| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | 4% |
Moon Capital Management generated a 4% return in the first half of 2026, underperforming the S&P 500's 9.6% gain as the market was driven primarily by AI-related stocks. The manager maintains only 10% technology exposure versus 39% for the index, expressing significant concern about the $1.8 trillion in AI capital expenditures planned by major tech companies through 2027. These investments have transformed capital-light, high-cash-flow businesses into capital-intensive operations with minimal free cash generation, raising questions about returns above cost of capital. The portfolio exited DaVita after a 174% gain over 3.5 years, as valuation normalization and flat volume growth reduced future opportunity. The manager added Zoetis at an attractive 11x earnings multiple, viewing temporary product cycle challenges as creating an entry point in a high-quality animal health franchise with strong competitive positioning, innovation capabilities, and secular growth tailwinds. The manager remains focused on selective opportunities in businesses with durable advantages trading at depressed valuations due to temporary setbacks.
Moon Capital Management focuses on acquiring high-quality businesses with durable competitive advantages at attractive valuations, particularly when temporary challenges create mispricings. The manager prioritizes long-term risk-adjusted returns over short-term relative performance, maintaining significant underweight to technology despite recent market leadership. The portfolio emphasizes businesses with strong cash generation, rational capital allocation, and defensible market positions, while avoiding areas where massive capital deployment creates uncertain return profiles.
Manager expects to continue finding selective opportunities in high-quality businesses trading at attractive valuations due to temporary challenges. The focus remains on companies with durable competitive advantages and strong cash generation, while maintaining caution around AI-related capital expenditures and their uncertain return profiles. The manager is comfortable underweighting technology relative to the S&P 500 and prioritizing risk-adjusted returns over relative short-term performance.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 16 2026 | 2026 Q2 | AMZN, BRK/B, DVA, GDDY, GOOGL, META, MSFT, SSNC, ZTS | AI, Animal Health, Buybacks, Capital Expenditures, healthcare, technology, valuation | ZTS | Moon Capital underperformed in H1 2026 with a 4% return versus the S&P 500's 9.6%, driven by significant underweight to AI stocks. The manager actively avoids major tech companies deploying $1.8 trillion in AI capex with uncertain returns. Portfolio activity included exiting DaVita after 174% gain and adding Zoetis at depressed 11x earnings, capitalizing on temporary weakness in high-quality animal health leader. |
| Jan 15 2026 | 2025 Q4 | AAPL, MOH, NVDA | Compounding, fundamentals, healthcare, Managed Care, Margins, Medicaid, value | MOH | Moon Capital initiated Molina Healthcare at $160, down from $300, viewing it as a mispriced Medicaid compounder with transitory margin pressure. Despite industry losses, Molina maintains 250bp MLR advantage over peers. Contractual rate resets should normalize margins, creating 2-3x upside potential as earnings power becomes evident. |
| Oct 10 2025 | 2025 Q3 | AMD, AMZN, GOOGL, IONQ, KO, META, MSFT, QBTS, QUBT, RGTI, WMT | AI, Bubble, fundamentals, risk, technology, Valuations, value | - | Moon Capital draws direct parallels between today's AI investment mania and the late 1990s dot-com bubble. Hyperscalers are spending hundreds of billions on AI infrastructure with largely hypothetical returns, driving valuations to unsustainable levels. The manager maintains disciplined value investing focused on fundamentals, the same approach that generated positive returns during the 2000-2003 correction. |
| Apr 7 2025 | 2025 Q1 | AAPL, AMZN, CI, CVS, FHN, GOOGL, GS, KKR, META, MSFT, NTB, NVDA, SYF, TSLA | Corrections, financials, healthcare, Trade Policy, value, volatility | - | Moon Capital outperformed in Q1 with 3.8% gains but fell to -2.1% year-to-date after April's correction. Manager uses volatility to add to quality positions while maintaining disciplined valuation approach. Extensive tariff analysis highlights policy uncertainty risks. Strategic 2024 sales created cash for current deployment opportunities. Long-term constructive outlook despite acknowledging inevitable market cycles. |
