From “Roblox: Accepting Uncertainty” (August 2026):

“The 2H 2026 results will be ugly, and we don’t know how management will respond; buying RBLX here definitely feels uneasy. (As a reminder, we are just nine months removed from what one Wall Street firm called “arguably Roblox’s strongest quarter ever”.) Roblox has challenges to address, and investors need to be able to bank on sustainable and material profit growth over time. I can appreciate why others look at this set of facts and conclude this isn’t the time to buy - but I think a sufficient level of caution is priced in. Roblox created a global gaming platform that has taken significant share, with ~135 billion hours of engagement over the past year (only ~30% less than the ~195 billion hours of engagement on Netflix over that period). I believe this platform will be worth a lot more than ~$24 billion over time.”

Roblox’s Q3 FY26 results included a discouraging milestone: for the first time, YoY daily active users (DAUs) declined. In addition, bookings declined by ~12% YoY, to ~$1.7 billion, which was also the worst result in their history. (The prior “record” was the low-single digits declines reported in 1H FY22.)

While near term DAU and bookings pressure is understandably cause for concern among investors, I see two notable reasons for these headwinds.

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Microsoft: The $250 Billion Club”)

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Three Notable Items

“How Beer Companies Stole Happy Hour From Liquor Brands”

Amidst sustained volume pressures in the U.S. alcohol business, one bright spot has been ready-to-drink cocktails (RTDs). While my investment activity in this industry has been relatively limited thus far – a stake in Fever-Tree – I see a handful of additional companies I’d be interested in at the right price.

“Sales by value for RTD cocktails rose 28% over the past 52 weeks… It has grown from 4% of the total U.S. alcohol market volumes in 2019 to 10% today… The RTD category isn’t a natural fit for distillers. The drinks are packaged, distributed and consumed more like beer. Making them requires canning facilities, but distillers are more likely to own bottling lines.”

“Personal AI assistants could soon reshape the digital economy”

An Economist article discussing the emergence of AI agents and assistants. As mentioned in last week’s Meta update, this has aligned with my own experience: Muse has quickly become an integral part of how I manage my business, and it has significantly impacted how I interact with the internet broadly - for example, far less use of search engines and other chatbots.

“More than 10 million people have downloaded the Muse app since its debut... ChatGPT, the hit chatbot from OpenAI that precipitated the AI boom, had only 3.7 million downloads of its mobile app in the same timeframe after its release, around six months after the web version was first unveiled.”

“The Making of Grand Theft Auto VI”

A Bloomberg article on the eight-year process to create the latest installment of GTA. Given the significance of this launch, I’ll be interested to see how it impacts engagement for a platform like Roblox, if at all, in the months ahead.

“GTA VI, due out November 19, is expected to be one of the biggest entertainment releases in history. Its immediate predecessor has sold 230 million copies, making it the bestselling nonmobile game of all time. The first trailer for GTA VI racked up almost 300 million views on YouTube, shattering records, while a recent gameplay premiere on Netflix was the platform’s most viewed content the week it came out… Some analysts expect the next GTA to sell 40 million copies on PlayStation and Xbox, and to generate more than $3 billion in revenue in its first four months.”

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be an update on Roblox (RBLX).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

From “Microsoft: CapEx Conundrum” (August 2024):

“If these [Copilot] tools become part of the daily workflow for knowledge workers, and then deliver meaningful productivity improvements, I am confident there will be significant adoption among the more than 400 million Office 365 Commercial paid seats over time (said differently, that value add would significantly outweigh the $30 monthly cost for certain types of knowledge workers). If that happens, the spread between seats growth and revenue growth should widen further in the years ahead.”

Over the next few quarters, I was somewhat disappointed by the lack of improvement on this KPI (the spread between M365 Commercial seats growth and M365 Commercial revenue growth). What you can see below is that Microsoft has started putting those concerns to rest:

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Netflix: Our Strategy Is Unchanged”)

Three Notable Items

“Markel Group Reports Q3 FY26 Results”

While this activity remains relatively small against a ~$23 billion market cap, Q3 FY26 marked the highest quarterly ($315 million) and TTM ($771 million) repurchase spend in Markel’s history. Management has argued of late that the stock is undervalued, and they are increasingly reacting accordingly.

Gayner: “We build Markel to relentlessly compound value over the long-term, by serving our customers and policyholders, owning businesses with staying power, underwriting with discipline, and reinvesting patiently through cycles. Our Q3 results demonstrate we continue to do that… We continued to deploy capital where we believe it creates the most long-term value.”

“Thrive to Buy ADT for $7.6 Billion”

A notable deal for a company discussed in the Alarm.com (ALRM) initiation.

“ADT has agreed to be acquired for $7.6 billion in cash by Thrive Holdings, an investment vehicle formed by Josh Kushner’s VC firm, Thrive Capital. Thrive will pay $10 a share in cash, a 35% premium to Wednesday’s close.”

“Hasbro’s CEO on IP, Selling Toys To Adults”

A topic of interest to me, particularly as it relates to Build-A-Bear (BBW). On the “kidulting” trend, Build-A-Bear management estimates ~40% of their sales are to teens and adults (slide six).

“Today, the majority of toys are sold to households who don’t have kids. The growth is from collectors, fans, and older consumers... 65% of our sales are to consumers who are 13+ years old.”

