Next three weeks: Interactive Brokers (quarterly update), Nu Holdings (full research report), Remitly Global (quarterly update)

“The budget from the United States Navy on UUVs is small today – mainly focused on research. Australia has been at the forefront of the industry, signing its recent deal with Anduril. You could sense the passive aggressive tone from Anduril in the press release telling the US Navy it needs to get its act together and start building up its UUV inventory.

An inflection may be coming. Budget proposals have called for increased spending on UUVs, and while we don’t need to bore readers with the back-and-forth of reconciliation bills, what is important for Kraken Robotics is the long-term trend going higher.”

This quote is from my initial Kraken Robotics research report, published in September 2025. My belief at the time was that Kraken’s role as the premier battery supplier for underwater drones offered it a path to significant revenue growth. A premium valuation kept it on the watchlist, but I remained intrigued.

Interim events have proven the need for new defense technologies if the United States wants to maintain its role as the guarantor of global trade (for the sake of the global economy and the tens of millions who could starve to death in Africa and South Asia, I hope they do). This should lead to a sense of urgency around underwater drone contracts, meaning Kraken customers must procure subsea battery supply, and quickly.

At the same time, Kraken’s stock is up 77% since my initial research report, and it just announced a merger to consolidate its position as the key technology provider for the subsea defense market. This makes now, the day after its Q4 2025 earnings release, a perfect time to update readers.

In this quarterly update, I will cover:

• Proven importance on the battlefield

• Going all in on subsea technology

• Q4 2025 earnings

• Is there still an emerging moat?

• My investment decision

Proven importance on the battlefield

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Next Three weeks: Kraken Robotics (quarterly update), Interactive Brokers (quarterly update), Nu Holdings (Full Research Report)

“Yeah. I think you need to kind of take two lenses on that. Our referrals from LLMs are up substantially, you know, quarter-over-quarter, and that’s something we expect to see going forward. So that’s a positive trend. You know, on a macro lens, it doesn’t appear yet that that’s eating at Google at the moment. The issues we’re seeing are more so with Google itself, and as we noted, that November ranking rebound has not quite persisted. With Google, there’s two core challenges. One is offshore spam. This is particularly in international markets, this channelization issue due to kinda overly burdensome regulations. And two, negative SEO attacks, which is something we haven’t really discussed before. These are both unique to online gambling with search.” - Q4 2025 Conference Call

Catching falling knives requires buying knowing pain is to follow. It is close to impossible to time the bottom, meaning that, more likely than not, buying a stock that has fallen 50% will lead to another 20% drawdown. Expect this going in or else you will be disappointed. It can also make you look stupid for a short while (people hate looking stupid).

What is sacrificed in the first six months can be made up for over the next three years (or ten), as long as your thesis is correct on the business. Mr. Market is generally focused on the next few quarters, if not a shorter time horizon, giving individuals an edge even in the age of AI. This is why I like to fish in this pond and why I want to always invest on a multi-year time horizon.

The first few quarters after buying a falling knife are the most crucial, and the most risky. A stock does not fall 60% without reason. It is the investor’s job to determine whether this drawdown is due to a temporary disruption or a permanent impairment, meaning you might have to cut bait only a few months after buying in order to save yourself from a 50% loss. Never buy more until the stock starts working. I learned that the hard way.

We are at this moment for Gambling.com Group. The gambling marketer and data provider is down 27% over the last three months and 67% over the last twelve months. Brutal. Definitely a falling knife with a narrative taking hold that it will be an AI “loser” due to its reliance on Google Search results to feed its affiliate websites that make up the majority of revenue today.

As I will discuss behind the paywall, this narrative doesn’t tell the full story. My job is to determine whether the company can get back on the right footing and whether the stock looks attractive at a measly market cap of $137 million.

In this quarterly update, I will cover:

• AI headwinds, but different from what you think

• Subscription revenue opportunity

• Capital allocation priorities

• CEO transition

• Is there still an emerging moat?

• My investment decision

AI headwinds, but different from what you think

63% of Gambling.com Group revenue came from performance marketing in 2025:

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Next three weeks: Gambling.com Group (quarterly update), Kraken Robotics (quarterly update), and Interactive Brokers (quarterly update).

