OMAHA - The first Saturday in May brings committed compounders and shareholders from all over the world to Nebraska for the Berkshire-Hathaway Annual Meeting. 2026 marks the first year with new CEO Greg Abel leading the conglomerate. Throughout the Business Review and Question & Answer Abel showed an impressive command of the entirety of the sprawling operations, commitment to the culture, and an eye for detail.

Below we offer our Top 6 Takeaways from the meeting:

1. Technology

Abel offered one of the most rational AI and Technology strategies I have heard from a CEO. The explanation of a “narrow AI” strategy to enhance operations and not replace human talent and judgement sets the initiatives up for more attainable success. Coming into the meeting, I was skeptical of the opportunity for further operational efficiency gains given that Abel has been overseeing the non-insurance operating businesses for many years already. Using GEICO as a model to learn, making the reinvestment decisions to prioritize technology may be game changers for many of these businesses. Abel believes that technology and AI will power the “step-change” that the BNSF railroad needs to catch up with peer operating margins.

2. Industrial Businesses

I stand by my observation published in Barron’s last week that Berkshire is the ultimate “HALO” (Heavy Asset, Low Obsolescence Risk) company that investors are missing. The business review segment this morning went over the industrial businesses in greater detail than any annual meeting I can remember. One notable example was Precision Castparts and IMC which are part of the global aerospace supply chain for Boeing and Airbus - two companies with estimated 10 year backlogs for their end products. One company little discussed within Berkshire, WW Steel, was highlighted as producing steel for bridges and construction projects including the Sphere in Las Vegas (which fellow HVP portfolio company Everus Construction Group (ECG) helped build). Berkshire also owns Clayton Homes, one of the largest builders of affordable homes in the US as well as other building supply companies including Benjamin-Moore paints. These are each hard to disrupt businesses.

3. Utility

Berkshire-Hathaway operates one of the largest utilities in the country, generating about 50% of their power from non-carbon sources. Their natural gas pipeline business touches 15% of natural gas volume in the US. In prior years Warren Buffett had been downright pessimistic on the utilities, in part due to the risks of wildfire litigation. Abel struck a more optimistic note, reminding shareholders that Berkshire is very much involved in powering data centers and well positioned for that growth opportunity. He cited Berkshire’s roughly 8% peak load coming from data centers - when competitors are hoping to get to 5%. He explained the potential to grow the data center business as a percentage of peak load by half to 12% in the coming years. Important to this discussion is Abel’s careful understanding of the regulatory compact between operators like Berkshire and the rate-payer. Operators need to earn an economic rate of return to be able to reinvest in the grid. Berkshire’s MidAmerican Energy offers prices 45% lower than the national average. Abel made clear that the hyperscalers will need to pay for their own power and that individuals should not bear higher costs for the expansion.

4. Japan, Inc.

Abel and insurance chief Ajit Jain offered some more details on Berkshire’s recent investment in Tokio Marine & Fire, the largest non-life insurance company in Japan. The three part deal included an investment in the company’s Tokyo listed shares, an ongoing investment in business underwritten by TM&F, and a uniquely open-ended commitment to pursue large business opportunities together.

Coupled with the investment dating back over 5 years now in the 5 Japanese “trading houses” (Mitsubishi Corp., Mitsui & Co., Itochu Corp., Marubeni Corp., and Sumitomo Corp), I am beginning to see the potential for “Japan, Inc” to continue to grow as a business/investment line for Berkshire. Many private equity firms have tried and failed to crack the Japanese market. The Berkshire culture, so strongly reiterated at the meeting this year, of being a committed, long-term investor with stable capital seems to be a very good fit with Japanese business culture. I would not be surprised in future years to hear of more Berkshire capital deployed in Japan given Abel’s comments that Berkshire will continue to build relationships in the country.

5. Owner’s Day - now with details

Greg Abel referred to today as “Owner’s Day” for Berkshire-Hathaway. Rather than try to recreate the same Warren & Charlie wit and wisdom dynamic, Abel got down to business. He walked through Berkshire’s earnings in greater detail - line by line - on the business unit level. Throughout the sessions, key businesses GEICO, BNSF, and Insurance were showcased, and two new business leaders were on stage for questions. This gave the day more the feel of a typical investor day, not simply a celebration of American business success. Berkshire will need to attract the next generation of long term individual and institutional investors. Maintaining and growing the new level of detail and disclosure in the Annual Meeting will go along way.

6. Stock-Picking

There has been a lot of intrigue around who would be in charge of the publicly traded portfolio at Berkshire-Hathaway. Warren Buffett’s heritage is that of an investor in public markets and the acquisition of whole businesses is something that came later. Consider GEICO which started off as a public company whose shares were owned by Berkshire, to a business which was acquired in full in 1996. Portfolio Manager Todd Combs left earlier this year to take a job outside of Berkshire. This left Abel and Ted Wechsler as the two people responsible for the $300 billion + portfolio. In discussion, Abel broke down the portfolio into the Core Holdings & long term Japanese investments which leave a more “manageable” active portfolio of about $70 billion. He made clear they are still open to opportunities in public markets and as in all other capital allocation avenues, have the cash ($380 billion) as an asset to deploy when Mr. Market makes an offer. Abel characterized the portfolio as “concentrated” - with that being a positive attribute. To that end, if we see new stock purchases, I would expect them to be fewer and larger going forward.

==============================

Recent Berkshire Related HVP Media Mentions:

Barron’s “Berkshire-Hathaway Ahead of the Annual Meeting” April 27th Print Edition

Bloomberg News “BRK/B Shares Weak Ahead of Abel’s First Meeting as CEO” April 30th

Bloomberg News “Berkshire Meeting Highlights Tough Balancing Act for Greg Abel” May 2nd.

With a few trading days remaining, March 2026 may be one of the toughest months for equities since 2022. The third month of the quarter, with earnings season wound down, is usually the most headline driven, but with the outbreak of war in the Persian Gulf that feels like an understatement. For this month’s HVP Risk Dashboard, our thought is to focus on a few charts and indicators that we are watching most closely. Often our indicators are little changed week to week or even month to month. As markets seek to price the range of potential outcomes, the rate of change on a few of the indicators has picked up markedly. We’ve included some extra indicator specific commentary this month below.

The shock of the oil price spike and uncertainty around the duration of the conflict remind us of the “Liberation Day” tariff experience in April of 2025. Then as now, we know the precise cause of the selloff - then tariffs, now war. That means we also know how markets can regain their footing – a resolution to the hostilities, or even just a reduction to the sporadic and lower level of conflict that has plagued the Middle East for decades. Both of those are outcomes the market can live with, and we think could be swiftly priced if that is how events unfold. Leaving politics out of it. our assumption is that despite outward appearances, actors on the world stage work in their own rational self-interest. Professor Kenneth Waltz wrote the classic Man, The State, and War in 1959 and ever since it has been a staple of realist international relations theory. His work argues that the analyst ought to review the situation across the “three images” – individuals, states, and the international system. Although we’ll leave parsing that against today’s conflict out of this month’s note, we think it is a particularly apt framework.

Months like this remind us of the Warren Buffett adage that the market is a mechanism for transferring wealth from the impatient to the patient. We remain nimble and ready to act, but balance that with a studied patience as we evaluate the shares of the businesses we own (and would like to own).

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

The Movement of the US Treasury Yield Curve

Despite it all, one of the most “normal,” upward sloping yield curves we have had in years…

Blue = Current; Red = 6 months ago; Yellow =1 Year Ago

Performance of Gold in Major Currencies - % Change

The price of gold in most currencies has moderated substantially since the outbreak of war. A confluence of factors could be at work - US dollar strength, some central banks forced to sell gold to defend their currencies, speculative longs reducing risk in the face of uncertainty, and perhaps the most salient explanation: the yellow metal is many things to different people, but it is still a commodity that moved too far too fast.

A Look at the S&P 500 Sectors:

A look around the (multipolar) world:

When we look at these tables, it isn’t just about wanting to own the sectors or countries at the top of the list. Take a look at the color coded R/S Change value to see those that are moving up the list and those that are moving down the list with the greatest velocity. On the country list below, consider which national markets are above Gold, US Treasury Bills, or the S&P 500 as a proxy for the US market. Right now the bottom of the list is particularly interesting - both nations in the Persian Gulf and those dependent on oil & LNG exports from the gulf are clustered together. Consider how a resolution or continuation of hostilities might reconfigure this table…

Average Daily S&P 500 Index Returns over the Past 20 Years:

Time will tell whether seasonal patterns hold, but the start of Q2 in April has on average brough lower volatility levels.

1-Year Trailing Chart of the VIX with RSI

Compare the levels of a “War VIX” currently to a “Tariff VIX” one year ago…

CNN Fear & Greed Indicator

That’s all for this edition - see you next month for more charts!

Notes:

We are pleased to share a monthly version of our internal Risk Dashboard with our clients and subscribers from the investing public at large. A few reminders:

• The HVP Risk Dashboard is not an equity or credit research product and not a specific recommendation to make any investment decisions.

• Past performance may not be indicative of future results.

• Data is generally presented here without comment.

• HVP and affiliates may have positions in or against any securities referenced.

• This is a chart heavy report. Clicking or tapping a chart will open it in a new window. While we all live on our phones, the best viewing will probably be on a larger screen such as your iPad, laptop, or desktop.

• The Risk Dashboard is complimentary for HVP clients, institutional partners, and members of the investing public we hope decide to become clients!

Watch Recap & Outlook

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

Lies, Damn Lies, and Economic Statistics

Atlanta Fed GDPNOW

Y= C + I + G + Xn

February 24, 2026 Estimate: +3.1% for Q1

Tech Sector Layoffs:

2026: 29,570 employees / 45 companies

2025: 123,941 employees /269 companies

2024: 152,074 employees/546 companies

2023: 263,180 employees/1,191 companies

2022: 166,269 employees/1,064 companies

(layoffs.fyi as of 2/27/2026)

The Movement of the US Treasury Yield Curve

Blue = Current; Red = 6 months ago; Yellow =1 Year Ago

Net % of Banks Tightening Lending Standards for C&I Loans

Looking at Housing

Canary in the Coal Mine: FHLB Borrowings

Performance of Gold in Major Currencies - % Change

Broad Market Levels

Top Panel/Blue = SPY; Middle Panel/Green = HYG; Bottom Panel/Red = CMBS. As of 2/27/2026.

