| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 5.2% | -10.5% | -10.5% |
SGA's International Growth Portfolio returned -10.3% gross in Q1 2026, underperforming the MSCI ACWI ex USA return of -0.7% due to limited participation in AI hardware momentum and no exposure to energy stocks that benefited from Middle East conflict. The portfolio's underperformance occurred entirely in January-February, with relative performance turning positive in March as geopolitical risks increased. Despite fundamental delivery with portfolio companies growing revenues 11% and earnings 14%, holdings experienced 10% multiple contraction due to sentiment rotation. The portfolio now trades at its most attractive valuation relative to the market since 2017. Key contributors included Arm Holdings, TSMC, and Linde, while detractors were Adyen, SAP, and HDFC Bank. SGA initiated a new position in Spotify and exited Heineken and Dassault Systemes. The manager believes quality compounders are positioned for outperformance as AI momentum moderates and energy headwinds mount, with high conviction in the portfolio's attractive risk-adjusted return potential.
SGA builds high-conviction portfolios focused on quality growth businesses anticipated to achieve consistent mid-teens earnings growth with reduced variability, supported by predictable revenue and cash flow generation, designed to protect and reliably compound client wealth over time.
SGA believes conditions for meaningful rotation towards quality compounders are building as energy headwinds mount and AI investment cycle matures. The portfolio trades at discount to market not seen since 2017 despite strong fundamental execution, creating attractive setup for strong performance. Manager has high conviction in positioning to navigate turbulence ahead and believes it sets stage for attractive risk-adjusted returns in quarters ahead.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 28 2026 | 2026 Q1 | ADYEY, ARM, HDB, LIN, SAP, SPOT, TSM | AI, energy, Geopolitical, growth, international, Quality, semiconductors, valuation | - | SGA's international growth strategy underperformed in Q1 2026 due to limited AI hardware exposure and energy conflict dynamics, but portfolio fundamentals remain strong with companies delivering consistent growth. Trading at most attractive valuation versus market since 2017, manager sees compelling setup for quality compounders as momentum conditions moderate and rotation toward predictable growth accelerates. |
| Feb 8 2026 | 2025 Q4 | 1299.HK, 6098.T, 9983.T, ADYEN.AS, ALC, AON, ARM, BABA, CP, DSY.PA, EXPN.L, FEMSAUBD.MX, GALD, GRAB, HDFCBANK.NS, HEIA.AS, HLN.L, INFY, LIN, MELI, OR.PA, SAP, SE, SGE.L, SHOP, SRT3.DE, STE, TEAM, TSM, UL, UMG.AS, WALMEX.MX, WCN, YUMC | AI, Cyclical, E-Commerce, growth, international, Quality, Southeast Asia, valuation |
9983 JP SRT GR DSY FP ARM TEAM |
SGA International Growth underperformed in Q4 as cyclical assets dominated quality growth strategies. Despite challenging year, portfolio maintains strong long-term track record with 6.4% net annualized returns since inception. Quality factor now at historically depressed levels creates attractive setup for 2026. New Southeast Asian positions in Sea Limited and Grab Holdings reflect conviction in regional e-commerce growth opportunities. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
AIAI infrastructure spending continued to drive market performance through February, with hyperscalers committing over $650 billion in 2026 CapEx. However, geopolitical risks in March led to AI momentum pullback. SGA sees AI disruption risks for some holdings but believes companies like Infosys, Universal Music Group, and SAP are adapting to reinforce competitive advantages rather than being displaced. |
Infrastructure CapEx Disruption Adaptation Hyperscalers |
SemiconductorsMemory providers like SK Hynix and Samsung saw massive gains through February on supply constraints and HBM demand, but corrected 30% in March. SGA avoids memory providers due to boom-bust cycles and commodity pricing, preferring TSMC's monopolistic position in high-performance compute chip production with technological leadership and careful capacity expansion. |
Memory HBM Supply Foundries Cycles | |
EnergyMilitary conflict in Iran disrupted global energy markets, pushing Brent crude above $100 from $70. Energy stocks outperformed significantly in March as the immediate beneficiaries of higher oil prices. The disruption affected oil-importing economies like Southeast Asia and India, weighing on consumer spending and business sentiment. |