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be an update on Microsoft (MSFT).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

From “Meta: In Limbo” (August 2026):

“While I remain confident about the long-term future in Meta’s core business, and while I think that the current valuation is at least reasonable, I believe management’s likely course of action in the years ahead has greatly changed the range of possible outcomes for this business, particularly if they struggle to close the gap with MSL’s leading competitors. Here’s one data point to help contextualize how the range of outcomes is changing: a year ago, Meta had ~$28 billion of non-cancelable contractual commitments, primarily related to investments in servers and network infrastructure, with the majority to be realized by yearend 2025 [within six months]. One year later, Meta now has ~$349 billion of non-cancelable contractual commitments, with more than 60% of those commitments (>$200 billion) coming due in 2028 or later.”

Developments over the past three months neatly frame the Meta debate: while there are encouraging signs of progress in the core business, along with green shoots from emerging opportunities, that all comes with the asterisk of how much is being spent / invested to get there – and, critically, uncertainty on their willingness to adjust if things started to go sideways.

First, an update on the above figures: the value of non-cancelable contractual commitments increased >$100 billion over the past 90 days, to ~$455 billion. As it relates to capital expenditures, management expects FY26e spending to nearly double YoY, to ~$140 billion (original FY26e CapEx guidance, set alongside the Q4 FY25 results, was ~$125 billion). This will result in FY26e CapEx intensity of ~55%, with yet another leg higher likely coming in FY27e.

In addition to depreciation expense, other costs are skyrocketing higher. For example, research and development expense is on track to increase by nearly 50% this year, to ~$85 billion. As a result, it will be equal to ~33% of revenues, or ~1,000 basis points higher than the trailing ten-year average.

Altogether, you have a business on track for ~42% total expense growth in FY26e, to ~$167 billion (adjusted for the nearly $10 billion charge from the AG settlement related to teen mental health and social media; I remain cautious about the long-term cost of legal and regulatory risks). This is their highest adjusted expense growth (%) in eight years, and it’s well ahead of expected FY26 revenue growth. The result is persistent margin pressure, with Q3 FY26 FOA segment adjusted EBIT margins down ~700 basis points YoY.

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From “Netflix: This Is When It All Matters” (April 2022): “A key part of any long-term investment is partnering with an honest and able management team; while this period is a major bump in the road, I’m confident that Netflix management will adjust and find a way to win in the years ahead.”

That update was published following Netflix’s Q1 FY22 results, at a time when sequential subscriber growth had come to a standstill. For a company that led structural change in the media industry over the prior 10+ years, this presented previously unexperienced financial pressures, with revenue growth falling below 10% in each of the next six quarters. It coincided with profit headwinds, as TTM operating margins contracted more than 400 basis points over the next two years. The stock, which traded at ~$60 per share at the end of 2021, was below $20 per share six months later (split adjusted). Netflix was a first mover in DTC streaming, but legacy media companies had responded – and Mr. Market was convinced tougher times were coming.

That pessimistic take proved well overstated, as reflected in various KPIs. A notable example is operating income, which has compounded at >20% over the past five years, to ~$16.1 billion in FY26e. (At ~$66 per share, or an EV of ~$285 billion, Netflix is trading at a mid-teens NTM EV/EBIT multiple.)

Another is revenue growth, which returned to the double-digits in Q4 FY23 and has remained there ever since. That period was undoubtedly a tough one for Netflix – but management responded and proved the naysayers wrong. Those with the ability to see beyond near term challenges were ultimately well rewarded, with a trough to peak stock price increase of >7x off the lows.

While the above revenue chart provides some relative context for the following statement (i.e. what we’re seeing today doesn’t rival 2H FY22), there’s a clear sense that Netflix is facing another period of heightened competitive intensity. That viewpoint has been exacerbated by their uncharacteristic decision to pursue a >$80 billion acquisition, along with struggles in the near term to reaccelerate engagement trends. More recently, they announced layoffs affecting ~6% of their workforce, including their Chief Content Officer and the head of their film division. As management admits, current growth rates are falling short of what they aspire to. Some cracks have emerged in Netflix’s business, and they will need to be addressed.

That brings us to the opening comment from co-CEO Ted Sarandos during the Q&A session of the company’s Q3 FY26 earnings call. When pressed on an evolution in Netflix’s strategy, he said the following:

“Our strategy is unchanged. It always has been, and it continues to be, to combine best-in-class entertainment with industry-leading discovery, global distribution, and the best possible monetization. We want to be the must-have entertainment service, the first one members check for a great series or film and the last service they’d ever canceled. The anchor of that strategy are Netflix originals. Differentiated, exclusive, ambitious, professionally produced series, films, and live events. We’ve oriented the market to expect something great and new to watch every week, so we have to always deliver on quality and quantity. Live events… drive new membership, they add fuel to our ad revenues, they please our existing members, and they enhance the value of Netflix… We pair exclusive programming with a broad offering of third-party programming, including second run titles… In addition, we look to new ways to bring third-party content onto the service, like we just did with TF1 in France, where we ingest a full network of programming… Roughly 95% of our spend and nearly all of our revenue is focused on that core, where we see a long runway for growth… The core is the critical growth engine.”

Sarandos can be a bit hardheaded about how it’s labeled (“unchanged”), but that’s beside the point. What’s become clear - and importantly what I think management also now recognizes - is that Netflix needs to make changes on the margin to more effectively execute against its long-standing strategy.

