| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 18.5% | 39.1% | 10.4% |
Immersion Investment Partners returned 39.1% in Q2 2026, significantly outperforming the Russell 2000's 21.5% gain, as the market began pricing non-AI holdings more rationally after an irrational Q1 selloff. The fund operates a concentrated micro- and small-cap portfolio, adding the S&P SmallCap 600 as a benchmark because it better represents their investable universe of profitable, liquid companies. The managers view selloffs driven by macroeconomic noise as opportunities to add to positions at attractive prices, which they did near the Q1 lows. Key holdings include Red Violet, whose AI-driven identity platform is benefiting from AI trends rather than being threatened by them, and Mama's Creations, which was sold off on a timing mismatch between Q1 expenses and Q2 revenue from new Walmart product launches. The fund initiated a position in Strata Critical Medical, a leading organ transplant logistics provider positioned to consolidate a fragmented industry while benefiting from regulatory changes and new technologies expanding the donor pool. The managers emphasize that their process remains identical through market volatility, re-underwriting each holding to ensure fundamentals remain intact.
Immersion Investment Partners focuses on concentrated investments in overlooked micro- and small-cap companies where the market has created a gap between price and intrinsic value due to temporary factors unrelated to underlying business fundamentals.
The managers expect returns to continue arriving in a lumpy fashion given their concentrated micro- and small-cap portfolio. They believe that when macroeconomic noise is loudest, the opportunity is often greatest, and they will continue to evaluate both the macroeconomic environment and what is happening within each company. The fund is positioned in businesses where revenue continues compounding, earnings convert into cash flow, and management teams are doing the small, unglamorous things that tend to appear in financial statements many quarters later.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Aug 8 2026 | 2026 Q2 | BROS, CELH, MAMA, PAR, RDVT, SRTA | AI, concentrated, Food, healthcare, Microcap, small caps, value |
RDVT MAMA SRTA |
Immersion Investment Partners returned 39.1% in Q2 2026 as the market reversed its irrational Q1 selloff of non-AI holdings. The concentrated micro- and small-cap fund added capital near Q1 lows in companies like Red Violet and Mama's Creations, where temporary factors created gaps between price and value. New position Strata Critical Medical offers compelling growth in organ transplant logistics with significant consolidation opportunities ahead. |
| Apr 30 2026 | 2026 Q1 | BELFB, BROS, CELH, MAMA, PAR, RDVT, UFPT | Concentration, consumer discretionary, Consumer Staples, Microcap, Quality, small caps, value |
CELH BROS MAMA RDVT |
Immersion suffered a sharp -20.6% drawdown in Q1 2026, driven by Red Violet's compression on misplaced AI fears despite meeting expectations. The fund maintains concentrated exposure to high-quality small caps with superior fundamentals versus benchmarks. Management sees attractive valuations in energy drinks, QSR, and prepared foods, with specific catalysts around distribution expansion and unit growth positioning the portfolio for recovery. |
| Jan 30 2026 | 2025 Q4 | BELFB, BROS, CAVA, CELH, CMG, DPZ, MAMA, PAR, RDVT, SBUX, TGT, WING | AI, Food, growth, Restaurants, small caps, tech, Valuations |
PAR MAMA BROS |
Immersion Partners is capitalizing on AI-driven mispricing in small-cap tech and consumer stocks. Their concentrated portfolio of five core holdings includes Dutch Bros, a compelling restaurant concept with exceptional unit economics, and undervalued software companies like Par Technology. The strategy focuses on quality businesses with strong fundamentals trading at attractive valuations due to broad market sentiment rather than company-specific issues. |
| Oct 20 2025 | 2025 Q3 | CELH, MAMA, PBPB, RDVT | Acquisitions, Beverages, Distribution, Food, growth, small caps, value |
CELH MAMA CELH MAMA |
Immersion Partners gained 18.4% in Q3 2025 through concentrated small-cap investing, targeting undervalued companies with strong fundamentals creating coiled spring effects. Major developments include Celsius gaining energy drink distribution control from PepsiCo and Mama's Creations acquiring Crown I Enterprises, both positioned for significant earnings growth as market recognition catches up to operational improvements. |