Another MeracdoLibre report? Yes, another MercadoLibre report. While this is the first time I have written about the company in detail, there are approximately 8,000 newsletter write-ups on the “Amazon of Latin America,” circling around the internet.

My philosophy at Emerging Moats is to provide readers with value they cannot find elsewhere. If a stock is covered ad nauseam (Nvidia, for example), I generally do not want to cover it unless there is novel analysis to provide. There’s nothing unique for me to say about Alphabet. It is much easier to provide useful analysis for readers by looking at undercovered stocks like Kraken Robotics or Gambling.com Group.

MercadoLibre is an exception this week. One, I currently own the stock, and feel the need to write my full reasons why for subscribers. Second, MeracdoLibre is trading at its lowest earnings multiple in years (chart below). Three, I believe investors are overstating the heightened competitive intensity in Mexico and Brazil and, in fact, expect this to lead to a widening of MercadoLibre’s moat over the next five years. Four, I find that most reports on the stock just summarize its huge list of products/services, call it an Amazon clone, and hit publish (thank you, AI bots, for increasing this slop by 10x). Understanding the business from an emerging moats perspective should be viewed through a different lens, which I will try to articulate below.

This report may be slightly longer than usual, but I believe it will give any reader a full understanding of what matters to MercadoLibre’s business, my thoughts on management, and why I decided to allocate 9% of my long portfolio to it as of April 3rd, 2026.

Given each region’s idiosyncrasies, I will analyze MercadoLibre by country (Brazil, Mexico, Argentina, and Other) rather than by business segment. Then, we will put everything back together to fully understand the big picture.

Thank you to the writer of CapexAndChill for helping me with edits on this one.

I will cover:

• An evolving business model (history and overview)

• Brazil

• Mexico

• Argentina

• Other countries

• Advertising potential?

• Opinion on management

• Financial model and valuation

• Is there an emerging moat?

• My investment decision

An evolving business model

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“There is no reason to panic sell because the stock plummeted. However, I am getting weary of management continuing to move the goalposts with their long-term goal of 10%+ revenue and adjusted EBITDA growth. If this keeps getting delayed, we will not see an inflection in free cash flow, and the stock price will go nowhere.

Interim delays have brought me tremendous opportunities (look at Sprouts Farmers Market’s stock chart) while also falling knives like (Match Group). I am willing to wait a few more quarters at the risk of holding a Match Group to make sure I do not miss another Sprouts Farmers Market.”

I wrote the above quotation as a conclusion to my quarterly update on Portillo’s back in August of 2025. This was written before the Emerging Moats paywall was enacted, so it remains free for anyone to read. Paywalled articles have more detailed analysis, for anyone wondering.

The stock was trading at around $7.25 at the time of publishing. Today, it trades at $5.40. Since then, there has been a strategic reset on unit expansion, an overhaul of the executive team, two more quarterly earnings, and initial guidance for 2026. So far, it is looking much more like a “Match Group” than a “Sprouts Farmers Market,” using my above analogy.

Almost everything surrounding Portillo’s is negative. I have been completely wrong about this stock, making it a big loser for me in 2025. But does that mean I am selling or doubling down on my thesis?

Subscribers to Emerging Moats already know my decision. Today, readers will get my full analysis of Portillo’s latest quarter and how I am analyzing the stock for 2026. Along with last week’s update on The Real Brokerage, this has been a time for covering some of the biggest drags in my portfolio. I am not going to be a newsletter that only discusses winners to grab empty-calorie subscribers. We all want to become better investors, and learning from our mistakes is the best way to do that.

In this article, I will be covering:

• Portillo’s Q4 earnings

• My thoughts on the rejuvenation plan

• New management and restaurant industry outlook

• Is there still an emerging moat?

• My investment decision

Portillo’s Q4 earnings

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With an 85/15 revenue split on residential real estate transactions, capped at $12,000 annually, it is easy to see why The Real Brokerage can convince agents to switch to its cloud brokerage platform: they keep tens of thousands in sales that used to go to their old broker. Evidenced by Mr. Market’s continued pessimism (the stock is down 50% in the last six months alone), there are growing concerns about whether this model works for The Real Brokerage.

