Performance - Night Watch Investment Management LP experienced a net depreciation of -1.80% in Q4 2025, concluding the year with a total performance of 23.61% [2] - The performance in 2025 was broad-based and not reliant on a few securities, despite high volatility in single stocks during Q4 [2] Notable Positions - Haypp (HAYPP) emerged as the top performer, benefiting from regulatory resolutions and a reintroduction of Zyn at lower costs, positioning for high-margin growth in 2026 [3] - Allfunds (ALLFG) saw inflows into European securities and received a non-binding acquisition bid from Deutsche Boerse, leading to a reduction in Night Watch's position [4] - Marex (MRX), a Futures Commission Merchant, showed resilience despite market concerns over interest rates and exchange volumes, becoming the largest position in the portfolio with a P/E ratio around 9x [5] - Western Digital Corp (WDC) benefited from a memory shortage linked to AI data centers, with shares increasing over 200% since purchase, prompting a scaling down of the position [6] - Endava (DAVA) faced challenges as an IT services provider perceived as an AI loser, but potential for growth exists if programming efficiency leads to higher project volumes [7][8] - Distribution Solutions Group (DSGR) maintained performance expectations with organic growth accelerating to 6%, despite a contraction in US industrial activity [9] Portfolio Strategy - Night Watch employs a global value strategy focusing on companies with identifiable catalysts for re-rating, such as industry tailwinds or company-specific events [10] - The portfolio as of December 31, 2025, includes 32 positions with a significant focus on defensive sectors, Europe, and unique holdings to provide diversification [12] Outlook - The outlook indicates that after four years of economic difficulty, opportunities are emerging in industrials and consumer discretionary sectors, with expectations for further rate cuts and tax refunds supporting US consumer spending [15][16] - The investment strategy includes a focus on international markets, particularly in Japan, Hong Kong, and Brazil, with a belief that Brazil's equity market will normalize over time [17] - Defensive sectors, including food production and healthcare, are prioritized, with an emphasis on acquiring undervalued stocks with strong free cash flow yields [18] Company Update - Night Watch acquired a controlling stake in KEDM Inc., enhancing its research capabilities and aligning with its investment strategy focused on value and catalysts [22][24]