Sanara MedTech (SMTI)

Sanara MedTech had a really strong quarter, in my opinion even stronger than it looked on the surface. While overall revenue grew by 19%, surgical revenue grew by 21%. It was also the first quarter they showed a GAAP profit, despite their still very high interest payments. In my write-up, I outlined the thesis that the company will continue to grow by more than 15%, with multiple growth levers still to pull.

Despite a lower guidance of only 14-17% annual growth, after Q1, I believe the odds are pretty high that they will be able to beat that guidance, as they did this quarter.

Some key KPIs are heading in the right direction: the number of distributors stands at 450+ since Q4, which is 100 more than one year ago. Further, they have hired three additional reps in Q1, who are currently undergoing training and will contribute to sales by the second half of 2026. They did $103M revenue with 40 reps in 2025. $2.5M per rep. Adding three, in theory, could mean an additional $7.5M. As a reminder, the internal reps manage the relationship with the distributors and their 1099 reps who ultimately sell the products to the surgeons.

They don't disclose surgeon count growth, but on the call they said “solid growth“ there too.

In January they signed a contract with Vizient, the largest GPO in the States, for BIASURGE. While they don‘t disclose revenue of each product, I believe BIASURGE saw strong growth this quarter, albeit from a small base.

Using the royalty payments for BIASURGE we can estimate a sales range, and also track the growth in royalty payments to get a feel for the growth in BIASURGE.

We have another data point from Q4 2024, where they saw a spike in BIASURGE sales, driven by the hurricane. They disclosed this drove $1.8M in additional BIASURGE sales for that quarter.

Assuming roughly $0.2M of baseline BIASURGE sales at time on top of the $1.8M hurricane spike, that's ~$2M in total BIASURGE revenue for Q4 2024. The $63K royalty payment works out to 3.15% — in line with the 2-4% disclosed range.

In addition, the overall number is not that important, as we know the business is still 80%+ CellerateRX but the growth rate is what matters. And royalty payments grew by 57% YoY this quarter.

It will be an important data point to track as the product gains more traction driven by the new contract and overall adoption.

However, there was also bad news buried in the 10Q, Chemo Mouthpiece did not receive its reimbursement code. Without a reimbursement code it‘s unlikely that the product will get launched. Hence this optionality (it was a joint venture) is likely a 0 now.

Overall I am back to my original estimate of 15-20% growth, while I believe 17-20% is the most likely outcome for the full year.

Shares are trading at 1.8x EV/Sales (2026e), which is too cheap in my opinion. The company is profitable, with multiple catalysts still ahead: their refinancing, further ramping of BIASURGE, and the launch of OsStic in 2027

If they can come in at 17-20% growth for the year, I believe the market will start to re-rate shares closer to a 3x EV/Sales multiple.

Frontera Energy (FEC:TO)

Frontera reported their first quarter as an infrastructure company with the E&P labeled as “discontinued operations”. The infrastructure assets consist of their 35% stake in the ODL pipeline and their 99.7% ownership of Puerto Bahia, a port in Cartagena, Colombia. The dividend payments from ODL can be lumpy and this quarter no dividend was received, which made cashflow appear lower. Regardless, the company expects to receive US$64.7M in dividends from the pipeline this year, 40% in the second quarter, 35% in the third and the remaining 25% in the fourth quarter. The dividend from the pipeline is used to repay their loan via their cash-sweep agreement. This will lower their debt from US$167.8M to US$131M by year end.

Overall the pipeline is a stable source of income, with volumes from Caño Sur offsetting the decline in the other blocks. Caño Sur is one of the growth projects from Ecopetrol.

Applying a 6x multiple to roughly US$65M in dividends net of taxes, would imply a valuation of US$390M for the pipeline alone. Keep this number in mind, as I will show you the current Enterprise value post special dividend.

The port, Puerto Bahia will become the growth engine of the remaining infrastructure stub. It consists of its liquid terminal as well as the general roll-on/roll-off (RORO) terminal. The liquid terminal side is currently declining because they lost one oil trader that stopped doing business in Colombia. General cargo, however, is becoming a real growth driver, increasing revenue by over 100%.

This was driven by the port positioning itself as a key strategic partner for the Colombian automotive sector. Automotive sales in Colombia increased by 26.5% in 2025 and a staggering 47.8% in Q1 2026. This is fueled by imports from (chinese) EVs and a strong peso.

But RORO is not even the real growth story here. Their LPG project started in March 2026, and is expected to reach nameplate by early 2028:

Once the project reaches full capacity it is expected to generate between US$10-15M in EBITDA. Additionally the LNG project with Ecopetrol only needs approval from ANI and is expected to start by the end of this year. This is a critical project for Colombia as it would eventually import 40% of its national demand for natural gas. Frontera is expected to invest $80M in capex to upgrade its facilities.

The project is divided into two phases, the first one with 126 MMcfd , and the full ramp-up would increase throughput to 370 MMcfd from Dec 2028. It is a seven-year take-or-pay contract with Ecopetrol as the commercial partner and responsible for the marketing of the gas, with multiple partners already signed.

Frontera is responsible for the infrastructure and will collect a toll. While the concrete payment is not official yet, talking to other investors and playing around with LLMs gives me range of $0.50-$1/MMBtu. This would imply revenue of US$24M-47M (126 MMcfd × 365 × 1.03 MMBtu/cf = ~47.4M MMBtu/yr → at $0.50 = $24M, at $1.00 = $47M)

Taking $0.50/mmbtu and assuming an EBITDA margin of 70% (which is typical), it would result in roughly US$16M in EBITDA. Adding the US$10M from the LPG project (low-range of the publicly stated guidance) and the current run-rate of $16M it would lead to US$42M in potential earnings power. This does not even include the ramp-up to 370 MMcfd.

Since they have not guided officially yet to anything regarding the project with Ecopetrol, I am not sure whether my estimates are correct, hence I would appreciate anyone with industry expertise to verify them.

Even if I am wrong on the Ecopetrol deal, the current port and the LPG alone provides a path to US$25M+ for the port by 2028. Add whatever you assign to the regasification project on top.

So what is the stock trading at post special dividend?

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For the whole year, however, Energy is still the strongest sector. Tech stocks have gained back most of their losses from earlier this year and are now the third best-performing sector.

All that while Brent and WTI both trade above $100/bbl as I write this on May 1st. The market seems to not care (anymore) about the war and consequently the shutdown of the Strait of Hormuz. I don’t have a strong view on how markets play out from here, but I generally tend toward the view that if markets haven’t cared much about the blockade so far, they won‘t in three weeks, especially since at some point the strait should see traffic increase again. It will likely still take a long time until it returns to normal. That said, I can imagine this being long-term bearish for oil, as supply is being increased and as some countries recognize how dependent they are/were. By long-term I mean 5 years plus. In the near term, Brent contracts are above $75/bbl until May 2028.

Update on Colombian thesis
I laid out the thesis for Colombia here. By now we have some polls to draw conclusions from. For that subject, I recommend this guy on X, as well as the Latin American risk report (which was recently featured on Odd Lots).

Bottom line: as Polymarket also indicates, I believe there is a roughly 60–66% chance that a right-wing candidate wins the election.

Since that’s better than a coin flip — albeit not by much — I continue to view Frontera Energy as the best bet, since the company would benefit under both outcomes. A right-wing win would likely trigger a re-rating of Colombian equities broadly, and their pipeline would see higher throughput as E&P companies restart exploration. In a scenario where Cepeda wins and the fracking ban stays intact, their port with its LNG and LPG projects becomes vital for Colombia, as the country plans to import 40% of its natural gas demand through it.

You can find my original write-up here, and an update here.
The first round of the Colombian election is May 31st, with the likely second round on June 21st.

Portfolio Update

In April, my portfolio rose by +8.48%, bringing my YTD performance to +17.8%.

My full portfolio remains top-heavy with almost 40% in my top two picks, where I continue to like the risk-reward at current levels.

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I put 80%+ odds on the company being sold at a premium within the next three months. I estimate the upside to be at least 19%, which works out to a 104% IRR.

