Happy Friday!
In this week’s letters,
– Minot Light Capital Partners on the economy and market drivers
– Artisan Focus Fund on market uncertainty and concentration
– ACR Alpine Capital on market volatility and risks
– Elevator pitches for CSL, CF, and DT
Quarter in progress: 464 fund letters of 2026 Q1 are live on our database!
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Q1 2026 INVESTOR LETTER SUMMARIES
- We believe the general macro narrative that drove this sector rotation is that an extended war will lead to an acceleration in raw material shortages and inflation, which is good for oil & gas and basic materials. This would inevitably lead to higher interest rates and pain for the U.S. consumer.
- Potential consumer weakness would be magnified if rapid AI progress leads to a meaningful increase in unemployment. Furthermore, this narrative implies that defense spending by the government could increase dramatically, potentially crowding out healthcare spending and forcing cuts.
- In this scenario, defense spending would join the AI infrastructure build as one of the dominant drivers of GDP growth, while healthcare and consumer spending would remain under pressure.
- Entering 2026, the 10 largest software sector companies in the S&P 500® Index derived around 55% of their current valuation, on a median basis, from the net present value of the next 10 years’ cash flow in the discounted cash flow model. This means that the remainder of their valuations, or approximately 45%, came from assumptions beyond the year 2036.
- Geopolitical developments have reintroduced a different kind of uncertainty, one that resists quantification altogether. Escalation involving Iran is not simply a macro variable to plug into a model. It affects energy markets, global risk appetite, inflation, and policy responses in ways that are nonlinear and path dependent.
- We believe the U.S. is entering a new phase of industrial expansion that is often characterized as cyclical but is more appropriately understood as the early stages of a multi-decade rebuild of domestic productive capacity. For over two decades, U.S. consumption and production diverged.
- The U.S. shocked the world when Operation Epic Fury was launched on February 28th. Despite devastating attacks on Iranian military assets, Iran’s hardline regime has remained undeterred. As we write, a fragile ceasefire is in place, with a contested and closed Strait of Hormuz.
- The rise in energy prices is causing knock-on effects on producer prices, consumer prices, and demand. However, we believe the negative impact on consumption and our holdings in consumer cyclicals is likely to be short-lived and immaterial from a valuation perspective. In our view, both the U.S. and Iran are motivated to de-escalate.
- Recession is always a possibility, but unless hostilities persist and snowball into something worse, we do not think current events in the Middle East will cause a recession. The investments most impacted by recent events are naturally related to energy, so this is a good time to discuss how we adjust these direct exposures for commodity price volatility.
ELEVATOR PITCHES BY FUNDS
Carlisle Companies (by ROCKLINC Partners)
- Building owners, contractors, and architects alike turn to Carlisle to manufacture materials for the entire building envelope, the “skin” of the building that keeps heat in and rain out. As one of the few manufacturers in the United States, Carlisle is able to provide a full-coverage warranty that no small competitor can match.
- The typical 20- to 30-year full-coverage warranty creates a natural replacement cycle, as owners prioritize complete retrofits to secure a new long-term guaranteed warranty.
- With over 70% of the U.S. non-residential building stock exceeding 25 years of age, Carlisle is well positioned to accelerate growth and expand margins.
CF Industries (by Spheria Global Opportunities)
- CF Industries is North America’s largest nitrogen fertiliser producer, manufacturing ammonia, urea, UAN and ammonium nitrate from its network of plants across the US and Canada.
- CF’s business model is built around the nitrogen “spread”, meaning it purchases North American natural gas as its primary feedstock (at Henry Hub prices) and sells nitrogen products whose prices are set by global marginal cost producers.
- Whilst the magnitude of the near-term earnings tailwind will depend on the duration of the supply disruption, we are comfortable owning a high-quality, cash-generative business.
Dynatrace (by Starboard Value)
- We made a substantial investment in Dynatrace because we believe the Company is a high-quality, durable observability platform with a long runway for continued growth and an opportunity for significant margin expansion.
- Enterprise adoption of AI should ultimately result in accelerating revenue growth for Dynatrace. As enterprises deploy more applications and more AI agents, the volume and complexity of telemetry data will grow materially.
- If Dynatrace can execute on these opportunities, we believe Dynatrace can generate more than $3.30 of free cash flow per share by FY2029, nearly double FY2026 levels.
HIGHLIGHT OF THIS WEEK
MEDIA APPEARANCES BY BSDs
SoftBank Plans to Create and List AI Vehicle Roze in the US
- SoftBank Group Corp. plans to establish and list an AI and robotics company called Roze in the US, potentially raising capital to propel founder Masayoshi Son’s growing bets on artificial intelligence.
- The company aims to create and float Roze as soon as this year, though the timing could slip to 2027, according to people familiar with the matter.
Boaz Weinstein Set to Triumph in Fight for Baillie Gifford Trust
- Boaz Weinstein is set to win a vote to oust the board of a Baillie Gifford & Co. trust that placed an early bet on SpaceX, the activist investor’s biggest win in his long campaign targeting British investment trusts.
- A proposal by Weinstein’s Saba Capital Management is expected to have garnered enough support to replace the entire board of Edinburgh Worldwide Investment Trust with three candidates nominated by the hedge fund, the trust said in a statement on Thursday.
Warren Buffett has stepped aside. Berkshire is now Greg Abel’s show.
- Berkshire Hathaway (BRKa.N), opens new tab shareholders making the pilgrimage to Omaha, Nebraska, for the conglomerate’s annual shareholder weekend will find much that looks familiar.
- Discount shopping. The 5K run. Tens of thousands of like-minded investors and Berkshire fans. It is by far the largest shareholder gathering in corporate America.
- Warren Buffett will be there. But for the first time in 60 years, the spotlight will not be his.
