What We’re Reading (Week Ending 21 December 2025) - 21 Dec 2025
Reading helps us learn about the world and it is a really important aspect of investing. The late Charlie Munger even went so far as to say that “I don’t think you can get to be a really good investor over a broad range without doing a massive amount of reading.” We (the co-founders of Compounder Fund) read widely across a range of topics, including investing, business, technology, and the world in general. We want to regularly share the best articles we’ve come across recently. Here they are (for the week ending 21 December 2025):
1. 100% IRR in Ice Cream – Joe Raymond
Imagine finding a 70-year-old ice cream company with a teens ROE trading for less than net cash and only 4x earnings.
Talk about mouthwatering!
That’s exactly the position Jim Mitchell found himself in in 1990…
…One such illiquid gem was Eskimo Pie Corporation (EPIE), a neat company with an interesting history…
…When Jim Mitchell started buying EPIE in 1990, Reynolds Metals owned 88% of the outstanding shares. The other 12% traded OTC.
Thus, Eskimo Pie was controlled, illiquid, non-reporting, and unlisted.
Music to Mitchell’s ears!
The business itself was perfectly satisfactory…
…Average annual operating profit was $1.6 million and ROE was in the low-teens. Aside from a blip in 1986 and ’87, EPIE earned a healthy profit every year. By the end of 1990, the company had a cash reserve of $12 million…
…I can’t think of a single case where buying a decent, stable business with a multi-decade history of profitability at a negative EV, single digit earnings multiple, and huge discount to book value hasn’t resulted in a home run return.
And Eskimo Pie certainly classifies as a home run.
Reynolds Metals decided to spin off EPIE and complete an IPO in 1992, less than two years after Jim started buying the stock.
Returns are typically favorable when you can buy a non-marketed minority interest on the pink sheets and later sell that same asset once it’s listed after a promoted IPO.
Mitchell Partners made 6.6x on Eskimo Pie in 19 months.
2. Weird Events, Part 2: Some quick hits $ADVM $DXLG $PETS $PGRE $WBD – Andrew Walker
ADVM was a tiny little biotech company that announced a deal to get bought by Eli Lilly in late October…
…The stock closed at $4.18/share the day before the merger was announced, and ADVM sold for $3.56/share in cash plus a CVR. The CVR could be potentially very valuable; if both milestones hit, it would be worth another $8.91/share. That is, of course, a big if; the tender docs valued the CVR at $1.72/share for a risk adjust fair value of the whole acquisition of $5.28/share ($3.56 in cash plus the risk adjusted CVR)…
…I wanted to highlight two things related to insider purchases and stock grants I don’t think I’ve ever seen in a merger before:
- On the night of December 8th (i.e. after market close on the last day the stock traded), the CEO and COO filed form 4s that showed they had bought, in total, ~178k shares on the last two days the stock traded. That purchase is not a small purchase; ADVM had ~22m shares outstanding, so on the last few days of trading the CEO and COO bought almost 1% of the company on the open market. It also materially increased their ownership; the form 4 from the CEO noted he owned ~201k shares after the purchases, and he bought ~128k shares…. so more than 60% of his ownership came on these last second purchases. The COO buys similarly stocked him up; he ended up with ~80k shares and he bought 50k of them right before the merger closed.
- Why am I highlighting it? I’ve just never seen insiders so eager to get their hands on stock right into merger close before. Given that this merger has an enormous CVR component to it, I think it’s interesting that the insiders weren’t blacked out from buying before the deal closed. I’m also a little disappointed they timed their form 4s to come after the stock had stopped trading; if I saw a CEO and COO trying so desperately to increase their ownership in a CVR / right before a merger close, I can assure you I would not have had a basically meaningless position!
- After the merger closed, ADVM filed a bunch of form 4s for directors and insiders. That’s not unheard of… but what is weird is that the COO, CMO, CEO, and CFO all had a PSU share acquisition listed in the filings. These are not small grants; the CEO was granted 500k PSUs, which is more than 2% of the company! If you read the footnotes of the form 4, it notes that the PSUs were granted on September 12 to vest two days after the completion of a change of control or a significant out-licensing.