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In this case, we have a commodity business with an ugly balance sheet. Sounds horrible, right? That’s exactly why the opportunity exists.

But taking a closer look reveals:

1. The external headwinds that crushed 2025 have fully reversed into tailwinds. Management’s 2026 EBITDA guidance midpoint of $160M essentially matches 2023’s $162M — a level the current market cap doesn’t reflect.

2. Cash flow from 2026 plus some announced asset sales should be sufficient to put the balance sheet into a healthy position by year-end.

3. Despite being a commodity business, it operates in a regional oligopoly and the local regulator itself has formally described the company as exhibiting “features of a monopoly player” in its core market. The next meaningful competitor sits 600+ km away.

With most of the EBITDA flowing to debt repayment, the company currently trades at a levered FCF yield of ~30% for 2026.

Three catalysts beyond earnings: asset sales, capital structure simplification, idle asset restarts.

The stock is…

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This brings my overall return, since Jan 1 2023, to 147%, which equals a CAGR of 32.1%. Compared to the S&P 500 of 70% (17.7% CAGR), and MSCI World of 57.80% (15.1% CAGR).

Mental flexibility

This outperformance was only possible by not putting myself into a box, but rather by following my hunches and — most importantly — my curiosity.

I think no one, myself included, would have expected that in Q1 2026 I would buy mainly Latin American oil companies. However, that is exactly what I did, and what led to the outperformance in Q1.

I believe putting yourself into any kind of box is a fool’s game. The only box I would put myself into is the one I think will beat the market. That can be Tech, Quality, or as it was in Q1, Oil. I don’t care if it’s in the US, Europe, Asia or Latin America. As long as the set-up is attractive and I think I have an edge, I’d be willing to go there.

Equally, I couldn’t care less about absolutes, only relatives. I don’t care if a company, country or sector is good in absolute terms. What I care about is whether it will be better than its current perception. You rarely make money on the best company if everyone knows it’s the best company — and it is priced accordingly. On the flip side, you can buy the worst company if it’s priced for bankruptcy but will actually survive. Obviously the best set-ups are somewhere in the middle, and have the greatest discrepancy between the current state and the potential future. Importantly, this change in perception can happen on multiple levels.

American stocks as a whole could experience a downgrade in investor‘s perception, while Latin American stocks could experience an upgrade. It does not matter that the US is still the richest nation and cares most about the stock market. What matters is the trajectory, compared to the current status quo. The same can happen for an industry as well as for a specific company.

Most bottom-up investors may not credit much of their returns to the first two levels, only to the last one. I believe that is only partly right. The years from 2020 to 2026 have pretty clearly showed the difference, in my opinion. Right after Covid, you had a stock market of two stocks: Covid winners and Covid losers. In 2022 — a year that 2026 is seemingly echoing — everything that benefited from inflation rose, while everything sensitive to higher rates plummeted. The years of 2023–24 were driven by American exceptionalism, fueled by the Mag 7 and a strong dollar, making everything ex-USA look weak. While 2025 looked good on paper for US stocks, it lagged most other country returns, especially measured in EUR. For European investors trading their stronger Euro into a weaker dollar to buy shares, the S&P barely did better than flat.

Anyway, it’s not about trying to predict the macro. But I think everyone who sees themselves as a bottom-up guy should acknowledge that their companies do not exist in a vacuum, but in a market driven by the perception of its participants. And that perception is what drives share prices in the short-to-medium term.

For me personally, a thesis rarely has a time frame longer than 12–24 months. I am happy to hold longer if the company continues to execute and the share price still remains attractive from a valuation perspective. However, to be frank, the IRR for most stocks decreases materially after the first 18 months of ownership, if you did time it right.

A perfect example is Cipher Pharmaceuticals (CPH.TO). I still own shares of Cipher, now for almost three years. After an unexciting 2025, also fueled by some fears around measures taken by the Trump administration around lower drug prices, shares are now positioned again for a strong 2026. Something I had already shared with my paid subscribers at the end of last year.

Operationally, Cipher has done a tremendous job all along, and yes it is more tax efficient to hold shares the whole time, but it is equally true that shares did not move for almost two years. Additionally, this is actually already the best case scenario: a micro-cap that holds its level after a run-up. Way more likely is that either the multiple gets so far ahead of the business that a bigger pullback becomes probable, or the company runs into operational problems. After all, growing a company is hard. Very hard.

All that is to say that in my opinion the stock market is about a change in perception, and that selling is equally — if not more — important than buying.

I believe a common “lazy man’s” excuse is that it is only a short-term issue and you should wait one more quarter. I think that is a very thin line, and it is actually very difficult to tell whether a problem or a trend reversal is really short-term, or how long it will last. In my experience, I have barely made money being contrarian. The easy money is buying Cipher at CA$3, when there are no expectations and you spot a new trend early. No contrarianism, no trying to catch a falling knife, just being early in an emerging uptrend.

Portfolio Update

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Given what is going on in Iran, I think there is a not insignificant chance this will lead to sustained higher prices in oil, fertilizers, and chemicals. I am of the opinion the market has still not really priced in the ongoing war. I may be wrong. This is not a macro call, but I think ignoring it completely is riskier than acknowledging the potential that “something might actually happen” and sizing the portfolio accordingly. What is even more interesting is that most of the effects are just fuelling what the market has been telling us from the start of the year. The sectors that would benefit most from ongoing disruptions are Energy and Chemicals. Both had been the best performing sectors already in January and February, before the war broke out.

Chemicals are a bit more nuanced than Energy, but to give you a sense of how real this already is: roughly 84% of Middle East polyethylene capacity depends on the Strait of Hormuz for export access. Asian petrochemical producers from Japan to Taiwan to South Korea have declared force majeure across the board because they simply can’t get naphtha feedstock.

It all comes down to what your feedstock is. If you’re a producer relying on crude-derived naphtha, your input costs are likely rising more than your output prices. That’s most of Asia and a good chunk of Europe. On the other side, producers using cheap natural gas as feedstock, primarily in North America, become cost-advantaged.

As for oil, futures markets are now pricing in a longer war. While oil prices are still set to decline on the curve, futures are no longer trading below $70 even three years out, and are holding above $75 through May 2027.

And this isn’t just a transit disruption. The IEA’s March report called this the largest supply disruption in the history of the global oil market. Gulf countries have cut production by at least 10 million barrels per day. Physical infrastructure has been hit by drone strikes on terminals in the UAE, Bahrain and Qatar’s Ras Laffan LNG complex. Even Saudi Aramco’s Ras Tanura took damage. You can’t just flip a switch on that. The IEA responded with an emergency release of 400 million barrels, the largest ever, and it barely moves the needle against a ~15 million barrel per day net supply loss.

The important context is that neither $75 nor $100 is actually that expensive, adjusted for inflation. Sure, at the start of the year, some some analysts argued “fair price” might be around $60. But even pre-war, you had very low investment into new fields in the US. Just look up the commentary from McCoy, or any other oilfield service provider, and you’ll get a good understanding of the underinvestment in the onshore Permian.

Quite the opposite is happening south of the border. With higher oil prices, capex spending in Vaca Muerta will only accelerate. “Chevron Eyes Tripling Vaca Muerta Production by 2035”, and VISTA’s CEO has said higher oil prices will likely further increase capex spend there. As a matter of fact, I view Latin America as the potential biggest beneficiary of all of this. I already wrote about cheap Colombian E&Ps here:

And now, one week after the parliamentary elections, we have the first polls, which are looking good.

The way I see the election: Cepeda (left) has his ~35% base of voters. They will always vote for him. The other 65% are undecided, and a good chunk of them will divide between far-right candidate Abelardo de la Espriella and center-right Paloma Valencia. Hence, as the polls are also expecting, the race will likely go into a second round, where I see the likelihood of Valencia winning as not too small. The likelihood, at least, is greater than it was in January. If that happens, Ecopetrol and Parex will be the biggest beneficiaries. Add to that oil prices above $70, and it’s easy to see the potential upside in these names.

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Ready for stagflation?

