| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | -2.3% |
Bonhoeffer Fund returned -2.3% net in 1H 2026 versus +9.1% for MSCI World ex-US and +10.1% for S&P 500. The manager continued selling slower-growth firms and purchasing durable, faster-growing firms in temporarily depressed sectors, particularly distribution, community banks, and homebuilders. The portfolio holds 49% in distribution firms like Ferreycorp, a Caterpillar dealer benefiting from copper mining demand driven by data centers and electric vehicles. Community banks including Northeast Bank and Private Bancorp of America focus on SBA lending with 15%+ earnings growth, though SBA loan growth has slowed due to Trump administration policy changes. Builders First Source is positioned to benefit from the recently passed ROAD to Housing bill providing regulatory relief for new construction. The portfolio has projected 19% earnings growth with 14.5% weighted average earnings yield. New investments target at least 30-40% expected returns combining growth and earnings yield. About 25% of the portfolio remains exposed to cyclical end markets, which the manager is actively diversifying. The manager replaced lagging investments like Asbury Automotive with higher-ROE firms like Meritz Financial, demonstrating disciplined portfolio management focused on sustainable returns on invested capital.
Bonhoeffer Fund invests in deep value special situations and growth-oriented firms that compound value over time, purchased at no more than high single-digit multiples of five-year forward earnings. The portfolio targets companies in market niches that grow organically or through consolidation, engage in active capital allocation through opportunistic buybacks and synergistic acquisitions, and demonstrate durability measured by increasing recurring revenues, high free cash flow conversion, and consistent growing returns on equity.
The manager expects new investments to deliver combined expected growth rates (return on equity times retention ratio) plus earnings yield of at least 30 to 40%, a metric of deep value incorporating growth. The portfolio has projected earnings and free cash flow growth of about 19%, with a weighted average earnings/free cash flow yield of 14.5%. The manager will continue to diversify away from the current 25% cyclical exposure and focus on firms demonstrating durability through increasing recurring revenues, high free cash flow conversion, and consistent and growing returns on equity.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Aug 7 2026 | 2026 Q2 | BLDR, FERREYCORP, NBN | Buybacks, Community Banks, Consolidation, Distribution, SBA, small caps, value | - | Bonhoeffer Fund lost 2.3% in 1H 2026 while continuing to rotate from slower-growth firms into durable compounders in distribution, community banks, and homebuilders. The portfolio targets deep value with growth, seeking 30-40% expected returns from firms trading at high single-digit forward earnings multiples. Distribution holdings benefit from copper demand for data centers and EVs. Community banks deliver 15%+ earnings growth through SBA lending despite near-term policy headwinds. |
| Dec 23 2025 | 2025 Q3 | ABG, BLDR, CZBS, FERREYCORP, FFBC, FFH.TO, FTT.TO, LOTTE, MRZTY, MSBC, NBN, OTOEL.AT, TVK.TO, UBAB | Acquisitions, banks, Consolidation, Distribution, Float, insurance, ROE, value | - | Bonhoeffer Fund underperformed in Q3 2025 while executing portfolio transformation toward higher-quality compounders. Focus on distribution, insurance float strategies, and community banks with strong ROEs. Deep value approach targets companies at single-digit forward multiples with 30-40% expected returns. Diversifying away from cyclical exposure while maintaining discipline on capital allocation and durability metrics. |
| Sep 10 2025 | 2025 Q2 | ABG, ART.JO, ARW, ASO, BLDR, TIGO, TVK.TO, VTY.L | banks, Buybacks, Consolidation, Construction, deep value, Distribution, small cap, value | - | Bonhoeffer Fund returned 8.7% in Q2 2025, focusing on deep value opportunities in distribution, construction, and community banks. The portfolio emphasizes consolidation plays and financial compounders trading at significant discounts with 30-40% expected growth plus earnings yield. Despite cyclical headwinds from higher rates, the fund is positioned for recovery through infrastructure spending and potential rate cuts. |
| May 20 2025 | 2025 Q1 | ABG, ARW, AXOS, BLDR, FFBB, MSBC, NBN, TIGO, TRVS.TO, UBAB, VTY.L | banks, Consolidation, deep value, Distribution, infrastructure, real estate, small cap, value |
TTVS.TO 161560.KS MSBC |
Deep value fund targeting consolidation plays and banking compounders underperformed in Q1 2025 despite repositioning toward higher-quality businesses. Portfolio trades at 12.8% earnings yield with 14% projected growth, focused on distribution, construction finance, and serial acquirers using leverage buyout strategies. Manager sees persistent mispricing in highest-quality portfolio in fund history. |
