Wild or zoo: 2025 letter to partners

Dear partners,

In 2025, Stone Sentinel Capital (“SSC”) made 50.7% while the S&P 500 Index (“S&P”) gained 17.9%. Figures are gross returns in USD. S&P returns are total returns which assume reinvestments of dividends.

Since inception in 2024, SSC has generated 95.9% cumulatively while the S&P returned 47.4%.

Acrobats in gravity-defying acts perform long enough to dazzle but cannot sustain for long.

Your manager is no acrobat. The objective is to achieve the opposite.

No dazzle, yet sustainable returns.

Excess returns are unlikely to arrive linearly or regularly.

Wild or Zoo

Consider a lion in the wild.

It wakes before dawn on open savannah. Hunger is familiar. Several days have passed without a successful hunt.

When the pride moves, it does so quietly. Each lion aware of its role. Each conserving energy for the moment when action matters.

Hunts are coordinated and infrequent. Most fail. Success comes only when timing, positioning, and patience align.

The wild lion knows when to wait as much as when to strike.

Now consider a lion in a zoo.

It lives within walls. The ground is worn smooth from pacing. Food arrives daily, delivered by keepers at predictable hours.

The lion is observed daily. Crowds gather. Cameras click. Children point. Noise is constant.

The zoo lion must tolerate confinement, routine, and proximity to humans. It is expected to remain calm under scrutiny and predictable for handlers.

Health is monitored. Risk is engineered away. Stable behavior is rewarded.

The two lions do very different things to survive.

The wild lion hunts. Judgment matters. There are plenty of wrong judgments and failed hunts, but there is also nothing better than fresh prey.

The zoo lion follows. Consistency matters. Expectations of predictable and human-friendly behavior are high, but food arrives like clockwork, unaffected by judgment and the volatile savannah.

Unlike lions, investors have the liberty to decide which environment is best.

This also means investors must know what kind of lion they are.

Being self-aware matters more than it sounds.

Because strengths in one environment become weaknesses in another.

Place the wild lion in a zoo and its instincts betray it. Restlessness replaces vigilance. The routines feel unnatural. Traits once essential — keen judgment, sensitivity to threat — result in unpredictable behaviors and become sources of distress.

Release the zoo lion into the wild and the outcome is harsher. It would not recognize signs of danger. It would misjudge distance and timing. Hunger would arrive quickly. Survival would be brief.

The tragedy is not merely under-performance. It is under-performance in one environment that is excellence in another.

The real tragedy is mismatch.

Investors therefore must know what kind of lion they are, then pick the right environment.

Some thrive in the “wild” where returns are uneven but few formal constraints allow the expression of intellectual freedom and courage to make original bets.

Others excel in the “zoo” where support systems are structured, risks are controlled, and performance is continuously observed and evaluated.

Knowing what kind of lion one is sounds simple until one is aware that self-deception is the intuitive norm.

Humans are wired to see the world as they think, not what it is.

Our intellect is also rife with biases that further distort reality.

Only the investors committed to deliberate thinking and sound judgment may evaluate themselves correctly and find the right environments.

Your manager spends as much time evaluating himself and refining his environment as he does analyzing companies.

Practice can only be elevated after the practitioner does so.

In investing, survival is difficult. The average investor loses.

For those investing in the wild, the unpredictable harshness of nature challenges survival further.

But those who overcome the adversities often produce the most original ideas with conviction.

Like wild lions, they mostly wait and only hunt at the most opportune moments.

They observe reality closely, test ideas against it, and adjust without attachment.

Investors benefit most when they allow nature to teach, improving judgment by accepting its constraints and feedback.

They do what nature demands rather than what comfort would prefer.

Henry David Thoreau has practical advice for all investors:

“Give me for my friends and neighbors wild men, not tame ones.”

Mismatch is an identity placed in the wrong environment.

The worse tragedy is mistaken identity.

Like a lion mistaking itself for one.

Most investors, professional or otherwise, will never outperform a simple benchmark over a full cycle.

What is costly to clients, themselves, and their families is the refusal to accept this reality.

The persistence in playing a game for which one is unsuited - sustained by reputation, habit, or the fear of choosing differently - is reminiscent of Sisyphus.

While investors need wisdom and courage, the act of knowing when one is not or no longer is takes far more.

A compass for the mind

Theodore “Teddy” Roosevelt, the 26th POTUS, almost died during an expedition in the Amazon in 1913-14.

The uniformly dense jungle made navigation difficult. As landmarks dissolved into sameness, direction became uncertain and perspective was lost.

Unrelenting insects and wildlife deprived the men of rest, compounding physical exhaustion with cognitive fatigue. Fevers followed. Hallucinations set in.

