Overbrook’s Year-End Analysis: The monk and the empty boat
We are grateful for your continued trust and partnership as we begin a new year. As we reflect on the past year, we remain grounded in the same mindset and discipline that guide our approach across market environments—particularly during periods of heightened noise and volatility.
What drives our investment decisions is not a single macro call or market forecast, but a repeatable process and a clear philosophy around how we interpret information, assess businesses, and respond to market behavior.
Process Over Reaction: The Empty Boat
In investing, I often think about a simple Buddhist parable known as the Empty Boat. A monk leaves his monastery to meditate alone on a quiet lake. While sitting peacefully in his boat, another boat begins drifting toward him. As it approaches, irritation rises, then anger. He assumes the other boatsman is careless and intrusive. Just before the boats collide, he lashes out—only to discover the other boat is empty. No captain. No intent. Just drift.
The lesson is not about the boat; it is about the monk’s reaction.
In a long-only, core equity strategy, markets present us with “incoming boats” constantly: short-term dislocations, macro headlines, policy shifts, multiple compression, crowded positioning, or a stock moving sharply for reasons unrelated to fundamentals. The temptation is to assign meaning or urgency—to believe the market is signaling something that requires immediate action.
Often, however, the market’s movements resemble the empty boat. They reflect flows, positioning, liquidity, sentiment, or time horizons misaligned with our own. No intent. No signal. Just drift.
Patience is the restraint to pause before reacting. Consistency is the commitment to return—again and again—to our underwriting and process. Discipline is the ability to distinguish between new information and noise, between real changes in intrinsic value and temporary collisions.
Our responsibility as investment managers is not to avoid every bump on the lake—that is impossible—but to ensure that decisions are not driven by emotion, fear, or the illusion that every price movement requires a response. When a thesis remains intact, secular narratives are durable, balance sheets are strong, and long-term compounding is on track, the correct response is often no response at all.
The market may feel personal. It never is. The only thing fully within our control is how we react.
Principles and Process: The Cornerstone of Differentiation
Our investment approach is deliberately focused and long-term in nature. We build concentrated portfolios designed to reflect our highest-conviction ideas rather than mirror market composition or respond to short-term fluctuations. This structure allows us to allocate capital where we believe fundamentals—not momentum—will ultimately drive value creation.
Anchored by the discipline embodied in the “empty boat,” our framework emphasizes deep analysis of business models, competitive advantages, unit economics, and capital allocation. We evaluate operational quality, cash-flow durability, and governance to ensure that only high-caliber companies are considered. Positions are sized with intention, aligned to long-term risk and return objectives rather than near-term sentiment.
Continuous monitoring allows us to differentiate between meaningful changes in intrinsic value and temporary market drift, reinforcing the patience required to allow compounding to work over time. By embedding these principles throughout our process, portfolios are designed to remain resilient while positioned to capture structural growth opportunities as they emerge.
Identifying Long-Term Opportunities
A recurring theme in our strategy is identifying businesses where near-term financial results may understate long-term economic potential. This often occurs in industries undergoing structural change, where investment cycles, platform buildout, or scalability dynamics obscure future earnings power.
In these situations, we focus on factors such as operating leverage, margin evolution, capital intensity, and customer integration. As platforms scale, fixed costs are absorbed, returns on invested capital improve, and incremental revenue increasingly converts to free cash flow. When markets remain anchored to short-term metrics, they may fail to fully reflect these longer-term economics.
Our goal is not to predict short-term outcomes, but to identify durable business models with improving capital efficiency and the potential to compound value over extended periods.
Macro Environment: Context, Not a Compass
Throughout the year, markets were influenced by a range of macroeconomic and geopolitical developments, including shifts in monetary policy, fiscal uncertainty, and global trade dynamics. While these forces shaped sentiment and volatility, outcomes were ultimately driven by company-level execution, balance-sheet strength, and capital discipline rather than sustained macro disruption.
Our approach remains bottom-up. Portfolio decisions are informed by changes in fundamentals and long-term value creation, not by attempts to forecast macro variables. When conditions evolve, we reassess businesses individually, adjusting exposure where the underlying economics or competitive landscape materially change.
Across periods of uncertainty, disciplined portfolio management—rather than macro prediction—remains central to navigating complex environments.
Market Outlook: Selectivity and Discipline
After an extended period of strong equity market performance and increasing concentration among market leaders, the bar for future returns is higher. This does not suggest an imminent end to the cycle, but it does reinforce the importance of selectivity, valuation discipline, and fundamental underwriting.
Structural forces such as labor dynamics, energy markets, policy outcomes, and technological adoption continue to shape opportunity sets. We believe companies with pricing power, operational flexibility, and thoughtful capital allocation are best positioned to navigate a more mature phase of the cycle. At the same time, the long-term productivity potential of applied artificial intelligence remains underappreciated in certain areas, particularly where it translates into durable cash-flow growth rather than narrative appeal.
Our strategy remains focused on businesses where execution—not storytelling— determines outcomes.¹
Conclusion: Compounding with Discipline
¹ The firm’s investment strategy is offered through separately managed accounts as well as private fund structures, depending on client objectives and circumstances.Volatility, dispersion, and shifting leadership continue to test investor conviction. There is no shortage of “incoming boats,” many demanding reactions while carrying little fundamental significance. In those moments, we remain focused on separating meaningful change from temporary drift.
Our differentiation lies not only in discipline, but in how it is expressed. We manage focused portfolios that require conviction and patience, while maintaining the flexibility to act when genuine opportunity or risk emerges. This combination allows us to be patient when others are forced to act, selective when others generalize, and opportunistic when dislocations arise.
We believe that pairing long-term conviction with emotional discipline remains one of the most effective ways to steward capital across market cycles. As always, our focus is on doing fewer things—but doing them well—allowing time, fundamentals, and compounding to work in our favor.
Warm regards,
Ryan Kanaley
Chief Investment Officer
Disclosure:
Past performance is not indicative of, or a guarantee of, future performance. The information contained herein is not, and should not be construed as, an offer to sell or the solicitation of an offer to buy any securities. Any such offer or solicitation may be made only by means of a Fund's Confidential Private Placement Memorandum and only in those jurisdictions where permitted by law, if participating via a private fund structure. The information is confidential and is for the use of the intended recipient and may not be published, distributed or disclosed in whole or in part without the express written consent of Overbrook Management Corporation (“Overbrook”). Overbrook does not make any representation or warranty, expressed or implied, as to the accuracy or adequacy of the foregoing information or any other work product or projections based upon such information, and in no event shall Overbrook, its information providers or their respective affiliates, directors, officers, managers, agents or employees be liable to you or anyone else for any decision made or action taken by you in reliance on such information. An investor must make its own assessment of the information contained herein and form their own opinion of the relative riskiness of the strategies described herein.