| Jan 8 2025 | 2024 Q4 | BRK-B, CVS, GS, KKR | Capital markets, financials, healthcare, technology, valuation, value |
CVS GS KKR |
Moon Capital delivered 27% returns in 2024 through value-focused stock selection, avoiding Magnificent Seven concentration. Manager liquidated CVS, Goldman Sachs, and KKR at fair value targets, drawing parallels to 1999 bubble conditions with elevated S&P 500 valuations. Maintains disciplined approach with cash ready for future opportunities when market declines create attractive entry points. |
| Jul 12 2024 | 2024 Q2 | AAPL, AMD, AMZN, GOOGL, INTC, META, MSFT, NTB, NVDA, TSLA | AI, Banking, Market Concentration, semiconductors, technology, value | NTB | Moon Capital delivered 13% first-half returns while avoiding AI speculation that drove market concentration. Added Bank of N.T. Butterfield at six times earnings - an offshore bank with 23% ROE, conservative balance sheet, and dividend potential to double from $1.76 to $2.80+ as bond portfolio matures over next two years. |
| Apr 26 2024 | 2024 Q1 | AAPL, AMZN, BTI, GOOGL, ITC.NS, META, MSFT, NVDA, PM, TSLA | earnings, Fed policy, Market Timing, rates, Tobacco, value | BTI | Moon Capital outperformed with 13% Q1 returns despite concerning market fundamentals where stock gains vastly exceeded earnings growth. The firm trimmed overvalued positions while adding deep value plays like British American Tobacco at 6x earnings with 16% cash yield. Fed rate cut expectations drive optimism though bond markets remain skeptical of projections. |
| Jan 26 2024 | 2023 Q4 | ALLY, BN, FI, FRFHF, GRBK, KKR, MBIN, META | Banking, contrarian, financials, Homebuilders, Quality, value | MBIN | Moon Capital's contrarian value strategy delivered 24% returns in 2023 by buying quality companies at discounted prices. Strong performance from homebuilders and financials defied conventional wisdom about interest rate sensitivity. Recent purchase Merchants Bancorp represents the approach: exceptional 30% book value growth, 25%+ ROE, yet trading at only 5x earnings. |
| Jul 19 2023 | 2023 Q2 | CNQ, FAF, FHN, MLNK | - | - | |
| Dec 1 2023 | 2022 Q4 | ABBV, CI, DVA, GRBK, LGIH, MCK | - | - | |
| Jul 10 2022 | 2022 Q3 | ALLY, SOBKY, SYF | - | - | |
| Jun 7 2022 | 2022 Q2 | META | - | - | |
| Jul 4 2022 | 2022 Q1 | 0A53LN, APPS, EPAM, FFX GR | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIManager expresses significant concern about AI capital expenditures, noting that Amazon, Alphabet, Meta, and Microsoft are expected to spend $1.8 trillion on AI infrastructure in 2026-2027. These investments have transformed high-quality, capital-light businesses into capital-intensive operations generating minimal free cash flow. Manager questions whether companies can generate adequate returns above their cost of capital on these massive deployments. |
Data Centers Cloud Capital Expenditures Free Cash Flow |
DialysisManager exited DaVita position after generating 174% total return over 3.5 years. While DaVita remains an exceptional operator with competitive advantages, the opportunity diminished after significant stock appreciation. Total dialysis treatment volume has been flat for six years, making this effectively a zero-growth business with reimbursement growth lagging inflation. |
Healthcare Reimbursement Buybacks Volume | |
Pet CareManager added Zoetis at an attractive valuation of less than 11x earnings, down from 30x historically. The animal health industry offers defensive characteristics with favorable competitive structure, lower R&D costs, and strong veterinarian relationships. Manager believes near-term product cycle challenges are temporary and the market is underappreciating the durability of Zoetis' portfolio and innovation engine. |
Animal Health Veterinary Innovation Valuation | |
GeopoliticalManager notes that much of market volatility can be traced to the conflict in Iran, but believes geopolitical events are rarely meaningful drivers of long-term investment returns. The manager states that as investors rather than speculators, they have the luxury of largely ignoring short-term market swings that accompany wars and military actions. |
Iran Volatility Risk | |
InflationInflation has been highly volatile, with May 2026 showing a 4.2% increase (largest monthly jump since 2023), followed by a 0.4% decline in June (largest monthly decline since April 2020). This erratic inflation data has led to erratic interest rate expectations, with markets shifting from debating Fed rate cuts to contemplating rate increases. |