| Mar 14 2025 | 2024 Q4 | ABG, ASO, BECN, BLDR, FFBB, NBN, TIGO, UBAB | Banking, Buybacks, Consolidation, deep value, Distribution, small cap, value | - | Deep value fund targeting consolidation opportunities and niche growth companies at mid-single digit forward earnings multiples. Portfolio emphasizes distribution, banking, and construction themes with 13.7% earnings yield and growth versus benchmark's 11.4% yield and 7.9% growth. Manager sees highest-quality businesses in fund history with persistent market discounts despite operational improvements. |
| Dec 15 2024 | 2024 Q3 | ABG, AHT.L, ARW, BLDR, FFBB, LOTTE.KS, NBN, NOA.TO, TIGO, TVK.TO, UBAB, VST.L | Asia, banks, Buybacks, Consolidation, Construction, Distribution, growth, value | - | Bonhoeffer delivered 11.3% net returns in Q3 2024 while transitioning from deep value to higher-growth companies in consolidation themes. The portfolio now features the highest-quality businesses in fund history with 12.5% earnings yield and growth rates. Focus on distribution, construction, and specialty banks with strong buyback programs and sustainable competitive advantages. |
| Sep 7 2024 | 2024 Q2 | AHELQ, AHT.L, ASB, BLDR, FFBB, NBN, TIGO, TVK.TO, UBAB, VTY.L | Banking, Consolidation, Distribution, Homebuilders, small caps, value | - | Bonhoeffer Fund targets deep value with growth, focusing on consolidation plays, niche banking, and partnership homebuilding. Portfolio trades at 14.4% earnings yield with 12.5% projected growth despite -4.2% Q2 performance. Manager sees highest-quality businesses in fund history with persistent discount, continuing to replace slower-growth firms with durable compounders in temporarily depressed sectors. |
| Jun 16 2024 | 2024 Q1 | ABG, AHT, ARW, AZO, BLDR, ODFL, TIGO, WBD | Asia, Buybacks, Consolidation, Distribution, Electronics, small caps, Specialty Finance, value | ARW | Bonhoeffer Fund targets consolidation opportunities in distribution and specialty finance, achieving 5.9% Q1 returns. The portfolio emphasizes high-velocity distributors, acquisition-driven growth models, and niche financial services firms generating 20%+ ROE. With 12.3% earnings yield and 12.5% projected growth, the manager sees the highest-quality businesses in fund history trading at persistent discounts. |
| Feb 13 2024 | 2023 Q4 | ABG, BLDR, CNSL, NOA.TO | Buybacks, Construction, Distribution, international, Mining Services, small caps, value | NOA.TO | Bonhoeffer Fund targets value-oriented special situations and growth firms with unique consolidation opportunities. Portfolio weighted average 15.9% earnings yield with 11% projected growth at 4.2x EV/EBITDA. Key themes include compound mispricings, public LBOs, distribution, and specialty construction. Manager replacing slower-growth firms with higher-quality businesses in depressed sectors while maintaining focus on active capital allocation and synergistic acquisitions. |
| Dec 20 2023 | 2023 Q3 | ABG, BLDR, CNSL, NOA.TO | Construction, Distribution, international, Mining Services, small caps, Telecom, value | NOA.TO | Bonhoeffer Fund focuses on value-oriented special situations and growth companies in depressed sectors, emphasizing organic growth and consolidation opportunities. Despite Q3 underperformance, the manager believes the portfolio contains the highest-quality businesses in fund history trading at persistent discounts. Key themes include distribution, construction, mining services, and telecom with strong free cash flow growth potential. |
| Feb 10 2023 | 2023 Q2 | ASO, BERY, BLDR, CNSL, TMIC, VSTO | Buybacks, Construction, Distribution, Korea, LatAM, small cap, value | ASO | Bonhoeffer Fund targets value-oriented special situations and growth companies with active capital allocation strategies. Portfolio trades at 15.3% earnings yield with 10% projected growth across distribution, construction, and public LBO themes. Key holdings include Academy Sports expansion story and Berry Global buyback strategy. Rising rates create headwinds but manager sees quality businesses at persistent discounts. |
| Jun 23 2023 | 2023 Q1 | AHT.L, CNSL, TIGO, TIM.MI, TVK.TO | Consolidation, Distribution, energy, Korea, special situations, Telecom, value |
003550.KS CNSL AHT.L TIGO TVK.TO |
Value-focused fund targeting special situations and growth companies through consolidation strategies. Portfolio emphasizes high-velocity distribution businesses and compound mispricings across South Korea, US, and Latin America. Added TerraVest while trimming slower growers. Sees continued consolidation opportunities in attractive ROIC industries despite higher interest rate headwinds affecting acquisition economics. |
| Sep 3 2023 | 2022 Q4 | 036800 KS, 0QRV LN, BLDR, KT, TIGO, TIT IM | - | - | |
| Jul 12 2022 | 2022 Q3 | 005300 KS, ABG, BERY, TIGO, TIT IM | - | - | |
| Sep 21 2022 | 2022 Q2 | BERY, THRY, TIT IM, WWI NO | - | - | |
| Oct 6 2022 | 2022 Q1 | ABG, CSP LN, GTN | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
DistributionPortfolio holds 49% in distribution firms including car dealerships, branded capital equipment dealerships, and building product distributors. Ferreycorp, a Caterpillar dealer in Peru and Central America, benefits from copper mining demand driven by data centers and electric vehicles. The manager expects recurring revenues from spare parts and services to grow 6% annually over the next five to ten years. |
Dealerships Building Products Copper Mining Services Capital Equipment |
