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Firefly Capital Update - 2025 Q1
2025 Q1 results
January 1st
March 31st
$ change
% change
Firefly Capital
$689,360.85
$605,817.56 *
Firefly Capital (Normalized)
$204.04
$214.01
$9.97
4.89%
S&P500
$5,881.63
$5,611.85
$(269.78)
-4.83%
Difference
9.72%
Year-over-year results
April 1st, 2024
March 31st, 2025
$ change
% change
Firefly Capital (Normalized)
$176.05
$214.01
$37.97
21.57%
S&P500
$5,243.77
$5,611.85
$368.08
7.02%
Difference
14.55%
Total results
April 1st, 2020
March 31st, 2025
$ change
% change
Firefly Capital (Normalized)
$100
$214.01
$114.01
114.01%
S&P500
$2,470.50
$5,611.85
$3,141.35
127.15%
Difference
-13.4%
There are no rows in this table
* We are currently at $112,634.24 in cash.
As we complete our fifth year, I find myself amazed at how quickly time has flown—it seems like just yesterday I was gathering our initial investors for this venture. Thank you, everyone, for your continued trust. I remain deeply committed to stewarding your capital with the utmost care. I do not take the responsibility lightly.
I want to quickly highlight a possible confusion in the data above. You might see that our ending capital is about $84,000 less than our starting capital, but I also included a “normalized” line which shows an increase of nearly 5%. A significant investor has decided to use his capital elsewhere after heeding last quarter and withdrew. This means that his money is no longer in the fund, around $100K, and that each of our ownership percentages has increased, and that the fund still increased overall. Partners have received specifics separately.
As this is the year's closing, this update will be a little longer. It will contain a few more in-depth updates of the fund itself, more on the state of the world through my eyes, and also highlight additional & alternative investments.
Valuing our fund
As I highlight each year at this time, I like to separate price from value.
The best way to value a fund: its owner earnings
Name
2024
2023
2022
Fund Owner Earnings Growth
-1.91%
+116.36%
+0.41%
There are no rows in this table
I was honestly pretty shocked to see this negative number across the portfolio and has definitely prompted me to action. Ironically, the reason we’re up this quarter is because one of the companies that has seen drastic growth the last few years (in owner earnings) finally shot up ~40% in price. This is also one of the companies that was slightly down in owner earnings this last year. It shows that price eventually should match value.
Likewise, I have started to cull non-performing assets where my confidence isn’t quite there for one reason or another. Despite our $100K less in the fund, we're sitting on a cash pile of 18.5% - not quite 'Scrooge McDuck swimming in gold coins' level, but I'm aiming for a more luxurious 30% cash bath when the market finally serves up some deals.
It’s also worth noting that our fund shot up ~100% in owner earnings the previous year, and despite us growing 21% Year-over-Year, that still leaves a lot of room to grow.
Currently, we have 2 major positions and 4 minor positions., including a new company we’re excited about that we entered this quarter. We have many things we would like to own and seeing the recent price drops leaves me a bit like a dog next to a steak dinner.
Don’t forget about the real estate
In mid-2024 we entered a significant portion of the fund into a real estate deal. I don’t believe I gave much detail, but I believe I can add more now. It was a $75,000 investment at a bit over 10% of the total fund at the time. This real estate is . They took an old in-need-of-renovation Inn in Vermont near Mount Snow (the closest inn to Mount Snow), , and opened it up to the public around November. We’ve now had a quarter of it operating, beating several of their estimates on targets, and expect it to start delivering quarterly cash flow.
Before
After
I am really excited about this project and quite frankly wish I put more money into it. That said, every update I put that $75,000 on our books as if it hasn’t changed value. Despite a multi-month huge renovation where the roof, piping, and completely updated interior — all things that add value, we still carry it at $75,000. I don’t update it because I don’t know how much its “true” value will be, and probably won’t for another 3-5 years when they sell it and return it to us. It just means that my estimate of the fund value and your ownership is fairly conservative.
State of the world
Trump Administration
Off to the races with executive orders
Trump's administration stormed in like a bull in a policy china shop, with a , mass government layoffs through , , withdrawing from WHO, declaring national emergencies, reinstating the death penalty, removing protections over wildlife refugees, creating a “strategic bitcoin reserve” (I’m more concerned with other countries central banks , indicating less reliance on us as the World’s Reserve Currency), tariffs, and trade wars with multiple countries.
Some people are horrified while others are elated. For an economy already doing the tightrope walk, Trump has finally joined the choir.
Government Layoffs
One of the most debated actions has been the mass layoffs in the government. It’s worth taking a look at some of the raw data:
I certainly agree that there is probably bloat in many of the agencies, though I think that there could perhaps be better approaches. He is certainly not being cautious with his changes, and while some are cheering at the expected decrease in the US deficit (something we won’t be able to calculate fully until later), we’ve seen that some of his replacements of government officials are already shaking things up.
