Black Bear Value Fund commentary for the month ended August 31, 2024.
Dear Partners and Friends,
- Black Bear Value Fund returned -3.1%, net, in August and is +2.5% QTD and +4.6% YTD.
- The HFRI Value Index returned +0.7% in August and is +3.6% QTD and +8.3% YTD.
- The S&P 500 returned +2.4% in August and is +3.7% QTD and +19.5% YTD.
Please note returns could vary depending on your time of investment.
We welcomed a new family office and a fair amount of inflows for September. As I tell all potential and existing investors, we are only seeking capital from investors with a long-term mindset. We are typically buying businesses that have short-term pessimism priced in and it takes time, patience and sometimes a strong stomach to realize the returns. Patience/pain tolerance, coupled with being correct, is in short supply in the investment world. We can only succeed as a Partnership if we are all aligned with the same long term mindset and expectations.
An area of concern for some has been our small headcount as we number a Fund of 2. I have added a legal document that spells out specifically how the Fund would be wound down in the event of something unfortunate happening to me. We have an individual who is a close friend, former Fund Manager and current CIO of a family office who would serve as interim CIO with the authority to wind our investments down in a timely manner. I would put this in the "plan but don't hope for" category.
Many of our businesses continue to go down in price as short-term recession fears (both domestic/global) create uncertainty, especially in the smaller-capitalization commodity/natural resource companies. The longer-term horizon remains bright given the lack of global capacity investment. In addition our businesses have little debt/net-cash de-risking the business during times of potential stress. An economic downturn would benefit our businesses long-term with some potential interim pain. It looks to me like much of that pain is already priced in but time will tell.
See the full tear sheet here.
Thank you for your trust and support,
Adam
Black Bear Value Fund