CLBTW - Greenhaven Road Capital Main Fund Q1 2024 Investor Letter

2024-04-28 07:20:00 ET

Summary

• Greenhaven Road is a boutique hedge fund with the patience and confidence to step outside of the norm. Greenhaven Road Capital digs deep, searching in places rarely trafficked to locate the few hidden gems that will outperform a diversified portfolio of blue chips.
• The Fund returned approximately 2% in the first quarter of 2024.
• We are betting that people matter, products matter, customer wins matter, the competitive landscape matters, and, ultimately, there will be a connection between business progress, fundamentals, and the share price.

Dear Fellow Investors,

The Fund ^[1] returned approximately 2% in the first quarter. Returns will vary by fund and investment class, so please check your statements for your actual returns.

Paid to Wait

The hardest part about investing is the waiting. As Charlie Munger of Berkshire Hathaway said, “The big money is not in the buying and selling, but in the waiting.” In the short term, almost all share price gains and losses are related to changes in the multiples investors are willing to pay. Earlier this month, the March consumer price index came in at 3.48%, which was rounded up to 3.5%, which was higher than the expected 3.4%, and – BAM – multiples contract, and there is only red on my computer screen at 8:30 a.m.

Ironically, when the CPI update was posted and everything sold off, I was sitting in the audience for KKR )’s investor day. Management laid out a 302-page tour de force on how they can 4X their adjusted net income per share over the next 10 years ( slide 23 ) . Given the track record of their underlying funds, the firm’s new distribution channels (high net worth and insurance), history of fundraising success, and high-net-worth individuals’ under allocation to private equity, I had the overwhelming feeling of inevitability when considering KKR’s long-term prospects. Of course, nothing is truly inevitable about the short-term direction of any share price, but KKR’s business will almost undoubtedly grow significantly in the coming years. The firm’s people, business model, products, market need, and track record all signal to me that this will be an even bigger, more profitable business in 5 years than it is today. They have compounded assets at 18% for almost a decade and a half and grown fee-related income 7X since 2010. The pieces are in place for the next phase of growth including successful existing funds, robust distribution channels, new products, and a large base of existing limited partners. The team has been building....

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