Credit Capital

L/S Investing Ideas
William McLane & Max Howard
Substack: [email protected]

[Credit Capital @CreditCapi]

$BROS up 13% this week since this post. The market is clearly beginning to price in a unit growth inflection.

[Credit Capital @CreditCapi]

$BROS 58 new system shop openings so far in Q2 according to their website on the back of 41 Q1 shop openings. Unit growth clearly inflecting higher with 59% Y/Y growth vs 1H 2025 and Q2 shop openings set to beat all new system shop openings in 1H 2025. 58 is already a record number of quarterly shop openings and we're only 70% through the Q.

99 system shop openings so far this year, hard to see how the guide doesn't get raised from here given they've already opened 53% of their yearly target in ~5 months. As the stock trades on new shop openings, we believe this is an extremely attractive setup with ~40-80% upside over the next 18 months with limited downside.

Write-Up: https://t.co/BVUJ9YGf15

[Credit Capital @CreditCapi]

Merino wool price is up 64% in the past year and 27% in the past 6 months. $ZGN $RL $LVMH.NE $VFC and $BOSS only have two options heading into the fall and winter wool season, 1) raise prices 10%+ while margins contract ~5% or 2) lower the grade/percentage of wool they use in their garments.

Wool supply has tightened significantly following sustained drought conditions and flock reductions in Australia. Production in the 2024/25 season was down 10.4% compared to the previous year's season. Flock reductions are continuing into this year and, combined with sustained demand tailwinds from China, should continue to drive wool prices higher over the long-term as it takes ~4-5 years raise new flocks.

Most major brands lock in wool prices with 6 to 12 month forward contracts. These should be expiring within the next few months, forcing these brands to roll over to contracts at higher wool prices for the fall and winter season.

Forward contracts rolling over at 30-60% higher prices forcing brands to raise prices or lower quality combined with sustained supply tightening and continued demand tailwinds for wool could provide an attractive short setup for some of these companies with high wool exposure coming into the fall/winter season.

[Credit Capital @CreditCapi]

$DBO.TO announcing a partnership with the 6th largest cinema chain in North America, meaning it now covers 4 of the top 10 operators. B&B gives D-BOX a 564-screen opportunity across 57 locations. This should 1) add upside to a new screen installation base that was already tracking well through the quarter and 2) show the increasing ROIC that these chains are seeing from the investments into D-BOX seats.

$CNK $CGX.TO

[Credit Capital @CreditCapi]

$DBO.TO earnings thoughts: D-BOX recorded 133% Y/Y growth in theatrical revenues from new installations and 32% Y/Y growth in royalties, with the stock up ~25% since we posted our write-up. Theatrical sales growth was largely in-line with our expectations given our scrape of all US $CNK locations showing significantly accelerating new D-BOX installations.

We remain long due to 1) aggressive screen installation 2) an accelerating box office that will raise recurring royalty revenue and give theaters more discretionary cash to spend on D-BOX seats, 3) the movie slate this year heavily favoring family and action films which suit D-BOX seats, and 4) Avengers: Doomsday not having an IMAX window, leaving D-BOX over indexed as the only premium viewing option for the largest film release of the year.

Since we posted our write-up, we continue to believe that the most important factor to D-BOX's success is new installations. Weekly scrapes of US Cinemark locations show D-BOX's new installations are continuing to accelerate this Q, driven by additional discretionary theater income. While we believe that the royalties that a strong box office will create are important, we feel that a far more important and overlooked aspect of the D-BOX narrative is that given the high fixed cost nature of the unit economics of D-BOX's customers, a strong box office has a magnified effect on FCF and the discretionary cash that Cinemark and AMC have to spend on high ROIC but capital intensive features such as D-BOX installations. Installation (theatrical) revenue has the largest impact on quarterly revenue trends and thus remains the most important driver of performance over the next 3Q.

