Theme of the Week
Shorting Through the Cycle
We had a fantastic time at our Happy Hour with Muddy Water’s Freddy Brick! The full video is available on our website, but for those who couldn’t join, we’ve highlighted the key takeaways below.
Looking ahead, we’ve got more exciting guests lined up for upcoming Happy Hours. Unlike traditional podcasts, our Happy Hours are interactive, giving you a chance to ask questions directly to both our guests and Kuppy during the show. We hope to see you at our next event!
From White Monkey to Project Shitadel
Freddy Brick has been with Muddy Waters since 2014, but he got there in a fairly roundabout way. He graduated into the 2009 European job market. At one point, he was down to a final-round interview at Bank of America, only to find himself competing with candidates flying in on private jets.
So he left. China at the time was running peak, unfiltered capitalism. Freddy ended up working as a white monkey, essentially a Western interpreter trotted out by SOE chairmen as a status symbol.
From the outside, it looked like proximity to power. In reality, it was closer to a prop in a system that had little interest in IP protection or the rule of law.
Kuppy’s Tweet of the Week
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Kliff Note of the Week
Spin Monitor: Middleby (MIDD) filed to spin off its Food Processing division, targeting a July 6 spin-off. This one is interesting. Middleby Food Processing is a solid business with quality brands and a strong position in areas such as protein, bakery, and snacks. Last year, it generated $850m in revenues with EBITDA margins around 20%.
Revenues have grown ~12% p.a. since 2019, and roughly 40% of its sales come from services and spare parts (hence more recurring). The spin should have low debt, about 1.25x. There’s also plenty of room for more acquisitions.
Now compare this to MIDD overall, which has similar margins but much less growth and much higher leverage, and therefore trading at ~11x EV/EBITDA. Capital markets day on May 12.
Cluster Insider Buy Monitor: We flagged German IT hardware/service provider Kontron (KTN GR) roughly a month ago. The company is facing poor end markets and recently reported slow bookings and a weak 2026 guidance.
The Chairman and CEO bought the dip for almost €3m. More recently, their largest shareholder, Ennoconn, crossed 30% and is reported to be considering a bid at €23.50 p/s. Meanwhile, the CEO continues to buy.
CEO Changes Monitor: Bekaert (BEKB BB) fired its CEO after failing to deliver margin improvements and reduce cyclicality in the business. Targets were missed, markets turned against the hydrogen push, and the board clearly wants a faster reset.
But Bekaert’s current CEO will still be presenting the next set of results, and we would not be surprised if they were poor. Could be an interesting short ahead of the next set of results, and perhaps once the new CEO steps in and does some serious kitchen-sinking.
13D Monitor: We might soon see some action at OraSure (OSUR). A small diagnostics company with a net cash balance which almost covers its market cap.
Activist Altai has pushed its way onto the board, and a key new product (CT/NG) seems close to FDA approval, which should restart real growth. If the new test lands and strong growth resumes, the stock has quite a bit of upside from here. The CEO and CFO recently bought shares.
Strategic Alternatives Monitor: The trouble continues for automotive wholesaler LKQ (LKQ), which is still facing negative organic growth, margin compression, and a problematic ERP implementation, all of which have driven down EPS guidance for this year. And the shares clearly don’t like this.
But a reminder that LKQ recently launched a full strategic alternatives process to unlock value. LKQ is also exploring a sale of its Specialty segment. So, sell the higher-quality assets first, then check whether the rest can be sold?
There’s not much growth priced in, which makes sense given the headwinds, but this is a cyclical industry and FCF remains strong. And a decent selling price should reflect that.
Other Interesting ED Action: QuidelOrtho (QDEL) is an ugly, deeply out‑of‑favor diagnostics name, but the dislocation seems extreme here.
A niche, low‑growth but steady business, trading at what seems under 3x (pro‑forma) earnings, with a serious path to generating its entire market cap in free cash flow over the next three years.
2026 has not been kind so far and management has not exactly been the best here. Might be too early as we’re still not hitting a base, but it’s on the watchlist.
