Pellom Value Investments Q2 '25 Review
Pellom Value Investments LLC is a private family office registered in the state of Tennessee. Pellom Value Investments LLC is not a registered investment advisor with any governing or regulating body. Nothing in this website should be construed as a public offering or solicitation. We do not accept outside funds for our services. We are not professional investment advisors, nor do we represent ourselves as such.
The information on this site is not intended to be and should not be treated as legal advice, investment advice, or tax advice. You should discuss all recommended tax strategies and other strategies that may be available to you with your professional investment, legal and accounting advisors before implementing them.
I’ll begin this quarter’s letter by recommending you listen to a podcast conversation between David Senra and Patrick O'Shaughnessy. David is the founder and host of the incredible Founders podcast where he shares the essential lessons learned from studying over 400 biographies of the greatest entrepreneurs in history.
If forced to distill the essence of entrepreneurial greatness into a single word, Senra lands on "focus.” He observes that the truly great founders maintained an unwavering dedication to a singular mission or product, often for decades. This, he notes, stands in stark contrast to the fragmented attention spans cultivated by modern digital environments, where the emphasis is often on rapid shifts and chasing trends rather than deep, sustained effort.
This intense focus is intimately tied to the primacy of the product and the work itself. The most impressive entrepreneurs aren't primarily driven by financial metrics or short-term gains; their success stems from a love for and obsession with what they are creating. The reward for great work, in this philosophy, is simply the opportunity to do more great work.
Another crucial principle is prioritizing durability over growth. While growth is often the focus today, Senra's study suggests that long-term success and substantial wealth are byproducts of building durable businesses, designed to last, rather than merely achieving rapid scale. He quotes Nick Sleep on the perplexing nature of companies losing money but wanting to get bigger and “lose more money.” Later he quotes Steve Jobs on the same topic, "victory in our industry is spelled survival.”
How does someone find what they are obsessed about?
Senra echoes Jeff Bezos's sentiment that, "You don't pick your passions your passions choose you.” Ken Griffin's long-standing obsession with the stock market, "for reasons I don't quite understand," since third grade is given as an example. Michael Dell's early obsession with computers from age 12 is another. Kobe Bryant knew at a young age he would “be the best basketball player in the world.” It seems to manifest as an intense, often unexplained, interest that drives the individual.
Finding this mission and focusing on it feels like an "unbelievable relief," a "weight off your shoulders.” Once found, great founders have "low to zero introspection" about what they should be doing; they wake up every morning knowing exactly their task and are resolved to do it for as long as they are able.
That’s what I feel like I’m doing with Pellom Value Investments.
I’m not arguing I’m a budding billionaire, a visionary leader, or a revolutionary figure. All I’m arguing is I am intensely motivated by the work I am doing here.
I grew up in a very poor household. Our only income was the disability check my dad received due to a back injury he sustained at work — he was a brick mason for the first twenty years of his adult life. I vividly remember the day his check was increased from $550 a month to $650 a month. We were rich!
We received food stamps, a housing voucher, and various other types of government aid. Finances were always tight. It created pressure a young kid cannot understand or explain, but as I grew older, I certainly felt the strain.
To compound the financial pressure, both my parents battled hard drug addiction. (My dad died of a drug overdose when I was eighteen years old.)
As a kid, growing into a young man, I could never understand why the adults in my life would not make better decisions. In the neighborhood I grew up in, with the friend group I had (largely a byproduct of my parents’ relationships with their parents), we thought it was incredible when an adult could sustain a job - any job. Often it was treated as a minor miracle. Drug addiction has a way of making you notoriously unreliable.
When I became an adult, I realized how simple it is to make good decisions. Not easy, but simple. It’s amazing how far you can get showing up on time, doing the work no one else wants to do, and not being a jerk.
Once I started bringing in a regular paycheck, I realized how important it is to spend less than you make and save a little for the future. Again, this is very simple, but it is not easy.
Around the same time, I was introduced to the magic of compound interest by a college professor. Both Warren Buffett and his long-time business partner Charlie Munger have consistently harped on the idea that compound interest is something people either understand immediately, intuitively, or not at all. You’re either hooked by the idea and obsessed with it, or, alternatively, no amount of teaching and coaching can make you understand or care.
