"Most of the mistakes in thinking are inadequacies of perception rather than mistakes of logic." -- Edward de Bono

Dear Partner:

Arquitos Capital Partners returned 64.0% net of fees in 2017, compared to 21.8% for the S&P 500. Our annualized net return since the April 10, 2012, launch is 34.5%. Please see page four for more detailed performance information.

2017 was a great year. Nearly every position provided a positive contribution. The results were even more remarkable because we take a highly conservative approach to debt, both in the portfolio—we don’t employ margin leverage—and in the companies in which we invest.

The overall markets had a great year as well, though our returns were not directly linked to the indices. We only have one significant holding that would be considered a household name, Bank of America (BAC), and we don’t actually own the stock. Instead, we own the warrants that were issued as part of the TARP program. These warrants come due later this year and early in 2019. They were one of my first purchases when I started the fund and contributed 5% to the portfolio gains during 2017.

The other holdings are relatively unknown outside of niche investing circles. They aren’t directly affected by inflows into index funds. Their results come from company-specific circumstances.

See full letter below:

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