| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Stone Sentinel Capital returned 7.6% year-to-date through June 2026 versus 10.2% for the S&P 500, with the manager emphasizing that short-term underperformance is expected when favoring unpopular investments over popular ones. The core thesis centers on investing in disfavored businesses where low expectations anchor high potential returns and under-priced fundamentals reduce downside risk. The manager views AI infrastructure spending as an uneconomic arms race, with hyperscalers projected to spend $1 trillion in 2027 requiring unrealistic 30-60% incremental revenue growth to justify returns. High expectations in popular AI stocks heighten downside risk. The portfolio holds 4 concentrated positions in Taiwan, Malaysia, US, and Japan, all trading at deep value multiples. New long Marex, a clearing firm with structural competitive advantages, contributed the majority of returns. Existing holdings Ascentech (8x forward PE) and Protasco (1.3x trailing PE) remain in drawdowns but are performing according to expectations. The manager prioritizes risk before reward, seeking minimal downside exposure through contrarian positioning in unpopular stocks with strong fundamentals.
Stone Sentinel Capital generates excess returns by investing in unpopular, disfavored businesses where low expectations create high potential returns and under-priced fundamentals reduce downside risk, while actively avoiding popular stocks with high expectations and elevated downside risk.
Manager maintains conviction in existing holdings despite drawdowns in Ascentech and Protasco, both performing according to expectations with strong underlying fundamentals. The focus remains on unpopular, disfavored businesses where low expectations anchor high potential returns and under-priced fundamentals reduce downside risk. Manager continues to prioritize risk before reward, seeking investments with minimal downside exposure.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 3 2026 | 2026 Q2 | ASCY.KL, MRX.L, PROT.KL | AI, Asia, Capital markets, Clearing, contrarian, risk management, value |
ASCY.KL PROT.KL MRX.L |
Stone Sentinel Capital invests in unpopular, disfavored businesses where low expectations create asymmetric upside and under-priced fundamentals limit downside. The manager views AI infrastructure spending as an uneconomic arms race with unrealistic return requirements and actively avoids popular AI stocks. The concentrated 4-stock portfolio trades at deep value multiples, led by new clearing firm position Marex with structural competitive advantages driving 50% margin balances growth. |
| Apr 8 2026 | 2026 Q1 | - | AI, Asia, infrastructure, risk management, uncertainty, value |
ASCENTECH.T PROTASCO.KL |
Stone Sentinel's concentrated 4-stock Asian portfolio declined 7.8% on AI disruption fears and contract uncertainty. Manager distinguishes between manageable risk and unpredictable uncertainty, focusing only on businesses with bounded outcomes. Current holdings in Japanese VDI infrastructure and Malaysian road maintenance offer strong downside protection with significant upside when market uncertainties resolve. |
| Jan 2 2026 | 2025 Q4 | ASCENTECH.T | AI, Asia, Cloud, Japan, Mental Models, Philosophy, value | 3565 JP | Stone Sentinel delivered 50.7% in 2025 through patient, opportunistic investing. Manager positions as wild lion versus zoo lion, emphasizing judgment over predictability. Portfolio spans Asia with new Japanese holding Ascentech, a Citrix VDI operator benefiting from hybrid work trends. Dismisses AI disruption concerns, arguing sustainable insights require mental models beyond accessible knowledge. |
| Oct 9 2025 | 2025 Q3 | 1627.HK, 5238.KL | Asia, Capital Allocation, Construction, dividends, real estate, value | - | Stone Sentinel Capital generated 45.3% YTD returns through concentrated value investing in 5 Asian and European positions. The fund emphasizes certainty-driven stock selection, recently adding Hong Kong construction company Able Engineering (9% dividend yield, office building overhang) and Malaysian road maintenance operator Protasco (asset monetization catalyst). Philosophy centers on practical wisdom and rapid adaptation to changing realities. |
| Jul 7 2025 | 2025 Q2 | CLA.PA, FINV, GSJ.MC | Buffett, cash flow, China, Construction, Europe, Fintech, technology, value | - | Stone Sentinel Capital achieved 38% YTD returns through concentrated value investing in deeply discounted securities. The portfolio focuses on three core holdings: Spanish construction company GSJ trading at minimal valuation despite strong cash flows, software publisher CLA at 6.5x FCF, and Chinese fintech FINV offering 30% FCF yields in a consolidated oligopoly market. |