Initial Write-Up: https://t.co/hqbS8U6gCP

[Credit Capital @CreditCapi]

We're long $BROS with a FY 2027 PT of $87.45, an IRR of 29.6%, and a risk/reward of 13.1x. We believe the market misunderstands Dutch Bros, underestimating its unit growth potential, assuming LTO innovation will slow, and ignoring the CPG and urban market opportunities. Sentiment scrapes of over 300k data points and public reviews, visits to Dutch Bros locations, and channel checks with CPG retailers all reveal that 1) Dutch Bros unit growth is inflecting, with the strongest new shop approval pipeline in company history, indicating 228 new shop openings in 2027, 2) transaction growth has only strengthened this quarter led by the Myst Energy Refresher which addresses an entirely new customer need state, and 3) CPG products are selling out on rollout while urban markets provide the opportunity to over double Dutch Bros TAM.

Write-Up: https://t.co/BVUJ9YGf15

Full Excel Model: https://t.co/ytNBcoTRIg

[Broken Moats @BrokenMoats]

$F announced they would get into the battery storage business on May 18th and the stock has gone up everyday since the announcement. Adding 40% or $20B to their market cap.

Batteries, and energy grid systems have plenty of public comps, so we can use Tesla mega pack 3 as the economic framework (even though they are at more scale and a much better manufacturer and being doing this for years but lets give ford the benefit of the doubt).

Tesla generated 3.9B on 14 GWH in Q4 and 2.2B on 8.8 GWH in Q1 26'. With a 30% gross margin.

Ford at full scale after a $2B investment is hoping in 2028 (yes no deliveries or revenue until 2 years from now) to generate 20 GWH a year in production. If pricing held at todays levels and giving them $TSLA manufacturing margins that would equate to 3-5B$ a year in revenue for Ford. And a 1-1.5B$ gross margin business (this is in-line with analyst estimates I have seen).

Ford has done around 1.5B in gross profit over the past few years. So at most this "new" hot ai business will increase their gross profit dollars 6-10%. And thats to assume they fill the full demand in 2028, be as efficient as Tesla and see no pricing degradation from now to then (Tesla has a new 60 GWH facility coming online in Houston in a few months), the history of batteries has not been kind to pricing its a game of efficient manufacturing and enormous scale to succeed....two things that Ford has not been or done in generations and does not have the balance sheet to get there to compete against the asian manufacturers and Tesla.

So $F is now ai, but an actual grounding and understanding of this new business and materiality to their earrings says its incremental at best. I know facts won't matter until the cycle is over, but the air being put under names so afar from the center of AI is scary for when reality ultimately strikes

[John Huber @JohnHuber72]

Such common sense, so refreshing to see, and unfortunately so rare

[Credit Capital @CreditCapi]

The level of mismodeling around the probability weighted distribution for $SPCX success regarding data centers in space is shocking. Many investors still believe this involves launching actual data centers into space rather than individual racks and thus systematically underestimate the likelihood of success for racks in space and the time it will take us to get there. Not a view on the company just an observation on how misunderstood the future of AI still is.

[Credit Capital @CreditCapi]

$SIVEF up ~20% again today and ~347% since we invested. A perfect reminder that great ideas tend to come from extensive due diligence into companies with high probabilities of mispricing.

Our original write-up revealing Sivers' potential undisclosed biometric sensor relationship with $AAPL is detailed below.

https://t.co/dyzKmV6o94

[Credit Capital @CreditCapi]

Long $APO, short $OWL / $ARES has been one of our more interesting trades over the past 3 months. Our thesis largely centered around the fact that 1) Athene making up ~40% of net inflows allows Apollo to be one of the only private credit firms growing FPAUM during this cycle and 2) we believed Apollo's NAV markings were more accurately valued than Blue Owl and Ares, with the Medallia loan being a prime example.

With the peak in private credit default rates earlier this week and more attractive risk/reward spreads elsewhere, we exited the position with ~20% return in the past 3 months.

[Credit Capital @CreditCapi]

"It's similarly ridiculous to think applying a multiple on trailing financials is revealing anything insightful about what $SPCX is worth or where it should trade."

