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To me, the notion that value investors should be focused on, or looking into, the Mag 7 to find value is absurd. These companies are some of the most scrutinized, analyzed, modelled, and debated stocks in history. The likelihood of finding substantial, underappreciated value in these stocks is remote. Here, I can immediately see someone shouting about Berkshire’s investment in Google. Assuming Buffett blessed the investment, this doesn’t change the fact that there are far more opportunities in small caps, obscure markets, and underfollowed securities. Berkshire’s mere size forces it to invest in the likes of Google to capture potential returns, but as a small investor, the market is your canvas.
Take a company like Warpaint London, an unknown LSE AIM-listed value color cosmetics firm. The company has a market cap of a mere £155M (£17M is cash). Warpaint has grown revenues from £40M in 2020 to £105M TTM, with EPS growing from 4p to 20p. Management is superb (ROE and ROCE stand at 25%, respectively), and they own 40% of the company. The CEO knows his business well: he started trading cosmetics wholesale in the 1980s at age 18 with £500 in his pocket, and now his company generates over £100M in sales, exactly the kind of entrepreneur Buffett likes. And he and his co-founder did that with zero debt.
The stock has been punished in 2025 because their growth slowed down to 8%, due to Trump’s tariffs and general weakness in the UK consumer space (their second largest market after the EU). Consequently, Warpaint trades for an EV/EBITDA ratio of 6.2, a P/E of 9.8, and an FCF yield of 9%. For a company that has grown revenues and profits at double digits for years, and still has plenty of room to grow, these multiples are a joke. Most importantly, with a market cap of £155M, the stock can quintuple from here and would still be a blip compared to the mega caps. Said another way, the sky is the limit if Warpaint ends up being the European ELF, assuming the latter doesn’t buy them beforehand.
In doing my DD, I ordered a bunch of their stuff and gave it to my wife and her friends to try, and they loved the products and couldn’t believe how cheap they were. They all complained Warpaint brands are not available in stores in Canada. I assume stores here will carry them soon enough. Everyone major chain Warpaint went into, be it in the UK, Europe, or the US gave them more shelf space and more stores after the initial roll out.
This is what real value investing is about. It is not about chasing what everyone is chasing; it is about combing through thousands of companies and finding the real gems, those that no one cares about, those that no one talks about, or those that everyone stopped talking about, before they are discovered, or re-discovered, again.