A term that has scared most investors since 2022, and is likely coming back, is stagflation. The comparisons with the 70s were drawn already in 2022, and are naturally returning now. As I already said, my approach is neither to obsess, nor to ignore it, but to attribute a certain likelihood to it actually happening.

As you can see, logically, the best-performing asset classes have been commodities, and interestingly small caps as well. Another potential similarity, albeit a complete long-shot: what was the richest country in South America in the 70s? Venezuela, by a mile. It was one of the 20 richest countries in the world. The ramp-up in Venezuela is taking place right now. Even though it’s still small in absolute terms, it’s happening. Not to an extent that it could offset the 10-20% of lost supply from the Iran war, but enough that it could transform the business of smaller companies.

Maurel et Prom (Disc. I am long) is looking to 3x their production in Venezuela in the coming years.

”Venezuela, -- of course, it’s the big item. We’re looking at more than 400 million barrels in existing reserves at 100%. So of course, we would like to have a strong ramp-up. (…) The ambition is to bring production back up. You may remember this to that 13,000 when we resumed operations, now this then at upwards of 20,000 and we’re looking at 30,000 by year’s end. And our ambition is to reach 60,000 barrels per day by, say, well, within 4 or 5 years.”
— Earnings Call 2025 results

American exceptionalism?

One remaining question mark for me is American exceptionalism. Before the war broke out, it was pretty clear that markets were of the opinion the US is getting weaker while other countries are catching up. The US was lagging all other countries year-to-date, and the dollar had lost roughly 15% of its value compared to the Euro in 2025. However, since the war in Iran broke out, investors have been selling everything to park their cash in USD, and even US stocks. Brazil, for example, lost ≈7% peak-to-trough on the first day after the war. Being up ≈15%+ year-to-date before that doesn’t make this a weak overall performance, but still, since the war, the USD has been strengthening and the S&P has been the best-performing index.

I can totally see why Europe, as a whole, would once again be the big loser of a potential continuation of the war and increasing energy costs. The spread between natural gas prices in Europe and the US has never been higher. Nevertheless, especially in the perception from the outside world, it is fair to say that the US has not gotten stronger with this war. And frankly, the only way out right now seems to be to leave the region without “winning” the war. As a thought exercise, this could potentially be the continuation of the “sell America” trade. Maybe. But then the question remains: what to buy? If energy costs stay elevated, Europe as a whole is not the answer.

I have already described Latin America as a potential destination for capital, especially in an environment of high energy costs. Most of the countries in South America are net energy exporters.

It certainly might be the right time to start hunting outside of the USA.

On this topic, I'd recommend: https://www.biremecapital.com/blog

How to position / trade the current market

As I already outlined, I believe the markets have not really priced in the potential long-term effects of this war. Coming from rich valuations anyway, it would not surprise me to see lower stock prices. I also believe the chances of having higher oil prices for longer are high, because even if the Strait of Hormuz opens, it will take time to recover the production shut-ins. Currently, I have 15% of my book in upstream producers, another 17% in a special situation that recently sold its upstream business and is now a midstream and infrastructure play. Add to that 8% in cash, and I am basically 40% “hedged”, if you will. As of right now, that was a very good decision, and looking at the current market, the only charts that are looking good are the ones from energy-related companies. Importantly, I don’t own them because of the war. I was long most of them before, because of their fundamental progress, but naturally they have become much more attractive relative to other names in the current environment. That, however, may change fast, and I am not married to the thesis. So far, it becomes stronger weekly. If that changes, I will change my mind. But, like it or not, I don’t think you come away in the current market ignoring macro.

Disclaimer: I own shares of Maurel et Prom. I do not own shares in any other company mentioned in this article. Nothing in this newsletter constitutes financial advice, and all content is for informational and entertainment purposes only. I am not a financial advisor. You should always do your own research and consult a qualified professional before making any investment decisions. My positions may change at any time without notice.

And there are reasons for that. Politically, the country has done the oil sector no favours — quite the opposite. With current policies the country will run out of oil in 7 years. However, most of these Colombian E&Ps are not pure-play Colombian businesses anymore, or at least are planning on not staying that way. Yet all of them trade much lower than their historical mean valuation (based on $60-65/bbl forecasts), and also much lower than state-owned Ecopetrol, which is already trading above its mean.

On top of that, each company has somewhat exciting developments going on that can unlock value for shareholders. A consolidation is underway, and soon we will have one clear big independent player behind Ecopetrol, producing 90,000+ boepd. Two of the players are expanding into other Latin American countries like Argentina, Ecuador, and Venezuela. All while trading below 3x EV/EBITDA. And with oil at $75/bbl or above, one of these companies would be trading at a free cash flow yield north of 50%.

That’s what I call layers of catalysts. I own two of these players.

Why now?

Investing in cyclicals is all about timing, and I believe there are potentially multiple catalysts hitting here. Some broader, others country-specific, others company-specific.

The “safe barrel” trade

With the current war in Iran, potentially 20% of global oil supply is at risk. Colombian barrels are untouched by this. The crude flows from the Llanos Basin to the Caribbean port of Coveñas via pipeline, then five days by tanker to the U.S. Gulf Coast. No Strait of Hormuz. No Suez Canal. No tanker war insurance premiums. Atlantic basin barrels, listed on Western exchanges in Toronto and London.

These companies don’t just benefit from higher oil prices. They benefit from a repricing of risk. When capital rotates out of Middle East-exposed energy assets and into “safe” producers, Latin American E&Ps are a natural destination.

Colombia obviously has its own risks. Pipeline attacks, political uncertainty, heavy crude discounts. But those risks are uncorrelated with the ones dominating headlines right now. A Hormuz crisis doesn't make Colombia worse.

The election catalyst

Colombia holds presidential elections on May 31, 2026. Petro cannot run again. Every major center and right-wing candidate is campaigning on reopening exploration and allowing fracking. Even Claudia López, the center-left former mayor of Bogotá, reversed her anti-fracking stance in 2025, calling cheap energy the best predictor of industrialization. Cepeda is the only major candidate who would maintain the moratorium. Colombia currently imports natural gas at steep premiums because domestic production cannot meet demand. Voters feel this on their utility bills. A center or right-leaning president would reprice these stocks almost overnight.

But here’s the key: the thesis does not depend on a right-wing victory. If the moratorium continues, existing operators are already positioning themselves to grow outside of Colombia. That shift would only accelerate if the current stance on fracking remains after elections.

Colombia, a brief overview

You are probably asking yourself why I am writing about Colombian oil producers. Honestly, I would not have guessed this half a year ago. But my curiosity led me there.

Despite being known for its violent past in the 80s and 90s, Colombia has improved and stabilized since then tremendously. They have one of the oldest democracies in all of Latin America. The country was usually known for its right/center-leaning politics, especially during the eight-year tenure of Alvaro Uribe, a right-wing politician, from 2002-2010. He was responsible for a pro-oil agenda. His 2003 reforms created the ANH, opened the sector to foreign investment, and triggered a production boom from ~530,000 bopd to over 800,000 bopd by the time he left office. Production continued climbing to an all-time high of ~1,008,000 bopd in 2013 under his successor Santos.

However, this changed when Gustavo Petro won the elections in 2022. The reaction from the market? The Peso crashed to COP5000/USD, and the 10-year yield climbed to a record high of 14%.

Consequently, the stock market crashed as well:

Importantly, Petro never had power over the parliament. He couldn’t do much “damage” — most of his proposals never passed congress. Recently seen by the suspension of his (ridiculous) 23% proposed hike in minimum wage. The court threw it out. A clear example that the parliamentary system in Colombia works, and that the country can actually be seen as politically stable.

The overall economic situation is not exciting. GDP grew 2.3% in Q4 2025, below forecasts, with inflation around 6%. But it’s also not horrible. Probably still good enough that common-sense policies could see a material improvement.

The upcoming elections

This weekend’s parliamentary elections gave us the first real signal. Paloma Valencia, the Centro Democrático candidate backed by former president Uribe, won the right-wing consulta with 3.2 million votes, roughly 59% of the primary vote. That’s a serious number for a primary. The right came out of March 8 looking united and energized.

