| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10.52% | 19.76% | 27.02% |
The FPA Queens Road Small Cap Value Fund returned 19.76% in Q2 2026 versus 17.19% for the Russell 2000 Value Index, bringing YTD returns to 27.02% versus 22.99% for the benchmark. Outperformance was driven by exceptionally strong returns in technology holdings, particularly component manufacturers and distributors (Arrow, Vishay, Littelfuse) that benefited from cyclical recovery and incremental data center sales, with stocks up roughly 100% or more. TD Synnex's data center business Hyve is growing billings at nearly 100% annually and contributing approximately $700 million in operating earnings. The managers have aggressively trimmed technology positions as valuations expanded, reallocating proceeds into more attractively valued opportunities. New positions include Vontier (gas station equipment), Bank of N.T. Butterfield (Caribbean banking), and Unitil (New England utility). The fund added significantly to JBT Marel and UGI Corp. The managers emphasize their holdings were long-term positions acquired through bottom-up fundamental analysis rather than chasing the AI trade, and they continue to avoid beaten-down SaaS companies due to wide outcome ranges from AI disruption despite lower valuations.
The fund employs a four-pillar bottom-up investment process focused on identifying high-quality small-cap companies at attractive valuations, with emphasis on earnings consistency and returns on invested capital, willing to sacrifice upside in speculative markets to preserve capital in downturns.
The managers remain focused on long-term fundamental performance rather than short-term market movements and express confidence in the Fund's long-term prospects. They will continue managing the portfolio with diligence, discipline, and patience. The managers note their process is designed to hold up better in down markets and trail in speculative markets, and remind investors of this trade-off given current strong market conditions.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Aug 11 2026 | 2026 Q2 | ARW, CNXC, FN, GPK, IDCC, JBTM, LFUS, NTB, PLUS, QRVO, RLI, SFM, SNX, SYNA, UGI, UPBD, UTL, VNT, VSH | Data centers, Distribution, financials, semiconductors, small caps, technology, Utilities, value | - | FPA Queens Road Small Cap Value Fund delivered 27% YTD returns through Q2 2026, outperforming its benchmark by 400 basis points. Technology holdings drove performance with component manufacturers and distributors up 100%+ on cyclical recovery and data center exposure. Managers aggressively trimmed winners as valuations expanded, redeploying capital into utilities, financials, and industrials. Portfolio remains concentrated in high-quality compounders trading at reasonable valuations with strong cash generation. |
| Mar 31 2026 | 2026 Q1 | CNXC, DECK, DORM, ECG, FAF, FN, GPK, LFUS, PLUS, QRVO, REVG, RLI, SFM, SKWS, SNX, UPBD, VSEC | long-term, Quality, rebalancing, small caps, value |
FAF DORM FN SNX LFUS SFM RLI |
FPA Queens Road outperformed in Q1 2026 while continuing to upgrade portfolio quality through disciplined stock selection. The managers added positions in title insurer First American Financial and auto parts manufacturer Dorman Products, both trading at attractive valuations with strong fundamentals. They maintain conviction that small-caps offer compelling opportunities for patient value investors focused on balance sheet strength and earnings consistency. |
| Feb 10 2026 | 2025 Q4 | AAP, CSGS, FN, IDCC, NJR, OSK, PLUS, PVH, REVG, RLI, SFBS, SFM, SNX, UGI, UPBD | insurance, Quality, small cap, technology, Utilities, value |
SNX RLI NJR FN IDCC UGI PVH UPBD SFBS AAP |
FPA Queens Road Small Cap Value Fund delivered 13.36% returns in 2025, outperforming its benchmark despite Q4 underperformance in speculative markets. The fund's quality-focused approach targets overlooked small caps trading at significant discounts to large caps. With capital fleeing small value strategies, the managers see expanding opportunities in strong franchises with compressed valuations, maintaining disciplined positioning with 10.1% cash. |
| Nov 8 2025 | 2025 Q3 | AAPL, ESGR, FN, IAC, IDCC, IMKTA, MGM, NNI, NVDA, OSK, REVG, RLI, SAIC, SFM, SNX, THS, VSH | Defensive, Disciplined, downside protection, Quality, small cap, value | - | FPA Queens Road Small Cap Value Fund's Q3 underperformance reflects its disciplined quality-focused approach during a speculative rally favoring momentum and low-quality stocks. The fund's defensive positioning and four-pillar investment process targeting resilient compounders with strong balance sheets continues to deliver on its mandate of outperforming in down markets while building long-term value through disciplined stock selection. |