Moving Averages

S&P 500

Nasdaq

Dow Jones Industrial Average

A Look at the S&P 500 Sectors:

A look around the (multipolar) world:

Seasonality

Average Daily S&P 500 Index Returns over the Past 20 Years:

1-Year Trailing Chart of the VIX with RSI

Sentiment & Technical Indicators

Insider Buying & Selling

Top Buys in the Last 3 Months (as of 2/27/26 via Bloomberg)

Top Sells in the Last 3 Months (as of 2/27/26 via Bloomberg)

CNN Fear & Greed Indicator

That’s all for this edition - see you next month for more charts!

Notes:

We are pleased to share a monthly version of our internal Risk Dashboard with our clients and subscribers from the investing public at large. A few reminders:

• The HVP Risk Dashboard is not an equity or credit research product and not a specific recommendation to make any investment decisions.

• Data is generally presented here without comment.

• HVP and affiliates may have positions in or against any securities referenced.

• This is a chart heavy report. Clicking or tapping a chart will open it in a new window. While we all live on our phones, the best viewing will probably be on a larger screen such as your iPad, laptop, or desktop.

• The Risk Dashboard is complimentary for HVP clients, institutional partners, and members of the investing public we hope decide to become clients!

In our 10 Surprises for 2026 one of our predications was that Latin America would be a focus for investors and for geopolitics. We were surprised how quickly that flashpoint came. Time will tell what the long term effects on the region, energy markets, and the international order are, but for now there has been a minimal response in markets. The combination of low multiples and cyclical industries still has investors looking at allocations to Latin America.

The move in metals, particularly silver and gold (cue the Burl Ives!) that started in 2025 has continued in 2026. We remind ourselves that commodities are one of the ways to make or (with maybe even more frequency) lose a fortune quickly - when prices move, they can take on a life of their own. In a brisk and wide ranging interview with BNN Bloomberg, our Christopher Davis reminded viewers that there can be symmetry in charts - steep ascents may be followed by equally sharp pullbacks. After a torrid run, today on January 30th, we are starting to see that pullback and consolidation take place. You can view the full clip, including some comments on what happened at the WEF in Davos, Switzerland at the YouTube link below.

Watch Bloomberg BNN Clip

With reports from the likes of Apple, Microsoft, Meta, and Tesla (not to mention many great companies who grab fewer headlines), we are starting to see a divergence between how investors are treating different firms’ AI strategies. Where Microsoft and Meta are spending big to build big, Apple is spending dramatically less and building the next version of Siri in collaboration with Google to grow its suite of Apple Intelligence features. We might argue that quite logically, the market is rewarding those firms allocating their AI spend to their biggest and most profitable businesses. Investors are less willing to give these companies the benefit of the doubt on their other AI spending than in the past.

In some of the biggest news of the week, Kevin Warsh was nominated to succeed Jerome Powell as Chairman of the US Federal Reserve. Hot off the recording press, our Christopher Davis joined friends of HVP Larry McDonald and Robbert van Battenburg on their podcast The Lens this morning to discuss the Fed, rates, gold, silver, and the incredible scale of the upcoming IPO pipeline which includes SpaceX. The show was live streamed on X earning a few thousand viewers in real time. With much of the US feeling another deep freeze this weekend, it could be something to enjoy fireside or on the treadmill.

Watch & Listen on YouTube

Themes to Takeaway

Bullish Themes

• GDP Now is tracking strongly - see the chart below

• The market’s advance has been broader - more stocks reacting well to good news

• Fiscal policy is supportive

Bearish Themes

• Housing affordability is still challenged

• Inflation has not yet returned to the “2% target”

• Cracks and risks are emerging in the lending markets

Keep your eye on

• The Commodity Complex

• Inflation Expectations

Whatever happened to?

• True snow days for school kids?

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

Lies, Damn Lies, and Economic Statistics

Atlanta Fed GDPNOW

Y= C + I + G + Xn

January 29, 2026 Estimate: +4.2% for Q4

Tech Sector Layoffs:

2026: 22,668 employees / 18 companies

2025: 123,941 employees /269 companies

2024: 152,074 employees/546 companies

2023: 263,180 employees/1,191 companies

2022: 166,269 employees/1,064 companies

2025 Federal Sector Departures & “DOGE” Cuts:

Total YTD Federal Departures: 182,528

…of which DOGE Layoffs are: 71,891

(layoffs.fyi as of 1/30/2026)

The Movement of the US Treasury Yield Curve

Blue = Current; Red = 6 months ago; Yellow =1 Year Ago

Net % of Banks Tightening Lending Standards for C&I Loans

Looking at Housing

Canary in the Coal Mine: FHLB Borrowings

Performance of Gold in Major Currencies - % Change

Broad Market Levels

Top Panel/Blue = SPY; Middle Panel/Green = HYG; Bottom Panel/Red = CMBS. As of 1/30/2026.

Moving Averages

S&P 500

Nasdaq

Dow Jones Industrial Average

A Look at the S&P 500 Sectors:

A look around the (multipolar) world:

Seasonality

Average Daily S&P 500 Index Returns over the Past 20 Years:

1-Year Trailing Chart of the VIX with RSI

Sentiment & Technical Indicators

Insider Buying & Selling

Top Buys in the Last 3 Months (as of 1/30/26 via Bloomberg)

Top Sells in the Last 3 Months (as of 1/30/26 via Bloomberg)

CNN Fear & Greed Indicator

That’s all for this edition - see you next month for more charts!

Notes:

We are pleased to share a monthly version of our internal Risk Dashboard with our clients and subscribers from the investing public at large. A few reminders:

• The HVP Risk Dashboard is not an equity or credit research product and not a specific recommendation to make any investment decisions.

• Data is generally presented here without comment.

• HVP and affiliates may have positions in or against any securities referenced.

• This is a chart heavy report. Clicking or tapping a chart will open it in a new window. While we all live on our phones, the best viewing will probably be on a larger screen such as your iPad, laptop, or desktop.

• The Risk Dashboard is complimentary for HVP clients, institutional partners, and members of the investing public we hope decide to become clients!

In the tradition of the storied strategist Byron Wien, Hudson Value Partners is delighted to share our second annual list of 10 Surprises for the coming year. For our fundamental research team, preparing this list is a chance to cast a wider gaze. We consider a “surprise” to be an event with a 50/50 chance, yet only 1 in 3 are even considering. Predictions about the future are notoriously difficult, but we hope our “10 Surprises” spur investors to think about the wide range of possibilities for 2026.

1. Just as GLP’s have revolutionized weight loss treatment, a new drug class will herald an increase in “health-spans.”
2. A quantum computing breakthrough will allow the technology to be commercialized for a narrow application.
3. Users of AI LLMs will be rocked by a major data breach and privacy scandal forcing a rethink of their use.
4. Some large global investors will find leading corporate credits more attractive than certain developed market sovereign bonds.
5. Latin America will be a key focus for markets and geopolitics.
6. Among heads of state of what was the G8, a leader will face an unscheduled challenge to their leadership at home.
7. The Japanese people will reconsider Article 9 (no-war clause) of their constitution amid global threats and a push to rearm.
8. New forms of nuclear power technology will become viable faster than anticipated.
9. As rote and rules-based tasks become automated by AI, the value of creative skill sets and a liberal arts education will rise.
10. The confluence of crypto currencies, stable coins, and growing interest in gold will lead a weak fiat currency to find hard(er) backing.

This year’s edition of the 10 Surprises is dedicated to the memory of our late friend and mentor, Stephen J. McGruder. The legendary investor’s ceaseless intellectual curiosity will forever inspire our work at HVP.

About Hudson Value Partners
Hudson Value Partners is an employee-owned boutique investment manager, serving private wealth and institutional clients. We take a modern, opportunistic value investing approach, driven by an experienced team that conducts research and builds world-class portfolios that prioritize client interests. The firm has a partner-oriented, client-centric mindset that serves a diverse group of individuals, families, businesses, and nonprofits, positioning them as trusted family advisors and stewards of their clients’ irreplaceable assets.

It should not be assumed that future performance of any specific investment or investment strategy will be profitable, equal any historical performance level(s), or prove successful.

The HVP Risk Dashboard will resume its normal chartbook format in January 2026. Happy New Year!

The 10 Surprises were initially released in a Press Release here.

On December 16, 2024 we released the inaugural HVP List of 10 Surprises for 2025. While there is still some time left in 2025, we want to grade last year’s list in preparation for the upcoming release of our 2026 list. We are scoring each surprise with a maximum of 1 point, and possible scores of 0, 1/3, 1/2, 2/3, or 1 depending on how many legs of triple jump we either landed or fell flat on. As a reminder, we consider a surprise something that had a 50/50 chance, but only 1/3 of people were considering.

Let’s get to it!

1. The much-heralded Department of Government Efficiency will have a national impact.

Did it ever! DOGE struck fear in the hearts of many and changed the national conversation. While the cost savings were not as high as the lofty goals, they appear to be real. The DOGE mentality also bled over into corporate America. Score: 1/1.

2. Nvidia will face a meaningful challenger in AI chips. Investors will reassess their market share expectations.

It took awhile for this one to materialize, but recent news about Alphabet’s TPUs, Broadcom’s ASIC chips, and even AMD’s hardware have investors giving some thought to challengers and NVDA’s long term market share. Score: 1/1.

3. Ukraine will not join NATO or the EU. A demilitarized zone will emerge as continued conflict proves too costly for all sides.

As of press time, Ukraine is in neither NATO or the EU. A DMZ proved to be a humanitarian hope rather than a reality. Score: 2/3.

4. An unexpected company will emerge as a leader to help businesses implement AI tools.

Not yet. Score: 0/1.

5. Tariffs – however they are enacted - will not have consensus impacts.

It was ugly for a time in April, but from point to point, the impact has been far less negative than the consensus. Score: 1/1.

6. Corporate governance reform will help Japanese stocks, but the Bank of Japan will face challenges raising rates.

The Nikkei has outperformed the US stock market as of press time. After one hike out of the gate in January, rates in Japan have been flat at 0.50% since. There may be an additional 0.25% at the BOJ’s December 19th meeting. Score: 1/1.