The presidential field has now narrowed to roughly six candidates for the May 31 first round. Cepeda leads the polls and will carry the left. De la Espriella is the hard-right independent who has been rising fast. Valencia now enters as the official center-right coalition candidate. If she and De la Espriella consolidate, the path to a pro-oil presidency looks increasingly plausible.

In Congress, neither side won a majority. Petro’s Pacto Histórico gained 5 Senate seats, but Centro Democrático gained 4. The parliament remains fragmented, which, as we’ve seen over the past four years, actually works in investors’ favor: it means no president can do too much damage in either direction.

Importantly, they don’t need a Milei. The country, albeit with 6% inflation, is not in ruins. A lift in regulations would be bullish for regional perceptions.

That being said, let’s dig into each of the smaller companies. I will not cover Ecopetrol, it’s already well covered, state-owned, and much more expensive. There are only four independent players. Soon, only three. I own two of the three companies I'm covering here, plus Frontera Energy which I've written about before.

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The best performing sectors continue to be Energy (+25%) and Materials (+17.7%). As I’m writing this on Sunday morning, the full extent of the Iran strikes is still unclear. The initial reaction looked like markets down, oil up, but that’s already starting to reverse. The big caveat for oil will be the strait of Hormuz and by how much OPEC could increase production to offset Iran. We’ll find out more once futures open. My view is that the longer-term effects will be negligible and markets will have forgotten about this within a few weeks.

I came across this post showing the historical effect of similar strikes on the stock market:

Source: https://x.com/TheShortBear/status/2027476773785501838?s=20

Current positioning

My portfolio is up +2.7% YTD. Honestly, it feels like I left some stuff on the table. Two of my last three pitches here on the blog have worked very well and much faster than I expected (+46%, +79%), yet they only contributed 5% and 1% to my YTD performance. Hindsight is 20/20, of course, but it once again highlights the difference between being a good analyst and a good portfolio manager. Position sizing cuts both ways, but with small positions only, it's tough to generate meaningful outperformance.

Here’s an overview of the biggest contributors so far this year:

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Earnings in February

BluMetric (BLM.V) — February 26th (Disc. I am long)

BluMetric files on a separate calendar, so they will report their Q1 FY2026 results. I think it will be an interesting quarter given it will be the first in which we see the numbers of their recently acquired consulting business. The last three quarters were underwhelming on the bottom line: in Q2 and Q3 the Canadian service business was slower, and in Q4 they absorbed a one-time expense of CA$1.1M in their water-tech business. They’ve already hinted at how the business will look post-acquisition on a pro forma basis: CA$85–90M in revenue, with 10% EBITDA at CA$100M revenue as the goal, and high single digits pro forma.

Things to watch: Numbers from the acquired company, margin improvement in their water-tech business.

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Frontera Energy (FEC:TO) — From Spin-Off to Divestiture (Disclosure: I am long)

When I pitched Frontera in January, the thesis was straightforward: the market was pricing the stock as a struggling Colombian E&P company and assigning almost no value to its infrastructure assets, a 35% stake in the ODL pipeline and a majority-owned deep-water port, Puerto Bahía. A planned spin-off of those assets, I argued, would force the market to recognize that hidden value. Conservative sum-of-the-parts suggested 90–180% upside.

Although it didn’t play out quite the way I expected, it actually turned out even better.

On January 30, ten days after I published, Frontera announced it had agreed to sell its entire Colombian E&P business to GeoPark for a firm value of US$622 million. The proceeds will fund a special dividend of approximately CA$7.18 per share. When I pitched the stock, shares were trading at CA$6.36. The special dividend alone covers more than the share price.

What remains after closing is the infrastructure business. I increased my position the morning the news dropped, as the market was slow to react. I’m still holding.

The question now is exactly how much the remaining stub is worth. I'll walk through my valuation model and what the specific upside looks like from here below the paywall.

The Second Idea from January

In early January I also pitched a small-cap with direct exposure to a potential Venezuelan oil reopening. The thesis at the time was that this company was on the cusp of receiving a license in Venezuela, something the market wasn’t pricing in. You were essentially getting a well-run company at a fair valuation, with a free option on one of the most politically charged macro trades of the year.

The license saga was somewhat of a roller coaster. I'll cover what it means for the valuation below.

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While this trend initially started with a weakening dollar once Trump took office, the latest driver appears to be the potential disruption by AI. Naturally, the last great tech wave (the internet) is the most fragile to the next one (AI). However, it is not hard to see how almost every sector will be changed by AI, just like the internet eventually changed every industry.

But not only that, the Mag 7 are spending as much on CapEx as never before. What once were asset-light compounders now look more like oil producers. I have no stance on who is winning or not, but it seems logical to me that these companies, which are still attributable for a good chunk of the S&P 500, are less attractive now than they were four years ago.

This is obviously a drag on the index.

Moreover, the second and third tier of software companies look even worse. I came across this post from the founder of SaaStr, one of the go-to conferences for software companies.

So where is the money flowing? Energy is the sector with the strongest YTD performance, followed by materials, staples, and industrials.

Long live the old economy.

But something else is rotating within the oil sector: Is Argentina the next power house for Oil?

The Permian in the US has been the home of US shale and recognized as probably the highest quality oil field in the world. However, it appears that this story is close to over. Some sources claim 60% of Tier 1 Permian acreage is depleted, the EIA forecasts that US crude production will decline in 2026-271, and large-cap producers only have 7.5 years of inventory left (smaller ones just 2.5 years)2. Harold Hamm recently shut down drilling in the Bakken, a warning sign for the whole industry3.

Viva la vaca muerta. Long live the dead cow.

With break-even prices lower than in the Permian ($36-45 vs. $58), Vaca Muerta (”Dead Cow”) in Argentina is becoming a more and more attractive destination for oil producers. And the gap is only widening, an Enverus report projects US shale breakevens could rise to $95 per barrel by the mid-2030s as core inventory depletes.4

I would argue that we have somewhat of a perfect storm that could make Vaca Muerta one of, if not the most attractive oil field in the Americas.

Why it is technically superior to the Permian

• Productivity: Vaca Muerta wells produce approximately 30 barrels per foot of lateral drilled, compared to the Permian average of just 15–23 barrels5.

• Vertical Thickness: The formation is 30 to 450 meters thick (averaging 150m), allowing for “stacked development” (multiple wells at different depths) that increases resource density per acre6.

While it might be more expensive to drill there compared to the US (e.g., higher sand prices), the field is just much more productive.

Two things have held the field back: First politics and second infrastructure. But both are inflecting.

Let’s touch on both:

Politics. Since Milei took over, he has already implemented new regulations that make Argentina more attractive, such as the RIGI Framework (Incentive Regime for Large Investments) and dismantling capital controls to allow cash flows to exit the country.

Just this week another reform passed, allowing 12-hour shifts in Argentina. Milei is serious about pursuing his goals to make Argentina business-friendly and an energy net-exporter.

Infrastructure. The other thing that held Vaca Muerta back was the infrastructure. But with ADNOC, the 4th largest oil company, backing a $17B infrastructure push, this is changing fast.7

There are major projects coming online in 2026, like the Oldelval Expansion, which will double the capacity of the existing trunk line to Puerto Rosales (from ~36,000 m³/d to over 80,000 m³/d)8. Then there is Vaca Muerta Sur (VMOS), a 437 km dedicated oil pipeline and a massive deepwater export terminal at Punta Colorada capable of handling VLCC (Very Large Crude Carrier) supertankers9.

The King of Vaca Muerta: VISTA Energy (VIST)

How has this story played out for investors? 73% CAGR since 2021.

To continue on the Vaca Muerta trend, look at the organic replacement ratio from Vista Energy.

Yes, VIST is a well-known story by now. But Vaca Muerta is still in its early days, country risk under Milei is lower than two years ago, and if anything, this oil field should trade at a premium, not a discount.

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Vaca Muerta aside, the rotation is also creating opportunities in the US. Here are three US names that fit the theme.

