Year End 2025 Portfolio Review

Another ugly year for me, that's three of the last four.  My portfolio was down -5.93% on the year, compared to a positive +17.91% for the S&P 500.  My long term performance has shrunk to 18.49% annualized, below my long term target of 20.00%.  I've spent some time considering how much more effort I want to put into trying to outperform the market going forward.  Starting in the new year, I'm taking on an expanded role in my day job, so even if performance bounces back considerably I'm going to scale back on the blog and individual stocks.  Focusing on my career seems to be the best return on investment at this point in my life.  However, I plan to continue posting for the love of the game, just will be less frequent and/or be dedicated to higher conviction ideas.  

Current Positions (alphabetical order):

• Braemar Hotels (BHR) is an externally managed (Ashford Inc) lodging REIT focused on luxury hotels and resorts, back in August, BHR announced the initiation of a sales process.  In keeping with the "K-shaped economy" theme, BHR's high end luxury resorts have performed well on an individual basis, but the REIT's abusive external management agreement and conflicts of interest have kept the stock from performing.  Ashford is incentivized to sell BHR because they're due a 12x termination fee, but not necessarily incentivized to sell at an advantageous price for the equity (other than getting a reasonable enough deal to secure the vote).  @somehotelguy posted on Twitter back at the end of October, "Braemar call for offers tomorrow.  Any guesses?" and the CEO Richard Stockton wrote in his annual letter that "further announcements should be coming in 2026."  I'm hoping for a good outcome in Q1.  Interestingly, Ashford's other lodging REIT, Ashford Hospitality Trust (AHT), initiated a similar sales process in December, adding legitimacy to both, seems like Monty Bennett is serious about one last grift and leaving public markets.
• Brightstar Lottery (BRSL) is a pure play lottery operator following the sale of their IGT gaming terminal business to Apollo (APO).  Brightstar trades cheap at just ~6x EBITDA for a fairly high quality business with clear revenue line of sight.  Brightstar is returning cash to shareholders via a large buyback plan and an above average dividend yield.
• Franklin Street Properties (FSP) is an office REIT in the midst of a sales process, shares have traded down significantly since my original post.  FSP's debt (combination of two term loans and senior notes) is likely the reason, their debt matures on 4/1/26, the company issued a press release on 11/21, "FSP is currently in active negotiations with a potential lender to refinance all of its existing indebtness."  At a current price of $0.90/share, I have the implied cap rate at 14-15%.  There's a lot of talk about 2026 being the year when commercial real estate transaction activity returns as bid-ask spreads shrink with sellers accepting the new reality; a sale of FSP should happen early in Q1.
• Forward Air (FWRD) is primarily an asset-lite less-than-truckload transportation services provider that historically had a nice niche in airport-to-airport routes.  They're almost a year into a strategic review that has had a few twists and turns.  There's a lot of debt here, but FWRD insists the process is ongoing, with potential proxy fight / director nominations around the corner, the company might end up taking the best offer on the table sooner than later.
• Golden Entertainment (GDEN) is a regional casino owner operator focus on the Nevada market, they announced a transaction with VICI buying the real estate and Chairman/CEO Blake Sartini taking the operating company private.  The implied multiple on the operating company is around 1x EBITDA leaving open the possibility for a bump to secure shareholder approval.

I left the VICI side of the trade unhedged which appears to be a mistake, shares are currently trading below the merger consideration and depending on when the close happens, GDEN could get another $0.25 dividend or two that I didn't account for in the above.