- Why am I highlighting this? PSUs granted to encourage a change of control obviously aren’t weird…. but these are enormous grants and I do not believe they were disclosed until the merger had closed (there were no form 4s filed in September or October, the only two 8ks filed in September and October make no mention of the PSUs, and I don’t see it in the Q3 10-Q…. that basically covers the whole range of filings, so unless I’m missing something I have no clue where else they could have been disclosed!). That is…. strange on a whole host of levels…
…There was a really weird day on August 11. WOW was supposed to report earnings that morning; instead, they delayed earnings till after market close. After the market closed, WOW announced a definitive deal to go private alongside their earnings. Ever since then, I’ve had my eye open for companies that delay their earnings out of no where from morning to afternoon.
It happened again last week. DXLG was originally scheduled to report earnings on the morning of December 4. After market on December 3, they pushed earnings from the 4th to the morning of the 11th. On the morning of the 11th, they pushed earnings to after market on the 11th….. at which time they announced a merger of equals with FullBeauty.
What was particularly interesting here is DXLG had an activist (Fund 1) who had offered to buy them for $3/share last December, so you could have some idea the company was in play when they delayed earnings multiple times.
Obviously I will be on high alert for the next delayed earnings set up!
3. Exclusive: How China built its ‘Manhattan Project’ to rival the West in AI chips – Fanny Potkin
In a high-security Shenzhen laboratory, Chinese scientists have built what Washington has spent years trying to prevent: a prototype of a machine capable of producing the cutting-edge semiconductor chips that power artificial intelligence, smartphones and weapons central to Western military dominance, Reuters has learned.
Completed in early 2025 and now undergoing testing, the prototype fills nearly an entire factory floor. It was built by a team of former engineers from Dutch semiconductor giant ASML (ASML.AS), opens new tab who reverse-engineered the company’s extreme ultraviolet lithography machines or EUVs, according to two people with knowledge of the project…
…Nevertheless, China still faces major technical challenges, particularly in replicating the precision optical systems that Western suppliers produce.
The availability of parts from older ASML machines on secondary markets has allowed China to build a domestic prototype, with the government setting a goal of producing working chips on the prototype by 2028, according to the two people.
But those close to the project say a more realistic target is 2030, which is still years earlier than the decade that analysts believed it would take China to match the West on chips…
…Chinese electronics giant Huawei plays a key role coordinating a web of companies and state research institutes across the country involving thousands of engineers, according to the two people and a third source.
The people described it as China’s version of the Manhattan Project, the U.S. wartime effort to develop the atomic bomb…
…Until now, only one company has mastered EUV technology: ASML, headquartered in Veldhoven, Netherlands. Its machines, which cost around $250 million, are indispensable for manufacturing the most advanced chips designed by companies like Nvidia and AMD—and produced by chipmakers such as TSMC, Intel, and Samsung.
ASML built its first working prototype of EUV technology in 2001, and told Reuters it took nearly two decades and billions of euros in R&D spending before it produced its first commercially-available chips in 2019…
… One veteran Chinese engineer from ASML recruited to the project was surprised to find that his generous signing bonus came with an identification card issued under a false name, according to one of the people, who was familiar with his recruitment.
Once inside, he recognized other former ASML colleagues who were also working under aliases and was instructed to use their fake names at work to maintain secrecy, the person said. Another person independently confirmed that recruits were given fake IDs to conceal their identities from other workers inside the secure facility.
The guidance was clear, the two people said: Classified under national security, no one outside the compound could know what they were building—or that they were there at all.
The team includes recently retired, Chinese-born former ASML engineers and scientists—prime recruitment targets because they possess sensitive technical knowledge but face fewer professional constraints after leaving the company, the people said…
…ASML’s most advanced EUV systems are roughly the size of a school bus, and weigh 180 tons. After failed attempts to replicate its size, the prototype inside the Shenzhen lab became many times larger to improve its power, according to the two people.
The Chinese prototype is crude compared to ASML’s machines but operational enough for testing, the people said.
China’s prototype lags behind ASML’s machines largely because researchers have struggled to obtain optical systems like those from Germany’s Carl Zeiss AG, one of ASML’s key suppliers, the two people said.