Three US Stocks that fit into the rotation

1) Ascent Industries - Specialty Chemicals

Ascent has transformed under the leadership of Bryan Kitchen into a specialty chemicals pure play. After divesting their steel business, they’re sitting on $58M in net cash against a roughly $160M market cap. The chemical market is still soft, but thanks to recent business wins, I expect revenue to grow from roughly $77M in 2025 to $88-95M in 2026.

While shares aren’t as cheap as they were last November, I think there’s still a lot of value ahead. Management repurchased roughly 7% of shares in 2025 and authorized a new buyback program for up to 2M shares — that’s 22% of shares outstanding. Another potential catalyst would be an acquisition.

2) Core Molding Technologies (CMT) — Trucking Recovery

This is a bet on the recovery of the trucking market. Core Molding is a supplier of molded parts for the trucking industry. They lost their Volvo business some years ago and recently won it back. Despite that loss, they stayed profitable the entire time. With the Volvo contract and other wins, the company is guiding towards annual product revenue exceeding $325 million within the next two years.

3) Ampco-Pittsburgh Corporation (AP)

Ampco has two divisions: Forged and Cast-Engineered Products and Air and Liquid Processing (ALP). After exiting their unprofitable UK segment, the company is positioned to benefit from the same industrial tailwinds driving the rotation we're seeing. My friend wrote a thorough (and free) deep-dive on the catalysts aheah, I recommend reading it here:

Trident Opportunities

Ampco-Pittsburgh Corporation ($AP): A good business bad business setup with catalysts ahead

First of all, the disclaimer: I am invested in Ampco-Pittsburgh ($AP). Nothing I write should be considered investment advice. I bought my first shares at USD 4.05…

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5 months ago · 40 likes · Christian Schmidt

Disclaimer: I own shares of Ascent Industries (ACNT). I do not own shares in any other company mentioned in this article. Nothing in this newsletter constitutes financial advice, and all content is for informational and entertainment purposes only. I am not a financial advisor. You should always do your own research and consult a qualified professional before making any investment decisions. My positions may change at any time without notice.

In fact, my current timeline offers a perfect case study. With the narrative that AI is disrupting software, investors who made a fortune in the sector over the last decade are now spending their days arguing why the market is wrong, insisting AI will actually be a tailwind.

They might be right. I’m not here to debate the future of software, but rather to highlight a behavioral trap: the thin line between being a contrarian and simply wanting your ego to be proven right. And from my personal experience, it’s a good heuristic to believe that in most cases, it comes from a place of wanting to be right.

The reason for that is: why do you choose this game in the first place? Why do you choose a theme where you have to do mental gymnastics and be the only one having a certain opinion, a contrarian opinion to all other people? Why don’t you just step over a one-foot-hurdle? A game where the competition is easier, the puzzle simpler, and you’re not the only one with the contrarian opinion?

Ultimately, the market doesn’t care about you.

It doesn’t even know you exist. The market is like the weather. Sometimes it rains, sometimes there’s thunder, sometimes the sun shines. All types of weather are needed and can be used to do different activities and serve different purposes.

However, you get into trouble if you insist that this Sunday it should be sunny. Sunday comes and it’s not sunny, your mood is ruined, and your Sunday as well. All the preparation for a sunny Sunday was wasted. Instead, on the other hand, approach Sunday with an open mind. If it rains, you stay inside and read your favorite book. If it’s sunny, you go hiking. If it’s cold, do a road trip. Commit to having a great Sunday, not to having a great Sunday in a certain way.

It sounds like a simple example, but how many people approach the market with rigid rules? “I only buy companies X.” Well, to me that’s like obsessing over a sunny Sunday. Sure, during summer, this works because most Sundays will be sunny, giving you the illusion that your approach is so good it will always work—until winter comes along.

The best stock pickers are not contrarian, neither high conviction—they are adaptable.

Too many times I had a clear set of stocks that I wanted to make money with. It had to be them. One bad quarter and you say, “Well, next quarter it will be better.” If you don’t average down, you have no conviction.

See, it’s not about the action itself. It’s more about why you’re doing it. Are you really averaging down from a place of rational behavior? Or are you averaging down because you want to make money with this stock because your ego is attached to it?

But that’s just my circle of competence.

Circle of competence is often just a polite way of saying: “I don’t want to learn this.”

“I underperformed because my style didn’t work,” or “My year was bad because I was concentrated in X.” Sure. But the style and the concentration were decisions. If you don’t revisit them, you’re not staying disciplined, you’re staying attached.

See, your circle of competence is not something you were born with. Neither is your strategy or approach something you were born with. At some point you learned about an industry, and at some point you learned about a certain investment style.

Then you likely made some money and stuck with it.

But guess what, you are actually capable of learning about new industries. It takes you probably a month or a quarter until you get a good overview. You won’t be the expert, but you’ll get the 20% that are most important.

It happened to me in 2025 as well. Mining stocks were a relatively obvious bet mid-2025. A friend of mine and tremendous investor pitched me a gold miner. I barely looked at it because “I don’t buy mining stocks” “I don’t know anything about miners.”

The stock is up 300% now. It would’ve cost me one month to learn the basics of the mining industry. If, after doing that work, I had decided not to invest in the sector, that’s fine. But not even looking at it in the first place can be ignorance.

Does this mean you should chase momentum and approach a different strategy every week? No, that’s the other side of the extreme.

But a lot of times, the ways to make money are not the trades where you are the contrarian betting against anyone. It can be. But from my experience, more often than not cases it’s not, instead, it’s the obvious trades you spotted early.

Ask yourself, if you’re really honest:

Do you want to be right, or do you want to make money?

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Disclaimer: This article is for informational and educational purposes only and does not constitute financial advice, investment recommendations, or an endorsement of any specific strategy. The views expressed are my own. Please do your own research or consult with a qualified financial advisor before making any investment decisions.

This discount exists because the previous management team made questionable capital allocation decisions. However, I argue that with a new team and an activist now on board, the company should no longer be punished for past behavior.

Furthermore, a unique and strange set of macro-headwinds that plagued the company in recent years has finally turned into tailwinds.

The business itself has two segments: one is an actual monopoly, and the other is a high-quality “razor-and-blade” model with high recurring revenue.

The Math:

• Conservative case (~65% upside): No growth, no multiple expansion — returns come primarily from free-cash-flow-driven debt pay down (≈19% IRR over ~3 years).

• Base case (130%+ upside): If margins normalize even partway and valuation re-rates toward its historical mean (~12x EV/EBITDA), equity value can more than double within the next three years (≈33% IRR).

The kicker: We don’t need a sale to win. But the CEO is explicitly incentivized to pursue a segment sale. Notably, a pure-play industry comp was acquired in a strategic transaction at a premium multiple (~20x EBITDA) less than a year ago.

This is why I have made it my biggest position.

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What changed in January (high level):

• Performance: +1.1% in January

• Activity: 3 new positions, 1 re-entry and 1 add to an existing core position, exited one position, trimmed 3.

• Key theme: More focus on mispriced stocks with tangible near-term catalysts, less emphasis on “high-growth” narratives.

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So the overall outlook looks bearish, neutral at best. However, there is also some good news for oil bulls, like Kazakhstan, which had a supply disruption, and a rise in demand outlook for 2026 stated by The IEA’s January Oil Market Report.

What is interesting though, are a couple of other things.

#1: Oil has been going down for three years straight, making this the second longest period of declining oil prices since the 80s (1981-1986). Can it decline for another two years? Yes, for sure. But I'm a fan of simple heuristics, and regression to the mean is one of them. The best cure for low prices is low prices. If prices stay in the current range, investments will naturally decrease, which will solve the oversupply.

#2: Oil stocks had a strong start to the year and have been outperforming oil prices. However, I would take the XLE with a grain of salt because Chevron and Exxon combined are 40% of the index. Nonetheless, it’s noteworthy.

#3: Lagging behind other commodities. While basically all commodities have been going straight up since 2025, oil has actually declined. As this chart indicates, this is somewhat of a divergence from past behavior.

In my opinion, it’s impossible to predict oil prices, you can spin every narrative the way you like. That being said, I do think oil at $65/bbl is not expensive. Can it go lower? Yes, but the lower it goes, the higher the likelihood of higher prices in the future becomes.

