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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"European value fund delivered 16.9% in 2024 through concentrated portfolio of owner-led companies. Sold About You and Interactive Brokers on valuation concerns, added Spanish pharma Rovi and German telecom United Internet."
The Compound Interest Fund delivered 16.9% returns in 2024, driven by investments in About You, Chapters Group, Interactive Brokers, MTU, and PayPal. The fund maintains a concentrated portfolio of 13 companies focused on owner-led businesses in Europe and North America with defensible moats and strong balance sheets. Key portfolio changes included selling About You following Zalando's takeover offer and Interactive Brokers due to valuation concerns, while adding positions in Spanish pharmaceutical company Rovi and German telecommunications holding United Internet. The fund's investment philosophy centers on three criteria: capable and trustworthy management teams, understandable and defensible business models, and prices significantly below intrinsic value. With a ten-year investment horizon and intentionally broad mandate, the strategy adapts to market changes while maintaining focus on long-term compounding. The manager expects significant earnings growth across nearly all portfolio companies in 2025, supported by strong operational fundamentals and attractive valuations.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
High conviction evidenced by concentrated 13-position portfolio with named holdings and detailed position-specific analysis. The manager provides specific investment rationales for each major holding, discusses intrinsic value assessments, and demonstrates willingness to hold through volatility. Personal co-investment through additional fund share purchases reinforces conviction level.
Growth Outlook
The manager expresses mild optimism about portfolio companies' prospects, expecting significant earnings growth in 2025 and notable increases in intrinsic value. However, the letter lacks broader market commentary and focuses primarily on individual company fundamentals rather than market-wide opportunities.
Risk Appetite
The fund maintains a concentrated 13-position portfolio with 15.88% cash, indicating moderate risk appetite. The manager sold positions due to valuation concerns (Interactive Brokers) and added new positions selectively, suggesting a balanced but cautious approach to risk-taking.
Capital Deployment
Net neutral deployment activity with cash at 15.88%. The manager engaged in rotation by selling About You and Interactive Brokers while adding Rovi and United Internet positions. No significant change in overall cash levels indicated, representing portfolio rotation rather than net deployment or de-risking.
Forward Guidance
The manager demonstrates selective deployment bias, having added new positions in Rovi and United Internet while trimming overvalued holdings. The expectation of significant earnings growth across the portfolio suggests a mildly positive action bias for 2025.
Language Signal
Language is balanced with selective use of positive terms like 'outstanding companies,' 'attractive valuations,' and 'significant earnings growth' offset by cautious language around valuation concerns and operational challenges at Tucows. Overall tone is measured and analytical.
Perceived Risk
Limited risk discussion in the letter. The manager acknowledges operational challenges at Tucows and mentions valuation concerns that led to position sales, but does not elaborate on broader systemic or macro risks. Risk perception appears moderate and company-specific rather than market-wide.
Opportunity Density
The manager demonstrates selective opportunity identification, adding two new positions while maintaining focus on specific criteria. The ability to find attractive investments in Rovi and United Internet, combined with ongoing evaluation of ideas outside current focus, suggests moderate opportunity density in targeted markets.
Time Horizon
Explicitly permanent horizon with ten-year evaluation criteria for all investments. The manager states intention to invest for decades and emphasizes long-term compounding as the eighth wonder of the world. Fund structure and philosophy are designed around multi-decade investment periods with no urgency for thesis realization.