4. The Hermès heist: how an heir to the luxury dynasty was swindled out of $15bn of shares – Avantika Chilkoti
Its founder, Nicolas Puech, was the largest individual shareholder in Hermès, a luxury-goods firm. From 2004 he owned nearly 6% of the company, a stake that would now be worth €13bn ($15bn). Puech, who is part of the Hermès family, has no children. The entirety of his vast fortune was destined for the Isocrates foundation, which he had set up in 2011 on the advice of his Swiss banker of 24 years, Eric Freymond…
…Bernard Arnault, the founder of LVMH, is credited with transforming the luxury sector from a smattering of small labels into a multi-billion-dollar global industry. He has assembled his empire by taking over smaller businesses including Louis Vuitton, Dior, Moët & Chandon, and assorted watchmakers and jewellers, earning him the nickname, “the wolf in cashmere”. In 1999 Arnault tried to acquire Gucci, but failed. Then Hermès caught his eye…
…Arnault’s team got in touch with Freymond and the pair met in secret on several occasions to negotiate a deal. Puech often joined them. Freymond was tasked with identifying family members keen to sell their shares and discreetly transferring their stakes to Arnault. Puech’s part in the affair remains unclear. In court documents, Puech is quoted as saying he saw no “objection” to the deal but never agreed to sell his own stake (which would have been worth around €500m at the end of 2008)…
…LVMH never managed to accumulate enough Hermès stock to block decisions made by the family. The Hermès heirs rallied together to prevent a takeover. On December 5th 2010 they announced the creation of a new family holding company, H51, into which dozens of heirs deposited more than 50% of the firm’s capital, more or less locking up their equity for the next 20 years. (In 2022 the deadline was extended to 2041.)
Meanwhile, the French financial regulator, Autorité des Marchés Financiers (AMF), opened an investigation into the acquisition of Hermès stock by LVMH. In June 2013 it concluded that the information LVMH had provided was insufficiently accurate, precise and sincere. The AMF fined LVMH €8m (€2m less than the maximum possible fine). This paled into insignificance next to the €3.8bn in capital gains that LVMH reported on its investment in Hermès, thanks to the rise in the company’s share price. (When asked to comment on the matters raised in this article, LVMH shared a press release that it issued last week after renewed interest in its dealings with Hermès: “LVMH and its shareholder [sic] firmly reiterate that they have never, at any time, diverted shares of Hermès International in any manner and that they hold no ‘hidden’ shares—contrary to the implications put forward by Mr Nicolas Puech, who has chosen to turn to the French courts after being dismissed on numerous occasions by the Swiss judiciary.”…
…The failure of the tie-up with LVMH was a huge disappointment for Freymond, who had expected to pocket a small fortune for his services. According to Glitz, a French publication, he filed a complaint against Arnault claiming 10% of the capital gains LVMH made on its Hermès stock. Freymond reportedly employed private detectives to investigate what he believed to be backroom dealing by Arnault and provided evidence which he claimed showed that LVMH, despite Arnault’s denials, had indeed planned to take over Hermès. Freymond, says Glitz, withdrew his complaint in 2019.
Despite everything, Puech stood by his banker. Charlotte Bilger, a judge who oversaw Hermès’s criminal complaint for several years, told me that Puech was “in complete denial” and even wrote to the court asking her to stop pursuing the case against Freymond. “He seemed to be someone who was easily manipulated,” said Bilger. She compared Puech to Prince Myshkin, the guileless hero of Fyodor Dostoyevsky’s novel, “The Idiot”…
…After decades of denial, Freymond admitted to the magistrates that he had sold Puech’s shares to LVMH. He said that Puech was “perfectly informed” and met Arnault 14 times, including at Arnault’s apartment in Paris and his chateau in Bordeaux. “It was Mr Puech who made the decision, who was enthusiastic and eager to move forward for the simple reason that he had a score to settle with his family,” claimed Freymond.
This, too, Puech strenuously denied. He acknowledged that he had met Arnault several times and said that Arnault had given him presents including a travel bag. Arnault had been “friendly”, he added. “He told me, ‘Just call me Bernard.’” But Puech maintained he never agreed to sell his shares. “Often, I assumed that Mr Freymond had spoken to Mr Arnault before and I would arrive somewhat as a figurehead, as an important member of the Hermès family,” he said. The Parisian investigators found that millions of shares belonging to Puech were sold in 2008, in some cases for less than €100 per share. The stock is now worth more than 20 times that.
