Palm Valley Capital Management, an investment management firm, has released the “Palm Valley Capital Fund” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here.  In the fourth quarter, Palm Valley Capital Fund appreciated 0.66% compared to a 1.70% gain for the S&P SmallCap 600 and a 3.12% rise in the Morningstar Small Cap Total Return Index. At the beginning of the quarter, the Fund allocated 74.1% to Treasury bills and increased to 76.3% by the end of the quarter. The equity ho ...

Core Viewpoint - Verizon Communications is facing challenges despite its 6.6% dividend yield, which has been described as "sacrosanct" by the CEO, Daniel Schulman. The company has a history of increasing dividends for 19 consecutive years, but the growth has been modest compared to inflation [1][2][10]. Financial Performance - Verizon reported $134.8 billion in revenue for 2024 and serves 146.1 million wireless retail connections, covering 99% of Fortune 500 companies and 99% of the U.S. population with its 4G LTE service [5]. - The company has lost 30% of its market share since 2017 and is now ranked No. 3 in the telecom industry, indicating heightened competition [6]. - In the last quarter, Verizon lost 7,000 postpaid phone customers and laid off 13,000 employees, reflecting dissatisfaction with its performance [7]. Dividend Analysis - Verizon's dividend has increased by only 1.8% this year, which is below the annual inflation rate of 3%. Since 2020, the dividend has grown by 12%, also lagging behind inflation [2][12]. - The company declared a quarterly dividend of $0.69 per share, amounting to $2.92 billion in dividends next quarter, which is less than half of the $7 billion in cash flow from operating activities [10]. - Verizon has paid off $9.4 billion in debt over the last year, which is nearly equivalent to the $11.2 billion paid in dividends for 2024, allowing for potential flexibility in maintaining dividends [11]. Strategic Outlook - The new CEO aims to reclaim network leadership, with some positive indicators such as 306,000 net adds in the broadband segment, totaling 13.2 million subscribers [8]. - Efficiency gains have led to a record $7 billion in free cash flow for the company, marking a 17% year-over-year increase [9]. - While the dividend is expected to remain stable, future hikes may be minimal, making it less appealing for long-term investors due to inflation concerns [12].

Financial Data and Key Metrics Changes - Consolidated net sales for Q2 were $53.2 million, a sequential improvement from $50.7 million in Q1, but a decline from $55.7 million in the prior year period [26] - Consolidated gross profit for the quarter was $5.8 million, or 10.9% of sales, compared to $6 million, or 10.8% of sales in the prior year [26] - SG&A expense for the quarter was $8.7 million, reflecting a 7% improvement compared to the prior year [27] - Loss from operations was $3.5 million, an improvement from a loss of $5.4 million in the prior year [27] - Adjusted EBITDA was negative $1 million, an improvement from negative $1.1 million in the prior year [28] Business Line Data and Key Metrics Changes - Bedding segment sales for Q2 were $30.8 million, up approximately 10% sequentially and over 2% year-over-year [30] - Gross profit in the bedding segment was $3.1 million, or 10.1% of sales, a 200 basis points improvement from the prior year [31] - Upholstery segment sales for Q2 were $22.4 million, flat sequentially but down approximately 12% year-over-year [31] - Gross profit in the upholstery segment was $3.6 million, or 16.1% of sales, down from $4.3 million, or 16.9% of sales in the prior year [31] Market Data and Key Metrics Changes - The home furnishings industry continues to face significant challenges, with low consumer confidence and high levels of unsold homes impacting sales [7][20] - The bedding market is showing signs of stabilization, with expectations for an increase in unit activity driven by historical product replacement cycles [19][20] - Upholstery business remains impacted by weak consumer sentiment and housing market conditions, particularly affecting lower and middle-income segments [21][22] Company Strategy and Development Direction - The company is focused on winning market share and adjusting its cost structure to achieve profitability in the current market cycle [8] - A comprehensive restructuring project has been completed, expected to yield approximately $11 million in annualized cost savings [14][18] - The integration of the bedding and upholstery divisions aims to create a unified Culp-branded business, enhancing operational efficiency [15][16] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenging demand environment for home furnishings but expects steady consolidated sales performance in the near term [36] - The company anticipates continued improvement in operating loss and near break-even to positive Adjusted EBITDA for Q3 [36] - Management remains cautious about the timing of market recovery but is positioning the company to capitalize on future demand increases [45][46] Other Important Information - The company has a net debt position of $7.6 million and continues to manage liquidity and capital expenditures aggressively [32][34] - The company is owed approximately $4.7 million from the sale of its Canada facility, expected to be received in Q3 [36] Q&A Session Summary Question: What is the realization status of the cost savings? - Management indicated that significant savings are being realized, with most expected to be fully realized by Q4 [41][44] Question: What will be the incremental margin on the next point of sales growth? - Management confirmed that there is built-up leverage to capitalize on any increase in sales, with fixed costs in place to retain a significant portion of incremental dollars [47][48] Question: What is the status of the new tariffs in Turkey and Haiti? - Management explained that recent tariff changes have created challenges, but the company is well-positioned to navigate these issues [49][50]