| Aug 19 2025 | 2025 Q2 | CELH, MAMA, PBPB, RDVT, UFPT | Food, fundamentals, growth, Microcap, small caps, value, volatility |
MAMA MAMA |
Immersion Partners delivered 28.13% returns in Q2 2025 by investing in overlooked small-cap companies where fundamental improvements create coiled spring effects. Their concentrated approach focuses on businesses like Mama's Creations, benefiting from prepared foods category growth and strong management execution, while maintaining that volatility differs from true investment risk. |
| May 15 2024 | 2024 Q1 | BELFB, CELH, GFF, PBPB | concentrated, long-term, Patient Capital, small caps, value | - | Immersion Partners outperformed the Russell 2000 by 444 basis points in Q1 2024, maintaining concentrated exposure to fifteen small-cap positions. The fund exploits short-term market inefficiencies by providing patient capital to overlooked companies, with their five largest investments comprising 75% of assets. Management emphasizes time arbitrage as their competitive advantage against short-term focused institutional investors. |
| Feb 2 2024 | 2023 Q4 | EDR.MC, GFF, PBPB | execution, mispricing, small caps, turnaround, value |
EDR.MC AAGFF ALTG|AREN|CVGI|PBPB|QBTS|QMCO|SCOR|TURN |
Immersion delivered 34.69% returns in 2023 by investing in overlooked small-cap companies with strong fundamentals. Their concentrated portfolio targets mispriced businesses where management execution eventually drives market recognition. Key holdings like eDreams subscription transformation, Griffon's improved governance, and Potbelly's franchise turnaround demonstrate their strategy of finding quality companies before the market catches up. |
| Nov 22 2023 | 2023 Q3 | BELFB, CELH | Beverages, Components, small caps, turnaround, undervalued, value | - | Small cap value fund targeting overlooked companies with structural improvements trading at generational lows. Russell 2000 at 12.5x P/E versus 18.1x average presents historic opportunity. Top holdings Bel Fuse (electronic components turnaround) and Celsius (energy drinks gaining share) demonstrate strong fundamentals despite market indifference. Fund confident that math wins long-term as quality businesses get recognized. |
| Jan 7 2023 | 2023 Q2 | BFIT.AS, FC, IDT, MPAA, PBPB | Auto Aftermarket, Fitness, Restaurants, small caps, special situations, turnaround, value | - | Immersion delivered 22.3% in Q2 by largely holding their concentrated small cap portfolio of coiled springs. Small caps trade at dot-com bubble-level discounts to large caps despite strong fundamentals. New holding MPAA offers significant earnings inflection in auto aftermarket. Reduced European fitness play Basic-Fit and exited IDT completely. Opportunity set remains large in sub-$5B market cap universe. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIThe fund views AI as a source of market volatility and mislabeling rather than a direct investment theme. In Q1, non-AI holdings were irrationally sold off, while in Q2 the market reversed course. Red Violet benefits from AI trends through its custom-built AI-driven CORE platform, which efficiently builds profiles from billions of data points, and the company's identity offering is not exposed to AI threats. |
AI Data Privacy Identity Software |
Small CapsThe fund operates exclusively in the micro- and small-cap space, adding the S&P SmallCap 600 as a benchmark because it better represents their investable universe. The managers emphasize that concentrated micro- and small-cap portfolios should expect lumpy returns, and they view selloffs driven by macroeconomic noise as opportunities to add to positions at attractive prices. |
Small Caps MicroCap Russell 2000 Value | |
Organ TransplantThe fund initiated a position in Strata Critical Medical, a leading provider of organ transplant logistics and clinical services. The industry is benefiting from enormous unmet need for organs, regulatory changes expanding geographic distribution, and new technologies like normothermic regional perfusion that expand the donor pool. Strata handles approximately 50% of NRP procedures nationally and is positioned to consolidate a fragmented industry. |
Healthcare Logistics M&A Growth | |
FoodMama's Creations was irrationally sold off in Q1 when investors reacted to a headline gross margin decline without understanding that the company was spending to support new product launches at Walmart. The expenses appeared in Q1 while most of the associated revenue would not be recognized until Q2, creating a timing mismatch that was apparent to anyone who listened carefully to the earnings call. |