Management believes this pessimism is unwarranted, that its core brokerage business could be GAAP profitable today if they chose to be, and that gross margins will improve once its new business lines, like mortgage underwriting and title insurance, gain scale:

“It’s important to understand that for a company with our growth profile and capital efficiency, profitability is largely a strategic choice. Many of our peers are currently posting much steeper losses, as you’ve seen, despite having significantly larger agent bases, which we believe validates the superior efficiency of our model. To give some context, our largest segment, North American Brokerage, was nearly break-even in the full- year of 2025. The significant majority of our consolidated loss currently reflects our ancillary businesses, where we are deliberately choosing to invest today because we believe the long-term returns will be substantial.” - Founder Tamir Poleg, Q4 2025 Conference Call

If you agree with Poleg, then The Real Brokerage stock may be especially cheap right now.

In this quarterly update, paying subscribers for Emerging Moats will receive my latest analysis on The Real Brokerage, covering:

• Growth in a dead housing market

• What about ancillary services?

• Management uncertainties

• Is there still an emerging moat?

• My investment decision

Growing in a dead housing market

Let’s take a look at the macro picture for home sales in the United States:

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A quick update on the portfolio. As always, reply to this email or DM me on Substack if you have any questions about my current thinking.

I added to the short portfolio this morning. No n…

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“During Q4 of 2025, Coupang became aware of a data incident involving a former employee that illegally accessed data from over 33 million user accounts and retained data from approximately 3,000 user accounts. Third-party cybersecurity expert firms, including Mandiant and Palo Alto Networks, have conducted a comprehensive forensic investigation and confirmed that the customer data accessed was limited to basic contact and order information: names, email addresses, phone numbers, delivery addresses, and limited order histories. Building lobby codes were accessed for 2,609 Korean user accounts. No financial or payment card data, no login credentials or passwords, and no government-issued IDs were accessed. To date, there have been no confirmed instances of any of this customer data being exploited or of any secondary harm to customers related to this incident.” - Q4 2025 Letter to Shareholders

The last few months have been interesting, to say the least, as a Coupang bagholder. Any longtime reader (or listener to the podcast) knows I have been fascinated by this company since its IPO. I remember distinctly reading the S-1 and thinking, “Damn, I need to own this.” By early 2024, the opportunity was there to strike at a dirt cheap valuation, and it has remained one of my largest positions to this day.

In late summer, I thought 2025 looked to be another banner year. Users kept growing, revenue kept compounding, unit economics looked strong, and profit margins in the core business were expanding, while reinvestment in new ventures (food delivery, Taiwan, fashion, and advertising/streaming) continued to show promise, even though it would hurt consolidated cash flow in the interim. No worries, Coupang’s core business has enough juice – along with a healthy balance sheet – to give the business optionality to invest on a multi-year time horizon. Stock peaking its head above $30? Let’s keep the party going.

By January of this year, shares had fallen 50%, wiping out most of my gains in the last two years. Panic had ensnared both the Korean public and its government, with news stories hitting the international wires that made it seem on the verge of collapse. Investors naturally decided to dump their shares without actually verifying what happened.

I believe this has ended up as a mass psychosis event for both South Koreans and the investment community. It has provided us (yet again) an opportunity to buy Coupang at a cheap valuation.

In this quarterly update, paying subscribers to Emerging Moats will read:

• Data breach psychosis

• Quarterly numbers

• Long-term growth opportunity?

• Is there still an emerging moat?

• My investment decision (and trades for the week)

Let’s dig in.

Data breach psychosis

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• Wix.com: A Hidden AI Winner Trading At 10x Free Cash Flow? (Ticker: WIX)

• Evolus: The Beautification Arms Race (Ticker: EOLS)

• Cava Group: Our Mediterranean Future (Ticker: CAVA)

Opportunities to buy high-quality businesses at a fair price – a truly fair price – are rare. As Buffett says, an investor may follow a stock for a decade before finding the right valuation entry point, testing their patience as they sit at home plate, letting pitch after pitch hit the catcher’s mitt without swinging.

Bull markets can make waiting for the fat pitch painful. It will also make you feel stupid and inferior (trust me, I’d know). But it is this patience that can make the bear markets and drawdowns that much more rewarding when said opportunities finally arise.