Media Industry & Antitrust Concerns - Potential merger of Netflix and Warner Brothers raises antitrust concerns due to significant market share, requiring government review to prevent monopolies and protect consumers [2][3][4] - The Department of Justice (DOJ) has an antitrust division to test the legitimacy of market share, but the independence of the DOJ is crucial to avoid political interference [4][5] - Trump's prior involvement in the AT&T/Warner merger faced criticism, and his current expressed intent to be "personally involved" in the Netflix/Warner merger raises conflict of interest concerns [5][6][7] - Jared Kushner's involvement in a hostile bid by Paramount (backed by the Ellison's) to buy Warner instead of Netflix creates a conflict of interest, as his family could potentially profit [6][7] - Government intervention to favor specific companies or punish political opponents through media oversight could be an abuse of power [10] Political Influence & Power Dynamics - Concerns are raised about Donald Trump's attempts to shape culture and exert influence over government institutions, potentially undermining their independence [1][16][17] - Trump ousted the board of the Kennedy Center to install loyalists, deviating from the historical bipartisan balance [13][14] - Trump renamed the Institute of Peace after himself, indicating a pattern of personalizing government institutions [14] - The Trump administration is seeking more power before the Supreme Court, raising concerns about the potential for a monarchy-like system [15][17] - Justice Sotomayor warns that granting the president unqualified removal power could lead to a corrupt patronage system [17][20]

Core Insights - Verizon is undergoing significant leadership changes and operational restructuring to address recent customer losses and market challenges [1][2][3] Leadership Changes - Verizon replaced CEO Hans Vestberg with Dan Schulman, former CEO of PayPal, on October 6, 2025, amid declining customer numbers [1] - Schulman criticized the company's performance, stating it is "clearly falling short" of its potential due to price increases and customer experience issues [2][3] Customer Loss and Churn Rate - In Q3 2025, Verizon lost 7,000 postpaid phone customers, resulting in a churn rate of 0.91% [2] - Schulman noted that customer satisfaction scores are lower than competitors, attributing this to complex offers and lack of financial flexibility for employees [5][6] Operational Restructuring - Verizon laid off over 13,000 employees to simplify operations and focus on customer-centric strategies [3][4] - Schulman emphasized the need for aggressive transformation to improve shareholder value and customer experience [3][4] Market Position and Competition - Verizon has lost 500 to 700 basis points of market share over the past five years, leading to increased pressure on revenue [5] - The company faces heightened competition, with customer satisfaction scores for postpaid plans below the industry average [6][16] Industry Trends - The telecommunications sector has seen significant layoffs, with Verizon accounting for a large portion of job cuts in November 2025 [11][17] - Job cuts in the telecom industry reached 15,139 in November, marking the highest monthly total since April 2020 [17]

