SCC Portfolio Update (YTD thru Q2 2025)

Seven Corners Capital's equity portfolio finished the first half of 2025 up ~11%, versus up ~6% for the S&P 500, representing an outperformance of ~5% during the initial 6 months of the year. Since the beginning of 2020 (i.e., on a "Pandemic stacked basis"), the SCC Portfolio has appreciated ~160% versus up ~109% for the S&P 500, in each case including all dividends received, representing outperformance of 5,100 basis points versus the index:

	SCC	S&P 500	SCC vs S&P 500
2025 YTD Return	11%	6%	+5%
2024 Return	17%	25%	-8%
2023 Return	17%	26%	-9%
2022 Return	6%	-18%	+24%
2021 Return	11%	29%	-18%
2020 Return	46%	18%	+28%
Pandemic Period	160%	109%	+51%

“Lethargy, bordering on sloth, remains the cornerstone of our investing style.” --Warren Buffett

The top 6 holdings in the SCC portfolio (representing 77% of total AUM; NOTE that "YTD Total Return" column includes all dividends received during the applicable time period):

The following is an update regarding earnings and other news for SCC's top-6 equity positions (PSHZF, TPB, GNW, CART, SD & RKT):

Pershing Square Holdings (PSHZF), 28% position (Cost Basis: $15.75; Current PPS: $54)

• PSHZF, led by billionaire hedge fund manager Bill Ackman, finished 1H 2025 up 12.3% (including dividends), underperforming a 15.5% increase in its NAV (thus, PSH's discount to NAV increased to 34%):

• The long thesis continues to be two-fold: (1) a bet that Bill Ackman will outperform the overall market with his stock picking and uncanny ability to make huge sums via hedging; and (2) more importantly over the intermediate term, the closing of the sizable NAV discount. Simply closing the current discount would result in a ~52% appreciation in the stock, assuming NAV were to remain constant.

• Ackman hinted in 2022 that PSH could become a Berkshire Hathaway-type vehicle via a US listing: "As PSH grows in market capitalization and its ownership stakes in its portfolio companies increases, one can envision a world in which over time PSH becomes a controlling owner of one of more businesses that comprise the substantial majority of our assets and income. We expect to continually evaluate PSH and its operations, and consider whether in the future it may be able to operate not as an investment company in the U.S., but rather as an operating company that could be listed in the U.S."[source]

• On this front, Pershing recently announced a transaction with Howard Hughes Corporation (HHH) to invest $900MM at $100/share, thereby increasing its equity interest in HHH to 47%, with the following specifics:

  • While Pershing Square will own 46.9% of HHH shares outstanding, the hedge fund "has generally agreed to" limit its voting power to 40% and its beneficial ownership to 47%, according to a statement.

  • The senior leadership of the Woodlands, Texas-based real estate developer, known for its master planned communities, will remain unchanged with expanded roles and responsibilities, it said. HHH’s other employees will remain unchanged.

  • As part of the deal, the Pershing Square organization will be available to HHH to support the company's transformation by providing investment, advisory, and other ancillary services, including corporate development, transaction execution, and capital markets assistance. Pershing Square will also assist HHH in identifying and hedging macro-related risks.

  • HHH will pay Pershing Square a quarterly base fee of $3.75M and a quarterly management fee equal to 0.375% of the increase in HHH’s equity market capitalization above the reference market cap of the company. The reference market cap is determined by multiplying the post-transaction share count of 59,393,938 (the “Reference Share Count”) by the reference market price of $66.1453, which is adjusted annually for inflation, subject to equitable adjustment for stock splits, reclassifications or similar capital changes.

  • The management fee won't change if HHH issues addition shares to raise equity, acquire a company for stock, or for compensation to employees. As a result, the management fee will not increase due to share issuances. It will only increase if the company’s share price compounds at a rate in excess of inflation.

  • HHH will seek to acquire controlling interests in high-quality, cash-flow generative public and private companies, Scott Sellers, chairman of HHH's special committee said. "We believe this agreement not only reflects the value that HHH has created in recent years, but it also positions the company to transform its strategy, with enhanced value creation opportunities and upside potential, while improving its credit profile," he said.

  • The board will continue to consist of a majority of independent directors, the company said. Pershing Square will have the right to nominate three directors as long as it beneficially owns at least 17.5% of fully diluted HHH shares. The board now includes David Eun, Beth Kaplan, David O’Reilly, Scot Sellers, Steven Shepsman, Mary Ann Tighe, Anthony Williams, Pershing Square’s Bill Ackman, Ben Hakim and Ryan Israel, and Jean-Baptiste Wautier as a new director.