| Apr 9 2025 | 2025 Q1 | - | dividends, Equity Valuations, Fed policy, fixed income, interest rates, Market Outlook | - | Oujo Wealth Strategies reports strong 2025 performance across asset classes with the S&P 500 recovering to 6,700. The firm is cautiously optimistic, making tactical moves into fixed income as markets climbed. They favor dividend payers, mid and small caps, and bonds, believing current equity valuations offer only slight premiums over safer assets. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIManager views AI infrastructure spending as an uneconomic arms race driven by competition rather than demand. Hyperscalers are projected to spend $1 trillion in 2027 alone, requiring unrealistic revenue growth (30-60% incremental) to justify returns. The capital-intensive nature of AI, short GPU lifespans, and funding strains (consuming 94% of operating cash flow) suggest overcapacity and losses ahead. High expectations embedded in AI stocks heighten downside risk. |
Hyperscalers Capex GPUs Overcapacity Valuations |
ValueManager explicitly favors unpopular, disfavored businesses where low expectations create high potential returns and under-priced fundamentals reduce downside risk. The portfolio consists of 4 stocks trading at deep value multiples (Protasco at 1.3x PE, Ascentech at 8x forward PE). Manager weighs economics and intrinsic value over popularity, preferring to bear minimal downside risk through contrarian positioning. |
Unpopular Disfavored Low expectations Fundamentals Downside risk | |
Capital MarketsManager initiated a new long position in Marex, a clearing firm benefiting from structural competitive advantages. Large banks are exiting small/mid-client clearing due to capital regulations, while smaller clearing firms face rising fixed costs. Marex's margin balances grew 50% over two years versus low-single-digit growth at large banks. The clearing business generates 50% PBT margins and is structurally advantaged against both large and small competitors. |
Clearing Derivatives Margin balances Capital regulations Market structure | |
| 2026 Q1 |
AIManager discusses AI disruption fears affecting portfolio company Ascentech, arguing that AI actually increases demand for infrastructure-layer services like VDI and security. The narrative of AI displacing software incumbents is viewed as misapplied to infrastructure providers. |
Infrastructure VDI Security Disruption |
InfrastructurePortfolio includes infrastructure plays in both technology (Ascentech's VDI infrastructure) and physical infrastructure (Protasco's road maintenance contracts in Malaysia). Manager emphasizes the defensive nature and switching costs of infrastructure businesses. |
Roads Maintenance Switching Costs Contracts | |
| 2025 Q4 |
AIManager views AI as unlikely to disrupt Citrix's VDI business, positioning it as infrastructure that AI runs within rather than being displaced by it. Discusses how LLMs synthesize existing knowledge but don't flatten the mountain to insight, maintaining that value investing edges persist despite AI advances. |
Artificial Intelligence LLMs Value Investing Software Infrastructure |
CloudFocuses on Virtual Desktop Infrastructure through Ascentech's transformation to become Citrix operator in Japan. Emphasizes post-pandemic hybrid work tailwinds and demand from risk-averse customers in regulated industries for secure hybrid work solutions. |
VDI Virtual Desktop Hybrid Work Citrix Infrastructure | |
| 2025 Q3 |
ConstructionAble Engineering Holdings is engaged in building construction and RMAA projects for Hong Kong public works, with double-digit growth and strong fundamentals supported by government spending on public housing projects. |
Public Works RMAA Government Contracts Infrastructure |
Commercial Real EstateAble Engineering faces potential impairments on an office building carried at book value equal to market cap, with Hong Kong office vacancy at 17% and Kowloon East at 24%, though cities are resilient and don't die like companies. |
Office Buildings Vacancy Rates Impairments Hong Kong | |
DividendsAble Engineering offers roughly 9% dividend yield with consistent and growing dividends since 2022. Protasco used to pay dividends until 2019 and resumption would signal proper capital allocation. |
Dividend Yield Dividend Growth Capital Allocation | |
| 2025 Q2 |
ValueThe manager emphasizes deep value investing principles throughout the letter, highlighting stocks trading at significant discounts to intrinsic value. Portfolio holdings like GSJ trading at 6.5x FCF and FINV offering 30% FCF yields demonstrate the focus on undervalued securities with strong fundamentals. |
Intrinsic Value FCF Discount Bargain Undervalued |
FinTechFINV represents a significant position as a Chinese nonbank lender connecting borrowers to lenders for fees. The company operates in an oligopoly after 95% of competitors exited due to regulations, with superior technology and risk models updating weekly versus quarterly for competitors. |
