Brian Chingono of Verdad presented his thesis on European deep-value microcaps, featuring Delfingen (France: ALDEL), at European Investing Summit 2026.
Thesis summary:
Brian argues that Europe’s scariest corner, deep-value microcaps, offers patient investors the most attractive compensation. Every September since 1997, Verdad screens European stocks above $40M market cap for the cheapest quartile by price/book with above-median free cash flow yields. With no size target, the screen lands in microcaps: the median firm is worth about $300M, and 73% fall within the MSCI Europe Micro Cap Index’s size range. The segment has outperformed the market by 5% annualized since 1997.
With low gas inventories and Strait of Hormuz disruptions, the headlines echo 2022, when euro-area inflation peaked at 10.6% and took three years to return to 2%; it now stands at 3.8%. After 7.7% price-driven growth in 2023, deep-value revenue stalled near zero in 2024-2026, against a 3.4% long-term average. Companies cut costs: market EBIT outgrew revenue in each of the past three years, and deep-value EBIT, after a 2% decline in 2025, turned positive in 2026.
Prices have not followed. The market has re-rated from 1.65x book in 2023 to 1.85x, within 4% of its 30-year average, but deep value still trades at 0.66x, near 2023’s 0.63x and a 15% discount to its 0.77x average. Its valuation spread versus the market, 0.35x against a 0.40x median, has rarely been wider, mainly around 2000 and in 2020-2021. When spreads were wider than the median, deep value outperformed by 7% annualized over the following three years.
Verdad’s bridge implies a 17.2% five-year expected return for deep value versus 13.2% for the market: a 12.1% free cash flow yield, 1.9% historical EBIT growth and 3.2% from re-rating, so about 70% is cash available for near-term distribution. Brian sees the 2022 analogy breaking down: Europe added a third more LNG regasification capacity, Norway and the US supply 57% of its gas, and gas prices are roughly a quarter of their 2022 peak. Yet equities are priced for a repeat.
Brian’s example is Delfingen, a family-controlled French wire-protection specialist with an €81M market cap, trading at 3.6x EV/EBITDA, 0.5x book and a 30% free cash flow yield. Its IMPULSE 2026 restructuring lifted the operating margin from 5.0% in 2022 to 9.0% in 1H 2026 and cut leverage to 2.1x. Industrial, 17% of 2025 revenue at a 26% EBIT margin, could alone be worth most of the €208M EV at peers’ 12-15x EBIT. Risks include the auto cycle (1H 2026 revenue fell 8%) and limited liquidity.
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European Investing Summit 2026 was held from October 20-23, 2026. The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.