| Aug 4 2025 | 2025 Q2 | AAP, ANGI, CNXC, CSGS, DAR, FN, GIII, IAC, IDCC, IMKTA, LFUS, NNI, PVH, REVG, SCHL, SFM, SYNA, THS, UGI, VSH | Passive investing, Quality, small caps, tariffs, technology, value |
IMKTA NNI |
Small caps are generationally cheap versus large caps, with quality small companies trading at modest premiums unlike expensive large caps. The fund outperformed significantly in Q2 2025 through diversified holdings of quality companies at reasonable valuations. Tariff volatility created deployment opportunities while passive investing distortions continue creating inefficiencies in the small-cap market for active managers to exploit. |
| Mar 31 2025 | 2025 Q1 | AAP, ARW, AX, BAM, CNO, CNXC, CSWI, IDCC, LFUS, MDU, NJR, OSK, PVH, REVG, SCHL, SFM, SYNA, UGI, UPBD, VSH | consumer, Electronics, Quality, small caps, tariffs, Utilities, value | - | Fund outperformed Russell 2000 Value by 520 basis points in Q1 amid tariff-driven volatility, maintaining defensive positioning with 10.3% cash. Manager sees small-caps as extremely cheap versus large-caps but emphasizes quality focus given index junkiness. Adding to utilities and electronics companies as valuations improve, remaining patient and disciplined while expressing confidence in three-to-five year prospects. |
| Dec 31 2024 | 2024 Q4 | AAP, AGCO, ALTM, ARW, CNXC, CSGS, CSWI, DAR, DECK, FN, IDCC, JBTM, LEVI, LFUS, MATV, MDU, OSK, QRVO, SAIC, SCHL, SFM, SYNA, UGI, UPBD, VSH | active management, compounders, Quality, Russell 2000, small cap, value | - | FPA Queens Road Small Cap Value outperformed in Q4 with a focus on quality compounders at reasonable valuations. The fund trimmed top performers that reached position limits while adding to cyclically weak names. Despite expensive markets and difficulty finding quality at reasonable prices, the manager believes quality small-caps offer attractive diversification when large-cap indices are expensive and concentrated. |
| Oct 30 2024 | 2024 Q3 | AAN, AAP, ALTM, AZO, CNXC, CSWI, DAR, DECK, FN, HMN, IDCC, ORLY, SFM, VSH | - | - | |
| Jul 31 2024 | 2024 Q2 | AAN, AGCO, ALTM, ARW, AX, BAM, CNO, CNXC, CSGS, CSWI, DAR, DCO, DECK, EQC, ESGR, FN, FSTR, GGG, GIII, GPK | active management, earnings, Quality, small caps, value | - | Small-cap value fund outperformed benchmark despite negative quarter, emphasizing active management to avoid 'junky' index constituents. Focus on quality companies with consistent earnings trading at discounts to large-cap peers. Key winners included AI-beneficiary Fabrinet and expanding grocer Sprouts. Maintains disciplined approach with 10% cash, seeking quality compounders over 3-5 year horizons. |
| Apr 15 2024 | 2024 Q1 | AAN, AEL, AGCO, ALTM, ARW, AX, CNO, CNXC, CSGS, CSWI, DAR, DCO, DECK, ESGR, FN, GGG, GIII, JBT, LEVI, MDU | Balance Sheet, compounders, Quality, small cap, valuation, value | - | FPA Queens Road Small Cap Value Fund outperformed the Russell 2000 Value Index in Q1 2024, returning 3.36% versus 2.90%. The fund trimmed expensive high-quality compounders and redeployed into cheaper opportunities while maintaining focus on balance sheet strength and quality. Cash position at 9.6% reflects disciplined approach in challenging environment for finding quality small-cap investments. |
| Jan 31 2024 | 2023 Q4 | AX, CHD, CNCR, DECK, DLG, FN, GIII, HMN, IDCC, MSTX, PVH, SFBS, TGHS, UNFI, VSHY | Cash, Margin Of Safety, Quality, small caps, value | - | FPA Queens Road delivered strong Q4 performance with disciplined value investing in quality small-caps. The fund maintains 9.5% cash while selectively adding to existing positions rather than compromising standards. Management expresses increased confidence in long-term prospects despite macro uncertainty, believing current holdings will appreciate significantly over the next three to five years. |
| Sep 30 2023 | 2023 Q3 | AAN, AEL, CNXC, DAR, DECK, FN, GIII, HNI, IAC, IDCC, LTHM, MTZ, SFBS, SFM, SNX, UGI, UNFI | long-term, Margin Of Safety, Quality, small caps, value | - | Small-cap value fund outperformed benchmark despite negative Q3 returns. Added Aaron's position while maintaining 9.7% cash due to selective investment criteria. Manager optimistic about long-term prospects despite macro uncertainty, citing attractive valuations and quality management teams. Disciplined approach prioritizes margin of safety over full capital deployment. |
| Apr 14 2023 | 2023 Q1 | DECK, FN, GIII, IDCC, NJR, OMI, RLI, SFBS, SYNA, UNFI | - | - | |
| Nov 2 2023 | 2022 Q4 | AEL, FN, GIII, IDCC, NJR, OMI, RLI, SJIJ, SYNA | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
SemiconductorsThe fund holds multiple semiconductor component manufacturers and distributors (Arrow, Vishay, Littelfuse) that benefited from a strong cyclical rebound from deep trough levels in 2025. These companies experienced exceptional returns in H1 2026, with stocks up roughly 100% or more, driven by both cyclical recovery and incremental sales into data centers. The managers have been aggressively trimming positions as valuations expanded significantly. |
Semiconductors Components Semiconductor Cycle Distribution |
Data CentersSeveral portfolio holdings have meaningful exposure to data center spending, including TD Synnex's Hyve business (growing billings at nearly 100% annualized rate and contributing ~$700m of operating earnings in 2026) and Fabrinet's optical networking equipment for AI training. The managers acknowledge benefiting from the AI/data center trade but note they did not actively chase it, instead holding long-term positions that happened to have this exposure. |
Data Centers AI Cloud Infrastructure Optical Networking | |
AIThe fund has exposure to AI through several holdings including Synaptics (edge AI processing, acquired by ON Semi), Fabrinet (optical networking for AI training with Nvidia as 10% customer), and TD Synnex's data center business. However, managers explicitly avoid chasing the AI trade and have not purchased beaten-down SaaS companies, citing concerns that AI disruption creates an outrageously wide range of outcomes and that valuations remain quite full even after declines. |
AI Edge Computing Enterprise Software SaaS | |
DistributionThe fund holds significant positions in distributors across technology (TD Synnex, Arrow, ePlus) and industrial sectors. TD Synnex is the largest IT distributor globally and has been a top holding for over a decade, consistently finding smart ways to grow through diversification into software, security, cloud licenses and services. Arrow is the largest semiconductor distributor globally with strong cash flows used for share buybacks. |
Distribution Industrial Distribution IT Services Logistics | |
Small CapsSmall cap stocks had strong performance in H1 2026, with the Russell 2000 Value Index gaining 22.99% and outperforming the S&P 500. This outperformance was driven by small company earnings growth finally kicking in after being non-existent since 2022, outpacing larger cap earnings growth from much lower absolute valuations. The fund returned 27.02% YTD, outperforming its benchmark. |
Small Caps Value Earnings | |
UtilitiesThe fund added a new position in Unitil, a well-run diversified utility serving Maine, New Hampshire and Northern Massachusetts with attractive regulatory jurisdictions. The company is making attractive acquisitions at roughly 1.25x rate base and expects to grow EPS at 5-7% annually. The fund also holds a significant position in UGI Corp, a regulated gas utility with pipelines and propane distribution businesses. |
Regulated Utilities Gas Utilities Water Utilities | |
BuybacksArrow Electronics used strong cash flows during the Covid component shortages (2020-2023) to retire roughly one-third of its outstanding shares. TD Synnex is modestly levered and uses its cash flow to repurchase shares and pay dividends. The managers view share repurchases as an important use of capital for cash-generative businesses. |
Buybacks Dividends Capital Markets | |
| 2026 Q1 |
Small CapsSmall-caps as an asset class are relatively cheap compared to large-caps and reasonably valued from an absolute perspective. There are significant differences in the quality of small public companies, with shares of quality small companies selling at very reasonable valuations. Small-caps are out of favor and the number of investors looking at small-caps through a long-term, fundamental lens has declined. |
Value Quality Opportunity |
Data CentersFabinet dominates its niche in optical networking equipment for data centers, especially those used to train artificial intelligence models. The company's highest bandwidth products are finding increasing demand in data centers. However, data center spending expectations may have gotten ahead of itself in stock prices. |
AI Networking Infrastructure | |
QualityThe fund continues to rebalance towards higher quality holdings, with the three most important elements being balance sheet strength, earnings consistency, and returns on capital. Balance sheet strength helps companies overcome challenges and protects on the downside, while earnings consistency indicates continued profitability and high returns on capital suggest efficient resource use. |
Balance Sheet Earnings Returns | |
| 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 that valuations remain attractive despite strong performance, with no multiple expansion driving returns. |
Frontier Markets Emerging Markets Equities Value Growth |
LiquidityManager provides detailed analysis of liquidity challenges in African frontier markets, noting structural factors including foreign investor participation, local retail involvement, and institutional buy-and-hold behavior. Acknowledges liquidity constraints but expects improvement in current bull market environment with increased investor interest. |
Market Structure Trading Redemptions Volatility | |
CurrenciesComprehensive review of currency performance across African markets shows mixed results, with West African Franc gaining 0.6% while Ghanaian Cedi and Nigerian Naira declined significantly. Manager actively times investments to buy when currencies are weak, citing Kenya as successful example and Nigeria as potential opportunity. |
Foreign Exchange Depreciation Timing Risk | |
| 2025 Q3 |
QualityThe fund follows a disciplined four-pillar process focusing on quality companies with strong balance sheets, valuation discipline, strong management teams, and growing industries with stable competitive dynamics. Quality is defined by steady operating margins and high returns on capital, allowing companies to compound value over time. |
Balance Sheets Returns On Capital Operating Margins Compounders Downside Protection |
ValueThe fund practices valuation discipline, believing their stocks hold up better when disappointing things happen and investor expectations come down. They avoid value traps where fundamentals are deteriorating and focus on companies trading below intrinsic value with margin of safety. |
Valuation Discipline Margin Of Safety Value Traps Intrinsic Value Downside Protection | |
Small CapsThe fund invests exclusively in small-capitalization U.S. companies, defined as those with market capitalization no greater than the largest company in the Russell 2000 Index. Performance is expected to outperform in down markets and trail in speculative markets due to their disciplined process. |
Russell 2000 Small Cap Value Downside Capture Market Cycles Defensive Positioning | |
| 2025 Q2 |
Small CapsSmall caps are generationally cheap compared to large caps, trading at the widest discount to the S&P 500 since the tech bubble 25 years ago. High-quality small companies command only a modest premium over lower-quality small companies, unlike large caps where quality commands significant premiums. |
Small Caps Value Quality Discount |
QualityThe fund focuses on quality companies defined by balance sheet strength, earnings consistency, and returns on capital. Quality small companies are trading at very modest price premiums compared to lower-quality small companies, creating attractive opportunities for selective investors. |
Quality Balance Sheet Earnings Returns | |
ValueThe fund's portfolio P/E has trended modestly down over ten years and is currently cheap relative to its own history. The manager emphasizes buying quality companies at reasonable valuations with a three-to-five year investment horizon. |
Value Valuation P/E Discount | |
| 2025 Q1 |
Small CapsManager emphasizes that small-caps are extremely cheap relative to large-caps but warns of the relative junkiness of small-cap indices. Quality small companies are still expensive but becoming more attractive from a valuation perspective as the market declines. |
Quality Value Junkiness Valuation Outperformance |
ValueFund follows a disciplined value approach focusing on companies with strong balance sheets, reasonable valuations, quality management, and favorable industry economics. Manager continues to be conservative when allocating capital and buying new positions. |
Discipline Balance Sheet Management Industry Economics Conservative | |
Trade PolicyPresident Trump announced tariffs on April 2nd, sending equity markets down and volatility up. Manager discusses how extremely high tariffs hurt small businesses that lack working capital to pay tariffs, with small businesses accounting for over 80% of US employment. |
Tariffs Volatility Small Business Employment Working Capital | |
