| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 15.05% | 35.34% | - |
The Osterweis Opportunity Fund delivered exceptional Q2 2026 performance, returning 35.3% versus 25.7% for the Russell 2000 Growth Index, driven primarily by AI infrastructure and semiconductor holdings. The fund's Information Technology sector returned 61% versus 47% for the index, led by SiTime (114% return) and Semtech, both benefiting from AI data center buildout. Industrials also outperformed with Cardinal Infrastructure reporting 64% organic growth and announcing its first data center win. Health Care holdings like Hinge Health delivered strong results, while Consumer Discretionary names including Life Time Group benefited from removal of private equity overhang. Looking ahead, managers acknowledge many AI-related stocks have delivered exceptional returns and may consolidate as infrastructure investment growth moderates. They are taking profits in Technology and Industrials and rotating into less-crowded sectors including select Software, Health Care, and Consumer companies offering attractive fundamentals, compelling valuations, and sustainable long-term growth prospects independent of AI.
The fund capitalizes on explosive AI-driven growth in small cap semiconductors and infrastructure while actively managing concentration risk by rotating profits into undervalued sectors with sustainable growth.
The managers continue to believe AI will remain a key driver of economic growth and market performance but expect a potential consolidation period as spending moderates. They are increasingly focused on underappreciated future AI beneficiaries and companies whose prospects are not directly tied to AI, seeking attractive fundamentals, compelling valuations, and favorable long-term growth prospects in overlooked areas.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 27 2026 | 2026 Q2 | CDIN, FN, FSV, HI, LTH, SITM, SMTC | AI, Data centers, growth, industrials, semiconductors, small caps, technology | - | Osterweis Opportunity Fund returned 35% in Q2 2026, significantly outperforming on AI-driven semiconductor and infrastructure gains. SiTime and Semtech led with triple-digit and strong returns respectively as data center CapEx surged. Managers now rotating profits from crowded AI winners into undervalued Software, Health Care, and Consumer names with sustainable growth, anticipating consolidation as infrastructure spending moderates. |
| Apr 25 2026 | 2026 Q1 | CWST, MOD, MTSI, RGEN, TTAN, TWST | AI, growth, healthcare, innovation, semiconductors, small cap, technology |
MTSI TTAN MOD CWST TWST RGEN |
Osterweis small cap growth fund underperformed slightly in Q1 amid Iran war volatility and AI disruption fears. Strong performance from AI infrastructure plays like MACOM and Modine Manufacturing offset software weakness. Managers reduced software exposure while maintaining focus on innovative companies with sound fundamentals, expecting shift from speculation to fundamentals in 2026. |
| Jan 27 2026 | 2025 Q4 | AX, BIRK, CAVA, CECO, CWST, FSV, GH, GWRE, LSCC, LTH, MOD, MTSI, NOVT, SITM, TREX, TTAN, WAY | AI, Biotech, Fintech, growth, healthcare, semiconductors, small cap, technology | - | Osterweis Opportunity Fund outperformed in Q4 despite lagging for the year, as thematic investing dominated over fundamentals. Strong semiconductor and fintech holdings drove performance while avoiding speculative AI and biotech names. Manager expects return to fundamentals-driven markets and sees opportunities across AI, robotics, and healthcare diagnostics secular trends. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIAI infrastructure and semiconductor companies continued to drive market performance with explosive growth. Anthropic achieved the fastest revenue growth in enterprise software history, reaching $47 billion ARR. AI inference explosion is driving massive CapEx increases, benefiting small cap semiconductor and infrastructure companies in the portfolio. |
Infrastructure Semiconductors CapEx Inference Data Centers |
SemiconductorsSemiconductor holdings delivered exceptional returns, with the IT sector of Russell 2000 Growth returning 47% and the fund's IT holdings returning 61%. Precision timing, connectivity solutions, and optical packaging companies all benefited from AI data center buildout and increased bandwidth requirements. |
Precision Timing Connectivity Optical Packaging Data Centers Bandwidth | |
Data CentersData center demand accelerated significantly driven by AI adoption. SiTime saw increasing adoption in AI data centers for precision timing. Semtech's connectivity solutions are increasingly critical to AI data centers. Cardinal Infrastructure announced their first data center win with strong organic growth. |
AI Infrastructure Connectivity Precision Timing Organic Growth | |
