Market Overview & Valuation Concerns - The market's confidence seems too high relative to existing uncertainties such as Middle East, China-Taiwan, and Russia-Ukraine tensions [3] - S&P 500's valuation is around 23 times earnings, placing it in the 97th percentile of historical valuations, suggesting it's expensive [2] - Tariffs and "guns and butter" policies could lead to crowding out, further exacerbating the stock market's problems [3] - Averages are expected to go nowhere, with individual stock picking and unweighted indices performing better than cap-weighted indices like the S&P 500 [5][6][9] Investment Strategy & Stock Picks - The firm's investment approach is bottom-up, focusing on individual stock selection [7] - Fidelis Insurance (FIHL) is highlighted as a favorite idea, trading at a discount to its book value of around $21 and expected to earn close to 20% on equity, implying around $4 in earnings [7] - Other favored names include Apollo in private equity, Energy Transfer (yielding about 8% with 10% earnings growth), KBR, and Verizon [7][8][9] - The firm likes energy stocks with low production costs, citing Tourmaline, a major natural gas producer in Canada, and Energy Transfer [11] Specific Company Analysis - Mr Cooper is undergoing a "world-class merger" by combining its mortgage servicing rights (number one) with Rocket Mortgage's mortgage origination (number one) [8] - Legato's bonds are considered undervalued at 30 cents on the dollar, with potential for a triple in capital appreciation plus a coupon; the firm believes the government is unfairly treating the company regarding its 5G spectrum [12][13]