| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | 0% | 0% |
| 2024 |
|---|
| 23.0% |
Moon Capital Management's Q4 2025 letter emphasizes the disconnect between alarming headlines and market performance, as the S&P 500 delivered positive returns despite geopolitical tensions, trade wars, and recession fears. The manager argues that earnings growth of approximately 13% drove market appreciation, reinforcing that fundamentals matter more than narratives over time. The firm recently initiated a position in Molina Healthcare at $160 per share, down from $300 six months prior, viewing it as a mispriced compounder experiencing transitory margin pressure. Molina serves 5.6 million Medicaid members and continues generating profits despite industry-wide losses, with medical loss ratios running 250 basis points better than peers. The manager sees 2-3x upside potential as Medicaid rate resets normalize margins through contractual mechanisms requiring actuarial soundness. The investment thesis reflects the firm's philosophy of focusing on business fundamentals during periods of uncertainty, when patient capital allocation typically creates the most wealth.
Focus on business fundamentals over market narratives, as earnings remain the primary driver of stock prices over time, with patient capital allocation during periods of uncertainty creating long-term wealth.
The manager expects Medicaid margins to normalize over time due to contractual rate reset mechanisms, with Molina positioned to benefit from its operational outperformance. Long-term earnings power is substantial, with the company potentially generating over $30 in normalized EPS at target margins.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| 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 |
|---|---|---|
| 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 |
|---|---|---|---|---|---|---|---|---|---|---|
| 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 |
|---|---|
| AAPL | Apple Inc. represents 1.6% of company owned with cost basis of $6,255 million and market value of $61,962 million, providing $280 million in 2025 dividends. |
| MOH | We recently initiated a position in Molina Healthcare (MOH), which we believe is a mispriced compounder experiencing transitory margin pressure. The stock traded as high as $300 per share only six months ago; we purchased our shares at approximately $160 in late December. Molina provides managed healthcare services primarily to low-income families and individuals via Medicaid, Medicare and the various state marketplaces established by the 2010 Affordable Care Act (Obamacare). The company is an example of a situation in which the stock price decline has been vastly exacerbated by negative political news—and mostly disconnected from the company's actual business fundamentals. In our view, the market's reaction extrapolates short-term pressures indefinitely and underappreciates both the structural dynamics of Medicaid rate resets and Molina's long track record of operational outperformance versus peers. We see a credible path to 2–3x upside over the next several years as margins normalize and earnings power becomes evident. |
| NVDA | AI bellwether NVIDIA's very strong set of earnings in late November helped the AI theme re-assert its dominance when investors breathed a sigh of relief following the results. |
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