Performance highlights
Contributors
Detractors
Market Environment
International equities finished higher during the quarter, with 10 of 11 GICS sectors posting positive returns. By sector, financial and industrials contributed the most to market returns while consumer staples was the sole detractor. By country, Japan and Canada contributed the most to market performance, while Denmark and Germany detracted.
Portfolio Performance
The portfolio’s return was 0.97% (net) for the reporting period. This compares to the MSCI World ex USA Small Cap Index that returned 7.24% for the same period.
Top contributors:
Wynn Macau was a contributor during the quarter. The Hong Kong-based casino operator saw its stock price rise despite delivering underwhelming second-quarter 2025 results. This performance was supported by a strengthening Macau market in recent months, which has benefited Wynn as one of just six licensed operators in the city—and among the most efficient. We are encouraged by the company’s near-term plans to introduce updated rooms and a revamped Chairman’s Club, which should bolster its position in the premium segment. Wynn remains well-positioned for continued outperformance.
Azimut Holdings was a contributor during the quarter. The Italian financials firm’s stock price rose as it posted solid results during the period, in our view. We continue to appreciate management’s focus on long-term value creation. We think the company remains strongly positioned, as it could be a beneficiary of strong macroeconomic tailwinds.
JDE Peet’s was a contributor during the quarter. The Netherlands-headquartered coffee company’s stock price steamed ahead after announcing that it would be acquired by American beverage giant Keurig Dr Pepper in January 2026. Keurig Dr Pepper agreed to purchase JDE Peet’s for EUR 31.85 per share plus an interim dividend, shy of our estimated fair value but a solid premium over its share price at the time. We believe there is a high probability that the deal will go through, as the largest shareholder will vote in favor of the transaction, and regulatory concerns are minimal. We have pared back our JDE Peet’s position in recognition of its recent gains. Still, we remain invested in the company due to its strong market position in what we view as an attractive consumer packaged goods segment.
Top detractors:
Amplifon was a detractor during the quarter. The Italian hearing aid company’s stock price plunged after first half results revealed that revenue grew more slowly than expected, and the company reduced its fiscal year guidance. While this news was disappointing, we believe this shortfall is due to market and cyclical issues in the U.S. and several European markets rather than a structural slowing of hearing aid demand. We appreciate the front-footed management team which launched a new cost program to offset the impact from the revenue shortfall. We also believe that Amplifon’s strong market position and ability to earn attractive profits remains intact. As such, Amplifon remains an attractive holding in our view.
Lanxess was a detractor during the quarter. The German-headquartered global specialty chemicals company’s stock price declined after it delivered results. The company decreased its full-year profit guidance, citing weakened demand and a challenging environment. Still, we see Lanxess as a well-managed company with a long runway for future growth.
Hays was a detractor during the quarter. The U.K.-headquartered human resources and recruitment firm’s stock price declined due to broader market weakness and uncertainty. Still, the company remains well-positioned in markets that we find attractive. Over time, we think management can help the company bolster its profitability as conditions become more favorable.
Portfolio Positioning
We initiated the following position(s) during the period:
Alten (OTCPK:ABLGF) is one of the world’s largest engineering service providers, partnering with companies to help them design, execute, and manage project-based engineering and IT services. Over time, R&D intensity is rising as a percentage of GDP as corporations invest in new technologies and capabilities to differentiate their products, accelerate the speed of product development, and comply with increasing regulation. To help manage this cost, corporations are increasingly outsourcing their R&D spending, making outsourced R&D services a GDP+ growth business through-cycle. Alten is one of a handful of companies in this space that is considered a global tier-1 service provider, which helps them tightly embed with customers in very sticky relationships. The business itself is asset light and very cash generative and is still run by its founder, Simon Azoulay, who we consider a shrewd capital allocator into bolt-on M&A that enhances the company’s capabilities, customer list, and/or geographic reach. Alten’s stock price has contracted recently as the engineering services sector undergoes a cyclical downturn made worse by tariff uncertainty. We expect business fundamentals to eventually recover, driving an improvement in growth, profitability, and valuation, which is at historic lows.
Hamamatsu Photonics (OTCPK:HPHTF) is Japan’s premier photon specialist, supplying detectors and light sources that enable complex machines to see what the human eye cannot and detect nanometer-scale defects. Hamamatsu is widely regarded as the preferred industry supplier and commands leading market share position across its major product categories. Moreover, the company’s partnerships with its customers often begins in the concept stage of development, which has led to sticky, long-term relationships. In addition, we appreciate management’s commitment to reinforcing its competitive moat through consistent reinvestment in research development, and believe it is poised to see an inflection point in its share price as cyclical headwinds subside. These headwinds provided us the opportunity to initiate a position in a dominant company with improving shareholder returns that is trading at a significant discount to our estimate of intrinsic value.
