Arm Holdings PLC [XNAS:ARM]

Arm is an interesting company. Arm’s strongest suit in my opinion is their fundamentals and their moat – which, in some ways, is everything. That isn’t the full picture, but I’ll explain my discomforts in a later paragraph. ARM consistently grows their net income, their current ratio is spectacular, and net cash provided (used) by operating activities has jumped from ($284 M) to $899 M from the six months ending September 30, from 2024 to 2025. Not to mention they report a negative cost of sales and >95% gross margins.

Arm is one of, if not the, largest chip architecture producer in the world. They are not a processor manufacturer, but rather they produce the blueprints (or “architecture”) in which the most powerful chips in the world are built upon. 70% of the global mobile phone market runs off of ARM architecture chips, 50% of the IoT market runs of off ARM’s architecture, 44% of all automotive chips, 35% of consumer electronics, 30% of networking equipment, and the list goes on. These figures are found in the market share portion of their most recent earnings report. ARM has a massive market share in the processor market with consistent growth. They are the go-to architecture in Apple products, Mercedes Benz vehicles, Nvidia, AWS cloud computing, Google Pixel and smart home devices, and Meta AI, among others.

In a newer move, Arm is pushing their Compute Subsystems initiative to combat rising design and manufacturing complexity. And end-to-end service that works along-side partners to solve cost, time-to-market challenges, adoption across many end markets, growth, and deployment or partner needs. This initiative is leading to a substantial increase in Arm’s royalty revenue per chip. Some of their current partners are TSMC, Samsung, Intel, and Broadcom.

Arm has the full backing of SoftBank group, and is new to the public market, but not a new company. Back in 2022, Nvidia attempted to purchase Arm for $40 B, but was rejected on grounds that the FTC deemed it would grant uneven access to Arm’s technology within the sector. At the time of the deal dissolving, the CEO of Nvidia, Jensen Huang, had this to say: “Arm has a bright future, and we’ll continue to support them as a proud licensee for decades to come...Arm is at the center of the important dynamics in computing. Though we won’t be one company, we will partner closely with Arm”. Arm also has a long-term agreement with Apple that extends beyond 2040. 50% of Arm’s royalty revenue comes from products launched 10+ years ago, and the revenue outlook for products launched recently (FY 2021-2025) is very promising.

Arm’s a great company, and we’re happy to be owners. In the past year Arm has experienced a 25% decline in their share price, but it’s also experiencing typical volatility (which, albeit is high), and it’s currently at a low point. We purchased shares at an average cost of $56 and have experienced growth. We believe that Arm, like our other companies, is a long-term buy. We believe that the company is here to stay. They grow. They adapt. And they play a major role in the computing landscape.

Our biggest worries with Arm comes with their maturing. As Arm’s not a fully matured company, it of course hasn’t gone through the complete transition into a mature company. And that brings worries. A market value of $240 B for their products isn’t $1 T, and $1.6 B revenue isn’t that much for a leading AI company. We believe that Arm has the opportunity to grow into a top company such as Nvidia did in previous years so long as Arm maintains high quality business standards including strategic acquisitions, investor confidence, and regulatory compliance. Personally, we’d like to see Arm enter the manufacturing industry – which we’re happy to see them do this through their 2025 Acquisition of DreamBigSemi, a semiconductor manufacturer in San Jose, California. Additionally, many of their reporting figures need GAAP reconciliation, which is okay, but we’ve seen previous significant discrepancies between the reported figure and the GAAP reconciliation figure. We’d like them to transition more in-tune with US financial reporting standards. As a British company, their quarterly ing requirements aren’t the same as a US based one. Their stock has been highly volatile since their IPO as well, and we’d like to see corporate action to manage their stock price and to increase investor confidence.

Tilray Brands, Inc [XNAS:TLRY]

Tilray’s what we believe to be the future of the Adult Consumer Discretionary industry. They are more than just the largest global cannabis company by revenue and the first cannabis company to IPO. TLRY, in recent years, has acquired 9 brands from Molson Coors, and Annheuser-Busch InBev, and Tilray has since become the premier brand for university beverage partnerships, helping to create University of Oregon and University of Florida’s official beer. Not to mention their spirits company holds the rights to the official Burbon and Vodka of the Denver Broncos, and many other impressive partnerships. In addition to their thriving cannabis and alcohol business, the leadership’s experience in consumer health food products has led Tilray to launch a few spectacular seed and hemp-based crackers that are selling in Whole Foods, Walmart, Costco, Safeway, and many other grocery retailers. Alongside their wellness business, they also have a growing ingredient-sell business for food product manufacturers requiring wholesale hemp seed and oil. They take a “use the whole cow” approach to their business.

What solidifies the investment for us is their distribution lines. Tilray has operations in the US, Canada, and Latin America, as well as all over Europe, Australia, and New Zealand. And, in addition to their thriving businesses, they use and operate their own distribution lines which they are currently strengthening.

The alcohol and cannabis industry has faced some uncertainty in recent years: cannabis facing rescheduling, cannabis drinks and whether or not they should be sold in non-dispensaries, many craft beer businesses becoming non-operational, craft beer distributors failing, and major studies revealing the dangers of alcohol. Not to mention changing demand for alcohol and cannabis. However, this doesn’t worry me too much. I believe that Tilray has proven that they are here for the long run, and regardless of consumer sentiment, they’ll adapt to whatever the adult consumer market needs. That might be some nice seed-based crackers from whole foods, or that might be a spirit tasting experience from Breckenridge Distillery. And, even though the alcohol and cannabis industry is facing some changes, I think it’s unlikely that alcohol and cannabis consumers are going to be non-existent in the future. Tilray is setup for the long term, and I believe their Project 420 initiative is the most exciting initiative in consumer products today. Having a clear path to improve their business through SKU optimization, geographic optimization of brands, distributor rationalization, synergy optimization, and brand and business investment is a sure fire way to success, and they have the books to make it happen.