Food Grocers Specialty Retail Growth | |
Data PrivacyRed Violet's core identity offering benefits from reputational intangibles on both the supplier and buyer sides. Data providers selling sensitive personal information require significant security infrastructure from credible buyers, and customers like banks and debt collectors need accurate data and cannot rely on cobbled-together AI solutions. The company announced Forewarn's formal entry into healthcare, with an immediately addressable opportunity of $50-75 million in revenue. |
Data Privacy Identity Healthcare Software | |
| 2026 Q1 |
Energy DrinksCelsius brand has stabilized and is growing, with Alani doubling market share in a year. The fund views Celsius as significantly undervalued relative to Monster and Ghost on a per-point-of-market-share basis, trading at a 74% discount to Monster and 16% discount to Ghost. International expansion represents significant untapped value. |
Beverages Consumer Staples Market Share Brand International |
Quick Service RestaurantsDutch Bros is positioned as a QSR concept with cult status similar to Chick-fil-A and In-N-Out. The fund believes concerns about McDonald's and Dunkin' energy drink launches are overblown, with proprietary data showing little variance from consensus foot traffic growth. Build-to-suit leases, mobile ordering, and food introduction provide significant tailwinds, yet the company is valued like a matured concept despite significant unit growth potential. |
Restaurants Consumer Discretionary Unit Growth QSR | |
Prepared FoodsMama's Creations is gaining share in the $40 billion fresh/prepared deli category, stealing share from QSR and made-at-home. The company has capacity to organically double sales with little incremental investment. Crown 1 acquisition was described as a home run, and deepening retail relationships throughout 2026 position the company for material margin beats, with gross margins likely to exceed estimates leading to 20%+ EBITDA beat and 40%+ EPS beat in 2026. |
Food Consumer Staples Grocers Market Share M&A | |
Data & AnalyticsRed Violet performed in line with expectations but shares compressed violently in Q1. The market incorrectly views VantageScores in lending as a threat. A fund sold 10 days worth of volume in a month, and AI fears led to the group de-rating 30% on EV/NTM EBITDA in 90 days. The manager views these concerns as misplaced. |
Software Data Services AI Valuation | |
Small CapsThe fund maintains concentrated exposure to small and microcap companies with weighted average market cap of $3 billion excluding large cap software basket. Portfolio companies demonstrate superior quality metrics versus Russell 2000: 100% positive EBITDA, 89% positive free cash flow, and significantly lower dilution at 4.5% versus 9.5% for the index. The fund's guiding principle states smaller is better. |
Market Cap Quality Value Concentration | |
| 2025 Q4 |
AIManager views AI as a classic capital cycle bubble comparable to past infrastructure manias. Sees massive capital spending with improbable returns, creative financing, and circular dynamics among hyperscalers. Expects this to end badly for early investors despite potential societal benefits. |
Artificial Intelligence Data Centers Capital Cycle Bubble Infrastructure |
ValuePortfolio trades at 12.2x earnings with 8.2% earnings yield versus S&P 500's 26x multiple and 3.9% yield. Active value management through trimming expensive positions and adding to undervalued names has driven outperformance. Sees significant valuation disparity favoring value approach. |
Value Investing Earnings Yield Active Management Undervalued Valuation | |
GoldGold mining companies Kinross and Newmont delivered exceptional returns with gold reaching $5,000 per ounce. Mining profitability surged with net margins rising to 30%+ range. Maintains constructive long-term view on gold price for various unfortunate macroeconomic reasons. |
Gold Miners Precious Metals Commodity Cycle Mining Inflation Hedge | |
Dollar StoresIncreased allocation to retailers including Dollar General, Dollar Tree, and Five Below from 17.1% to 25.9% of portfolio. Added meaningfully to Five Below near yearly lows during tariff volatility. These retailers earn good returns on capital despite modest profit margins. |
Retail Dollar Stores Consumer Discretionary Tariffs Value | |
CloudViews cloud infrastructure spending as part of broader AI capital cycle excess. Sees formerly capital-light tech companies now in arms race that leverages balance sheets and gobbles up resources. Questions sustainability of massive data center investments and energy requirements. |