Geopolitical Oil Disruption Prices Conflict | |
GrowthSGA's portfolio companies delivered 11% and 14% revenue and earnings growth in the latest quarter, consistent with historical averages. The portfolio is expected to generate 16% growth over the next three years while valuations are becoming increasingly attractive. Portfolio trades at discount to market not seen since 2017 despite strong fundamental execution. |
Earnings Revenue Compounding Valuation Execution | |
QualitySGA emphasizes owning high-quality businesses with predictable revenue and cash flow generation. Despite fundamental delivery, portfolio holdings experienced 10% contraction in price-to-earnings multiples due to sentiment and style rotation. Manager believes quality compounders are positioned for outperformance as momentum conditions moderate. |
Fundamentals Predictable Multiples Rotation Compounders | |
| 2025 Q4 |
Live SportsMario Gabelli emphasizes live entertainment and sports as major investment themes, citing massive viewership numbers and recommending Atlanta Braves Holdings, Madison Square Garden Sports, and Manchester United as core positions. He views sports teams as increasingly attractive to institutional investors with significant upside potential. |
Sports Entertainment Media Teams Valuation |
MediaGabelli recommends Fox and Versant Media Group as media investments, highlighting Fox's sports broadcasting rights including NFL and World Cup coverage, along with strong buyback programs. Versant was recently spun off from Comcast and presents opportunities due to index fund selling pressure. |
Broadcasting Content Streaming Networks Spinoffs | |
Natural GasNational Fuel Gas is recommended based on its substantial mineral ownership in the Appalachian Basin overlying Marcellus and Utica shales. Gabelli sees unappreciated value in strategically located gas reserves near population centers, with potential for higher earnings and possible company split-up. |
Utilities Energy Infrastructure Reserves Valuation | |
AIGabelli acknowledges AI's transformative impact but warns of potential disappointment for investors, comparing it to historical technological revolutions with speculative bubbles. He expects AI will touch everything but sees challenges in identifying winners versus losers, favoring experiences and manufacturing over direct AI plays. |
Technology Innovation Disruption Valuation Risk | |
AerospaceAlbany International is highlighted for its aerospace composites business supplying lightweight parts for LEAP engines. The company is exploring strategic alternatives and potential spin-off of its structures assembly business, which could unlock value through separation of mature and high-growth segments. |
Defense Manufacturing Composites Spinoffs Restructuring |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Feb 8, 2026 | Fund Letters | Tucker Brown | 9983 JP | Fast Retailing Co., Ltd. | Consumer Discretionary | Apparel Retail | Bull | New York Stock Exchange | China, fashion, Japan, Moat, retail | Login |
| Feb 8, 2026 | Fund Letters | Tucker Brown | SRT GR | Sartorius AG | Health Care | Life Sciences Tools & Services | Bull | Xetra | Bioprocessing, Consumables, earnings growth, lifesciences, Margins | Login |
| Feb 8, 2026 | Fund Letters | Tucker Brown | DSY FP | Dassault Systemes SE | Information Technology | Application Software | Bull | Euronext Stock Exchange | engineering, Lifecycle, SaaS, Software, Subscriptions | Login |
| Feb 8, 2026 | Fund Letters | Tucker Brown | ARM | Arm Holdings plc | Information Technology | Semiconductors | Bull | NASDAQ | AI, architecture, datacenters, royalties, semiconductors | Login |
| Feb 8, 2026 | Fund Letters | Tucker Brown | TEAM | Atlassian Corp. | Information Technology | Application Software | Bear | NASDAQ | AI, Collaboration, Rotation, Software, uncertainty | Login |
| TICKER | COMMENTARY |
|---|---|
| TSM | Taiwan Semiconductor Manufacturing Company (TSMC) was a top contributor to performance during the quarter as its central role in AI-driven semiconductor demand continued. The company delivered margins that proved more resilient than feared and management reaffirmed roughly 30% revenue growth for the year. The company also raised its AI revenue growth outlook to a mid-to-high-50% CAGR through 2029, underscoring its integral role in accelerating AI infrastructure demand, and the positive outlook continued to be supported by a strong January sales report. TSMC's leadership in cutting-edge process nodes remains undisputed. Strategic steps to diversify manufacturing outside Taiwan, including new facilities in the U.S., Japan and Germany, further strengthen TSMC's position. With its technology leadership, strong customer relationships, and disciplined execution, TSMC remains well-positioned to deliver strong double-digit revenue and earnings growth over the coming years, and we maintained our above-average weight position during the quarter. |