Tilray, in the past, was perhaps one of the first “victims” of what is now colloquially called “hype”. In 2014-2015, the medical marijuana industry had many eyes on it, and many investors looked at the industry like how many investors were looking at AI in 2025. Naively. Most are likely unaware how slow permitting for alcohol and cannabis is globally, and how much time it takes to establish distribution lines and strong, recognizable SKUs – similar to how most people don’t understand API calls, nor how to build massive machine learning and large language models. Tilray has moved past this hype, and they are strengthening their core business through their Project 420 initiative. Set to complete in 2027, and it has already provided $24 M in savings.

Many institutional investors are owners in Tilray, and their books are spectacular. Boasting consistent reductions in their debt, while growing their revenue and their profit. We’re excited for Tilray, and we stand behind them through their Project 420 initiative. So long as they continue to prove that they can consistently execute their own initiatives, we’re proud to be owners far into the future. We expect the stock price to match closer to Molson Coors’ over the next 25 years.

AbCellera Biologics Inc. [XNAS:ABCL]

AbCellera is a strong buy according to the majority of analysts covering the company. It's a newer company and it has the network to have explosive growth. Their investor base includes high profile biotech investors including Peter Thiel, Ole Andreas Halvorsen, Two Sigma, and Baker Brothers. John Montalbano, the previous CEO of RBC Global Asset Management, also sits on their board along with their accredited scientists.

AbCellera is still a young company who’s revenue isn’t yet stable, however. The company was founded in 2012 by a group of researchers who developed a breakthrough process for antibody drug development. In 2020, they IPO’d while they were assisting Eli Lilly with COVID therapeutics. The company’s focus has always been to grow their amount of partner-initiated program starts and their molecules in the clinic – both of which have been growing quickly with partners such as Eli Lilly, Pfizer, Abbvie, and others. They are now venturing into internally led pharmaceuticals rather than partner-led. With the large investments they’ve received through grants and government investment to build their bio-tech campus, they’ve taken the initiative to lead their own pharmaceutical pipelines. ABCL635, one of their first of 2 internally led molecules in the clinic, works to reduce the burden of and treat menopausal symptoms, specifically hot flashes.

AbCellera isn’t yet profitable, and although they haven’t had many issues fundraising, growing concerns about their revenue are paramount. They are focusing heavily on their two molecules in the clinic, but the pharmaceutical industry is often an all-or-nothing kind of success. They may research and develop new medicine, and molecules may be in the clinic, but revenue doesn't actually begin until that drug reaches the market. A recent win for their revenue came recently when Bruker, a manufacturer of scientific instruments, was found guilty of using AbCellera property in the design of one of their instruments. They must remit a portion of all sales of that instrument to AbCellera in perpetuity.

However, this – and the Real Estate Joint Ventures that ABCL participates in – aren’t core to their business model. Additionally, the company’s founder has ongoing legal proceedings against an old lab mate that claims the founder stole the flagship process. This is the basis for our skepticism with AbCellera – to put it frank, they don’t have my full trust. They are facing many difficult changes, and most of them – with the exception of a few highly experienced officers - don’t have the experience of a mature company. They are either founding employees or come from academic and startup backgrounds. To grow at the speed they have been, they will have many hard decisions that will need to be acted quickly upon, and those decisions need to be right.

We believe that if AbCellera doesn’t mature gracefully, (which at the time of this writing we believe that that is more likely than if they do mature gracefully) then they are in an excellent position to be acquired by one of their gigantic partners that they have a history working with, such as Pfizer, Viking Therapeutics, or Eli Lilly. We are excited to be owners of this new antibody discovery and pharmaceutical manufacturing pipeline, and happy to have purchased it at such a large discount. However, we are hoping that in the next 30 years either AbCellera grows to be a similar value to other mainstream pharmaceutical and biotech companies and has built trust by leaving those employees that are causing the distrust, or that an acquisition occurs that enables our shares to be converted into a new company who is able to execute on building trust.

Mueller Water Products [XNYS:MWA]

Mueller Water Products is an American manufacturer of water infrastructure products including fire hydrants, water gauges, metering, and many others. They are a great company with the highest MSCI ESG rating and excellent books. The company has been focusing on growing the share value in recent years, and they’ve excelled under the leadership of Mariette (Martie) Edmunds Zakas.

One of my favorite aspects of MWA has been the leadership team – however, in recent months Martie has retired, and a large part of the executive team has seen new faces. It’s still too early to see an effective transition, and Martie is staying on the board for the next year, but we have faith that they are going to execute their strategy of optimizing their product offerings and strengthening their sales pipelines in the coming years.

Mueller is a respectable, boring money play, that we expect to grow significantly in the long term. They are an excellent choice for exposure to water.

We are staying with Mueller until the transition to new management is cemented and after Martie is no longer on the board, but we withhold the right act based on how Mueller changes, how industry changes, and how Systems Capital’s internal needs change. We may also keep our shares or buy more.