Own The Core

Despite persistent effort by the legacy media companies over the past 5+ years to try and close the gap, Netflix has sustained a massive global scale advantage. The company is on track for FY26e revenues of >$51 billion, which is roughly equal to the combined global DTC revenues generated by Disney, HBO Max, Paramount+, and Peacock. After years of significant investment, they all remain distant competitors to Netflix – less so in the U.S., but crucially in terms of global scale. (A reminder that Netflix generates about 50 hours of monthly viewership per average global member household, from which they generate only ~$0.25 in revenue per global viewership hour.)

On the other hand, the entertainment industry is evolving, with rising adoption for newer formats like user-generated content and short-form video. While I believe Netflix is largely holding its own in the narrower market of traditional TV shows and movies (albeit with near term volatility in a hit-driven business), its position in these newer formats rounds to zero. The media industry is evolving – to the benefit of YouTube and Meta, and at the expense of Netflix.

While I can appreciate efforts in video podcasts and with select YouTube creators, the critical priority for Netflix is to own their core opportunity: professionally produced movies and TV shows, documentaries, stand-up comedy, and live events. I don’t think the answer is to try and replicate YouTube. Instead, it’s to adjust their tactics to become a better Netflix.

One area where this has become clear is theatrical releases. Management has been somewhat resistant to industry-standard windowing – and on occasion, that has impacted the talent they could work with. First, I’d argue with the premise that a theatrical window materially diminishes the value of a movie on a streaming service (see “Project Hail Mary”, a nice winner for Amazon Prime Video after raking in nearly $700 million at the box office). Instead, I’d bet the opposite is true: movies with a theatrical run often have improved awareness and are viewed somewhat differently (being of higher quality) upon landing on a streaming service. But even if Netflix management still disagrees, I think we’re past the point where that matters: for top talent, they need to acquiesce on this issue. I suspect incoming Chief Content Officer Peter Rice will push for this to change, and it’s an important one. (“We need better execution [on our U.S. content]… We had some solid doubles and triples - but other territories count on some of those U.S. titles being home runs so they travel around the world. We’re focusing on execution.”)

Another example is a more traditional release schedule for their “highest-quality” TV shows, à la certain HBO shows; again, I think there’s a certain level of awareness and perception improvement associated with this model (as opposed to dropping an entire season at once). These adjustments can improve Netflix’s relationship with talent and its perceived value / quality among viewers; these are changes that management now seems open to.

In addition to those tweaks on Netflix originals, I was encouraged by two of the content licensing deals announced this quarter (with Disney and Globo). This is more of Netflix’s bread-and-butter, and it’s an area that has been in some flux over the years depending on the level of commitment that the various media companies have made to DTC at points in time. I continue to believe that this is a sustainable source of important supply, either through licensing or a more significant commitment (M&A). Effective execution here, which is rooted in the sustainable competitive advantages of industry leading scale and global reach, remains critical to Netflix’s long-term success.

Beyond these factors, I think the severity of Netflix’s current business challenges have started to be overstated. The stock getting cut in half from the mid-2025 highs has as much to do with the more optimistic assumptions the valuation implied / required as it does with anything in management’s near-term control. Mr. Market was optimistic, and now he’s somewhat less so.

Admittedly, Netflix cannot pull (to the same degree) some of the key levers that they did in 2022, most notably the password sharing crackdown and the ad-supported (AVOD) tier. At the same time, this business will report FY26e revenue and EBIT growth of ~13% and ~22%, respectively. Netflix continues to operate from a position of strength, and it does so with a large TAM ahead; with effective execution, I think the stock will generate solid returns from here.

Management’s actions suggest they agree: the company repurchased a record $4.8 billion of stock during the third quarter (at an average cost of ~$75 per share), bringing the trailing 12-month tally to ~$12.9 billion. As a result, Netflix’s diluted share count has declined by >3% over the past year.

Conclusion

The below graphic details all of my Netflix trades since I first bought the stock in January 2022. While I naturally wish that I would have bought more aggressively in mid-to-late 2022, and trimmed / sold more aggressively in mid-2025, I’ve done an effective job to date of not being overly influenced by Mr. Market’s wildly changing views on Netflix over the past five years. As a result, I’ve generated attractive returns on this investment, at least thus far.

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Build-A-Bear: A Narrower Path”)

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Three Notable Items

“Ally Financial Reports Third Quarter 2026 Financial Results”

It was another relatively uneventful quarter for Ally, which is a welcome outcome after years of pressure from the 2022 vintage. The combination of improved credit quality, higher NIMs, and growing capital returns is an interesting setup – particular for a business trading at ~8x trailing earnings.

“Ally paid a $0.30 per share quarterly common dividend, which was unchanged YoY. Ally’s Board approved a $0.35 per share dividend for Q4 2026 [+17%]. Ally repurchased $178 million in shares during Q3.” (YTD repurchases of ~$475 million, compared to a market cap of ~$11.7 billion.)

“It’s Too Late for Small Fixes at Pepsi”

While I’m less interested in Pepsi as an investment idea than some other names in the industry – see Celsius, Fever-Tree, and Monster – it has been interesting to watch the company’s strategic evolution, particularly in U.S. beverages as they navigate sustained volume pressure in sodas / CSDs.

