Through the first half of 2025, Partners in WMK’s Strategic Opportunities portfolio and our dealership required reserves both delivered meaningful growth. Despite volatility caused by shifting tariff policies, our disciplined, long-term strategies positioned us well for strength and resilience.
Market Musings
After a modest pullback in the first quarter, the second quarter saw extreme volatility. Equity markets opened under pressure due to emerging tariff policy rhetoric, driving a sharp selloff. Yet, within weeks markets reversed as a temporary pause in tariffs sparked a broad rally in both U.S. and developed international equities—turning prior losses into solid overall gains for the period.
Still, we remain aware that the U.S. has altered the trajectory of free trade, potentially creating long-term consequences for global commerce.
Fitch Ratings’ Effective Tariff Rate Monitor anticipates a substantial jump in U.S. tariffs compared to the end of last year. Independent estimates suggest these higher tariffs amount to a significant financial burden on average households, at a level that could strain personal finances if spending behavior remains unchanged.
With personal savings rates already low, this represents a meaningful pressure on households’ ability to absorb higher expenses. This scenario also limits flexibility if unemployment rises or unexpected financial stressors emerge.
In this context, we recall the prescient observation by economist Peter Bernstein:
“The fundamental law of investing is the uncertainty of the future.”
That uncertainty now includes broader geopolitical, economic, and financial tail risks. The path forward could include successful domestic policy implementation, accommodative monetary policy, or deeper macroeconomic headwinds. Markets often discount that uncertainty—and yet equity valuations remain relatively high compared to historical norms, especially in the U.S., while valuations elsewhere remain more moderate.
Given this backdrop—elevated valuations, economic pressure, and potential shifts in global capital flows—we are exceptionally disciplined in evaluating new equity positions. Everything now undergoes heightened scrutiny before being added to or retained in the portfolio.
Equity Holdings
Our concentrated equity strategy remains centered on holding durable businesses led by strong management teams for years—not weeks. Following the exit of Converge Technology Solutions via a private equity acquisition, we redeployed capital into another competitively advantaged business: Loar Holdings.
We chose to invest in Loar for several reasons:
- Attractive Industry Structure: Aerospace and defense parts manufacture features long product lifecycles, high regulatory barriers, and favorable demand tailwinds tied to both commercial air travel and defense spending.
- Proven Financial Performance: Since its founding, Loar has consistently grown revenues and operating profit, thanks to consistent value creation through productivity gains and margin expansion.
- Strong Leadership and Ownership: Led by its Founder and CEO, who brings deep industry experience and a collaborative leadership approach, and majority backed by a respected long-term asset manager, Loar benefits from both strategic insight and operational stability.
- Reinvestment Potential: With highly cash-generative operations and modest capital needs, the company has flexibility to reinvest organically, pursue strategic consolidation, and continue expanding its product portfolio.
Given its strengths, Loar is not a typically “cheap” stock. Instead, it trades at a premium multiple to expected EBITDA—but we view it as justified by the long-term runway for growth and intrinsic cash-generation ability. Our expectation is that Loar will compound value steadily for many years, if not decades.
Disclosures:
Investment advisory services are offered through WMKI Group LLC dba WMK Investment Partners, a Registered Investment Adviser. The views expressed represent the opinion of WMKI Group LLC. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While WMKI Group LLC believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and the WMKI Group LLC’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations.