“It’s not about what it is, it’s about what it can become” – Dr. Seuss
July 7, 2026
We treaded water in the fiscal period while the S&P 500 was up strongly. The Fund was down 0.15% while the S&P 500 was up 11.31%.
Below you will not find a dissertation about any unfairness in partly competing against the S&P 500 (though the concentration of that index creates certain distortions). I would not find such a lengthy discussion helpful if our roles were reversed. What you will find is our typical summary of the key drivers to our recent results, comments on any material portfolio activity, and the all-important look at our companies’ economic progress or challenges. We will also discuss our forward outlook for the portfolio.
Since our reorganization at the end of 2019, we have consistently quoted the returns for that period which we refer to as GoodHaven 2.0. We did so during the years of outperformance following the reorganization and it would be inappropriate to not continue that reporting during this period of underperformance. Our results since the start of GoodHaven 2.0 (12/31/19 through 5/31/26) are a strong annualized total return of 12.82% but now lag the S&P 500’s 15.93% for that period.
As we have said consistently over those prior periods of outperformance:
“While this period continues a string of strong results, we take this moment to remind you that our portfolio is managed striving for long-term outperformance, not short-term outperformance. We will underperform the market averages from time to time. We hope you will view such periods when they come as opportunities, as we expect we will.” 4
While we avoid overly celebrating strong short-term results or getting downbeat over weak short-term results, recent results have been somewhat disappointing. Our main tool for judging our companies in the short-term, their business results, was solid overall with a few notable strengths. The period also saw a material increase in insider purchases at several of our companies and more intensified corporate buybacks by our companies. Finally, we were more active putting capital to work in the period than we’ve been lately. The period clearly presented potential opportunities. Mixing all of the above together leaves us more optimistic about future long-term returns.
It’s hard to discuss the period without saying a few things about the macro backdrop.
As we have said previously, fiscal periods seem to now be packing in the range of economic and emotional experiences previously felt over years. In years past, stock prices and financial markets often proved much more volatile than the companies and economies they represented.
That feels different today, with the actual economic landscape itself experiencing more genuine volatility than in the past. The White House’s fiscal, economic and geopolitical policies are volatile, unpredictable and fast changing. We feel this is due to some combination of leadership style, a lack of true planning and a desire for periodic chaos. Combine this with financial markets that are now dominated by non-fundamental trading strategies, and this volatility may be the new norm.
Our long-term approach of striving to use volatility to help us buy attractive securities and sell those we wish to part with has not and will not change. Neither will our day-to-day focus on the fundamentals of our unique portfolio no matter the economic (or societal) headlines of the day. That doesn’t mean we are not thinking about such things as part of the backdrop our companies operate in and we invest in. Recent prolific headlines involve: Artificial Intelligence (AI), affordability and financial market excesses, war in the Middle East, oil prices and private credit risks.
Dramatic macro events are wrong to completely ignore. However, we think trying to predict such things and translate them into portfolio actions is ill-advised. Also, too much obsession about today versus tomorrow can easily distract one from making sound long-term investments and hinder long-term returns.
Table Of Top 5 Contributors & Detractors ($) For The Semi-Annual Period
Contributors (11/30/2025- 05/31/2026)
Arrow Electronics, Inc. (ARW)
Alphabet Inc. – Class C (GOOG)
TerraVest Industries (TRRVF)
Devon Energy (DVN)
Occidental Petroleum Corp Wt Exp 080327 (OXY)
Detractors (11/30/2025 – 05/31/2026)
Builders FirstSource, Inc. (BLDR)
Lennar Corp – Class B (LEN)
Berkshire Hathaway – Class B (BRK.B)
KKR & Co. (KKR)
Progressive Corp. (PGR)
Our two biggest detractors in this period were our two long-time winners involved in the domestic housing market – Builders FirstSource and Lennar. As we said last period on this topic:
“Our biggest detractor in the period was long-time winner Builders FirstSource. Our exposure to single family housing in aggregate, which also includes Lennar and Toll Brothers, was a material sector decliner in the period. We added to our Lennar exposure in the period and more recently established Toll Brothers (TOL) as a holding. It’s somewhat typical for long-time winners to go through periods of being detractors – especially if the companies have some cyclicity to their businesses.” 5
We echo our prior thoughts above today. In addition, Builders was our biggest material addition of capital in the period and Lennar was our third biggest. Toll has materially outperformed many of its peers. A recent Presidential Economic Report – which we are not endorsing in aggregate – implies that we are domestically underbuilt by approximately 10 million homes. 6 We would use a much lower, but still substantial number. However, the possibility that the administration might try and stimulate housing construction and supply would be welcomed at Builders. Clearly, we see much upside from recent levels for this sector in aggregate.