Cloud Computing Data Centers Infrastructure Capital Intensity Tech | |
| 2025 Q3 |
Small CapsThe fund focuses exclusively on smaller companies by market cap that are often less followed and less liquid. These companies create opportunities for violent outperformance when fundamentals are recognized by the market, creating a coiled spring effect where good news accumulates until it erupts violently once people take notice. |
Russell 2000 Market Cap Liquidity Coverage Institutional |
BeveragesCelsius Holdings represents a major position with significant developments including strengthened partnership with PepsiCo, acquisition of distribution control for energy drinks, and expected dramatic improvement in market share. The Alani brand alone is expected to generate $300mm in adjusted EBITDA growth in 2026. |
Energy Drinks Distribution Market Share PepsiCo Alani | |
FoodMama's Creations acquired Crown I Enterprises for $17.5 million, adding $56 million in sales and production capacity. The deal provides legitimacy to their acquisition strategy and could result in $30 million in consolidated adjusted EBITDA versus current street estimates of just $21 million. |
Prepared Foods Acquisition Production EBITDA Growth | |
| 2025 Q2 |
FoodFresh and prepared foods in grocery stores has been a growing category, catalyzed by consumer demand for healthier, fast, and affordable food options. Grocery stores have been increasingly dedicating more food space to the category. Today, it is one of only a couple of categories that are seeing volume growth. |
Prepared Foods Grocery Food Manufacturing Branded Products Food Distribution |
Small CapsThe fund focuses on smaller companies by market cap that are often less followed and less liquid. These names can experience pronounced coiled spring effects when good news accumulates but isn't priced in, leading to violent eruptions once people take notice. The inverse creates opportunity during macro risk-off trades. |
Microcap Volatility Liquidity Institutional Ownership Coverage | |
ValueThe fund focuses on fundamentals of companies and what they are doing internally, rather than judging them based on quarterly stock price performance. They seek companies where good news is not priced in quarter over quarter, creating coiled spring effects. |
Fundamentals Mispricing Intrinsic Value Long Term Contrarian | |
| 2024 Q1 |
Small CapsFund focuses on small-cap investments with market capitalizations ranging from $30 million to $17 billion, with a median of $600 million. The strategy targets overlooked and underappreciated companies that are too small for institutional investors. |
Small Cap Undervalued Overlooked Institutional |
ValueThe fund employs a value-oriented approach, seeking companies trading below intrinsic value due to temporary issues or market misunderstanding. They focus on patient capital deployment and long-term value realization. |
Value Undervalued Patient Capital Long-term | |
| 2023 Q4 |
TraveleDreams Odigeo is transforming into the first subscription-led online travel agency with 5.1 million Prime members, generating recurring cash flow and circumventing middlemen like Google. The company delivered strong Q2 results with revenue and EBITDA up 19% and 66% respectively, showing significant margin expansion potential. |
Online Travel Subscription Travel |
RestaurantsPotbelly continues executing its turnaround under new management, with each location averaging $1.3 million in annual sales and nearing mid-teens store-level operating margins. The company announced 192 total location commitments and is shifting from a regional company-operated concept to a fast-growing franchised business with national scale. |
Franchising Turnaround Restaurant | |
| 2023 Q3 |
Small CapsSmall cap stocks are trading at generational lows with the Russell 2000 at 12.5x P/E versus 18.1x long-term average. The fund sees this as a historic opportunity to buy well-heeled companies at depressed prices due to non-fundamental selling pressures. |
Russell 2000 Valuations Opportunity Generational Depressed |
ValueThe fund focuses on finding companies with structural changes being overlooked by the market, often trading at single-digit multiples despite strong fundamentals. They emphasize buying quality businesses at discounts when others are selling for non-business reasons. |
Undervalued Structural Changes Overlooked Discounts Quality | |
BeveragesCelsius Holdings represents a major position as an energy drink company growing market share to 6% nationally while achieving 20%+ share in mature markets like Florida and Amazon. The company benefits from PepsiCo distribution partnership and targets international expansion. |
