Q2 2025 Investor Letter

Would Martians Wear Shoes?

Disclaimer: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure - not a recommendation to buy or sell stocks.

The Results

During Q2 2025, the JB Global Capital fund depreciated by 3.4%. The slight decline was the result of mitigating price action of our top two holdings, Alibaba and Nike. Our performance in the second quarter fell short in comparison to both the VT Total World Stock Index and the S&P 500. Over the longer term however, we are outperforming the market by a significant factor. Due to the nature of the fund (long-term, highly concentrated positions), we expect our performance to vary greatly from our benchmarks.

When creating a portfolio, there are two general approaches one can take: Active or Passive investing. Passive investing is straightforward and basically anyone can do it; you simply purchase a diversified market ETF and enjoy average market returns without the risk of making any major mistakes, relatively speaking. Active investing involves concentrating on individual businesses that you believe can achieve higher than average market returns. We obviously fall into the later camp. With this approach however, in order to achieve long-term superior results, your thinking has to be both correct and different; different because market consensus is intrinsically built into present day values.

Remember, your goal in investing isn’t to earn average returns; you want to do better than average. Thus, your thinking has to be better than that of others – both more powerful and at a higher level. In short, being right may be a necessary condition for investment success, but it won’t be sufficient. You have to be more right than others, which by definition means your thinking has to be different. - Howard Marks, I Beg to Differ.

Our approach to active investing involves significant concentration of positions. Diversification is seen in the investment community as insurance against any one idea being wrong. While true in a mathematical sense (if a position makes up only 1% of your total portfolio, the most you can lose in a worst case scenario is 1%), it goes against business logic and the spirit of entrepreneurship. True investment success does not come from making hundreds of correct decisions (after all, how can any one individual be an expert across businesses in different life stages, industries, geographies etc.). It comes from recognizing the sources of enduring business success, getting in early, and owning enough to make a difference.

Portfolio Addition in the 2nd Quarter

In our Q1 Letter, we discussed the addition of Nike to the portfolio, citing the potential undervaluation driven by tariff announcements and global economic headwinds. Due to the erratic nature of trade negotiations and uneconomic reasoning behind the tariff rates, we believe that they will eventually be reversed to a more accommodative level for the functioning of an optimal global trade system. We think it is obvious that globalization is a net positive for the world and cannot be reversed without severely reducing the quality of life for all participants. Along the same theme, we have added another footwear company, Steven Madden ltd., Ticker SHOO 0.00%↑ to the portfolio.

Steven Madden designs and sells brand-name and private-label footwear and accessories. We like footwear as a product due to its dual functioning nature: it’s a practical necessity for every man, woman, and child and it functions as a fashion item for self-expression. It is safe to say that 100 years from now, we will still be needing shoes (whether on Earth or Mars). We wrote about footwear generally in our Q1 Letter, stating,

Footwear is a simple product to understand, made typically of leather, rubber, foam, and synthetic materials. However, simple does not mean insignificant. There are more nerve endings per square centimeter in the foot than any other part of the body. Our feet constantly supply us with vital information, without our being consciously aware of it. As such, comfortable footwear is deeply connected to the limbic system, regulating emotions, memory, motivation, and social behavior. Being that the product is simple to reverse engineer, it is highly unlikely that a new entrant will create a more comfortable [Shoe] that couldn’t simply be copied.

The company grew its revenue base from $1.2B in 2020 to $2.3B at the end of 2024 (CAGR 17.6%) while increasing both gross and operating margins during the same time period. The business is conservatively financed with a net cash position and has generated free cash flow every year since 2010. In May 2025, the company completed its acquisition of Kurt Geiger for $360M, increasing its international footprint (pun intended). The company’s founder and CEO, Steven Madden, is considered an icon in the footwear industry and has recently went viral for his appearance on The Cutting Room Floor podcast.

In our view, the company’s stock is trading cheaply from both an historical and a relative level; (~8X EV/EBITDA, 8.5% FCF Yield, 3.7% Dividend). Net asset value provides solid downside protection (47% of current market cap). We also believe that an acquisition is not out of the question being that the founder is in his late 60s. It seems reasonable that at some point, the board may begin to consider how to set the business up for continuity, which may be easier to accomplish under the umbrella of a large corporate parent rather than as a small public company. With $2B in sales and a globally recognized brand, Madden would seem to be an attractive target for a variety of companies.

The Portfolio

Since inception, we have made 20 investments in 9 industries as classified by Morningstar. While the investments span throughout various sectors, there is material concentration in the sectors of internet retail, financial services, and cloud computing. We anticipate high volatility in the fund due to portfolio concentration, emerging market risk, and a contrarian investment strategy. We thank our partners and readers for their continued support!

Until next time,

Jack Beiro, MBA

JB Global Capital

BABA 0.00%↑ NKE 0.00%↑ SHOO 0.00%↑

The information contained herein represents the author’s opinion and is for informational purposes only. Nothing in this newsletter should be construed as legal, tax, investment, or financial advice. No opinion expressed by the author should be construed as a specific inducement to make a particular investment or follow a particular strategy. The author may hold positions in securities mentioned in the newsletter and may buy or sell securities at any time. The author may express opinions based on information he considers reliable, but no guarantee or warranty is made with respect to such information’s completeness or accuracy, and the author is under no obligation to update or correct any information provided. Please consult your own financial or investment advisor before acting on any information provided herein.