One of the most important features of a great investor is being able to adapt your mental models to different market regimes and companies. For SpaceX all that matters is 1) ROIC of the current capital investment which is dependent on 2) what the future will look like (will there be data centers in space). This requires a strictly first principles approach as very few priors are relevant for the company.

While I have no personal view on SpaceX, one thing that most people overlook is the velocity at which technological advancement occurs. Evidenced by the rapid rate of LLM innovation that caused the SaaSpocalypse earlier this year, I believe many investors underestimate how quickly the technology necessary to make space data centers feasible will advance.

[Credit Capital @CreditCapi]

$SIVEF up another ~13% today on strong new board nominations of Joakim Nideborn and Helena Svancar. This should only support our extensive DD and thesis that Sivers is $AAPL's supplier for biometric sensor units for the next Apple Watch.

Full Write Up: https://t.co/ycOzQpnW3X

[Credit Capital @CreditCapi]

Our extensive due diligence into Sivers Semiconductors $SIVEF revealed a contract with an undisclosed Fortune 100 customer that we believe is $AAPL. If correct, Sivers would transform from a rather speculative photonics stock into the main supplier for one of the highest-volume consumer hardware companies in the world.

With an RFQ for 50 million consumer biometric sensor units per year, the deal only makes sense in one context: a mass-market consumer wearable. The only company that ships a wearable device at that volume is Apple, which has averaged 42.4 million Apple Watch sales per year over the last six years. Carnegie research also confirmed that Sivers released 135 wavelength architectures, which we found exactly matched Apple Watch’s technical specifications, giving us further conviction that this deal was with Apple. The reason we believe so few people have uncovered this is that Sivers IPO’d just six weeks ago.

Read our research for free below.

https://t.co/dyzKmV6VYC

[Credit Capital @CreditCapi]

Over the past three months we've been short $FLO driven by a broader consumer shift away from carbohydrates towards protein rich foods.

Our channel checks with popular grocers reveal longer shelf times and decreasing inventory turnover for Flowers Foods' products while visits to Flowers Foods bakeries indicate declining SSSG from Flowers' bakery segment. Flowers runs a high fixed cost business with a route delivery system that we believe poses a huge operating deleveraging risk as the business faces increased sentiment pressures.

[Credit Capital @CreditCapi]

Comprehensive primer on the optical supply chain from our recent write-up on $SIVEF covering $POET, $MRVL, $JBL, $NVDA, $AMZN, $MSFT, $GOOG, $META, $AVGO, $INTC, $AMD, $CSCO and $BABA.

A modern AI chip, like Nvidia’s H100 or B200, is a processor that does matrix math at extraordinary speeds. When you connect thousands of GPUs into a cluster, each GPU needs to constantly send and receive data. Traditionally, this was done with copper cables; however, at the data rates AI infrastructure now demands (1.6T/second), copper generates too much heat and consumes too much power. The solution has been to replace copper with light: instead of transmitting data as electrical signals through copper, optical interconnectors convert the data into pulses of light, send them through fiber-optic cables, and convert them back. Light travels faster, degrades less over long distances, generates less heat, and can carry a lot more data using WDM. The optical interconnect supply chain has five key layers.

Layer 1: the laser source. These are the indium phosphide (InP) based distributed feedback (DFB) laser chips, which emit a precise, continuous wave beam at a specific wavelength measured in nanometers. A single data center interconnect might use an array of 8, 16, or 32 lasers simultaneously, each at a different wavelength, to carry data streams through a fiber optic cable using the wavelength division multiplexing technique. These laser arrays are the only component in the optical chain that cannot be manufactured on silicon. InP is a fundamentally different material requiring specialized metal-organic chemical vapor deposition (MOCVD) equipment, 100mm maximum wafer sizes vs 300mm for silicon, and a chemical process that takes decades to develop.