7. Politicians will stay focused on China, but investors will increasingly look to India for opportunities.

As of press time, Chinese stocks have been stronger performers than Indian stocks and garnered more foreign flows. Score: 0/1.

8. The streaming wars will end with Netflix and YouTube winning. A merger will occur among at least two of the also rans.

Netflix and YouTube are still on top. Disney-FUBO-Hulu merged during the year. Right now we are in the middle of a fight for Warner Brothers between Netflix and Paramount/SkyDance. Score: 1/1.

9. The media will realize that Gen Z and millennials actually have an attention span and learn from successful long-form podcasts and interviews designed to share viewpoints rather than make soundbites.

Podcasts are still big. Legacy media still prefers “gotcha” sound-bites. Score: 1/2.

10. Private Equity ownership, the continued rise of legal gambling, and publicly traded teams will combine to make sports a more widely held asset class.

It’s been a big year for Sports deals, with stakes in the Lakers, Celtics, and NY Giants trading hands. Score: 1/1.

Final Score for 2025: 7.16/10

A high score means we were either on point or did not bring enough out of the box thinking to the endeavor. We’ll leave that to your judgement!

Stay tuned for the 2026 list later this month!

It should not be assumed that future performance of any specific investment or investment strategy will be profitable, equal any historical performance level(s), or prove successful.

Tariffs - industrial companies are commenting that they don’t see tariffs (as implemented) being a headwind to margins in 2026, having offset them partly through price increases, changes to sourcing, and partly through other cost cuts.

AI Capex - the market is treating those who have the Free Cash Flow and enterprise customers to back up their spending different than those who are more in the consumer side and/or using debt to finance the investments.

Volatility - we have the feeling so far that earnings misses are being punished more severely than usual by the market, but until earnings season concludes it is more difficult to quantify. That makes sense to us given that meets to small beats are getting muted reactions as well. Consensus expectations appear to have been cut too much in the face of tariff uncertainty earlier this year.

Speculative Fervor - a Bloomberg analysis of factor returns in Q3 showed that the “junk” - those stocks that aren’t categorized as high quality, profitable, or with lower price to earnings - floated to the top. That gives us the sense that there is still a degree of underinvestment out there and cash that people are willing to chase with.

The Fed - we reiterate our longstanding view that Central Bank press conferences are not helpful to markets. Let interest rates be set by the market, observed by participants, and less of a spectator sport. For those weighing capital allocation decisions in the real economy, interest rates are but one input in deciding whether or not a project goes forward.

In the press, our Christopher Davis shared his thoughts with Bloomberg News in their report on the end of an era - next year’s Berkshire annual letter will not be written by Warren Buffett (full article link here)

And to kick off the week, Christopher joined BNN Bloomberg live from our Palm Beach office to offer a tech sector earnings preview, and quick updates on Qualcomm (QCOM), Franco Nevada (FNV), and Thermo Fisher Scientific (TMO). You can catch the clip on YouTube below:

Themes to Takeaway

Bullish Themes

• Interest rates are declining - non recessionary rate cuts may be bullish for equities

• Tariffs are being handled better by firms than most feared

• There’s a strong cup of US economic stimulus coffee brewing for 2026 - tax cuts, tax refunds, spending & investment deals are all on deck

Bearish Themes

• Housing affordability is still challenged

• There are pockets of speculative excess in stocks

• Cracks and risks are emerging in the lending markets

Keep your eye on

• When the government shutdown impasse gets resolved in the US

• The Supreme Court IEPA case on Tariffs - oral arguments begin next week

• Whether the “unicorn” tech start ups can actually pay for their announced cloud & AI investment deals with the biggest names in tech

Whatever happened to?

• Worrying about counterparty risk?

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

Lies, Damn Lies, and Economic Statistics

Atlanta Fed GDPNOW

Y= C + I + G + Xn

October 27, 2025 Estimate: +3.9% for Q3

U6 Unemployment calculated in the pre-1994 adjustment method:

28.00%

(John Williams’ Shadow Government Statistics August 2025)

Tech Sector Layoffs:

2025: 112,732 employees /218 companies

2024: 152,074 employees/546 companies

2023: 263,180 employees/1,191 companies

2022: 166,269 employees/1,064 companies

Federal Sector Departures & “DOGE” Cuts:

Total YTD Federal Departures: 182,528

…of which DOGE Layoffs are: 71,891

(layoffs.fyi as of 10/31/2025)

The Movement of the US Treasury Yield Curve

Blue = Current; Red = 6 months ago; Yellow =1 Year Ago

Net % of Banks Tightening Lending Standards for C&I Loans

Looking at Housing

Canary in the Coal Mine: FHLB Borrowings

Performance of Gold in Major Currencies - % Change

Broad Market Levels

Top Panel/Blue = SPY; Middle Panel/Green = HYG; Bottom Panel/Red = CMBS. As of 10/31/2025.

Moving Averages

S&P 500

Nasdaq

Dow Jones Industrial Average

A Look at the S&P 500 Sectors:

A look around the (multipolar) world:

Seasonality

Average Daily S&P 500 Index Returns over the Past 20 Years:

1-Year Trailing Chart of the VIX with RSI

Sentiment & Technical Indicators

Insider Buying & Selling

Top Buys in the Last 3 Months (as of 10/31/25 via Bloomberg)

Top Sells in the Last 3 Months (as of 10/31/25 via Bloomberg)

CNN Fear & Greed Indicator

That’s all for this edition - see you next month for more charts!

Audio companion still in the works!

Notes:

We are pleased to share a monthly version of our internal Risk Dashboard with our clients and subscribers from the investing public at large. A few reminders:

• The HVP Risk Dashboard is not an equity or credit research product and not a specific recommendation to make any investment decisions.

• Data is generally presented here without comment.

• HVP and affiliates may have positions in or against any securities referenced.

• This is a chart heavy report. Clicking or tapping a chart will open it in a new window. While we all live on our phones, the best viewing will probably be on a larger screen such as your iPad, laptop, or desktop.

• The Risk Dashboard is complimentary for HVP clients, institutional partners, and members of the investing public we hope decide to become clients!

Better late than never - our September Risk Dashboard post is a few days late, but we’re going to roll with it as this Schwab Market Overtime special was recorded on September 30th. Our usual monthly format will be back later this month. We’ll let the video speak for itself, but for your reading pleasure we have a handful of the charts, indicators, and news items referenced in the video reproduced for you below.

Special thanks to the production team at Schwab Network, Sam Vadas as host, and our friend, best-selling author and strategist Larry McDonald for teaming up to make this special happen! Enjoy!

Repo 105 - what is it? Explanation from Wharton

First Bands Term Loan - a chart of one of the struggling business’ many debt instruments to give a sense of the stress in some pockets of the credit universe. A quick explanation of the situation from the FT.

Market Concentration - The top 10 stocks in the S&P 500 are approximately 37%+ of the index (as of 10/6/25)

Commodity Complex - details as of 9/30/25

Advance Decline on NYSE Stocks 3 Month Trailing

Consumer Lending - Capital One (COF), Sallie Mae (SLM) Affirm (AFRM)

Atlanta Fed GDP Now

Wholesale Power Prices - Bloomberg Article

Adobe & Salesforce Year to Date Chart

Global Industrial ABB (ABBNY)

Brazilian Equity ETF (EWZ)

MDU Resources (MDU) - Small Cap US Utility

Amentum (AMTM) - Small Cap Industrial with a growing global nuclear business

Seasonality of the US Stock Market - there can be some gremlins in October…

Please Note: HVP in accounts and strategies it manages, as well as employees personally, often have positions in securities mentioned. Videos and interviews are not personal investment advice and we do not undertake any obligation to update our views in the same medium they are first shared. If you have any questions, please contact your HVP team member. Please also note that the views of guests and other panelists may not be the same views as those held by HVP.

Where the numbers are less contradictory however are within the labor market. The headline unemployment rate has bounced around in a tight range of 4-4.2% for the past 12 months - certainly a strong level. Labor force participation has declined about 0.50% in the past 12 months. Not exactly what you would hope for in a growing economy, but we also are less convinced that the BLS is accurate to the level of 0.10%. That’s not a sleight against them, but a recognition of how hard is to measure an economy as large, diverse, and regional as the US. We prefer to think about the direction or trend rather than get too excited or depressed by tenths of a percent. Where it does get murkier is when we look under the hood at job gains/losses at a sector level. Depending on how you slice the data, roughly half of sectors or industry groups are adding jobs and half contracting. That’s a knife edge we want to watch. And to evaluate the reasons for those changes…pandemic over-hires rolling off? AI & technology increasing productivity? Or firms cutting costs due to declining sales? Each of those scenarios has different investment implications. It will be an area we watch closely.

All eyes will be on the Grand Tetons later this week for the Kansas City Federal Reserve’s Jackson Hole monetary policy symposium. We’ll get a speech from Federal Reserve Chair Jerome Powell and some new tea leaves about the upcoming FOMC meeting in September. Fed Funds futures are pricing in an 84% chance of a rate cut on September 17th as we write this (WIRP function via BBG). That, however, could change dramatically by the end of the week.

In markets unprofitable, speculative, and momentum driven companies which had a very hard bounce from May-July appear to be taking a breather as investors regain their focus on earnings and profitability. While these aren’t areas of the market we traffic in at Hudson Value Partners, they certainly can create a lot of chop on the surface. As we look to the fall, the headline driven market environment is here to stay.

In the press, journalists looked to HVP for some comments on recent events at Berkshire-Hathaway. We offered thoughts on their recent investment in the healthcare sector in a Bloomberg News article, and a theory on investor flows for CNBC’s Buffett Watch Newsletter.

Yesterday, in between some meetings in NYC, HVP’s Christopher Davis stopped by Bloomberg HQ on 731 Lexington Ave to join BNN Bloomberg’s “The Close” where he shared our thoughts on earnings, the consumer, and made our case for owning consumer stocks on both ends of the economy, namely McDonald’s (MCD) and luxury firm Richemont (CFRUY). You may find details on the video appearance here.

Themes to Takeaway

Bullish Themes

• It’s been a strong earnings season - many companies have posted 2 great quarters for 2025 - the year is half in the bag.

• Capital Markets activity within IPOs as well as Mergers & Acquisitions continue at a healthy pace.