“Protein shakes are one of the hottest corners of the grocery store. But while Coca-Cola’s Fairlife experienced a 78% increase in sales from a year earlier, Pepsi’s Muscle Milk fell 16%, according to Evercore’s analysis of Circana data. Coke now has nearly a quarter of the category, while Pepsi’s share is 3%. And Poppi, the prebiotic soda Pepsi bought for nearly $2 billion, is underwhelming: Pepsi now expects to pay almost none of the $300 million bonus that it promised the sellers if the brand hit its performance targets. “

“Match Group CEO: What Makes a Match on Tinder?”

Following up on last week’s news that Bumble had agreed to sell for ~$1.3 billion, I thought that this interview with Match Group CEO Spencer Rascoff provided useful context on how the online dating industry has evolved, along with his strategic vision for improving Match Group’s business trajectory.

28^th minute: “The company had sort of lost its way. It had not been innovative, and it had been run too much ‘by Wall Street, for Wall Street’. We became very short-term focused [as I highlighted at the time], and we were squeezing every nickel out of our users. We lost sight of what we were here to do.”

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be an update on Netflix (NFLX).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

“The shift to test the ‘stretchability’ of the brand is a notable change. I also suspect it reflects a management team that witnessed the huge growth of brands like Jellycat and Labubu over the past five years and wants in on the party… On the one hand, this may be an opportunity for incremental growth. On the other, it can also be seen as an attempt, or a need, for change.”

In the late 2025 update, I discussed efforts to expand beyond the company’s namesake offering. There were two primary ways this stretchability was being tested in the marketplace: prestuffed versus make your own, and building a broader retail sales presence beyond Build-A-Bear branded workshops.

A key question was whether consumers would follow the brand down this new road – and recent results have presented some reasons for caution.

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Is Ralph Lauren Still Relevant?”)

Three Notable Items

“Bumble in $1.3 Billion Deal With Ithaca Holdings”

While I’ve spent less time writing about online dating in recent quarters, I continue to monitor industry developments. This week, Bumble agreed to be taken private in an all-cash deal for ~$1.3 billion ($6.05 per share) - a nice bump from the ~$2.5 per share that the stock traded at a few weeks ago, but also ~90% below the 2021 highs. Note that the company repurchased ~$370 million of stock during 2023 and 2024 at an average cost of ~$9.75 per share – a roughly 60% premium to the deal price that management just agreed to.

“The deal marks a dramatic turn for Bumble, which was valued at $14 billion when it went public. The app was founded in 2014 by Wolfe Herd, a former Tinder cofounder, on the premise that only women could make the first move on the app. But Bumble, like many of its dating-app peers, suffered user declines as young people have grown fatigued with online dating.”

“How Zuckerberg is building superintelligence”

An interview on the Cheeky Pint podcast with Mark Zuckerberg and Alexander Wang, focused on Muse and model development at MSL.

Zuck: “This is a big step forward. With Muse Spark, we were very happy with the performance we were able to deliver as we were getting up to this point, but this is the beginning of MSL being at the frontier. These models are quite competitive with the best models that are out there.”

“Netflix Eliminates About 1,000 Jobs in Biggest Cuts Since 2022”

In advance of next week’s Q3 FY26 earnings report, Netflix announced job cuts impacting ~6% of its workforce. The culprit is underwhelming growth, with management struggling at the moment to find meaningful remedies, particularly to address relatively lackluster engagement trends. Personally, I find the current period reminiscent of Netflix’s challenges in 1H 2022. (The company announced last night that Peter Rice has replaced Bela Bajaria.)

“Co-Chief Executives Greg Peters and Ted Sarandos said in an email to employees Wednesday that the bulk of cuts would be in the streaming giant’s product, tech, legal and HR teams. ‘Our mission - to entertain the world - is ambitious, and delivering on it requires us to be disciplined about where we prioritize our people and resources,’ they told employees.”

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be an update on Build-A-Bear (BBW) – a company that has seen its stock price fall roughly two-thirds from the early 2026 highs, and which currently trades at less than 5x FY26e EV/EBIT.

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Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

“As my coverage of companies in the alcohol industry has expanded, I’ve developed more appreciation for changing competitive dynamics and shifting consumer preferences, along with how different companies are responding to those developments. One consistent theme is the critical importance of capital allocation and M&A. I’m wary of those engaging in a seemingly endless number of divestitures and acquisitions, with little reason to believe this activity has, or will, generate material value for owners (see Brown-Forman). Securing the U.S. rights to Modelo, Corona, and other Mexican beer brands was clearly a fantastic deal by Constellation – but more recent examples in cannabis and craft beer led to significant value destruction… My focus as I learn more about STZ will be to develop a clearer sense for future capital allocation decisions. To give a recent example, I’d prefer fewer deals like Sea Smoke; to me, it signals a lack of focus on what moves the needle.”

When that initiation was published, STZ was a ~$140 stock trading at ~13x NTM EV/EBIT – a meaningful reduction from the multiple Mr. Market had previously deemed appropriate for the business. It has remained challenged subsequently: as of Wednesday’s close, STZ is a ~$127 stock trading at ~11x NTM EV/EBIT. It was a “cheap” stock a year ago, and it’s a bit cheaper today.

And yet, while the stock price hasn’t cooperated for the past 5+ years, I think that the recent business results are presenting reason for some optimism.

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As noted in the Financial Times, the company had its fair share of challenges: “Ralph Lauren has faced competition from online competitors and fast fashion names like Zara and H&M that copy runway styles for a fraction of the cost and cycle through fashions at a rapid pace. The New York-based chain has seen same-store sales (SSS), a key metric, fall nine consecutive quarters.”

