| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
| 2025 |
|---|
| 1.7% |
Broyhill's 2025 annual letter reflects on a challenging year where the portfolio gained 1.7% while trailing the MSCI ACWI's 22.9% return, as extreme AI-driven market concentration and speculative momentum dominated performance. The manager deliberately avoided areas where expectations had become unanchored from fundamentals, instead concentrating capital in businesses trading at discounts to normalized earnings power in out-of-favor sectors and geographies. This discipline came at a cost during a year when speculative behavior was rewarded. The portfolio was materially reshaped, exiting positions where confidence eroded and reallocating toward higher-conviction opportunities with stronger balance sheets and clearer value realization paths. Key contributors included Philip Morris, IQVIA, and Dollar Tree, while major detractors were Fiserv, Avantor, and Six Flags. The manager views current market dynamics as similar to historical technological bubbles, with AI capex approaching levels that coincided with previous market peaks. The portfolio remains positioned in defensive sectors, small-to-mid caps, and European businesses, believing this creates the most compelling opportunity set in years as fundamentals should eventually reassert themselves over narrative-driven momentum.
The portfolio is positioned in undervalued, established businesses trading at substantial discounts to normalized earnings power, concentrated in defensive sectors and non-US markets, while avoiding the AI-driven speculative bubble that has created extreme market concentration and elevated systemic risk.
The manager believes the unusual momentum of the past few years has created the most compelling opportunity set in years, with value stocks positioned to benefit disproportionately as markets broaden and fundamentals reassert themselves. While acknowledging the career risk of sitting out speculative rallies, the manager expects mean reversion to favor patient, disciplined investors focused on businesses with durable economics rather than narrative momentum.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Feb 12 2026 | 2025 Q4 | AVTR, BAX, DLTR, FI, FUN, IQV, PM, RKT.L, TMO, WOSG.L | AI, Concentration, defensives, Europe, fundamentals, momentum, Speculation, value |
PM IQV DLTR FISV AVTR FUN WOSG LN RKT LN |
The AI capital cycle has created extreme market concentration and speculative momentum, with AI-related stocks accounting for 75% of S&P 500 returns since ChatGPT launched.… |
| Sep 4 2025 | 2025 Q2 | AVTR, DLTR, FI, IQV, PM, SCHW | dispersion, Mean reversion, small caps, stock picking, valuation gaps | - | The commentary emphasizes record valuation dispersion and fading market leadership as fertile ground for active stock pickers. Smaller and mid-sized companies trading at discounts to… |
| May 14 2025 | 2025 Q1 | 7974 JP, AVTR, BAX, DLTR, FUN, PM, UBER | - | - | - |
| Feb 5 2025 | 2024 Q4 | AVTR | - | - | - |
| Nov 5 2024 | 2024 Q3 | AVTR, BAX, BN FP, DG, EPAM, EVO SS, FI, NICE, PM, PYPL, RTO, SCHW | - | - | - |
| Aug 30 2024 | 2024 Q2 | AVTR, BAX, FI, FME, PM | - | - | - |
| May 15 2024 | 2024 Q1 | AVTR, FI, FIS, FMX, WBD | - | - | - |
| Oct 2 2024 | 2023 Q4 | 7974 JP, BAX, BAYRY, DG, FI, FMS, PM | - | - | - |
| Nov 16 2023 | 2023 Q3 | ATVI MM, DG, NFLX | - | - | - |
| Jul 27 2023 | 2023 Q2 | 0R1E LN, FHN, PYPL, SCHW, TD | - | - | - |
| Feb 23 2023 | 2022 Q4 | ATVI, KOF, MCK, META, MSGS, PM | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has become a dominant theme across major equity indices, with Nvidia leading the S&P 500, ASML dominating MSCI EAFE, and TSMC leading emerging markets. The fund benefited from AI-related dynamics, particularly through Samsung's memory products experiencing substantial price increases due to DRAM shortages driven by AI demand. |
Semiconductors Memory DRAM Technology Nvidia |
DefensivesGlobal defensive sectors have fallen to their lowest weighting since 2000, trading at discounts to both the market and their own histories amid deteriorating sentiment and unusually high short interest. These sectors offer significant upside potential and provide defense, as companies selling basic necessities tend to shine when the rest of the market is in trouble. |
Consumer Staples Healthcare Utilities Short Interest Necessities | |
MomentumThe past two years have rewarded momentum investing, with stocks in the top quintile of trailing nine-month returns generating 91% cumulative returns versus 47% for the S&P 500. This momentum period ranks as the second strongest since 1998, only behind the dot-com bubble era of 1998-1999. |
Momentum Growth Concentration Bubble Outperformance | |
ValueBlue Tower focuses on value investing with international diversification. The manager notes that the valuation spread between cheap and expensive stocks is one of the greatest in market history, creating a favorable environment for their value-oriented approach. |
Value International Cheap Expensive Valuation | |
| 2025 Q2 |
Dispersion |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Feb 12, 2026 | Fund Letters | Christopher R. Pavese | PM | Philip Morris International Inc. | Consumer Staples | Tobacco | Bull | New York Stock Exchange | cashflow, Nicotine, Pricing, rerating, Smokefree | Login |
| Feb 12, 2026 | Fund Letters | Christopher R. Pavese | IQV | IQVIA Holdings Inc. | Health Care | Life Sciences Tools & Services | Bull | New York Stock Exchange | backlog, Biotech, Clinicaltrials, Outsourcing, recovery | Login |