Layer 2: the modulator. A modulator switches a laser beam on and off billions of times per second, encoding data by manipulating the phase, intensity, or polarization of the light. At the current data rate of 1.6T per second, modulators must switch at 200 gigabits per second per lane across 8 lanes simultaneously. Silicon photonics chips do this by exploiting the plasma dispersion effect in silicon to shift the refractive index of a semiconductor. Marvell, Broadcom, and Intel are the primary designers of these “silicon photonic modulators” and photonic integrated circuits, or “PICs.” The limitation of silicon PICs is that they cannot generate light; they can only manipulate it, making layer 1 a structurally necessary step.

Layer 3: the interposer. This is the step where the InP laser source and the silicon PIC get physically assembled onto a single substrate. Optical coupling between InP and silicon requires extreme precision: a misalignment of even a few nanometers causes degradation of the signal across the entire system. Through a semiconductor fabrication technique called monolithic integration, a manufacturer combines the lasers, modulators, and drive electronics onto a single substrate. POET Technologies is developing an interposer platform that allows the integration of InP and silicon components on a single wafer. In fact, Sivers and POET have confirmed a joint light engine platform combining Sivers’ DFB lasers with POET’s interposer. Production of these platforms is expected by the end of 2026.

Layer 4: the transceiver. The integrated light engine platform gets packaged into one of two forms. The first one is a pluggable transceiver that plugs into a port on a switch or a server. The current upgrade cycle has been transitioning from 400G to 800G to 1.6T pluggable transceivers, with Jabil’s collaboration with Sivers targeting a 1.6T optical transceiver using Sivers’ DFB lasers. Co-packaged optics, or CPOs, is the second form: instead of a pluggable transceiver, the optical engine is directly connected on the same package as the GPU or switch ASIC (application-specific integrated circuit). This remedies the power consumption problem, as CPOs can reduce the electrical signaling between a chip and a pluggable transceiver from 5-10 picojoules per bit to less than 1 picojoule.

Layer 5: the system. At this layer, the transceiver/CPO module connects directly to an AI accelerator. NVIDIA’s NVLink Switch and InfiniBand fabric, Arista and Cisco’s data center switches, and the ASICS being developed by Google (TPU), Microsoft (Maia), Amazon (Trainium), and Meta are all the end destinations for this optical chain. The relevant metric here is total bandwidth per rack per cluster. NVIDIA’s NVL72 rack (72 x H100 GPUs) requires ~57.6 terabits per second of interconnect bandwidth within the rack, and expanding to the cluster level (thousands of GPUs connected across racks) increases optical bandwidth requirements into the petabits per second range. Every incremental GPU deployed into one of these AI clusters increases the demand for laser arrays in the first layer.

Write-up (free): https://t.co/dyzKmV6o94

[Credit Capital @CreditCapi]

Business Overview: Sivers operates through two main business segments: Photonics (~60% of revenue) and Wireless (~40% of revenue). The Photonics division manufactures distributed feedback (DFB) laser diode arrays and semiconductor optical amplifiers on its proprietary 100mm InP wafer platform. These chips emit an extremely controlled beam of light that is either shot through a fiber-optic cable to transmit data or shone onto human skin to detect biomarkers such as glucose levels. This segment targets three end markets: AI data center co-packaged optics (CPO), biometric health sensing for consumer wearables, and LiDAR for autonomous vehicles. The Wireless division produces mmWave RF transceivers and beamforming integrated circuits for SATCOM and 5G/6G infrastructure. These chips act as a “brain” inside satellite terminals and bases, controlling how signals are sent and received.

Thesis: Sivers came onto our radar after a recent IPO, and we were particularly interested in their disclosure of a contract with an unnamed Fortune 100 company. After combing through hundreds of pages of financial statements and disclosures, as well as doing channel checks, we believe that this customer is Apple.

What we were able to figure out is that in 2018, a U.S. Fortune 100 company co-invested over $18M in development contracts with Sivers to optimize lasers specifically for biometric sensors. In Q1, Sivers revealed that their customer ordered 30,000 chips for qualification and system testing, as well as asked for an RFQ for 50 million consumer biometric sensor units per year. We determined that no U.S. Fortune 100 company orders 50 million consumer biometric sensor units annually for industrial, medical, or enterprise locations; it only makes sense in one context: a mass-market consumer wearable. The only company that ships a wearable device at that volume is Apple, which sells between 33 and 50 million Apple Watches annually, averaging 42.4 million Apple Watches per year over the last six years, in line with the 50 million unit RFQ. Carnegie research also confirmed that Sivers released 135 wavelength architectures, which we found exactly matched Apple Watch’s technical specifications, giving us further conviction that this deal was with Apple.