Energy Drinks Market Share Distribution Growth International | |
ComponentsBel Fuse is the fund's largest position, manufacturing electronic components for mission-critical applications in aerospace, military, and data centers. The company underwent operational improvements under new management, with margins recovering to peer levels. |
Electronic Components Mission Critical Aerospace Military Margins | |
| 2023 Q2 |
Small CapsSmall caps are at their largest relative discount to large caps since the dot-com bubble. The five years following the dot-com bubble produced some of the best returns in the history of public small cap investing. Investors have decided that all small cap stocks are risky regardless of prospective earnings/cash flow generation, quality of management, and cheap valuations. |
Small Caps Valuation Discount Russell 2000 |
Auto AftermarketMPAA benefits from an aging automotive fleet which requires more replacement parts. The company is the largest supplier of aftermarket starters and alternators in the U.S. with 50% market share. This is a reversion-to-the-mean setup with significant pricing power potential as customers have become overly dependent on companies like MPAA. |
Auto Parts Aftermarket MPAA Pricing Power | |
FitnessBasic-Fit is completely dominating its industry as the only concept of any reasonable scale growing gym count in its core markets. They have accelerated market share gains since COVID and are quickly reaching cash flow breakeven. However, European investors do not seem to care about this dominance. |
Fitness Basic-Fit Market Share Europe | |
RestaurantsPotbelly represents low-hanging fruit with a fundamentally strong brand but subpar prior management. The entire board and c-suite has been turned over and the new team has embarked on realigning culture and basic operating practices. Annualized revenue per location is tracking to $1.35mm vs. pre-COVID levels of $950,000. |
Restaurants Potbelly Turnaround Management |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Aug 8, 2026 | Fund Letters | Immersion Investment Partners | RDVT | Red Violet | Other | Research & Consulting Services | Bull | - | AI platform, Data Analytics, Enterprise software, Healthcare Expansion, high-margin, Identity Verification, Reputational Moat, Research & Consulting, SaaS | Login |
| Aug 8, 2026 | Fund Letters | Immersion Investment Partners | MAMA | Mama's Creations | Other | Packaged Foods & Meats | Bull | - | consumer staples, Growth Investment, margin expansion, new product launch, Packaged Foods, Prepared foods, Retail distribution, Timing Mismatch, Walmart Supplier | Login |
| Aug 8, 2026 | Fund Letters | Immersion Investment Partners | SRTA | Strata Critical Medical | Other | Health Care Services | Bull | - | cash-rich, Consolidation Play, Equity, Fragmented Industry, Healthcare services, High Growth, M&A Platform, Medical Logistics, NRP Technology, Organ Transplant, SPAC Spinoff | Login |
| Apr 30, 2026 | Fund Letters | Immersion Investment Partners | CELH | Celsius Holdings Inc. | Beverages - Non-Alcoholic | Soft Drinks | Bull | NASDAQ | brand portfolio, consumer staples, Doubted Champion, Energy drinks, Functional Beverages, international expansion, market share gains, Private-label | Login |
| Apr 30, 2026 | Fund Letters | Immersion Investment Partners | BROS | Dutch Bros Inc. | Restaurants | Restaurants | Bull | New York Stock Exchange | brand loyalty, Coffee Chain, Cult Following, Doubted Champion, Drive-Thru, Mobile Ordering, Quick Service Restaurant, Unit growth | Login |
| Apr 30, 2026 | Fund Letters | Immersion Investment Partners | MAMA | Mama's Creations Inc. | Packaged Foods | Packaged Foods & Meats | Bull | NASDAQ | Distribution Expansion, Doubted Champion, Fresh Deli, grocery, M&A Consolidator, margin expansion, market share gains, operating leverage, Prepared foods | Login |
| Apr 30, 2026 | Fund Letters | Immersion Investment Partners | RDVT | Red Violet Inc. | Software - Application | Data Processing & Outsourced Services | Bull | NASDAQ | AI Concerns, big data, cloud-based, Data Analytics, Fraud detection, risk management, SaaS, Technical Selling, Underdog | Login |
| Jan 30, 2026 | Fund Letters | David Polansky | PAR | Par Technology Corp. | Information Technology | Application Software | Bull | New York Stock Exchange | ARR, mispricing, operating leverage, Point of Sale, restaurant software | Login |