Louvet stated it more succinctly:

“Is Ralph Lauren still relevant, or has the brand’s time passed?”

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from the Q3 2026 Portfolio Update)

Three Notable Items

“Charlie Munger’s Interview with Todd Combs”

A transcript from a 2022 conversation between Charlie Munger and Todd Combs. Thank you to Shane Parrish of Farnam Street for sharing it publicly.

Munger: “Warren used to say, ‘You really don’t need to be very smart to be a successful investor’, and I think he was right. It’s good to have the extra mental horsepower Henry Singleton had. That is helpful, but it’s perfectly possible to do splendidly well if you have the right temperament… I’m not a polymath. I’m a guy who has taken a moderate obsession and a long attention span and turned them into pretty good results. Of course, having a long attention span will help you a lot if you are reasonably smart.”

“Welcome to Skydance! Movies, TV ... and Massive Debt”

Paramount Skydance has completed the acquisition of Warner Bros. Discovery. One critical issue, as was the case with the prior transaction to create WBD, is that Skydance emerges from this transaction with massive financial leverage, which is particularly problematic given uncertainty about the long-term trajectory for the linear TV business. Time will tell whether management has appropriately prepared themselves for these headwinds, or if they will soon encounter the same stumbling blocks as their predecessors.

“Disney jacked up the price of Disney+ and Hulu over the past 3-4 years, while keeping the bundled price much more compelling; over time, they’ve basically walked you up to a combined price by raising the individual prices so aggressively… What I suspect will happen is a similar progression, where the HBO Max and Paramount+ prices go up far faster than normal, while the price for the bundle of the two goes up very slowly.”

“Big booze is reinventing itself”

A podcast from The Economist discussing how different companies are responding to changes in the alcoholic drinks industry. I’ll have more to say about this topic on Thursday in an update on Constellation Brands (STZ).

Carlsberg CEO Jacob Aarup-Andersen: “When we have the full-scale portfolio, including soft drinks, we actually increase the value and the resilience of our beer portfolio. Why? Because we become much more relevant to our customers - the big retailers, the big pop chains, etc. - and we become more relevant to the consumer because we cater to all occasions… I think that’s key. The average consumer globally consumes around eight cups of liquid every day. In emerging markets, they will purchase one to two of those eight cups. In developed markets, they will purchase four to five of those eight cups. They will definitely purchase more beverages in ten years than they do today. We are not exiting beer or alcohol, but we are making sure we have a portfolio that caters to all consumer needs… We see it being synergistic from the purchase of the can down to the consumer moment.”

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will examine the turnaround of Ralph Lauren (RL).

Subscribe now

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

As noted in today’s report, I have decided to make a portfolio change.

These trades will be executed after the market opens at 9:30 at ET.

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Q2 ’21, Q3 ’21, Q4 ’21, Q1 ‘22, Q2 ‘22, Q3 ‘22, Q4 ‘22, Q1 ‘23, Q2 ‘23, Q3 ‘23, Q4 ‘23, Q1 ‘24, Q2 ‘24, Q3 ‘24, Q4 ‘24, Q1 ‘25, Q2 ‘25, Q3 ‘25, Q4 ‘25, Q1 ‘26, Q2 ‘26

Q3 2026 Portfolio Changes:

Portfolio Change - 07/23/2026

Portfolio Change - 08/20/2026

Portfolio Change - 09/28/2026

Q3 2026 Top TSOH Research:

“On Holdings: Maintaining Pace” (07/20/26)

“Peloton: Subscriber Squeeze” (08/10/26)

“Portillo’s: Strategic Reset” (08/24/26)

“Celsius: The Pepsi Put” (09/07/26)

This chart seems a fitting summary of the current market environment.

Despite the S&P 500 being up low double digits YTD, and trading just shy of its all-time high (ATH), the majority of its constituents are trading >20% below their ATHs, with more than one-quarter trading >40% below their ATHs. The index remains a daunting competitor, with many of the companies within it struggling to keep pace. (As noted by Liz Ann Sonders, less than 10% of the S&P 500 constituents have outperformed the index over the past year.)

I follow or own many companies that would land on the right hand side of the above chart. I ran the ATH data for the 17 companies in the TSOH portfolio, along with 13 other non-portfolio holdings (selected based on the companies I’ve written about most recently). Here’s the data for those select 30 stocks – first, the comparable TSOH drawdown chart to the above S&P 500 data, followed by the percentage change from the ATHs for the 30 companies:

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Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Deckers: Clown Shoes To Compounder”)

Three Notable Items

“Mark Zuckerberg on Muse, New Audio-Only Glasses and Killer AI”

An interview with Zuck following Meta Connect 2026. I was interested to hear him discuss Muse, an AI tool I’ve been glued to throughout the week (to pick one example, Muse helped me save about $350 per year on a GEICO auto policy with unchanged coverages). Zuck has received plenty of flack over the past five years for the non-core / FRL investments, but it feels like Meta is at a point where some efforts are converging and can bear meaningful fruit.

“I think everyone in the future will have a personal agent that can basically do things for them. It will understand their goals, their context, and get things done for them… You give it a goal, and it can just go work on things for you… You’re basically going to have an extremely capable assistant who can understand the things you care about and help get basic things you don’t want to deal with out of the way so you can focus on the things you want.”