Community BanksManager holds FFB Bancorp, Private Bancorp of America, and Northeast Bank, all focused on SBA lending and purchasing orphan loans from forced sellers. These banks generate 15%+ earnings growth through small business lending with sustainable high-teens returns on equity. Northeast Bank's SBA loan growth has slowed due to Trump administration changes to SBA criteria, but management expects recovery as banking M&A picks up. |
SBA Small Business Loan Growth Specialty Finance | |
HomebuildersBuilders First Source is positioned to benefit from government infrastructure programs and new construction to replenish the US housing deficit. The recently passed ROAD to Housing bill provides regulatory relief and financial incentives to stimulate new home construction. Manager notes the bottleneck of local zoning still exists but expects Federal government to incentivize local changes. |
Housing Infrastructure Spending Building Materials Construction | |
BuybacksMany portfolio holdings use acquisition and buyback models with modest leverage to magnify equity returns to 20%+ over five to ten years. Firms like Terravest, Autohellas, and Builders First Source are buying back stock, and modest current valuations make these buybacks accretive. FFB management has reacted to stock price decline by buying back 8% of shares over the past few years. |
Capital Allocation Share Repurchases Leverage | |
CopperCopper is in high demand due to electricity demand from data centers and electric cars. This trend is expected to continue over the next five to ten years, increasing demand for mining extraction equipment and related services that Ferreycorp provides. Recent Peruvian elections resulted in the conservative party winning from the previous socialist government, a favorable event for continued copper mining expansion demand. |
Mining Data Centers Electric Vehicles Peru | |
InsuranceManager analyzes insurance companies as leveraged investment companies, focusing on those generating underwriting profits while investing float into balanced portfolios. Meritz Financial and Fairfax Financial are highlighted as firms with high expected returns on investment. Manager identifies ten insurance firms expected to generate the highest float returns, with total returns ranging from 24% to 44%. |
Float Underwriting Investment Returns P&C Insurance | |
ConsolidationPortfolio includes firms growing through acquisitions that provide synergies and operational leverage through vertical and horizontal consolidation. Increased cash flow from acquisitions and synergies are used to repay debt and repurchase stock in a repeating cycle. Effectiveness depends on spread between borrowing rates and cash returns from core business and acquisitions. |
M&A Serial Acquirers Synergies Operational Leverage | |
RatesLong-term interest rates have been declining and short-term rates are expected to follow, creating a large and growing spread available to firms with high return on capital. This benefits firms using the acquisition/buyback model with modest leverage. Declining funding costs for banks will support sustainable net interest margins as loan yields decline. |
Interest Rates Spreads Funding Costs | |
| 2025 Q3 |
DistributionHoldings in car dealerships, branded capital equipment dealerships and building product distributors comprise 52% of portfolio. Focus on highest velocity distributors globally with strong inventory turns. Includes Builders First Source, Asbury Automotive, Ferreycorp, Terravest and Autohellas. |
Dealerships Inventory Velocity Caterpillar Equipment |
InsuranceInsurance operations provide leveraged exposure to balanced portfolios financed by underwriting float. Focus on firms with good underwriting discipline and low-cost float to invest in high-performing assets. Fairfax Financial is primary example with 160% leverage via insurance float. |
Float Underwriting Leverage Combined Ratio Reinsurance | |
Community BanksHoldings include FFB Bancorp, United Bancorp of Alabama and Northeast Bank driven by financing of low-income real estate development, small business lending via SBA, and buying orphan loans from forced sellers. Target banks with sustainable ROEs above 15% selling at single-digit multiples. |
SBA Orphan Loans ROE Underwriting M&A | |
ConsolidationPublic leveraged buyout strategy focused on building products distributors and dealerships that grow through acquisitions providing synergies and operational leverage. Cash flow from acquisitions used to repay debt and repurchase stock in repeating cycle. |
Acquisitions Synergies Buybacks Leverage Consolidation | |
ValueDeep value-oriented special situations combined with growth-oriented firms purchased at reasonable prices. Portfolio seeks companies paying no more than high single-digit multiples of five-year forward EPS with strong capital allocation and durability metrics. |
Multiples EPS Capital Allocation Durability ROE | |
| 2025 Q2 |
DistributionHoldings include car dealerships, branded capital equipment dealerships, building product distributors and electrical component distributors. The fund owns some of the highest velocity distributors in markets around the world, with distribution firms representing 49% of the portfolio. |
Auto Dealers Building Materials Retail Industrial Distribution Electrical Equipment Auto Parts |