| Jan 30, 2026 | Fund Letters | David Polansky | MAMA | Mama’s Creations Inc. | Consumer Staples | Packaged Foods | Bull | NASDAQ | Distribution, Free Cash Flow, Margins, Prepared foods, retail expansion | Login |
| Jan 30, 2026 | Fund Letters | David Polansky | BROS | Dutch Bros Inc. | Consumer Discretionary | Restaurants | Bull | New York Stock Exchange | cash flow, Culture, expansion, Restaurants, Unit economics | Login |
| Oct 20, 2025 | Fund Letters | David Polansky | CELH | Celsius Holdings Inc. | Consumer Staples | Beverages | Bull | NASDAQ | Beverages, Distribution, EBITDA, Energy drinks, growth, Margins, market share, Partnership, PepsiCo, Re-rating | Login |
| Oct 20, 2025 | Fund Letters | David Polansky | MAMA | Mama’s Creations Inc. | Consumer Staples | Packaged Foods | Bull | NASDAQ | acquisition, Deli, EBITDA, Food, growth, Integration, M&A, Prepared foods, scale, valuation | Login |
| Oct 20, 2025 | Fund Letters | David Polansky | CELH | Celsius Holdings Inc. | Consumer Staples | Beverages | Bull | NASDAQ | Beverages, Distribution, EBITDA, Energy drinks, growth, Margins, market share, Partnership, PepsiCo, Re-rating | Login |
| Oct 20, 2025 | Fund Letters | David Polansky | MAMA | Mama’s Creations Inc. | Consumer Staples | Packaged Foods | Bull | NASDAQ | acquisition, Deli, EBITDA, Food, growth, Integration, M&A, Prepared foods, scale, valuation | Login |
| Aug 19, 2025 | Fund Letters | David Polansky | MAMA | Mama's Creations, Inc. | Consumer Staples | Packaged Foods & Meats | Bull | NASDAQ | Acquisitions, Deli, EBITDA, grocery, management, Margins, Prepared, Scalability, valuation | Login |
| Jul 1, 2025 | Fund Letters | Immersion Investment Partners | MAMA | Mama's Creations | Consumer Staples | Packaged Foods & Meats | Bull | NASDAQ | Branded Products, cash generation, Consolidation Platform, convenience stores, Food Manufacturing, grocery retail, Management Quality, margin expansion, microcap, organic growth, Prepared foods | Login |
| Jan 1, 2024 | Fund Letters | Immersion Investment Partners | EDR.MC | eDreams Odigeo | Consumer Discretionary | Internet & Direct Marketing Retail | Bull | Madrid Stock Exchange | cash generation, Europe, margin expansion, Mobile Bookings, Online Travel Agency, recurring revenue, subscription model, Travel Technology | Login |
| Jan 1, 2024 | Fund Letters | Immersion Investment Partners | AAGFF | Griffon Corp | Industrials | Building Products | Bull | NYSE | Building Products, capital allocation, Corporate Governance, Garage Doors, housing market, Margin Sustainability, restructuring, Value | Login |
| Jan 1, 2024 | Fund Letters | Immersion Investment Partners | ALTG|AREN|CVGI|PBPB|QBTS|QMCO|SCOR|TURN | Potbelly | Consumer Discretionary | Restaurants | Bull | NASDAQ | cash flow, franchise model, growth, Management Change, Restaurant Turnaround, Sandwich Concept, Unit economics, valuation discount | Login |
| TICKER | COMMENTARY |
|---|---|
| RDVT | Red Violet (RDVT – Underdog) merits some discussion, given the violent contraction in the first quarter and the subsequent snapback. To reiterate our previously stated views from our Annual Meeting presentation, the company's core identity offering is not exposed to AI threats. If anything, Red Violet has always been a beneficiary of AI trends and is itself powered by its custom-built AI-driven CORE platform, which can efficiently build profiles on every American from billions of data points in a secure environment with continuous monitoring and live profile updates. Aside from the technological advantages of Red Violet's CORE platform, the company benefits from reputational intangibles on the supplier and buyer sides of the equation. Data providers selling sensitive personal information require significant security infrastructure from credible buyers like Red Violet, and, on the other side, Red Violet's customers (banks, debt collectors, government agencies, etc.) need the data to be accurate. For example, a debt collector that contacts a person who has declared bankruptcy is liable to significant fines and penalties. Those customers cannot rely on a cobbled-together AI-built solution. They buy information from partners they can trust. Consistent with this narrative, the company's second-quarter results and forward commentary provided no indication that customers were delaying purchases or building their own AI-driven solutions. Management delivered expectation-beating top- and bottom-line results and noted on the earnings call that April (earnings call on May 6) was an "extremely strong month." Subsequent to the end of the quarter, Red Violet announced the Forewarn's formal entry into the healthcare industry. Forewarn's leading safety product can now be used by home health aides and nurses to screen for potential threats during home visits. We anticipate that the immediately addressable opportunity is in the range of $50 million to $75 million in revenue. Since Forewarn is effectively just a consumer-facing application skin on top of the CORE platform, utilizing the same data, even modest incremental revenue will translate into significant increases in profitability. |
