Gold experienced its best annual return since 1979 driven by seemingly insatiable appetite, entering bubble territory. The precious metal drove the Small Resources index to a 45.3% increase in the December half. Mining contractor Macmahon Holdings renewed a key Queensland resources contract whilst announcing new wins in iron ore and renewables markets, contributing positively to performance.

The year-end review reflects a contrarian, special-situations-driven value approach amid significant underperformance versus the S&P 500. The portfolio focuses on distressed equities, REIT liquidations, take-privates, and idiosyncratic balance sheet mispricings where catalysts such as sales processes, buyouts, or capital returns can unlock value. Value investing is framed as lumpy and uncomfortable, with long-term success dependent on patience, downside analysis, and selective conviction rather than benchmark alignment.

Major investments in chemical distributors Azelis and IMCD during industry downturn. Both are global value-added distributors with asset-light business models, strong free cash flow generation, and serial acquisition capabilities. Current chemical industry weakness creates attractive entry valuations. Anti-cyclical investment strategy targeting unloved sectors with attractive valuations. Portfolio positioned in companies trading at significant discounts to historical levels while maintaining high-quality business models and strong fundamentals. United Internet's 5G network buildout creating strategic positioning for industry consolidation. Company now positioned as decisive player in potential German telecom consolidation from 4 to 3 network providers, with significant synergy opportunities.

The report discusses the continued global race to scale artificial intelligence capabilities, emphasizing capital intensity in semiconductors, data centers, and energy infrastructure as structural drivers of corporate investment. Management highlights the migration of value from hardware build-out toward software monetization, while warning that elevated equity valuations and geopolitical fragmentation increase dispersion across regions and sectors. Portfolio positioning favors globally competitive companies with durable pricing power and exposure to long-term innovation cycles rather than cyclical beta.

The letter extensively discusses the AI investment boom following ChatGPT's arrival, comparing it to the dot-com bubble. Big tech is spending an estimated $400 billion in 2025 on AI infrastructure, with $3 trillion expected through 2028. The concentration risk is highlighted as the Magnificent Seven tech companies represent 35% of the S&P 500 and 30% of all capex.

The client letter reviews a volatile but resilient market environment shaped by tariffs, AI enthusiasm, moderating inflation, and shifting leadership across asset classes. Portfolio positioning emphasizes discipline, valuation awareness, and diversification, with increased focus on income, gold, and selective equity exposure as growth slows. Macro awareness is positioned as essential for navigating late-cycle dynamics and preserving capital.

RD Capital Partners focuses on permanent capital, long-term ownership, and compounding through control, liquidity, and operational discipline. The letter highlights a strategic shift toward deleveraging, recurring cash flows, and durable businesses capable of withstanding stress. Permanence remains attractive as patient capital exploits mispricing and builds value over decades.

Stone Ridge discovered significant untapped natural gas reserves in Arkansas' Fayetteville Shale through disciplined testing on 60,000 acres of undeveloped land. The discovery increased expected lifetime revenue from $10 billion to $15 billion, demonstrating the value of technological improvements and cost reductions in drilling and completion. Longtail Re executed a landmark $1.4 billion retrospective reinsurance transaction with Everest Group, growing assets to over $6 billion. The firm has delivered 20% annualized ROE since inception, focusing on selective legacy transactions while maintaining core prospective quota share business. Bitcoin serves as a critical tool for human rights activists and populations under authoritarian regimes, providing uncensorable money and financial freedom. The letter highlights bitcoin's role in supporting Venezuelan opposition leader María Corina Machado and its importance for financial sovereignty in countries with currency devaluation. Stone Ridge Energy has purchased almost $11 billion of energy assets through proprietary securitizations, achieving over 20% annual returns with low volatility. The firm operates 5,596 wells powering four million American families and is positioned to become a top three U.S. hydrocarbon producer.

Significant focus on AI infrastructure including NVIDIA DGX systems, AI workstations, and AI server testing. The organization is actively reviewing AI hardware and has multiple AI-related products in their testing pipeline. Extensive coverage of data center infrastructure including tours of Equinix facilities, data center testing equipment, and data center-focused content production. This represents a core focus area for the organization. Major investment in network testing capabilities including 800Gbps NICs, network security testing, and plans to expand network testing in 2026. The organization has made substantial investments in networking test equipment despite lack of ad revenue from this segment.

The update focuses on long-term value creation through operational improvement, strategic capital allocation, and hands-on ownership in private businesses. Returns are driven by cash flow growth, governance enhancements, and disciplined exit timing rather than leverage. Private investing is framed as an active process of compounding intrinsic value away from public market volatility.

The letter reiterates a global value strategy focused on mispriced securities driven by behavioral inefficiencies and cyclical pessimism. Markets are described as narrowly led, creating opportunities in overlooked sectors and geographies with strong balance sheets. Value is positioned for mean reversion as fundamentals and earnings power reassert themselves.

The letter examines climate change through an investment lens, challenging consensus views and focusing on economic impacts, incentives, and technological solutions. It highlights opportunities arising from adaptation, energy efficiency, and innovations such as direct air capture that could transform carbon from a liability into an asset. Climate is framed as a long-term thematic driver shaping capital allocation across energy, infrastructure, and industrial systems.