ConstructionCurrent construction holdings in US and UK should benefit as governments worldwide incentivize infrastructure programs and new construction continues to replenish housing deficits. The theme includes building products distributors and homebuilders. |
Homebuilders Building Products Infrastructure Spending Construction Equipment Building Materials Retail | |
Community BanksFocus on financing of low-income real estate development, growth in small business lending via SBA, and buying forced loans from mergers and FDIC actions. Looking for banks with sustainable ROEs and EPS growth rates higher than 15% selling at single-digit multiples. |
Community Banks Specialty Finance Mortgage Finance Consumer Finance Regional Banks | |
BuybacksMany holdings use acquisition/buyback models with modest leverage to magnify returns. The modest current valuations make these buybacks accretive, with firms like Arrow Electronics buying back stock at 9% per year. |
Buybacks Capital Markets Value Leverage Returns | |
ConsolidationGrowth creation through acquisitions providing synergies and operational leverage from vertical and horizontal consolidation. Increased cash flow from acquisitions and synergies used to repay debt and repurchase stock in a repeating cycle. |
Industrial Services Distribution Building Products Auto Dealers Specialty Finance | |
| 2025 Q1 |
DistributionHoldings in car dealerships, branded capital equipment dealerships, building product distributors and electrical component distributors comprise 54% of portfolio. Focus on highest velocity distributors with strong inventory turns in markets worldwide. Distribution firms include Builders First Source, Asbury Automotive, Arrow Electronics, Ferrycorp, Terravest and Autohellas. |
Auto Dealers Industrial Distribution Building Products Electrical Equipment Auto Parts |
Community BanksBanking compounders with EPS growth rates above 15% purchased at below average multiples, representing about 20% of portfolio. Focus on banks with sustainable RoEs, decent underwriting, and niche specializations like SBA lending, transaction processing, and buying orphan loans from forced sellers. Examples include FFB Bancorp, United Bancorp of Alabama, Northeast Bank, and Mission Bancorp. |
Regional Banks Community Banks Specialty Finance SBA Transaction Processing | |
ConsolidationPublic leverage buyouts representing 43% of portfolio focus on growth creation through acquisitions providing synergies and operational leverage. Companies use increased cash flow from acquisitions to repay debt and repurchase stock in a repeating cycle. Examples include Terravest, Asbury Automobile, Autohellas, Builders First Source and NOA. |
M&A Buybacks Operational Leverage Synergies Serial Acquirers | |
Infrastructure SpendingConstruction holdings in US and Europe should benefit as governments worldwide incentivize infrastructure programs and new construction continues to replenish housing deficit. Current holdings include Builders First Source and Vistry positioned for government infrastructure incentives. |
Construction Government Spending Housing Building Materials Public Works | |
ValuePortfolio consists of deep value-oriented special situations with weighted average earnings/free cash flow yield of 12.8% and average EV/EBITDA of 3.4. Paying no more than high single-digit multiples of five years forward EPS for growth-oriented firms that can compound value over time. |
Deep Value Special Situations Low Multiples Earnings Yield Mispricing | |
| 2024 Q4 |
DistributionHoldings include car dealerships, branded capital equipment dealerships, building product distributors and electrical component distributors. The fund owns some of the highest velocity distributors in markets around the world. Asbury Automotive exemplifies this theme with its model to grow earnings through merger and acquisition or buy back shares if acquisition targets are not available for a reasonable price. |
Dealerships Velocity Consolidation Buybacks Synergies |
ConsolidationPublic leverage buyouts strategy where firms grow through acquisitions, providing synergies and operational leverage associated with vertical and horizontal consolidation. The increased cash flow from acquisitions and subsequent synergies are used to repay debt and repurchase stock. This strategy's effectiveness depends on the spread between borrowing interest rates and cash returns from core business and acquisitions. |
Acquisitions Synergies Leverage Buybacks Operational | |
BankingFocus on niche banking services including multi-family lending, low-income housing finance, and small business administration lending. The fund seeks banks with sustainable returns on equity and earnings growth rates higher than 20% that are selling for single digit multiples with decent underwriting. United Bancorporation of Alabama exemplifies this theme as a community development finance institution. |
CDFI Multi-family SBA Community Underwriting | |
HomebuildersInvestment in both US and European construction holdings that should benefit as governments worldwide incentivize infrastructure programs and new construction continues to replenish housing deficits. Vistry represents a compound mispricing as it exits private homebuilding to focus exclusively on its partnership business with local governments and housing authorities. |