Lending China Technology Risk Models Oligopoly | |
ConstructionGSJ operates a core construction business valued at only €50m despite generating €32m net earnings and €117m free cash flow last year. The manager views this as an incredible bargain even excluding the value of undeveloped land holdings. |
Infrastructure Cash Flow Earnings Land Valuation | |
| 2025 Q1 |
DividendsDividend payers have performed well and paid their dividends. The firm views dividend-paying stocks as attractive investments with fair valuations and strong holdings for retiree income. |
Income Yields Retirees Valuations Performance |
RatesThe Federal Reserve has made only one minor cut this year despite pressure from the Trump administration. The firm expects more rate cuts would require negative employment data, weaker consumer sentiment, low inflation, and manufacturing softness. |
Fed Cuts Employment Inflation Manufacturing |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jul 3, 2026 | Fund Letters | Stone Sentinel Capital | ASCY.KL | Ascentech | Other | Industrial Machinery | Bull | - | business transformation, Cash-Adjusted Valuation, Drawdown, Equity, Industrial, Malaysia, Value | Login |
| Jul 3, 2026 | Fund Letters | Stone Sentinel Capital | PROT.KL | Protasco | Other | Construction & Engineering | Bull | - | Catalyst, Concession, Cyclical, deep value, Drawdown, Equity, infrastructure, Malaysia | Login |
| Jul 3, 2026 | Fund Letters | Stone Sentinel Capital | MRX.L | Marex | Other | Capital Markets | Bull | London Stock Exchange | Capital markets, Clearing, Derivatives, Equity, financials, market share gains, Regulatory Moat, ROE Expansion, Structural Advantage, UK | Login |
| Apr 8, 2026 | Fund Letters | Stone Sentinel Capital | ASCENTECH.T | Ascentech | Other | Systems Software | Bull | New York Stock Exchange | AI disruption, cash-rich, Citrix, Defensive Technology, infrastructure software, insider ownership, Japan, Value, Vdi, Zero Trust Security | Login |
| Apr 8, 2026 | Fund Letters | Stone Sentinel Capital | PROTASCO.KL | Protasco | Other | Construction & Engineering | Bull | Bolsas y Mercados Españoles (Madrid) | asset value, contract renewal, government contracts, infrastructure, Malaysia, net cash, political risk, Road Maintenance, switching costs, Value | Login |
| Jan 2, 2026 | Fund Letters | Marcel Gozali | 3565 JP | Ascentech K.K. | Information Technology | IT Services & Systems Integration | Bull | New York Stock Exchange | Execution, Hybridwork, Margins, Subscriptions, Vdi | Login |
| TICKER | COMMENTARY |
|---|---|
| MRX.L | Marex's excellent track record attracted your manager's attention. In the past decade, it increased revenues by a factor of 9 and EPS by 11. What was more impressive is the increase in returns. ROE increased 5x from 5% a decade ago to 26% last year. Improving capital efficiency is very desirable but rare. Yet the stock traded only at a low double-digit PE, presumably because the market perceived it as a commoditized mid-market broker. What Marex really provides is clearing of derivative trades, in addition to standard prime brokerage services. Clearing is a sleepy back-office function but immensely profitable at 50% PBT margins. As a non-bank clearing firm, Marex requires 80-90% less capital than large banks to support clearing. The lower capital costs of clearing allow Marex to generate much higher ROE in clearing to small and medium companies rejected by large banks. Compared to smaller clearing firms, Marex has a lower fixed cost per trade for clearing because it has enough scale to be one of the top 10 clearing firms (8 out of the top 10 are large banks). So Marex gets a natural source of clients from large competitors and wins against smaller competitors. Its margin balances — a key performance indicator — have grown 50% over the past two years, against low-to-mid-single-digit growth at large banks. Marex traced its roots to the bankrupt Refco and was initially capitalized by Marathon Asset Management before private equity took control. Its PE owners, largely of Lehman descent, built Marex through a series of M&A before taking it public in 2024. The PE owners still own roughly 9% but should pare their stakes over time. CEO Ian Lowitt, former CFO of Lehman, owns a 3.6% stake. The heads of various segments at Marex have led the company as CEO at different stages of its evolution. Senior management has deep knowledge of the entire business. Marex stock has increased by 60% year-to-date but is still cheap and disfavored at only roughly 12x forward PE. The market is still giving insufficient credit to its structurally advantaged position against large and small competitors and non-clearing peers. |
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