Lina Khan, former head of the FTC was on an anti-trust and anti-big-tech rampage preventing all sorts of M&As. While she was gone not even two months, , something that she blocked last year.
Tariffs & Trade Wars
I think it’s important to know what you don’t know, and I certainly don’t feel like I know enough about tariffs and the trade wars. I know why they are happening, but I don’t understand all the economics around it. The chart below seemingly makes a very strong point supporting Trump putting on these tariffs.
On the other hand, this seems like a very surface-level view of the problem. There may be ways we are benefiting other than direct trade that are not being taken into account. It’s an area I need to look into more.
One thing I do know is that it is creating a lot of volatility in the markets, and is in part the reason for our recent correction (10% down).
And just in case you forgot, I do a little happy dance when the market tanks. These blood-in-the-streets moments are when we go bargain hunting. We’re not there yet, but it seems like we’re close.
Now, we’re waiting for Liberation Day (April 2nd). What is Liberation Day? Here’s an excerpt from one of the articles I follow:
Trump is planning a “Liberation Day” announcement on April 2 of reciprocal tariffs for levies and other barriers by other nations, including U.S. allies. Officials familiar with the matter reportedly told Bloomberg that the new levies would be a notable expansion of U.S. tariffs, and it has been shaping up to be more focused than the widespread, worldwide effort Trump has mentioned.
Holy Fortune Telling, BATMMAAN
In case you don’t know, the top tech stocks in the S&P500 keep changing. For a long while it was a FAANG:
It then became the Magnificent 7:
And then it became BATMMAAN, the same stocks except with Broadcom (stock symbol: AVGO) added on. With all of that said, I always enjoy watching analysts forecasts as I know they will inevitably be wrong. This first image is from January.
You will also see that the BATMMAAN stocks get all the attention.
And then we come to the end of the quarter, where we get to see how these hundreds of Wall St professional analysts fared with their predictions.
Out of the original 8 stocks in BATMMAAN, Meta is the only one to have gone up.
Any more recession indicators?
I’m glad you asked. Remember, that a recession has to be officially declared by the , and so people might feel things even though we aren’t “officially” there. It usually is an indication that GDP has dropped by 2%. The stock market fluctuation would not, by itself, trigger a recession. While we hit the correction target (10% down), we still have another 10% before we get into “bear market” territory.
It should be worth noting that this chart does not correspond strongly with recessions. I certainly don’t think having this much debt is a good thing, but you can see through 2008 and recovery it didn’t actually decrease. However, when that is paired with jobs...
AI & China
While AI has continued its rapid trajectory, DeepSeek and then Alibaba rocked the world when they released their own models. while spending a fraction of the cost. Alibaba released its own AI model of similar quality and its stock shot up by 40%.
It was a reminder that the US isn’t alone in creating these models, and the bear we keep poking (China) also has some power here. They’ve done all this despite to keep powerful chips from them.
I think it's safe to say that AI isn't just a passing fad unless the robots decide we're too annoying to keep around. I think it’s impossible to say where we will be in a year from now, as it was a year ago. While it does seem like some AI progress is slowing down, that doesn’t mean we won’t have more breakthroughs.
If you aren’t using it, I suggest giving it a try. I use it in my daily life, from creating new recipes to designing workout programs to identifying roof shingles for insurance.
Investing alternatives
As some of you may know, I no longer accept more money into the fund. I absolutely love running it, but the complexity of state and federal law has pushed me away from it. At the same time, I have spent years studying other forms of asset classes. While my expertise pales in comparison to stocks, I have begun to do several Real Estate deals, and private money loans, and I will hopefully be acquiring my first small business soon.
I bring this up because these other investments can be partnered with and have other sorts of advantages and disadvantages.
Real estate often provides cash flow (as opposed to the hedge fund, which doesn’t return any cash). In addition, due to depreciation, it also can shield some income against tax. It is also decently diversified enough that if the general market does hit a recession, real estate might be a different story.
Recently, my favorite borrower when I was questioning about my concern over a recession, mentioned that rent prices have historically never gone down, despite recessions. I felt incredibly skeptical, as I’d heard people say similarly false statements like the stock market is never down in a 10-year period (wrong, has happened multiple times), or that houses always go up (wrong, often takes years to recover from a crash).
To my disbelief, he was correct. Rent prices have never gone down (on average).
So, if any of you want to deploy more money in a different asset class, whether that’s real estate, private money loans, or small business, let me know.
Happy almost-Summer!
It’s been great investing this last quarter, and as always, please send me any questions or comments you may have.
Cheers,
Kerry
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