Quarterly Letter - Q1 2025: The Empire Stumbles, the Underdogs Rise
Why U.S. Markets Faltered, Europe Surged, and Hidden Gems Thrived
The first quarter of 2025 was a stark reminder that markets move fast, and narratives shift even faster. While the S&P 500 stumbled amid renewed trade war tensions and tech stock unwinding, European equities surged ahead, marking their strongest relative outperformance in decades. U.S. tariffs reshaped investor sentiment, causing capital rotations and sectoral divergences. But amidst the turbulence, hidden opportunities emerged – from industrial consolidators like Germany’s MBB SE, to the software roll-up strategy of Topicus.com, to MDA’s booming space tech backlog. This quarter’s letter explores how shifting macro forces are opening up new areas for growth, why diversification beyond the U.S. is now more critical than ever, and how our focus on undiscovered excellence continues to uncover resilient, high-quality businesses poised for long-term value creation.