Athos Capital Advisors – Monthly Newsletter

June 2024

A Good Start to the Year

  • A strong start to year
    • S&P 500 up 11.3%
    • Nasdaq up 10.2%
    • Dow up 3.5%
  • Interest rate cuts scaled back
    • Expectations for 6 to 7 cuts coming into the year
    • Now just 1 to 2 cuts expected
  • Fiscal policy extremely stimulative
    • Unprecedented fiscal deficit during a time of full employment
  • Cavainvestment
    • +115% year to date
    • 3thbest stock in the market year-to-date
  • Bonds are still bad
  • Alternatives still doing great













In early January we discovered a compelling investment opportunity that has already performed strongly and added meaningfully to Athos client portfolios.  Cava Group is a fast casual, Mediterranean, Chipotle-style restaurant chain.  The food is healthy, addictive, and affordable, and to many customers superior to Chipotle.  After hearing many close friends rave about the restaurant and its food we decided to look at the company as an investment.  After doing a deep dive and peeling back the layers we found it to be compelling for a number of reasons.

The investment case for Cava is strong based on its outstanding product, loyal following, strong unit and store economics, and large potential for expansion alone but what has made CAVA notably attractive is its management team and shareholder base.  When investing in public equities it is always my preference to invest in founder-led businesses who are passionate about the company and its products and who are also the largest shareholders.  The level of alignment between owner-operators who are invested heavily alongside us as shareholders is critical and has historically led to some of the best performing stocks of all-time (think Amazon, Google, Meta, Shopify, Berkshire Hathaway to name a few).











Ron Shaich is that guy in the case of CAVA.  Ron founded Panera Bread in 1984 and led the company as CEO until it was taken private in 2018 by the Reimann family’s JAB Holding Company.  From IPO to being taken private, Panera returned 50x for investors and Ron often hangs his hat on this (see Panera chart above).  After Panera was taken private in 2018, Ron and a friend put together $250 million and set out to make early stage private investments in the restaurant industry.  Their first and largest investment was in Cava when there were just 3 stores.  Fast forward to today, Ron has been integral to the company’s growth to this point in his role as Chairman and today he is the second largest shareholder at ~10% of the company and a stake of nearly $900 million at today’s price.

Today Cava has 336 stores and a long runway to continue expanding.  For comparison, Chipotle has nearly 3,500 stores and more than 500 stores in California alone.  Cava’s stated goal is to reach 1,000 stores by 2032.

At Athos we were able to get to Cava early with purchases beginning at $42 a share in early January.  As of today’s writing Cava is at $91 a share.

Strong Start to the Year Despite Higher For Longer Interest Rates

Stocks have had a very strong start to the year and one of the biggest themes underpinning the market has been stocks ability to shrug off a rapid dialing back of interest rate cut expectations.  Coming into 2024 the market was pricing in 6 to 7 cuts from the Fed.  Hotter inflation and generally strong economic conditions have the Fed standing firm at current interest rate levels and so far into the year the bond market has adjusted expectations to just 1 to 2 cuts later in 2024.  Normally this would provide a challenging backdrop for equities but the market has weathered this adjustment well and to us this is a sign of underlying strength.

Interest Rate Expectations – Higher Rates for Longer

Interest rate expectations, always a critical driving force in financial markets, have adjusted meaningfully so far in 2024.  As mentioned previously, coming into 2024, the bond market was expecting 6 to 7 rate cuts in 2024.  Today the market is only expecting 1 to 2 rate cuts.  While large cap stocks have been able to shrug off the adjustment in rate cuts higher for longer interest rates should continue to put pressure on the more interest rate sensitive parts of the economy.

Tight Monetary Policy – Loose Fiscal Policy

Another key, and often overlooked, trend in markets has been the massive amount of fiscal stimulus continued by the current administration.  While monetary policy has been tightened dramatically, fiscal policy has been extremely stimulative.  This contradictory fiscal-monetary policy mix has made the Fed’s job harder and has likely contributed to stickier inflation and a hotter economy.

Bonds are Still Unattractive

Another area where Athos Capital client portfolios have benefited is in avoiding traditional fixed income.  Two and a half years ago we replaced traditional fixed income allocations with floating rate private credit and ultra-short term US t-bills.  This combination has worked well as traditional fixed income (AGG) has been volatile, produced negative returns, and has been highly correlated with equities.  The role traditional fixed income used to play in portfolios for nearly two decades (diversification, low volatility, steady returns) has completely broken down and has been a major drag on traditional balanced portfolios.

Interval Funds Continue to Outperform

Athos Capital clients are continuing to benefit from the robust performance of floating rate private credit investments.  These investments continue to generate consistent returns in a volatile environment, offering low volatility and high income.  Both Cliffwater funds continue to yield 11% and have gained 6% year-to-date while traditional fixed income is down 2%.

Outlook and Positioning

  • It remains important to stay balanced across portfolios, sticking to long term asset allocation targets, and with a continued emphasis on best-in-class interval funds, high quality equities, select individual equities (CAVA, QXO), and short duration fixed income
  • Athos Capital’s Interval Fund lineup continues to generate high rates of income and low volatility with expected returns in the 11% range
  • Traditional fixed income remains challenged – investors should continue to stay at the short end of the yield curve where risk is lowest and yields are the highest
  • Continue to focus on high quality, large cap equities with recurring cash flows and strong balance sheets

As always, I look forward to hearing from you.


Henry A. Miketa

President & Founder