Here’s a link to a compound interest calculator to see if you’ve got the bug.
I detailed my personal background above to show the work I’m doing here is a byproduct of my obsession with compounding and long-term investing. I am intensely focused on trying to do the right thing every day, and that by doing so, our managed portfolios get modestly and incrementally better over time as a result.
Because of my upbringing, I have no interest in advising those with large sums of money on how best to avoid losing it. My passion is for the low and middle income individual or family who might need help with a long-term, stable plan to create a retirement outcome they can feel good about. I’ve detailed in the past how my childhood makes me hyper-focused on leaving my kids with a large investment portfolio when I’m gone. I want to give them the head-start I didn’t get. This type of long-term, generational thinking is what I’m obsessed with.
I have no obsession with beating the market. I’m not here to chase a quick dollar or to bet on a stock to double in three months. I want to invest in great businesses at a discount to their value and to let those businesses do the heavy lifting of performance for our portfolios. I don’t need a huge salary, an expensive car, or a fancy office. I need to build something durable for those who trust me.
I truly believe you do not have to be a genius — I certainly don’t qualify — to get an outstanding result in the stock market. You simply have to be patient, and to stick to a few tried and true value investing principles. If you’re mostly correct about a great business, and mostly correct about its valuation, allowing the investment return to compound over long stretches of time is an edge over Wall Street which prioritizes maximizing short-term returns.
Anyway, I’m not sure anyone is here to read my pontifications or personal trials and tribulations. Let’s talk about our portfolio.
New Additions
Disclaimer: This is not investment advice. I am not a financial advisor. If a stock I list here goes down, it is because I am an idiot. If a stock I list here goes up, it just means I got lucky.
These investment summaries are intentionally concise, written for novice investors and clients who may be disinterested in business valuation, not financial experts. Much of the financial media drowns its audience in needless complexity, mistaking verbosity for insight. I believe their "precision" is often a smokescreen. If a story can only be told in a spreadsheet, it's not a story worth reading.
Exor N.V.
Full investment thesis here:
Archer-Daniels-Midland
Full investment thesis here:
Gruma, S.A.B. de C.V. BMV
Full investment thesis here:
United Parcel Service (UPS)
Full investment thesis here:
Portfolio Review
Warren Buffett announced at this year’s Berkshire Hathaway annual meeting that he plans to retire at the end of 2025. I wrote a bit about what Buffett means to me. I’ll share that here:
If you invested $1,000 in 1965, by the end of 2024 it would have grown to approximately $53.1 million in Berkshire Hathaway, or about $375,000 in the S&P 500, using the historical average growth rates.
Stealing this stat from Chris Bloomstran for more context: From 1965 to today, Berkshire stock could drop 99% and still be outperforming the S&P 500.
The outperformance is staggering. The total investment return is stupendous. If those numbers were all you knew about Warren Buffett, you’d certainly be impressed.
However, for me, the investment track record is not what makes Buffett a hero.
Each year, Markel hosts a shareholder meeting in Omaha the same weekend as Berkshire’s annual meeting. I’ll share video of that meeting and presentation here.
My sense is Markel is going through some growing pains. The company admits underwriting performance is not meeting its standard. The Markel “Ventures” wing of the company is comprised of many cyclical businesses going through macroeconomic headwinds.
The good news is management is buying back shares as Wall Street mulls the results of this transitory period. (Thank you,
for this great chart.) Our piece of the pie continues to grow.
Nintendo released the Switch 2 in June. In the four days following its June 5 launch, the game system sold more than 3.5 million units worldwide, becoming the fastest-selling Nintendo game system ever.
If current trends hold, it will be the largest video game release ever (through the first month of sales). The prior record is 4.5 million units in approximately 1.5 months for both the PS4 and PS5.
I decided to trim our positions in Ulta and Miller Industries. Both are companies I love and think I understand well. We bought Ulta in Q1, but for what it is, a specialty retailer, I believe I made it a larger position in the portfolio than it deserved. It did not hurt that it appreciated 40% in a matter of months — locking in a portion of that return felt like a sensible decision. Ultimately, I feel more confident about the growth prospects of our other holdings at this time, and used the cash from these sell decisions to round out the portfolio in new holdings, cash, and gold.