• Companies have shown little inclination to pull back on investment in the face of tariff uncertainty - they seem to be learning to live with them, although Q3 earnings will be a bigger test.

Bearish Themes

• Speculative assets are starting to rollover - that can sometimes be the first “tell” that the market is running out of steam.

• Tariffs were the end of the world in early April. Similar tariff rates in July & August are being treated as a non-event by investors. What changed?

• Geopolitical optimism can very quickly turn to despair.

Keep your eye on

• Real applications of AI in your personal and professional lives. Tell us what works!

• Watch the labor market closely - that may compel Fed action sooner than a further decline in inflation emerges.

• Stablecoins. We might just see in the next 12 months how much is hype and how much is innovation.

Whatever happened to?

• Paying with cash?

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

Lies, Damn Lies, and Economic Statistics

Atlanta Fed GDPNOW!

Y= C + I + G + Xn

August 19, 2025 Estimate: +2.3% for Q3

Alternative Looks at the Labor Force:

U6 Unemployment calculated in the pre-1994 adjustment method:

27.80%

(John Williams’ Shadow Government Statistics July 2025)

Tech Sector Layoffs:

2025: 81,567 employees /186 companies

2024: 152,074 employees/546 companies

2023: 263,180 employees/1,191 companies

2022: 166,269 employees/1,064 companies

Federal Sector Departures & “DOGE” Cuts:

Total YTD Federal Departures: 178,296

…of which DOGE Layoffs are: 67,749

(layoffs.fyi as of 8/20/2025)

Global Central Bank Postures

The Movement of the US Treasury Yield Curve

Blue = Current; Red = 6 months ago; Yellow =1 Year Ago

Net % of Banks Tightening Lending Standards for C&I Loans

Looking at Housing

Canary in the Coal Mine: FHLB Borrowings

Performance of Gold in Major Currencies - % Change

Broad Market Levels

Top Panel/Blue = SPY; Middle Panel/Green = HYG; Bottom Panel/Red = CMBS. As of close on 8/20/2025.

Moving Averages

S&P 500

Nasdaq

Dow Jones Industrial Average

A Look at the S&P 500 Sectors:

A look around the (multipolar) world:

Seasonality

Average Daily S&P 500 Index Returns over the Past 20 Years:

1-Year Trailing Chart of the VIX with RSI

Sentiment & Technical Indicators

Insider Buying & Selling

Top Buys in the Last 3 Months (as of 08/20/25 via Bloomberg)

Top Sells in the Last 3 Months (as of 08/20/25 via Bloomberg)

CNN Fear & Greed Indicator

That’s all for this edition - see you next month for more charts!

Audio companion still in the works!

Notes:

We are pleased to share a monthly version of our internal Risk Dashboard with our clients and subscribers from the investing public at large. A few reminders:

• The HVP Risk Dashboard is not an equity or credit research product and not a specific recommendation to make any investment decisions.

• Data is generally presented here without comment.

• HVP and affiliates may have positions in or against any securities referenced.

• This is a chart heavy report. Clicking or tapping a chart will open it in a new window. While we all live on our phones, the best viewing will probably be on a larger screen such as your iPad, laptop, or desktop.

• The Risk Dashboard is complimentary for HVP clients, institutional partners, and members of the investing public we hope decide to become clients!

Yesterday, I had the opportunity to attend the investor day for Atlanta Braves Holdings (BATRA / BATRK), the parent company of the Atlanta Braves baseball team and associated real estate development The Battery on behalf of Hudson Value Partners. Coming from the Berkshire-Hathaway annual meeting in May, I reflected on the value of in-person research and diligence trips. While earlier in his career, different books recount examples of Mr. Buffett heading out to count rail cars and knocking on doors to speak with company management, today’s market has certainly changed.1 Regulation FD limits what management can say to one or a group of investors without full public disclosure or a form 8-K. The internet and live streams bring meetings to my desk every week. There is no shortage of alternative data like credit card activity to get a pulse for what is happening in the consumer economy between quarterly earnings reports. That said, I still believe there are instances in which an in-person visit remains a valuable addition to our research efforts.

With our investment in the Atlanta Braves, it is not just about the 162 regular season games and hopefully a strong post season showing, but also the long-term vision that they are delivering for the mixed-used real estate development around the stadium. While one can visit on their own, going to the investor day, I was able to walk the property with the people developing it and tour soon to open facilities. I had the chance to hear from all the key leaders and have follow up conversations with the President, CEO, and Chairman Terry McGuirk, the head of Braves Development Company (real estate) Mike Plant, and members of the investor relations, accounting, and legal teams.

MLB & Sports Investing Market

The sports investing landscape is very active. The Braves are among a handful of sports teams that are traded in public markets. In our 10 Surprises For 2025, we augured that this would be the year that sports became accepted as an asset class. As I was sitting in the event, news broke of a sale of the NBA’s LA Lakers2 and a potential sale of the troubled Tampa Bay Rays in the MLB.

One of the sessions was a discussion between Braves Holdings President Terry McGuirk and MLB Commissioner Rob Manfred. The talk outlined the “close” relationship between the Braves and MLB with Manfred describing the Braves as a “model franchise” from the MLB’s perspective and the team’s business mix as being the “envy” of other teams. League wide 70 million people went to ballparks in 2023 and 2024, with a similar pace expected for 2025. In the past 3 years the average age of a ticket buyer has decreased by 7 years. Last year in the World Series, three games had greater viewership in Japan & Korea than in the US & Canada combined.

The upcoming collective bargaining agreement (CBA) with the players and work to align the media rights into one league wide package for 2029 are key priorities and large opportunities for MLB. Baseball media rights are highly fragmented with some national broadcasts, some through MLB.tv streaming, and some regional sports networks (like the Yankees’ YES Network) which have varying degrees of reach, success, and profitability. While there are differences between the NBA and baseball, the comparison of the increasing value of their media rights and the benefit of selling the package collectively is clear: the NBA’s new media deal is worth $7.7 billion annually at the midpoint versus $2.7 billion in the prior deal. A single media package is likely more valuable than a 30 deal patchwork, especially in today’s media landscape with new players Amazon, Alphabet’s YouTube TV, Apple TV, and Netflix all fighting it out. The Braves were pioneers of national media for baseball, as when Ted Turner owned the team, many games were broadcast nationally on his TBS network, helping to build the Braves a national following.

Commissioner Manfred characterized Terry McGuirk as an “owner-leader” within baseball and the two speak most days. McGuirk is a key member of MLB’s “Committee on Economic Reform” representing Braves shareholders’ interests in improving the valuation of baseball teams against other sports teams. To me, this league wide effort to improve valuations represents a powerful catalyst – in some ways happening at the same level as the Tokyo Stock Exchange’s drive to improve corporate governance among Japanese stocks – the league and the exchange fill a similar rule making and agenda setting role for their members.

The national media strategy is at the heart of economic reform efforts and has the potential to create more central recurring revenue for the league and each team. That central revenue has the potential to eliminate the need for - or at least substantially rework - the revenue sharing agreements around the league which are viewed as a negative for team valuations. Similarly, some reforms around containing player compensation costs the way other leagues have are also a potential positive for valuations.

While the CBA looms large for the end of 2026, Manfred has been working to get ahead of it since the last round of negotiations by meeting with players from each team, each year (30 meetings per year), to talk about the current system where the top 10% of players earn 72% of the compensation. The league is also considering reforms to the free agent system, which is currently viewed as too long a period each year. While sports media may be negative on the prospects for a new CBA and the commissioner may be too positive (it is his job!) , I tend to think that money talks and a better deal for the 90% of the players earning 28% of the total compensation pool will win the day.

Baseball Operations

Getting to the Braves specifically, since their ownership in the Liberty Media era began, they have been one of the teams that has consistently gotten to the postseason, but done in it financially disciplined way. Alex Anthopoulos, GM of the Braves was particularly proud that MLB players rank the Braves as #3 behind the Yankees and Dodgers as the most desirable team to play for – even though they have a payroll roughly half of those teams. His overarching goal as GM is to make the team consistently competitive and avoid drama. Team President Derek Schiller was also quick to note that in the last ten years the team with the highest payroll only won the World Series in two years.

Off the field, management detailed the Braves’ improvements since they built the new Truist Field at the Battery. Since 2022, 90% of stadium capacity has been sold in tickets, as compared with the old stadium in 2015 and 2016 where only 50% of capacity was able to be sold. Baseball event revenue has grown at an 8% CAGR (tickets, concessions, ads, sponsors). The Braves are also notable for owning and operating the retail and concession business themselves, not contracting it out to a third party. This is a point that fits in well with the overall corporate ethos of the Braves Holdings as owner-operators of the team, the stadium, and surrounding real estate to create a “master-planned” fan experience. The Braves use AI to drive ticket pricing and to aid in security within the stadium. The average Braves ticket price is $54, with the lowest being $10. A recent HVP Read highlighted on our X page, Manage For Profit Not For Market Share, uses the Toronto Blue Jays as a case study for using dynamic pricing to fill a stadium and increase revenues through effective pricing.

The master planning of the team and real estate offers some compelling opportunities. The Braves’ relationship with Comcast is one example. Just steps from one of the stadium gates is the Comcast regional HQ building for 1,000 employees. Comcast is a sponsor with in-stadium brand areas and signage. Within the Battery development, Xfinity TV is in apartments, condos, restaurants, hotels, and offices, and additionally Comcast delivers Wi-Fi and internet to the whole area.

Recent changes within the regional media landscape allow every household within the territory to watch games. Streaming is available through FanDuel, and over-the-air goes to 26 markets in 6 states, radio broadcasts cover the southeast through 170 stations.

Among MLB, the Braves have been ranked #1 for overall guest experience, concessions and in-game experience.

Real Estate Operations

Braves Development Company (BDC) is responsible for the development and ongoing evolution of the Battery site, not just building the buildings, but also through the leasing, maintenance, and finding opportunities upgrade tenants. Across all properties, Atlanta Braves Holdings currently has a 98% occupancy level. I came away with an appreciation for the creativity of the BDC team in managing the physical site. The day started in the TKE Elevator Company tower, rising 27 floors above Cobb County and offering sweeping views of downtown Atlanta and mountain ranges in the distance. The building was as modern and impressive as anything you would see in a major financial center and given the marquee tenant being TKE, there were some spectacular (and fast) glass elevators. Other office tenants include Papa John’s Pizza corporate as well as Shake Shak corporate and a test kitchen.