CPI Fed Rates | |
| 2025 Q4 |
Small CapsForeign small caps dramatically outperformed US small caps in 2025, with Foreign Developed Small Caps returning +34.1% versus US Small Caps at +11.6%. The market rewarded lower-quality names over high-quality companies, creating challenges for quality-focused managers like Grandeur Peak. |
Foreign Developed Quality Dispersion |
ValueValue significantly outperformed growth in foreign small caps, with fund category results showing a 17.2 percentage point gap versus only 6.2 points in index data. The five-year disconnect between index and fund returns has widened dramatically, suggesting index returns understate the opportunity set in growth stocks. |
Growth Dispersion Index Opportunity | |
QualityThe market increasingly rewarded companies with weaker fundamentals, with the lowest-quality funds in Foreign SMID returning +38.7% versus +14.5% for highest-quality funds. This low-quality rally has persisted for five years, with lowest-quality funds outperforming by +10.3% annually. |
Fundamentals Speculation Outperformance | |
BiotechnologyUS Biotechnology had another very strong quarter building on Q3 momentum, but Grandeur Peak continues to underweight the space due to lack of quality. Their US exposure underperformed while ex-US investments generally performed well. |
Momentum Underweight Ex-US | |
AIThe firm sees considerable speculation and unsustainable valuations in quantum computing, blockchain, crypto, and metaverse companies that outperformed in 2025. They focus on semiconductors, AI integration into enterprise workflows, edge computing, and cybersecurity while remaining cautious toward consumer tech hardware. |
Speculation Quantum Enterprise Semiconductors | |
| 2025 Q3 |
AIManager draws extensive parallels between current AI investment mania and the late 1990s dot-com bubble. The four major hyperscalers are collectively spending hundreds of billions on AI infrastructure, with Microsoft alone expected to spend over $100 billion this year. Despite genuine technological potential, valuations have reached levels that far exceed realistic expectations, with companies like OpenAI valued at $500 billion while burning significant cash. |
Artificial Intelligence Hyperscalers Infrastructure Valuations Bubble |
ValueManager emphasizes disciplined value investing approach, avoiding overpriced market segments regardless of short-term underperformance. This discipline helped navigate the dot-com bubble successfully from 2000-2003 with cumulative positive 54% returns while the S&P 500 fell. The approach focuses on actual business fundamentals like earnings and cash flow rather than chasing speculative trends. |
Fundamentals Discipline Earnings Cash Flow Undervaluation | |
Risk AppetiteManager observes that investor attitudes toward risk have become reckless, similar to the late 1990s. Market fragility is evident as investor confidence can swing sharply based on emotion rather than analysis. The brief trade-war sell-off earlier this year demonstrated how quickly fear can grip markets, yet investors have largely dismissed risks except for fear of missing out on the next big thing. |
Market Fragility Emotion Fear Speculation Overconfidence | |
| 2025 Q1 |
Trade PolicyManager provides detailed analysis of Trump tariffs, estimating $3,500 annual cost increase per household based on Goldman Sachs analysis. Discusses uncertainty around timing and scope creating business caution, with potential for retaliation and supply chain disruptions. |
Tariffs Trade Uncertainty Inflation Policy |
ValueManager emphasizes focus on quality businesses at reasonable prices, using market volatility to add to underweighted positions. Sold overvalued positions in late 2024 at higher prices than current levels, maintaining disciplined approach to valuation. |
Valuation Quality Opportunistic Discipline Fundamentals | |
VolatilityManager discusses normal market corrections, noting S&P 500 averages 14% intra-year decline even in positive years. Emphasizes that corrections and bear markets are inevitable but temporary, with historical precedent of recovery. |
Corrections Bear Markets Cyclical Historical Recovery | |
| 2024 Q4 |
ValueManager emphasizes value-focused process and fair value calculations based on present value of cash flows. Multiple positions were liquidated when they reached or exceeded fair value estimates. The approach focuses on mathematical analysis rather than market timing or predictions. |
Valuation Fair Value Cash Flow Intrinsic Value Undervalued |
