Happy Friday!
In this week’s letters,
– Focus Wealth Management on AI valuation and complacency
– Capicraft Investment Partners on Uranium, precious metals and the FED
– Boyar Value Group on market valuation and the FED
– Elevator pitches for EVT AU, CVS, and CLS
Quarter in progress: 233 fund letters of 2026 Q2 are live on our database!
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Q2 2026 INVESTOR LETTER SUMMARIES
- Many investors appear to view current conditions as unremarkable and continue to argue that prevailing valuations are justified. This complacency is itself a reliable warning signal. Although we generally advise clients to ignore the news, there are two circumstances in which we depart from this position and recommend paying close attention.
- The first occurs when investors are panicking, asset prices are collapsing, and fear has produced excessively pessimistic assumptions about the future. During periods such as 2002, 2009, and 2020, investors with the discipline and conviction to withstand the volatility were often able to capitalize on exceptional long-term buying opportunities.
- The second occurs when investors have become so complacent that they have abandoned any meaningful consideration of risk. When people genuinely believe that stock prices can only rise, when those who question the prevailing optimism are treated as irrational, and when everyone around us appears to profit by abandoning sound investment principles, the greatest risks are often already present. At that point, it is time to proceed with caution.
- Uranium-related shares have fallen sharply from the speculative highs reached at the end of February. Many speculators entered the sector during the preceding rally and have since been shaken out. Fortunately, as prices approached their highs, we had already reduced the Creator Fund’s uranium exposure from approximately 9% to 7%.
- Precious metals remain a scarce asset class that can provide portfolio diversification across a range of market environments. Gold has historically added value during periods of inflation, deflation, uncertainty, and geopolitical change. It also has a tendency to generate returns when investors least expect it.
- We also do not believe that the Federal Reserve, or most other central banks, can maintain a restrictive monetary stance indefinitely. The same underlying forces that support our precious-metals exposure—high debt levels, rising interest burdens, geopolitical fragmentation, and declining confidence in traditional reserve assets—are also making economies increasingly sensitive to high real interest rates.
- Peter Berezin, chief global strategist at BCA Research, recently argued that artificial intelligence is indeed in a bubble, but that it differs from the bubbles investors are accustomed to seeing. In the case of AI, he suggested that “the bubble is in earnings rather than in valuations.” It is a clever observation and one worth examining because it captures both the similarities to and the differences from the dot-com era.
- For years, the standard criticism of the U.S. equity market was that its largest companies were also its most expensive. That remains true, although the valuation gap has narrowed considerably. According to J.P. Morgan, the ten largest companies in the S&P 500 now trade at 21.6 times expected earnings for the next year, compared with 19.6 times for the remaining 490 companies. This represents a premium of roughly 10%.
- The quarter also brought a change in leadership in Washington. Kevin Warsh was confirmed in May as Chair of the Federal Reserve and quickly adopted a more hawkish stance on inflation than markets had expected. At one point, investors began pricing in the possibility that the Federal Reserve’s next move could be an interest-rate increase rather than a cut.
ELEVATOR PITCHES BY FUNDS
EVT Limited (by East72 Dynasty)
- EVT is the antithesis of a US activist capital management story. EVT is a A$2.1 billion entertainment and leisure business built around a series of assets accumulated in the 1930’s (cinemas and properties) and in the 1980’s and 2000’s.
- At $12.88, EVT trades at a rough 34% discount to ascribed PRE TAX value per share of $19.42.
- There will continue to be growth in the asset value of EVT, from management initiative, that there will be some closure in discount to NAV as enhancement initiatives bear fruit, not that the company will be sold off or broken up ante mortem.
CVS Health (by RS Large Cap Val)
- CVS Health is a diversified healthcare services company with leading positions in pharmacy benefits management, retail pharmacy, and health insurance (via its Aetna franchise).
- During the second quarter, CVS benefited from both company-specific execution and improving industry fundamentals. The company reported strong first-quarter results, raised full-year guidance, and saw S&P revise its credit outlook from negative to stable.
- Additionally, Medicare Advantage insurers received a meaningful tailwind when The Centers for Medicare & Medicaid Services (CMS) finalized a 2.5% rate increase for 2027.
Celestica Inc. (by Deep Sail Capital)
- Celestica has transitioned from its legacy roots as an IBM captive manufacturer to become a design and technology integration leader within the AI and cloud infrastructure space.
- Celestica is undergoing a structural margin expansion driven by its shift away from standard, low-margin contract manufacturing toward proprietary JDM services-led monetization.
- Until 2028, the architecture in data centers begin to push the envelope of technology and physics, which requires specialty design, engineering, and manufacturing that Celestica specializes in. It is the cheapest way to invest in growth in these AI trends; believe me I have looked at the entire space.
HIGHLIGHT OF THIS WEEK
MEDIA APPEARANCES BY BSDs
Burry says buying a home is rarely a good investment, but may still be worth it
- Michael Burry, who knows a thing or two about the housing market, says that buying a home is usually a mediocre investment.
- “I calculated the long-term after tax return on residential real estate over a 50 year adult life is about 4.5% after tax including expected maintenance costs,” he said in a Substack post on Monday.
SoftBank’s Son says AI will need $5 trillion per year by 2040, dismisses bubble
- The development of AI will require investment of $5 trillion each year by 2040, and any talk of a bubble forming around the technology is “absurd”, SoftBank Group (9984.T), opens new tab CEO Masayoshi Son said on Tuesday.
- Over the past two years, the technology investment group has embarked on an expansive investment programme to establish itself as a core AI platform, putting tens of billions into OpenAI, financing data centres and investing in robotics firms.
Ken Griffin Gives Millions to Back GOP in Tight Senate Races
- Ken Griffin, one of the biggest Republican political donors, gave $10 million to the party’s main Senate super political action committee and poured in millions more to bolster candidates in races the GOP must win to hold its majority, the latest Federal Election Commission filings show.
