The GoodHaven Fund commentary for the second quarter ended June 30, 2025.
"You never reach a final answer in this business - you reach a point of action that you take" - Warren Buffett, 2025 Berkshire Hathaway Annual Meeting
After a long run of consistent outperformance, we underperformed in the 2025 semi-annual period. The Fund declined 5.90% versus the S&P 500’s decline of 1.35%.
Our results since the start of GoodHaven 2.0 (12/31/19) through 5/31/25 are a strong total return of 101.99% versus the S&P 500’s total return of 99.11%. We feel we have accomplished this while taking less risk than the market overall. While we wonder if there is a perfect “category” for our unique portfolio we note that, according to Morningstar, we ranked (at 5/31/25) in the top 1% of our category for both three and five-year periods.
As we have said consistently over those prior periods of outperformance:
“While this period continues a string of strong results, we take this moment to remind you that our portfolio is managed striving for long-term outperformance, not short-term outperformance. We will underperform the market averages from time to time. We hope you will view such periods when they come as opportunities, as we expect we will.”
We had no material realized losses in the period and our companies have overall delivered better recent business performance than we expected. The upside market potential of many of our holdings now looks more promising than it has recently.
Since we last wrote to you, a benign economic climate of modest growth and declining inflation has been replaced by volatile trade related economic conditions and a military conflict with Iran. The White House’s April announcement of proposed materially higher tariffs for many countries we have cross-border trade with has been followed by counter measures by some countries, and a confusing mixture of backtracking, negotiating, tentative deals and no shortage of economic and market volatility.
Below is a chart from Apollo’s Torsten Slok showing US average tariffs over time, however we note that current tariff rates are not final and are subject to change. During the 2018 trade war with China, the average tariff went up from 2% to 3%. Today, the average tariff is 18%.
All volatile periods are different, and while the past holds clues to the future, a different set of unknowns always presents itself. I do not think this tariff focused approach is a thoughtful way to improve terms of international trade and/or our current account deficit. Material tariffs increase the risk of higher inflation, which has most recently returned to more normal levels, as well as potentially hindering overall economic growth. However, this approach is now part of the policy landscape.
We have a manageable overall exposure to companies directly impacted by these new tariffs. However, their magnitude and the potential second order negative impacts on many industries makes their potential economic impact more worrisome than it looked a few months ago. We know from prior volatile market and economic periods that volatility can create bargains in the securities markets. We also know that this situation may change materially from what we are looking at today.
Most importantly - we know that our portfolio is made up of high-quality businesses, modestly leveraged and trading at in aggregate below market valuations. We also feel that, as we have shown in the past, we know how to use difficult environments to position our portfolios for continued attractive long-term returns. Our strong returns since the start of GoodHaven 2.0 were due in no small part to opportunistic purchases made during the 2020 and 2022 downturns.
As I have mentioned in recent letters, the current structural make-up of markets brings with it more volatility, sometimes accompanied by actual economic dislocations, and sometimes unwarranted. Macro events are evolving and changing rapidly and we will continue to assess the underlying impact to the companies that we own.
Our biggest detractor in the period was our long-time successful holding Builders FirstSource. Our historic thesis on Builders reads well today - as they navigate through a period of lower housing starts and lumber prices. We expect over time to own a greater percentage of this unique company as they opportunistically continue to shrink their outstanding shares:
"Since the inception of its buyback program in August 2021 through April 30, 2025, the Company has repurchased 99.3 million shares of its common stock, or 48.1% of its total shares outstanding, at an average price of $80.90 per share for a total cost of $8.0 billion, inclusive of applicable fees and taxes."
Builders’ Chairman Paul Levy personally purchased approximately $55 million of Builders shares in May 2025 at about $111/share - one of the largest personal insider purchases we have seen lately. We too think we have much upside potential in our Builders position from recent levels.
Our next biggest decliner was our historic winner Jefferies.
Last period, recapping our strong 2024 results, we wrote to you and said:
“However, we too have benefited from some of our holdings now trading at higher earnings multiples than previous. We strive to simultaneously think about both the upside and the downside of both the underlying value of our holdings and their market prices in relation to such value. We will normally not sell an attractive long-term holding just because its market price is no longer as cheap as it was or is fairly valued. Cutting the flowers and watering the weeds can be a very counterproductive exercise over time to compound returns, not to mention being tax inefficient. However, we will also seek to avoid holding something we like if we feel the market price has borrowed too much from future performance.”