Small CapsSmall cap growth stocks delivered very strong returns with the Russell 2000 Growth Index gaining 25.7% in Q2, the best quarterly return since 2020. The fund outperformed significantly at 35.3%, driven by AI-related small caps, though managers are now rotating into less-crowded sectors with more sustainable growth rates. |
Russell 2000 Outperformance Rotation Growth | |
EarningsRobust corporate profits were the primary driver of the Q2 rally. Portfolio companies demonstrated strong execution with SiTime reporting 88% growth, Cardinal Infrastructure achieving 64% organic growth, and Hinge Health delivering 52% billings growth year-over-year. |
Corporate Profits Growth Execution | |
| 2026 Q1 |
AIAI buildout is creating opportunities for smaller innovative hardware companies, particularly in semiconductors and data center infrastructure. However, AI disruption concerns are pressuring software stocks as AI agents threaten existing business models. |
Hardware Semiconductors Software Disruption Agents |
Data CentersData center growth is driving demand for HVAC equipment and cooling solutions. MACOM is experiencing 35-40% growth in data centers, while Modine Manufacturing provides HVAC equipment to AI data centers. |
HVAC Cooling Infrastructure Growth | |
SemiconductorsSmaller innovative hardware companies are now positioned to benefit from AI buildout, historically dominated by hyperscalers. MACOM designs high performance analog and optical semiconductors with growth across data centers, defense, and communications. |
Analog Optical Hardware Innovation | |
DefenseDefense spending is creating opportunities in electronic warfare and radar applications. MACOM is well positioned due to expertise in power and frequency, supporting missile warning and radar programs. |
Electronic Warfare Radar Power Frequency | |
BiotechnologyBiotech sector showed outperformance during the quarter, though this outperformance may not be sustainable. Twist Bioscience is positioned in liquid biopsy and genomic testing, while also serving as outsourced wet lab for AI genomic databases. |
Liquid Biopsy Genomics Testing Databases | |
| 2025 Q4 |
AfricaFund delivered exceptional performance with 67.21% returns in 2025, significantly outperforming the 44.7% benchmark. Portfolio companies show strong fundamentals with forward PE of 6.1x, dividend yield of 8.0%, and expected EPS growth of 19.2%. Manager emphasizes this represents genuine earnings growth rather than multiple expansion. |
Frontier Markets Emerging Markets Equities Value Growth |
LiquidityManager addresses investor concerns about African frontier market liquidity, explaining structural factors affecting trading volumes. Notes that foreign investor participation, local retail and institutional involvement all impact liquidity. Observes trading volumes declining in key markets but sees potential improvement as bull market develops. |
Market Structure Trading Institutional Foreign Investment | |
ValuePortfolio trades at attractive valuations with forward PE of 6.1x and forward dividend yield of 8.0%. Manager emphasizes no valuation multiple expansion over 5+ years, with share price appreciation driven by earnings growth. Portfolio displays high quality metrics with 2026 ROE of 25.1%. |
Valuation Earnings Dividends Quality |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Apr 25, 2026 | Fund Letters | The Osterweis Opportunity Fund | MTSI | MACOM Technology Solutions Holdings Inc | Semiconductors | Semiconductors & Semiconductor Equipment | Bull | NASDAQ | AI infrastructure, Analog, data centers, Defense, Electronic Warfare, growth, LEO satellites, Optical, semiconductors | Login |
| Apr 25, 2026 | Fund Letters | The Osterweis Opportunity Fund | TTAN | ServiceTitan Inc | Software - Application | Software | Bull | NASDAQ | AI Resilient, Automation, Data Moat, HVAC, SaaS, Skilled Trades, subscription revenue, vertical software | Login |
| Apr 25, 2026 | Fund Letters | The Osterweis Opportunity Fund | MOD | Modine Manufacturing Company | Auto Parts | Industrial Machinery | Bull | New York Stock Exchange | AI infrastructure, Cyclical, data centers, divestiture, growth, Heat Transfer, HVAC, thermal management | Login |
| Apr 25, 2026 | Fund Letters | The Osterweis Opportunity Fund | CWST | Casella Waste Systems Inc | Waste Management | Commercial Services & Supplies | Bull | NASDAQ | compounding, defensive, double-digit growth, Northeastern US, operating leverage, Regional, waste management | Login |
| Apr 25, 2026 | Fund Letters | The Osterweis Opportunity Fund | TWST | Twist Bioscience Corporation | Diagnostics & Research | Life Sciences Tools & Services | Bull | NASDAQ | AI Models, biotechnology, Drug Discovery, Genomics, liquid biopsy, secular growth, Synthetic dna, Wet Lab | Login |
