IDIOSYNCRATIC.
“It is one of man’s curious idiosyncrasies to create difficulties
for the pleasure of resolving them.”
Joseph de Maistre
TOP TEN POSITIONS AS OF 6/30/26
POSITION TICKER INDUSTRY WEIGHT CHANGE* RETURN*
Cash 9.4% -20% 5.0%
Chemed CHE Hospice/Plumbing 5.5% 1% -5.5%
Scholastic SCHL Publishing 5.0% -11% 185%
Ingles Markets IMKTA Grocer 4.7% -10% 61%
FRP Holdings FRPH Real Estate 3.9% 63.6% 8.5%
CBIZ CBZ Accounting 3.6% 4.7% 14.4%
Omega Flex OFLX Building Products 3.0% -43% 5.7%
Lamb Weston LW Frozen Food 3.0% 67.2% -1%
Utah Medical UTMD Health Care 3.0% 0% 26.7%
John B. Sanfilippo JBSS Nut Wholesaler 2.9% -10% 38.4%
SIZE WEIGHTED RETURN (EX-CASH) 42.5%
*Position change since 3/31/26. Return are since inception dollar-weighted returns through 6/30/26.
The fund began reporting its top 10 positions quarterly in July of 2025. Initially, I was protective of this data, as I feared disclosure might impact prices or attract imitators. Few of us have ever bought a cow, but free milk analogies seemed germane. Writing this letter for the fifth time, my concerns have eased with repetition. It’s one of life’s less palatable truths, but people seldom pay as much attention as we think.
That being said, I still struggle with what context readers might enjoy. I’ve attended enough cocktail parties to know not everyone shares my fondness for stock market minutiae. Attention spans are finite and many outsource investment management primarily to protect theirs. But for the abundantly curious, a quick review of what’s been said:
Last July, I made a case for intentional scaling and revealed 39% of the fund was in cash. I explained my preference for defensive businesses with low economic sensitivity and how I thought tariff policy might impact inflation, interest rates, and by extension, equity prices.
In November, I described a style known as special situation investing. Each holding appears unique in isolation, but collectively share similar qualities like hidden assets, suboptimal capital structures, robust shareholder returns or activists advocating for change.
In February, I discussed why a fund that takes less risk may lag during periods of exuberance. In 2025, unprofitable stocks provided most of the index’s return and by focusing on profitable companies, many of whom pay a dividend, the fund rarely keeps pace during junk rallies.
In May, I provided a thumbnail of each holding, describing how I thought value might be created, either through monetization of hidden assets, divestiture, improved capital allocation or strategic review.
I’ve discussed nine of the top 10 holdings before, so this month I’d like to update you on current events. Since we’re in the middle of earnings season (half have yet to report), facts are certain to change.
CHEMED
Chemed averaged 20% returns for twenty years, a track-record few can claim, especially in small cap. At many public companies, the C-suite seems like a revolving door, yet Kevin McNamara has led Chemed for 25 years and been a board member since the Reagan administration. In May, proxy results revealed the company failed ‘Say-on-Pay,’ a sign that investors’ confidence in management is wavering.
In June, activist investor Barington Capital sought board representation, claiming Chemed was acting with insufficient urgency to address underperformance. In July, they argued compensation was poorly aligned, suggested a board refresh and strategic review.
You don’t need an MBA to realize there are few synergies between hospice and plumbing, and the market has long theorized about their separation. Despite repurchasing 14% of its stock in two years, Chemed still has modest debt and could conservatively borrow another $1 billion to increase capital returns. Should they monetize Roto-Rooter, you could probably quadruple that.
SCHOLASTIC
You may recall September’s letter where I highlighted the value of Scholastic’s real estate. Last June, the fund acquired shares when its market cap was below $500 million and six months later, they announced a sale leaseback for $481 million, over half of which was returned to shareholders. Given their stated leverage target, they still have $300m of additional capacity, meaning at today’s prices, they could feasibly buy back another 40% of the company. Having risen 125% since last June, repurchases are less accretive at today’s prices. Subsequently, the fund has significantly reduced its position, most of which qualified for long-term capital gains.
INGLES MARKETS
The thesis on Ingles was also under-monetized real estate, as it owns 11 million square feet, only half of which it occupies. Grocers can sustain substantial leverage, yet the company has modest net debt and only repurchased shares from family members. Despite being a controlled company, activist investor Summer Road launched a proxy battle in April and subsequently received a board seat.
There’s a large spread between the value of grocery-anchored real estate and grocers themselves. Ingles has the highest real estate ownership of any public grocer, as well as 29 undeveloped parcels, surprising for a company that hasn’t grown store count this century. In July, Kroger bought a similarly sized chain, Giant Eagle, for $1.7 billion showing appetite remains to consolidate regional supermarkets.
