Partners in WMK Group’s Strategic Opportunities portfolio earned a strong return in Q1.
Our conglomerate of businesses spans diverse industries—from e-commerce platforms to fire suppression technologies. Despite this range, all our holdings share common characteristics: exceptional returns on capital, long-term growth potential, and outstanding management teams. These qualities, while no guarantee of success, help mitigate risk and provide a foundation for long-term value creation that allows us to invest with confidence.
Portfolio Commentary
“And this is what Jeff Bezos always used to tell me. He said, don’t make bets on short-term things.
Make bets on long-term things.”
– Lyft CEO, David Risher
We do not own Lyft, but Mr. Risher’s quote captures the spirit of the long-term mindset we seek in our investments. With leadership experience at companies like Microsoft and Amazon, he understands the power of compounding and patience over time—values that align closely with our own.
We categorize many of our investments into two broad themes:
- Things that stay the same
- Inevitable change
Things That Stay the Same
Certain industries offer enduring relevance. Within these, uniquely positioned companies can establish durable competitive advantages that make it difficult for new entrants to compete effectively.
Railroads
We own a rail operator with historical roots dating back to the 19th century. Railroads remain one of the most efficient and fundamental components of North American logistics, and that advantage has persisted across generations.
Insurance
The insurance industry is notoriously hard for newcomers to penetrate. Some of our positions in this space include leading insurance brokers, some of which trace their histories back centuries. These firms benefit from scale, regulatory expertise, and longstanding client trust.
Waste Management
The waste industry offers long-term stability. While the methods of waste disposal may evolve, the need for responsible, large-scale waste handling will persist. Our investment in a major environmental services company fits squarely into this theme.
We should emphasize: just because an industry has existed for a long time does not mean every company within it is a sound investment. However, businesses operating in time-tested sectors often offer a more fertile ground for identifying high-quality, long-term investments.
Inevitable Change
On the other hand, some industries are shaped by secular trends—structural, long-term shifts in society, technology, or behavior. Within these movements, many companies may falter, but those that align with the trend often enjoy strong tailwinds.
E-Commerce
Consumer behavior continues to shift toward online retail. We own companies well-positioned to benefit from this change, with operational scale and technological infrastructure that support their growth.
AI & Cloud Computing
Artificial intelligence and cloud services are driving transformation across nearly every sector. While some companies receive most of the media attention, we prefer to own enablers—businesses that support or benefit from these trends rather than those whose valuations require perfection. This includes providers of IT infrastructure and digital platforms.
Climate Change & Sustainability
As the world adapts to a changing climate, demand is growing for both mitigation and adaptation solutions. We are invested in businesses that contribute to a safer, more resilient environment—for example, firms providing technology for wildfire prevention and suppression.
Trying to invest based on short-term predictions is extremely difficult and often unrewarding. Long-term investing, by contrast, allows our patience and discipline to be a competitive advantage. We continue to prefer bets aligned with enduring trends rather than attempting to time short-term market moves.
CFC Required Reserves Portfolio Update
Several of our investors—including myself—hold conservative fixed income portfolios within reinsurance entities, governed by strict capital preservation mandates. These portfolios are heavily weighted toward high-quality bonds and are designed to minimize risk.
Throughout the period, we maintained a lower risk posture than the broader bond market. This included reducing interest rate sensitivity through the use of hedges or floating-rate securities. The result was a strong relative performance and a favorable risk-adjusted return.
In the first quarter, the bond market began to acknowledge that a resilient U.S. economy may necessitate elevated interest rates for a longer period. While nominal yields did rise slightly, real yields (adjusted for inflation) remain below long-term historical norms. This means that fixed income investors are currently earning less purchasing power growth than would traditionally be expected—despite taking on risk. Historically, bonds offered investors a reliable way to grow wealth modestly over time; today, that role is far less certain.
Disclosures:
The views expressed above are those of WMK Investment Partners. These views are subject to change at any time based on market and other conditions, and WMK disclaims any responsibility to update such views.
Past performance is not indicative of future performance. Principal value and investment return will fluctuate. There are no implied guarantees or assurances that the target returns will be achieved, or objectives will be met. Future returns may differ significantly from past returns due to many different factors. Investments involve risk and the possibility of loss of principal. The values and performance numbers represented in this report do not reflect management fees.
WMK may discuss and display, charts, graphs, formulas which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used on their own to make investment decisions. To the extent that certain of the information contained herein has been obtained from third-party sources, such sources will be cited, and are believed to be reliable, but WMK has not independently verified the accuracy of such information.