Core Insights - T-Mobile US, Inc. is a significant player in the wireless telecommunications industry, known for competitive pricing and innovative promotions, which have contributed to its substantial market share [1] - KeyBanc upgraded T-Mobile to a Sector Weight rating, indicating a neutral performance expectation in line with the market [2][5] - T-Mobile's recent "Black Friday" promotion is aimed at capturing a larger market share during the holiday season, potentially attracting many new subscribers [3][5] Stock Performance - Following the upgrade, T-Mobile's stock price decreased by 1.14%, or $2.38, settling at $206.63, with trading between $205.58 and $209.11 on that day [4][5] - Over the past year, T-Mobile's stock has experienced a high of $276.49 and a low of $199.41, with a current market capitalization of approximately $231.14 billion [4]

Core Viewpoint - OPEC+ is expected to maintain oil output levels for the first quarter of 2026, reflecting a cautious approach to market dynamics amid concerns of a potential supply glut [1] Group 1 - OPEC+ meetings are scheduled for Sunday, where the decision on oil output levels will be discussed [1] - Delegates indicate a moderation in efforts to regain market share, suggesting a strategic pause in production increases [1] - The decision comes in light of fears regarding an impending oversupply in the oil market [1]

Summary of ANTA Sports Conference Call Company Overview - **Company**: ANTA Sports Products (2020.HK) - **Industry**: China/Hong Kong Consumer - **Market Cap**: US$30,594 million - **Current Stock Price**: HK$81.40 - **Price Target**: HK$128.00, implying a 57% upside Key Points Sales Performance - **Sales Trend**: Sales in 4QTD are on track with management's guidance, with expectations for group sales growth to accelerate in 4Q25 compared to 3Q25, driven by a higher base [2][10] - **E-commerce Growth**: ANTA's e-commerce sales growth is expected to accelerate in 2026 following adjustments [4] Brand Performance - **ANTA Brand**: Retail GMV has surpassed Rmb40 billion, with running category contributing ~45% of total sales, growing at over 10% [4] - **FILA Brand**: Retail GMV has exceeded Rmb30 billion, with sales growth driven by product assortment adjustments and a focus on tennis and golf, which together account for ~10% of sales [5] - **Descente**: Growth is expected to moderate after approaching Rmb10 billion retail GMV but remains robust [6] Product Strategy - **New Formats**: Introduction of new store formats such as Guanjun, Superstore, and Sneakerverse is anticipated to drive growth [4] - **FILA's Marketing**: Increased marketing efforts around tennis events and collaborations with FILA Global are planned [5] Financial Outlook - **Revenue Projections**: Expected revenue growth from Rmb70,826 million in 2024 to Rmb93,086 million by 2027 [8] - **EBITDA Growth**: Projected EBITDA growth from Rmb17,837 million in 2024 to Rmb24,770 million by 2027 [8] - **Earnings Per Share (EPS)**: EPS expected to increase from Rmb4.27 in 2024 to Rmb5.62 by 2027 [8] Market Dynamics - **Competitive Landscape**: FILA ranked no.1 in e-commerce channels, with strong growth in livestream channels [10] - **Discounting Strategy**: FILA has implemented deeper discounts in 2025 for destocking, with potential pricing improvements to drive operating profit growth [5] Risks - **Upside Risks**: Stronger economic growth, continued FILA growth momentum, and successful reengineering of the ANTA brand [13] - **Downside Risks**: Weak sales and earnings growth in 1H24, continued macroeconomic weakness, and unfavorable shifts in fashion trends [13] Valuation - **Valuation Methodology**: Base case value based on a 23x target P/E multiple on the 2026 EPS estimate, indicating continued market share gains [11] Additional Insights - **Market Cap and Trading**: Average daily trading value is US$120 million, with a stable product return rate year-over-year [10] - **Stock Ratings**: ANTA Sports is rated as "Overweight" by Morgan Stanley, indicating a positive outlook compared to the industry average [8][29] This summary encapsulates the key insights from the conference call regarding ANTA Sports, highlighting its performance, strategic initiatives, financial outlook, and market dynamics.

