Navigating Market Cycles: White Falcon Capital's Strategic Advantage
Performance Highlights and Long-Term Vision
White Falcon Capital's investment philosophy prioritizes a long-term perspective, focusing on rolling three-year and full market cycle returns rather than short-term fluctuations. For the period ending December 31, 2025, the firm proudly announces a 25.9% compounded annual growth rate (CAGR) on a rolling three-year basis, net of all fees. This performance notably surpasses that of leading market benchmarks, including the S&P 500. This achievement underscores White Falcon's commitment to delivering substantial wealth creation for its partners, demonstrating that a $1 million investment three years prior would have nearly doubled to $2 million. Even when considering the volatile bear market of 2022, the four-year returns stand at 16.1% CAGR, outperforming the S&P 500 (CAD) by approximately 300 basis points and BlackRock's XEQT by around 420 basis points, net of fees. The firm attributes this success to its disciplined approach to risk and quality, ensuring confidence in its future trajectory despite current market highs.
The Power of Compounding: A Growth Imperative
The profound impact of compounding on investment growth is a cornerstone of White Falcon Capital's strategy. As an illustration, a 2% annual return difference over two decades on a $1 million portfolio can translate into an additional $2 million, boosting total wealth by roughly 40%. This principle motivates the firm's active management approach, as even a slight edge, consistently applied, can generate significant long-term gains. While predicting future market movements is inherently challenging, White Falcon remains focused on the intrinsic value of its holdings, providing partners with insights into the long-term prospects of the companies they own.
Key Portfolio Holdings Driving Success
White Falcon Capital's portfolio is strategically concentrated in 20-25 high-quality stocks that meet stringent valuation criteria, eschewing alignment with broad market indices. The top five positions include precious metal royalty companies, Advanced Micro Devices (AMD), NFI Group (NFI), EPAM Systems (EPAM), and Nu Holdings (NU). These selections reflect a belief in their strong fundamental tailwinds and potential for sustained growth. AMD, under CEO Lisa Su, has emerged as a leader in high-performance computing, poised for significant stock appreciation with projected earnings per share growth. EPAM Systems, an IT services firm, is recognized for its capacity to integrate AI and expand without proportional headcount increases, offering attractive valuations. Nu Holdings is lauded for its rapid growth, high returns on equity, and expansion into new markets, suggesting continued earnings growth and stock price appreciation. NFI Group, a major bus manufacturer, is expected to re-rate positively due to a robust backlog, increasing exposure to EV buses, and debt reduction. Lastly, precious metal royalty companies provided a significant hedge against macroeconomic volatility, contributing a third of the year's gains amid a notable surge in gold and silver prices.
Seizing Opportunities Amidst Market Volatility
White Falcon Capital views market downturns not as setbacks but as strategic opportunities. This was evident during the "tariff tantrum" of April 2025, when the firm initiated positions in Wayfair and Aritzia, both of which delivered exceptional returns before being exited due to valuation concerns. This agile response demonstrates the firm's discipline in transforming volatility into advantageous investment opportunities. Furthermore, the report acknowledges the widening gap between intrinsic value and market price for several holdings, including Amazon, Rentokil, Ag Growth, EPAM, and Grifols, reinforcing conviction in their long-term potential. In a contrarian move, White Falcon has also initiated a small basket of housing-related companies, anticipating a recovery when interest rates decline and demand rebounds, showcasing its opportunistic investment style.
Strategic Insight into Huntsman Corporation: A Deep Dive
Huntsman Corporation, a global specialty chemicals company, embodies White Falcon's contrarian value investing approach. Operating with a "best-owner" philosophy, Huntsman has strategically transformed itself from a diversified conglomerate into a focused leader in differentiated organic chemical products. This evolution, marked by significant divestitures over the past two decades, has streamlined its operations into three core segments: Polyurethanes, Performance Products, and Advanced Materials. Each segment, driven by specific market dynamics and proprietary technologies, contributes to Huntsman's revenue and Adjusted EBITDA. The company's strategic moves, such as closing the Moers maleic anhydride plant and implementing aggressive cost-reduction programs, demonstrate its resilience during cyclical troughs. Despite a current supply glut in the MDI market and a high debt-to-EBITDA ratio, Huntsman's robust liquidity, extended debt maturities, and proactive dividend cut position it for a strong recovery. Forecasts suggest significant upside potential if industry cycles turn, making Huntsman an attractive, albeit speculative, long-term holding.
