A hand setting one more clay brick on top of a precisely stacked column of bricks

Aadi Capital · Long-only

Built brick by brick.

We own businesses whose growth is built into how they are constructed, and where the bricks laid this year are still standing the next.

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(01) Philosophy

We buy businesses with the compounding built in. Not growth that has to be re-won every year, but growth that happens because of how the business works.

Long only: We own the businesses we believe in and hold them while the mechanism keeps working. We do not short, and we do not trade around positions.
Owners, not renters: We read a business the way an owner would: by what it retains, what it earns on it, and what it will look like in four years.
Conservative by construction: We do not optimise for the highest possible outcome. We underwrite on estimates we are comfortable being wrong on, and treat any upside beyond them as a bonus.

(02) The mechanics

Three engines we look for

a. Retained capital compounds itself
b. Customers grow more valuable with time
c. Scale lowers the cost to serve

When all three run in the same business, each one feeds the next.

Cross-section of an old oak trunk showing hundreds of growth rings — Retained capital compounds itself

A business that earns a high return on its capital and keeps it grows without asking anyone for more. The equity funds the next year of the business; the next year earns the return again. The growth is arithmetic, not hope.

A nautilus shell cut in half revealing its spiral of ever-larger chambers — Customers grow more valuable with time

A customer won with one product adds a second, then a third. Revenue per customer keeps rising for years after the cost of acquiring them has already been paid.

A sculptural staircase of stacked travertine and clay blocks rising step by step — Scale lowers the cost to serve

When the marginal customer costs almost nothing to serve, rising revenue per customer over a flat cost per customer becomes operating leverage, and it compounds the first two.

(03) The arithmetic

Every year lays a new course. None are taken away.

Growth in capital is roughly the return on capital times the share of earnings kept. Move the two dials and watch the wall build over ten years. Each colour is one year's retained earnings, laid on top of everything before it.

Return on capital25% Share of earnings retained100%

9.3×Capital after 10 years

3.1Years to double

Illustrative arithmetic only. Not a forecast, a target or an expected return.

Starting capital Year 1 Year 10

An ancient Roman stone arch, every block still in place, in low golden light

(04) Durability

“The bricks must not disappear overnight.”

What a business built last year should still be there next year: a customer relationship that deepens, a balance sheet that retains, a cost base that scales. We avoid growth that evaporates the moment the marketing budget stops.

An antique brass balance scale holding a single brick against a stack of brass weights, perfectly level

(05) Discipline

What we will not pay for

i.
Growth that depends on marketing spend
If the growth stops when the spending stops, it was rented, not built.
ii.
A perpetuity-growth terminal value
We do not let a formula about forever carry the valuation. The return has to come from earnings a company reports within a few years.
iii.
A generous market multiple
We exit, on paper, at a multiple a mature peer already trades at today. Nothing depends on the market becoming kinder.

(06) How we underwrite

Five rules, applied every time

A mason's trowel resting on a freshly laid course of bricks

01
Year one is the company's guide
We do not out-forecast management on the year it can already see. The first year sits inside guidance or on reported actuals.
02
Then only the mechanism
The following years apply the drivers already at work: customers, revenue per customer, cost of risk, cost to serve. Nothing requires a new product or a new market.
03
Exit at a multiple someone already pays
The exit multiple is the only terminal value in the work, and it is one we can point to today in a mature peer.
04
Three scenarios, one expected value
Bear, base and bull are separate sets of drivers, not haircuts on one another, weighted by where the evidence actually is.
05
Know the one line it rests on
Every position has a single thing that needs to be true. We name it before we buy, and we check it every quarter.

(07) Current research

Compounding machines in consumer finance

Why lenders that fund themselves with deposits and layer services onto a growing base compound in two dimensions at once: the balance sheet, and the customer. Two cases, published as open research dashboards built from primary filings.

Case 1 · NYSE: NU