Core Viewpoint - Walmart's CEO Doug McMillan announced his retirement, with John Ferner set to take over on February 1st, leading to a market sell-off of approximately 2.75% in Walmart shares [1][2]. Company Transition - Doug McMillan has been a significant leader for Walmart, contributing to its impressive market cap and diversification strategies over his 14-year tenure [2][5]. - John Ferner, who has been with Walmart for 32 years and currently runs the US business, is expected to continue the company's success, as the US segment accounts for 70% of Walmart's operations [3][4]. Market Reaction - The market's reaction to the leadership change has been negative, raising questions about potential underlying issues [6]. - Despite the sell-off, there is a belief that this transition presents an investment opportunity, given Ferner's familiarity with the business and his role in its success [2][7]. Competitive Position - Walmart is successfully attracting higher-income consumers, alongside competitors like TJX, indicating a shift in consumer shopping behavior [3]. - The company maintains a strong advertising business, which is highly profitable, and has the ability to keep prices low due to its market power over vendors [9][10]. Economic Context - The primary risk identified is a potential economic slowdown affecting consumer spending, but Walmart's competitive advantages may mitigate this risk [8].

Financial Data and Key Metrics Changes - In Q3 2025, the company generated $2.7 billion in revenue and $638 million in adjusted EBITDA, resulting in an adjusted EBITDA margin of 24% [6][17] - Revenue decreased by 3% year-over-year due to lower volumes, while adjusted earnings per diluted share were $3.67 [17][18] - Free cash flow for the quarter was $752 million, an increase from $558 million in the same period last year [18] Business Line Data and Key Metrics Changes - **Roofing Business**: Revenue was $1.2 billion, up 2% from the prior year, driven by positive price realization despite flat volumes. EBITDA was $423 million, maintaining a 34% margin [20][22] - **Insulation Business**: Revenue decreased by 7% to $941 million, primarily due to lower demand for residential products. EBITDA margins were 23%, resulting in $212 million in EBITDA [23][24] - **Doors Business**: Revenue was $545 million, down 5% from the prior year, with EBITDA of $56 million and margins of 10% [24][25] Market Data and Key Metrics Changes - The U.S. roofing market faced a uniquely quiet storm season, with no named storms making landfall, impacting demand [8][22] - Residential trends in the U.S. are weakening, affecting volumes in both repair and remodel and new construction product lines [8][10] - Non-residential construction activity in North America is expected to decline slightly, while European markets are anticipated to gradually improve [29] Company Strategy and Development Direction - The company is focused on maintaining strong cash generation capabilities and disciplined capital allocation, with a commitment to return $2 billion to shareholders over 2025 and 2026 [7][19] - Strategic investments are being made to enhance market-leading positions, including a new plant in Alabama for roofing and a new fiberglass line in Kansas City for insulation [11][12] - The divestiture of the glass reinforcements business is targeted for completion by the end of the year [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to achieve margin and cash flow goals despite current financial performance challenges [9][10] - The outlook for Q4 anticipates revenue to be approximately $2.1 billion to $2.2 billion, down mid to high teens versus the prior year, with adjusted EBITDA margins expected to be around 16-18% [29][30] - The company expects to see a gradual recovery in the European market and improved housing affordability in the U.S. as mortgage rates decline [10][29] Other Important Information - The company was recognized as one of the 100 Best Corporate Citizens, ranking third for its environmental, social, and governance performance [15] - The company continues to focus on operational efficiencies and cost synergies, with a target of achieving $125 million in enterprise cost synergies by the end of the second year of ownership [13] Q&A Session Summary Question: Concerns about roofing margins and pricing pressure - Management indicated that pricing has remained positive throughout the year, driven by the value provided to contractors and distributors, despite typical seasonal pressures [37][39] Question: Non-residential demand and project delays - Management noted project delays in both the U.S. and Mexico, viewing them as shifts from quarter to quarter and potentially into 2026 [42][44] Question: Doors segment impairment and market share - Management explained the impairment was due to near-term market weakness, but they remain confident in long-term earnings potential and are focused on cost synergies [46][48] Question: Inventory destocking and its impact - Management expects inventory destocking to normalize in Q1, with cautious buying behavior anticipated from distributors [71][73]