Excluding our sports holdings (which I view more as hard assets like gold instead of businesses generating future value through operations) we hold 13 companies in our portfolio today. Our top 7 holdings represent roughly 80% of the portfolio. I feel this is adequate concentration. I don’t spend much time thinking about optimal portfolio size. I try to buy good businesses at a discount. I could see our number of holdings increase in the future to 15, 20, or 25 companies if the opportunities present themselves.
I’m not afraid of too much diversification. I understand it limits the ability to earn a drastic outperformance. However, I am content to earn what I deem to be a safe 10% return (potentially pushed to 12% with share buybacks and dividends) over multiple years rather than push for 15% returns or higher if I feel I am contorting myself to make unreasonable assumptions about future growth or ignoring downside protection.
If you would like to read more portfolio updates, I try to post pertinent information on our holdings in the Substack Notes tab, as well as in the Pellom Value Investments subscriber chat:
Performance
I’m going to insert another disclaimer here for posterity. I am not a financial advisor. Past performance is not a guarantee of future results. Please do your own research and make your own investment decisions.
We finished the quarter up 11.90%. This compares to 10.94% for the S&P 500, and 12.14% for the MSCI World Index.
Our top performer was Nintendo, contributing 5.62% of our total return. Fairfax Financial contributed 2.03%, and Alphabet contributed 1.58%.
Our bottom performer was Berkshire Hathaway, which dropped our total portfolio return by -1.30%.
For the year, we are up 18.52%, while the S&P 500 is up 6.20%, and the MSCI World Index is up 10.23%.
I don’t expect this outperformance to last much longer. Our largest holdings are overvalued by historical standards. Knowing this beforehand will allow us to sit tight when and if the results go against us. We have no benchmark and no requirement to beat the market over any short window of time. I’d rather own this collection of businesses than attempt to replace them.
Ideas Worth Sharing
"You never know what worse luck your bad luck has saved you from.”
— Cormac McCarthy, No Country for Old Men
“The chief task in life is simply this: to identify and separate matters so that I can say clearly to myself which are externals not under my control, and which have to do with the choices I actually control. Where then do I look for good and evil? Not to uncontrollable externals, but within myself to the choices that are my own…”
— Epictetus, Discourses, 2.5.4–5
“The reason to study market history is to protect your portfolio from yourself.”
— Charlie Ellis
"Risk is not price volatility. Risk is buying something for more than it is worth."
— Robert Hagstrom
"Nothing will work unless you do."
— Maya Angelou
Books Worth Reading
Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein
This book is a wild ride through history, showing how humans slowly, but surely, figured out how to deal with risk. Bernstein unpacks how we went from crossing our fingers and hoping for the best to actually understanding probability and using it to our advantage. It's a classic for a reason – super engaging and shows how managing risk is at the heart of pretty much everything we've ever achieved.
It's the story of John Paulson, who saw the 2008 housing crash coming a mile away and made a fortune betting against it. It's a fascinating peek at one of the biggest financial upsets in history and the guts it took to pull off such a crazy bet.
The Worldly Philosophers by Robert L. Heilbroner
Heilbroner brings to life folks like Adam Smith and Karl Marx, showing these weren't just dusty old guys, but passionate thinkers trying to figure out how society works. He makes complex economic ideas accessible and shows how they're tied into everything else going on in the world. I learned more from this book than any undergraduate or graduate business course I’ve ever taken.
How Markets Fail: The Logic of Economic Calamities by John Cassidy
After the 2008 meltdown, John Cassidy wrote this book to say, "Hey, maybe markets aren't always perfect." He pokes holes in the idea that markets can fix everything on their own, arguing that human nature, bad info, and other messy stuff often lead to market failures. It's a great read if you want to understand why things sometimes go sideways in the economy and why a little regulation might not be such a bad thing.
As always, thank you for reading. It is an honor to know there are a few folks who’ve given me the opportunity to invest for them, and a few others who read what I write about the process. I’m thankful for all of you.
Take it slow,
Tyler
Great update - and thanks for the shout out Tyler