GTT is amazing. What am I missing? My stock buy of the week.

Is second-level thinking even needed with Gaztransport & Technigaz?

Hi all, another week, another record-high for markets.

It’s amazing.

And it’s also nerve-wracking.

I heard a Buffett quote this week saying he likes it better when markets are going down.

I couldn’t agree more.

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Face value

I invest a little each week. And this week, I went with Gaztransport & Technigaz (GTT).

Adding to my previous holding.

But it was a low-conviction move.

Sure, GTT is absolutely stellar.

And it’s down about 10% in my fund since I first bought back in June.

So I got a chance to buy more at a lower price.

But I fear I’m taking everything at face value.

There’s no deeper “second-level thinking” going on here.

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Second-level thinking

Second-level thinking is a term I got from Howard Marks.

Super helpful.

It means:

• going beyond the obvious, surface or consensus view

• thinking more contrarian

• taking psychology and possible outcomes into account

• trying to figure out what the market underestimates or undervalues

Recently, this approach worked well with Novo Nordisk (NVO) and Molina Healthcare (MOH).

Sell-off psychology

In both cases, the companies got caught up in powerful sell-off cycles.

Falling some 20% more in one day, and continuing downward.

First-level thinking in these cases was:

• That’s bad

• Others are fearful, so I should be too

• Sell sell sell

Second-level thinking here is remembering:

• the market is manic depressive

• the market overreacts, both upwards and downwards

• the more these companies fall, the less the downside risk

• buying when others are fearful is usually good

• buy

And if you did this, you’ve already been rewarded.

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Good enough

Because for example, Novo Nordisk rose 11% just this week.

And it’s up some 35% since hitting its trough last month.

And Molina is up around 15% since July, when the entire US healthcare sector was in freefall.

And both still look cheap. With lots of room left to revert back up to their means.

When I bought both of those, I was confident.

I thought - at the very least, I wasn’t falling victim to hype. And I wasn’t overpaying.

The same is not true for GTT.

Because there’s nothing second-level going on here.

I’m not even looking past the first level.

It still looks more than good enough.

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First-level GTT

Here’s the first-level on GTT.

The amazing financials open for all to see at fiscal.ai:

• 97% gross margin

• 74% 5-yr avg ROIC

• 70% 5-yr avg ROCE

• 64% 5-yr avg ROE

• 46% free cash flow margin

• no debt

• net cash

• 13% 2-year forward revenue CAGR

• 12% 2-yr forward earnings CAGR

• Generous dividend and buyback programs

These are fantastic numbers.

GTT is a dominant force in a specialized, niche segment of the growing LNG market.

The numbers show this.

And you get all this at a:

• trailing PE of 16

• forward PE of 13

• EV/EBIT of 14

• Earnings yield of 6

• FCF yield of 6

• PEG of 0.8

Ie - not super cheap. But not super pricey either.

Both Alphaspreads and Uncle Stock put GTT at 6-7% undervalued.

And Uncle Stock rates them a strong buy.

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Second-level GTT

As mentioned, I like to go second level.

And as mentioned, the problem here is I don’t have much second-level stuff to go on.

I’m not feeling anything the market isn’t also probably feeling.

Perhaps…I could have similar second-level thoughts about the LNG market as I had last week on oil.

That both are somewhat of a hedge against instability.

Meaning, if/when wars break out, energy and natural gas prices can surge.

This happened in 2022.

And the market may be underestimating the potential for this ahead.

But I don’t have the same sense of safety as I do with oil.

Because a lot of big oil companies have steadily dropped since 2022. Offering strong value.

For example, Equinor is down to an EV/EBIT of 2.5.

Meanwhile, over the past couple years, GTT has climbed.

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Who needs deep?

So this week’s move is very first-level stuff.

It comes down to:

• GTT’s high margins, high ROIC and low debt level still looks stellar

• it’s not too overpriced

• the LNG market looks just fine medium-term

• and the share price is down a bit recently, giving me a chance to buy more at a lower price

All very straight forward.

Nothing second-level going on here.

But with such solid numbers, maybe it doesn’t have to be deeper than this?

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Thanks for reading. Talk to you next week.

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Hi, I’m Joel Sherwood. I analyze stocks and invest each week. And write about it all here. Building an equity fund for the long term. And trying to get good at this investing thing.

I’m a former financial journalist and current bank employee. I live in Stockholm, Sweden and started the Sherwood Investment Letter in January 2025.

Purchases are not recommendations.