Capital MarketsSignificant discussion of Goldman Sachs investment banking operations and KKR's private equity business. Manager notes Goldman's leadership position in investment banking and expectations for M&A resurgence, while KKR demonstrated exceptional growth in assets under management from $170 billion to over $600 billion. |
Investment Banking Private Equity Asset Management M&A Fee Income | |
AIManager discusses Microsoft's planned $80 billion investment in data centers for artificial intelligence training. Notes that the Magnificent Seven tech companies are collectively reinvesting over 60% of operating cash flow into capital expenditures and R&D, questioning their reputation as capital-light businesses. |
Data Centers Capital Expenditures Technology Investment Cash Flow R&D | |
| 2024 Q2 |
AIAI has been the dominant investment theme driving market performance, with the Magnificent Seven AI-related stocks producing the S&P 500's returns while other stocks declined. The manager explains AI through machine learning concepts and notes the market's fixation on chip companies is masking broader market weakness. |
Machine Learning Semiconductors Graphics Processing Computing Power Nvidia |
Regional BanksThe manager added Bank of N.T. Butterfield, an offshore bank with strong presence in Bermuda and Cayman Islands. The bank generates high returns on equity through trust and wealth management services, maintains conservative liquidity, and trades at attractive valuations with potential for dividend increases. |
Offshore Banking Trust Services Wealth Management High ROE Dividend Yield | |
| 2024 Q1 |
TobaccoBritish American Tobacco represents a value opportunity trading at only 6x earnings despite generating robust free cash flows exceeding 16% yield. The company is successfully transitioning from traditional combustibles to reduced-risk products, with New Categories business growing 30% annually and turning profitable in 2023. BTI plans to use proceeds from ITC stake sales for share buybacks and debt reduction. |
Tobacco Dividends Buybacks Value Transformation |
RatesFederal Reserve's shift from rate hikes to expected cuts has driven market optimism, with FOMC predicting three quarter-point cuts in 2024. Interest rates are fundamental to asset valuations as they appear in the denominator of valuation formulas. Bond markets signal skepticism about Fed projections, with rate futures indicating bottoming around 3.75% in 2027 versus Fed's 2.6% median forecast. |
Rates Inflation Liquidity Volatility | |
EarningsFirst quarter stock returns significantly outpaced earnings growth, with S&P 500 earnings expected to increase only 2.4% versus initial projections of 5.9%. Excluding the Magnificent 7 tech giants, overall S&P 500 earnings are expected to decline for both Q1 and full-year 2024. This disconnect between price appreciation and earnings fundamentals highlights market inefficiency. |
Earnings Value Quality | |
| 2023 Q4 |
ValueMoon Capital focuses on buying valuable companies when stock prices don't reflect underlying business values, often leading to investments with little investor appetite. This contrarian approach led to successful investments in homebuilders and financial companies despite conventional wisdom suggesting they would struggle with higher interest rates. |
Contrarian Undervalued Discount Mispriced Fundamentals |
HomebuildersDespite higher interest rates and tighter lending standards, homebuilder stocks had a second straight year of substantial gains. A decade of underbuilding combined with early 2022 sell-offs created large valuation discounts. Green Brick Partners was purchased at $21 in early 2022 and reached over $50 after almost doubling in 2023. |
Housing Construction Underbuilding Residential Development | |
Community BanksMerchants Bancorp represents one of the best run banks with 30% annual tangible book value compounding over five years and 25%+ return on tangible equity. The company operates profitable niches in multifamily mortgage and mortgage warehousing with minimal interest rate and credit risk exposure. |
Banking Lending Mortgage Warehousing Agency |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jul 16, 2026 | Fund Letters | Moon Capital Management | ZTS | Zoetis | Drug Manufacturers - Specialty & Generic | Pharmaceuticals | Bull | New York Stock Exchange | Animal Health, Companion Animals, defensive, Innovation Pipeline, Livestock, pharmaceuticals, Pricing power, Product Lifecycle, Share Buybacks, Value, Veterinary Medicine | Login |
