AAR(US:AIR) Seeking Alpha·2025-10-07 14:25Performance - Night Watch Investment Management LP achieved a net appreciation of 4.28% in Q3 2025, with a year-to-date performance of 25.88% [2][3] Portfolio - The portfolio as of September 30, 2025, is diversified across various themes, with the largest allocation in Europe at 25.7% and significant positions in Aerospace (12.3%) and Semiconductors/Tech (12.1%) [4] - The portfolio consists of 24 positions, with 17 having insider ownership and 21 identified with catalysts for potential rerating [4][6] Strategy Update - The US stock market showed a strong recovery in Q3, particularly in small caps, due to weaker-than-expected jobs data, which may lead to interest rate cuts by the Federal Reserve [9] - Increased government involvement in corporate America, including nationalization of Intel and export taxes on Nvidia, is viewed negatively, impacting corporate profit margins and business confidence [10] - The firm is cautious about the US economy and is shifting focus to international opportunities, particularly in Europe and Asia [11][12] Position Updates - A new position in Brookdale Senior Living was reinitiated, driven by anticipated demand from the aging baby boomer population [15] - Two positions in technology benefiting from AI-related spending were initiated, specifically in Western Digital Corp, which has become a pure play on hard disk drives [16] - Integral KK, a Japanese private equity manager, was added to the portfolio, showing significant growth in assets under management and potential for future profitability [20][21] Conclusion - The firm is adopting a more cautious stance on US stocks due to economic deterioration and speculation in the market, while maintaining a disciplined investment process [26] - There is a focus on sourcing new investment ideas outside the US, with plans for an investment trip to Hong Kong [27]