| ARM | Arm Holdings was a top contributor to returns during the quarter. Shares responded positively following strong fiscal third quarter results, with revenue and royalty growth exceeding expectations, driven by accelerating data center adoption, and rising penetration of Arm's CSS platform in smartphone, automotive, and infrastructure segments. Importantly, management reiterated confidence in sustaining approximately 20% royalty growth longer term, reinforcing the market's confidence in Arm's structural growth profile. While near term concerns around smartphone unit softness due to higher memory costs persisted, company commentary highlighted that Arm's royalty economics are increasingly skewed toward high end devices, where royalties per unit are significantly higher, allowing royalty growth even in a declining unit environment. In parallel, investor focus sharpened on Arm's expanding role in AI, particularly as CPUs take on a critical coordination role in agentic workflows. Growing adoption by hyperscalers, including broader use of Arm CPUs for AI adjacent workloads, reinforced this narrative. These developments reinforced our thesis that Arm is becoming a foundational architecture not only for mobile computing but also for AI driven data center, edge, and embedded applications. With strong pricing power, highly recurring revenues, and expanding royalty rates as Arm captures more value across the compute stack, we continue to view the company as a high-quality, long-term compounder well-positioned to benefit from the proliferation of AI and power efficient computing. |
| LIN | Linde, the world's largest industrial gas company, was a top contributor to performance during the quarter. The company delivered solid results despite geopolitical and macroeconomic headwinds, with sales and EPS up approximately 6% each. Later in the quarter, the conflict in the Middle East drove a spike in European natural gas prices; however, Linde's ability to pass through higher energy prices to customers should help protect margins. Additionally, elevated helium prices provided a modest tailwind. While Linde is benefiting from its position as the largest U.S. helium producer, much of its helium is sold via long term contracts. If prices stay elevated over the medium term, they can benefit further as contracts rollover. Although helium accounts for less than 5% of revenue, its strategic importance in semiconductor manufacturing added to investor enthusiasm. Linde remains an attractive long-term investment due to Linde's durable business model and structural advantages. A large portion of revenues is derived from long-term, recurring contracts with customers in essential end markets, supporting pricing power and cash flow visibility even in a softer growth environment. The company is also well-positioned in secular growth areas such as electronics, where management expressed high confidence in its competitive standing with leading semiconductor fabrication customers, and offers additional upside optionality from emerging opportunities in space-related applications. |
| SPOT | We initiated a new position in Spotify, the world's largest audio streaming platform, which operates a global freemium model across music, podcasts, audiobooks, and emerging interactive audio formats. We see a compelling long-term growth opportunity driven by Spotify's leading scale, high engagement, and a long runway for subscriber growth, pricing, and improved monetization. Pricing power has been supported by personalization, curated playlists, and rising switching costs tied to user data, with limited churn following multiple price increases globally. Recurring subscription revenue represents over 90% of profits and is reinforced by strong engagement, while the ad-supported tier serves as an effective funnel for premium conversion. Industry dynamics have improved as updated label agreements promote more rational pricing. Additional growth opportunities include average revenue per user (ARPU) expansion in developed markets through price increases, continued subscriber growth in underpenetrated regions, scaling of the advertising business, audiobook and podcast expansion, marketplace tools for creators, and the potential introduction of higher-priced or AI-enabled tiers that could increase lifetime value and ARPU. |
