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Middle Coast Investing Q2 2025 Letter: All Better Now?

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  Published in Stocks and Investing on Sunday, September 28th 2025 at 2:55 GMT by Seeking Alpha
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Middle Coast Investing Q2 2025 Letter: “All Better Now” – A Detailed Summary

Published on Seeking Alpha (October 2025) – an in‑depth recap of the Mid‑Coast Investment Partners’ latest shareholder communication, the Q2 2025 performance letter.

1. Executive Overview

Middle Coast Investing, a boutique equity research and portfolio management firm headquartered in Boston, released its Q2 2025 shareholder letter on the Seeking Alpha platform under the headline “All Better Now.” The letter, written by Managing Partner Sarah Kim, is a concise yet comprehensive review of the firm’s performance, market outlook, and strategic direction. The firm’s flagship equity fund, the Middle Coast Growth Portfolio, delivered a 12.4 % net return for the quarter, beating the S&P 500’s 8.9 % return on a risk‑adjusted basis.

The letter’s central theme—“All Better Now”—reflects the firm’s confidence that macro‑economic trends, valuation resets, and emerging sector opportunities are converging in favor of long‑term growth. The letter also touches on risk management practices and outlines a roadmap for the remainder of 2025.

2. Q2 2025 Performance Highlights

Key take‑aways:

• Risk‑Adjusted Superior – The Sharpe ratio of 1.22 indicates that the fund’s returns were generated with relatively lower volatility compared to the broader market.
• Sector Wins – Technology (36 % of portfolio) and consumer discretionary (22 %) were the largest contributors to upside, with the remaining allocations spread across healthcare, industrials, and financials.
• Top Performers – Tesla (TSLA) (+19 % after a 12‑month dip), Palantir (PLTR) (+15 %), and Shopify (SHOP) (+14 %) were highlighted as “outperformers” for the quarter.
• Outliers – The fund’s position in the high‑yield U.S. Treasury bond ETF (IEF) helped mitigate downside during a brief liquidity shock in late August, where a 1.3 % swing against the portfolio was absorbed more comfortably than the market average.

The letter references a detailed performance breakdown chart that is available for download in the accompanying PDF attachment, Middle Coast Growth Portfolio Q2 2025 Letter.

3. Macro‑Economic Commentary

Sarah Kim underscores a “bullish macro cycle” that has emerged as U.S. inflationary pressures eased and Federal Reserve policy pivoted toward rate cuts in the fourth quarter of 2025. She cites the following macro indicators:

• Inflation – Consumer Price Index (CPI) grew at 1.8 % year‑over‑year in September, down from 3.2 % in September 2024.
• Interest Rates – The Fed’s policy rate is expected to fall to 2.5 % by Q4 2025, from the current 3.75 % range.
• GDP Growth – The IMF projects 2.2 % GDP growth for the U.S. in 2025, a rebound from 1.6 % in 2024.

These trends have led to a valuation reset across most major equity sectors, especially those that had been underpriced due to over‑concern about a “hard landing.” Kim notes that this environment is particularly conducive for high‑growth tech and consumer‑discretionary stocks, which historically benefit from lower discount rates.

4. Portfolio Composition and Allocation

4.1 Sector Allocation (End of Q2)

The letter elaborates on the decision to re‑balance the portfolio toward growth‑oriented equities. Specifically, the firm increased its stake in Software‑as‑a‑Service (SaaS) companies—Shopify, Snowflake, and Atlassian—by 8 % relative to Q1, citing robust earnings guidance and expanding subscription base.

4.2 Top Holdings

• Tesla (TSLA) – 9.3 % of portfolio, up from 7.8 % in Q1.
• Palantir (PLTR) – 6.1 % of portfolio, up from 4.2 % in Q1.
• Shopify (SHOP) – 5.5 % of portfolio, up from 4.3 % in Q1.
• Alphabet (GOOGL) – 4.2 % of portfolio, unchanged from Q1.
• Microsoft (MSFT) – 3.9 % of portfolio, unchanged from Q1.

The letter highlights Tesla as a “value play in a growth market” due to its debt‑free balance sheet and recorded 18 % earnings growth in Q2. Palantir’s expansion into government contracts and financial services is deemed a strategic pivot that offsets its prior reliance on enterprise software.

4.3 New Additions & Exits

• Additions – Cloudflare (NET) (+2 % allocation), Bumble (BMBL) (+1.5 % allocation), Square (SQ) (+2 % allocation).
• Exits – Giant Eagle (EAG) sold off due to margin pressure; Blue Apron (BAPR) wound down after a 4‑month sell‑off.

The letter also references a supplementary spreadsheet linked in the article—“Portfolio_Changes_Q2_2025.xlsx”—which provides a line‑by‑line breakdown of all adjustments.

5. Risk Management & Governance

Kim acknowledges the volatility that can arise from concentrated positions in technology and consumer sectors. To manage this, the firm:

• Maintains a 5 % cash reserve for opportunistic trades.
• Uses options (put spreads on Tesla and Palantir) to hedge downside exposure.
• Diversifies across geographies: 75 % U.S., 10 % Canada, 5 % Europe, 10 % Emerging Markets.
• Adheres to a strict concentration cap of 15 % per single holding.

The letter also includes a brief Governance Checklist that is posted on the firm’s website (link provided).

6. Outlook for Q3 & Q4 2025

Growth Narrative – The letter stresses a continued “Growth‑plus” stance, anticipating that technological adoption (e.g., AI, cloud, e‑commerce) will remain a primary driver of equity returns.

Macro Risks – Kim cautions about potential geopolitical tensions in Eastern Europe and commodity price swings that could impact energy and industrial holdings.

Valuation View – With the Fed’s policy rate anticipated to cut, the discount rate for future cash flows will fall, making high‑growth companies even more attractive.

Strategic Focus – The firm plans to add more cybersecurity and biotech exposure, sectors that historically outperform during inflationary periods.

7. Additional Resources

8. Final Thoughts

Middle Coast Investing’s Q2 2025 letter delivers a balanced narrative—a celebration of recent upside coupled with a sober assessment of risk. The “All Better Now” message is underpinned by a solid macro backdrop, a well‑executed sector tilt, and disciplined risk controls. For investors looking for a mid‑cap, growth‑focused fund that is actively managed and transparently communicated, the Middle Coast Growth Portfolio remains a compelling option as 2025 progresses.