The strength of the Braves brand and ties to the local business community were a key factor in the Battery being able to win the business for the new Truist Securities headquarters building which I was able to tour before its opening later this July. Originally Truist was perhaps looking for four floors in an existing building on the site, but that became too small for their needs. Through some creative engineering, BDC was able to take a site with steep grade directly across the street from a ballpark gate and put up a world-class 250,000 sq ft building financed by Truist Bank and leased entirely to Truist Securities.

So far this year, BDC has also acquired nearby office buildings in their “Pennant Park” acquisition.3 This brings additional parking for evening games and events under the Braves’ control and the 34-acre, 763,000 sq fit site has opportunities for expansion.

The Battery hosted 283 non-baseball events in 2024 and 74% of visitors were from outside of Cobb County, Georgia.

BDC contributes to the strength of the Braves baseball experience. The thoughtful creation and evolution of the live-work-play community of the Battery helps create additional cash flow for shareholders and over time has the potential to smooth out the seasonality of baseball revenues. I came away with the distinct sense that there is still more to come for future BDC real estate projects.

Concluding Thoughts

The MLB commissioner outlined a compelling plan to help improve the valuation of all baseball teams versus that of other major US leagues. The Atlanta Braves team made clear the benefits that the unified approach to baseball and real estate create to deliver a league leading fan experience and make the team a top choice for players. About 30% of the Atlanta population is 18-39 and the Battery is a favorite spot for young people to meet for concerts, baseball, dining, work, and even to rent apartments.

The valuation gap in public markets between what the Braves sell for today and what some teams with similar revenues (like the Red Sox) are valued at privately remain large. Greater investor engagement like yesterday’s event is a start. Notably the team needed MLB’s permission to be able to offer as much detail and a valuation framework on their real estate as they did for the first time yesterday. The current valuation discount reminds me of Berkshire-Hathaway (BRK.B) during COVID - when sitting down and doing the math, it seemed you were getting for “free” either the cash or the Apple (AAPL) stake. It was at that point that HVP decided to double our target position size for Berkshire-Hathaway, and we have been glad we did ever since.

With the Braves current valuation in public markets, the team is at the lower end of the scale for MLB despite very strong performance on the field, with fans, and as a top choice for players. Comparing that value to other teams suggests very little value is being given to the ongoing real estate development. How, when, and if that valuation gap ever gets closed remains an open question, but it is hard to think that the increased interest in sports investing will not help the valuation of this scarce asset and savvily operated team. If MLB can negotiate a smart CBA and improve the media rights package for the league, while Terry McGuirk and team continue to deliver a best-in-class fan experience, the odds of a “double-play” mean this is a game that we may want to stick around for the final innings of! - Christopher P. Davis

Note 1: We were pleased to see that the Braves chose Peter Millar as a merchandise partner for the golf shirts they gave to attendees. Peter Millar’s parent company, Richemont (CFRUY) is also an HVP portfolio company.

Note 2: The source for much of the material discussed in this note can be found in the full Braves 2025 Investor Day presentation on their website: https://www.bravesholdings.com/investors/news-events/presentations

Note 3: HVP is a holder of shares of the Atlanta Braves BATRA/K for separately managed accounts and the limited partnership we advise. Not all accounts hold all positions depending on individual client suitability and approach.

We write with just over 2 weeks before the end of the 90 day pause on the Trump administration’s reciprocal tariffs is set to expire. The details on any finalized trade deals between the US and counterparties have yet to emerge. In April, before this 90 day pause, equity markets moved swiftly to price a “worst-case” outcome for global trade and the US economy. Since that pause was put in place, markets have begun to price what feels like a “best-case” outcome - a permanent pause on anything that matters. Invariably, reality will fall somewhere between the worst and best cases, which has led us to temper our enthusiasm for this rally on tariff grounds. On the matter of the budget deficit and federal debt, we are actually a bit more optimistic than in the past. While the mechanics of it are too involved for this short note, we see a scenario in which the path of US Treasury debt refunding and debt issuance, coupled with at least arms-length central bank coordination, could lead to lower rates, lower debt expense, and an improved path. There are a few different decision trees that can get you there, but a few of the paths do end up with something that is long-term bullish for assets, especially those that can grow their cash flows over time. If some of those early steps continue to progress, the market may quickly sniff them out. But that’s a long term matter.

In the short term, we expect heightened volatility for the rest of the summer. Between now and July 9th, there are a scant 13 US trading days due to the Juneteenth and July 4th holidays. Throw in many risk takers taking time off and markets can easily get jumpy. That all was the case before the simmering conflict between Israel and Iran & its proxies boiled over on the evening of June 12th. Markets had largely shrugged off the tensions in the Middle East since the October 7, 2023 Hamas attacks on Gaza. At this point, it is only fair to consider it an active war zone with nuclear ramifications. As investors, we do not see too many immediate off-ramps, which means this risk will be with us for awhile.

One of the best advantages an investor can have is time. We are fortunate at HVP to have a loyal and patient investor base which gives us the freedom to treat short-term disruptions as long term opportunities. The next few weeks look to be incredibly headline driven.

Themes to Takeaway

Bullish Themes

• IPOs have performed well in early trading and SPAC issuance has stepped up significantly - both point to “risk-on” investor sentiment.

• Inflation in government statistics has not (yet) moved higher due to trade policies. It is still a stretch to call the labor market weak.

• Q1 Earnings Results were strong throughout most sectors, notably technology and AI related firms. The massive amount of AI investment by corporations appears to be undeterred by recent events.

Bearish Themes

• The suspended animation of the tariff pause is nearly over without major deals signed.

• There is open conflict between middle-eastern nations.

• The “Big-Beautiful Bill” is yet to be passed and has debatable impacts on the long term budget deficit.

Keep your eye on

• Do a flurry of trade deals emerge?

• Does an off-ramp for the Israeli/Iranian war appear?

Whatever happened to?

• Living within your means?

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

Lies, Damn Lies, and Economic Statistics

Atlanta Fed GDPNOW!

Y= C + I + G + Xn

June 9, 2025 Estimate: +3.8% for Q2

Alternative Looks at the Labor Force:

U6 Unemployment calculated in the pre-1994 adjustment method:

27.50%

(John Williams’ Shadow Government Statistics April 2025)

Tech Sector Layoffs:

2025: 62,832 employees /141 companies

2024: 152,074 employees/546 companies

2023: 263,180 employees/1,191 companies

2022: 166,269 employees/1,064 companies

Federal Sector Departures & “DOGE” Cuts:

Total YTD Federal Departures: 171,843

…of which DOGE Layoffs are: 61,296

(layoffs.fyi as of 6/14/2025)

Global Central Bank Postures

The Movement of the US Treasury Yield Curve

Blue = Current; Red = 6 months ago; Yellow =1 Year Ago

Net % of Banks Tightening Lending Standards for C&I Loans

Looking at Housing

Canary in the Coal Mine: FHLB Borrowings

Performance of Gold in Major Currencies - % Change

Broad Market Levels

Top Panel/Blue = SPY; Middle Panel/Green = HYG; Bottom Panel/Red = CMBS. As of close on 6/13/2025.

Moving Averages

S&P 500

Nasdaq

Dow Jones Industrial Average

Berkshire Watch

(Charts as of 6/13/25)

A Look at the S&P 500 Sectors:

A look around the (multipolar) world:

Seasonality

Average Daily S&P 500 Index Returns over the Past 20 Years:

1-Year Trailing Chart of the VIX with RSI

Sentiment & Technical Indicators

Insider Buying & Selling

Top Buys in the Last 3 Months (as of 06/15/25 via Bloomberg)

Top Sells in the Last 3 Months (as of 06/15/25 via Bloomberg)

CNN Fear & Greed Indicator

That’s all for this edition - see you next month for more charts!

And later next week for a Special Field Notes Edition - HVP is on the road 6/18!

Notes:

We are pleased to share a monthly version of our internal Risk Dashboard with our clients and subscribers from the investing public at large. A few reminders:

• The HVP Risk Dashboard is not an equity or credit research product and not a specific recommendation to make any investment decisions.

• Data is generally presented here without comment.

• HVP and affiliates may have positions in or against any securities referenced.

• This is a chart heavy report. Clicking or tapping a chart will open it in a new window. While we all live on our phones, the best viewing will probably be on a larger screen such as your iPad, laptop, or desktop.

• The Risk Dashboard is complimentary for HVP clients, institutional partners, and members of the investing public we hope decide to become clients!

Founded in 1930, Markel Group is a specialty insurance company that behaves like a “mini-Berkshire.” The firm had its IPO in 1986 at $8 per share and has grown substantially over the years. Like Berkshire, Markel operates with insurance operations being at the core as the largest business and the source of the “float” collected from policy holder premiums which can then be invested. Markel has a large portfolio of quality stocks and investment grade fixed income. They also have a portfolio of 21 wholly owned businesses ranging from luxury handbags to one of the world’s largest growers of perennial and annual plants for garden centers.

There is substantial overlap between shareholders of Berkshire-Hathaway and Markel and since 1991, Markel has held a shareholder event for the morning after the Berkshire meeting in Omaha. While Berkshire attracted some 40,000 attendees, Markel reported approximately 2,500 registered guests – which is fitting given Berkshire’s more than $1 trillion dollar market cap as compared with Markel’s $23.8 billion.

In December of 2024, activist investor Jana Partners urged Markel to sharpen it’s focus on the insurance operations and to consider selling off the “Markel Ventures” group of private businesses (CNBC Article).

We are not (yet) activist investors ourselves at Hudson Value Partners, but from time-to-time activists engage with the companies we own. Activism can also make companies we are looking at more attractive as it can increase the potential for market prices and the fuller value of a business to converge. To us, Markel was going through a tougher patch in their insurance business, but the portfolio of private companies was part of the appeal of Markel and something we do not think they will be likely to part with.

That said, anything that gets more eyes on a business we think is undervalued is a good thing. Markel management took Jana’s actions seriously and announced a full board-led review of all of Markel’s businesses. In a business as diverse as Markel there will always be areas performing better than others and opportunities for improvement. As long-term shareholders, we understand that and see as a feature not a “bug” of the Markel machine just as it is with Berkshire.