The housing market remains challenging as affordability and elevated mortgage rates continue to impact the majority of home buyers in particular the entry level market. Despite the difficult environment, Lennar recently discussed some stabilization with a meaningful decline in sales incentives on deliveries this past quarter. Although Lennar is cautiously optimistic, it is possible that this is a leading indicator of margin recovery. The company is well positioned for different market conditions including a pickup in the housing market and a broader recovery. The company continues to repurchase its shares, buying back close to 3% of its outstanding shares in the past two fiscal quarters alone.
Our next top detractor was our largest holding, Berkshire Hathaway. Sometimes stock price declines coincide with some company short-term misstep or company specific uncertainty. Sometimes the share price had been too elevated relative to underlying value. None of those are part of the backdrop at Berkshire lately. Business results have been solid, the very well telegraphed and discussed handoff to Greg Abel as CEO happened. The company restarted its share repurchase plan and Mr. Abel made a material purchase of Berkshire shares in the open market personally (more later on this). Berkshire has also recently been more active deploying cash into potentially higher-return investments. The pending acquisition of homebuilder Taylor Morrison (TMHC) in the period and their participation in Alphabet’s recent capital raise in June are noteworthy.
We have observed in the past that some investors seem to approach evaluating Berkshire along religious lines, without as much of a focus on the underlying economics, management and the long-term outlook. Others seem to revel in some joy of pointing out even the most minor Berkshire misstep. We will stick with our unemotional and eyes wide open approach, focusing on the fundamentals, the people, the ownership culture, and the unique safety and optionality inherent in their cash rich balance sheet. We like what we see.
Berkshire has had a material negative impact on our recent relative results after a prior stretch of positive contributions to our relative results. From 4/1/20 – 11/29/24 Berkshire compounded at approximately 24.16% annualized, outperforming the S&P 500 for that period. From 11/29/24 – 5/31/26 Berkshire declined slightly and underperformed the S&P 500 by approximately 1900 basis points (annualized).
Berkshire shares did not enter this period inflated and after a recent period of material stock price underperformance looks even more attractively priced for potential future gains – and might now be a contrarian investment idea.
Our top three detractors – all long-term winners – accounted for approximately 400 basis points of negative performance in the period. Mark to market declines on long term winners, combined with our positive forward outlook for such companies, is in our opinion different than having portfolio missteps and troubles.
Our biggest contributor in the period was Arrow Electronics – which we have not previously discussed. Arrow is one of the largest global distributors of electronic components and IT hardware and software solutions. This is in an industry where the top few players have over half of total market share. A simple way to think about their service is that they sell most of the components that can be found on an integrated chip board and IT software, to both large and small customers including OEMs, contract manufacturers, and value-added resellers. Increasingly the company is also shifting to providing more value-added supply chain management services where operating margins are significantly higher. Historically, this has been a cyclical industry where the pendulum of demand and supply imbalances can swing significantly in a short period of time. We bought our shares during the recent downturn and we feel the key players in the industry have adapted their inventory levels to the cycle correction sensibly. In the recent few quarters, the company has noted that they are cautiously optimistic on the recovery in demand across most geographies, seeing global component demand pickup in datacenters and industrial end markets, with reported growth in both volumes and pricing. The unprecedented boom in spending by many large technology companies to support the buildout of their AI infrastructure is directly helping certain parts of Arrow’s business and indirectly helping to cure the prior industry downturn.
