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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Manager holds concentrated positions in hated cable/telecom names trading at extreme discounts while maintaining winners Millicom and Garrett Motion despite material appreciation. Charter Communications trades at ~50% forward free cash flow yield with bonds near par, suggesting 2-4x equity upside."
Brennan Asset Management's Q2 2026 letter focuses on the discipline required to hold winners and add to hated names. The manager sees broad US markets trading at extreme valuations (Shiller P/E ~41x) with geopolitical risks underpriced, while AI spending of $700-$800 billion juices returns but raises sustainability questions. The portfolio's largest winners, Millicom and Garrett Motion, have appreciated materially but manager believes significant upside remains as Colombian margin expansion and industrial/EV revenue drive free cash flow growth. Conversely, Charter Communications and Liberty Capital have struggled but manager added to both, viewing CHTR's ~50% forward free cash flow yield as incongruous with bonds trading near par and seeing 2-4x upside potential. Liberty Capital's Alaska cable business appears insulated from competitive threats and manager believes odds of value-destructive intra-Liberty deals have declined. DCC faces a likely take-under by KKR/ECP at prices well below intrinsic value. The manager acknowledges being wrong on cable competition but emphasizes that holding winners through volatility and adding to mispriced names at inflection points drives long-term returns, even if this approach causes periodic underperformance.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
High conviction based on concentrated portfolio with detailed, sized position discussion and willingness to add through volatility. Manager names and extensively analyzes 7 core positions (TIGO, GTX, CHTR, GCI, LILAK, DCC, CODI) with specific financial projections and position sizing actions. Explicitly added to CHTR after 25% decline, added to GCI after 35% decline, and added to CODI. Provides detailed LBO models for DCC, multi-year free cash flow projections for TIGO and GTX, and pro-forma analysis for CHTR post-Cox deal. States 'we have been impressed' and 'we believe there could be considerable opportunity' with conviction language. However, also acknowledges being wrong on CHTR and notes 'we must be conscious of total position sizing,' preventing score from reaching 0.85+. The detailed financial analysis, willingness to add through drawdowns, and specific position sizing commentary support high but not extreme conviction.
Growth Outlook
Manager expresses clear concern about market conditions. S&P 500 trading at Shiller P/E of ~41x (2.4x long-run average) near highest levels in 145-year history. Geopolitical risks (Iran war, Strait of Hormuz closed) and AI spending sustainability questions are not priced into markets. Manager states 'geopolitical and valuation concerns do not appear to be priced into broader US market prices' and notes 'we see fewer pockets of value, and most are outside the US.' Acknowledges AI spending juices economy but suspects 'even minor disappointments here could drive substantial downside.' This is cautious language about market-wide conditions with specific warnings about valuation extremes.
Risk Appetite
Manager is selectively adding to deeply discounted positions (CHTR, GCI, CODI) while maintaining large winners (TIGO, GTX) despite volatility. Added to CHTR after 25% Q1 decline and continued adding after Q2 weakness. Added to GCI after 35% decline following terminated LILAK deal. However, also sold 'a good portion' of PTSB position, suggesting selective risk management. Portfolio is concentrated in hated, volatile names but manager is deploying capital into specific opportunities rather than broad risk-on positioning. This reflects selective risk appetite in targeted situations rather than aggressive across-the-board deployment.
Capital Deployment
Moderate deployment activity with selective additions offset by one notable sale. Manager explicitly added to three positions: CHTR (after Q1 and Q2 declines), GCI (after 35% decline post-LILAK termination), and CODI. However, also sold 'a good portion' of PTSB position during Q2. No cash level data provided, but the pattern of adding to multiple deeply discounted positions while trimming one position suggests net deployment. The additions were made into significant price weakness (CHTR down 25% in Q1, GCI down 35%), indicating opportunistic deployment rather than aggressive across-the-board capital deployment. Score reflects selective but meaningful deployment activity.
Forward Guidance
Manager signals selective deployment bias but with significant hedging. States 'we have and will make selective sales for better risk/reward opportunities' and notes adding to CHTR, GCI, and CODI. However, also acknowledges 'awaiting further confirmation that the business is stabilizing could prevent us from throwing good money after bad and this could be worth the price of higher prices for any future purchases' regarding CHTR. On GCI, notes 'few catalysts outside consummating an attractive transaction' and acknowledges 'unclear when this sentiment changes (if ever)' for cable names. This is mildly positive action bias tempered by significant uncertainty about timing and outcomes.
Language Signal
Language is mixed with notable bearish framing on markets but bullish framing on specific positions. Bearish language dominates macro discussion: 'universally hated,' 'deeply unpopular,' 'exceptionally cheap,' 'hated sectors,' 'horror of horrors,' 'mispriced,' 'underpriced,' 'extreme valuations,' 'substantial downside.' However, bullish language appears in position-specific discussions: 'considerable upside,' 'stellar returns,' 'fantastic,' 'compelling,' 'attractive,' 'strong visibility,' 'material improvement.' The letter's title references being 'pulled back in' (negative framing) and manager acknowledges being 'very wrong' on CHTR. Overall, bearish language slightly outweighs bullish, particularly in market-level commentary, though specific positions receive constructive framing.
Perceived Risk
Manager perceives elevated risk across multiple dimensions with specific, detailed discussion. Geopolitical risk discussed extensively: Iran war with Strait of Hormuz closed, daily bombings, unclear exit strategy, and inflation implications. Market risk flagged with Shiller P/E at ~41x near 145-year highs. AI spending sustainability risk explicitly noted: 'we suspect even minor disappointments here could drive substantial downside.' Competition risks detailed for cable sector from fixed wireless, fiber, and Starlink. Manager acknowledges being 'very wrong' on CHTR competitive dynamics and notes 'it is possible we could continue to be wrong.' Uses phrases like 'material downside,' 'substantial downside,' 'considerable uncertainty,' and 'exceptionally hard.' However, stops short of systemic crisis warnings or tail risk language, keeping score below 0.85. The breadth and specificity of risk discussion across macro, sector, and position levels support a high perceived risk score.
Opportunity Density
Manager characterizes opportunity set as sparse and requiring selectivity. Explicitly states 'we see fewer pockets of value, and most are outside the US, or are involved with some special situation or simply reside in truly hated sectors.' Notes GCI CEO said they 'looked at multiple deals but passed given the unrealistic valuation expectations of sellers (particularly private equity owners)' and that it was 'far better to sit tight rather than consummate a poor transaction.' Manager is finding opportunities but describes them as concentrated in hated/unpopular areas rather than broad-based. The emphasis on patience, selectivity, and waiting for private equity sellers to face pressure suggests a constrained rather than abundant opportunity set. However, manager is still finding enough to deploy capital into multiple positions, preventing score from falling below 0.30.
Time Horizon
Multi-year thesis horizon with specific 2028-2030 projections but some catalyst dependency. Manager provides detailed 2028 free cash flow projections for TIGO and GTX, 2030 revenue targets for GTX industrial/EV business, and pro-forma 2027-2029 analysis for CHTR. Discusses holding winners through volatility and notes 'the best way to earn 3 times your investment is to avoid selling after it doubles in value.' However, also references near-term catalysts: Cox deal closing 'mid-to-late August,' PTSB shareholder vote 'July 30,' CHTR resuming buybacks 'in the fourth quarter,' and DCC takeover timeline. The combination of multi-year financial projections and willingness to hold through drawdowns suggests 2-4 year thesis timeframe rather than permanent capital horizon. Manager watches quarterly results (discusses Q1 and Q2 CHTR prints in detail) but frames decisions around multi-year value realization.