JEOL (OTC:JEOLY) manufactures, develops, and sells a range of scientific and industrial equipment. JEOL’s roots lie in its scientific instruments business, which sells tools like electron microscopes to academic institutions and food, chemical, and semiconductor customers, among others. Building and servicing this equipment requires significant scientific know-how, resulting in high barriers to entry and thus oligopolistic market structures. JEOL subsequently leveraged its electron beam technology to manufacture mask writing equipment, which fulfills an integral step in chip manufacturing that tethers the company to the world’s leading-edge foundries. JEOL services mask writers for years after selling them, creating a recurring revenue stream that helps smooth out the volatility of equipment sales. Additionally, management has intensified its focus on improving profitability in the scientific instruments business, where margins meaningfully lag global peers. In sum, we believe we are buying two good franchises – scientific instruments and mask writers – for the price of one.
Kansai Paint (OTCPK:KSANF) is one of the two market leaders in paint and coatings in Japan. The company’s products are used primarily for automobiles, construction, and ships along with bridges and residential housing. We have owned Kansai on and off over the past 15 years. We most recently sold out of the company in early 2024 as the share price reached our estimate of intrinsic value. Since then, the share price has declined more than 20% due to weak auto production and a weak decorative market in India as well as a de-rating of most global paint companies. Since then, management has focused on shifting emphasis to niches within the paint market, such as construction chemicals and wood coating while focusing less on retail. With the shares priced at more attractive levels, we reinitiated a position in the company. After speaking with management, we continue to believe that there is ample opportunity to reduce costs and improve profitability. Additionally, we believe many of the negatives of the Indian decorative market are now priced into the shares. Finally, we think management continues to allocate capital well and plans to return 100% of free cash flow through dividends and share repurchases.
Robertet (OTCPK:RBTEF) is a global leader in the production of flavors and fragrances and a near pure-play on the natural ingredients sub-segment. The company supplies premium components to high-end luxury brands such as Hermès, Chanel, and Aesop. Although these inputs represent a small portion of end products’ cost of goods sold, they are critical to the consumer experience, defining the signature scent or taste and enabling Robertet to command premium pricing. Many of these scents and flavors underpin popular heritage products, leading to long-lived, recurring revenues. Despite its strong positioning, the stock trades at a discount to our estimate of intrinsic value due to cyclical headwinds and lingering investor overhang, which we believe are temporary. We appreciate Robertet’s shareholder-aligned management team and believe their renewed efforts to expand, internationalize, and modernize the business will lead to significant value creation over the long term.
Aumovio (OTC:AMVOY) spun out of Continental in September 2025 and now develops, manufactures and distributes auto components and technology systems as a standalone company. Even without the backing of Continental’s tires business, there’s a lot to like about Aumovio. It built up strong positions in structurally attractive markets over the years under Continental. Aumovio operates through several segments that expose it to a compelling range of auto megatrends, like active safety, autonomous driving and software. Those trends have long teased upside, and we believe recent restructuring, portfolio optimization and a focus on returns will help Aumovio realize its potential. CEO Philipp von Hirschheydt and his management team deserve credit for that improved execution, and now that he’s armed with a cash-rich balance sheet following the spinoff, we expect his knack for underpromising and overdelivering to continue. We were excited to open a position in Aumovio at a price we believe is well below its intrinsic value.
We eliminated the following position(s) during the period:
- BIPROGY
- Hakuhodo DY Holdings (OTCPK:HKUOY)
- Sapiens International (US Shs) (SPNS)
Outlook
For more than a decade, those of us who practice “value investing”—especially in overseas markets—witnessed U.S. growth/momentum stocks soar. We asserted that this trend was unsustainable as it was mostly driven by both weak foreign currencies as well as valuation expansion by U.S. growth stocks. Year-to-date, we are witnessing the unraveling of this paradigm. At the same time, the fundamentals of what we view as the most attractively priced global region, European equities, have improved thus driving more investor interest. As the valuation spread expanded during the last 10 years, our view was that the greater the spread was, the harder it would be to maintain it. We remain confident in our belief that given the large valuation spread that still exists, we will continue to benefit from this change.
AVERAGE ANNUALIZED TOTAL RETURNS (%)
Returns for periods less than one year are not annualized. Composite inception: 10/31/1995
Past performance is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. The gross performance presented above does not reflect the deduction of investment advisory fees. All returns reflect the reinvestment of dividends and capital gains and the deduction of transaction costs. The client’s return will be reduced by the advisory fees and other expenses it may incur in the management of its account. The advisory fee, compounded over a period of years, will have an adverse effect on the value of the client’s portfolio.
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Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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