| ADYEY | Adyen was a detractor from performance during the quarter following fourth quarter results and a more cautious 2026 outlook. Fourth quarter revenue missed expectations by 2-3 pts, and 2026 revenue guidance was lowered from low-to-mid 20s to 20-22%, less than three months following the company's capital markets day, raising concerns regarding the consumer spending environment and competition. However, we believe the revenue miss and guidance cut were a result of poor communication by management, not a significant deterioration in market volumes or competitive pressures. The initial guide was issued before the company conducted its rigorous annual reviews with customers, and therefore more preliminary than the company led investors to believe. In reality, the slight cut to guidance was the result of the timing of customers' rollouts of new markets and incremental Adyen products, not lost business. Despite the disappointment, we remain confident in Adyen's long-term outlook. The company continues to demonstrate strong pricing power, supported by higher authorization rates, lower fraud and chargebacks, and a lower total cost of ownership for merchants through its single, fully integrated platform. Revenues are highly repeatable, underpinned by billions of transactions annually and very low customer attrition. These strengths position Adyen well to capture secular growth in global electronic payments, omnichannel commerce, and an expanding mix of local and alternative payment methods supporting 20% sales and earnings growth over the next three years. |
| SAP | SAP, the global leader in enterprise resource planning application software, was a detractor from performance during the quarter as concerns mounted around the company's positioning in the evolving AI landscape. Shares were weak after SAP reported Q4 current cloud backlog growth of 25% on a constant currency basis, below the company's stated 26% target. Additionally, questions of whether SAP's products risk becoming secondary systems of record rather than primary systems of engagement, potentially weakening its pricing power added to concerns. Broader macroeconomic uncertainty also weighed on sentiment, with investors cautious about near-term enterprise software spending. Despite missing short-term backlog expectations, SAP's revenue growth is expected to accelerate by 1% in constant currency in 2026 to over 10% while free cash flow will also increase by ~20% during the year. Furthermore, as evidence of cloud and AI demand, management asserted the closure of more, larger complex deals with total cloud backlog growth of 30% in constant currency, of which two-thirds of deals in Q4 involved SAP's AI products. Despite lingering uncertainty around the company's ability to execute a timely rollout of AI features across its cloud offerings we continue to have confidence in SAP's ability to generate double-digit revenue and mid-teens earnings growth over the next three years. |
| HDB | HDFC Bank was a detractor from performance during the quarter following earnings as deposit growth fell short of market expectations. Sentiment was further pressured by the unexpected resignation of the bank's non-executive chairman, which contributed to elevated volatility despite swift action by regulators and the board to reaffirm confidence and the absence of any material operational, financial, or governance issues. Additional headlines related to legacy compliance matters added to near-term noise, despite appearing isolated and non-systemic in nature. Fundamentally, results were solid with net income up 12% backed by good asset quality. Guidance was constructive as management reiterated earnings growth for March and the next fiscal year earnings growth. Asset quality continues to be strong, cost of funding remains well-controlled, and management has reiterated its focus on improving the loan to deposit ratio. As liquidity conditions in India normalize and merger related disruptions fade, we expect loan growth to reaccelerate, margins to stabilize, and operating leverage to improve. Given HDFC Bank's scale, brand strength, and long history of disciplined execution, we see the recent weakness as sentiment driven, and we continue to view the bank as a high-quality, long-term compounder supporting mid-teen earnings and revenue growth, so we maintained an above-average weight position in HDFC Bank. |
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