The firm anticipates 2026 with considerable enthusiasm, not merely due to favorable sports team performances, but primarily because the current market environment offers an exceptional range of opportunities for its distinct investment approach. Despite overall market indices approaching record highs and displaying elevated valuations, a prevalent sense of greed, impatience, and hubris permeates the equity markets. This sentiment often leads investors to gravitate towards concentrated benchmarks, neglecting fundamental analysis in favor of momentum-driven strategies and aggressive capital management that may erode long-term shareholder value, such as opaque private equity valuations that mask underlying risks.
This market behavior has created a clear divergence: while US technology stocks have seen a significant re-rating driven by enthusiasm for artificial intelligence, other securities, particularly those outside this sector, have experienced a corresponding de-rating from an already conservative base. This phenomenon is particularly evident in European holding and investment companies, many of which are trading at substantial discounts to their net asset value (NAV). For instance, Hansa Investment Company, D'leteren, and Avation PLC represent prime examples of quality securities trading at considerable discounts. Hansa, post-merger, offers significant capital management flexibility and has initiated share repurchases, yet its shares trade at a deep discount. Similarly, D'leteren, despite owning the highly valuable Belron, is undervalued due to market skepticism about private equity valuations and perceived opacity, while Avation PLC, an aircraft leasing business, is financially robust but trades below its adjusted NAV, presenting a compelling investment case.
The firm's analysis of these companies underscores a belief that market perception often misjudges the long-term value of controlled entities. Despite investor wariness regarding family control and capital management practices, the evidence assembled by the firm suggests that these controlled structures, such as Hansa's disciplined share issuance, offer unique advantages. The strategic initiatives undertaken by these companies, including D'leteren's share buyback program and Belron's strong cash flow generation, are expected to unlock significant shareholder value. Moreover, Avation's efforts to reduce financial risk and strategically grow its fleet, coupled with favorable market tailwinds in global air travel, indicate a promising outlook. The firm remains confident that these overlooked opportunities, with their substantial discounts and sound fundamentals, will eventually be recognized by the market, providing considerable upside potential.
In a landscape increasingly dominated by short-term gains and speculative fervor, focusing on fundamental value and patient capital management stands as a beacon of stability. The current market bifurcation, while challenging for some, illuminates paths for discerning investors to uncover true value that might otherwise be obscured by transient trends. Embracing a long-term perspective and rigorously analyzing underlying business strength will ultimately lead to robust and sustainable returns, fostering an environment where sound investment principles prevail over fleeting market emotions.