| MAMA | Mama's Creations (MAMA – Doubted Champion) We have written about our investment in Mama's Creations almost ad nauseam. For a refresher, you can read about it here, here, and here. Red Violet may take the cake for being irrationally discarded in the first quarter because it carried the wrong sector label, but Mama's Creations was a close second. Investors appeared to react to a headline financial figure without fully considering what management had explained about the underlying business. During the first quarter, Mama's increased spending to support orders for new products launching at Walmart. However, most of the revenue needed to offset those expenses would not appear until the second quarter. Gross margin declined to 23.6% from 26.1% in the prior-year period. The decline reflected approximately $1 million of startup costs associated with new product launches, as well as the reclassification of approximately $500,000 from marketing expense to trade spending. This was part of the plan. As it should have, Mama's spent money preparing to fulfill orders that it knew were coming. Because the financial books must be closed on an arbitrary date, the expenses appeared in one reporting period while much of the associated revenue would not be recognized until the next. After several days of heavy selling, analysts began to recognize the timing mismatch and published notes stating that they expected margins to improve throughout the remainder of the year. This conclusion was apparent to anyone who spoke with management or simply listened carefully to the earnings call. It continues to amaze us that fundamental investors who read the filings, listen to the calls, and speak directly with management can retain such a meaningful advantage over other market participants. |
| SRTA | Strata Critical Medical (SRTA – Babushka Doll) Strata Critical Medical is a newer holding for the partnership, having been purchased in September 2025. The history surrounding the stock is intriguing to us because it's the abandoned remainco of an overhyped COVID-era SPAC. Strata itself is a leading provider of organ transplant logistics and clinical services, but most investors have never heard of it. The business operated and grew in the shadows as a subsidiary of the former e-mobility company Blade, which came public via a SPAC in late 2020 to significant fanfare and bulge-bracket bank coverage from the likes of JP Morgan, Deutsche Bank, CitiGroup, and Credit Suisse. Like many 2020 SPACs, the Blade e-mobility business disappointed and the stock faltered, peaking at $20 in early 2021 and swiftly plunging to $2 by late 2023. In August 2025, the company announced that it was selling its e-mobility, or 'Passenger,' business to Joby, would retain the organ logistics and services business and rebrand to Strata Critical Medical (ticker: SRTA). The transaction closed later that month for $76 million in Joby shares and a $35 million earnout. Most analysts who promoted the stock up until then abandoned the name. We think this is silly because this is exactly when the story gets interesting. What we have today is a high-quality logistics and services asset growing more than 20% organically while operating in an inefficient, fragmented industry, with a cash-rich balance sheet and enormous M&A opportunities ahead of it. Strata works with transplant centers and organ-procurement organizations as a one-call solutions provider with end-to-end capabilities for the placement, recovery, and transportation of organs. It has local equipment and staff in all major medical hubs, including 30 owned and dedicated aircraft and 50 ground vehicles across 19 bases, an open-source platform with zero captive assets (machines, etc.), and a staff of licensed physicians capable of performing recoveries. Initially known as Blade MediMobility, the company began transporting organs using Blade's passenger infrastructure in 2019 on behalf of NYU Langone. It grew the business organically until 2021, when it acquired Trinity Medical Services for $23 million. Annual pro forma revenue for the combined MediMobility and Trinity business was $20 million. From that acquisition