Atherean Value Fund's commentary for the fourth quarter ended December 31, 2025.
Dear Atherean Value Fund Limited Partners:
The Atherean Value Fund, LP (“Fund”) was down 2.1% in the fourth quarter of 2025, and for the full 2025 year the Fund is down 2.8%. Please refer to your statements from the Fund administrator for the exact performance of your account as returns will vary by timing and fee structure. As of today the gross exposure of the Fund is 134% of equity and the net exposure, not including options, is 115%. Currently1 the core value-oriented long portfolio has thirty positions and comprises 76% of Fund gross exposure, risk-arbitrage and special situations comprise 9%, trend-following strategies comprise 12%, and discretionary shorts comprise the remainder of gross exposure. For the full year 2025 the risk-arbitrage and trend-following strategies were profitable and the short book and core long portfolio experienced losses.
It was an especially difficult year for our core long portfolio as speculative stocks of all market cap ranges have been popular while the stocks of many highly profitable companies have been discarded. We believe that many speculative stocks are priced as if their future will be perfect, and that many reasonably-priced stocks of profitable companies are priced as if their future will be dismal. We believe that over the long-term stock prices are determined by the fundamental economic reality of each individual company and management’s ability to execute and allocate capital rather than short-term sentiment about a particular company or industry.
U.S. equity market indices remain highly concentrated, with several of the largest components of the S&P 500 index currently having market caps larger than the annual economic output and total equity market capitalization of many G-7 countries2. In contrast with the S&P 500, which is currently trading at a forward price to earnings ratio of about twenty-two, its highest level since the meme-stock mania of late 2021, we believe that our core long portfolio is attractively-valued with a weighted average forward price to earnings ratio of just over fifteen and a non-normalized free cash flow yield of over ten percent3. As long-term owners of the businesses in the portfolio we believe that free cash flow and business durability matter and that short-term speculative sentiment based on wildly optimistic extrapolations into the distant future is specious. In the fourth quarter we continued to hunt for and find attractive opportunities, and we have made several new additions to our core long portfolio. These new investments are in stocks which have become, in our opinion, excessively inexpensive because of management missteps or destructive capital allocation decisions made in the past, in contrast with solid business practices and anticipated effective and value-generating capital allocation policies in place going forward.
Ascent Industries (NASDAQ:ACNT)
Originally formed as a specialty chemical manufacturer in 1945, Ascent in 2012 began diversifying into steel products via acquisitions after experiencing cyclicality of its chemicals business after the 2008 financial crisis. This started with the acquisition of Palmer of Texas Tanks in 2012 and continued with Specialty Pipe and Tube in 2014, Marcegaglia in 2016 and American Stainless Tubing Inc. in 2019. The company then proceeded to expand its chemicals business with the acquisition of Dan Chem Technologies in 2021. As of 2023 the company’s stock price was approximately back to where it had been a decade prior despite the company’s aggressive growth-through acquisitions strategy. The reason for this in our opinion was a lack of focus and a confusing story which investors struggled to understand. In 2023 the board embarked on a back-to-basics plan to refocus its capital and attention on its core chemicals business. Beginning in December 2023 the company began selling its steel products divisions with the sale of Specialty Pipe and Tube for $55M and continuing with the sale of Bristol Metals for $45M in April of 2025 and American Stainless Tubing in June 2025 for $16M. As a result of these sales the company is now deleveraged and has a significant cash balance which together have reduced its enterprise value substantially. Based on our research we believe that the company has regained its focus and is on a viable path to organic and possibly inorganic growth going forward. We believe that the company has a strong possibility of attaining about $15M-$20M in annual EBITDA within the next few years by fully utilizing its current plant capacity. Given that some of the company’s peers are trading at an enterprise value to EBITDA multiples in the low 20’s5, we believe that the stock has substantial upside.
Monro, Inc. (NASDAQ:MNRO)
Monro, Inc. operates a chain of stores that provide undercar repair and tire services. Since 2022 the company’s same store sales have declined due to inflationary pressure on lower income consumers and the resulting shift away from high- margin, high-end tires toward lower cost, low-margin substitutes. In early 2025, with the stock price down over eighty percent from its all-time high and same-store sales continuing to decline, the board brought in a new management team with strong capital allocation and operational expertise. In April of 2025 the company closed 145 underperforming stores, about 11% of the total store count, and began initiatives to improve the customer experience. Since the turnaround efforts started the company has achieved substantial growth in same-store sales after years of decline. Even with total sales down substantially from their high in June of 2022 the company continues to be cash flow positive and pay a dividend with a dividend yield and non-normalized free cash flow yield against the Fund’s average entry price of 6.4% and 11.4% respectively. We have confidence in the new management team’s ability to continue to execute the turnaround successfully and grow free cash flow per share.
Fiserv, Inc. (NASDAQ:FISV)
Founded in 1984, Fiserv, Inc. was originally a provider of back-office financial services technology solutions, using its own stock to grow its revenue thirty-fold through acquisitions between its IPO in 1986 and 1990. The company continued to grow over the next few decades through small, carefully chosen acquisitions of adjacent, complimentary back-end technologies. In 2019 the company completed a $22B merger with First Data, the largest combination in the company’s history which aimed to merge Fiserv’s back-end bank processing technologies with First Data’s front-end merchant acquiring technologies. Over the past twenty or so years, due to its highly specialized nature and consistent profitability the company has almost always traded at a high price-to-earnings ratio, with a twenty-five year median of over 31. Due to what we believe to be integration pains related to the 2019 merger, the stock recently crashed and was down over seventy percent from its all-time high set earlier in 2025 in the fourth quarter. When we initiated this position the stock had a price-to-earnings ratio of just over ten, close to its all-time low. With EBITDA margins of over forty percent which have steadily expanded over the past fifteen years we believe that we are purchasing a quality company at an extensive discount given the resilience and stickiness of the company’s core businesses, especially its legacy financial solutions business. Given where we purchased the stock, we very conservatively estimate that we paid a low enough price that we obtained a non-normalized free cash flow yield of over seven percent on the legacy, stable but slow but slow-growing financial solutions business alone, which is still well below the median yield which the stock fetched prior to the 2019 merger.
We have retained Spicer Jeffries LLP to conduct the audit of the Fund for the 2025 year and based on last year’s timing, we expect the audit to be completed sometime toward the end of the first quarter.
Thank you for your shared interest in the Fund and for entrusting us with a portion of your wealth. As always, we are available to discuss the Fund and its investments. Feel free to reach out.
Sincerely,
Atherean Asset Management LLC
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