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Three Ways to play it

The safe way to play oil is through the service providers. They depend on the capex of the oil companies instead of the oil price in general. On the flip side, the “torque” is also lower if oil prices really go higher. Further they usually lack behind. First prices rise and Oil producer make and then they increase their capex.

Here are two cheap names:

OMS Energy Technologie (OMSE)
It’s an oil service provider specializing in surface wellhead systems and oil country tubular goods for the oil and gas industry. The company came public as a spin-off. It trades very cheaply at 4.5x (FY’25) earnings. They also have more than half of their market cap in net cash, so on an EV/EBIT basis, shares are even cheaper. However, I'm not sure about their earnings power. Based on LTM numbers, shares are trading at 6.5x earnings, and their last quarter was not necessarily strong.

Reasons it’s so cheap: Saudi Aramco contributes 67% of their revenue, the company’s jurisdiction is the Cayman Islands, and there’s a majority shareholder. It gave me more than enough reasons to pass, despite it being cheap.

Ashtead Technology Holdings Plc (AT.L)
A service provider for the subsea space. They mainly make their revenues from rental equipment. The decline in offshore wind made the stock tumble to new lows. The other reason might be because it's a UK-listed company and they just go down (just kidding). However, they did uplist from the AIM to the LSE; ironically, this caused some AIM-focused funds to sell out. Shares have recovered from their lows in the summer of last year but remain at historically low(er) valuations:

Here is a good thread from Adam:

It’s added to my watchlist, but I just have a natural aversion to UK-listed companies.

Oil exposure with a politcal kicker

Speaking of the outperformance of Chevron and Exxon, this has been nothing compared to the YTD performance of Colombian state-owned, major oil producer Ecopetrol.

I wrote about the upcoming election in Colombia in the last Treasure Hunting weekly, so I won’t repeat myself here. But obviously, Colombian oil stocks trade not only on oil prices but on politics as well.

If you want to look one row behind Ecopetrol, Parex Resources (PXT.TO) is the largest 100% privately owned oil producer with 100% Colombian exposure. The market cap is roughly US$1 billion, and they trade at the typical Colombian discount of 2.5x EV/EBITDA for a debt-free oil producer that has returned money to shareholders through buybacks and dividends (current yield is 8%).

The issue with Colombian E&P firms is the relatively low reserve life and the low oil quality, meaning the oil is usually sold at a discount. So, the 2.5x EV/EBITDA multiple is not as cheap as it seems, and regardless of the country-specific risk, these companies deserve to trade at a discount. However, a lift of the current exploration ban—something that right-wing candidate de la Espriella is advocating for—would increase current reserve lives, albeit at the expense of some serious capex. Therefore, a player like Parex with a debt-free balance sheet can probably take advantage of that.

For me, I don’t see any meaningful catalyst for Parex, apart from the upcoming election and higher oil prices. That’s why I opted to buy this special situation instead, where the election and oil prices just serve as an additional kicker for the upside but are not thesis-dependent:

Summary

I’m watching the oil sector closely, and I’m also learning more about the sector as a whole. I think it makes more sense to learn about oil when it’s at $65/bbl than when it’s at $100. At the same time, I’m monitoring the situation in Colombia. The currency and the stock market are betting on a right-wing president, while the bond market seems still skeptical. If you have any interesting names, feel free to comment your favorites.

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As you may have seen, I just launched a new project with called “The Small Cap Earnings Monitor. Your fast track to micro-cap and small-cap earnings (under $2B Market Cap) insights. You can learn more about it here (click here).

Disclaimer: I don’t own any of the mentioned companies. This is not financial advice—for entertainment purposes only.

If you like special situations, deep value, and roadkill, here’s something for you. If you’re looking for a compounder, skip this.

This is priced for disappointment (jurisdiction + commodity skepticism) — which is exactly why the setup is interesting.

The Set-Up: A conglomerate is simplifying. It’s preparing to spin off its infrastructure business.

Even under conservative assumptions, today’s valuation appears to assign little-to-no value to the upcoming spin.

Conservative sum-of-the-parts suggests ~90–180% upside.

Two potential kickers would increase the upside further: a strategic transaction and a sentiment/regulatory shift.

Frontera Energy 
Ticker: FEC:TO / FECCF 
Market Cap (in US$): $316M 
Enterprise Value: $689M 
Price: $4.56 / CA$6.36 
(all numbers in USD) 

Frontera Energy (FEC.TO/ FECCF) is a conglomerate of its infrastructure assets, which include a 35% stake in the ODL pipeline and a 99.97% stake in the Bahia Port in Cartagena, Colombia. The second part of the business consists of their onshore E&P operations in Colombia. The company announced in November last year that it would aim to spin off its infrastructure business. If the spin-off takes place, the company would finally extract the value of its highest quality asset.

Frontera Energy is perhaps the cheapest E&P company, and there are reasons for that. In 2016, the company came out of a debt restructuring process with The Catalyst Group as its majority shareholder. The Catalyst Group is a distressed debt fund with a bad reputation. There are multiple litigations against them. However, I believe it’s the first time we are aligned with them. Back in 2015, the Catalyst Group just raised money for their latest fund, Fund V. Usually these distressed debt funds have a lifespan of ten years before they aim to return the assets to their shareholders. More than ten years have passed now since the inception of their fund. I think they’re trying to cash out the assets where they can. Frontera being one of them.

The Assets

The company is best valued using a sum-of-the-parts method. And yes, most sum-of-the-parts theses never work, but with the upcoming spin-off and the steep discount, I believe the odds are stacked in our favor.

It was already communicated how the set-up will look like post spin-off.

The Infrastructure Business

The infrastructure business consists of their 35% stake in the ODL pipeline, the port in Cartagena, and a water treatment facility, which is negligible.

The ODL pipeline pays them an annual dividend depending on the oil flowing through the pipeline. In the last few years, it averaged roughly $60M in dividends. They have a cash-sweep agreement in place with Macquarie that these dividends will flow into the repayment of their $202M loan with them, including interest payments at 13%.

The wells from which the oil is flowing are Caño Sur, Rubiales, and Jagüey/Palmeras Stations. Rubiales is already at a mature state, while Caño Sur is expected to offset the decline of Rubiales going forward.

The pipeline can be valued as a constant, secure stream of cash flows. Given the fact that it’s Colombia and the reserve lives are not that long, I would assume a potential buyer would command a yield of 15%.

That would imply a valuation of $58M × 6.6 = $382M. Minus $202M debt = $180M equity value.

If you assume dividends were to shrink after year 7 to, say, eventually $38M in year 12, the present equity value would equal roughly $103M.

Valuation range ODL pipeline: $103-180M

The Port

I think the port is the most exciting (or boring?) asset here. The Bahia port is one of the biggest ports in Colombia. The income streams for Frontera are roll-on/roll-off (general cargo) and oil storage. LTM EBITDA sits at $16M.

As of right now, they have two interesting projects going on. First is the Reficar connection with Ecopetrol. The connection just went live in the last quarter, and it will stabilize cash flow much more than the general renting out of liquid oil tanks, where they just lost a client. It should also increase their EBITDA from Q4 onwards, but I’m not ascribing much value to it.

The second project is their LPG terminal. It’s a gas terminal to make the import of natural gas into Colombia easier. As you may remember from Maurel et Prom, Colombia has a gas shortage and needs to import natural gas. The terminal is one of the solutions for that. The company expects that the new terminal could add another $10-15M in EBITDA once it’s running at full capacity. The terminal is expected to go live in 1H 2026. Meaning, the terminal and Reficar alone could double the EBITDA of the port from $16M to $30M within the next 2-3 years.

General cargo is also interesting. On the import side, Colombia‘s second most valued imports are cars. The peso has been pretty strong in the last two years compared to the dollar. Furthermore, more and more Colombians are able to afford a car—the rise of something like a middle class, or at least the poor getting richer (in absolute terms), is something we can see all across the region. Both the strong peso and the rise of the middle class bode well for an increase in car imports. Car imports have been on rise lately.

On the export side, livestock has been a growth driver for the port.