It can take time for the true cost of an insurance policy to be known. As such it takes time for improvements in underwriting standards and matching rates to risk to flow through to earnings. While we think that Markel management was already on the case to improve the firmwide combined ratio (the key metric for an insurer – the % of each dollar collected in premiums that is paid out in claims) the activist pressure created additional urgency. In the past few weeks, Markel elevated Simon Wilson who had ran Markel’s international insurance group to run all of insurance. His international group delivered a stellar combined ratio of under 80% in 2024. A former management consultant and insurance industry specialist, he delivered a compelling presentation outlining the ways in which he will work to improve overall insurance operations. We look forward to the changes he plans to make and to giving him the time needed to get the job done. Additionally, the activist pressure has led Markel to increase transparency in their reporting and share more details on the business lines which can only help investors better understand and value the company.

Markel Group (MKL) Quick Stats:

Founded: 1930

IPO: 1986 at $8 per share

Recent Price: $1,860 per share

Market Cap: $23.8 billion

Unrealized Gains in Securities Portfolio: $8 billion

Owned Businesses: 21

Insurance & Reinsurance Premiums: over $10b in 2024

Click here for the slides & video from Markel’s event on May 4, 2025

(As of early May 2025, source Bloomberg & Markel reports)

HVP is long shares of Markel Group (MKL).

Saturday May 3, 2025

From Omaha, Nebraska

Today, HVP’s Marino Patrk and Christopher Davis attended the Berkshire-Hathaway Annual Meeting in Omaha, NE and have been in town since Thursday. They were able to attend conferences held by Gabelli Asset Management and Columbia Business School’s Heilbrunn Center for Graham & Dodd Investing, as well as visit the over 20,000 square foot exhibition of products & services that bring the sprawling conglomerate to life.

Throughout the meeting, Mr. Buffett came back to the phrase “turn every page” as an investor on the hunt for ideas and in the quest for knowledge. It was not until the very last page, however, that Mr. Buffett made his big announcement – that he would advise the Board of Directors to have Mr. Greg Abel succeed him as CEO at the conclusion of this year.

At nearly 95 years of age, Buffett’s record as the greatest investor of all time stands firm. His recall of both current events and those 60-70 years ago was incredibly strong throughout the over 4 hours of question and answer. Buffett’s commonsense approach to investing, policy, and living have been a timeless draw for shareholders from all over the world. It was the late Charlie Munger who let slip a few years ago in a meeting that “Greg would preserve the culture” and in subsequent meetings it became more and more apparent that the leadership transition had happened without fanfare and under our noses. Buffett’s comments today also affirmed his support of Abel in that he plans to keep every share he has in the business. He qualified that it was an economic decision, “because I think the prospects of Berkshire will be better under Greg’s management than mine.” A truly breathtaking statement from the man who turned a failing New England textile mill into a trillion-dollar business, hitting all time highs in price with Friday’s close.

Berkshire-Hathaway is a cornerstone holding across all strategies and portfolios at Hudson Value Partners. Mr. Buffett’s 60 years of stewardship have been nothing short of exceptional. Like him, we have confidence in Mr. Abel and all of Berkshire’s managers to navigate the challenges and opportunities of the decades ahead with the same discipline, ingenuity, and integrity that have benefited Berkshire-Hathaway shareholders for 6 decades.

Below we will share the top 5 ideas that came up in our conversations as a firm, at conferences, and with investors from around the world from the past few days in Omaha:

1) Berkshire may ultimately repurchase Mr. Buffett’s shares after his estate donates them to charity

• Christopher Davis first shared this idea in his post meeting letter in May 2024. Sitting in the stands, it struck him at last year’s meeting how many times Buffett returned to how hard it is buyback large blocks of Berkshire stock and how much he likes seeing the wealth that Berkshire has created being given back to society. We believe HVP was the first (or among the first) to go public with this idea in an interview live from the NYSE on Schwab Network on September 30, 2024 (video).

• The “big buyback” is an idea now a part of the conversation and calculus for many shareholders.

2) A needle moving acquisition for Berkshire might have to be done with stock, not cash!

• While the firm has over $340 billion in cash, sellers of truly large, needle-moving businesses may not want the tax impact of selling the business for cash.

• Berkshire might be able to solve future liquidity needs for some of the largest family-owned businesses in the world like S.C. Johnson, Koch Industries, or Cargill.

• Berkshire has used stock for large acquisitions in the past like Burlington Northern Santa Fe Railroad in 2009 or the General Re acquisition in 1998.

• Stock acquisitions are more attractive if Berkshire management sees the shares as close to or above their estimate of intrinsic value.

3) Investments in the 5 Japanese Trading Houses

• Berkshire’s investments in the 5 Japanese “trading houses” Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo began in 2020.

• It was revealed in the meeting that although Buffett was the one who identified the opportunity - “turning the pages” looking at Japanese stocks - it has since been Mr. Abel leading the ongoing dialogues with the firms, and visiting with them several times a year.

• Notably the scale of these public market investments overseen by Mr. Abel at over $23b is likely more than either Berkshire equity portfolio managers Mr. Combs or Mr. Wechsler currently manage individually.

• In the meeting, Mr. Abel spoke about the cultural similarities between Berkshire and the trading houses and the potential for these investments to be a springboard for joint ventures and deals around the world with each of the firms.

• They reiterated their intention for these to be investments for the next 50 years.

4) GEICO is back on track

• Mr. Combs who was originally brought on as an equity portfolio manager, has also been the CEO of GEICO since January of 2020.

• GEICO had been losing share to Progressive and others and was behind in telematics (devices that track driving behavior) and pricing.

• Today it was revealed that a revamped GEICO now has a combined ratio in the 80-90% range, which is incredible. This means that their underwriting profits are over 10%, when very good insurance operation may only have a 5% profit.

• Combs also overhauled the technology of the firm and Mr. Jain believes they are leaders or peers in the industry with the best of telematics and pricing.

• Surprisingly, Mr. Jain reported “tens of thousands” of jobs were cut at GEICO in the overhaul.

• That could very well be a taste of the changes to come within broader Berkshire as they seek continuous improvement under the leadership of a new generation.

5) Utilities are tougher places to be

• Just like Mr. Buffett confessed the sin of that one time they paid a 10-cent dividend in 1967 in this year’s letter, he also admitted the biggest mistake in the PacifiCorp acquisition was not to break up the west coast utility into companies divided by state to ring fence the liabilities.

• They admit the legal and governmental environment in some states is trying to make utilities the “insurer of last resort” in the case of wildfires has lowered the value of these businesses substantially.

• They do, however, still believe that Berkshire-Hathaway Energy will be able to deploy meaningful amounts of capital to earn regulated rates of return, especially with greater power demand needs and an aging grid.

• Mr. Buffett made a plea for more federal coordination of electric grid policy and planning amid the patchwork of 50 states of regulations, plans, and differing environmental targets.

• This reaffirms our view at HVP that utilities (beyond those owned inside our Berkshire holdings) are best viewed through our special situations framework.

Stay tuned for our takes from the Markel Shareholders Brunch on May 4^th and we will also be sharing our list of the best 2025 meeting quotes from Mr. Buffett and Mr. Abel in the coming days as well.

Prior to the meeting, InvestmentNews’ Gregg Greenberg checked in with HVP for our thoughts. You can read the comments in that article here.

Politicians have the spin cycle after the news comes out. For investors, right now we are in what we call the “agitate” cycle - left/right up/down as the latest news and information gets digested by markets. We worked to get our quarterly investor letters out as quickly as possible to our investment management clients given everything happening in markets. If you would like us to resend a copy of those, please contact your HVP team member as our views have not broadly changed since then.

This month we are going to take a slightly different approach, and call it a HVP Risk Dashboard - In Action. On April 7th, our Christopher Davis gave an interview after the market close on how we are making sense of and looking for opportunities during this sell-off. Our views are backed by HVP Research and in the interview, Christopher mentioned several of the indicators, charts, and factors we look at. For this edition, we will be showcasing the data points he mentioned in the interview so you can see them in action!

We recommend giving the video (6 mins) a watch first or watching it side by side with the charts.

Watch Video

Why this market sell-off is different (0:00 - 0:58)

• Market declines can be broadly grouped into 3 types - cyclical (those driven by the business cycle), systemic (think 2008 Financial Crisis), or shock driven (COVID).

• Tariffs so far have created a shock driven sell-off. These sell-offs may turn into cyclical downturns, but they do not have to.

• We find works by Howard Marks (Mastering the Market Cycle (2018)) and Peter Oppenheimer (The Long Good Bye (2020) and Any Happy Returns (2024)) to be instructive when thinking about market cycles.

Manner in which this can be resolved…Can markets move higher? (0:59 - 2:45)

• Removal of uncertainty will be a positive for markets.

• 50 Countries (now over 75) looking for trade deals directly with the US.

• Markets want to see off-ramps; to see a template for trade deals and how things are resolved.

• A trade deal with China will be the toughest, but that is the part this probably the least surprising to investors.

• Friday April 4th, on news that Vietnam was seeking to negotiate a deal, companies exposed to manufacturing there rallied sharply.

• Monday April 7th, what on that day was fake news about a 90 day pause on reciprocal tariffs sent stocks higher temporarily.

• It is clear that markets were willing to higher on good news (a healthy sign) as they did when subsequent to the interview on April 9th, a true 90 day pause was announced around 1:30pm EST.

Bottoms are a Process - Indicators to Watch (2:46 - 3:40)

Click/Tap to Enlarge Each Chart

• It’s devilishly hard to call a bottom no matter how many indicators or charts you have.

• No chart or indicator is infallible.

• But we use our Risk Dashboard to have a constellation of indicators and factors to be able to challenge and test our views as we seek to develop confidence.

Stocks Closing Above their 200 Day Moving Average (5 Year Chart)

NYSE Stocks Making New Lows (5 Year Chart)

Economic Policy Uncertainty Index

Year to Date 2025 US Stock Trading Volume (billions of shares)

Looking for Opportunities (3:41 - 4:30)

Bloomberg “Mag 7” Index (Blue Mountain) vs S&P 500 Index (top green line)

• The rate of change has been dramatic in markets. While the broad market level is still expensive, there are many stocks across sectors that have become cheaper than the overall market average itself.

