Dear Partners,
Our partnership interest rose 21.1% in Q2, raising year-to-date performance to 25.3%. The S&P 500 Total Return Index gained 10.9% in the quarter and is up 6.2% year-to-date.
These results reflect a shift in market temperament. The second quarter marked a turning point: conviction was no longer just tested, it was rewarded. We're encouraged by the outcome, and even more by the insight it offered.
Letting quality and time compound
The gains this quarter came from companies we've owned for years: ASA International, Dino Polska, Inter & Co, Puuilo, Mader Group, Jet2, and goeasy. These are businesses we've come to know thoroughly, through years of research, engagement, and lived volatility.
What mattered this quarter wasn't what changed, it was what didn't. Balance sheets stayed strong. Cash flows grew. And management teams continued making rational, long-term decisions.
Fading positions, lasting lessons
Our 2020 investment in Goodfood Market remains one of the clearer lessons we've taken away over the years. The real issue wasn't the initial misjudgment. It was staying in the position too long and failing to adjust when reality diverged from thesis.
One of the few consolations of a stock that has declined meaningfully is that it no longer poses a risk to the portfolio. As the winners grow over time, the impact of very small positions naturally fades into the background.
To their credit, management has since taken meaningful steps toward a turnaround, showing discipline and reimagining the business through targeted M&A. While the outcome remains uncertain, the effort is real, and it deserves recognition.
Simple models, durable results
In contrast, our 2023 investment in Puuilo continues to reaffirm the value of owning businesses with clear economics. Puuilo sells essential goods from modest stores in lower-rent suburbs in Finland, turns inventory quickly, and funds growth from internally generated cash flows. The model is easy to describe and, more importantly, easy to monitor.
There are no hidden levers. We can track foot traffic, store count growth, margin stability, and cash conversion with a high degree of visibility. When something breaks, we'll know. Until then, we'll let it grow. Our position is nearing a 100% return since initiation. The business isn't exciting. But it's highly profitable. And it works.
When engagement drives value
Our investment in ASA International, five years ago, wasn't smooth sailing. At one point, the stock was down over 40% but we saw enduring strength in the business model. Rather than exit, we rolled up our sleeves, engaged management, and stayed close to the facts. With improved performance and a new CEO, the stock is up approximately 80% this year. The business is also better positioned to grow sustainably, without compromising its social mission of supporting the lowest-income women in frontier markets.
This past April, I joined the board as an independent non-executive director. That gave us a front-row seat, not just to observe, but to influence and transform.
How we think, at scale
Behind our results was another quiet transformation, one that changed how we generate insight.
In a world of information overload, speed and precision in research are no longer optional. As our universe expanded across geographies, languages, and filings, the constraints of a purely manual process became obvious. Late last year, we rethought our research process. Rather than hiring analysts, we hired engineers. Rather than building decks, we built systems. Rather than summarizing, we built tools that read. We didn't replace human judgment, we scaled it.
These efforts resulted in Phoenician Intelligence™, our proprietary AI platform powered by large language models. It reads filings, parses transcripts, surfaces anomalies, and runs valuations and due diligence, purpose-built to mirror our investment process, delivering insights with speed and accuracy that were previously unimaginable.
In one case, Intelligence flagged an accounting inconsistency in a European small cap that would have taken weeks to uncover by hand. It surfaced the anomaly in under two minutes. This is not a gimmick. It's a real edge that augments, not automates, judgement, and it compounds quietly behind the scenes, just like the companies we seek to own.
A deliberate path forward
We are currently underwriting two new opportunities that align closely with our investment criteria: businesses with clear pricing power and led by high-caliber founders with a proven track record in capital allocation. In both prospects, we believe there is a meaningful discount between market price and intrinsic value, reflecting the kind of asymmetry we actively seek.
Our pace remains deliberate: not to act quickly, but to act precisely, when the evidence supports a long-term commitment. This quarter marked a realignment, not around any single company, but around the enduring principles that drive long-term compounding. Thank you for your continued partnership. We wish you a pleasant summer and look forward to reconnecting in the fall.
Cordially,
John G. Khabbaz