I have followed Adyen since 2021, but have never owned a share due to valuation concerns. It has sat on the watchlist, gathering dust.

Today, that may change, which is why I decided to pull this research report forward to early March.

The payments processor is down 66% from its 2021 highs, recently puking after a slightly disappointing 2026 revenue growth guidance, meaning you can now buy a stake in a business that has grown its revenue at 35% annually for a decade at roughly 20x pre-tax 2026 earnings.

The question is: why? Is now the best opportunity we will ever get to buy Adyen stock? Or is the current drawdown warranted because of a fundamental change to the business?

In this research report, I will cover:

• The contrarian player in payments

• A history of market share gains

• Why a customer chooses, sticks with, and grows with Adyen

• Why I like Adyen’s culture

• Competitive threats

• Is there an emerging moat?

• Financial modeling

• My investment decision

The contrarian player in payments

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“This was our highest growth quarter in more than two years. Nights and seats booked grew 10%, our strongest quarter in years. But what matters most is the momentum that we’re gaining. In a marketplace, reaccelerating growth isn’t as simple as stepping on the gas pedal. It’s more like turning a cruise ship. It takes time and discipline, and you don’t always see it from one quarter to the next. The acceleration that you’re seeing didn’t happen by accident. It’s a result of a deliberate path we’ve been on for the past few years.” - Founder & CEO Brian Chesky, Q4 2025 Conference Call

Five years after the IPO, you can feel the frustration mounting among Airbnb investors. Its share price is still down from its initial trading price, while S&P 500 Index investors have seen a total return of 100% over the period.

Founder Brian Chesky, along with the rest of the leadership team, hammers home the same talking points to investors each quarter. Geographic expansion. Product expansion (experiences and traveler services). A Loyalty program and advertising ambitions. AI Search? It’s just around the corner. We’ll get there eventually, everyone, just wait.

Look, on the one hand, I share in the frustration over Airbnb’s much-hyped expansion outside its core home-sharing business, which has so far shown little financial return. What exactly are they spending $2.35 billion in product development costs on every year?

On the other hand, its core business has a long runway to keep expanding globally, is protected by inflation, has best-in-class cash flow conversion, and a moat that can keep widening (no, I do not believe AI agents are going to kill the business). It is a wonderful asset.

At 26x EBIT, shareholders probably make out just fine despite multiple compression risks if we get high single-digit revenue growth in the core business, share repurchases, and margin expansion over the next decade.

But what if you trust in Chesky’s grand vision? If you do, then we might have a multibagger on our hands. One that – as the stock price today tells us – few investors actually believe in.

Today’s paid subscribers are receiving a quarterly update on Airbnb and my thoughts on the stock. I will cover:

• The building blocks for growth

• Can we trust the product expansion thesis? (Chesky’s vision)

• Underappreciated embedded earnings power

• Is there still an emerging moat?

• My investment decision

The building blocks for growth

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This Friday, paid subscribers will receive a quarterly update on Airbnb. The week following will be a full research report on Adyen.

Portfolio changes

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Above is the upcoming schedule (and archive) for Emerging Moats Research paid subscribers. If you want a one-week free trial, please follow and DM me on Substack! -Brett

“We do not disclose details regarding individual components, but we can say that we are working to secure stable supplies of memory components by holding discussions from a long-term perspective with our business partners. As a result, the recent rise in memory prices did not have a significant impact on hardware profitability in the third quarter. In addition, we do not expect any significant impact in the fourth quarter. However, if this rise in component prices lasts longer than expected and runs through the next fiscal year and beyond, it may put pressure on profitability. If the situation deteriorates significantly, we will carefully assess market trends and respond.” - Shuntaro Furukawa, President, Q3 FY 2026 Conference Call

I call myself a long-term investor, willing to wait years for my thesis to play out, if necessary.

Nintendo sometimes makes me rethink the sanity of this philosophy.

Holiday-quarter sales of the Nintendo Switch 2 (SW2) were strong and exceeded initial volume guidance. Revenue is beginning to swing upwards, with Nintendo deftly transitioning from one console to another while keeping customers engaged.

And yet, the stock is now in a 45% drawdown and somehow flat over the last five years while the S&P 500 has doubled. Some of this drawdown is due to factors beyond the company’s control, such as the current narrative around memory chip prices impacting profitability. Others, self-inflicted. Would it pay them to simply tell investors (and customers) your true product roadmap? Could you actually give guidance that isn’t disingenuously sandbagged?

Wall Street – or, more generally, investors focused on near-term returns – periodically grows frustrated with Nintendo’s methodical approach and secrecy. This is especially true at a time like early 2026, when energy is spent determining whether your software holdings will go out of business tomorrow. Who cares about five-year earnings estimates when AI is going to kill every business?

An advantage we have as individual investors is being unshackled from this short-termism. And while I, too, get frustrated with Nintendo management, any astute follower of the business knows it takes a simple reading of the tea leaves to understand what’s coming.

In other words, Nintendo’s stock hasn’t been this attractive since the first year of the SW1 launch. My conviction can be reflected in my latest Portfolio Update.

Let’s dive deeper into holiday-quarter earnings and analyze where Nintendo stands in early 2026. In this piece, I will cover:

• No Wall Street handholding (holiday quarter results)

• Hardware sales, then software sales, then profits

• What about memory chips?

• Is there still an emerging moat?

• My investment decision

No Wall Street (or customer) handholding

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A great business is one that generates durable cash flow that can be freely returned to shareholders. Nothing more.

Different businesses will get you to this outcome, but the outcome is always the same. It doesn’t matter if you are invested in a small aerospace parts maker, a conglomerate of airport operators, or a multinational consumer brand. Cash flow and the return of cash flow to shareholders at a reasonable price are what we should all be hunting for.

If you understand this, you should be attracted to the nicotine sector. Cigarettes are the most profitable single product category in history. Just look at the long-term total return for Altria Group. The ability to steadily raise prices alongside durable market share and low capital intensity turned Altria Group – along with the other tobacco giants – into cash flow machines. It didn’t matter if they got an enormous fine in the 1990s or set money on fire through dumb acquisitions; shareholders still made out like bandits. Eventually, business quality wins.

Today, cigarettes are being replaced with modern forms of nicotine usage. Profit characteristics look similar, and, combined with new-user adoption, there may be multiple decades of massive cash flow ahead for the brands that win consumers’ hearts and minds.

One company has taken advantage of the nicotine transition better than any: Philip Morris International. After its acquisition of Swedish Match and the Zyn nicotine pouch business in late 2022, I became interested in following the company and realized it also held a dominant position in the heated tobacco unit (HTU) space.

In 2023 - 2024, I purchased some shares of Philip Morris International (PM) for around $100. During the tariff tantrum in April, I decided to sell when the stock ripped to $160 while the rest of my watchlist was crashing (I used the proceeds to move into Airbnb and IBKR). As of this writing, the stock trades around $183 and has produced a total return of 171% over the last five years, most of which have come in the last two years.

The company remains of interest for Emerging Moats because of its successful transition from cigarettes to new nicotine categories, which is extending the company’s terminal value, building a new consumer branding/scale/distribution moat, and laying the groundwork for decades of durable cash generation.

In this quarterly update, I will cover:

• The sustainable combustible formula

• Durable HTU growth

• Nicotine pouch uncertainty

• Consolidated growth assumptions

• Margin expansion and cash flow expectations

• Dividend growth and capital returns

• Is there still an emerging moat?

• My investment decision

Let’s begin.

A sustainable combustibles formula

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Here is the upcoming schedule for the rest of Q1:

Let’s rewind the clock. Five years ago. February 2021.

GameStop was going up 100% a day. Shopify was trading at 60x sales. You couldn’t buy a pandemic beneficiary at too high a price. I remember Fastly getting pitched as a $250 billion business? It marked the official top for the unprofitable stay-at-home stocks and my unofficial top in the bull market animal spirits, determined by how many non-investing friends were pinging me about stocks.

At the same time, two naive young investors (Ryan and myself) started an investment fund for family and friends. Our idea was to start small, invest with a concentrated, buy-and-hold approach, and keep costs to a minimum while building a marketable track record. Five years on, we could then use this audited track record to grow to a more professional level of AUM.