• Importantly, Ackman clarified that any performance fees earned by PSH from its investment in HHH will offset (and reduce) the fees that would otherwise be charged by PSH to PSHZF shareholders on an ongoing basis (which should hopefully reduce that yawning NAV discount that PSHZF currently suffers from). On the PSH quarterly call from May 22, Ackman addressed this issue as follows:

  • So either Ryan or [Ackman] are going to get compensated for being executives of [HHH] in cash or salary or equity, or other form. But in addition to Ryan and [Ackman], effectively the entire Pershing Square team is being made available to Howard Hughes. As part of our arrangement with Howard Hughes, we negotiated a $15 million annual fee; as well, you might think of it like an incentive management fee. A management fee that gets paid to the extent that the stock price goes up over time, and the extent that we receive fees [from HHH], we're going to rebate or reduce the fees of the [PSH] funds by that amount, proportional to the amount of the company each of those funds owns.

  • So on a net basis, to an investor in the PSH funds, there's no incremental fee load. And I would argue it's not just a neutral benefit, it's a materially positive benefit. We believe we're going to be able to add value to these companies well in excess of the effect. It's almost like a cost reimbursement that we are receiving. And to the extent we can add value, for example, the management fee is effectively 150 basis points per annum above inflation.

  • To the extent we add more than 150 basis points per annum above inflation to the companies in value we're creating meaningfully, it will be a materially important positive for shareholders in terms of conflicts of interest. One, we own this investment through the Pershing Square funds. We're the largest investors in the Pershing Square funds, and that we now have an even larger position we've taken through the management company that's owned 90% by the employees. That's about as good as you can get in terms of alignment, and both companies themselves have different mandates. The mandate of the Pershing Square funds is to invest in basically minority stakes in large cap and mega cap companies of the kind that we've just discussed today, and the mandate of Howard Hughes is to build a diversified holding company by growing an insurance operation by buying controlling or 100% interest in private companies.

  • Over time, hopefully we can grow the [HHH] market cap meaningfully. That means a meaningful reduction in the headline fees paid by the funds that we manage.

• Linked are the most recent NAV performance statistics and monthly performance reports for PSHZF

• Pershing Square Capital Management's 13-F holdings can be found here. In addition, PSH continues to repurchase shares under its repo program (see PRs here).

• The original 2018 SCC long case for PSHZF can be found here. PSHZF has appreciated over 21% annually since this bull thesis was published.

Turning Point Brands (TPB), 16% position (Cost Basis: $25.60; Current PPS: $76)

• Turning Point Brands, up ~190% since the beginning of 2024, is an old standby in the SCC portfolio, having originally been purchased back in Q3 of 2016 (via SCC's investment in Standard Diversified [SDI], which then owned a majority stake in TPB and subsequently merged into TPB in mid-2020). The investment thesis remains that the company enjoys the benefit of a steady, high-quality compounding business model via its Zig-Zag and Stoker's brands, which should benefit from a tailwind in the long-term decline of the use of traditional cigarettes (while the waters have recently been muddied by the struggles of its NewGen brands segment, this is now a de minimis portion of the overall pie at TPB). Stoker's FRE brand of smokeless tobacco is currently growing at an extremely high rate; per TPB's Q1 2025 results announcement from early May: "Modern Oral sales were $22.3 million, up nearly 10-times versus the prior year and nearly double the prior quarter." The recent run-up in the stock price likely reflects investor optimism regarding the future value of the FRE business.

• Last November, Turning Point announced a 50/50 joint venture with Tucker Carlson to promote a smokeless tobacco product called ALP (see PR here), which appears to be selling well. Politico featured an article regarding the JV in February (see here). The company even sent yours truly (unsolicited) a fairly cool-looking box containing free samples of ALP:

• The company refused to include SCC's Rule 14a-8 proposal in its proxy for the 2025 annual meeting (dealing with permitting special meetings if called for by at least 10% of shareholders), citing a technicality. This speaks to the company's lack of proper corporate governance standards, which remains a red flag (despite the recent stock increase). On a positive note, the TPB board chair did reach out (after SCC complaining to him) and state that he would be happy to meet in person to discuss concerns.

Genworth Financial (GNW), 14% position (Cost Basis: $3.75; Current PPS: $7.78)

• GNW stock outperformed the market during 1H 2025, being up 11%.

• GNW continues to represent a way to obtain (A) (at a discount) indirect ownership in its 81% owned subsidiary, Enact Holdings (ACT), a private mortgage insurer, and (B) a call option on its other businesses (Long Term Care and Life & Annuity). SCC has previously provided calculations regarding GNW's seemingly perpetual discount to its sum-of-the-parts (which usually runs about 20%), which is needless to repeat here.

• The SCC underlying thesis on GNW involves the eventual separation of GNW's ACT stake from GNW's generally unprofitable long-term care & life and annuity operations (the market currently ascribes zero value to the latter). Longer term value could be unlocked by a de-stacking transaction involving GNW's Life & Annuity business (L&A). Currently L&A is trapped below the long-term care business in the org chart, hence no funds may dividended up from that entity to the holdco; however, L&A could become valuable if and when the applicable insurance regulators give their blessing to GNW liberating it from the LTC stranglehold.

• The company has been actively repurchasing its stock in recent years (notably, this began after SCC started applying pressure on GNW management in 2022). Thru the end of Q1 2025, GNW has repurchased $590M of stock in aggregate under the repo program at an average price of $5.73 per share.

