| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | 14.6% |
| 2025 |
|---|
| 14.6% |
Drew argues that markets have reached dangerous valuation extremes with investors giving 100% faith to continued levitation regardless of fundamentals. The technology sector now represents 35% of the S&P 500 trading at 43x earnings versus financials at 19.6x, creating stark disparities. He draws parallels to the late 1990s tech bubble, noting AI investments have massive costs with ROI years away but are valued as having infinite promise. Labor market cooling with 17% decline in job openings and services sector contraction for four months prompted Fed rate cuts that risk inflation from tariff-induced demand constraints. The Strategic Value portfolio returned 14.6% versus 11.6% benchmark through stock selection despite low tech exposure. Portfolio changes included liquidating Federated Hermes after 60% gain, swapping LyondellBasell for loss harvesting, and adding consumer staple and staffing positions as defensive plays. Goldman Sachs expects only 3% annualized S&P returns over the next decade, favoring alpha generation through value-focused stock selection over broad market beta.
Markets are extremely overvalued with technology sector trading at unsustainable multiples reminiscent of late 1990s bubble, while value investing and stock selection will become increasingly important as broad market returns moderate over the next decade.
The manager expects continued market strength but warns of valuation extremes. Goldman Sachs view of 3% annualized returns over next decade may benefit value-focused stock selection. The manager remains committed to navigating uncertain times with discipline and focus on long-term value.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Oct 13 2025 | 2025 Q3 | BRK-A, FHI, LYB, OXY | AI, Labor, rates, technology, valuation, value |
FHI US LYB US OXY US |
Markets have reached dangerous valuation extremes reminiscent of the late 1990s tech bubble, with AI investments valued at unsustainable multiples despite massive costs and distant ROI. Labor market cooling and Fed rate cuts risk inflation while Goldman Sachs projects only 3% annual S&P returns ahead, favoring disciplined value investing and stock selection over broad market exposure. |
| Jul 25 2025 | 2025 Q2 | CPRI, LYB, PFE | Bubble, Credit Stress, inflation, rates, Risk Appetite, Trade Policy, value | - | Strategic Value portfolio outperformed benchmarks despite conservative positioning as markets surged 25% from April lows driven by retail euphoria. Manager warns of bubble conditions with ineffective macro indicators and mounting fiscal risks, positioning defensively in quality value stocks with strong cash generation while monitoring bond market signals for potential trouble ahead. |
| Apr 14 2025 | 2025 Q1 | - | Cash Position, Fed policy, inflation, Market Correction, tariffs, Trade Policy, value | - | Historic tariff-driven market selloff creates long-awaited value opportunities as S&P 500 loses $5.4 trillion. Manager deploying cash reserves accumulated during stretched valuations into quality businesses at reasonable prices. Trade policy uncertainty poses stagflation risks but underlying economy remains robust. Correction viewed as overdue reset enabling disciplined value investing approach. |
| Dec 31 2024 | 2024 Q4 | ABBV, CPRI, DAL, TPR | Fed policy, Government Spending, inflation, Market Sentiment, Trade Policy, valuation, value | CPRI | Delivered 17.2% returns through disciplined value investing despite growth-dominated markets. Exited positions at fair value while adding to underperforming names with upside potential. Concerned about extreme US valuations, leveraged ETF risks, and inflationary policy mix. Positioned for business-friendly regulatory changes under new administration, particularly M&A environment improvements. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q3 |
AIAI continues to compel investors to buy into technology regardless of costs or potential for adequate returns. The manager draws parallels to the late 1990s tech boom, noting that AI promises to change information usage and displace workforce portions, but costs are massive and ROI is years away while valued as if having infinite promise. |
Technology Valuation Bubble |
ValueThe manager emphasizes stock selection and long-term value investing, noting that Goldman Sachs believes alpha will be more available than beta as stock selection becomes more meaningful. The portfolio focuses on companies with significant longer-term value relative to stock price. |
Stock Selection Alpha Undervalued | |
StaffingAdded a new position in a global staffing business trading at recession-level multiples, predominantly focused on blue-collar workforce. This business should be more immune to AI fears and has total yield over 11% combining dividends and stock repurchases. |
Blue Collar Recession Yield | |
| 2025 Q2 |
Trade PolicyThe manager discusses punitive tariffs by the world's largest economy aimed at realigning global trade balance, which incited the single largest two-day selloff since early pandemic. China responded with reciprocal tariffs, creating new global trade barriers that central banks are responding to with economic stress measures. |
Tariffs Trade War China Global Trade Economic Stress |
Credit StressUS credit rating was downgraded by Moody's joining S&P and Fitch on concerns about government indebtedness and inability to manage fiscal deficits. The US interest bill as percentage of tax revenue is fourth highest globally at 17.5%, with projections showing almost one dollar in four of tax income going to interest by 2035. |