through the end of last year, Strata grew revenue nearly ninefold organically (not a typo, a 72% CAGR) and ended 2025 with $197 million in revenue. Today, the company has a 5% share of organ placement, 10% of recovery and perfusion services, 30% of air logistics, and 15% of ground logistics. The organ-transplant industry is extremely fragmented, with Strata being a top five player in every part of the value chain in which it participates. Strata is benefiting from the enormous unmet need for organs, which is driving significant changes in the rules governing the distribution of viable organs, processes that are expanding the pool of available organs, and new recovery and storage technologies that allow organs to be moved longer distances. At any given time, more than 100,000 Americans are awaiting organ transplants, while only approximately 50,000 receive a transplant over the course of a year. In business parlance, supply does not meet demand. This has spurred changes in how organs are allocated. Until 2017, organs were allocated within specific geographic areas known as donor service areas, or DSAs. DSAs prioritized proximity to the donor. Beginning in 2017, the system shifted to acuity circles, which deemphasized proximity in the ranking system. In 2023, lung allocation shifted again, this time to a continuous distribution model that placed even greater emphasis on need and further deemphasized distance. Although only lungs are currently allocated under the continuous distribution model, the average distance traveled by all organs increased 64% between 2018 and 2024. Adding to the tailwind of greater travel distances is an expanding donor pool. Historically, organ donors were primarily brain-dead patients, known as donation after brain death, or DBD. Donation after circulatory death, or DCD, was not viable for most organs because internal organs are damaged after the heart stops. Over the past decade, new technologies have been introduced that allow blood to perfuse the organs and preserve their viability after circulatory death. DCD donors have driven nearly all industry growth since 2018, with the number of DCD donors increasing approximately fourfold while DBD volumes have remained essentially flat. Strata addresses DCD donor organs through normothermic regional perfusion, or NRP, which restores warm, oxygenated blood flow to part of the donor's body after death has been declared. The use of NRP has exploded, increasing from just 4% of DCD donors in 2022 to 50% in 2025. Strata's management believes this figure will approach 100% over the next several years. The company handles approximately 50% of NRP procedures performed nationally, while the second-largest provider is only about one-fifth of Strata's size. The stock currently trades at approximately $5 per share, with 92 million shares outstanding, including options and restricted shares. Strata has zero debt, $59 million in cash, and $38 million of contingent consideration and holdbacks related to the sale of the Passenger segment to Joby, which we believe are highly likely to be realized. This gives us an enterprise value of approximately $360 million, compared with our 2026 expectations of $280 million in revenue, $35 million of EBITDA, and $20 million of free cash flow. We believe the unmet need for organs will continue to drive the adoption of NRP procedures and longer average organ-transport distances. In isolation, this backdrop should support low-teens organic revenue growth for at least the next five years. Additionally, Strata's pristine balance sheet and its position as the only publicly traded pure-play organ-transplant logistics and services company put it in a prime position to consolidate an industry containing a significant number of subscale operators. Management has acted quickly on this opportunity, completing four acquisitions since the separation from the Passenger business. It has spent a total of $162.5 million in cash and stock to acquire businesses with a combined $87 million of LTM revenue and $20 million of LTM EBITDA. Given the significant organic and inorganic growth opportunities ahead of Strata, along with the likely margin benefits as it gains greater scale, we believe a 10x multiple of current-year EBITDA is far too low. Ultimately, we believe EBITDA can grow at a CAGR of more than 30% over the next five years, meaning that, at today's share price, we are paying less than three times our estimate of 2030 EBITDA. If we are correct, we will earn five to eight times our investment in the stock. |
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