2025 Annual Letter to Limited Partners

Travel Capitalist

01 May 2026 — 13 min read

To my limited partners:

The S&P 500 index went up 16.39% (17.54% with dividends) in 2025, ending the year with another all-time high just like 2024. The bull market run from 2023 seems unstoppable, an easy 78% gain in three years just by holding the index, if this trend continues, everyone who’s simply holding the index can beat Warren Buffett. The Magnificent 7 technology stocks went up an average of 22.4%, and only Alphabet and Nvidia have outperformed among the 7 stocks.

Stock price improvement comes from two factors: P/E ratio increase and earnings growth. The P/E ratio of S&P 500 has increased about 10% in 2025, and the earnings of the largest 500 US corporations have grown about 12%. This earnings growth has outperformed the historical average of around 6%. We cannot predict the market sentiment, but we work hard to find companies with above average earnings growth that lasts many years.

Value Investing

I wrote in my 2023 letter that value investing is about buying good companies run by good managers at an attractive price. It is difficult to do so when the stock price is at an all-time high and S&P 500 P/E ratio is at 25x, so it is time to look for bargains somewhere else. Lawrence J. Goldstein has run Santa Monica Partners for over 40 years with 16% annualized gains (or in total 39,096% gain from 1982 to 2021), he specializes in “pink sheet” investing, focusing on overlooked or ignored small-cap and micro-cap stocks, and hold on to them for decades until they become large cap. Most famously Goldstein invested in Balchem Corporation (BCPC) in the 1980s at an average cost of between $0.24 and $0.49 per share and held on to the majority of shares until 2017 when the stock price appreciates to about $80. We started to look into micro-cap OTC stocks and foreign stocks in 2025, and made two such investments, which represent 100% of our investments in new stocks.

Why is S&P 500 hard to beat?

Because it purchased every stock when it becomes large (for only 0.01% position) and held on to it forever. Very few people purchased Nvidia in 2001 despite dotcom bubble and never bought or sold any shares. The so-called "rebalance" doesn't really buy any existing shares

69 Pence on the Pound for a Book That Compounds at 18.5%

A London-listed insurance private equity firm trades at £240M market cap against £350M book value — a 31% discount to NAV. The same NAV has compounded at 18.5% per year for the last nine years (11% per year since 2005). Of 23 current investments, exactly one is marked below cost.

A 138-Year-Old Thrift Trading 38% Below Book

A federally-chartered savings bank in the American Midwest carries $39M of book value, sits on roughly $20M of excess capital above what regulators require, and trades at a $24M market cap. The math, before we even get to the buybacks, is $0.62 on the dollar of book — and management