Credit Rating Fiscal Deficit Interest Expense Government Debt Bond Market | |
Risk AppetiteDespite concerning geopolitical events, retail investors embraced buy-the-dip mentality with over $70 billion in inflows year-to-date, much in volatile crypto and AI-linked businesses. Professional investors are being forced back into markets for fear of missing returns, creating conditions resembling a euphoric bubble. |
Retail Inflows Buy The Dip Bubble Professional Investors Market Rally | |
RatesThe Federal Reserve maintained restrictive interest rates despite global central banks easing conditions. Today's interest rate levels match the period before the Great Financial Crisis, though the critical difference is the size of the nation's debt burden both now and in years ahead. |
Federal Reserve Interest Rates Central Banks Debt Burden Great Financial Crisis | |
| 2025 Q1 |
Trade PolicyThe Trump administration has deployed aggressive tariff strategies globally, including a blanket 10% duty on all imports and 34% on Chinese goods. This represents the largest tax increase since 1968 and has triggered historic market selloffs. The administration aims to rebalance trade deficits but faces risks of global trade war and economic disruption. |
Tariffs Trade War China Inflation Recession |
InflationTariffs are creating mounting inflationary pressures, with one-year inflation swaps reaching 3.07%. Goldman Sachs projects core PCE inflation could reach 3.5% by end of 2025. The measures represent a tax hike on US households and businesses, though longer-term swaps suggest eventual economic cooling may reduce inflation. |
PCE Consumer Prices Tax Hike Economic Cooling | |
RatesGoldman Sachs economists now predict three Fed rate cuts this year, up from two previously, due to increased tariff risks. Fed Chair Powell faces the difficult choice between supporting economic activity through rate cuts or fighting inflation by holding firm. The Fed's March projections show median PCE inflation at 2.7% for 2025. |
Fed Cuts Powell Monetary Policy Economic Activity | |
ValueThe manager maintains focus on securities not priced for perfection, avoiding growth stocks trading at stretched valuations. Market corrections create opportunities to buy meaningful businesses at reasonable prices. The portfolio has maintained cash overweight positioning to capitalize on emerging opportunities as valuations compress. |
Valuations Cash Position Market Correction Opportunities | |
| 2024 Q4 |
ValueManager maintains value investing discipline despite market focus on growth at any price. Exited Delta Airlines and AbbVie at fair value estimates while adding to underperforming positions with significant promise relative to full value calculations. |
Valuation Intrinsic Value Undervalued Fair Value Fundamentals |
InflationConcerns about inflationary pressures from proposed policies including lower interest rates, increased spending, and restrictive trade policies. Fed lowered rates 100bps despite inflation above 2% target, creating potential for price inflation resurgence. |
Price Inflation Monetary Policy Fed Policy Interest Rates Trade Policy | |
Trade PolicyAnticipates more restrictive trade policies under new administration which could contribute to inflationary pressures. Manager expects changes in regulatory and spending approaches that may be more business-friendly. |
Tariffs Trade Restrictions Regulatory Changes Business Policy Administration |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 13, 2025 | Fund Letters | Andrew T. Anton | FHI US | Federated Hermes, Inc. | Financials | Asset Management | Bull | NYSE | asset management, buybacks, capital allocation, compounding, dividends, growth, valuation | Login |
| Oct 13, 2025 | Fund Letters | Andrew T. Anton | LYB US | LyondellBasell Industries N.V. | Materials | Chemicals | Bull | NYSE | cash flow, Chemicals, energy, M&A, recovery, valuation, Value | Login |
| Oct 13, 2025 | Fund Letters | Andrew T. Anton | OXY US | Occidental Petroleum Corp. | Energy | Integrated Oil & Gas | Bull | NYSE | balance sheet, energy, FCF, M&A, oil, Re-rating, valuation | Login |
| Dec 31, 2024 | Fund Letters | Hourglass Capital | CPRI | Capri Holdings Limited | Consumer Discretionary | Textiles, Apparel & Luxury Goods | Bull | NYSE | Affordable Luxury, fashion, Luxury goods, M&A, Regulatory Overhang, retail, Special Situation, turnaround, Value | Login |
| TICKER | COMMENTARY |
|---|---|
| FHI | I liquidated our position in Federated Hermes (FHI), a provider of asset management products, after the company exceeded my long-term valuation target. Federated provided a return of over 60% from our initial purchase in 2023. |
| LYB | I swapped our long-held position in LyondellBasell (LYB) in late August into a similar chemical manufacturer to harvest the loss we incurred as a result of the protracted decline in ethylene and propylene demand and pricing. |
| BRK-A | This thesis was recently supported by the Berkshire Hathaway acquisition of the OxyChem business from Occidental Petroleum for $9.5 billion. Even at 95 years old, Warren Buffet is still hunting for value! |
| OXY | This thesis was recently supported by the Berkshire Hathaway acquisition of the OxyChem business from Occidental Petroleum for $9.5 billion. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
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