Reverse Pessimism
PoW #34 | Another Subsurface Winner
I personally love when a company that one could classify as a fallen angel comes my way. These are businesses that were popular for a while, usually ended up hyped for reason A or B, but ultimately came crashing down after they lost a manager, a major contract, or the narrative simply shifted.
Well, today, we’re presenting such a case study.
The core of this company is inevitable. It provides complex and non-replicable software where the key to development is data, and these guys have it all collected, unlike their competitors.
However, in this case, the numbers are distorted by an acquisition that carries a one-time impairment, completely obliterating the company’s otherwise impeccable track record (stretching back to 1978). This has further fueled a doom narrative, casting doubt on the entire continuation of the business as a whole.
From our perspective, they’ve simply gone through a shitty year. 2026 will be a transition phase, and 2027 will mean a return to normal. Even with zero growth, we see a return to their historical 5-, 10-, and 15-year averages of 40%+ EBIT margins, backed by their 75%+ recurring revenues (plus a bit more they’ve recently acquired).
You guys know how we love our O&G data providers... uuuuu yeah. This is another great example of finding gems perfectly within our circle of competence.
Its current price has created a situation that is a classic: heads I win, tails I don’t lose much.
As we now do every week for transparency and to provide full value, here is our list of Pick of the Week posts and their returns since publishing:
Equally weighted picks: +13.69%
Fund-allocated picks: +41.62%
At The Hermit, we hunt for unloved, mispriced small- and micro-caps that institutional screeners miss because of dirty data, and this asset-light, cash-generative engine is completely disguised as a sleepy legacy market anomaly.
If you're ready to elevate your career and ride along with a rigorous, primary-data-driven research process…
Start benefiting from our takes and verify our institutional frameworks as we execute.
Pick of the Week. A curated series of high-conviction research on companies currently under our microscope. We screen for specific dislocations where the market has mispriced the balance sheet or earnings power.
The Selection Criteria:
Asset Arbitrage: Trading at a discount to tangible liquidation value.
Backlog Disconnect: Future contracted revenue ignored by the market.
Hidden Margins: Structural profitability masked by temporary noise or CAPEX cycles.
The Structure:
The Business: A concise operational overview.
The Dislocation: The specific structural reason the opportunity exists.
The Valuation: A stress-tested snapshot including downside risks (”Red Flags”) and our proprietary score.
None of the following should be construed as investment advice. Please consult a financial advisor before making any investment decision. You will find a full disclaimer at the end of this post.