Partnership Infrastructure Housing Government Capital | |
ValueDeep value-oriented special situations combined with growth-oriented firms purchased at reasonable prices. The fund typically pays no more than mid-single digit multiples of five years forward earnings per share. Current portfolio has weighted average earnings/free cash flow yield of 13.7% and average EV/EBITDA of 3.4 with 13% growth. |
Multiples Earnings FCF EBITDA Growth | |
BuybacksActive capital allocation through opportunistic buybacks is a key criterion for portfolio companies. Many holdings use the acquisition/buyback model where increased cash flow from acquisitions and synergies are used to repurchase stock. The modest current valuations make these buybacks accretive for portfolio companies. |
Capital Allocation Accretive Valuations Cash | |
| 2024 Q3 |
DistributionHoldings in car dealerships, branded capital equipment dealerships, building product distributors and electrical component distributors comprise 51.6% of portfolio. Focus on highest-velocity distributors with strong inventory turns in markets worldwide. Arrow Electronics exemplifies the model with modest earnings growth and aggressive buybacks. |
Distribution Dealerships Inventory Electronics Buybacks |
ConstructionConstruction holdings in US and Europe through Builders First Source and Vistry positioned to benefit from government infrastructure programs and housing deficit replenishment. Real estate/construction/finance theme represents 51.6% of portfolio with focus on sustainable growth drivers. |
Construction Infrastructure Housing Building Government | |
Community BanksInvesting in niche growing banks like FFB Bancorp, Northeast Bancorp, Citizens Banks, Mission Bank and United Bancorp of Alabama. Seeking banks with sustainable 20%+ RoEs and EPS growth rates selling at single digit multiples with decent underwriting. Focus on SBA lending and orphan loan purchases. |
Banks SBA Lending Orphan Underwriting | |
BuybacksActive capital allocation through opportunistic buybacks is a key criterion for holdings. Many firms use acquisition/buyback model with modest leverage to magnify equity returns to 20%+ over past 5-10 years. Current modest valuations make buybacks particularly accretive. |
Buybacks Capital Leverage Returns Valuation | |
| 2024 Q2 |
DistributionHoldings in car dealerships, branded capital equipment dealerships, building product distributors, automobile transportation logistics, and capital equipment leasing firms. Focus on high-velocity dealerships with superior inventory turns in markets around the world. |
Auto Dealers Building Products Logistics Capital Equipment |
ConsolidationPublic leverage buyouts using acquisition/buyback model where firms use leverage to boost equity returns from stable cash flow businesses. Growth creation through acquisitions provides synergies and operational leverage from vertical and horizontal consolidation. |
Buybacks Industrial Distribution Building Products Auto Dealers | |
Community BanksFocus on niche growing banks with sustainable 18%+ ROEs, good underwriting practices, and single-digit earnings multiples. Includes financing of low-income real estate development and small business lending via SBA and purchasing forced sale loans. |
Regional Banks Specialty Finance SBA Real Estate | |
HomebuildersInvestment in partnership homebuilders like Vistry transitioning from land-heavy traditional model to land-light partnership model. Focus on affordable housing finance and construction with government partnerships generating mid-20% ROEs. |
Homebuilders Real Estate Infrastructure Spending | |
| 2024 Q1 |
DistributionThe fund focuses on high-velocity dealerships and distributors across multiple sectors including auto dealerships, building products, and capital equipment. Arrow Electronics represents a major new investment in electronic components distribution with 15% global market share and strong consolidation opportunities. |
Auto Dealers Industrial Distribution Building Products Components Consolidation |
ConsolidationA core investment theme targeting firms that grow through acquisitions and benefit from operational leverage. The fund sees significant opportunities in fragmented markets where scale advantages create competitive moats and drive returns through the acquisition-buyback model. |
Buybacks Industrial Machinery Auto Dealers Building Products Specialty Finance | |
Specialty FinanceInvestment in niche banking and financial services firms that specialize in areas large banks cannot or will not enter due to regulatory constraints. Holdings include banks focused on affordable housing finance, SBA loans, and transaction processing with 20%+ returns on equity. |
Community Banks Specialty Finance SBA Transaction Processing Affordable Housing | |
ValueThe portfolio consists of value-oriented special situations trading at attractive multiples. Current holdings have a weighted average earnings yield of 12.3% and EV/EBITDA of 4.4x, with projected earnings growth of 12.5%. |
Value Special Situations Earnings Quality Compound Mispricings | |
| 2023 Q4 |