We wrote this as a general market and portfolio observation and reminder of our approach. But we also had in mind at the time a few of our holdings, including last year’s biggest winner - Jefferies.
The last few years were filled with strong progress at Jefferies, and their business outlook at fiscal year-end was promising and its stock price reflected as much. However, the last few months have instead been met with an abrupt and material slowdown in capital markets activity partially offset by increased trading volumes recently, and less robust results at Jefferies. This led to a material recent stock price decline. Jefferies has done well with the things they can control, but they cannot control the capital markets overall climate.
Our long-term outlook for continued value creation at Jefferies remains. With a stock price now trading around stated book value, and a bit over 10x earnings in an improving, but not robust environment, much upside exists.
Our biggest dollar gainer in the period was TerraVest. One of the unseen but important portfolio “activities” we have performed in the last few years was not selling any of our TerraVest shares as the price increased materially. This long-term perspective was rewarded as near the end of the period TerraVest caught “the big one”, announcing the acquisition of EnTrans International in March 2025.
EnTrans, based in Tennessee, was purchased for over $500 million, TerraVest’s biggest acquisition by far. EnTrans is the industry leading manufacturer of tank trailers, heavy haul trailers and LPG transportation equipment. In typical TerraVest fashion, the acquisition price of 7X EBITDA (before synergies) is an attractive price for this high-quality company. This deal has the potential to increase TerraVest’s normalized free cash flow 30% in the near-term. Like some of our other successful holdings we remind ourselves that there is cyclicality to some of TerraVest’s businesses.
Berkshire was our next biggest gainer in the period. In another selfless act amidst a lifetime of selfless behavior Mr. Buffett, and subsequently the Berkshire Board of Directors, confirmed that Greg Abel will assume the CEO role at Berkshire after year-end 2025. Mr. Buffett, who at 94 still thoughtfully tackled hours of questions at this year’s meeting, will for now remain Chairman. Contrary to criticisms of Berkshire’s succession plans, this is one of the more well telegraphed plans we’ve seen. We shall at some point write much more about Mr. Buffett. Berkshire’s business results have been solid and our returns since we made it a larger holding have been attractive - as we’ve previously articulated.
Our biggest additions in the period were; Arrow Electronics, Chubb, Lennar (B) and Asbury Automotive. Our largest sale was Millrose Properties, a spin-off we received from Lennar, which we sold when the shares were publicly traded. In addition, we fully exited our holding in Academy Sports in March of this year.
We also eliminated our holdings in Camden Property, Fannie Mae (common) and Global Industrial, as well as reducing Bank of America. We initiated a new position in Toll Brothers.
We experienced shareholder outflows in the period which impacted some of our activity.
Subsequent to the period end Guild Holdings - a smaller holding - agreed to be purchased in a going private transaction. While we had hoped to own Guild shares for a long time, our total return on the position since our purchases in 2021 is approximately 65% including special dividends and assuming the acquisition price of $20 in cash.
Although corporate M&A optionality is not a core thesis for our positions, we do note that Guild Mortgage represents the third company of ours recently taken over. As a reminder the other two were STORE Capital and Alleghany in 2022.
We have been writing for a while about the long-term unsustainable path the domestic fiscal deficit is on, and concurrent long-term worries about the US Dollar. The administration’s tariff policy may exacerbate this. Additionally, the Congressional Budget Office (CBO) in May 2025 reported that the then proposed new tax bill, subsequently signed into law, would increase the deficit by approximately $3.3 trillion over the 2025 - 2034 period.
We also consciously have a decent sized exposure to companies domiciled outside the United States including TerraVest and Exor. A weaker US Dollar, all else being equal, should be beneficial to the carrying value of these holdings, where we do not hedge our foreign currency exposure.
Speaking of Exor, the company recently announced a reverse tender, which we think is a thoughtful approach to repurchasing shares. We continue to like Exor’s long-term outlook and did not tender any shares.
As I typically do annually, I added to my Fund holdings in the period.
As of May 31, 2025, my family and I and the team here at GoodHaven Capital Management, LLC, the investment advisor to the GoodHaven Fund, owned approximately 132,529 shares of the Fund. It is management’s intention to disclose such holdings (in the aggregate) in this section of the Fund’s Annual and Semi-Annual letters on an ongoing basis.
I thank all fellow shareholders for their continued confidence as GoodHaven 2.0 continues to unfold. I also thank our Fund Board of Trustees and our long-time partner and investor Markel for their support and wise counsel.
Stay healthy and safe and forward we go.
Larry Pitkowsky
The GoodHaven Fund
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