Investors spent much of the past month watching developments in the Middle East while attempting to gauge the direction of inflation and interest rates around the world. Economic growth has moderated in most major economies, but there is little evidence of a broad global recession. Instead, the dominant themes remain government spending, artificial intelligence investment, supply chain realignment, and energy security.

European markets continue to benefit from improving investor sentiment and relatively attractive valuations compared to North America. Economic growth remains modest, but the region has avoided the deep slowdown many economists feared earlier in the year.

The biggest challenge facing Europe is inflation. Rising energy prices tied to the conflict involving Iran have pushed inflation expectations higher and forced the European Central Bank to maintain a more cautious stance than investors expected at the start of the year. Energy costs remain the key variable.

European governments continue to increase spending on defense, energy infrastructure, and industrial policy initiatives. Germany remains committed to significant fiscal spending programs designed to strengthen infrastructure and industrial competitiveness. These measures are providing an important offset to slower private-sector growth.

For long-term investors, Europe continues to offer attractive opportunities in financials, industrials, defense contractors, and infrastructure-related businesses.

The British economy remains caught between slowing growth and stubborn inflation. Economic activity has held up better than many expected, with first-quarter growth remaining positive, but inflation pressures have prevented the Bank of England from aggressively lowering rates. Recent economic data show moderate growth, rising unemployment, and inflation still above target levels.

The new government continues to emphasize infrastructure investment, housing initiatives, and industrial modernization. Investors remain concerned about fiscal discipline, but Britain retains several advantages, including a deep financial sector, world-class universities, and growing technology investment.

The London market remains one of the least expensive developed markets in the world. Dividend yields remain attractive, and takeover activity continues to provide support for undervalued shares.

Japan remains one of the most interesting investment stories in the world. Inflation has finally returned after decades of stagnation, wages are rising, and corporate governance reforms continue to unlock shareholder value. Bank of Japan officials have signaled increasing confidence that inflation is becoming sustainable rather than temporary. Wage growth remains a critical part of the story.

The Bank of Japan has gradually moved away from ultra-easy monetary policy. Interest rates remain low by global standards, but policymakers are now debating additional rate increases. The Japanese economy has slowed somewhat as higher energy costs affect consumers, but corporate profits remain healthy.

The structural bull case for Japan remains intact. Corporate buybacks, dividend increases, balance-sheet optimization, and governance reforms continue to create opportunities for shareholders.

China remains the most important economic story in Asia. Beijing has adopted a pragmatic approach aimed at stabilizing growth while continuing to reduce excesses in the property sector. The government has set growth targets in the 4.5% to 5% range and continues to support strategic industries through fiscal spending and targeted stimulus programs.

Artificial intelligence, semiconductors, electric vehicles, renewable energy, and advanced manufacturing remain national priorities. While China's property sector continues to face challenges, exports and manufacturing have performed better than expected.

Elsewhere in Asia, technology spending remains a major economic driver. Semiconductor production, AI infrastructure, and data center investment continue to support growth across Taiwan, South Korea, Singapore, and other regional economies. Fiscal policy throughout Asia is increasingly focused on domestic demand and strategic investment rather than pure export growth.

The United States remains the strongest major developed economy. Growth has slowed from the exceptionally strong pace seen earlier, but consumer spending remains resilient and corporate profits continue to exceed expectations.

The most important government actions remain related to industrial policy. Massive investments continue to flow into semiconductor manufacturing, artificial intelligence infrastructure, energy production, and supply-chain reshoring. These initiatives are supporting capital spending and creating long-term opportunities across multiple sectors.

Canada's economy remains closely tied to commodity prices and U.S. demand. Energy, mining, and financial services continue to dominate the investment landscape. Lower energy prices resulting from any improvement in Middle East tensions would likely provide additional support to Canadian consumers and businesses.

No issue has had a greater influence on global markets over the past month than the conflict involving Iran. The primary economic concern has been the potential disruption of energy supplies moving through the Strait of Hormuz, one of the world's most important shipping routes. The conflict has contributed to higher energy prices, increased inflation expectations, and greater uncertainty among businesses and consumers.

Recent reports suggest that diplomatic efforts have accelerated and that a framework for a peace agreement may be emerging. While details remain uncertain, any agreement that reduces the risk of supply disruption would be a meaningful positive for markets.

A successful peace agreement would likely produce several important economic benefits. Oil prices would probably decline as concerns about supply disruptions fade. Inflation pressures would ease across Europe, Asia, and North America. Central banks would gain greater flexibility to support economic growth. Business confidence would improve, encouraging investment and hiring. Lower energy costs would also act as an effective tax cut for consumers worldwide.

Markets have already shown signs of responding positively whenever progress toward peace has been reported. Recent declines in oil prices and rallies in global equities demonstrate how important this issue has become for investors.

The global economy is growing more slowly than it was a year ago, but it is still growing. Governments continue to spend aggressively on defense, infrastructure, artificial intelligence, and energy projects. Corporate balance sheets remain generally healthy. The banking system remains stable. Credit conditions have tightened but are far from recessionary.

The biggest risk remains a renewed energy shock stemming from geopolitical developments. The biggest opportunity remains the combination of artificial intelligence investment, infrastructure spending, and ongoing corporate restructuring in undervalued markets such as Europe, Japan, and selected areas of Asia.

For Perfect Stocks Portfolio investors, patience remains the appropriate strategy. Market volatility is likely to remain elevated, but the long-term backdrop continues to favor ownership of companies that trade for less than the value of their assets and have a large margin of safety.

The Perfect Stocks Portfolio continues to perform as expected. We are focused on buying good businesses at discounts to tangible book value, collecting dividends when available, and allowing value realization, corporate actions, and improving fundamentals to close the gap between price and intrinsic value.

