Happy Friday!
In this week’s letters,
– Oldfield Partners on US equity concentration and diversifications
– Old West Investment Management on AI valuation gap and natural gas
– Burke Wealth Management on FED, Supreme Court and SaaS
– Elevator pitches for ESI CN, BOBS, and RWE GR
Quarter in progress: 595 fund letters of 2026 Q1 are live on our database!
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Q1 2026 INVESTOR LETTER SUMMARIES
- For investors whose portfolios are heavily concentrated in US equities, this means diversifying away from the US toward other markets, or parts of markets, that are attractively valued.In the US, the Shiller price-to-earnings ratio is at a level that has historically been followed by negative real returns over the subsequent ten years.
- Outside the US, the picture is different. Take the UK as one example. Since June 2016, the combined effects of Brexit and a series of unsuccessful prime ministers have led to sustained investor outflows. Over the 118 months since then, the UK stock market has experienced net outflows in 114 of them.
- Japan is another example. Investors once had to justify why Japanese companies traded at much higher price-to-earnings ratios and other valuation multiples than companies in other markets. That is no longer the case. The long decline in the Japanese stock market, which lasted until very recent years, has left many good companies trading at attractive valuations.
Old West Investment Management
- The largest gaps between price and value over the next decade may be found at the intersection of artificial intelligence and the physical economy. The rise of AI agents, or machines that can operate 24/7 and perform tasks in the physical world, creates a new source of demand and a potential source of strain on physical infrastructure.
- One area that deserves attention is natural gas, which ended the quarter near seventeen-month lows. We understand the reasons often cited for its current weakness, but we still find the situation unusual. Electricity is already in short supply, and the largest technology companies in the world are committing hundreds of billions of dollars to build data centers that require enormous amounts of power.
- This is a period of rapid change. The marginal cost of intelligence appears to be moving toward zero, but the marginal cost of the physical world is not. Nearly every major event this quarter, including geopolitical conflict, supply disruptions, commodity price spikes, and the scramble for physical resources, reinforced the same point: as AI becomes more capable, the economy does not become less physical. It becomes more physical.
- The Federal Reserve is also entering a potential period of policy change. Kevin Warsh has been nominated as the next Fed Chair. His support for a smaller Federal Reserve balance sheet and greater rate flexibility in response to AI-driven productivity changes would mark a clear departure from current policy. However, his nomination is likely to face meaningful bipartisan friction.
- The Supreme Court also delivered an important ruling on tariffs. In a 6–3 decision, the Court struck down blanket tariffs based on IEEPA authority, but preserved most of the 2025 trade reset. The ruling also did not create a refund mechanism for importers. As a result, the decision appears to be largely status quo for markets.
- Enterprise software remains under pressure, including companies such as Salesforce, CrowdStrike, ServiceNow, and Snowflake. Strong earnings results and accelerating guidance have not been enough to change investor sentiment. Valuations are now at ten-year lows. We believe the market’s indiscriminate AI-disruption sell-off has gone too far and is approaching its conclusion.
ELEVATOR PITCHES BY FUNDS
Ensign Energy Services(by Bison Energy)
- Drilling companies tend to benefit with a lag when oil prices rise, as higher prices typically lead to more rig additions, higher utilization, stronger day rates, and better cash flow. Ensign also has exposure to increased drilling activity in Venezuela.
- We also believe the typical refinancing risk associated with leverage is substantially mitigated in Ensign’s case by its two largest shareholders.
- After adjusting for net debt and shares outstanding, this equates to an estimated replacement value of $17.4 per share versus a current share price of $3.5. Replacement value is a useful benchmark for cyclical oilfield service businesses.
Bob’s Discount Furniture (by Minot Light Capital)
- Bob’s Discount Furniture is an everyday low-price furniture retailer that recently IPO’d at $17.00/share and peaked soon after at around $22.50/share. Since then, it has gone straight down to $10.85/share as we write this letter.
- Even though the housing market has been very weak for several years now, Bob’s has demonstrated top-tier metrics relative to the broader retail universe.
- Bob’s is easily funding all new unit growth with internally generated cash flows with an abundance of free cash to spare.
- The company’s balance sheet is extremely strong post-IPO with no debt and significant cash on hand.
- RWE is a German energy major with a deliberately balanced dual model, renewables for growth and flexible gas generation for stability.
- It has a role in powering the next phase of technological expansion. Electrification across transport, heating and industry is already lifting baseline demand, but the real inflection comes from data centres and AI.
- Around 80% of its power purchase agreements are now driven by data centres, and its extended agreement with ASML underscores its relevance to the semiconductor supply chain. In effect, while Nvidia sells the picks and shovels, RWE is supplying the electricity required to use them.
HIGHLIGHT OF THIS WEEK
MEDIA APPEARANCES BY BSDs
Larry Fink Predicts Birth of Futures Market for Computing Power
- A new asset class will be buying futures of compute. We just don’t have enough compute power right now.
- There is not an AI bubble. There is the opposite. We have supply shortages. Demand is growing much faster than anyone has ever anticipated.
- For the next 10 years, we will be rewiring the global economy.
Peter Thiel backs $1bn ocean data centre start-up powered by waves
- Peter Thiel is leading a $140mn investment in a US start-up that plans to use wave energy to fuel giant fleets of floating data centres, as Silicon Valley’s search for AI power pushes into exotic new frontiers.
- Panthalassa, which has spent a decade developing its ocean energy technology, uses the bobbing motion of waves to force water through a turbine to produce electricity and power AI chips.
- Thiel, a co-founder of Palantir and PayPal, said: “The future demands more compute than we can imagine. Extraterrestrial solutions are no longer science fiction. Panthalassa has opened the ocean frontier.”
AI Investor Coatue Joins Data-Center Frenzy With New Venture to Buy Land
- Coatue Management doesn’t just want to invest in the hottest artificial-intelligence companies. It wants to get in at the ground level—literally.
- Philippe Laffont’s $70 billion investment firm, known for big bets on tech stocks and startups, has launched a venture to buy land that will be developed for AI data centers, according to people familiar with the matter. Tens of billions of dollars could be spent on the effort, the people said.