”For the three and nine months ended September 30, 2025, Puerto Bahia’s general cargo revenues increased by 97% and 57%, respectively, mainly due to a strong performance from general cargo operations, which saw strong growth in container volumes, that surpassed 3,000 TEUs in September 2025 and higher volumes handled, particularly livestock during the first quarter of 2025.”
MD&A Q3 2025

And this is no coincidence but driven by supply changes within LATAM. Brazil, the biggest beef and livestock exporter in the region, is in discussions to ban the export of livestock. This has led the Middle East and China to buy more livestock from Colombia than ever before, leading to record highs in livestock exports for the region in 2024 and 2025. Colombia tried to implement a similar ban, but it didn’t go through congress and is no longer discussed.

Ports are usually valued around 10x EBITDA. Given the fact we have a sub-scale operation in Colombia, I’m using 8x EBITDA. Valued on LTM numbers, that would total $128M. Based on NTM (my estimate), it would likely be $160M ($20M × 8).

Add now the $47M in cash and we get to $175M + $207M.

Total valuation range net of debt for the infrastructure asset: $278-387M

Current market cap in USD of the entire business: $313M.

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The Bad Asset

The remaining asset, which is currently valued at $0 in my opinion, is their E&P operation in Colombia. The point is not to determine whether this is a great asset or not, or if oil goes to $100/bbl. The only task at hand is to figure out if the asset is worth more than $0. If yes, we would likely make money.

As of right now, they have 36,000boe/d in Colombia. Most of it is heavy oil. The cost to produce a barrel is therefore higher than with light oil operations.

In the past, they have tried to diversify away from Colombia by exploring into Guyana. The government ended up seizing their assets. They lost +$300M. It’s still an ongoing lawsuit. I ascribe $0 value to it, but potentially they could still get some money out of it

At $65/bbl, they guide to $270M in EBITDA substracting maintance capex of $160M, you would get to $110M, substract $25M in interest and you have roughly $85M pre-tax free-cashflow. Colombia has a a tax system depending on the surplas of oil prices, meaning at $65/bbl, they would pay only $0-$5M in cash taxes.

Colombian oil producers are trading at a deep discount. Usually 2.5x EBITDA. Reason for that is lower reserve lives of 7-10 years, and it’s usually not as profitable because it’s heavy oil that is sold discounted. I also believe that multiples have stayed low since the election of Petro and his “anti-oil” stance (more on that later).

The two ways to value the company: one is by EV/EBITDA. In that case, I would assume a 2x EV/EBITDA multiple to be fair. Valuation at $65/bbl in that case: $270M EBITDA × 2 = $540M. Minus $220M net debt = $320M equity value.

A buyer, however, would likely ignore that since oil prices fluctuate and look at what they’re paying per flowing barrel. And here, the discount becomes very apparent.

They have produced 36,000 boe/d. The current EV (excl. the debt of the port) is $533M. Meaning the company is currently valued at $15k/flowing barrel. That's by far the cheapest oil producer in Colombia.

As a matter of fact, there hasn’t been any transaction I could find in the region below $25k/flowing barrel. The GTE/Petroamerica transaction in 2015 was at $28k/flowing barrel. The Oxy/Carlyle (SierraCol) at $25k/flowing barrel in 2020.

Just recently, GeoPark, a Colombian producer, rejected an offer from Parex, another Colombian producer, for $35k/flowing barrel. Granted, the oil of GeoPark is lighter and has a lower breakeven price than Frontera’s oil. (read here)

But, while the valuation of $15k/barrel did not include the net debt of the port, it still includes the calculated equity value of the infrastructure asset. Meaning the actual implied value per flowing barrel is even lower than the $15k/barrel.

Even if the company were to get acquired at what would mark most likely the cheapest deal for 38k boe/d, we would get the value of the port on top of that. Implying $300M+ upside.

At a reasonable, still low valuation of $20k/flowing barrel, that’s $760M - $220M net debt = $540M.

Valuation range for E&P: $320-540M

Total equity valuation range: $598-927M, or $8.71-13.00 USD per share. Current share price: $4.55 USD.

Potential upside: 91-185%.

Why Now?

As I alluded to before, I believe Catalyst Group is aiming for an exit. They have tried to sell the company as a conglomerate back in 2023 and did not succeed. The spin-off is very likely the first step to a sale of the infrastructure asset. I actually believe they may already have a buyer. Macquarie already owns the debt of the ODL pipeline. The cash sweep agreement means they’re already getting paid. They would naturally be the most aligned buyer if the cash sweep goes back to your own pockets. It would also fit, given the fact they just raised US$8 billion.

Other usual suspects would be infrastructure funds like Brookfield that have been investing into Colombia recently.

The Political Kicker

Talking about Colombia. I think the timing is also not a coincidence. In 2022, Colombia elected its first left-wing president in a long-time, Gustavo Petro. While he was not able to pass any meaningful laws through the constitution, the money from the outside has fled Colombia since then. The last elections in South America have all shifted to the right, from Argentina and Bolivia to Chile. More importantly, Petro’s approval ratings are extremely low. He also cannot run for president again.

As of right now, the two top candidates for the upcoming election in May are Iván Cepeda Castro and Abelardo de la Espriella.

De la Espriella is perceived to be an “ultra-right-wing” candidate who has his own business and, to quote a Colombian Reddit user, “would sell his grandma for money”—sounds like the next best friend of Trump if you ask me ;).

His opponent is likely a continuation of Petro’s “failed” policy. In the recent poll, the right-wing candidate was leading. While I don’t know if he will win, if he does, it would be a perfect catalyst for the company as well. Most likely he will stop the exploration ban, make Colombia more business-friendly, and push valuations up.

Just imagine, Colombian oil producers not trading at 2.5x EV/EBITDA but at 3.5x!!!! Now, apply $70/bbl+ prices… I’m losing the plot and start to dream.

Anyhow, there are still a series of events that have to happen to increase the upside here. While the probability of all of them happening is certainly lower than I’d like them to be, I believe there are reasons to believe they will happen, and now is the time.

How to Lose Money

If none of these events were to take place—meaning there is no spin-off, Colombia elects a left-wing government, and oil goes to $40/bbl—then the E&P might actually be worthless. Well, in an absolute worst-case scenario, they burn cash, struggle to refinance the debt in 2028, and dilute equity holders to save the company. In that case, you could assume a $0 for the E&P. I think it’s unlikely. Probably in such an event, a buyer could potentially step in. Even if they had to repay the bondholders, it could still make sense to buy the assets for cheap. As outlined above, in the case that E&P is valued at zero, the infrastructure business is likely already worth the current market cap. Furthermore, after the spin-off, there is also no need to keep holding shares in the E&P. So they just have to survive the next 6-12 months for the trade to work out.

If the spin-off doesn’t take place, they could likely lend against the debt-free port.

But if you think the company is able to refinance its $320M unsecured bonds until 2028, then you may be interested in buying the bonds. They are trading at 70 cents on the dollar, with a 7.8% coupon and expiration in 2028. I’m not a bond expert, but to me that’s a pretty attractive yield.

Conclusion

I think the company is very cheap, too cheap, even though it has a lot of hair. The spin-off should serve as a great short-term catalyst. Hard-to-measure events like the election in Colombia and the price of oil will dictate how big the potential upside can be. The price we’re paying, however, protects our downside, even if both of these events turn out negative.

For me, therefore, it’s a 5% position. I’ll track elections and the price of oil closely, and could imagine increasing the position if one or both events turn favorable in the coming months. The same goes, obviously, for any progress related to the upcoming spin-off.

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Disclaimer: The content provided in this newsletter is for informational and educational purposes only and does not constitute financial, investment, legal, or tax advice. The views expressed are my own and based on my own research. I am not a financial advisor.

Disclosure: As of the time of this publication, the author holds a long position in Frontera Energy (FEC.TO / FECCF). The author may buy or sell shares at any time without notice. Do your own due diligence (DYOR) before making any investment decisions.

In this week’s treasure hunt:

• Why I missed the 78% run in LatAm (and what I’m doing now).

• Notable insider buys… and a cheap stock trading at 5x EV/EBIT

• Assessing the damage in the Travelzoo chart.