Roosevelt later wrote that the psychological resilience, for which he was known, eroded under these conditions. He pressed on despite mounting signs that rest and retreat were necessary.

At one point, he urged the party to leave him behind to die so he would not slow them down.

Not out of courage, but because his mental compass had failed.

If Teddy Roosevelt could lose his bearings in the wild, anyone can.

Markets can be no less disorienting.

Volatility has a way of eroding judgment and shaking conviction.

Yet it may also be a provider of unprecedented opportunities.

Clear thinking reveals volatility for what it really is.

Rest and retreat clarify thoughts, but nothing helps as much as reflection.

Journaling makes reflection precise, turning experiences into principles.

Writing a manual on thinking clearly and general principles of wisdom, currently in progress, is an attempt to distill those lessons.

It is not a map and offers no predictions.

Its modest purpose is to serve as a compass.

It is an internal reference that helps restore orientation when the environment becomes noisy and feedback unreliable.

More importantly, it guards against drift.

Your manager may publish the entire manual or selected chapters should others find it useful in due course.

Build for the ages

There are many perspectives discussing the disorienting impacts of large language models (LLMs) and artificial intelligence (AI).

One such view was articulated by Mr Guy Spier.

In “The Golden Age of Value Investing Is Over”, he suggested that advances in LLMs make the acquisition of knowledge so much more accessible that original thoughts, long the advantage of value investors, would be commonplace and erode the edge of value investors.

As Mr Spier implied, knowledge is not the same as insights.

Insight is not about knowing more.

It is about reaching an understanding so robust that it survives volatility and repels dissent.

Knowledge is a prerequisite of insight, but it is not sufficient.

The other prerequisite is to think well.

Knowing without thinking well leads to unsustainable banal perspectives.

Knowing and thinking well result in sustainable insights.

To think well is to process knowledge through the right mental models.

LLMs do little to identify or validate the right mental models.

LLMs are powerful tools for synthesizing what is already known. They operate by producing what is most likely to be said next.

Insight, however, rarely emerges from what is most obvious.

The right mental model is often the least likely one.

The climb to insight is therefore as steep as it always has been.

Better tools may equip the climber, but they do not flatten the mountain.

To maintain an edge, the value investor must not only acquire the right mental models, but also apply them at the right time.

Thinking about mental models seems redundant in periods of “golden ages”.

Any golden age of value investing is temporary, akin to a rising tide that lifts all boats.

When the tide inevitably subsides, the reversion during the most unexpected moment leaves only the robust boats afloat.

Build the most robust boat you can, using knowledge and mental models.

Golden ages do not matter for the value investor who builds for all ages.

Portfolio update

SSC is currently invested in 5 stocks that are listed in public markets in Hong Kong, Malaysia, Spain, and Japan.

The most recent addition is Ascentech K.K..

Listed in the Tokyo Stock Exchange, Ascentech is the first Japanese stock in your manager’s career.

Ascentech caught your manager's attention when it elevated its business model in March 2025.

Before March 2025, Ascentech was a tier-1 distributor and systems integrator (SI) for Citrix. It bought Citrix licenses wholesale which were sold to other SIs and enterprise clients.

After March 2025, Ascentech became the Citrix operator in Japan. Revenue-share with higher margins (25-35% gross margins) replaces fixed distributor margins (8-15%). Multi-year recurring subscriptions reduce working capital risk. Access to the entire slate of Citrix products and bundling opportunities increase revenue growth potential. 

However, the transformation entailed upfront payments (tied to projected sales) payable to the Citrix parent. Missing projected sales is an obvious risk. What may cause a miss in sales are Ascentech missing on execution and poor demand for Citrix products. 

Your manager is comfortable with Ascentech’s execution. It has demonstrated world-class competence in Japan (~19% ROE, ~38% ROIC over past decade) for it to become an operator.

For the other risk, Citrix is one of two leaders in VDI  (Virtual Desktop Infrastructure). The post-pandemic hybrid work tailwind is unlikely to dissipate. Risk-averse customers in the highly-regulated industries (city governments, finance, healthcare) that Ascentech targets are unlikely to abandon hybrid work arrangements, even with back-to-office mandates. The demand for more secure and efficient hybrid work will only increase.

AI is also unlikely to disrupt Citrix like it may for other software. Citrix is the control-plane infrastructure within which AI runs.

The stock has risen 70% over the past year but it’s still trading at forward multiples (9.5x PBT and 13.5x PE) that seem to undervalue its position as the exclusive operator of leading VDI software.

Your manager welcomes questions and comments at mg@stonescap.com.

At your service,

Marcel Gozali