| Jan 15, 2026 | Fund Letters | Garrett Arms | MOH | Molina Healthcare, Inc. | Health Care | Managed Health Care | Bull | New York Stock Exchange | buybacks, managed care, margin normalization, Medicaid, Rate Resets | Login |
| Jan 8, 2025 | Fund Letters | Moon Capital Management | CVS | CVS Health Corporation | Health Care | Health Care Services | Bear | NYSE | capital allocation, Equity, Health Care Services, managed care, Medicare Advantage, Pbm, Pharmacy, Regulatory risk, turnaround, vertical integration | Login |
| Jan 8, 2025 | Fund Letters | Moon Capital Management | GS | The Goldman Sachs Group, Inc. | Financials | Investment Banking & Brokerage | Neutral | NYSE | asset management, Cyclical, Equity, financial services, investment banking, M&A, tangible book value, Value | Login |
| Jan 8, 2025 | Fund Letters | Moon Capital Management | KKR | KKR & Co. Inc. | Financials | Asset Management & Custody Banks | Bull | NYSE | asset management, AUM growth, C-Corp Conversion, Capital markets, Carried interest, Equity, Fee-Based Business, Insurance, private equity, Value | Login |
| Jul 12, 2024 | Fund Letters | Moon Capital Management | NTB | Bank of N.T. Butterfield | Financials | Regional Banks | Bull | NYSE | Bermuda, Cayman Islands, Conservative Banking, Dividend Growth, fee-based revenue, high ROE, Offshore Banking, Trust Services, Value, wealth management | Login |
| Apr 11, 2024 | Fund Letters | Moon Capital Management | BTI | British American Tobacco | Consumer Staples | Tobacco | Bull | NYSE | cash flow, deleveraging, dividend, E-cigarettes, Reduced-Risk Products, Share Buybacks, tobacco, transformation, Value | Login |
| Jan 26, 2024 | Fund Letters | Moon Capital Management | MBIN | Merchants Bancorp | Financials | Regional Banks | Bull | NASDAQ | Agency Lender, asset-light model, high ROE, insider ownership, Low Interest Rate Risk, Mortgage Warehousing, Multifamily Lending, regional banks, Value | Login |
| TICKER | COMMENTARY |
|---|---|
| GOOGL | In June, Berkshire Hathaway invested $10 billion in an Alphabet private equity placement, part of an $80 billion equity offering (later raised to $85 billion) Alphabet is using to help fund AI investments. At the end of June, approximately 10% of our stock portfolio was invested in technology sector companies (Alphabet, GoDaddy, and SS&C Technologies), compared with roughly 39% for the S&P 500. We currently own some Alphabet and have previously owned both Meta and Microsoft. But the extraordinary capital commitments these companies are making in an effort to win the AI race have fundamentally changed the economics of these businesses compared with just a few years ago. |
| GDDY | At the end of June, approximately 10% of our stock portfolio was invested in technology sector companies (Alphabet, GoDaddy, and SS&C Technologies), compared with roughly 39% for the S&P 500. |
| SSNC | At the end of June, approximately 10% of our stock portfolio was invested in technology sector companies (Alphabet, GoDaddy, and SS&C Technologies), compared with roughly 39% for the S&P 500. |
| DVA | During the second quarter, we exited our position in the kidney dialysis services company DaVita. While DaVita remains an exceptional operator with a well-established competitive advantage, we concluded that the future opportunity had become less attractive following the significant appreciation in the stock. Over our 3.5-year holding period, we generated a total return of approximately 174%, or roughly 35% annualized. We originally purchased shares at approximately $72 per share following a selloff triggered by the company's reduction in its 2023 guidance. At the time, the market was focused primarily on near-term volume concerns, while we believed investors were underestimating the durability of DaVita's cash generation. Based on the company's EBITDA outlook, we estimated free cash flow would exceed $1 billion annually, allowing us to purchase the business for less than 7x free cash flow, roughly half of its historical valuation. A key part of our thesis revolved around DaVita's ability to use its depressed valuation to create significant per-share value through share repurchases. This thesis played out well. While free cash flow expectations increased only modestly, DaVita resumed repurchases and retired a substantial amount of stock. The share count declined from approximately 93 million to 64 million during our ownership period, increasing earnings power from roughly $8.50 per share to more than $14 per share. However, the same factors that drove our strong return have reduced the future opportunity. DaVita is expected to generate approximately $1.1 billion of free cash flow this year against a market capitalization of roughly $14.9 billion. Unfortunately, DaVita's growth algorithm has become more challenging. After decades of expansion, total dialysis treatment volume has been roughly flat for the past six years. Excluding reimbursement increases, this is effectively a zero-growth business. The company has also acknowledged that reimbursement growth continues to lag inflationary pressures affecting its cost structure. |
