Given the current climate, we expect significant apprehension regarding IPO and M&A activity, both of which are critical for Donnelley Financial (NYSE: DFIN), as DFIN’s business model is tied to capital markets activity. We believe DFIN is fairly valued and are exiting the position. The stock is down ~38% YTD but up over 390% since our initial purchase (see initiation report here), and we’ve trimmed at attractive levels along the way.
Portfolio Positioning Note:
Never in our careers have we seen a presidential policy action introduce such profound uncertainty. Is this tariff policy part of a broader plan, a restructuring of the world order? If so, what might that look like?
Will Trump reverse course or double down on tariffs? Given their bilateral nature, how will negotiations evolve, and what would sufficient appeasement look like, given the complexity of non-tariff barriers? How forceful will the retaliatory responses be from major trading partners like China, Europe, and, reflexively, the U.S.?
This raises more questions about the future of trade and alliances than at any point since Bretton Woods launched modern globalization over 80 years ago. America has a long history of oscillating between global engagement and inward focus, and this moment feels like an extreme shift toward the latter.
In light of this extreme uncertainty, we’re maintaining substantially elevated cash levels in the portfolio. This is both a defensive and offensive posture. When the environment shifts or opportunities become compelling, we plan to rapidly deploy capital into high-opportunity positions.