Change in Regime = Change in Market Leadership (4:31 - 6:13)

• The change from a bull to bear market regime typically brings about a change in market leadership. This does not occur immediately however.

• The present policy changes which seek to reorder the global trading environment mean that it will take time for winners and losers to shake out.

• It is time to start looking at businesses, especially those high quality businesses that are often more expensive stocks and start asking the question, What do you want to own when the market turns? What do you want your portfolio to look like in 3-5 years?

• Changes in leadership mean investors should be looking beyond technology and be selective within technology too - there are real differences between hardware, software, cloud, and advertising driven businesses.

• We look at relative strength measures to see which areas of the global market are rising to the top and which might be so un-loved that they demand a look too. The tables below don’t necessarily drive us to buy up an entire sector or country, but rather help to guide us to corners of the market to do further fundamental work on.

A look at Relative Strength in Broad S&P 500 Sectors:

Click/tap to enlarge

A look at Relative Strength Around the World:

Click/tap to enlarge

Looking Forward…

Themes to Takeaway from Mid-April 2025

Bullish Themes

• Trade negotiations are underway.

• Market uncertainty and volatility can create opportunities.

• Shock driven sell-offs and bear markets have the potential to be resolved more readily than those of a cyclical or structural nature.

Bearish Themes

• Consumer and business sentiment indicators have weakened, even more so along political party lines. That can create a negative feedback loop of less spending, layoffs, higher unemployment, further declines in spending….

• Uncertainty will lead to lower earnings forecasts from many firms and downward revisions, if not outright guidance pulls. Stock prices are lower, but their earnings are in question. We know the P in P/E Ratios, but it is the E that is in doubt.

• Bond and foreign exchange markets have by some measures displayed even more volatility than stocks, which can be a warning sign.

Keep your eye on

• How the market reacts to the first trade deal being announced - whenever that is and with whatever country it happens to be.

• If any shortages of goods begin to emerge on store shelves.

• United Airlines (UAL) rather interestingly offered 2 versions of their guidance - recessionary and non-recessionary. That’s rather unusual and may start at a trend of companies doing so. It points to how exogenous the tariff shock really is.

We must have missed…

When “tariff” became a verb as well as a noun…

e.g. “We will tariff them…”

(via Merriam-Webster)

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

Coming Soon…

Look for a special edition of the Risk Dashboard in early May, with our takes fresh from Omaha at the Berkshire-Hathaway annual meeting!

Markets were swept up by optimism after the election. In 2017, many of the pro-business policies such as deregulation and tax cuts came before the attempts to recalibrate relationships with America’s trade partners through tariffs. This time the vinegar came before the honey and markets didn’t quite expect it.

In our January note we had Treasury Secretary Scott Bessent in our “Keep an Eye on” list – his performances so far in the press have been strong and it is notable the degree to which he is traveling the world on behalf of the administration. Surprising investors who were used to the first Trump administration using the stock market as a barometer of success, Bessent has been unmoved by price-action and focusing on the fiscal house. For all the attempts to paint the president as focused on the billionaire class, policy actions have been decidedly populist and Main Street oriented.

In the past few years, diversification across industries, company size, and geographies was not as rewarded as had been in the past – earning it the sobriquet diworsfication ! But in 2025 it has paid off so far.

Stocks can handle a few unknowns and variables being in play – perhaps up to 3. But when those question marks approach a half dozen – Tariffs? Trade war? Gaza? Ukraine? Deportations/Labor Force? Cuts to Spending? – it becomes much tougher for market participants to price. As such, our outlook remains choppy, but constructive so long as some of these variables begin to be resolved.

10 Surprises Check-in

#7 China being a political focus but investors looking at India more… China is certainly in geopolitical focus, and Chinese stocks have trounced their India counterparts so far this year. While there are still 3 quarters to go, this one is looking like a swing and miss on the investment front. A good reminder that sometimes simply being so cheap can still be enough of a catalyst!

As for sports becoming more of an asset class, all we can say is…play ball:

Themes to Takeaway

Bullish Themes

• Economic indicators, while slowing, are still positive.

• Germany’s radical mindset shift may portend long term fiscal growth stimulating the continent.

• Innovation hasn’t stopped in technology, healthcare, or applications of new ideas

Bearish Themes

• Sentiment indicators have weakened, even more so along political party lines.

• Uncertainty will lead to lower earnings forecasts from many firms and downward revisions.

• The indexes are still top-heavy and cheaper pockets don’t matter as much to the aggregate.

Keep your eye on

• The 10 Year Treasury yield which has clearly become the focus point for the administration - 30 year mortgage rates tend to be correlated to the 10 year over the long term and a lower 10 year improves the ability to refinance the US debt.

• Any clarity that may emerge from the much anticipated April 2nd tariff announcement from the White House.

Whatever happened to?

• “I don’t think we should ever shake hands again” - a public health official 5 years ago in the pandemic.

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

Lies, Damn Lies, and Economic Statistics

Atlanta Fed GDPNOW!

Y= C + I + G + Xn

March 18, 2025 Estimate: -1.8%

*Note: there are some distortions from large scale gold imports during Q1 as well as import pull-forwards due to tariff concerns that create noise in the Net Exports (Xn) component. For example, Bloomberg’s competing GDP Nowcast takes into account some of these factors and comes to a positive +1.79% (as of 3/24/25).

Alternative Looks at the Labor Force:

U6 Unemployment calculated in the pre-1994 adjustment method:

27.40%

(John Williams’ Shadow Government Statistics February 2025)

Tech Sector Layoffs:

2025: 23,382 employees /89 companies

2024: 152,074 employees/546 companies

2023: 263,180 employees/1,191 companies

2022: 166,269 employees/1,064 companies

Federal Sector Departures & “DOGE” Cuts:

Total YTD Federal Departures: 116,033

…of which DOGE Layoffs are: 38,791

(layoffs.fyi as of 3/24/2025)

Global Central Bank Postures

The Movement of the US Treasury Yield Curve

Blue = Current; Red = 6 months ago; Yellow =1 Year Ago

Net % of Banks Tightening Lending Standards for C&I Loans

Looking at Housing

Canary in the Coal Mine: FHLB Borrowings

Performance of Gold in Major Currencies - % Change

Broad Market Levels

Top Panel/Blue = SPY; Middle Panel/Green = HYG; Bottom Panel/Red = CMBS. As of 3/25/2025.

Moving Averages

S&P 500

Nasdaq

Dow Jones Industrial Average

Berkshire Watch

(Charts as of 3/25/25)

A Look at the S&P 500 Sectors:

A look around the world:

Seasonality

Average Daily S&P 500 Index Returns over the Past 20 Years:

1-Year Trailing Chart of the VIX with RSI

Sentiment & Technical Indicators

Insider Buying & Selling

Top Buys in the Last 3 Months (as of 03/24/25 via Bloomberg)

Top Sells in the Last 3 Months (as of 03/24/25 via Bloomberg)

CNN Fear & Greed Indicator

That’s all for this edition - see you next month!

Notes:

We are pleased to share a monthly version of our internal Risk Dashboard with our clients and subscribers from the investing public at large. A few reminders:

• The HVP Risk Dashboard is not an equity or credit research product and not a specific recommendation to make any investment decisions.

• Data is generally presented here without comment.

• HVP and affiliates may have positions in or against any securities referenced.

• This is a chart heavy report. Clicking or tapping a chart will open it in a new window. While we all live on our phones, the best viewing will probably be on a larger screen such as your iPad, laptop, or desktop.

• The Risk Dashboard is complimentary for HVP clients and institutional partners. Members of the investing public can subscribe for a low monthly fee.

More than halfway through Q4 earnings season, Bloomberg aggregate data shows sales growth at about 4.61% (vs 4.63% last quarter) and earnings growth at a solid 8.88% (vs 5.4% last quarter) with 1639/3095 companies in the data set reporting. (As of 2/20/25).

As we have cautioned in prior HVP Risk Dashboards, it is important to pay attention to implemented policies versus those simply talked about. The 48hr US/Mexico/Canada trade war is a good example. Little has been implemented - for now.

While aggregate numbers have so far been strong in earnings season, it hasn’t been necessarily as satisfying as an investor to watch. This excellent Bloomberg Intelligence chart details the rather muted reactions stocks are having to good news this quarter - the smallest since 2Q of 2023 (click image to enlarge).

In HVP news we were delighted to catch up with investing friends at the 28th Annual CSIMA conference at Columbia University on 2/7 in NYC. Our Christopher P. Davis spoke on a panel and shared why we started HVP, our process, and one recent stock pick.

On the same trip, Christopher stopped by the NYSE to make the case for 3 recent purchases as well. You can view the clip below.

Click Here to Watch!

10 Surprises Check-in

#1 about DOGE having a national impact - it very much seems so - and not just in media palpitations.

#2 about investors reassessing NVDA market share expectations due to challengers in AI chips. 1/2 way there - it wasn’t a chip challenger, but a cheaper model from DeepSeek.

Themes to Takeaway

Bullish Themes

• GDP Now and other macro productivity indicators are strong.

• Earnings reports have been solid.

• Tariffs have been more bark than bite.

Bearish Themes

• The broad stock market in the US is expensive on a historical basis.

• The Magnificent Incumbent 7, have been weak this year.

• Inflationary measures may be ticking back up.

Keep your eye on

• European politics as they continue to unravel; the leadership vacuum north of the border in Canada.

• Layoffs - not just from DOGE, but major corporations as well. Efficiency may become a movement.

• Changes in healthcare and food regulation.

Whatever happened to?

• All those people who got into the Airbnb and short term rental game in the ZIRP/COVID era?

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

Read more

Shoot the leading edge of the target - not where you think the target may fly. The shooter must connect with the target, move with it, and then dispatch it.

Right now, a few more investors than usual are taking shots with the buy and sell button and hoping that the target just happens to fly into their shot stream. That’s a tough approach!

As ever, it is important to understand the valuation of the broad market, especially as it relates to what you own. As markets have become more indexed and stocks get bought and sold en masse correlations have gone up. That doesn’t mean there is less merit in owning cheaper stocks with a margin of safety. You just might not be immediately rewarded for it.