| Apr 25, 2026 | Fund Letters | The Osterweis Opportunity Fund | RGEN | Repligen Corporation | Medical Instruments & Supplies | Life Sciences Tools & Services | Bull | NASDAQ | biologics, Bioprocessing, guidance, Life Sciences Tools, manufacturing, Nih, recovery, Sentiment | Login |
| TICKER | COMMENTARY |
|---|---|
| SITM | Our best performer within IT was SiTime, which returned 114% in the quarter. The company is the leading pure-play precision timing semiconductor company, with increasing adoption in AI data centers and other applications like Apple's iPhone. The company reported 88% growth in its most recent quarter, reflecting broad-based acceleration in its Communications, Enterprise, and Data Center division. SiTime also acquired Renesas's timing business, furthering its target of 25-30% annual growth and 30%+ operating margins. We believe precision timing is an underappreciated part of AI infrastructure, and SiTime is the market leader. |
| SMTC | Another strong performer in IT was Semtech, a leading provider of high-performance analog and mixed-signal semiconductors, whose connectivity solutions are increasingly critical to AI data centers. The company reported strong growth in both its data center and LoRa businesses, which is the company's long-range, ultra-low-power wireless platform designed for the Internet of Things. Management guided to 85% growth next quarter and may also divest its non-core Sierra Wireless business, which would boost gross margins. We believe Semtech is well positioned as a critical supplier in the transition to higher-bandwidth AI interconnect infrastructure. |
| FN | One of our few IT underperformers was Fabrinet, a leading provider of advanced optical packaging and precision manufacturing services to complex technology companies, serving customers across optical communications, networking, and industrial end markets. While Fabrinet reported strong overall growth approaching 40%, ongoing commodity related supply constraints are limiting shipment volumes. We trimmed the position, favoring companies that are demonstrating strong execution in the current environment. |
| CDIN | Our Industrials holdings also outperformed their counterparts in the index, and the biggest contributor was Cardinal Infrastructure. The company reported strong first quarter results, including 64% organic growth, announced their first data center win, and executed a well-priced secondary late in the quarter, generating excitement that more accretive M&A is on the way. The company is still led by its founder and operates in just two states today. We believe there is a meaningful long-term opportunity for Cardinal's superior vertically integrated service model to grow organically and inorganically for many years to come. |
| FSV | On the downside, FirstService, a provider of residential and commercial property services, had a tough Q2 as both its roofing and residential closet businesses remained soft. This has weighed on organic growth for several quarters, but we expect it to pick up in the second half of the year, driven by not only easier comps but a normalization in its storm restoration business (2025 had limited weather activity). Despite the company's soft Q2 results, we are maintaining our position, as revenues should accelerate and its valuation is at the low end of its ten-year history. We also believe it will be a favorable area to allocate capital if the AI trade begins to cool a little. |
| HI | One of our best performers was Hinge Health, a provider of virtual physical therapy that benefitted from exceptional financial results and a realization by investors that this was not a software company prone to AI disruption. Q2 billings increased 52% year-over-year, driven by a combination of new members as well as higher utilization. Furthermore, the company raised Q2 guidance intra-quarter during its analyst day in June. While we are excited by current trends, we do not think Hinge's growth rates are sustainable, so we have been trimming our position. |
| LTH | Our Consumer Discretionary names also outperformed in the second quarter, led by Life Time Group, which operates high-end health clubs nationwide. The company has been a strong performer for the year and a half that we have owned it, consistently beating and raising estimates, however we believe the private equity overhang was holding back the stock. When the company reported its first quarter earnings, it announced that it had reached an agreement with Atairros to purchase shares from PE holders Leonard Green and TPG. The stock responded positively to this news, and then the PE holders sold another block the next day, cutting their combined position to under 10%. We believe that the fears of this secondary overhang are behind us, and investors will now shift their focus to the long-term opportunity of 400-500 gyms nationwide, up from 190 today. |
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