| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | 1.3% | 1.3% |
The Shelton International Select Equity Fund returned 1.30% in Q1 2026 versus -0.37% for its benchmark, though the managers note timing differences suggest actual underperformance of about 1%. The quarter unfolded in two acts: strong January-February gains driven by AI hardware investment and dollar weakness, followed by sharp March declines after Iran conflict closed the Strait of Hormuz. This energy shock removed 20 million barrels daily from global trade, causing Brent crude to surge 43% in March and exposing small-cap vulnerability to macro shocks. Top contributors included Lynas Rare Earths (+78.5%) on critical mineral supply chain themes, Vermilion Energy (+66.3%) benefiting from the oil shock, and Amada Co. (+16.6%) on AI manufacturing demand. Key detractors were Konica Minolta (-24.9%), Gamma Communications (-24.7%), and De'Longhi (-19.4%), primarily due to energy cost pressures on European and Japanese companies. Despite macro headwinds, the managers maintain conviction in structural themes including AI infrastructure, defense spending, and governance reform, viewing the selloff as creating more compelling valuations in international small-caps versus U.S. counterparts.
International developed small-cap equities offer significant exposure to structural growth themes like AI infrastructure, defense spending, and critical minerals at valuations well below U.S. counterparts, despite near-term macro headwinds from geopolitical energy shocks.
The case for international developed small-cap equities is more nuanced but the structural opportunity remains intact and in some respects more compelling from a valuation standpoint after the March selloff. The manager maintains conviction in structural growth stories while being attentive to near-term energy cost and demand risks.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Mar 31 2026 | 2026 Q1 | 4506.T, 4902.T, 6113.T, CHC.AX, DLG.MI, ERIC, GAMA.L, KLR.L, LYC.AX, VET.TO | AI, energy, Europe, geopolitics, infrastructure, international, Japan, small caps |
LYC.AX 6113.T VET.TO |
International small-caps delivered mixed Q1 results as AI hardware gains were offset by Iran-driven energy shock. Fund outperformed benchmark despite macro headwinds, with rare earths and energy beneficiaries leading while European consumer and Japanese manufacturing names lagged. Managers maintain conviction in structural AI, defense, and governance themes, viewing March selloff as creating more attractive valuations. |
| Aug 22 2025 | 2025 Q2 | 7751.T, 9766.T, 9962.T, STN.TO | Dollar, Europe, gaming, international, Japan, Outperformance, Trade Policy |
9766 JP STN.TO 9766.T 9962.T 7751.T |
International equities continued strong outperformance in Q2 2025, with the fund returning 13.7% versus 12.0% for the benchmark. Dollar weakness, trade tension relief, and regional policy support drove broad-based gains led by Europe and Japan. While magnitude may moderate, structural factors supporting international over U.S. equities remain compelling for patient investors. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
AIAI-related hardware investment drove strong gains in January and February across international markets, particularly in Japan, Taiwan, and Northern Europe. The AI hardware and infrastructure investment cycle continued generating outsized performance in select names through February, with companies like Amada Co. benefiting from strong order activity driven by AI-related manufacturing capacity buildout. |
Hardware Infrastructure Manufacturing Automation |
OilThe Iran conflict and closure of the Strait of Hormuz removed approximately 20 million barrels per day from global trade, causing Brent crude to rise more than 43% in March alone. This energy shock exposed small-cap vulnerability to macro shocks and created meaningful uncertainty for energy-import-dependent economies, particularly continental Europe and Japan. |
Energy Geopolitics Supply Shock | |
Rare EarthsLynas Rare Earths was the top contributor with a 78.5% return as investor focus shifted back to the structural scarcity of rare earth supply outside China. The Iran conflict intensified this theme as it raised broader questions about commodity supply chain resilience and the strategic importance of diversified critical mineral supply chains. |