“Ted Sarandos on Next Stage of Growth for Netflix”

A wide ranging discussion with Netflix co-CEO Ted Sarandos at Bloomberg Screentime 2026. In particular, I was interested to hear Sarandos’ comments about the evolution of their gaming strategy, the Warner Bros. deal, and competition from FAST services like The Roku Channel (TRC) and Tubi.

11^th minute: “Mobile gaming was a gateway to cloud gaming; we’re much more interested in what you can do on your TV using your phone as a remote. In a post-console world, there’s going to be all kinds of opportunities for gaming on the TV – and we want to be early to invest in that.”

“How Arc’teryx Turned Climbing Gear Into a Luxury Status Symbol”

An interesting feature in the Wall Street Journal about the mountaineering brand founded by a group of climbers in Vancouver, Canada that has grown its revenue base from ~$500 million in 2020 to more than $2 billion in 2024.

“The highly technical products are designed for climbers, but the rapid brand growth has also been fueled by ‘gorpcore,’ a fashion trend where technical gear is worn as high-end streetwear… This commitment to form and function comes with a hefty price tag, with the Alpha SV jacket in the U.S. retailing for ~$900… The company has 48 repair centers [ReBIRD], aimed at helping to keep products in use longer; it’s a central part of the identity of the brand.”

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research report will be the Q3 2026 Portfolio Update.

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

The company started in 1973 in Santa Barbara, California, when two college buddies started selling flip flops - originally known as “Driftwood Dans”, but the name was later changed to “deckas”, a slang phrase that referred to the stacked appearance of their sandals. A decade later, in 1985, the company licensed a sport sandal called Teva that had been created by a Colorado river rafter. Those two products carried the company to a 1993 IPO, and would eventually lead the way to two transformative acquisitions in the company’s history: the 1995 deal for UGG, which makes sheepskin boots, and the 2012 deal for HOKA, which makes maximalist running shoes. (HOKA co-founder Jean-Luc Diard: “The Deckers partnership brought two things for HOKA. First, it was a group in the footwear business, so they could bring [benefits with suppliers and production]. Second, it didn’t have a running brand in the portfolio… It was a four-year plan, with stages of additional capital investment so everyone could use that experience in learning how to work together.”)

As you can see below, those two brands account for the vast majority of Deckers revenue base. Notably, the HOKA brand, which has reported ~5x revenue growth since FY21, is on track to rival UGG’s size for the first time.

The rise of brands like HOKA and On, which has coincided with a lesser position for incumbents like Nike, has been a well-covered theme at TSOH Investment Research. It’s a story we’ve also watched from the angle of retailers like Dick’s Sporting Goods and Academy Sports + Outdoors.

What makes today’s DECK initiation timely is the carnage in the space.

Each of those companies has seen its stock price decline meaningfully from its all-time highs, with significant underperformance versus the S&P 500 over the past year; they also trade at wide discounts to their historic valuations.

Some see what has happened in recent years and argue the space is uninvestable (too much fad / fashion risk). I think that’s a broad brush which may close people’s eyes to compelling opportunities – with Deckers itself a great example over the past 10-20 years: DECK has been nearly a 30-bagger over the past two decades (~18.5% CAGR), leaving the S&P 500 in the dust.

As noted above, Deckers growth over the past decade was led by HOKA. The brand was founded in 2009 by two former executives of French sports equipment company Salomon. The idea, as one running blogger put it in the early 2010s, was a shoe with an oversized midsole and a wide body, utilizing maximalist design already applied to other sports equipment like powder skis, golf clubs (drivers), mountain bike tires, and tennis rackets. (“‘HOKA ONE ONE’ originates from the Maori language, meaning ‘to fly over the earth’.”)

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I’ve decided to make a portfolio change, which will be completed during today’s market session. This was the allocation as of yesterday’s close:

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From “On Holdings: Maintaining Pace” (July 2026):

“Mr. Market has some concerns about the sustainability of their current financial trajectory. Personally, I am somewhat less pessimistic about On than I think this rating implies. I see a premium athletic brand that etched out a unique position in the industry, at least at its current size… If I walk away from [On’s 2026 Investor Day] with more appreciation for where this business can go over the next five to ten years, I will be open to changing my conclusion.”

The Investor Day in question was held last week in Zurich, with the company setting medium-term financial targets through FY29, announcing their first share repurchase authorization, and detailing their plans to expand into golf and soccer (welcome aboard Mbappé). For a stock that has spent most of 2026 heading in the wrong direction, the >10% pop in response was a notable change in direction; with that said, it’s still down ~35% year to date.

The Mbappé signing is a fitting place to start, because I think it captures the broader strategic vision for On. As management noted at the Investor Day, “We are entering because at the premium end of the sport there is still space left open for radical innovation on the pitch... A few incumbents own the architecture of the category, and they compete head-to-head. We will play a different game… Our innovation engine has given us an entry ticket nobody else holds. I’m quoting Sydney Schertenleib – ‘I’ve never felt the ball like this before’. That’s what Sydney said after her very first practice in an early concept of our upcoming performance football boot. This is the disruptive power of LightSpray. On a football boot, LightSpray does something that no other boot has done: it puts almost nothing between the foot and the ball.”