Turns out it was a bad time to launch a fund without any bear market experience. At launch in February 2021, we had plenty of optimism about our long-term approach and buying quality at a reasonable price. Eventually, the best businesses win out, right? Turns out, a reasonable price is not 20x sales. And while our performance ended up being adequate through closing the fund at the end of 2023 (we did begin with some great value names like Sprouts Farmers Market and Altria Group that have outperformed since February 2021), we had dug ourselves too deep a hole to make our performance marketable without many more years of operating at a loss, given our subscale and fee structure.

Wix.com (Ticker: WIX) was one “quality stock” that killed our performance in 2021. And 2022. I actually remember distinctly buying at over $300, averaging down 8 times, using it for tax-loss harvesting, and then getting back in below $60 in June of 2022. I know, depraved stuff. From there, the stock price recovered, and I think we actually made out okay.

But it could have been much better if we just simply waited for the stock to trade at an attractive valuation.

Why am I telling you this story? Because five years on, we may not just be getting Wix at a good price, but a great one. Wix is now considered an “AI loser” because, apparently, your local restaurant is going to save $500 a year after vibe coding their own website with Claude. I’m a tad skeptical.

The website creation and small business management platform has accelerated topline growth following the 2022 pandemic bullwhip, is now consistently generating free cash flow and repurchasing stock, and trades at 3x gross profit compared to 20x sales in 2021. Oh, and it just acquired one of the fastest-growing vibe coding platforms.

The more Wix’s stock price falls, the more interested I get. As I write this on Thursday, February 5th, the share price looks headed to $75 and a P/GP of 3. It is the definition of a falling knife, sure, but that is irrelevant to someone with a three to five-year time horizon such as myself.

I am a firm believer that AI will be disruptive to the software market, making it more competitive. But I am also a firm believer that AI is not going to kill software. Grandma’s bakery is not going to spend hours and hours of work trying to replicate QuickBooks. Or her Wix website that her daughter made for her.

Given the timeliness of the drawdown before Wix reports earnings in February, I have bumped up this research report for Emerging Moats subscribers.

Report summary:

• Core business threat

• Transformative potential of Base44

• Modeling legacy cash flow

• Has management turned a corner?

• Is there an emerging moat?

• Valuation

• My investment decision

Let’s begin with what Wix does, and how it is supposedly under threat today.

The core business threat

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Next week, I will be publishing a comprehensive research report on Wix.com, which just announced a $2 billion share repurchase program (it has a market cap under $5 billion).

Here is the upcoming schedule for Q1, along with past newsletters:

Per usual, if you’d like a complimentary trial to Emerging Moats, send me a DM on Substack.

“The end of the Costco relationship represents the latest setback for AmEx, which once was known as a status symbol for the affluent but is now under attack from competitors like J.P. Morgan that are also going after wealthy Americans. AmEx is now trying to expand into other areas, such as pitching prepaid cards for low-end consumers, but that strategy will likely take years to pay off. AmEx is also trying to get more small businesses to accept its cards.” - The WSJ, February 12, 2015

The most underrated Buffett investment is American Express. The second time. In 1991, Berkshire Hathaway began buying shares of the premium credit card brand, which subsequently turned into a 100-bagger and remains its second-largest position behind Apple today. If Berkshire Hathaway keeps selling its Apple stake, American Express will soon be its largest single equity position. When raising over $100 billion in cash from stock sales in the past few years, not a single share of American Express has been sold. Curious.

Some may argue that Buffett’s best investment was Apple, being the largest by far at cost. Others may argue Coca-Cola, See’s Candies, or any of the insurance deals. My pick would be American Express due to its significant impact on Berkshire’s total return over the long term, its size relative to the overall portfolio today, and the potential for the stock to deliver further returns for Berkshire Hathaway in the coming decades.

Why does Buffett/Berkshire love American Express? Why are they still holding the stock today while trimming virtually every other equity position?

It is the same reason I have been closely following it as a watchlist stock since 2023. When you truly understand American Express’s business model, you realize it is one of the rare companies with a reinforcing competitive advantage across all four moat categories.

Here is my reintroduction to American Express as the next entry into the Emerging Moats stock universe. As always, I will finish this article with my current valuation assessment and my investment decision.

Let’s begin.