• GCI Liberty (GLIBA/K) is an Alaskan telecom that recently completed a $300MM rights offering backstopped by John Malone (the backstop wasn't needed).  The rights offering worked out nicely for those who participated with equity being raised at $27.20/share compared to the current price of $36.09/share.  Now we wait for Malone to put those funds to work with an acquisition to turn GLIBA into a "new Liberty Media".  I hope we see a true arms length transaction and not something like GLIBA buying distressed Liberty Puerto Rico from Liberty Latin America (LILA).  In the meantime, GCI Liberty remains reasonably cheap at just 5.7x LTM EBITDA, but competition from satellite providers like Starlink is a concern.
• Green Brick Partners (GRBK) is primarily a Texas homebuilder, mostly focused on Dallas, but they've recently branched out to the Austin and Houston markets.  The company has performed exceptionally well, but in the back of my head I wonder what is really their competitive advantage?  They would tell you land sourcing and development, they like to talk about infill communities, but its questionable.  GRBK trades for 10x earnings and 1.5x book, both pretty reasonable for this business, I've coffee canned this position for the time being.
• Income Opportunity Realty Investors (IOR) is a money-market like investment with almost all of its assets consisting of a cash sweep account receivable with its external manager that owns almost all of the shares.  The play here is to wait until they squeeze out the remaining shares.  The controlling family ownership group, via TCI, continues to buy whatever shares are available below $18 per share, book value is $30.72 per share.
• Mechanics Bancorp (MCHB) is a California based regional bank with branches up and down the west coast that swallowed up distressed HomeStreet (HMST) this past year.  The bank is majority owned by Ford Financial Fund, their strategy is pretty simple, chip away at the expense ratio and pay out the vast majority of net income as a dividend.  The team at Ford Financial has run this playbook a few times in the past before selling out, the same will likely happen here at somepoint.  I plan on selling down my position sometime in 2026 as my original thesis with HMST has played out.
• Mount Logan Capital (MLCI) is a subscale, lower-quality private credit asset manager that recently completed a reverse merger with 180 Degree Capital (TURN), providing MLCI with a U.S. listing and some cash/securities on its balance sheet.  A lot of digital ink is being spilled about the risks of private credit, I generally think the systemic risk fears are overblown and much of the "cockroaches" that have been uncovered are unrelated to private credit.  But, I'm under no impression that Mount Logan is a long term winner in this space, the company has an odd management structure that doesn't scream alignment and the management team has some past missteps with credit picking in their prior seats.  This week, MLCI formally launched their previously announced tender offer for approximately 12% of the shares outstanding at a price that reflects the merger date book value of $9.43 per share.  The tender is set to close on February 2, 2026, doing a little work on what potential outcomes could look like I get the below:

The math will end up a little better because I'm assuming 100% of shares tendered in the above, management has pledged not to tender and there will be some legacy shareholders asleep at the wheel or that just forget to tender.  The IRR swings pretty wildly depending on what discount-to-book you believe the manager will trade at post merger.  In the long run, the hope is that MLCI will decouple from being valued off of its balance sheet and rather be valued based off an earning stream, but that bridge is pretty shaky and confusing at the moment.

• Net Lease Office Properties (NLOP) is an office REIT with an explicit liquidation business plan, it was spun from W.P. Carey (WPC) with corporate level debt, but that's all been paid off and the REIT is now distributing asset sales proceeds to investors.  NLOP is a pretty safe way of playing the return to office theme.
• NSTS Bancorp (NSTS) is a small thrift conversion located in the far northern suburbs of Chicago.  The thesis is fairly simple but requires patience, NSTS passed its three year mark following the conversion making it eligible to be acquired by another bank or credit union.  NSTS trades for 0.80x tangible book value, stopped repurchasing stock and is facing shareholder pressure to sell.  Tim Melvin was on Value After Hours a few weeks back and gave a quick pitch for NSTS.
• Sotherly Hotels (SOHOO) is a small lodging REIT that is being taken private by Kemmons Wilson Hospitality Partners and Ascendant Capital for $2.25/share.  SOHO has a three classes of preferred stock, each of these classes features a conversion option to common in the case of a change of control, but the number of shares has a cap.  Below is what I show as the spreads and IRR based on a 3/31 close for the common (the merger is targeted to close in Q1) and a 5/15 close for the preferred stock (the conversion happens post merger closing).