It’s clear that On’s initial efforts in soccer will be focused on top of the line premium cleats with a LightSpray upper (they currently offer two different styles of LightSpray men’s shoes – the Cloudmonster 3 Hyper for $280 and the Cloudboom Strike 2 for $310). They have no interest in competing with lower end (~$100) soccer cleats sold by Nike and Adidas, let alone the endless list of brands sold through sites like Amazon for even less. On enters the market with a clear focus on selling to a select group of soccer players who are willing to pay a premium for the highest quality boot they can make.

This should sound familiar, because it mirrors what they’ve done in running, tennis, etc. As co-founder Caspar Coppetti has said about On’s early days, “Passionate runners were investing more into their gear every year. They were willing to pay for progress. They were the most valuable customers in the running category, but no brand catered to them exclusively. That was the moment where it all made sense to us. We would disrupt running with innovation, and we would only sell at the premium end of the market.”

Critically, On consistently acts in a way that reinforces it’s premium brand image. To paraphrase management, operating in that manner is simple in principle, yet demanding in practice, and powerful because it compounds.

As management noted, On has the industry’s lowest discount rates and the highest average selling prices (“since 2023, we have taken ASPs from $145 to $170”). On the latter figure, they also noted their U.S. wholesale ASPs are ~40% higher than their peer average. In a more mature category for On like Running, the company’s pricing architecture has evolved to cover a broader range of price points, with success driving “better” / “best” SKU adoption:

“Generally speaking, we will not take prices down. That is off the table. But we have different playbooks of price points we design to. In performance, what we’ve seen is that the aperture is opening up. For example, we’ve seen a really strong response to Cloudmonster 3, which comes in three versions - regular Cloudmonster [~$190], Cloudmonster Hyper [~$220] and LightSpray Cloudmonster Hyper [~$280]. A very large share of Monster, 40% - 50%, is from those higher-priced versions, much more than we expected. We’ve actually been chasing the units to go after that… In performance, we want to open up the aperture: an initial price point probably around $160, then something at $200+, and then something that’s closer to $300.”

Naturally, this strategy has its limitations, particularly in terms of market size. As quantified at Investor Day, the premium sportswear segment is ~$150 billion (125 billion CHF), and it accounts for roughly one-third of the global sportswear market. Said differently, there’s the other ~65% of the market that On does not – and per management’s vision, will never – compete within.

When asked about the trade-off that this will present over time, particularly if the brand aspires to sustain outsized topline growth in the decade ahead, co-CEO Caspar Coppetti said the following:

“I just don’t think that holds true [tight growth / margin trade-off]. The premium playbook has been applied in other industries – say, consumer electronics, what Apple has done. They are high margin, the highest price point, and the highest market share. What it comes down to, and I think it’s what your question is leading to, is discipline. We’re educating our consumer not to expect a sale from us, and we’re going to fulfill that promise. As long as we stay the course on the premium playbook, there isn’t an either / or tension; it’s actually reinforcing.” (And when it goes wrong, losing control of promotional intensity creates material brand risk, as seen at Nike under John Donahoe.)

As I discussed in July, I think On management deserves a lot of credit for continuing to do an effective job of nurturing the long-term development of their premium sports brand, while also delivering strong financials. In the face of a near-term environment with heightened competitive intensity and some unforeseen external developments (U.S. tariffs), they’ve delivered compelling results that exceeded the trajectory envisioned at their 2023 Investor Day.

From a financial perspective, the past three years (FY23 – FY26e) have been quite rewarding: a mid-20’s revenue CAGR, with nearly 500 basis points of adjusted EBITDA margin expansion. The vision for the next three years, as outlined at Investor Day, is similarly impressive: high-teens annualized constant currency net sales growth and adjusted EBITDA margins expanding another ~200 basis points to at least 22%. In addition, the Board authorized an inaugural share repurchase program, for up to $1 billion through the end of 2029, which is equal to ~10% of the market cap. (The following charts are in dollars; as noted at Investor Day, management is preparing to move to U.S. dollar reporting in 2027, which aligns with their share price currency.)

On’s growth strategy includes a few key levers: first, broad global expansion, with low-teens growth in America outpaced by ~20%+ growth in EMEA and APAC; second, a significant expansion of their Apparel business, with revenues climbing from ~$200 million in FY25 to ~$900 million in FY29e; and third, the Lifestyle business, led by Cloudtilt (“Cloudtilt is one of the industry’s fastest-growing sneaker franchises, and the precursor of more to come”).

As noted earlier, Mr. Market’s optimism has faded over the past few years, with ONON closing on Friday at ~$30 per share – down ~50% from the early 2025 highs. With ~336 million diluted shares, the company has a market cap of ~$10 billion and an enterprise value of ~$8.6 billion. As you can see below, the EV/EBIT multiple Mr. Market has typically deemed appropriate for On was 30x, 40x, or even 60x; today, it trades at ~14x FY26e EV/EBIT. (Relative to the ~$1 billion of FY29e EBIT shown earlier, the stock is at ~8.5x EV/EBIT.)

Mr. Market is suddenly feeling much less optimistic, a statement that applies to peers like Deckers and Nike, as well as major retail partners like Dick’s Sporting Goods. In my view, while I certainly appreciate that more cautious sentiment given On’s growing size and the constraints of their premium-only model, I think the runway for this business will extend well beyond what the valuation now implies. This brand has staying power and room for growth.