• A market-leading distributor with a new CEO executing a turnaround.

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The 78% return I’ve missed

It’s really funny how much the world has changed in the past four years. Well, in your day-to-day life, the world has changed very little to nothing, but investment-wise, I feel the change is quite big. I was just listening to a podcast that did some predictions for 2026. The last time I listened to the podcast was at the beginning of 2022. The only theme that had stuck was inflation. Otherwise, what used to be “tech will outperform” is now “commodities will continue to outperform.”

The run in commodities is really impressive, and I think it's something that no one would have predicted 4 years ago. The other common theme seems to be that Latin America will continue to perform well. As a resource power hub, that is, country-by-country shifting to the right, it seems very well positioned. And obviously markets have caught up to that. With low starting valuations, it has already made good moves. I would have made way more money if I had just put my portfolio into a Colombian ETF one year ago.

As a stock-picker in microcaps, I must admit, it is really a tough pill to swallow. Sure, hindsight is 20/20, but boy, what a performance. I could have just chilled all year in Rio, learned to surf, AND made 78%.

Looking back 10 years, the picture obviously looks different:

If you wonder why I picked Colombia and Brazil, it is because these are the two countries with upcoming elections this year. Both countries have been governed by left-wing presidents, and both presidents have low approval ratings.

I, and apparently the market as well, think that a right-wing candidate in Colombia is more likely to be elected than in Brazil. Colombia has historically voted right-wing/center-ish. Current president Petro cannot be re-elected. Favorites right now are right-wing newcomer de la Espriella, and left-wing successor of Petro’s politics, Cepeda. There is also still a chance someone else makes the race, like Pinzón or Valencia.

Importantly for the market, as long as Cepeda does not win, every one of these other three candidates would be an improvement from the current anti-oil administration.

Anyway, as a stock picker, it is an interesting development, and while the overall landscape of Colombian companies is not really investable, there will surely be some beneficiaries. Most of them are likely in the oil sector.

Talking about the oil sector…

Interesting Insider Buys

A company I have been following for a while now, and even talked to in Vegas, is McCoy Global (MCB.TO). The company had some insider buying by multiple insiders, including directors James Rakievich and Alexandre Ryzhikov, as well as officers Bing Deng and Lindsay McGill. It could mean they are making progress regarding their orders in the Middle East. I wrote about the company here, back in May.

Another company with notable insider buying was Innovative Food Holdings (IVFH) (Disc. I own shares).

The buys have been in the $0.30 range, and shares have already recovered from their lows. Notably, Ian Cassel also increased his position.

Before I would consider increasing my currently small position, I would like to see operational progress—the warehouse sale and some cleaning up in Q4 from the horrible Q3 results. But eyes are on it.

A company I am also following since mid-2024: Q.E.P. (QEPC)

It is very cheap and has purchased 100k shares from its former CEO, Lewis Gould. (H/T John W. on X)

The company has a market cap of $125M, with $36M in net cash. They earned $19.8M in EBIT last year, and will likely earn at least $18M this year. Putting the stock at merely 5x EV/EBIT. I don’t know about their growth prospects, so re-rating would likely depend on smart capital allocation. If they start repurchasing a bunch of shares here, it could be a buy.

Worst-looking chart of the week

It doesn’t matter if markets are green or red; one push notification I always get is “new 52-week low for TZOO.”

This is the textbook of a falling knife.

The big question is, is it a train wreck or a contrarian buying opportunity?

Travelzoo (TZOO) is a global publisher of exclusive travel deals that shifted its business model from getting paid via advertising to a paid membership model at $40/year. However, they now have to spend money upfront to acquire these paid subscribers, and those acquisition costs get expensed immediately while the revenue is recognized over the course of the year—even though they receive the full $40 upfront. So the GAAP numbers look worse because the expense hits today, but the revenue gets spread out over twelve months. The market has been selling off on this constant decrease in operating profits each quarter this year.

Regardless, bulls argue that they can get back to previous profitability levels ($4-5M/quarter). In that case, shares would trade at less than 6x earnings. However, there are some red flags, like a majority shareholder with weak governance. Not sure if that’s worth the risk, but I’ll put it on the watchlist.

Speaking of watchlist:

Top Watchlist Pick for this week

A classic turnaround setup: This market-leading wholesaler and distributor has been crushed by mismanagement. Here is why the new CEO's cost-cutting plan makes it a top watchlist pick.

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Weekly Treasure Hunt #01

News

Acorn Energy, Inc. (ACFN) — Expands Infrastructure Asset Management Technology Offerings for Cell Towers, Data Centers and Utilities. Strategic partnership with Israel-based AIO Systems, Ltd. to market, distribute, integrate and sell AIO’s best-in-class solutions for cell tower, data center and utility infrastructure asset management to customers in North America.

DIRTT Environmental Solutions Ltd. (DRT.TO) — Early Termination of Lease Agreement for Former Rock Hill Facility. “This action represents an important step in rationalizing DIRTT’s real estate footprint and is expected to deliver recurring annual cost savings of $1.6 million beginning in January 2026.”

WW International, Inc. (WW) — GLP-1 Platform with Access to Wegovy® Pill Advancing a New Standard for Long-Term Weight Health. $149 per month, providing a more accessible entry point for individuals seeking clinically supported, evidence-based weight health care. On Friday, Amazon announced it will distribute the Wegovy® Pill as well, including a collaboration with $WW. Nonetheless, shares were down 11%.

B.O.S. Better Online Solutions Ltd. (BOSC) — $2.2M order from existing Indian customer for electromechanical connectors, with deliveries expected over the first three quarters of 2026. Reflects strategic expansion in the growing Indian defense and aerospace supply chain market.

Earnings

EACO Corporation (EACO) — A distributor of electronics and fasteners had another set of strong earnings. Revenue grew by 18% and net income by 35%. Furthermore, the company believes “it continues to gain market share through its local presence business model.”

The Caldwell Partners International Inc. (CWL.TO) — A tech-enabled executive search company posted strong earnings. Revenue grew by 36%, and operating income came in at CA$0.8M compared to break-even last year.

SANUWAVE Health (SNWV) [Disclosure: I own shares] — Preliminary results for Q4 2025 came in at the low-to mid-point of their guidance ($13.3-13.4M vs. $13-14M). This represents their highest-quarterly revenue ever and a 29-30% increase compared to 2024 Q4.

Beaten Down Names, Near 52-Week Lows

LifeVantage Corporation (LFVN)—14% above 52-week low. MLM supplement company trading at less than 6x earnings. Dayton Judd (CEO of FitLife) is on the board and owns close to 6% of the company. Shares trade down due to stagnation in sellers and fear of GLP-1 drugs. The company presents in January at the 28th Annual ICR Conference.

Bragg Gaming Group Inc. (BRAG.TO) — iGaming operator, shares are up 24% the last five days and 16% on Friday alone. After a five-year decline from CA$28/share to CA$3ish/share, this could indicate the bottom has been found. The company trades at less than 4x EV/EBITDA. Stock has been punished for regulatory changes in the Netherlands, which used to be their cash cow.

Supremex Inc. (SXP.TO) — Former FinTwit darling. Stock is trading down due to United States Postal Service and labor issues at Canada Post; consequently, revenue and EBITDA decreased. The company did two acquisitions and announced a $53M sale-leaseback in 2025.

Forrester Research, Inc. (FORR) — Stock is down from $60 to $8 in the last three years. Declining revenue and margins caused by weakness in their consulting business are the main reasons for weak share performance in the past years. Currently, shares are trading at 6x earnings.

Epsilon Energy Ltd. (EPSN) — Natural gas and oil producer. Shares are down from $8 to $4. First, the Powder River acquisition made investors cautious; then news from Venezuela and fears over a longer-term cheaper oil price caused the stock to further decline at the start of 2026. The biggest investor, Solas, has been selling shares, while the CEO has been buying sub-$5.

Top Watchlist Pick for this week

A mining services player trading at 5x EV/EBIT after a 52% drawdown. The bad news is priced in, but I am waiting for the 1H 2026 report in February to confirm the turnaround.

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