Hillman Capital Management

#### I. Institutional Overview Mark Hillman, the driving force behind Hillman Capital Management, represents a distinct breed of investment managers who blend rigorous fundamental analysis with a contrarian, value-oriented psychological profile. As of the Q4 2025 reporting period, Hillman Capital Management oversees a reported 13F portfolio value of **$158,907,311**. While this scale places the firm in the category of a boutique institutional manager, its influence and the clarity of its investment signals often punch above its weight class. The firm’s portfolio currently consists of **56 stocks**, a number that suggests a sophisticated balance between high-conviction concentration and prudent risk diversification. To understand the psychological portrait of Hillman Capital, one must look beyond the raw numbers and into the philosophy of "Quality at a Reasonable Price" (QARP) with a specific tilt toward "Distressed Quality." Hillman’s investment style is characterized by a search for companies that possess enduring competitive advantages—what Warren Buffett would call "moats"—but are currently facing temporary headwinds that have depressed their valuations. With 56 holdings, the average position size is approximately 1.78% of the portfolio, yet the top-heavy nature of the holdings (where the top 10 represent a significant portion of the total value) indicates that Hillman is not afraid to place larger bets when the risk-reward profile is skewed in his favor. The current scale of $158.9M reflects a stable yet cautious institutional footprint. In an era where mega-funds manage hundreds of billions, a boutique firm like Hillman Capital has the "liquidity advantage"—the ability to enter and exit positions in mid-cap and large-cap stocks without significantly moving the market price. This agility is evident in the Q4 2025 adjustments, where we see substantial percentage changes in share counts (such as the 87% increase in DuPont or the 88% reduction in Nucor) that would be much harder for a multi-billion dollar fund to execute within a single quarter. Hillman’s psychological portrait this quarter appears to be one of **"Strategic Realignment and Defensive Consolidation."** The institution is not merely sitting on its hands; it is actively pruning "winners" that may have reached full valuation or where the macro environment has shifted, and recycling that capital into either broader market protection (as seen in the new SPY ETF position) or specific value-recovery plays. The fact that the firm maintains 56 stocks while managing $158M suggests a "multi-sleeve" approach to risk, where a core of established giants (like Microsoft and Boeing) is supplemented by tactical value plays and industry-specific bets. The stability of the firm's investment style is a hallmark of Hillman’s tenure. Unlike "momentum chasers" who rotate into whatever is trending on social media or news cycles, Hillman’s holdings often have a "holding age" measured in years, not months. For instance, positions in **BA (The Boeing Company)** and **MSFT (Microsoft Corporation)** have been in the portfolio for over a decade. This long-term conviction provides a stabilizing force to the portfolio, allowing the manager to weather short-term volatility in pursuit of long-term intrinsic value realization. In summary, Mark Hillman - Hillman Capital Management enters the end of 2025 with a portfolio that is lean, disciplined, and increasingly defensive. The institution’s psychological state is one of "watchful waiting," characterized by a willingness to take profits on cyclical peaks and a preference for sectors with high barriers to entry and reliable cash flows. This is the portrait of a manager who prioritizes capital preservation and disciplined valuation over the pursuit of speculative growth, making every move in this 13F report a calculated step in a much larger, long-term strategic journey. #### II. Sector Allocation Analysis The sector allocation of Hillman Capital Management in Q4 2025 provides a profound window into the institution's macro-economic worldview and its specific industry preferences. By analyzing the weight distribution across different sectors, we can infer whether the manager is preparing for an economic expansion, a contraction, or a period of prolonged uncertainty. | Sector | Weight (%) | Trend/Sentiment | | :--- | :--- | :--- | | **Healthcare** | 27.03 | Dominant Core / Defensive Growth | | **Consumer Staples** | 21.72 | Secondary Core / Defensive Value | | **Technology** | 16.63 | Tactical Growth / Quality Tech | | **Communication Services** | 9.79 | Value Recovery / Media | | **Materials** | 7.50 | Cyclical Value / Selective Exposure | | **Industrials** | 7.45 | Core Infrastructure / Quality Value | | **Consumer Discretionary** | 5.75 | Selective Consumer