Critical Minerals Supply Chain China Scarcity | |
Small CapsThe quarter reinforced small-cap vulnerability to macro shocks, as smaller companies have less financial flexibility to absorb input cost spikes and tend to sell off more sharply in risk-off environments. However, the structural opportunity remains intact with international small-caps offering significant exposure to growth areas at valuations well below U.S. counterparts. |
Valuations Vulnerability Opportunity International | |
Infrastructure SpendingKeller Group continued to benefit from elevated infrastructure activity across its European and North American project pipeline. Europe's defense and infrastructure spending program represents a durable, multi-year investment thesis that one quarter's geopolitical shock does not diminish. |
Defense Europe Projects Spending | |
| 2025 Q2 |
DollarThe U.S. Dollar Index declined further in Q2, falling an additional 7% during the quarter and finishing down over 10% year-to-date. This provided significant tailwinds for international equity returns when measured in USD terms. The dollar's structural weakening trend appears likely to continue, supported by narrowing growth differentials and Federal Reserve policy accommodation. |
Currency USD Exchange Rates International Returns |
Trade PolicyThe gradual de-escalation of trade tensions and progress in U.S.-China negotiations provided relief to international markets, particularly benefiting export-oriented economies. While progress has been made, the final resolution of tariff negotiations remains pending, with key deadlines approaching in early Q3. |
Tariffs US-China Trade Tensions Export Markets | |
GamingKonami Group Corp performed exceptionally well, gaining over 29% for the quarter. The company announced new online features to its upcoming Metal Gear franchise and teased a remake in its Silent Hill franchise, which generated buzz in the gaming community and drove share price momentum. |
Digital Entertainment Video Games Franchises Online Features |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Mar 31, 2026 | Fund Letters | Shelton International Select Equity Fund | LYC.AX | Lynas Rare Earths | Other Industrial Metals & Mining | Diversified Metals & Mining | Bull | Australian Securities Exchange | Australia, Commodities, Critical Minerals, geopolitical, materials, Rare Earth Mining, supply chain diversification | Login |
| Mar 31, 2026 | Fund Letters | Shelton International Select Equity Fund | 6113.T | Amada Co. | Specialty Industrial Machinery | Industrial Machinery | Bull | New York Stock Exchange | AI infrastructure, Factory Automation, Industrial Equipment, Japan, Laser Systems, manufacturing, Precision Machinery | Login |
| Mar 31, 2026 | Fund Letters | Shelton International Select Equity Fund | VET.TO | Vermilion Energy | Oil & Gas E&P | Oil & Gas Exploration & Production | Bull | Toronto Stock Exchange | Canada, cash flow, Diversified Production, dividend, energy, geopolitical, oil and gas, Portfolio Hedge | Login |
| Aug 22, 2025 | Fund Letters | Derek Izuel | 9766 JP | Konami Group Corporation | Communication Services | Interactive Home Entertainment | Bull | New York Stock Exchange | Content, Engagement, Franchises, Gaming, Ip | Login |
| Jun 30, 2025 | Fund Letters | Shelton International Select Equity Fund | STN.TO | Stantec Inc | Industrials | Professional Services | Bull | Toronto Stock Exchange | Canada, engineering, Equity, growth, infrastructure, professional services | Login |
| Jun 30, 2025 | Fund Letters | Shelton International Select Equity Fund | 9766.T | Konami Group Corp | Communication Services | Interactive Media & Services | Bull | Tokyo Stock Exchange | Digital Entertainment, Equity, Franchises, Gaming, growth, Japan, Video games | Login |
| Jun 30, 2025 | Fund Letters | Shelton International Select Equity Fund | 9962.T | Misumi Group Inc | Industrials | Trading Companies & Distributors | Bear | Tokyo Stock Exchange | acquisition, dividend, Equity, Factory Automation, Japan, Manufacturing Components, Value | Login |
| Jun 30, 2025 | Fund Letters | Shelton International Select Equity Fund | 7751.T | Canon Inc | Technology | Technology Hardware, Storage & Peripherals | Bear | Tokyo Stock Exchange | Equity, Imaging Equipment, Japan, Optical Products, Share Buyback, technology hardware, Value | Login |
| TICKER | COMMENTARY |
|---|---|
