Q3-Q4 Investor Audible Series: Vlata Fund, Greenhaven Road Capital, and Tourlite Capital

Episode Summary

Executive Summary: The episode is an audiobook-style reading of three investor letters centered on macro uncertainty and stock-picking discipline. Vlata Fund argues inflation, war, and rising rates make macro forecasts unreliable, so investors should focus on micro fundamentals and companies that benefit from higher rates and shortages. Green Haven Road details a severe drawdown but defends owning durable, cash-rich, low-churn businesses with secular tailwinds. Torlight Capital similarly emphasizes low net exposure, correlation spikes, downside protection, and selective longs/shorts tied to recession and factor risk.

Main Topics: Macro vs. micro investing framework (Priority: 5/5): Vlata Fund argues macro indicators are overwhelmingly negative, but macro forecasting is mostly useless for stock selection. The better approach is second-level thinking: asking whether prices already reflect bad news and focusing on company-level fundamentals. Inflation, rates, and money debasement (Priority: 5/5): The letters frame rising rates, inflation, deficits, and currency weakness as the main long-term investor problem. Vlata uses Turkey as an extreme example to show how nominal asset prices can rise as currencies fall. Green Haven Road drawdown and portfolio resilience (Priority: 5/5): Scott Miller acknowledges the fund’s worst drawdown, but argues the portfolio still contains durable companies with low churn, strong balance sheets, secular tailwinds, and operating leverage that can survive recession. Business cases that benefit from the macro environment (Priority: 4/5): Vlata highlights companies that can benefit from rising rates, higher commodity prices, defense spending, and inflation, including banks, insurers, energy, and industrial names. Torlight’s market regime and risk management (Priority: 4/5): Torlight says 2022 was dominated by macro and factor exposures, with high correlations across securities. The fund kept low net exposure and focused on capital protection until fundamentals regain importance. New long and short ideas (Priority: 4/5): Each fund highlights specific portfolio changes: Vlata adds Arrow Electronics and Alphabet; Green Haven adds PAR, Elastic, KKR, Celebrite, API Group, and Hagerty; Torlight adds Vero Mobility and shorts a Canadian retailer. Insurance and marketplace flywheel at Hagerty (Priority: 4/5): Green Haven’s detailed appendix argues Hagerty has a durable niche auto insurance franchise with low loss ratios, high retention, low CAC, and a growing marketplace/reinsurance ecosystem.

Key Arguments: Macro conditions are poor, but macro forecasts are too dispersed and backward-looking to guide short-term stock returns. Second-level thinking matters more than first-level pessimism: bad macro news may already be reflected in valuations. Higher interest rates can help some businesses, especially banks and insurers with large investment portfolios. Companies with current profitability, low debt, and strong balance sheets are better insulated from rate hikes and recession. Stock declines in 2022 were driven more by multiple compression than by fundamental deterioration in many portfolio companies. Low-churn, recurring-revenue businesses with secular tailwinds and operating leverage can keep growing even in a weak economy. Recession can be a “healing environment” that favors financially strong companies and weakens less efficient competitors. Hagerty’s niche insurance model benefits from low loss ratios, high retention, and partnerships with large insurers rather than competing directly with them. Torlight’s strategy relies on low net exposure, downside protection, and exploiting dispersion when correlations break down. Market timing is difficult; missing the market’s best days can materially impair long-term returns.

Data Points: MSCI World decline: more than 17% - Vlata Fund cites global stock market performance in 2022 S&P 500 decline: more than 19% - Vlata Fund on 2022 U.S. equity market performance NASDAQ decline in 2022: 33% - Vlata Fund and Green Haven cite tech-sector selloff JPMorgan net interest income Q2 2021: $12.7 billion - Used by Vlata to show higher rates can boost bank profits JPMorgan net interest income Q3 2022: $17.5 billion - Used to illustrate benefit from rising rates Qualitas bond portfolio yield: around 10% per annum - Vlata example of insurers benefiting from higher rates SYNOVUS Energy description: record profits - Vlata cites energy producer profits amid high commodity prices Portfolio dividend + buyback yield: around 10% of market cap - Vlata says this is unusually high for several holdings Green Haven YTD return: approximately -59% - Scott Miller describes the fund’s worst drawdown since inception Green Haven annualized return since inception: over 960 basis points per year - Performance from January 2011 inception Green Haven cumulative value of $1,000 invested: nearly $300,000 - Illustrates long-term compounding despite drawdowns PAR churn rate: 4% - Green Haven on PAR Technology's QSR point-of-sale business Elastic customers: 19,000 paying customers - Elastic customer base discussed in Green Haven letter Elastic net revenue retention: about 130% - Shows expansion within existing customer accounts Celebrite customer churn: 2% - Highly sticky government-focused software business API Group backlog: $3.2 billion - Supports revenue visibility in fire safety and contracting Hagerty customer base: roughly 2 million cars insured - Appendix discussing Hagerty’s market penetration Hagerty market size: over 43 million registered classic and collectible cars - Indicates runway for growth Hagerty loss ratio: around 41% - Compared with typical auto insurer levels Typical auto insurer loss ratio: 70% plus - Benchmark used to show Hagerty advantage Hagerty customer retention: 90% plus - Supports low churn thesis Hagerty reinsurance economics: $11 operating profit per $100 premium - Explains economics of Haggerty Re business Hagerty Re return on incremental retained dollar: 30% to 40% - Leverage from writing more premium against retained capital State Farm investment in Hagerty SPAC: $500 million - Used as evidence of sophisticated backing Markel additional investment in Hagerty deal: $30 million - Alongside its prior 25% ownership State Farm policies to onboard: 470,000 policies - 2023 contractual event for Hagerty Hagerty revenue share change with Markel: 70% to 80% - Another 2023 contractual tailwind Torlight fund Q3 return: -2.8% - Quarterly performance for the Founder Class Torlight fund since inception: 1.6% - Since April 2022 inception S&P 500 since Torlight inception: -20.2% - Benchmark comparison Torlight gross exposure: roughly 150% - Lower than expected range Torlight expected gross exposure range: roughly 180% to 250% - Target range mentioned by the manager Torlight S&P 500 YTD decline: -23.9% - Over first nine months of 2022 Torlight NASDAQ YTD decline: -32% - Over first nine months of 2022 Vero Mobility cashless toll penetration: 65% now, expected over 80% - Torlight long thesis on tolling transition Hagerty revenue growth vs industry: 3x the overall insurance industry - Historical growth comparison

Pivotal Quotes: "Macro forecasts have such enormous dispersion and these days especially that they are practically worthless." — Daniel Gladys: Vlata Fund letter arguing against macro-driven investing "The businesses have not, and I believe that even in the face of economic headwinds they are all well positioned to remain fundamentally sound." — Scott Miller: Green Haven Road letter defending portfolio quality despite drawdown "Until we see a shift in the market regime from macro towards share prices driven by business fundamentals, the fund remains focused on downside protection while addressing the optimal time to start playing offense." — Jeff Jerkin: Torlight letter explaining current risk posture

Implications: Listeners are urged to prioritize business quality, balance sheets, and cash-flow durability over macro predictions. The episode reinforces a 2023 playbook favoring real assets, financials, insurers, and niche software/marketplace businesses with pricing power and recurring demand.