Post-Costco invigoration

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As usual, DM me on Substack to receive your one-time complimentary paywalled article.

“Throughout 2025, we introduced a wide range of new products and enhancements worldwide, guided by deep engagement with and a strong understanding of the needs of our diverse client base. This year, we expanded market access to Brazil, Taiwan, the UAE, and Slovenia, with additional countries planned for 2026.” - Nancy Stuebe, Director of IR, Q4 2025 CC

The fourth quarter for Interactive Brokers (IBKR) brought more of the same. More global access. More account openings. More revenue. More interest income. A steady drumbeat of market share gains.

My thesis at $75 is the same as when I bought shares below $40 in April of 2025. IBKR has a growing advantage due to its global market access and automated expertise, allowing the brokerage to offer a better client proposition at a lower cost. No competitor can match this.

There is no reason to expect the core brokerage business's market share gains to halt in 2026.

Taking a longer view, winds are beginning to shift that may change the underlying nature of all financial assets. Many internal projects and competitive forces have begun to bubble to the surface, creating a vast ocean of opportunities (and potential risks) for IBKR’s business over the next decade. I have confidence this team is setting itself up to deftly navigate these changing trade winds while legacy competitors are run aground.

In this newsletter:

• Q4 earnings review

• Prediction Market opportunities

• The 24/7 gravy train

• An underestimated growth runway

• Is there still an emerging moat?

• Valuation limbo

• My investment decision

Let’s begin.

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Today, paid subscribers to Emerging Moats receive a piece on my shorting strategy, current short portfolio, and watchlist for 2026. Expect one to three of these articles a year.

Below is the Q1 schedule for the newsletter. Notice that I have made one change: Wix.com has replaced MercadoLibre for the upcoming full research report. MercadoLibre is covered extensively in the newsletter community, and I believe Wix.com could be highly interesting trading at below 10x free cash flow.

Other articles will go through existing portfolio + watchlist stocks, staggered to occur after quarterly earnings are released. We will begin next week with Interactive Brokers.

Many people will tell you not to short stocks. The responses are almost scripted:

• “A stock can only go down 100%, but can go up by infinity.”

• “Over the long term, the market goes up, making it much harder to be short than long.”

• “The market can remain irrational longer than you can remain solvent!” (HR Karen voice)

• “What about the risk of a short squeeze?”

And on. And on. And on.

The average stock will be down 10 years from now (especially in real terms). Statistically, most stocks perform poorly. That feels like a good pond to fish in. I believe people are afraid to short stocks because it is easy to look foolish, does not “feel” good, goes against the crowd, and is villainized by the media. Profiting on short sales is misunderstood.

(Here is an explainer on how short selling works. Or, ask your local LLM.)

I write articles for the Motley Fool. They publish hundreds of articles a day, and not one will speak positively about shorting. If I were to pitch an article titled “3 Stocks To Short in 2026” it would likely not get approved, because they don’t want readers to short a stock, make a mistake, and blame them. I understand; it is simply the nature of their business.

In my personal portfolio, I am free to invest how I want. As I see it today, we are in a great period to short stocks.

My shorting strategy is simple. Look for stocks that are wildly overvalued, use heavy diversification, and make it a small percentage of the overall portfolio (I am typically aiming for 10% the size of the long book).

There are a plethora of these stocks out there. Use a simple screener on Fiscal.AI: market cap above $100 million, P/S ratio above 100 (exclude Biotech). That just returned 71 results. Fun times we live in, huh?

I do not care about catalysts. Any stock with the risk of a 10x increase will be sized appropriately, allowing me to safely ride the volatility rollercoaster.

The short book currently makes up 5% of the portfolio. Performance has been acceptable for a raging bull market, and I now want to add to my positions. My goal is to build out dozens of small short positions over time.

The benefits of the short portfolio are multifold:

1. Absolute returns. I believe there is an opportunity for strong absolute returns in shorting, especially in speculative pre-revenue stocks.

2. More funding for longs. Many novices do not appreciate that long/short means you take the cash proceeds from your short sales and buy something else. As long as your long positions outperform your shorts + funding costs, you make money. The best short is sometimes the stock that goes nowhere.

