

• "We love all companies in Our Portfolio right now" sitting five days after an issue that named JDG.L as the most likely sale and gave three holdings a "Not sure" on the ten-year test.
• Mislabelled artefacts: both performance graphics in this issue are titled "March 2026" while the text discusses April.