• SCC's discussion of the corporate governance issues plaguing GNW in recent years can be found as follows: initially (2022), here and, more recently (2025), here.

Instacart (Maplebear Inc.) (CART), 8% position (Cost Basis: $30; Current PPS: $45)

• Instacart's stock appreciated 76% in 2024, outperforming the S&P 500 by about 50%, and has climbed an additional 10% in the first half of 2025, all reflecting the continued success of the company's underlying business model. In Q1 2025 (see shareholder letter here), CART increased its Gross Transaction Value (GTV) by 10% year-over-year to $9.1B, which resulted in Q1 revenues increasing 9% y-o-y to $897MM. Advertising and other revenues in Q1, meanwhile, were up 14% y-o-y to $247MM. Net income for Q1 2025 came in at $106MM, or $0.37/diluted share.

• The more consumers realize that ordering their groceries and other household items via CART is saving them large chunks of time (and time, of course, is money) without any meaningful sacrifice in the quality of selection, the more often they use the service. On the other hand, the greater the use of CART's service, the better the speed and quality of selection becomes (as CART's designated shoppers' skills increase). This virtuous circle results in increased shareholder value. While many other public companies experienced a temporary COVID boost to their operations that subsequently dissipated (think Peloton, for example), the inherent robustness of CART's business model appears to have been maintained and the company has incrementally built upon the foundation it created during the 2020-2022 pandemic period.

• CART's CEO Fidji Simo resigned in May 2025 (effective on August 15th) to work at an AI company and CART will replace her with its existing Chief Business Officer Chris Rogers (who originally joined the company in 2019). We don't see things changing much as a result of this CEO shift, as Simo will remain with the company as Board Chairman and several large holders of stock remain represented on the board.

Sandridge Energy (SD), 6% position (Cost Basis: $5.53; Current PPS: $11)

• Sandridge is SCC's largest energy holding and has declined along with the price over oil over the past year and a half. The long thesis here remains that the secular decline in O&G drilling, combined with the revival of inflation generally, will support carbon-based energy prices going forward (in other words, if you own O&G assets, then ESG is your friend). With legendary investor Carl Icahn as its largest shareholder (he owns 13%) and Icahn's former lieutenant Jonathan Frates as SD's CFO, Sandridge did an admirable job steering the company away from the abyss of bankruptcy in April 2020 (when, recall, the price of oil dropped to NEGATIVE $40/bbl). The company has cut unnecessary expenses to the bone ("high-grading" SD's well inventory in fact, not just as a management talking point), thereby maximizing free cash flow conversion. SD has also done a great job recompleting and reactivating dormant wells. SD's annual PDP decline is expected (by the company) to average approximately 8% over the next 10 years.

• In Q3 2024, SD acquired additional production and acreage in the Western Anadarko basin (in Oklahoma) for a cost of $144MM, which is equal to 68% of their cash balance of $211MM as of the end of Q2 2024 (see PR here). Should oil prices increase over the next 3-5 years, this acquisition will redound to SD's benefit.

• In addition, the company retains significant natural gas acreage, which presumably should benefit as LNG exports from the Gulf Coast ramp up over the next decade.

Rocket Companies (RKT), 5.5% position (Cost Basis: $8.24; Current PPS: $14)

• Rocket Companies announced two transformative acquisitions during the first half of 2025, of (1) Redfin [PR here] and (2) Mr Cooper [PR here]. In connection with the Redfin transaction, which recently closed, Rocket collapsed its "Up-C" structure and now all of the company's common stock has equal voting rights. The Mr Cooper transaction is expected to close by the end of 2025.

• Redfin Acquisition: Valued at $1.75B (or $12.50/RFIN share). Stated rationale: "By combining Redfin's home search and real estate agent network with Rocket's mortgage origination and servicing capabilities, [RKT] envisions a more seamless experience from search to close, to servicing and future transactions." The company has already announced that clients buying a house using a Redfin agent and obtaining a Rocket Mortgage to finance the purchase will receive preferred mortgage pricing: "Clients who finance their home through Rocket Mortgage and buy a home listed by a Redfin agent or purchase with the help of a Redfin agent will have a one percentage point reduction in their interest rate for the first year of their loan or receive a lender credit at closing, up to $6,000".

• Mr Cooper Acquisition: Valued at $9.4B (or 11 RKT shares for each COOP share); Rocket shareholders will own approximately 75% of the combined company on a fully diluted basis [pro forma for the Redfin transaction], while Mr. Cooper shareholders will own approximately 25%. Stated rationale: "(1) Combined company to service more than $2.1 trillion in loan volume. (2) Integrating Rocket's originations-servicing recapture flywheel with Mr. Cooper's servicing platform will drive down costs and improve the experience for the companies' nearly 10 million combined clients, representing one in every six mortgages. (3) Transaction is expected to generate annual run-rate revenue and cost synergies of approximately $500 million, contributing to organic revenue growth while increasing operating leverage and maintaining significant capital and liquidity".

Date Posted: July 18, 2025.

DISCLOSURE: Long all of the above.