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Expensive Companions and Mates,
Our partnership recorded a acquire of +4.9% internet of all charges, bills, and allocations for the quarter ending September 30, 2025. Over the identical interval, the S&P 500 (SPY) recorded a acquire of +8.1% together with dividends, and the Russell 2000 (IWM) recorded a acquire of 12.4% together with dividends.
The under desk highlights the partnership’s key portfolio composition metrics as of September 30, 2025: 4
Please see vital footnotes to the above tables underneath the “Disclaimer” part on the finish of this letter
Our partnership returned +4.9% internet of all charges, bills, and allocations for the third quarter of 2025. At instances this yr, I’m certain I’ve not been alone in feeling that the one prerequisite that has been wanted for a inventory to outperform has been to incorporate the phrases “AI” or “information heart” someplace in its press launch. “Momentum” and “junk” shares have continued to have fairly a run, too, defying elementary gravity for longer than many people would have wagered.
As you might need appropriately guessed, not a greenback of our partnership’s capital has chased the AI theme. Though we maybe may have doubled (or quadrupled!) our partnership’s property by means of well-timed AI trades, in virtually all instances, this conduct would have amounted to not way more than hypothesis in our view. Hypothesis is neither essential nor sustainable as an funding technique, we imagine, and historical past suggests it not often ends nicely for many who take part.
Throughout the dot-com unwind, for instance, the NASDAQ (QQQM) fell -78% from its March 2000 peak to its 2002 89 trough. In the meantime, small-cap worth shares led the next years’ fairness management by a large margin. In different phrases, there have been lengthy stretches when proudly owning sturdy, money generative, smaller corporations, the sorts of corporations we search to personal, is exactly the publicity traders wished that they had.
Regardless of the AI mania, we merely proceed to use the identical funding method that we expect has served us nicely since our partnership’s inception. Search high-quality companies and administration groups, with sturdy free money stream per share progress prospects, at low valuation multiples to guard our draw back danger. This stance could also be retro in a market this slim, however we’d moderately be accountable than common.
As expressed in prior letters, we anticipate reaching a degree, maybe before later, once we will intend to cease accepting new capital. We want to all the time preserve a capital base small and nimble sufficient that permits us to put money into our highest conviction concepts with ample focus. Our aim stays targeted on responsibly maximizing funding returns moderately than maximizing property underneath administration. The best way we view it, this method mitigates danger to the sturdiness of our future returns on capital, simply as we’d anticipate our portfolio firm CEOs to consider their companies. We additionally really feel we’re doing the correct factor by our valued companions.
In the meanwhile, we’re open to accepting a further $9 million in new subscriptions. As soon as our threshold is reached, we intend to shut the partnership to new subscriptions perpetually. Preserving the standard of our companions stays our prime enterprise precedence. We stay up for assembly likeminded potential traders.
As all the time, I wish to prolong a thanks to all of our excellent restricted companions, together with these of you who’ve lately joined our partnership, in your steadfast dedication and belief. It’s the excellent high quality of our restricted companions, a complete depend which is now 60, that permits our partnership to take care of its long-term orientation over investments, stand up to volatility, and understand as greatest as attainable our aim of compounding our capital on the highest fee of return that we responsibly can.
Portfolio Replace
Our companions are inspired to learn our commentary on our partnership’s prime 5 holdings in Appendix A connected to the top of this letter.
Analysis With out Reward
Earlier this yr, I promised to maintain you knowledgeable about our pursuit of funding alternatives in Japan. We ended up devoting appreciable time this yr to at least one specific Japan-listed firm concerned within the shopper staples sector. After a number of months of major analysis, together with U.S. retailer visits, competitor scuttlebutt, and a visit to Tokyo, we concluded that this was not a worthwhile funding.
After our first month of analysis, we sought to talk with investor relations (IR), which was organized in July. Our major analysis had produced encouraging qualitative information factors, and so far, we have been changing into more and more enthusiastic about this firm’s prospects, pending additional, important excellent objects. I used to be not fairly certain what to anticipate with IR, given this was my first video name with a Japanese firm. I employed a translator (a market that I discovered is surprisingly costly!) and got here ready with an in depth checklist of questions. Maybe probably the most predictive body of reference for this Japanese company assembly got here from Peter Lynch’s e book Beating the Road:
Japanese companies are very formal and the conferences have been ceremonial in nature, with a number of bowing and occasional tippling. At one firm, I requested a query about capital spending, which took about 15 seconds in English, however the translator took 5 minutes to relay it to the Japanese skilled, who then took one other seven minutes to reply in Japanese, and what lastly got here again to me in English was “100 and 5 million yen.” This can be a very flowery language. (Peter Lynch, Beating the Road)
Certain sufficient, our expertise was not dissimilar. I knew that hoping to get by means of my checklist of 25 questions in an hour was formidable, however I used to be not anticipating to cowl solely 4 and a half of them. Whereas pissed off, I used to be nonetheless decided to obtain solutions, lest this be a possibility that bought away for lack of attempting. Shortly thereafter, upon my request, the corporate’s administration agreed to fulfill me at their headquarters in Tokyo in August.