Our second biggest dollar gainer in the period was Alphabet. The first quarter continued to see strong results, with their top line growing at 22%, and higher operating margins of 36%. The positive results were driven by strong growth in Google Search and in Google Cloud which saw AI solutions driving its backlog to nearly double quarter-over-quarter to $460 billion in Q1 2026. The company continues to see durable Search results, faster AI model adoption, demand for cloud services and upside optionality on its own custom TPU chips and Waymo. Although capital expenditures are at very elevated levels and expected to grow significantly, we remain hopeful (and watchful) that more normalized spending is on the horizon.
Another top gainer in the period was long-term winner TerraVest. While TerraVest was a strong contributor in the period, on the heels of solid underlying business results and a stepped-up pace of new acquisitions, there was material news at TerraVest after the end of the period.
On June 5th, 2026 a news story ran in Le Journal de Montreal implying that there is a Canadian regulatory investigation into TerraVest’s Executive Chairman (and largest shareholder) Charles Pellerin potentially conveying non-public information about TerraVest to some family and friends who traded on such information. The basis of the article was a search warrant from Canadian regulators – a copy of which we then independently obtained. TerraVest shares dropped materially in June.
No charges have been filed against anyone at this time and we do not yet know if these accusations are accurate or if there is an ongoing investigation. To date neither the company, nor any other executives or board members have been mentioned as having any involvement in these alleged issues.
TerraVest announced that they are formally looking into these allegations which they were previously unaware of. They also announced they have not been approached by regulatory authorities on this matter.
TerraVest has been a very successful investment for GoodHaven. While Charles has not been active day to day for some time, he has been a value creating and involved Executive Chairman who we have admired. Charles owns approximately $300 million (Canadian) of TerraVest. The implications of the warrant are that the alleged individuals may have profited in an amount that aggregates approximately $6.8 million (Canadian). No matter how things evolve, TerraVest’s CEO and President is Dustin Haw, a very talented and committed executive in his own right. Dustin has been in that role for some time, has been a very important part of TerraVest’s success and is complemented by a strong group of operating managers. As we finalized this letter TerraVest announced the acquisition of a company called Superior Pressure Vessels –which seems like a typical TerraVest sensible deal. Also, TerraVest recently announced it had made material share repurchases in the month of June (2026). This was their most aggressive share buyback in many years, and given their strong track record regarding buybacks it is, in our view, positive news.
As we said earlier our largest addition in the period was adding to Builders FirstSource. Our next biggest addition was adding to Asbury Automotive (ABG).
We have studied the US auto dealership industry over the years with great interest. We note the impressive continued consolidation by the public companies, localized competitive advantages, unique relationships with the Original Equipment Manufacturers (OEMs) and last but not least the state franchise laws that protect the dealer centric sales model and prevent legacy OEMs from selling directly to consumers. On a high level, the dealerships are a core component to an OEMs success. There are significant industry tailwinds; the average age of a passenger car is approximately 15 years, and 12 years for light trucks. These metrics have continued to trend higher over time which bodes well for the replacement cycle. Another important development for the industry is the more rational and dynamic actions by the auto manufacturers in recent years when there is a supply and demand shock. We have considered in our thinking that one day Chinese auto manufacturers might be permitted to enter the domestic market – which poses risks, but also possible opportunities.
We have long followed Asbury Automotive, one of the largest publicly traded US automotive retailers with over 150 new dealership locations offering new and used vehicle sales, parts & service, and finance & insurance products which include extended servicing contracts. Asbury has a diversified portfolio and brand mix that includes about ⅓ luxury, ⅓ domestic and ⅓ imports that complements its core business segments of new, used sales and its repeatable and high-margin parts and service business. While half of Asbury revenues typically come from new sales, approximately 70% of the total operating earnings come from the combination of parts & service and finance & insurance segments.
Under the leadership of CEO David Hult, the company since 2019 has grown its revenues from $7 billion to $18 billion in 2025, and earnings per share from ~$9 to $25 during the same period. The company has grown more than 2.5x in 6 years which is in part from the strong organic growth during the COVID recovery, but also through inorganic growth, as they acquired a few important franchises including regional brands: Larry Miller, Jim Koons, and most recently Herb Chambers. There has been a generational shift from founders looking for an exit, and increasingly the large dealerships have been able to capture that market share. David has managed this impressive level of growth with an extreme focus on operating expenses—Asbury has one of the highest operating margins in the industry. This is a business that should generate attractive free cash flow during different market cycles, and we believe there is an opportunity for greater share repurchases in the future as well.