FRP HOLDINGS
FRP is the only holding not previously covered and owns aggregate quarries, apartment buildings and industrial properties in Florida and the Mid-Atlantic. The company is run by the Baker family which sold Florida Rock to Vulcan Materials in 2007. I’ve previously invested in another Baker enterprise, Patriot Transportation, and found them to be especially shareholder friendly. From 2020-2023, it returned 140% via $10 in special dividends before an eventual sale to United Petroleum Transports.
FRP’s primary assets are aggregate mines under long term lease to Vulcan. These are structured as a per-ton royalty, so Vulcan bears operating costs, while FRP benefits from rising prices, which according to CPI data, have risen 74 of the last 75 years. Unfortunately, due to a quirk of the IRS tax code, aggregate royalties don’t qualify for REIT status.
The company uses the cash flow from rocks to reinvest in multifamily and industrial properties. You may be aware that it’s a difficult time for real estate developers. Pandemic era interest rates led to over-supply and a subsequent period of indigestion. Due to low occupancy and development delays, FRP has fallen 36% in a little over a year and trades at a substantial discount to its estimate of net asset value. John Baker II owns 17% of the company and bought another $10 million in March.
CBIZ
The fund’s May letter had this to say:
“In the past three years, roughly 1/3rd of the largest accounting firms were acquired by private equity, often at valuation multiples twice where CBIZ currently trades. I’m not suggesting a sale is imminent but am always intrigued when a company can be bought below private market value.”
I should have suggested a sale was imminent. On Wednesday, the company announced it was being acquired by Grant Thornton for $55 a share, among the largest accounting acquisitions ever. This is an 89% premium to where shares were purchased in February (the returns in the table are only through 6/30/26). Given the offer is 37% below its all-time high, a competing bid may still emerge before the go-shop expires later this month.
OMEGA FLEX
Omega Flex was the subject of December’s letter which highlighted the company’s sensitivity to single-family housing starts. I pointed out that the US had substantially underbuilt housing demand, but given affordability challenges, saw few quick fixes. I also hypothesized that tariffs may improve pricing for its primary product even if volumes stayed flat. Since we’ve had two more quarters of data to parse, revenue has continued to decline and margins erode. Homebuilders are trimming inventory, the spring selling season was chilled by the conflict in Iran and interest rates remain uncooperative. My thesis could still hold, but it may take longer than anticipated and I’ve sized the position accordingly.
LAMB WESTON
Did you know the average American consumes 38 pounds of french fries per year? They are among the most ubiquitous menu items and essential to restaurants’ profits. Lamb Weston was spun out of Conagra in 2016 and quickly traded at a premium since fast growing staples are scarce. Coming out of the pandemic, earnings were turbo-charged due to rising restaurant traffic, supply chain shortages and a particularly poor potato crop, which led to unsustainable earnings growth. The stock peaked at $115 in 2023 before falling 65% and being politely asked to leave the S&P 500.
Activists Jana Partners and Starboard are agitating for change, international operations are particularly challenged and the Chairman, CEO and CFO have all been replaced. Prior management overinvested in capacity, botched an ERP roll-out and expenses grew faster than profits. Each strikes me as fixable.
UTAH MEDICAL
Utah Medical manufactures products for women’s health and fell 56% from late 2021 to last summer when the fund began purchasing shares. The company has been facing three headwinds: its largest customer switched suppliers after a change in ownership, a Chinese customer stopped paying its bills and third, persistent litigation over its tubal ligation product, the Filshie Clip. What’s not to love?
I believe all three headwinds are abating. The company has 40% of its market cap in cash, has repurchased 12% of its stock in the past two years and has been an excellent steward of shareholder capital. The company IPO’d in 1982 (which raised less than $2 million) yet has returned over $250 million to shareholders since.
JOHN B. SANFILIPPO
Given high inflation, changes in consumer preferences and GLP-1s, public markets have soured on snack companies, which is why I found it curious that potato chip manufacturer UTZ Brands was acquired this month at a 91% premium by Intersnack, a family-owned company in Germany. John B. is primarily a private label and contract manufacturer, so it’s not the best comp, and I’ll agree its margins are lower, but JBS is growing (UTZ wasn’t), is conservatively levered (UTZ wasn’t), generates meaningful free cash flow (UTZ didn’t), has superior returns on capital (it’s not even close) and yet trades at a material discount. In the last twelve months, they generated more cash from operations than UTZ, but has half the market cap. Again, I have no knowledge of an imminent transaction, but companies that trade at sizable discounts to their private market value have always piqued my interest.
CONCLUSION
The title of this letter is Idiosyncratic, meaning peculiar to a particular person and this portfolio is nothing if not peculiar. Few of these companies have exciting end markets, yet all have ample raw material with which to create value, much of which is within their control. I’ve yet to find a way to explain my style of investing without going into specifics, and while this may not be everyone’s cup of tea, I appreciate your interest.
Sincerely,
Dan Walker