| ZTS | We added one new stock to the portfolio last quarter, Zoetis. (Our average purchase price was about $73.20/share.) Zoetis is the world's largest pure-play animal health company. We have long viewed Zoetis as one of the highest-quality businesses in healthcare (albeit for mostly four-legged patients), and the company has generally been valued accordingly. However, temporary concerns around slower companion animal growth and increased competitive pressures created an opportunity to purchase the company at an attractive price. After trading above 30 times earnings for much of the past decade, Zoetis now has a P/E of less than 11x, a valuation we believe significantly understates the quality, durability, and long-term earnings power of the business. The animal health industry is attractive as it combines the defensive characteristics of healthcare investing with a more favorable industry structure than traditional pharmaceuticals. Within this landscape, Zoetis has established one of the strongest competitive positions in the industry. The company holds leading positions in major therapeutic categories, with a broad portfolio spanning hundreds of products across companion animals and livestock, along with a global commercial infrastructure that would be extremely difficult for competitors to replicate. Zoetis has consistently extended the life of its key franchises through innovation, including new formulations, expanded indications, and geographic expansion. The company's leading franchises in parasiticides, dermatology, and pain management provide a strong foundation for future growth. Zoetis also maintains one of the strongest innovation engines in animal health. At our purchase price, we were able to acquire a business with industry-leading margins, strong free cash flow generation, and a dominant competitive position for less than 11x earnings. Additionally, Zoetis' remaining $1.8 billion share repurchase authorization provides an attractive opportunity to significantly enhance per-share value at a time when the stock is trading at a depressed valuation. We believe Zoetis represents one of those opportunities: a high-quality company experiencing a period of slower growth rather than a permanent impairment of its competitive position. |
| BRK.B | In June, Berkshire Hathaway invested $10 billion in an Alphabet private equity placement, part of an $80 billion equity offering (later raised to $85 billion) Alphabet is using to help fund AI investments. |
| AMZN | During 2026 and 2027, Amazon, Alphabet, Meta and Microsoft are expected to spend roughly $1.8 trillion on AI-related capital projects. For some context, just five years ago those four companies collectively spent only $110 billion on capital expenditures, most of it directed toward assets that generated immediate economic returns. Less than one year ago, these businesses produced enough free cash flow to internally fund all of their AI investments. Today, that free cash flow has largely been exhausted. |
| META | During 2026 and 2027, Amazon, Alphabet, Meta and Microsoft are expected to spend roughly $1.8 trillion on AI-related capital projects. We currently own some Alphabet and have previously owned both Meta and Microsoft. But the extraordinary capital commitments these companies are making in an effort to win the AI race have fundamentally changed the economics of these businesses compared with just a few years ago. |
| MSFT | During 2026 and 2027, Amazon, Alphabet, Meta and Microsoft are expected to spend roughly $1.8 trillion on AI-related capital projects. We currently own some Alphabet and have previously owned both Meta and Microsoft. But the extraordinary capital commitments these companies are making in an effort to win the AI race have fundamentally changed the economics of these businesses compared with just a few years ago. |
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