Strategic Growth: Navigating Market Dynamics for Superior Returns

Q2 2025 Portfolio Performance and Strategic Adjustments

During the second quarter of 2025, Patient Capital Management’s Opportunity Equity Strategy delivered a robust 15.3% total return after fees, significantly surpassing the S&P 500 Index’s 10.9% gain. This strong performance was primarily driven by effective stock selection, although some allocation and interaction effects partially moderated the overall impact. Top performers in the portfolio included QXO Inc., Coinbase Global Inc., Nvidia Corp., Dave & Buster’s Entertainment Inc., and Meta Platforms Inc. Conversely, New Fortress Energy Inc., Kosmos Energy Ltd., Alibaba Group Holdings, JD.com, and Biogen Inc. were the main detractors during this period. The strategy maintained a strategic overweight position in sectors such as Consumer Discretionary, Communication Services, Financials, Energy, Industrials, and Healthcare, while having no exposure to Real Estate, Utilities, Materials, and Consumer Staples, and an underweight in Information Technology.

Significant Portfolio Shifts: New Ventures and Strategic Exits

The second quarter saw the addition of five new positions: Noble Corporation, Tempus AI Inc., UnitedHealth Group Inc., Clear Secure, and Costco Wholesale Corporation Put Options. These additions reflect a focused strategy on identifying undervalued opportunities and emerging trends. Concurrently, three positions were divested: Carvana Co., New Fortress Energy Inc., and the long leg of a call spread in Nvidia Inc. These exits were tactical, allowing the firm to reallocate capital to higher-conviction opportunities and manage risk effectively. By the end of the quarter, the portfolio comprised 41 holdings, with the top 10 positions accounting for 51.0% of total assets, indicating a high active share of approximately 93.6%.

Market Recovery and Thematic Investment Insights

Following a sharp downturn early in Q2, the equity markets experienced a rapid, V-shaped rebound, ultimately reaching new record highs. Initial concerns regarding trade tariffs subsided as market participants became more optimistic about less severe final policy implementations. Patient Capital Management capitalized on this volatility, selectively increasing exposure to deeply undervalued assets during the market dislocation. Cyclical investments, which had been hit hard earlier in the year, notably contributed to the recovery. Significant themes contributing to performance included the surge in Bitcoin ETFs and crypto-related assets like Coinbase, boosted by favorable regulatory developments. Turnaround stories such as Dave & Buster’s Entertainment and Canada Goose Holdings also delivered strong results due to better-than-expected earnings and robust consumer spending.

Targeted Sector Investments: Energy and Healthcare Opportunities

Patient Capital Management continued to increase its allocations to the Healthcare and Energy sectors, recognizing long-term potential despite their recent underperformance. In Energy, the focus was on idiosyncratic opportunities, with new investments in offshore drillers like Seadrill Limited and Noble Corp., which are poised to benefit from tightening rig supply and a shift towards offshore production as land-based output slows. Kosmos Energy Ltd. was identified as nearing a critical inflection point, with substantial free cash flow generation anticipated from its Tortue LNG project. In Healthcare, the strategy targeted attractively valued companies with strong long-term prospects. UnitedHealth Group Inc. was added after a significant price correction, with confidence in its ability to overcome short-term challenges and leverage its integrated platform for future growth. Tempus AI Inc. was also highlighted for its innovative use of AI in personalized diagnostics and its expansion into new medical fields.

Detailed Overview of New and Divested Holdings

The quarter saw several strategic adjustments to the portfolio. A new position was established in UnitedHealth Group Inc. following a substantial decline in its stock price, presenting an opportunity to acquire a high-quality company at a compelling valuation despite short-term headwinds in its Medicare Advantage business. Noble Corporation PLC was also added, reflecting a positive outlook on the offshore drilling market due to industry consolidation, constrained supply, and management’s commitment to shareholder returns. Tempus AI Inc., a leader in precision medicine leveraging AI and genomic data, was included for its potential to revolutionize cancer care and its path to profitability. A tactical options position was initiated in Costco Wholesale Corporation by purchasing put options, based on a belief that the market might reassess its high valuation relative to its growth prospects. Additionally, Clear Secure Inc., a provider of identity verification services, was identified as an attractive investment due to its strong profitability, healthy balance sheet, and expansion opportunities beyond airport security. On the divestiture side, positions in Carvana Co. and a portion of Nvidia Inc. were closed to reallocate capital, while New Fortress Energy Inc. was fully exited due to deteriorating fundamentals and increasing balance sheet concerns.

Key Performance Drivers: Contributors and Detractors Analyzed

This section provides a detailed breakdown of the primary factors influencing the portfolio's performance, distinguishing between top contributors and detractors. QXO Inc. emerged as a significant contributor, benefiting from its strategic acquisition of Beacon Roofing and its proven roll-up strategy in the building products distribution sector. Coinbase Global Inc. saw a strong rebound, propelled by positive regulatory shifts and increasing institutional adoption of digital assets, solidifying its position in the crypto ecosystem. Nvidia Corp. continued its upward trajectory, driven by robust demand for its GPUs in AI applications, continuous innovation, and strategic expansion into related AI fields. Conversely, New Fortress Energy Inc. acted as a major detractor, impacted by disappointing earnings, liquidity concerns, and a deteriorating financial outlook, leading to its eventual exit from the portfolio. Kosmos Energy Ltd. also faced headwinds from broader energy price declines, despite its impending inflection point with the Tortue LNG project. Finally, Alibaba Group Holdings experienced a downturn due to tariff announcements, though its underlying fundamentals, including AI initiatives and e-commerce growth, suggest potential for future recovery once market sentiment improves.

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