Quarterly Newsletter: 1st Quarter, 2026

Financial Planning

If you’d like help organizing your financial life and putting together a financial plan, we can help. We help organize income, expenses, assets, liabilities, insurance coverages, and estate documents. We do this to make future financial decisions easier and to estimate your future cash flows. This can help improve the probability of successfully accomplishing your future financial goals, and ensures you are protected against any risks you’d like to be protected against.

When you have any major life changes, we update your financial plan too.

Investment Commentary

The effects of tariffs on inflation throughout the world has started to show up in economic data. As we mentioned in previous newsletters, the potential for higher inflation has risen significantly since largescale tariffs were introduced in the US last April. Tariffs are essentially an additional tax on consumers collected by a government. We’re seeing this increase anecdotally through our conversations with clients too. Inflation acts like a ‘brake’ on economic activity when it rises too quickly as we’re able to buy less as our costs increase. Despite the inflationary headwinds, economic growth is still stable thanks to massive spending connected to the Artificial Intelligence boom and the build out of infrastructure to support it. At an individual/family level we’re seeing and hearing about tightening budgets and difficulty meeting expenses.

With the US Supreme Court ruling in February that said many of the original tariffs are illegal, new tariffs were put in place which are slightly less onerous. However, with the war in the Middle East beginning shortly after, there are now other, much more powerful forces that are contributing meaningfully to inflation. If that conflict continues prices may rise considerably for many core expenses.

More importantly, we are concerned about and here for anyone that is impacted by the war in the Middle East. No one benefits from war and it is rarely justified. Hopefully this is a temporary period, but it is a very dangerous one. Our actions in Iran have been very similar to the actions of Russia in 2022 and their ‘special operations’ in Ukraine.

When there are major events that have the potential to impact our lives significantly, it’s sometimes tempting to want to ‘sit it out’ when it comes to investing. Investing is about focusing on the long-term and making decisions based on what we see as probable outcomes over the next five, ten, and twenty years.

Often, when we have significant issues like tariffs, growing civil unrest in the US, and wars in Europe and the Middle East, investment risks are increasing too. At least in the short-term. That is true today. What is also true is that these risks often provide an increasing number of investment opportunities. This can sound callous when we consider the humanitarian side of these issues. However, by focusing our energy on investing in high quality companies that treat all their stakeholders well, we’re able to help them to grow and prosper, while increasing our own wealth too. Increasing our wealth gives us options and makes us better able to do what we can during times of crisis.

The companies we have approved for investment are leaders in their respective industries, and, regardless of how the current issues play out, their businesses should perform well. Their stock prices may go down temporarily with the overall stock market, but that doesn’t change the underlying performance of the businesses. As owners of a company’s stock, we are owners of the underlying business, and we ultimately make money as the company makes money. The more money they make, the more money we make. Stock prices change with human emotion (often significantly during difficult times) but will move upwards (often significantly) when investors focus on what matters for investment returns – a company’s ability to make money. Currently, a lot of the companies we own are priced very cheaply and, in many cases, they have been getting even cheaper – which can act as a drag on investment performance.

This often happens in the later stages of ‘bubbles’ where a disproportionate amount of investment funding goes towards the bubble area, as investors increasingly fear missing out and get caught up in the euphoria of quick and ‘easy money’. The current bubble area is Artificial Intelligence, and anything connected to it.

Additionally, because so much of the investment market has become owned by passive investment funds (funds that are invested solely based on an index like the S&P 500 or the FTSE 100, without any active decision making to select investments), this is accelerating the imbalances caused by bubbles. An estimated 53% of the US market is passively invested. This means fewer experts are responsible for selecting investments for an increasing number of investors. This isn’t sustainable.

The good news is that if we are correct about the long-term money-making abilities of the companies we own, their stock prices will move upwards (likely significantly) once investors move their attention from ‘the next big thing’ to what consistently makes money and continues to grow that money making ability.

To be clear, Artificial Intelligence is important. Like the internet, companies that don’t find ways to incorporate it into their operations are more likely to struggle to maintain their competitive edge and may shrink or go out of business. However, once appropriate regulations are put in place to govern the use of AI, much of what has been done so far will prove to be illegal. The internet gave rise to many companies that took advantage of limited regulations and were responsible for a wave of intellectual property stealing (e.g. Napster). Many of the largest AI companies have built their models on the theft of other people’s ideas – mostly from artists (musicians, authors, creators, etc.). Using our own intellectual property to learn from and avoid past mistakes is valuable. It helps us become efficient more quickly and to collaborate more easily with others. Using intellectual property that isn’t ours without consent and without compensation is theft.

In our last newsletter we used some of our current/most recent investments to discuss catalysts that we look for to indicate a company has turned a corner. Catalysts that will enable a stock to become more widely noticed and start to drive its stock price and significant future outperformance (see 2025-Q3 Quarterly Newsletter for examples).

We have done the same this quarter (including some potential investments we’re currently researching) to explain some of opportunities were finding currently.

Adobe, Inc. (a recent new investment)

Adobe is a global leader in creative software, digital marketing, and document management solutions. Known for creating the PDF, they have grown significantly into the premier partner for creatives. They also pioneered the subscription model of service which made their revenues and profit much more reliable.