| LYC.AX | Lynas Rare Earths was the top individual stock contributor with a return of 78.5% in the quarter. Lynas is an Australian mining company and one of the few scaled rare earth producers with processing facilities outside China — a strategic position that carries increasing significance as governments and manufacturers seek to diversify critical mineral supply chains. After a difficult end to 2025, when unexpected production disruptions weighed on the stock, investor focus in Q1 shifted decisively back to the structural scarcity of rare earth supply outside China — a theme that only intensified as the Iran conflict raised broader questions about commodity supply chain resilience. We maintained our position through the earlier volatility, and it was rewarded in Q1. |
| 6113.T | Amada Co. returned 16.6% for the quarter. The Japanese precision machinery and laser systems manufacturer benefited from strong order activity driven by the continued buildout of AI-related manufacturing capacity — factory automation, precision fabrication, and sheet metal processing demand all showed resilience through February. |
| VET.TO | Vermilion Energy added performance to the portfolio, returning +66.3%. The Canadian oil and gas producer was a direct beneficiary of the energy shock — Brent crude rose more than 43% in March alone — and Vermilion's diversified production base across Europe, North America, and Australia positioned it to benefit across geographies. This was a case where a position held for its cash flow and dividend characteristics became an unexpected portfolio hedge in a period of sharp energy price dislocation. |
| KLR.L | Keller Group and Ericsson also contributed meaningfully. Keller, the UK-listed geotechnical engineering firm, continued to benefit from elevated infrastructure activity across its European and North American project pipeline. |
| ERIC | Ericsson's exposure to the ongoing global network buildout — particularly 5G and AI-adjacent infrastructure investment — drove its +15.2% return. |
| 4902.T | Konica Minolta declined by -24.9%. The Japanese office technology and healthcare imaging company faced a confluence of pressures: continued structural headwinds from declining print volumes, cautious enterprise technology spending, and the oil shock's effect on Japanese manufacturing cost structures. Konica Minolta has been navigating a multi-year transition toward healthcare and industrial precision imaging, but the pace of that transition remains a source of investor uncertainty. |
| GAMA.L | Gamma Communications returned -24.7% in the quarter. The UK-listed business telecommunications provider sold off sharply in the risk-off March environment, amplified by concerns that its enterprise client base may face margin pressure as energy costs rise. The stock had been a strong performer in 2025 on the strength of its cloud communications growth, and we view the Q1 decline as partly an unwinding of that prior momentum rather than a fundamental deterioration. |
| DLG.MI | De'Longhi fell by 19.4%. The Italian premium appliance maker is exposed to European consumer discretionary spending, which deteriorated sharply in March as energy cost concerns weighed on household confidence. The ECB's hawkish pivot — markets moved from pricing rate cuts to pricing potential hikes — was a meaningful headwind for a consumer-facing European company at this valuation level. |
| CHC.AX | Charter Hall Group declined during the quarter, returning -21.7%. The Australian real estate fund manager had been a strong performer in 2025, supported by a guidance upgrade, active property acquisition activity, and improving sentiment toward Australian real assets. In Q1, rising long bond yields globally — driven by the oil-shock-induced repricing of central bank expectations — weighed mechanically on real estate investment trust valuations. We view Charter Hall's Q1 decline as primarily a rates-driven re-rating rather than a reflection of any change in its underlying business trajectory. |
| 4506.T | Sumitomo Pharma fell by 11.8%. The Japanese pharmaceutical company has built a compelling position in oncology, with its flagship drug Orgovyx generating strong commercial results. In Q1, investor sentiment softened as the market reassessed the pace of growth in that franchise and the timeline for broader pipeline contributions. |
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