Conclusion

As noted in the opening quote, I came into Investor Day with an openness to changing my conclusion depending on the clarity of the vision presented. Personally, I think management hit all the right notes, and I’m confident they will continue to etch out a unique path by remaining committed to their premium playbook. In addition, the stock took on further water in recent months amidst broader industry pressures, pushing On’s valuation lower.

In summary, I think now is a good time to initiate an ONON position.

I’ll send the portfolio change email before the market opens (at 9am ET).

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

Each update features a Chart of the Week, along with a brief discussion on three news items relevant to companies in the TSOH investable universe.

Chart Of The Week (from “Going Through Some Pain”)

Three Notable Items

“Ralph Lauren’s Patrice Louvet On Magic, Logic, & Saying No”

An interview with Ralph Lauren’s CEO focused on the company’s turnaround efforts over the past decade. As we think about the long-term evolution of companies like Nike, I think Louvet shares valuable insights for investors.

19^th minute: “We had overextended the brand. We were overextended in off-price, and we had a department store presence that was very significant. We were in a lot of places where we, frankly, were not proud of being there. My filter for the team was two things: first, are we proud of the way we show up; and second, is it financially attractive? If the answer is no to either, then we need to make an intervention to address the issue, or get out. We left about $1 billion of revenue on the table [from pulling back on distribution]. I was confident it was the right thing to do. I had done something similar when I ran the fragrance business at P&G, where I saw the benefits in terms of brand desirability… In hindsight, I wish we had done even more… It would be foolish to think we can create the desirability we’re looking to create if we look good in our Chicago store, but in other locations the brand image is different. The consumer needs to have a consistent, holistic experience for the brand.”

“Peloton Is Revamping Its Treadmills”

As expected, Peloton has revamped its treadmill line, including a cheaper, foldable model with a list price of $2,195 (relative to the other Tread models, the Flex is much more price competitive with the NordicTrack T Series). In addition, the company is progressing on talks to refinance ~$800 million of debt. Both of these developments are important components to my thesis.

“The connected fitness company unveiled three new treadmills and new features for its Peloton IQ artificial intelligence platform with tools for runners, walkers and hikers. Peloton aims to widen its customer base, from people looking for a more affordable, space-saving treadmill to more experienced athletes looking for personalized coaching.”

“Bob Chapek Is So Not Over Getting Fired From Disney”

Former Disney CEO Bob Chapek is out with a tell-all book about his career at the company, which culminated in his late 2022 firing from The House Of Mouse. This discussion with Ben Fritz of the Wall Street Journal primarily highlights the difficulties Chapek faced in navigating his relationship with Bob Iger. While there are two sides to every story, I think that there’s some merit to Chapek’s version of the facts: as opposed to doing what he could to position his successor for long-term success, Iger undermined Chapek and was happy to see him go. Iger’s history with Disney exemplifies the various challenges a great CEO must be able to navigate. On the topic of succession, Iger has proven a good example of what not to do – and I would argue that he materially hurt The Walt Disney Company as a result of his self-serving actions. (This timing is surely coincidental, but Harvard Business Review also released an interview with Iger yesterday morning that touches on this topic.)

“If the cues I got from the opening press conference [in February 2020] weren’t enough, when he did the interview with Ben Smith [in April 2020] where he essentially reasserted himself as CEO - that was as big a sign as possible of an attempt to undermine me.” (From the April 2020 NYT article: “Mr. Iger has effectively returned to running the company. After a few weeks of letting Mr. Chapek take charge, Mr. Iger smoothly reasserted control.”)

TSOH Updates

Here’s the updated TSOH research list for the past six months:

Monday’s research will be an updated look at On Holdings (ONON).

Have a great weekend!

NOTE - This is not investment advice. Do your own due diligence.

I make no representation, warranty, or undertaking, express or implied, as to the accuracy, reliability, completeness, or reasonableness of the information presented in this report. Assumptions, opinions, and estimates expressed in this report constitute my judgment as of the date thereof and are subject to change without notice. Projections are based on a number of assumptions, and there is no guarantee that they will be achieved. TSOH Investment Research is not acting as your advisor or in any fiduciary capacity.

“One notable deal signal is the aforementioned ‘cheap’ price tag. At Foot Locker’s 2023 Investor Day, management detailed a long-term plan to reach >$800 million in FY26e EBIT; needless to say, if they were truly confident in that vision, they would not have sold the business for anywhere close to ~$2.4 billion. The more plausible answer is that Foot Locker’s financial struggles were expected to persist – and, from Dick’s perspective, that the expected future benefits are dependent upon their influence and ownership.”

In early 2025, the Dick’s investment thesis was a simple one: a management team with a clear long-term strategic vision for their business, along with straightforward capital allocation priorities. The company had meaningfully improved its unit economics, and was evolving its store footprint to the “House Of Sport” and “Field House” experiential prototypes. In addition, they’d repurchased ~$2.5 billion of stock in the preceding four years, which was meaningfully reducing the share count. It was a straightforward strategic vision, and the financial results suggested it was going according to plan.

Then they decided to change course.

In May 2025, they announced the ~$2.4 billion acquisition of Foot Locker. While management argued this was similar to deals like Galyan’s in the early 2000s, there were two key differences: first, it nearly quadrupled their total store count, and second, it gave them a significant international presence.

On the Foot Locker deal call, Chairman Ed Stack said they’d long considered this move: “It’s something we’ve looked at and thought about for a long time.”

It’s looking like they should’ve thought about it even more.

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