Q1 2025 INVESTOR UPDATE
EQUITIES
Accounts in Seabird’s Value Equity strategy declined by ~5.2% during the first quarter of 2025 (and of course quite a bit farther over the first few days of Q2). Our attention, however, is focused on delivering long-term returns. We live under no illusion we won’t endure temporary – and sometimes testing – downturns. Our annualized cumulative returns below are more indicative of how we view the proper timeframe:
Value Equity
- 1 year: 9.4%
- 5 year: 23.3%
- Inception*: 15.7%
Thoughts & Commentary: In times of volatility and uncertainty, we remind ourselves of two things: First, volatility is an enterprising investor’s ally for the opportunities it provides. Second, good businesses are, on average, likely to grow more valuable over time. Economic dynamism and the free enterprise system will see to that, tariffs and trade wars notwithstanding. In short, today’s volatility produces the building blocks for tomorrow’s performance.
In Q1 we struck a balance between taking chips off the table and putting new money to work. And today, opportunities are shaking free from some of our favorite counterparties: nervous retail traders, rule-based computer algorithms, and short-sighted hedge funds. As usual, we’re scouring some of the hardest hit corners of the market for exceptional opportunities to acquire shares in “cash machine” businesses.
During the quarter we sold the last of our shares in Microchip Technologies (MCHP) for a small
profit. We owned the shares for several years previously selling some at higher prices. MCHP has long been one of the best-run companies in the semiconductor industry, but a series of company-specific missteps and widespread industry challenges proved hard to overlook, so we sold.
We also acquired shares in Avantor (AVTR), a life science tools company that supplies the “picks and shovels” needed for scientific discovery and biologic drug production. Avantor’s secret sauce is its highly profitable distribution business serving early-stage research labs. This gives them visibility into their customers’ future production needs, which they leverage to have their products permanently specified into large-scale drug manufacturing. The company calls the model “beaker-to-bulk,” and it’s brilliant. There is a lot to like here: predictable growth, recurring cash flows, and regulatory barriers that make this business incredibly sticky. We found this in the abandoned property bin after temporary headwinds compelled many “growth” investors to flee. We’ve had success investing in distribution businesses before and see a compelling risk/reward with double-digit return potential over time.
FIXED INCOME
Our fixed income strategies delivered unremarkable Q1 performance of 0.6% and 0.5% in our Performing Credit and MuniPlus strategies respectively. Below are our long-term results.
Performing Credit
- • 1 year: 7.6%
- • 5 year: 11.5%
- • Inception: 8.4%
MuniPlus
- 1 year: 4.9%
- 5 year: 6.1%
- Inception: 6.0%
- ( * 9/30/2016 – inception date for all strategies)
Thoughts & Commentary: While fixed income markets have not experienced a similar level of volatility to that seen in equities, we certainly prefer the opportunity set offered today to the tighter market that developed in late 2024 and persisted well into the new year. We’re already finding ourselves more aggressive in the late stages of Q1 and into Q2 as yields have become considerably more generous across the gamut of Corporate Bonds, Preferred stocks, and Municipal Bonds, the bread and butter of our fixed income universe. Though we did add to positions judiciously as attractive offerings presented themselves, Q1 was mostly just blocking and tackling as usual.
-Arch Peregoff
-Joe Di Scala, CFA