DistributionHoldings include car dealerships, branded capital equipment dealerships, building product distributors, automobile transportation logistics, and capital equipment leasing firms. Key performance indicator is velocity or inventory turns, with the fund owning some of the highest-velocity dealerships globally. Recovery seen in markets previously hit by COVID like South Africa and Latin America. |
Auto Dealers Industrial Distribution Logistics Building Products Equipment Leasing |
ConstructionReal estate and construction holdings benefit from China and Hong Kong reopening from COVID restrictions. Cement and construction holdings in US/Europe and Korea positioned for global recovery and government infrastructure programs. North American Construction featured as detailed case study with durable moats in specialty contractor industry. |
Construction Equipment Infrastructure Spending Building Materials Cement Construction | |
Mining ServicesNorth American Construction provides heavy civil and bulk earthmoving services in supply-constrained markets, typically first contractor in and last out of project and mine sites. Company has over 3,500 employees and 900 pieces of equipment operating at 30 sites with fleet replacement value over $2 billion. |
Mining Services Construction Equipment Industrial Services Critical Minerals Oil Sands | |
BuybacksPublic LBO strategy involves growth through acquisitions providing synergies and operational leverage, with increased cash flow used to repay debt and repurchase stock. Strategy effectiveness depends on spread between borrowing rates and cash returns from core business and acquisitions. Several portfolio companies actively repurchasing shares. |
Buybacks Leverage Capital Markets Value Earnings | |
| 2023 Q3 |
DistributionHoldings include car dealerships, branded capital equipment dealerships, building product distributors, automobile transportation logistics, and capital equipment leasing firms. Key performance indicator is velocity or inventory turns, with the fund owning some of the highest-velocity dealerships globally. Recovery seen in markets previously hit by COVID like South Africa and Latin America. |
Auto Dealers Industrial Distribution Logistics Building Products Equipment Leasing |
ConstructionReal estate and construction holdings benefit from China and Hong Kong reopening from COVID restrictions affecting tourism. Cement and construction holdings in US/Europe via Builders FirstSource and Vistry, and in Korea via Asia Cement positioned for global recovery from COVID shutdowns and worldwide government infrastructure programs. |
Construction Building Materials Infrastructure Spending Cement Homebuilders | |
Mining ServicesNorth American Construction provides heavy civil and bulk earthmoving services in supply-constrained markets, typically first contractor in and last out of project and mine sites. Company has over 3,500 employees and 900 pieces of equipment operating at 30 sites with fleet replacement value over $2 billion. |
Mining Services Construction Equipment Earthmoving Oil Sands Heavy Equipment | |
TelecomIncreasing use of transaction processing and rollout of fiberoptic and 5G networks providing growth opportunities. Holdings are often holding companies with multiple value components including real estate, with longer realization timelines. Event-driven situations unfolding in Consolidated Communications and Millicom. |
Telecom Infrastructure 5G Equipment Fiber Optics Transaction Processing Wireless Infrastructure | |
| 2023 Q2 |
DistributionHoldings include car dealerships, branded capital equipment dealerships, convenience stores, building product distributors, automobile transportation logistics, and capital equipment leasing firms. Key performance indicator is velocity or inventory turns, with the fund owning some of the highest-velocity dealerships globally. Recovery seen in markets previously hit by COVID like South Africa and Latin America. |
Dealerships Logistics Inventory Velocity Equipment |
BuybacksPublic LBO strategy involves growth through acquisitions providing synergies and operational leverage, followed by repurchasing shares with debt. The increased cash flow from acquisitions and synergies are used to repay debt and repurchase stock in a repeated cycle. Berry Global example shows buybacks are accretive at current 13% earnings yield. |
Repurchases Leverage Synergies Debt Accretive | |
ValuePortfolio consists of value-oriented special situations and growth-oriented firms that exhibit unique qualities when applying a value framework. Securities have weighted average earnings/free cash flow yield of 15.3% and average EV/EBITDA of 4.2, associated with projected earnings/free cash flow growth of about 10%. |
Valuation Yield Multiple Discount Framework | |
ConstructionCurrent cement and construction holdings in US/Europe via Builders FirstSource and Vistry, and in Korea via Asia Cement should benefit as the world recovers from COVID shutdowns and governments worldwide incentivize infrastructure programs. Builders FirstSource has developed local economies of scale and scope moats. |
Infrastructure Recovery Materials Economies Moats | |
| 2023 Q1 |