Where exactly Puech’s bearer shares ended up may remain a mystery for ever. In 2014, after the AMF investigation into the stock acquisitions had been completed, LVMH and Hermès reached a truce. LVMH agreed to hand all its Hermès stock to its own shareholders: two Hermès shares for every 41 in LVMH.
The Hermès shares that were scattered between LVMH’s shareholders are impossible to trace. Christian Dior, the largest investor in LVMH, distributed the stock to its own investors. The Arnaults, who ended up with 8.5% of Hermès, began to sell off their stake, according to data from company reports. They handed over much of what was left in 2017 as a step in LVMH taking full control of Dior.
An audit commissioned by Puech’s lawyers established that he still had 535,899 Hermès shares at the end of 2013. But those were progressively sold, so that by 2021 he no longer had any shares in his family firm.
It appears that Freymond funnelled over €100m of assets out of Puech’s accounts, often to benefit himself and his circle. Documents cited by the Parisian magistrates show that transfers of 200,000 Hermès shares and €26.4m were made to Noor Capital, an Emirati investment firm managed by an associate of Freymond’s, Olivier Couriol, who has been named in press reports in connection with fraud and money laundering. Another €25.8m of Puech’s money was put into Hydroma, a Canadian firm with hydrogen projects in Mali—in a series of small purchases, made in quick succession at increasing prices, that a magistrate described as “quite unusual”. (Couriol could not be reached for comment.)
Freymond also opened various joint bank accounts with Puech, depositing €35.8m at one private Swiss bank. Freymond said this money was used to fund the pair’s travels and “common projects”. Puech said he had no knowledge of any joint accounts…
…Puech, once among the world’s richest men, now appears to be worse off than his caretaker. According to documents reviewed by the magistrates, the 82-year-old is penniless. He doesn’t even own the house in the Swiss Alps. Earlier this month Reuters reported that Puech had lodged a civil case against Arnault in Paris in May (when I asked LVMH if its boss had been summoned by magistrates in the ongoing criminal case, it declined to comment).
5. John E. Olson, Analyst Who Was an Early Skeptic of Enron, Dies at 83 – James R. Hagerty
He just didn’t get it. That was the verdict of senior Enron executives on John E. Olson, a securities analyst at Merrill Lynch.
When Enron was flying high in the 1990s, Olson was one of the few analysts who was publicly skeptical about the outlook for the company, an operator of gas pipelines that had diversified into a complex array of businesses, including electricity sales, a power plant in India, and derivative contracts allowing traders to bet on weather patterns.
Olson, who died of cancer Dec. 9 at the age of 83, found the company’s financial statements too opaque to explain exactly how it was making the profits it reported. While most analysts rated the company’s stock a strong buy, Olson called it the equivalent of a hold, a rating widely understood as a polite way to recommend selling.
In the spring of 1998, Enron executives complained to investment bankers at Merrill and threatened to cut that firm out of a lucrative role in a securities offering. A few months later, Olson left Merrill. He said the firm had threatened to take away his stock options and other benefits if he didn’t retire early. Merrill executives said his job had been eliminated in a restructuring. (Merrill itself was sold to Bank of America in 2008 during the financial crisis.)
In any case, Merrill raised its ratings on Enron. A Merrill investment banker sent an internal memo in January 1999 saying that relations between the two firms had been patched up, clearing the way for more investment-banking fees, according to documents later released by a Senate subcommittee…
…Six months later, in December 2001, Enron collapsed into bankruptcy. Top Enron executives eventually were found guilty of fraud that concealed enormous financial risks.
Though he was consistently skeptical, Olson was surprised by Enron’s sudden collapse. In September 2001, after Enron shares had fallen about 70% from peak levels, he saw the stock as a bargain and raised his rating to strong buy, less than three months before the bankruptcy filing. Olson explained later that he had thought there was still a solid trading business to be salvaged. “You couldn’t see how bad some of the failures were,” he told the Washington Post, “because they’d buried the bodies.
Disclaimer: None of the information or analysis presented is intended to form the basis for any offer or recommendation. We currently have a vested interest in ASML and TSMC. Holdings are subject to change at any time.