3. Hedging for market downturns. My goal as an investor is to maximize absolute returns over the long term. One way to do this is by minimizing drawdowns. The size of my short book will not eliminate drawdowns, but it will give me much more flexibility to “tune” the portfolio through the market cycle.

Let’s dive into the existing short portfolio. If you have any short candidates, please email or DM me on Substack, and a year of Emerging Moats Research will be granted if your idea is selected for the portfolio.

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Every Friday morning, paid subscribers will receive my latest research note. After publishing, I will decide whether I want to make any changes to the portfolio. If I do, a brief email will be sent on Saturday morning outlining my trades for the upcoming Monday. Given my trading habits, expect these about once a month, depending on market conditions. You may not receive one for three months.

Some of you may not be interested in my trades/allocation and simply want the stock research. That is fine. Ignore these emails. However, I want to operate with full transparency and never inadvertently put subscribers at a disadvantage, even though I know longtime readers/listeners trust us, and the easiest way to do this is by always saying what I am going to do before I do it. Simple.

In late 2025, I deposited a nice slug of money into my brokerage account, and I am now holding over 10% in cash. I see opportunities for trades in the Emerging Moats stock universe.

With that being said, here is what my long portfolio looks like as of this writing:

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After reading this report, you will be up to speed on this stock.

As always, free subscribers can receive one free complimentary report to try out the service. Please contact me if you are interested.

“The millennial is the single largest new user of these procedures in the category. They are fueling the growth of the category. They are twice as likely as their predecessors to consider a procedure like this. The adoption rate of these procedures continues to move down in age, right? The millennial, believe it or not, is already approaching into their early 40s. You see them actually becoming more loyal patients of these products when you get them adopted on them relatively early. They are relatively brand loyal. The lifetime value of these patients is of high value to us.

We continue to see them adopting in younger and younger. We continue to see our brand positioning very well targeted towards these audiences. As they start to use these products, they tend to continue to use these products. The value of that consumer grows over time.” - Former CFO Sandra Beaver, Needham Virtual Healthcare Conference, April 2025

The world is increasingly experienced through images enhanced by technology. People you interact with are using tools – both digital and physical – to make themselves appear more attractive to you. These tools keep getting better.

At the same time, the average person is encountering more images of people every day than someone 100 years ago did in a full year. The people you see on your computer screen are increasingly augmenting themselves with digital filters and physical procedures, making the average scroller feel inferior, thus slowly prodding them to have enhancements done to themselves.

It is a self-reinforcing beautification arms race. For women (who make up 95% of the beauty market), this competition has driven an increase in demand for neurotoxin (Botox) and filler procedures. She’s getting this work done, so why shouldn’t I?

800,000 Botox procedures in 2000 has grown to an estimated 10 million today. Fillers are on a similar trajectory. Global spending on neurotoxins and filler drugs by aesthetic practices totaled $3.7 billion in 2019 and is expected to reach $7.4 billion by 2028.

With low production costs, regulatory protections, and the ability to sell to the end consumer at a premium price, there is a large and growing profit pool in selling aesthetic drugs.

Which brings us to Evolus (NASDAQ: EOLS). It is the newest entrant in the performance aesthetics space, targeting both Botox and fillers, and has gained an impressive level of market share in the United States since 2019.

So why is this stock down since its 2018 IPO?

In this research report, I am going to try and answer that question, as well as:

1. Are aesthetics still a secular growth category?

2. Does Evolus itself have an emerging moat?

3. Is the stock a buy today?

Let’s dig in.

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You may ask: why write a “cliche” newsletter with this title?

This is an exercise to get me thinking about my portfolio allocation for 2026. Allocation is just as important as stock analysis. That is why Nelnet has been such an important winner for me, having outperformed the market while being a 15%+ position since 2021. It doesn’t matter if you are right if it is a 0.5% position.

Calendar year returns are not necessarily what I am after in my personal portfolio, but performing one of these exercises every 12 months is a good practice, and it feels right to do this at the start of the new year. Additionally, I typically have a significant amount of excess savings at the beginning of every year due to the timing of tax payments as a sole proprietor/LLC owner.

For the three stocks below, I will outline why they are my top picks for 2026, provide an update on the current state of the businesses, and describe my trading plan for the year.

Here is my portfolio as of this writing on December 23rd:

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