To Our Clients and Partners
For the full year 2025, the Hutner Capital Core Quality Portfolio returned 14.8% net of fees, against 12.6% for the S&P 500. Since the portfolio’s inception, a dollar entrusted to us has compounded at a rate we believe few strategies of comparable risk have matched — though, as always, we caution that any single year, good or bad, tells you almost nothing. Judge us over five.
The Year in Review
2025 rewarded exactly the qualities we underwrite for: pricing power, balance-sheet strength, and managements who allocate capital like owners. Our largest contributors were businesses we have held for over six years — a reminder that most of the work in this strategy was done long ago, at the moment of purchase.
- Our payment networks grew earnings per share at double-digit rates while repurchasing shares, the quiet arithmetic of compounding at work.
- Our software franchises demonstrated that genuine switching costs survive even a capital-spending slowdown among their customers.
- Our consumer staples lagged the index — and we are entirely untroubled. Their decade-forward earning power is intact, and their valuations are now more attractive than a year ago.
What We Got Wrong
Candor is part of what you pay us for. Our 2023 purchase of a specialty distributor has not worked; the moat we underwrote — density of distribution — is proving shallower than we judged, as competitors replicate it with software rather than warehouses. We reduced the position by half in November and will exit entirely if evidence continues to accumulate. The error cost the portfolio roughly 40 basis points this year. We document every mistake in our internal error journal, and this one has already changed how we evaluate distribution moats.
Looking to 2026
We enter the year holding 18 businesses, with our top ten positions representing just over 70% of the portfolio. Cash stands at 6% — not a market call, but the residue of discipline: prices simply ran ahead of a few of our intrinsic-value estimates.
We thank you for the quality of your partnership. The patience of our client base is, genuinely, a competitive advantage of this firm — one we never take for granted.
Confidentiality Notice
Privileged & Confidential. This letter contains non-public performance data for the Hutner Capital Core Quality Portfolio and is prepared exclusively for clients of the firm. Redistribution in any form is prohibited.