The dates provided for this assembly fell lower than per week earlier than I used to be scheduled to journey with my household. So as to make this Tokyo go to work, I booked a round-trip flight the place I would go away New York, fly to Tokyo, and be again residence simply 39 hours later. This allowed sufficient time to conduct additional scuttlebutt at shops in Tokyo, sightsee for a bit, and meet with administration earlier than heading again to Haneda Airport for the return flight residence.
Opposite to the IR video name, the in-person administration assembly was glorious in high quality. Three of the corporate’s prime executives attended. Administration spent virtually two hours with me, addressed virtually all of my questions, and famous that I used to be the primary U.S. investor to go to their headquarters in a few years. Nonetheless, it was the substance of their solutions that proved stunning. Their responses have been detailed but painted a meaningfully weaker outlook than I had anticipated, which was the precise reverse message that IR had communicated simply weeks earlier! In actual fact, after we concluded the assembly, IR, who had sat in on the assembly, turned to me and stated, “I hope you might be nonetheless all for our firm,” which was concerning the closest to an request for forgiveness we could ever hear from a public firm investor relations consultant.
In the end, we didn’t come residence with a high-conviction, residence run thought, and that was completely acceptable. In a special set of circumstances, underneath totally different strategic choices, this firm might need grow to be a compelling funding, however on this timeline, it wasn’t. As underwhelming as the result was within the second, nonetheless, for each potential funding we discover that begins to emerge as a beautiful scenario, we are going to all the time conduct these months of diligence and we are going to all the time take that 39-hour round-trip to Tokyo, within the occasion that the engaging scenario does materialize. This isn’t the primary potential funding of ours with dozens of hours of logged analysis that has resulted in a “go,” and it definitely gained’t be the final, although in between is the place the diamonds within the tough are found. The one logical plan of action as we see it, particularly after working right into a string of deflating high-effort useless ends, is to simply accept the consequence, take it in stride, and transfer on to the following alternative with the identical excessive power.
Related to our learnings on Japan, this specific firm’s predominant enterprise concerned shopper staples with a notable U.S. part. We subsequently believed it may be extra insulated than the standard Japanese firm from the chance of knowledge and communication frictions for overseas traders, however on the contrary, this expertise underscored for us that regardless of our greatest efforts, this danger can very a lot nonetheless exist.
With that in thoughts, I’ve concluded that the very best alternative for us to take part in Japanese equities is thru a basket method, an method that we’ve given an excessive amount of thought and analysis to over the course of this yr. In Could, we spent a number of weeks fastidiously establishing a basket of 25 deep worth, small-cap Japanese equities that we screened utilizing quantitative standards and selective judgment. We then monitored that basket’s efficiency over a trial interval by means of the top of September. We have been happy with the outcomes, because the basket outperformed related Japanese inventory market indices by a wholesome margin,7 and the worst performer within the basket declined by solely -2%. In consequence, going ahead, our partnership could contemplate a basket of Japanese equities for funding, regularly up to date and monitored. We might view this as a collective place in our portfolio that we imagine may ship double-digit common annual returns whereas possessing below-average danger of everlasting capital impairment.
Closing Ideas
Thanks for taking an curiosity in our newest letter. I’m enthusiastic about our partnership’s future. I stay assured that our partnership’s north star will all the time be to compound our capital on the highest fee of return responsibly attainable. In some respects, this method could render our partnership uninvestible by many institutional traders. That’s completely high-quality by me. We are going to proceed to simply accept as companions solely those that perceive, and who’re aligned with, our goal. In case you want to be taught extra concerning the partnership, please be at liberty to succeed in out to me straight. Our partnership at present welcomes introductions to new traders who’re aligned with our philosophy and our long-term method. Readers all for receiving future letters can register at our web site www.sohrapeakcapital.com. I worth the belief you could have positioned in me to take a position your hard-earned capital, because the substantial majority of my very own wealth is presently invested alongside yours. I stay up for writing to you once more subsequent quarter.
Most Sincerely,
Jonathan A. Cukierwar, CFA
Supervisor of Sohra Peak Partnership LLC, the Common Companion of Sohra Peak Capital Companions LP
Editor’s Word: The abstract bullets for this text have been chosen by Looking for Alpha editors.
