The year has been marked by a remarkable gain in net asset value.

The past year brought a handful of transactions: two arbitrages of uneven size and one fresh commitment. The larger switch was the exit from Molson Coors, banked at a decent gain, with the proceeds marched straight into Topicus.

Topicus operates out of the Netherlands and is a partial spin from Mark Leonard’s Constellation Software, which kept both a controlling stake and its habitual watchfulness. The mission is simple enough: reproduce Constellation’s acquisition machine across Europe’s vertical-market software niches—a sprawling map of small champions and remarkably little private-equity interference.

It debuted brilliantly as a listed company, doubling in value within weeks—the parent’s cult following did no harm—before getting dragged down with the wider tech sell-off in the back half of 2022. We used the slump to build our stake in a single stroke. The Molson Coors sale was nothing mystical: Topicus was plainly the superior prospect, even at a cash-earnings multiple north of forty.

Molson Coors remains, in our view, the sturdiest of the Western brewers. Rivals such as Heineken, Carlsberg and AB InBev have chased growth across Russia, Asia and Africa—fertile markets, yes, but thick with hazards. A domestic focus is the one thing Molson Coors has in its favour. Unfortunately, the U.S. beer market itself is a weary battleground of shrinking volumes, sharp-elbowed competition, limited pricing power and meagre reinvestment opportunities. At eight times earnings it was irresistible; at fourteen, merely ordinary. That was the moment to trade second-best for best.

We also disposed of a small position in a Houston biotechnology outfit—a brief holding, a minor gain and, candidly, a purchase made in error. Our optimism dimmed quickly. Cancer research, we discovered, has its own flavour of the chicanery familiar from financial markets. Doubts crept in about the reliability of the company’s science, followed by stronger misgivings about the conduct—civic and political—of its controlling shareholder. The exit was not difficult.

The capital found a better home in Daily Journal Corporation of Los Angeles. Under the chairmanship of Charlie Munger, Daily Journal combined an ageing print business with a securities portfolio and real estate almost equal to the entire market value of the company at the time we invested. That left a modest implied price on its growing software operation serving courts in the U.S., Canada and Australia.

Later in the summer, we initiated a position in Tessenderlo Chemie of Belgium. The company has been reshaped under the quiet but formidable leadership of Luc Tack. Its subsidiaries enjoy durable positions on both sides of the Atlantic, and the valuation remains stubbornly below any reasonable estimate of earning power or sum-of-the-parts.

A good portion of the appeal was the cleanup of Mr. Tack’s cross-holdings in Tessenderlo and Picanol. The merger of the two controlled vehicles simplified the structure, removed old doubts about divided loyalties and produced precisely the alignment we had been waiting to see.

Looking ahead, our energy names are likely to cool through 2023. We are also weighing a shortlist of opportunities in the biotech wreckage, where dozens of promising companies now trade below their net working capital—a level of pessimism that usually marks the beginning of something interesting.