We have a good understanding of the internal culture thanks (in part) to our relationships with Adobe employees. They have created an environment that helps retain employees for the long-term. That stability has helped to fuel significant growth in revenues, profits, and stock price for the past 40 years. Software as s Service (SaaS) companies like Adobe have seen their stock prices drop significantly over the past few years as fears have grown that AI will take a large portion of their business. We started buying Adobe stock after a 50% drop in price.

With Adobe’s culture of evolution and growth, it’s highly likely they will take advantage of the AI revolution to become even more valuable to their clients. They are already implementing AI into their systems in a way that minimizes any legal issues as they own all the content used to train their AI models. This is another sign of their ability to grow and transform in a way that is relatively safe and predictable while taking advantage of AI.

The catalyst for Adobe will be the continued growth of revenues and profits (currently around 10% per year), as well as the continued build out of AI related revenues and profit (currently growing very quickly). This will likely take time as the fear of AI hurting their business is extremely high currently.

The Walt Disney Company (a recent new investment)

Disney is a premier global entertainment company operating in media and experiences. It’s one of the world's largest media companies. It has struggled for almost 10 years as the media industry has changed rapidly after Netflix and Google upended the previous way of making money on their content. The move to direct-to-consumer TV/film through our internet connection has been the biggest driver of these changes. Disney’s experiences segment has continued to grow from strength to strength during this period, but its media business has been a drag on its performance.

With the change in delivery mechanism from cable/satellite to internet they were forced to win back millions of customers by offering very low, initial teaser subscription rates. Most of this work has been completed and their media business is starting to produce significant revenue and profit again now that they have raised their cost of subscription to a more reasonable (and still acceptable) level. This is likely to continue for the long-term, as the hard work has been done. With more of their media business being direct to consumer now, this cuts out the middlemen. They are likely to make more profit per customer than they did before. They should also be able to reach a wider audience as more people around the world gain access to high-speed internet. They have a long runway for significant growth.

Their catalyst is the continued growth of their media business’ revenue and profit to prove out how successful they can be. We’re likely in the later stages of this process now. The successful hand off of the leadership reigns from Bob Iger to Josh D’Amaro is another sign that the hard work is complete. If D’Amaro just performs ‘ok’, Disney is likely to do very well. His experience growing the most successful ‘experience’ part of Disney suggests he is likely to be a good leader.

Lenzing AG (a potential future investment)

Lenzing AG is an Austrian company and the world-leader in the production of wood-based cellulosic fibers. This includes their own inventions, Lyocell and Modal. These are fabrics made from wood sourced from sustainable forests. Lenzing creates premium fibers/fabrics that are used in global fashion and in nonwoven (baby wipes, cleaning products, etc.) industries. They have a strong focus on sustainability, biodegradable products, and the circular economy.

We have been following Lenzing for a long time. They have built the largest supplier of biodegradable fabrics and fibers. They have created products that are likely to be extremely important and impactful over the next few decades as we try to move away from oil-based products – particularly in the fashion industry. Oil-based fabrics/fibers like polyester, nylon, and spandex are made incredibly cheaply, but typically take hundreds of years to break down in our environment. For things like clothes or bags that don’t tend to get used for very long before being discarded, oil doesn’t make sense as the raw material input. With concerns increasing about the effects of environmental waste and pollution and regulations changing to meet these concerns, companies like Lenzing are likely to thrive.

The catalyst for this investment may have already taken place. Rising oil prices make production of traditional fabrics more expensive, which in turn makes Lenzing’s environmentally friendly products more competitive. Lenzing’s materials are ‘premium’ when compared to traditional polyester and nylon, but the price differential has often been a barrier to wide-scale adoption.

They have recently been collaborating with the European Commission to better support their industry and help Europe’s economic security by reducing dependence on oil. If there are changes to regulations, such as a ‘pollution’ tax (like a carbon tax) or ‘environmental benefit’ credit (like a carbon credit), this would be a significant catalyst for the stock. That is looking increasingly likely.

Investment Strategy and Sustainability

We pay particular attention to the price we pay for investments because paying less means higher future returns. As a reminder, we intend to hold all investments for periods of at least five years and preferably much longer. This has the side effect of minimizing trading costs and capital gains taxes.

We seek to hold around 20 individual stocks like those we’ve mentioned so far in this newsletter and those listed in the attached, separate PDF. Stocks we consider to be significantly undervalued and that offer a high probability of future outperformance versus market averages. We combine these individual stocks with other active investment managers (mutual funds) to help further diversify your investments across stocks, bonds, and real estate/infrastructure. Our investment managers have similar philosophies to ours to seek out and take advantage of overlooked and/or underappreciated investments to buy at a discount with the goal of outperformance versus market averages.

Given our focus on the long-term, we invest in companies we believe are sustainable. Companies that produce high returns for their investors but also give equal focus to their other stakeholders – particularly employees and the environment. This helps creates stability and high performance for the long-term.

We believe we are well-positioned for future success. There will be periods when investment returns aren’t where we’d like them to be. This is most likely to happen during periods of excessive enthusiasm as the investments driving outperformance during those times tend to be ‘trendy’ and very expensive. Our research process gives us confidence to maintain our commitment and allow our investments the time they need to reach our goal of long-term outperformance.

We will continue to monitor your investment portfolios and keep you informed on major global events that may impact our investments. If you’d like to set up a meeting to talk in more detail, please reach out at any time.