This month we are taking profits in Friedman Industries (FRD), Movado Group (MOV), and Johnson Outdoors (JOUT). All three positions now trade well above tangible book value. While each remains a solid business, the margin of safety that initially attracted us to the shares has largely disappeared. Our discipline requires us to recycle capital from fully valued positions into stocks where discounts remain substantial and upside potential remains greater.

Megaworld Corporation (MGAWY) is one of the leading real estate developers in the Philippines. The company owns a valuable portfolio of residential, office, retail, and mixed-use properties and continues to trade at a substantial discount to underlying asset value.

Porsche Automobil Holding (POAHY) is the holding company that controls a large stake in Volkswagen and retains significant exposure to premium automotive assets. The discount between the market value of its holdings and its share price remains compelling.

Deswell Industries (DSWL) manufactures electronic products and plastic components. The company maintains a strong balance sheet and significant cash resources relative to its market capitalization.

K+S AG (KPLUY) is a German producer of potash and salt products. Agricultural demand and food security concerns continue to support the long-term outlook for fertilizer producers.

Sun Hung Kai Properties (SUHJY) remains one of Hong Kong’s premier property developers. The company owns a world-class portfolio of commercial and residential real estate and trades at a steep discount to net asset value.

Barratt Redrow (BTDPY) is one of the largest homebuilders in the United Kingdom. Housing shortages and improving affordability provide a favorable long-term backdrop despite current economic uncertainty.

Hello Group (MOMO) operates social networking and online entertainment platforms in China. The company continues to generate substantial cash flow while trading at a valuation that implies little future growth.

Danaos Corporation (DAC) is one of the world’s largest containership leasing companies. Strong cash generation and a shareholder-friendly capital allocation policy continue to support the investment case.

Assured Guaranty (AGO) is the dominant provider of municipal bond insurance in the United States. The company combines strong capital levels with consistent share repurchases and attractive valuation metrics.

Bollore (BOIVF) is a diversified French holding company with interests spanning logistics, transportation, media, and investments. The shares continue to trade below the value of the underlying assets.

Anhui Conch Cement (AHCHY) is one of China’s largest cement manufacturers. The company possesses a strong balance sheet and significant asset value despite weakness in Chinese construction markets.

Yue Yuen Industrial (YUEIY) is one of the world’s largest footwear manufacturers, producing shoes for many leading global brands. The company benefits from its scale and manufacturing expertise.

Subaru (FUJHY) remains a highly profitable global automaker with a loyal customer base and substantial financial resources. The shares continue to trade at attractive valuation levels.

TV Asahi Holdings (THDDY) is a major Japanese media company with valuable broadcasting assets and a strong balance sheet. Corporate governance reforms in Japan could help unlock additional shareholder value.

Autohome (ATHM) is China’s leading automotive information platform. The company remains highly profitable and cash-rich despite a challenging domestic auto market.

Central Glass (CGCLF) manufactures specialized glass products used in automotive, electronics, and technology applications. The company offers exposure to both industrial and advanced manufacturing trends.

Millrose Properties (MRP) owns and manages a portfolio of real estate assets. The shares provide an attractive combination of income potential and discounted asset value.

Fresh Del Monte Produce (FDP) is a global producer and distributor of fresh fruit and food products. The company owns valuable agricultural assets and logistics infrastructure.

JOYY (JOYY) operates social media and digital entertainment platforms across multiple markets. Strong cash generation and a discounted valuation continue to attract value investors.

A.P. Moller-Maersk (AMKBY) is one of the world’s largest shipping and logistics companies. Global trade volumes and disciplined capital allocation remain key drivers of long-term value.

NACCO Industries (NC) owns natural resource, mining, and royalty businesses. The company has a history of conservative management and significant asset backing.

Swatch Group (SWGAY) is one of the world’s premier luxury watch manufacturers. Its portfolio includes some of the most recognized brands in the industry and provides exposure to long-term luxury consumption trends.

Dai Nippon Printing (DNPLY) is a diversified Japanese industrial company with operations ranging from packaging to advanced technology materials. The company continues to benefit from Japan’s improving corporate governance environment.

Ingles Markets (IMKTA) operates a successful chain of supermarkets across the southeastern United States. The company owns substantial real estate assets that are not fully reflected in the share price.

Genco Shipping & Trading (GNK) owns a fleet of dry bulk vessels serving global commodity markets. The shares offer significant income potential and leverage to global trade activity.

Scorpio Tankers (STNG) operates one of the largest fleets of product tankers in the world. Tight tanker markets and strong cash flows continue to support shareholder returns.

Johnson Outdoors (JOUT) has rewarded us with a successful investment. The company owns several leading outdoor recreation brands, but the shares now trade well above tangible book value and no longer offer the discount we require.

Meren Energy (MRNFF) is an African-focused energy producer with attractive reserves and cash flow potential. Rising energy demand and disciplined operations support the long-term outlook.

Friedman Industries (FRD) has been one of our most successful investments. The steel processor and distributor now trades well above tangible book value, prompting us to exit the position and redeploy capital elsewhere.

Movado Group (MOV) has also generated excellent returns. The watchmaker’s strong balance sheet and valuable brands attracted us initially, but the shares have appreciated to the point where the valuation no longer provides a sufficient margin of safety.

As always, our focus remains on finding neglected companies selling at meaningful discounts to tangible asset value. By selling positions that have reached or exceeded fair value and redeploying proceeds into deeply discounted opportunities, we maintain the discipline that has driven our results over time.

So far in our journey together, our closed positions have generated an average gain of 155%.

Our remaining open positions have an average gain of over 12%, an average yield of 3.7%, and trade at approximately 96% of tangible book value.