Happy Tuesday!
In this week’s letters,
– Horizon Kinetics on indexation, IPOs, precious metals and Bitcoin
– Zelikovic Investments on AI concerns
– Hirschmann Capital on Gold and gold mining equities
– Elevator pitches for TOI CN, HWM, and HGV
Quarter in progress: 540 fund letters of 2026 Q2 are live on our database!
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Q2 2026 INVESTOR LETTER SUMMARIES
- First, here is the crux of the misunderstanding: we are not antagonistic toward indexation as a concept or toward the way it was originally practiced in the 1970s by Vanguard founder John Bogle. Indexation can be a valuable tool, and it has benefited many investors. We do not disdain overvalued or misrepresentative index funds any more than we disdain an overvalued common stock or a mislabeled industry sector.
- Near-term volatility looms large in investors’ minds and often unsettles their nerves. Someone recently pressed me on the question, “What is the matter with TPL?” He believed something must be wrong because the share price had fallen 30% from its all-time high. I responded that TPL had experienced many declines during the three decades in which he had owned it. He replied—and he is a talented securities analyst and fund manager in his own right—“Yes, but not for this long.” Naturally, I had to investigate further.
- Predicting political outcomes is a perpetual challenge. But what if political outcomes could be reduced to index data points and performance statistics, similar to those used for the S&P 500, together with confidence levels and standard deviations?
- When it comes to AI-related investments, I remain highly skeptical. I believe that many of these investments will ultimately disappoint investors and generate substantial losses. First, as of late 2025, the valuations of the “Magnificent Ten” appear extremely inflated. These are undoubtedly exceptional companies with impressive financial strength, but their current valuations assume that they will continue growing at similarly high rates far into the future.
- Second, the increasing popularity of passive investing worldwide is also contributing to the sharp appreciation of U.S. mega-cap stocks. As global investors continue pouring money into index funds, the gap between the economic value of these companies and their stock-market valuations is likely to widen further.
- Finally, the enormous capital expenditures currently being made by the leading AI companies could materially weaken their future financial performance. One of the main factors that made the “Magnificent Ten” such attractive investments for many years was their exceptionally high profitability. Sustaining that profitability will become more difficult if capital intensity continues to rise.
- Gold’s correlation with risky assets, including U.S. equities, has increased since mid-2025, prompting some investors to question its value as a portfolio diversifier. However, correlations can change abruptly as the macroeconomic environment evolves. For example, U.S. equity and Treasury returns were generally negatively correlated from the late 1990s through mid-2021, but they have been positively correlated since then. Gold’s recent correlation with equities therefore does not necessarily represent a permanent shift.
- Valuation also matters. Even a sovereign debt crisis could produce disappointing returns if investor allocations to gold were already near historical peaks. However, as discussed in my previous letter, current gold allocations remain at roughly half their 1980 peak. Moreover, the sovereign debt crisis I anticipate could be significantly more severe than the inflation crisis of the late 1970s and early 1980s, partly because the U.S. government’s debt-to-GDP ratio is substantially higher today. Gold allocations—and, by extension, gold prices—therefore still have considerable room to rise.
- Gold-mining equities declined sharply during the market selloffs of 2008 and early 2020, and they could again fall temporarily during a broad market crash. However, I expect them to perform very well in the type of crisis for which the Fund is positioned: one characterized by declining confidence in U.S. government debt.
ELEVATOR PITCHES BY FUNDS
Topicus (by Rowan Street Capital)
- The more important development over the past year has been capital allocation rather than quarterly earnings. Topicus built a ~25% ownership stake in Asseco Poland, its largest investment to date, investing approximately €413 million at an estimated valuation of roughly 8x EV/EBITA.
- Despite continued business progress, Topicus shares remain well below their 2025 highs. The decline has been driven primarily by a broader de-rating across vertical market software, as investors weigh the potential impact of artificial intelligence on legacy software businesses. This pressure has been more acute for Topicus than for its parent.
Howmet Aerospace(by Polen Capital)
- Howmet occupies an advantaged position in parts of the engine supply chain where there are very few companies with the technical capabilities, scale, and customer approvals required to compete.
- In certain mission-critical engine components, Howmet is one of only a small number of scaled suppliers, and in some cases effectively serves as the key provider capable of meeting industry demand.
- Importantly, Howmet can potentially benefit from both new aircraft production and aftermarket demand. We believe Howmet should benefit from the need for more engine components over time.
Hilton Grand Vacations(by 1 Main Capital)
- The industry’s negative reputation and inaccurate investor perceptions of cyclicality are the primary reasons the shares trade at a single-digit free cash flow multiple.
- HGV generated over $750mm of adjusted free cash flow in 2025 — a high teens FCF yield on the current market cap. Even when normalizing for recent above-average securitizations the company should convert 55–65% of EBITDA to FCF in the coming years.
- HGV has been capitalizing on its depressed valuation. The company repurchased $600mm of stock in 2025 and plans to repurchase another $600mm in 2026.
HIGHLIGHT OF THIS WEEK
MEDIA APPEARANCES BY BSDs
Steve Hanke told us why he doubts AI will be the job destroyer many expect
- The idea that artificial intelligence will be free to use and virtually costless to provide is delusional and dumb, Steve Hanke says.
- “This belief is based on a disconnect from reality, as well as a good dose of idiotic economic reasoning,” the professor of applied economics at Johns Hopkins University told Business Insider by email.
Citadel Buys Situational Awareness’s Stock Portfolio After Big Losses in AI
- Situational Awareness, the once-highflying AI-focused hedge fund, sold the bulk of its stock portfolio to Ken Griffin’s investment firm Citadel after suffering deep losses, according to people familiar with the matter.
- It marks a sudden downfall for Situational, led by former OpenAI employee Leopold Aschenbrenner. It had amassed well over $20 billion in assets under management since its founding just around two years ago, making it one of the fastest-growing firms in years.
An AI exec is stepping down, citing workload and stress
- Snap CEO Evan Spiegel, who calls his seven-day-a-week schedule “completely insane,” says Sundays are non-negotiable: church, brunch, and an afternoon with his four kids.
- At Berkshire Hathaway’s 2023 annual meeting, Warren Buffett and his late partner, Charlie Munger, contrasted themselves with Elon Musk, whom Munger said succeeds by insisting on unreasonably extreme goals. “Warren and I are looking for the easy job,” Munger said. “We don’t want that much failure.”