Apple has been developing non-invasive optical health monitoring for over a decade, as confirmed by Bloomberg in 2023. Their technology works by emitting specific wavelengths of near infrared light beneath the skin into interstitial fluid, then measuring the reflected light to detect biomarker concentrations. This requires precise, narrow line-width lasers operating across multiple wavelengths, all at the same time, which exactly matches the profile of Sivers’ DFB laser arrays.

When considering the competitive landscape, Sivers is one of the only companies that makes sense for Apple to source from. Apple’s previous primary photonic biosensor supplier was Rockley Photonics, which filed for bankruptcy in early 2023. Lumentum and Coherent already have their capacity allocated to NVIDIA’s optical interconnect buildout through 2027. VCSEL suppliers like ams OSRAM and Trumpf make a fundamentally different laser suite for Face ID surface sensing, not the spectroscopy that Apple’s biometric sensing requires. The list of qualified and independent InP DFB laser suppliers who could fill the gap left by Rockley and meet the volume demands is extremely short. Sivers, with five years of co-development, $18M of customer-funded R&D, and a manufacturing process specifically for consumer-grade yield and cost, makes it the most qualified candidate on that list.

When looking at the potential Fortune 100 customers and the number of units sold, it is clear that Apple is the only one that meets the criteria for biometric sensing and is close to the 50 million-unit-per-year range.

The reason we believe so few people have uncovered this is that Sivers IPO’d just six weeks ago. If correct, Sivers would transform from a rather speculative photonics stock into the main supplier for one of the highest-volume consumer hardware companies in the world.

Valuation: In the short term, we estimate this deal will translate to $130M in annual revenue, at ~27% EBITDA margins, compared to a current ~$38.9M in company-wide revenue. While this impact has already been priced in since we began the write-up, we believe the remaining upside lies in the long-term terminal value impact as investors come to realize that Apple is their undisclosed customer. Because Sivers partners with customers that Lumentum and Coherent are too capacity-constrained to serve, it has traditionally been viewed as a cyclical business leveraged to capacity demand with little to no terminal value. We believe that the Apple deal is a significant catalyst to change this perception.

Partnering with Apple is the single most valuable validation event in the consumer semiconductor industry. Apple’s qualification process is extremely rigorous, and once a supplier is embedded within their business, they typically remain for multiple product generations. Not only will this lend credibility to Sivers and drive new deals, but more importantly, it will add visibility into a potentially multidecade stream of cash flow. The realization that Apple is the undisclosed customer should significantly shift the terminal value perception as the market begins to price in consistent future cash flows, in contrast with the current cyclical nature.

Catalysts: The most relevant catalyst to this thesis is that we have begun to see other investors across various platforms come to similar conclusions. To be clear, Apple enforces strict Non-Disclosure Agreements, so Sivers is not able to speak publicly about any potential relationship before an official product launch. However, we do believe that this deal will be gradually priced in, as we have seen through $SIVEF’s 189% increase since we began writing. An RFQ for 50 million consumer biometric sensor units per year significantly limits the number of potential customers. We think this order could be for Apple’s Series 13 Apple Watch, set to release in the second half of 2027. From a web scrape of all relevant social media channels, we have found a significant uptick in the number of accounts looking into this deal, which we believe is a catalyst as more people begin posting about this and the narrative gains traction.

[Credit Capital @CreditCapi]

$SIVEF up ~24% since our write-up and ~259% since we invested at $1.70 after our extensive due diligence pointed to an undisclosed relationship with $AAPL.

In-depth overview below and write up available for free here (https://t.co/ycOzQpnW3X).