| Feb 12, 2026 | Fund Letters | Christopher R. Pavese | DLTR | Dollar Tree, Inc. | Consumer Discretionary | Discount Stores | Bull | NASDAQ | discount, Margins, Normalization, tariffs, turnaround | Login |
| Feb 12, 2026 | Fund Letters | Christopher R. Pavese | FISV | Fiserv, Inc. | Financials | Transaction & Payment Processing Services | Bear | New York Stock Exchange | Competition, Execution, Fintech, Governance, Payments | Login |
| Feb 12, 2026 | Fund Letters | Christopher R. Pavese | AVTR | Avantor, Inc. | Health Care | Life Sciences Tools & Services | — | New York Stock Exchange | Activists, lifesciences, Margins, recovery, turnaround | Login |
| Feb 12, 2026 | Fund Letters | Christopher R. Pavese | FUN | Six Flags Entertainment Corporation | Consumer Discretionary | Leisure Facilities | Bear | New York Stock Exchange | Attendance, Discretionary, Integration, leverage, turnaround | Login |
| Feb 12, 2026 | Fund Letters | Christopher R. Pavese | WOSG LN | Watches of Switzerland Group plc | Consumer Discretionary | Specialty Stores | Bull | New York Stock Exchange | Distribution, Luxury, Margins, retail, valuation | Login |
| Feb 12, 2026 | Fund Letters | Christopher R. Pavese | RKT LN | Reckitt Benckiser Group plc | Consumer Staples | Household Products | Bull | New York Stock Exchange | buybacks, defensive, divestiture, litigation, Staples | Login |
| TICKER | COMMENTARY |
|---|---|
| AVTR | We added a partial position of Avantor to the portfolio in the second half of the year after (and then while) the company had some self-inflicted ups and downs. It is probable that the worst is in the past for Avantor after a leadership change and guidance reset, but we felt it best to exit and book a loss before year end. |
| BAX | We also added to Baxter following share price weakness |
| DLTR | A non-benchmark position in Dollar Tree, Inc. (DLTR) contributed to performance driven by better-than-expected third-quarter earnings due to increased seasonal boosted margins and profitability. |
| FI | Fiserv was a material detractor in the quarter. This is a company that we have discussed extensively over the past few years as we owned it successfully from 2023 until 1Q 2025. However, last quarter was a different story. On the 3Q 2025 earnings call, the new CEO and CFO unwound the former team's guidance for the year. They also explained that the team uncovered aggressive tactics used to boost short-term revenue at the expense of long-term customer relationships and, therefore, earnings. As such, management explained that it would be temporarily backing off of the steady organic revenue compounding, earnings margin expansion, and free cash flow generation that investors had grown accustomed to in order to reinvest in the business and reposition Fiserv for higher quality, long-term growth through entrenched customer relationships. While this news was unexpected, we agree that this course of action is in the best interests of the business based on what we've learned. Despite all of these disruptions, Fiserv still expects to grow revenues throughout its reinvestment period and generate substantial free cash flow, because Fiserv remains a strong business with high recurring revenues and essential offerings across its end markets. We are excited to own Fiserv at these levels, as we believe substantial price compounding will be in order over the coming years. |
| FUN | This is a US activist campaign by JANA Partners and Sachem Head Capital Management. Six Flags Entertainment is a regional amusement-resort operator with approximately 27 amusement parks, 15 water parks and nine resort properties across 17 states in the United States, Canada and Mexico. However, this arrangement has not really gone as planned. In Q2, Six Flags faced severe weather conditions during their typical peak May to June season, which resulted in substantial EBITDA and attendance misses. This sent Six Flags' share price down over 58% from the completion of the Cedar Fair merger to the day prior to JANA's announcement. |
| IQV | IQVIA contributed meaningfully as fears around biotech funding and clinical activity began to ease. While sentiment toward the sector remains fragile, the company's role as a mission-critical infrastructure to drug development remains unchallenged. The first leg of the industry's recent rally was sparked by stabilization, rewarding patience through a prolonged industry downturn. We expect the next leg to gain steam as the recovery accelerates. |
| PM | The Vulcan Materials and Philip Morrises of the world are fine examples of modestly profitable businesses that can turn out to be wonderful investments if those profits are protected for decades. |
| RKT.L | Consider Reckitt Benckiser, the UK-listed maker of Lysol, Mucinex, and Durex. The company recently completed the divestiture of its slower-growth Essential Home business, leaving behind a focused hygiene and health portfolio with a clear path to accelerating organic growth and a large pile of cash recently returned to investors. Yet despite this improved business quality, shares still trade at a 20% discount to the market, as improving fundamentals at the core business are clouded by recent portfolio moves. |
| TMO | Thermo Fisher Scientific was up on improved sentiment toward the health care sector. |
| WOSG.L | The fifth largest contributor was Watches of Switzerland (+29.5% +62 bps), the British dealer of luxury watches and Rolex's most important authorized dealer. Again, political developments helped sentiment after US tariffs on Swiss goods officially reduced to 15% (from 39%)—a move applied retroactively from mid-November 2025 that provides meaningful relief for Swiss watch exports. |
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