As we talked about a few times last year, 2024 was the largest global election year in history - more people voted in more countries than ever before. It confirmed that for politicians, inflation is a deadly disease and a few more victims were found this month. New governments mean new policies, but all the old problems are still here. As solutions are tried, we will be eager to watch what happens to business confidence, the tone of managements on earning calls, and consumer sentiment.

In December, we issued our 10 Surprises for 2025. We are going to do our best to call the balls and strikes during the year to continue the fun. So far #8 about the streaming wars is looking like a strike and #6 about Japan is showing some promise as Honda and Nissan try an outside of the box merger. If you follow us on X, we will aim to post updates on these as they happen and review the misses at the end of the year.

We are also thrilled to share that HVP’s Christopher P. Davis will be a speaker on the Emerging Managers Panel at the Columbia Business School CSIMA Value Investing Conference on February 7th in NYC. We are honored to have HVP represented at the spiritual home of Value Investing.

Themes to Takeaway

Bullish Themes

• GDP Now and other macro productivity indicators are strong.

• Policy certainty may start to emerge and investors will have actions, not rumors to work with.

• Early earnings reports from the banks on 1/15 have come in strong.

Click here for Bonus Video From the First Day of Trading in 2025 - Sectors to Watch

Bearish Themes

• The broad stock market in the US is expensive on a historical basis.

• The impact of tariffs are challenging to model.

• US Debt & the Deficit remain in focus; bond yields have been skittish to the upside since the election.

Keep your eye on

• Scott Bessent and how Treasury Issuance (Mix between Bills/Notes/Bonds) changes.

• Tariff fears causing some pull-ahead in ordering.

• Earnings Growth vs Sales Growth as companies report. Is it efficiency, margins, and price hikes, or more sales?

Whatever happened to?

• Non-meat meats

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

And now since December was our Special 10 Surprises for 2025 edition, we have a trio of extra “Charts of the Month” for you!

Holiday Spending

(Click for Source)

Yen (Blue Line, Right Scale) vs NASDAQ ETF (Mountain, Left Scale)

Spot Bitcoin (Mountain, left scale)

vs US Money Supply (Blue Line, right scale)

Read more

In the tradition of the late strategist Byron Wien, Hudson Value Partners is delighted to share our inaugural list of 10 Surprises for 2025. For our fundamental research team, preparing this list is a chance to cast a wider gaze. We consider a “surprise” to be an event with a 50/50 chance, yet only 1 in 3 are even considering. Predictions about the future are notoriously difficult, but we hope our “10 Surprises” spur investors to think about the wide range of possibilities for 2025.

1. The much-heralded Department of Government Efficiency will have a national impact.

2. Nvidia will face a meaningful challenger in AI chips. Investors will reassess their market share expectations.

3. Ukraine will not join NATO or the EU. A demilitarized zone will emerge as continued conflict proves too costly for all sides.

4. An unexpected company will emerge as a leader to help businesses implement AI tools.

5. Tariffs – however they are enacted - will not have consensus impacts.

6. Corporate governance reform will help Japanese stocks, but the Bank of Japan will face challenges raising rates.

7. Politicians will stay focused on China, but investors will increasingly look to India for opportunities.

8. The streaming wars will end with Netflix and YouTube winning. A merger will occur among at least two of the also rans.

9. The media will realize that Gen Z and millennials actually have an attention span and learn from successful long-form podcasts and interviews designed to share viewpoints rather than make soundbites.

10. Private Equity ownership, the continued rise of legal gambling, and publicly traded teams will combine to make sports a more widely held asset class.

About Hudson Value Partners

Hudson Value Partners is an employee-owned boutique investment manager, serving private wealth and institutional clients. We take a modern, opportunistic value investing approach, driven by an experienced team that conducts research and builds world-class portfolios that prioritize client interests. The firm has a partner-oriented, client-centric mindset that serves a diverse group of individuals, families, businesses, and nonprofits, positioning them as trusted family advisors and stewards of their clients’ irreplaceable assets.

Media Contact

media@hudsonvaluepartners.com

It should not be assumed that future performance of any specific investment or investment strategy will be profitable, equal any historical performance level(s), or prove successful.

The HVP Risk Dashboard will resume its normal chartbook format in January 2025. Happy New Year!

The 10 Surprises were released in a Business Wire Press Release here.

White House advisers kept telling Manchin not to worry. One pointed to how 17 Nobel laureates said inflation would be transitory. Manchin shot back: “You’ve got 17 educated idiots telling you what you want to hear.”

WSJ 11/17/2024

The US election is behind us. Stocks initially rallied and then have been giving some of those advances back in what we see as a healthy digestion of gains. As we mentioned in last month’s Risk Dashboard, we focused more heavily on the earnings reports that came out in the lead up to the election than on the market swings along the way. The quantitative results from earnings season were strong and management commentary tended to hit optimistic notes.

The pattern, however, of companies beating consensus estimates on Earnings Growth with a greater frequency than on Sales Growth continued as we have often seen for the past few years. These types of beats are more indicative of cost cutting and efficiency efforts than pure growth. More from less is great, but that can only a get a company so far. Eventually to get more earnings you need more sales. This concept of the “consensus” is what we will focus our November Risk Dashboard note on.

At the top, we put a quote from Monday’s Wall Street Journal attributed to outgoing Senator Joe Manchin (I - WV). The article discussed the impact of inflation on the election, but that quotation jumped off the page as a classic example of the dangers of groupthink. A concept coined by sociologist Irving Janis in 1971 (brief summary article by Janis), groupthink is the phenomenon in decision making where groups can sometimes lead to and self-reinforce the wrong decisions. Pride, hubris, and an unwillingness to consider disconfirming evidence are all symptoms of groupthink. Janis’ original example is an analysis of the botched Bay of Pigs invasion, but relying on the wisdom of 17 Nobel Laureates, in the face of quantitative data and the contrary experience of everyday people, is a classic example as well. Indeed, the “amateur” Senator was correct to be worried when the “experts” were brushing it off.

We think this is an important example to remind ourselves of as we are now confronted with an unnerved media and financial press amid many unknowns about the course of economic policy. Those unknows do not dissuade commentators from speaking in absolutes or groupthink consensuses to rapidly emerge. Recent moves are what HVP CIO Paul W. Davis, CMT likes to call “shoot, ready, aim” investing. As we learned in the prior Trump administration, it will be more beneficial for us to focus on actions and implemented policies than to get whipped around by rhetoric and style. Tools like this Risk Dashboard are ways to take the emotion out of decision making, to focus on the numbers, and what the charts are telling us to build our own mosaic of the current environment. As ever, it is of critical importance to enter the market with an open mind. In the words of Shunryu Suzuki - “In the mind of the expert, the options are few. In the mind of the beginner, the options are many.” Backed by experience, we’ll try our best not to be hindered by it - embracing the power of a beginner’s mind.

Bullish Themes

• GDP Now and other macro productivity indicators are strong

• Talk of deregulation and tax cuts are generally bullish for equities

• A more business friendly M&A environment will support public companies, as well increase capital markets activity among Private Equity and Venture Capital owned firms - VIDEO BONUS on the topic from Schwab Network:

Bearish Themes

• Investors and the incoming administration are focused on the national debt and deficit - spending cuts could be coming

• The impact of tariffs are challenging to model

• Global wars may pick up steam during the lame duck period adding to instability

Keep your eye on

• The Department of Government Efficiency - how and will it work?

• Are you starting to use AI in your work and daily life?

• Housing sentiment and mortgage rates

• Political Betting Markets

Whatever happened to?

• “MyPlate” - the successor to the food pyramid.

We also are working on a special December edition which will look to 2025 in creative ways.

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

Read more

“When your work speaks for itself, don’t interrupt.”

- Henry J. Kaiser

There are probably only a handful of times in the collective careers of the HVP team where all the data gave us “green lights” - and even when everything points to one thing that can be an uncomfortable place too as things can’t improve from there. In this month’s HVP Risk Dashboard, we find ourselves trying to make sense out of dissonance and to parse the short term noise from long term trends.

As investors, our views get expressed through the stocks we own for our clients. Stocks are leading indicators and much of the economic data we get is backward looking or at best, a coincident indicator. As earnings season picks up, we think it will be a “something for everyone” type of quarter - able to create a bullish or bearish narrative depending on your slant. Looking at the price action in markets starting this week (week of 10/21/24) it has begun to feel like we are in the pre-election washing machine - with the markets on the “agitate” setting. We touched on this in our Q3/Autumn investor letters, but we think this earnings season in particular it is most important not to overreact to any stock price moves as the marginal trader (or even punter!) is trying to game it all through the lens of a US presidential election that’s on a knife edge. We are lucky that our investment horizon extends beyond any one presidential or congressional cycle and that great companies find ways to grow stronger no matter the political leadership.

That said, the U.S. has certainly changed since the 2020 election. We always like to look at big picture trends and the map below from the Tax Foundation is the most recent we could find showing how the population has moved in the years since then:

Blue counties have gained in population and yellow counties have lost population. People talk about migration to the sun-belt and lower tax states, but it is interesting to consider also that there has been migration within those states and the people who move sometimes bring the political leanings of their home state with them.

Turning back to stocks, our intention is to listen to as many earnings calls as we can and weigh those mosaic pieces more heavily than any short term price movements in the coming weeks.

Bullish Themes

• GDP Now and other macro productivity indicators are strong

• Margins appear to be holding up at the company level

• Fiscal spending looks set to continue in the US and globally no matter election outcomes

Bearish Themes

• The strength of gold is telling us something very different than reported inflation statistics

• Markets will one day start caring about national debts

• After a short lived pop in March of 2024, ISM Manufacturing measures have spent most of the past 2 years under 50 - meaning “in contraction” (chart below)

Keep your eye on

• India

• BRICs meetings and currency rumblings

• If a geopolitical risk premium starts to show up in commodity markets - especially oil

• Anti-trust & monopoly lawsuit announcements vs. announced M&A activity

Whatever happened to?

• All the ways 5G was going to change our lives?

We’re excited for the November HVP Risk Dashboard as the world might just be able to focus on company level results again by the time we put the report together. We also are working on a special December edition which will look to 2025 in creative ways.

If you haven’t already….

Follow Us On X

Connect With Us on LinkedIn

Read more