Huntsman's Operational Segments and Market Dynamics
Huntsman Corporation's strategic focus is evident in its three primary business segments. Polyurethanes, the largest segment, leverages proprietary "splitter technology" to produce over 2,400 tailored MDI formulations for diverse end markets like construction and automotive, with a significant presence in North America. The Performance Products segment specializes in Amines and Maleic Anhydride, serving industries such as coatings and oilfield technology. Recent strategic shifts, including the closure of its Moers, Germany facility, aim to address structural overcapacity and improve efficiency. The Advanced Materials segment excels in epoxy, acrylic, and polyurethane-based polymer resin systems for high-tech sectors like aerospace and semiconductors, benefiting from its established Araldite® brand and focus on extreme purity. These specialized operations highlight Huntsman's ability to compete in high-barrier-to-entry markets.
Navigating the MDI Market: Challenges and Opportunities
The global methylene diphenyl diisocyanate (MDI) market, valued at $28.90 billion in 2024 and projected to grow at a CAGR of 6.1% over the next decade, currently faces significant pricing pressures due to a supply glut. Major capacity expansions by BASF and Wanhua Chemical, despite U.S. anti-dumping duties, have created an oversupply that impacts Huntsman's pricing power. However, the long-term outlook remains positive, driven by green building standards and incentives for energy-efficient materials, particularly in North America. Cyclically, the market is nearing a turning point, with new BASF capacity expected to be absorbed by mid-2026. Potential declines in EU volumes and improvements in construction markets could lead to positive surprises, suggesting that while the market has not fully rebounded, conditions are improving, which could benefit Huntsman.
Beyond MDI: The Strengths of Huntsman's Other Divisions
While the cyclical nature of its MDI division often overshadows its other operations, Huntsman's Performance Products and Advanced Materials segments possess inherent quality and resilience. In the Aerospace and Defense sector, Huntsman's Araldite® brand provides a significant competitive advantage due to its long history and integration into original design specifications for major airframes. In the semiconductor market, the company's focus on extreme purity for "E-GRADE" chemicals creates high barriers to entry, competing with established giants. These divisions benefit from long-term structural growth trends, even as they currently under-earn due to specific market factors. As these factors reverse, these segments are expected to contribute significantly to earnings growth, a testament to their overlooked strength and durability.
Strategic Restructuring and Financial Prudence
To mitigate the impact of the cyclical downturn, Huntsman's management has implemented aggressive restructuring initiatives and cost-reduction programs, targeting over $100 million in savings, with $80 million already achieved by Q3 2025. These measures include the permanent closure of the Moers, Germany maleic anhydride plant and comprehensive SG&A realignment through headcount reductions and corporate streamlining. Furthermore, Huntsman proactively cut its quarterly dividend from $0.25 to $0.0875, reducing the annual payout from $172 million to $46 million. This move, coupled with a solid liquidity position of $1.4 billion and no near-term debt maturities, enhances financial flexibility and signals management's confidence in future performance. The company's ability to maintain the reduced dividend, alongside covenant relief for its revolving credit facility, indicates a robust strategy to navigate current challenges and prepare for future growth.
Future Outlook and Investment Thesis
Looking ahead to 2026, consensus estimates project Huntsman's revenue to remain flat at $5.75 billion, with EBITDA expected to recover to $342 million. Despite current valuations suggesting the stock is not cheap at 11x 2026F consensus EBITDA, White Falcon Capital believes the downside risk is limited. The base case anticipates a supply-demand balance improvement in the second half of 2026 and into 2027, which should lead to upward revisions in consensus estimates. If Huntsman achieves an EBITDA of $450 million in 2027, a 10x multiple implies a 52% upside to the current stock price. The bull case envisions a macro recovery, declining interest rates, and a rebound in the U.S. housing market, potentially leading to a normalized EBITDA of $700 million or more. This scenario, applying a 10x multiple, could drive the stock price to $35+, representing substantial upside and highlighting the company's high operating leverage and potential to benefit from a market turnaround.