DistributionPortfolio includes car dealerships, branded capital equipment dealerships, convenience stores, building product distributors, automobile transportation logistics, and capital equipment leasing firms. Key performance indicator is velocity or inventory turns. Holdings include some of the highest-velocity dealerships globally. Recovery seen in markets previously hit by COVID like South Africa and Latin America. |
Dealerships Logistics Velocity Inventory |
ConsolidationFocus on growth creation through acquisitions which provides synergies and operational leverage associated with vertical and horizontal consolidation. Strategy involves subsequent repurchasing of shares with debt. Effectiveness depends on spread between borrowing rates and cash returns from core business and acquisitions. Interest rate increases have reduced economics but large spread still exists at right prices. |
M&A Synergies Leverage Buybacks | |
TelecomHoldings include Latin American telecommunications firms, Italian incumbent telecom, and broadband communications providers. Focus on fiberoptic and 5G network rollouts providing growth opportunities. Timeline for realization may be longer due to holding company structures and multiple components of value including real estate. |
Fiber 5G Infrastructure Networks | |
ValueInvestment portfolio consists of value-oriented special situations and growth-oriented firms that exhibit unique qualities when applying a value framework. Particularly interested in companies generating growth through organic growth, transition, and consolidation. Focus on compound mispricings including Korean preferred stocks and holding company discounts. |
Special Situations Mispricings Discounts | |
EnergyTerraVest provides components and services for oil and gas extraction, transportation, distribution, and commercial/residential usage. Products support transportation and storage requirements for oil, natural gas, LNG, and RNG across US and Canada. Includes natural gas processing equipment and oil/gas services with 21 servicing rigs. |
Oil Gas LNG Processing |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Mar 31, 2025 | Fund Letters | Bonhoeffer Capital Management | TTVS.TO | Terravest Industries Inc. | Industrials | Industrial Machinery | Bull | Toronto Stock Exchange | Canada, Industrial Equipment, LBO, M&A, Metal Fabrication, Military contracts, Roll-up Strategy, serial acquirer, Storage Tanks, Transportation equipment | Login |
| Mar 31, 2025 | Fund Letters | Bonhoeffer Capital Management | 161560.KS | Lotte Chilsung Beverage Co Ltd | Consumer Staples | Soft Drinks | Bull | Korea Stock Exchange | Asset Play, Beverage, Compound Mispricing, Corporate Governance, Korea, preferred shares, Real Estate, Seoul, turnaround, Value-Up Plan | Login |
| Mar 31, 2025 | Fund Letters | Bonhoeffer Capital Management | MSBC | Mission Bancorp | Financials | Regional Banks | Bull | OTCPK | Banking Compounder, California, commercial real estate, community bank, credit quality, Efficiency Ratio, loan growth, management ownership, regional banking, SBA lending | Login |
| May 1, 2024 | Fund Letters | Bonhoeffer Capital Management | ARW | Arrow Electronics | Information Technology | Technology Distributors | Bull | NYSE | AI, Components, consolidation, Electronics Distribution, High Customer Retention, IoT, semiconductors, Share Buybacks, supply chain management, Technology Distributor, value-added services | Login |
| Dec 20, 2023 | Fund Letters | Bonhoeffer Capital Management | NOA.TO | North American Construction Group | Industrials | Construction & Engineering | Bull | Toronto Stock Exchange | acquisition strategy, Australia, Canada, Commodities, construction, Earthmoving, Heavy Equipment, Indigenous Partnerships, infrastructure, Mining Services, Oil sands, Value | Login |
| Dec 20, 2023 | Fund Letters | Bonhoeffer Capital Management | NOA.TO | North American Construction Group | Industrials | Construction & Engineering | Bull | Toronto Stock Exchange | Acquisitions, Australia, Bulk Earthmoving, Canada, construction, Earthmoving, Equipment Fleet, Heavy Civil, Indigenous Partnerships, Mining Services, Oil sands, Specialized Contractor, turnaround, Value | Login |
| Oct 2, 2023 | Fund Letters | Bonhoeffer Capital Management | ASO | Academy Sports and Outdoors, Inc. | Consumer Discretionary | Specialty Retail | Bull | NASDAQ | cash generation, economies of scale, growth, Hunting Equipment, Outdoor Recreation, retail, Southern US, Sporting goods, store expansion, Value retail | Login |
| Jun 23, 2023 | Fund Letters | Bonhoeffer Capital Management | 003550.KS | LG Corporation | Capital Goods | Industrial Conglomerates | Bull | Korea Exchange | Chemicals, Compound Mispricing, discount to NAV, electronics, Ev batteries, holding company, preferred shares, South Korea | Login |
| Jun 23, 2023 | Fund Letters | Bonhoeffer Capital Management | - | Telecom Italia | Communication Services | Integrated Telecommunication Services | Bull | Borsa Italiana | Asset Sale, Compound Mispricing, Government Approval, Italy, network infrastructure, Special Situation, telecommunications, Vivendi | Login |
| Jun 23, 2023 | Fund Letters | Bonhoeffer Capital Management | CNSL | Consolidated Communications Holdings Inc | Communication Services | Integrated Telecommunication Services | Bull | NASDAQ | activist, broadband, buyout, Fiber Optic, Network Rollout, private equity, Special Committee, undervalued | Login |