In late 2025, David Hult announced he will step down as CEO and transition to a role as Executive Chairman. Dan Clara, who was previously the Chief Operating Officer and played a key role in Asbury’s success the past 5 years, will become the company’s CEO and President.
Our differentiated view on Asbury is that we believe in a positive earnings inflection in the medium-term after some recent integration costs, continued strong parts & service segment results, and overall better execution and profitability including the used car business, even if we assume a weaker general pricing growth environment. If we are roughly right, we believe the shares are currently trading at 7x forward earnings and the appropriate multiple should be significantly higher giving us the potential for attractive returns. 7
Our only material sale in the period was to exit our holding in Vitesse Energy. We can tolerate some level of earnest missteps by our companies – we are all human. However, we have a low threshold for inconsistencies by management regarding strategy and capital allocation. We earned a low teens IRR on our Vitesse position.
Returning to our earlier comments about our companies seeing strong recent insider purchases here are a few specifics: In March, Berkshire’s Greg Abel bought approximately $15 million worth of Berkshire shares. Also in March, Builders’ Paul Levy bought approximately $4 million worth of Builders shares. Insiders at KKR, including both co-CEOs, so far this year bought over 500,000 shares or approximately $51 million worth of KKR shares. At Asbury Automotive, insiders including the outgoing CEO David Hult, bought over $1 million worth of Asbury shares. Finally, Arrow’s interim CEO bought about $600,000 worth of Arrow shares in the period.
It is not hard to find examples of worrisome increases in speculative activity in the financial market.
“Trillion-Dollar Borrowing Binge Lifting the Stock Market to Risky Heights” Leveraged funds and margin debt have grown to unprecedented levels this year” 8
And of course – the historic level of spending, change and fast-moving developments as it relates to AI continues:
“The Data-Center Boom Is Sparking a Third Wave of Inflation” 9
“Chip Makers Are Profiting Off AI at the Expense of Just About Everyone Else” 10
Our historic worries about unsustainable US Government borrowing levels keeps getting more worrisome – as this piece highlights: 11
IMF Says Treasuries Losing Premium, Warns US on Debt Management
2026-04-15 13:00:00 GMT
By Enda Curran
(Bloomberg) — The International Monetary Fund warned Wednesday that the escalating scale of US debt issuance is undermining the premium Treasuries have commanded from investors, with implications for government securities across the globe. “The increase in the US Treasury security supply is compressing the safety premium that US Treasuries have traditionally commanded — an erosion that pushes up borrowing costs globally,” the Washington-based fund said in its latest Fiscal Monitor report. The US has been selling large volumes of debt because its budget deficit has averaged roughly 6% of gross domestic product over the past three years — a historically large shortfall outside of wartime or recession eras. The gap is expected to stay around those levels throughout the coming decade, according to the Congressional Budget Office. The IMF pointed to a narrowing gap between the yields of AAA rated corporate bonds and Treasuries as a sign of reduced appeal for US government securities. 12 While spreads have typically been viewed as a gauge of the risk investors estimate for corporate borrowers, the fund is essentially flipping that analysis to view it as a metric of how much extra buyers are willing to pay for Treasuries.
As it relates to the unusual impact a few companies have had lately on the performance of the S&P 500, we note that by our calculation five semiconductor companies accounted for approximately 40% of the Index’s gain in our semi-annual period.
We begin the second half of calendar 2026 with an undervalued and fundamentally attractive portfolio.
As I typically do annually, I added to my Fund holdings in the period.
As of May 31, 2026, my family and I and the team here at GoodHaven Capital Management, LLC, the investment advisor to the GoodHaven Fund, owned approximately 136,845 shares of the Fund. It is management’s intention to disclose such holdings (in the aggregate) in this section of the Fund’s Annual and Semi-Annual letters on an ongoing basis.
I thank all fellow shareholders for their continued confidence as GoodHaven 2.0 continues to unfold. I also thank our Fund Board of Trustees and our long-time partner and investor Markel for their support and wise counsel.
Stay healthy and safe and forward we go.
Larry Pitkowsky
Original Post
Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.
