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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Deep value fund targeting consolidation plays and banking compounders underperformed in Q1 2025 despite repositioning toward higher-quality businesses. Portfolio trades at 12.8% earnings yield with 14% projected growth, focused on distribution, construction finance, and serial acquirers using leverage buyout strategies."
The Bonhoeffer Fund returned -3.4% net in Q1 2025, underperforming benchmarks as the manager continued repositioning toward higher-quality, faster-growing companies in temporarily depressed sectors. The portfolio maintains a deep value orientation with a weighted average earnings yield of 12.8% and EV/EBITDA of 3.4x, while targeting companies with combined growth rates and earnings yields of 30-40%. Key themes include distribution companies (54% of portfolio), real estate/construction/finance (50%), and public leverage buyouts (43%) focused on consolidation strategies. The manager emphasizes banking compounders with 15%+ EPS growth rates purchased at below-average multiples, representing 20% of the portfolio. Geographic exposure shifted to 59% US, 11% Canada, with the remainder in UK, Latin America, and South Korea. Despite near-term underperformance, the manager believes the fund holds its highest-quality businesses ever, with persistent discounts as markets fail to recognize operational improvements. New investments target banks, distributors, logistics, housing, and specialty finance with strong return profiles.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
High conviction evident through detailed case studies, specific return targets (30-40% combined growth and yield), concentrated themes, and strong belief in portfolio quality improvements. Manager provides extensive quantitative analysis and maintains clear investment criteria despite near-term underperformance.
Growth Outlook
Manager expresses cautious optimism about the opportunity set, identifying new industries and opportunities while noting persistent discounts. However, acknowledges market failure to recognize improvements and near-term underperformance, resulting in mildly positive but restrained outlook.
Risk Appetite
Portfolio shows moderate risk-on positioning through continued selling of slower-growth firms and purchasing faster-growing companies in depressed sectors. Manager is actively deploying capital into new opportunities while maintaining focus on quality businesses, indicating selective but constructive positioning.
Capital Deployment
Moderate deployment activity through continued selling of slower-growth firms and purchasing faster-growing companies. Manager is actively identifying opportunities in new industries and adding to existing themes, though specific cash level changes not disclosed. Selective but ongoing deployment evident.
Forward Guidance
Manager continues to identify and analyze new opportunities across multiple industries, with clear intention to add faster-growing durable companies. Forward guidance shows active deployment bias with specific targets for growth rates and earnings yields, though tempered by market recognition challenges.
Language Signal
Language shows net positive bias with terms like 'highest quality businesses', 'durable', 'attractive valuations', and 'opportunities'. However, this is balanced by acknowledgment of 'persistent discounts', 'market fails to realize', and underperformance, resulting in mildly positive language signal.
Perceived Risk
Moderate risk perception with acknowledgment of operational and financial leverage risks in banking holdings, regulatory consent orders, and market recognition challenges. Manager identifies specific risks around loan growth, efficiency ratios, and acquisition opportunities while maintaining measured approach to risk management.
Opportunity Density
Good opportunity density with manager identifying opportunities across multiple new industries including banks, natural resource royalties, distributors, logistics, housing, and specialty finance. Specific examples provided across themes with detailed analysis, suggesting selective but meaningful opportunity set.
Time Horizon
Long-term patient capital approach evident through focus on compounding businesses, five-year forward EPS multiples, and detailed multi-year DCF analyses. Manager emphasizes durability, recurring revenues, and businesses that can compound value over time, indicating patient investment horizon.