Exposure | | **Financials** | 3.88 | Underweighted / Cautious | | **Energy** | 0.25 | Negligible / Avoidance | **2.1 Concentration and Macro Judgment** The most striking feature of Hillman’s sector layout is the massive concentration in **Healthcare (27.03%)** and **Consumer Staples (21.72%)**. Combined, these two defensive sectors account for nearly **49%** of the entire portfolio. This is a powerful macro signal. Healthcare and Consumer Staples are traditionally "recession-resistant" sectors; people continue to buy medicine and household essentials regardless of interest rate hikes or GDP fluctuations. By allocating nearly half of the portfolio to these areas, Hillman is signaling a **cautious, defensive posture**. This suggests the institution may perceive the current market environment as being late-cycle, or perhaps believes that valuations in growth-oriented sectors like Technology have become stretched, making the "safety" of Healthcare and Staples more attractive on a risk-adjusted basis. **2.2 Healthcare: The Anchor of Conviction** With over 27% of the portfolio in Healthcare, this is clearly Hillman’s highest-conviction sector. However, the internal composition of this sector is diverse. It includes pharmaceutical giants like **GSK (GSK plc)** and **PFE (Pfizer Inc.)**, medical device companies like **ZBH (Zimmer Biomet)** and **BDX (Becton, Dickinson)**, and health services like **CVS (CVS Health)**. The logic here is multi-faceted: 1. **Demographic Tailwinds**: An aging global population ensures steady demand for healthcare services and products. 2. **Valuation**: Many large-cap healthcare stocks traded at reasonable P/E multiples throughout 2025 compared to the "Magnificent Seven" tech stocks. 3. **Innovation**: Despite being defensive, the sector offers growth through biotech breakthroughs and medical technology advancements. **2.3 Consumer Staples: Pricing Power as a Shield** The 21.72% allocation to Consumer Staples—featuring names like **EL (Estée Lauder)**, **BUD (Anheuser-Busch InBev)**, and **KHC (The Kraft Heinz Company)**—reflects a search for "brand equity" and pricing power. In an environment where inflation might be sticky or consumer spending power is under pressure, companies with iconic brands can often pass costs to consumers. However, the significant reductions in names like **EL (-22.47%)** and **CPB (-18.70%)** this quarter suggest that Hillman is not blindly holding staples; he is actively managing the sleeve to avoid companies where brand loyalty might be fraying or where recovery is taking longer than expected. **2.4 Technology: Quality Over Hype** At 16.63%, Technology is a significant but not dominant part of the portfolio. Hillman’s tech exposure is characterized by "Quality Tech"—companies with massive moats and essential roles in the global economy, such as **ASML (ASML Holding)** and **MSFT (Microsoft)**. The reduction in **ASML (-18.59%)** and **MSFT (-7.72%)** indicates profit-taking after a period of strong performance. This suggests Hillman views Technology as a source of "alpha" but is wary of over-concentration in a sector that is highly sensitive to interest rate changes and valuation re-ratings. **2.5 Strategic Underweights: Financials and Energy** The decision to remain significantly underweighted in **Financials (3.88%)** and almost entirely absent from **Energy (0.25%)** is a deliberate choice. The low exposure to Financials may stem from concerns about net interest margins or credit risks in a volatile rate environment. The avoidance of Energy suggests a lack of conviction in commodity price stability or a preference for businesses with more predictable, non-commodity-linked cash flows. This reinforces the image of Hillman as a manager who prefers "controllable" business models over those at the mercy of global macro-commodity swings. **2.6 Sector Rotation and Industry Insights** The increase in **Materials (7.50%)**, driven largely by the massive addition to **DD (DuPont)**, reveals a tactical pivot. While the overall portfolio is defensive, Hillman is willing to lean into "specialty materials" where he sees a valuation trough. This suggests a "barbell strategy": holding defensive anchors in Healthcare/Staples while making opportunistic, high-conviction buys in cyclical sectors that have been overly punished by the market. In conclusion, Hillman’s sector allocation is a masterclass in **defensive positioning with tactical flexibility**. The heavy tilt toward Healthcare and Staples provides a high "margin of safety," while the selective exposure to Tech and Materials ensures the portfolio can still capture upside from industry-specific recovery themes. It is a portfolio designed to survive a storm while being positioned to thrive when the sun returns to specific, undervalued corners of the market. #### III. Top 10 H ---