The take-private transaction appears to be on track: the definitive proxy is out, shareholder vote is set for 1/22/26, insiders own 17.73% of the shares and have signed on to vote yes, Apollo (Marc Rowan has recently said the firm is in a defensive posture) is leading the financing of the transaction.  Sotherly Hotels is my largest position heading into 2026.

Closed Positions:

• Mereo BioPharma Group (MREO) earlier this week announced their two phase 3 trials for Setrusumab with partner Ultragenyx (RARE) did not meet their primary endpoints.  That news sent the stock down 90%.  I had coffee canned this position for several years, fully aware that it was a science based biotech which is generally against my rules when turning over rocks in the sector.  Taking this one on the chin stings quite a bit.
• Seaport Entertainment (SEG) is an owner of real estate and entertainment assets in Lower Manhattan that was a spinoff of Howard Hughes (HHH) in 2024.  I sold because don't want to be in the Ackman business anymore and losing their CEO was a blow to my thesis.  Cash burning real estate plays relying on a low cap rates (the Seaport was originally built to a 4% cash yield) don't typically perform well in public markets.  The current market price is currently valuing the equity at a fraction of replacement cost, but given the treatment of minority shareholders over at HHH, I'm skeptical SEG shareholders will enjoy the fruits of any eventual turnaround.  The discount will be used against them when Ackman eventually acquires SEG back.
• The broken biotech basket is currently empty, during the last six months I sold or transactions closed for: Athira Phrama (ATHA) unfortunately before the recent great news on an asset sale, CARGO Therapeutics (CRGX), ESSA Pharma (EPIX), HilleVax (HLVX), Ikena Oncology (IKNA), Mural Oncology (MURA), Repare Therapeutics (RPTX) and Third Harmonic Bio (THRD).
• Par Pacific Holdings (PARR) was also a long term holding of mine, it had a great year as crack spreads widened again.  I like the management team, they're rational allocators of capital, I might re-enter PARR the next time crack spreads tighten or some other shock hits the refining industry.
• I wrote some covered calls on two of my "catching knives" stocks in Jefferies Financial Group (JEF) and Fiserv (FISV), both ended up rallying and my short calls were exercised.
• I also closed out CKX Lands (CKX), Enhabit (EHAB), Soho House (SHCO), Creative Media & Community Trust (CMCT) and Light & Wonder (LNW) during the last six months.

Odds & Ends:

• I participated in the Verve Therapeutics (VERV) tender offer for the CVR.  In June, Eli Lilly announced the acquisition of VERV, a gene editing biotechnology company targeting cardiovascular disease, for $10.50/share plus a CVR for up to $3/share.  The CVR is tied to VERV's lead asset VERVE-102 beginning a Phase 3 trial.  Eli Lilly is VERV's development partner on this asset, must have seen what they liked, shares traded around $11.10/share heading into the tender valuing the CVR at approximately $0.60. 
• In July, I tried to put on a full position in Synlogic (SYBX), a broken biotech that counts Cable Car Capital as a lead investor (Jacob Ma-Weaver published a letter outlining his process for busted biotech reverse mergers), but the stock ran away from me as rumors swirled that SYBX could merge with a crypto treasury company.  I could no longer justify owning it in my biotech basket, never wrote it up because I never filled enough to own more than a tracking position.
• I bought Solstice Advanced Materials (SOLS) shortly after its spin from parent Honeywell (HON), mostly thanks to this Quick Value post.  I flipped it a week or two later for a quick profit.

Performance Attribution:

Watchlist:

Current Portfolio:

As always, thank you for reading and commenting, please feel free to share any ideas in the comment section.  Happy New Year, despite my poor performance, I am optimistic about 2026.

Disclosure: Table above is my taxable account, I don't manage outside money and this only a small portion of my overall assets.  As a result, the use of margin debt, options or concentration does not fully represent my risk tolerance.