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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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LMN Capital 2024 Q2 Investor Letter | Buyside Digest

Back to Fund Profile (LMN Capital)

Primary Source Intelligence • Q2 2024 Letter Analysis

LMN Capital Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, LMN Capital. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

Annualized+10.8%

Digest Analysis

Quick Take

"Added MTU Aero Engines for aerospace duopoly exposure and re-entered Femsa post-simplification. Portfolio of 11 quality businesses positioned for significant profit growth in 2024 with abundant opportunities visible."

Executive Summary

LMN Capital's Compound Interest fund delivered 0.5% returns in H1 2024, bringing annualized returns since inception to 8.7%. The fund maintains a concentrated portfolio of 11 companies focused on owner-managed businesses in Europe and North America. Key additions included an opportunistic investment in Aareal Bank's AT1 bond, capitalizing on market stress around US commercial real estate exposure to generate over 26% returns. The manager also added MTU Aero Engines, benefiting from duopoly dynamics in aircraft engine manufacturing and decades of predictable aftermarket revenues. Mexican holding company Femsa was re-added following its Heineken stake sale and focus on Latin American growth opportunities. The fund operates with minimal cash at 1.09% and maintains a long-term investment horizon, adapting style to market changes while preserving the core focus on quality businesses with defensible moats. The manager expects significant profit increases across portfolio companies in 2024 despite strong index performance creating abundant opportunities.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

78%

CautiousHigh

High Conviction (78%)

High conviction evidenced by concentrated 11-position portfolio with detailed, specific analysis of individual holdings. Manager provides extensive fundamental analysis of Aareal and MTU with specific financial metrics, risk assessments, and multi-year thesis development. The 45-year investment horizon and willingness to make opportunistic investments during market stress demonstrates strong conviction in the approach.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The manager expresses constructive optimism about finding opportunities despite acknowledging market stress in specific sectors like commercial real estate. Language includes 'many exciting opportunities to invest' and expectations for 'significant increases' in portfolio company profits, but this is balanced with recognition of sector-specific challenges.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

Portfolio maintains low cash at 1.09% indicating full deployment, but the manager demonstrates selective risk-taking through opportunistic bond investments rather than aggressive equity deployment. The addition of three new positions shows moderate risk appetite while maintaining concentrated positioning.

Capital Deployment

25%

De-riskingDeploying

De-risking (25%)

Moderate deployment activity with three new positions added (Aareal bond, MTU Aero Engines, and Femsa re-entry) while maintaining very low cash at 1.09%. The activity represents selective deployment rather than aggressive capital deployment, as one position (EQS) was also exited during the period.

Forward Guidance

30%

CautiousExpansionary

Cautious (30%)

Manager expresses clear intention to continue finding and deploying into attractive opportunities, stating 'I currently see many exciting opportunities to invest.' However, the approach remains selective and patient rather than aggressively deploying, consistent with the long-term investment philosophy.

Language Signal

35%

BearishBullish

Bearish (35%)

Language is predominantly opportunity-focused with terms like 'exciting opportunities,' 'attractive returns,' and 'significant increases' in profits. However, this is balanced with acknowledgment of 'stress situations' and 'teething troubles' in specific investments, creating a measured rather than overwhelmingly bullish tone.

Perceived Risk

35%

Low RiskElevated

Moderate Risk (35%)

Manager acknowledges specific risks including commercial real estate stress, aircraft engine teething problems, and operational changes with fund structure transition. However, risks are discussed as manageable and temporary rather than systemic threats, with detailed analysis showing why current stress situations are not extreme.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

Manager explicitly states 'I currently see many exciting opportunities to invest' despite good performance of leading indices. The addition of three new positions and detailed analysis of multiple investment opportunities suggests a rich opportunity set, though selectivity remains important given the concentrated approach.

Time Horizon

90%

Short-TermLong-Term

Decade+ (90%)

Extremely long-term orientation with manager stating explicit aim to invest for the next 45 years. Discussion of decades-long revenue streams from aircraft engines, permanent capital approach, and willingness to hold through volatility demonstrates maximum patience. The fund structure and philosophy are built around permanent capital and compound returns over decades.