| Jun 23, 2023 | Fund Letters | Bonhoeffer Capital Management | AHT.L | Ashtead Group plc | Industrials | Trading Companies & Distributors | Bull | London Stock Exchange | Clustering Strategy, Equipment Rental, M&A, Operational Leverage, Share Buybacks, specialty equipment, UK, Unit economics | Login |
| Jun 23, 2023 | Fund Letters | Bonhoeffer Capital Management | TIGO | Millicom International Cellular SA | Communication Services | Wireless Telecommunication Services | Bull | NASDAQ | Emerging markets, Fiber Rollout, Fintech, Latin America, Special Situation, Strategic Bidders, telecommunications, Tower Monetization | Login |
| Jun 23, 2023 | Fund Letters | Bonhoeffer Capital Management | TVK.TO | TerraVest Industries Inc | Industrials | Industrial Machinery | Bull | Toronto Stock Exchange | Canada, consolidation, Family-owned Targets, HVAC, Industrial, M&A strategy, Metal Fabrication, oil and gas equipment, serial acquirer | Login |
| TICKER | COMMENTARY |
|---|---|
| BLDR | BFS is an example of an interesting public leveraged buyout. BFS is a consolidator of building products distributors and select building products, namely trusses, millwork and pre-assembled housing components. BFS utilizes its distribution relationships to sell its building products to local businesses which have local economies of scale that BFS can utilize to generate above average returns on capital. Since BFS is the largest building products distributor in the US, they have the largest scale advantages illustrated by margins and inventory turns that far outpace their competitors. BFS uses its software to design structures and facilitate distribution of building products. BFS is dependent upon single family home construction and to a lesser extent multi-family home construction. With both of these segments either slowing down (SFH) or halting new construction (MFH), the near-term outlook is not too good. Higher interest rates have caused much of this slowdown. The recently passed ROAD to Housing bill provides regulatory relief as well as financial incentives to stimulate new home construction. Recently, BFS had a management change as the CEO became the chairman and the CFO moved into the CEO role. The Chairman has retained his shares. Brad Jacobs, a successful CEO in businesses that implement automation, has taken an interest in building products distribution through his competing firm, QXO. QXO recently made an offer to purchase a building products distributor, Beacon Roofing (BECN). Comparatively, BFS has advanced the furthest in terms of truss automation and BFS management has also stated that the M&A pipeline is strong. As can be seen from the RoIIC analysis, BFS's RoE and RoIIC has increased over the past five to ten years. The BMC acquisition will further increase BFS's RoE. From this RoIIC analysis, we can see the cyclical nature of returns on equity with a relatively high average RoE of 30% over the past 10-years. In part due to BFS's acquisitions, RoEs have increased over time. Today, BFS is close to the bottom of its business cycle. The DCF below reflect the recovery to management's estimate mid-cycle margins over the cycle period of 5-years. The 5-year average of the FCF margin projected forward is equal to management's mid-cycle estimate FCF margin of 5%. The key assumptions in this DCF include an increase in operating margin from operating leverage as revenues rebound with a housing recovery and about a 10% of market cap buyback. The 10% buyback represents 85% of projected income in-line with historical buybacks as percentage of net income including the buybacks in 1Q 2026. These assumptions result in a high teens EPS growth rate over the next five years, a $246 per share value and a 28% IRR. |
| NBN | NBN's originated loans have been increasing by about 30% over the past year while purchased loans have made up the remainder. The purchase of orphan loans can be expected to be episodic and opportunistic and, therefore, unevenly distributed over time. By comparison, SBA loans have been more consistent in volume. That assumption holds but NBN's SBA loan growth has slowed down due to the Trump administration's changes to the SBA loan criteria. With the adjustment to the new SBA criteria, loan levels have increased but not to the extent management has expected. Banking mergers and acquisitions is picking up which should increase the purchased loan targets for NBN. The selling of insured loans, NBN's new loan platform, has grown slower than management has expected despite the high yields (10%+) and an insurance cover for 25% of losses with a 4% deductible. The slower than anticipated growth in these two platforms has led to a stagnant stock price despite increasing returns on equity. Over time, management expects the initial growth to materialize over a longer period of time. Non-performing loans decreased slightly to 0.56% of loans and loan loss provisions of 1.3% of loans. The key assumptions in this Discounted Cash Flow include a flat operating margin. NBN has typically retained excess cash flow to support orphan loan purchases and SBA originations. These assumptions result in a 17% EPS growth rate, a $424 per share value and a 27% IRR. |
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