| 2024 Q4 |
QualityThe fund focuses on high quality compounders with strong returns on capital, consistent earnings, and prudent balance sheets. The manager emphasizes that small-cap indices are generally 'junkier' with fewer quality companies than large-cap indices, making active management essential to find quality small companies trading at reasonable valuations. |
ROIC Earnings Balance Sheet Compounders Active Management |
ValueThe fund seeks companies trading within a 'range of reasonableness' for valuations, accepting that stocks are generally expensive but finding opportunities in quality small-caps that trade at significant discounts to large-caps. The manager trims positions when they reach the high end of reasonable valuations. |
Valuation Discount Reasonable Expensive Trim | |
Small CapsThe fund invests exclusively in small-capitalization companies, noting that while small-caps generally trade at discounts to large-caps, the indices contain many lower-quality companies. The manager believes quality small companies outperform when controlling for quality factors, citing AQR research showing consistent outperformance. |
Russell 2000 Market Cap Outperformance Discount Index | |
| 2024 Q2 |
QualityThe fund emphasizes quality companies with consistent earnings and high returns on capital. They analyze earnings consistency as a key quality metric, showing that quality small-cap companies trade at lower valuations than large-cap peers with similar quality characteristics. |
Earnings Value Small Caps |
ValueSmall-cap stocks are significantly cheaper than large-cap stocks on a price-to-earnings basis when controlling for quality metrics. The fund finds selective opportunities in quality small companies at reasonable valuations despite the broader small-cap index being 'junky'. |
Small Caps Quality Earnings | |
| 2024 Q1 |
QualityThe fund emphasizes high-quality compounders with strong balance sheets, high returns on capital, and steady margins. Quality has been a large contributor to outperformance during market downturns. The manager prefers companies where earnings will be higher in three to five years. |
Compounders Balance Sheet Returns Margins Outperformance |
ValueSmall caps remain cheap relative to large caps on a headline basis, though the discrepancy is largely compositional. The fund uses free cash-flow discount valuation models and demands a margin of safety while being willing to pay reasonable prices for quality. |
Valuation Margin of Safety Discount Free Cash Flow Cheap | |
Small CapsThe fund focuses exclusively on small-cap companies defined as those with market capitalization no greater than the largest company in the Russell 2000 Index. Small caps have underperformed substantially over the last 10 years but small value has outperformed over longer periods. |
Russell 2000 Market Cap Underperformance Long Term Small Value | |
| 2023 Q4 |
ValueThe fund focuses on acquiring quality companies at reasonable prices with a margin of safety. Current valuations, competitive positions, and experienced management teams at the fund's holdings give confidence they will be worth more in three to five years than today. |
Value Margin of safety Quality Reasonable prices Undervalued |
| 2023 Q3 |
ValueThe fund focuses on acquiring quality companies at reasonable prices with a margin of safety. Current valuations, competitive positions, and experienced management teams give confidence that holdings will be worth more in three to five years than today. |
Value Quality Margin of Safety Undervalued Reasonable Prices |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Mar 31, 2026 | Fund Letters | FPA Queens Road Small Cap Value Fund | FAF | First American Financial | Insurance - Specialty | Insurance | Bull | New York Stock Exchange | Cyclical Recovery, Data Moat, dividend yield, housing market, Real Estate Services, Share Buybacks, title insurance | Login |
| Mar 31, 2026 | Fund Letters | FPA Queens Road Small Cap Value Fund | DORM | Dorman Products | Auto Parts | Auto Components | Bull | NASDAQ | Aftermarket Auto Parts, defensive, High Returns on Capital, Non-cyclical, Quality Growth, Share Buybacks, tariff impact | Login |
| Mar 31, 2026 | Fund Letters | FPA Queens Road Small Cap Value Fund | FN | Fabrinet | Electronic Components | Electronic Manufacturing Services | Bull | New York Stock Exchange | AI infrastructure, compounder, contract manufacturing, data centers, Niche Dominance, Nvidia Customer, optical networking | Login |
| Mar 31, 2026 | Fund Letters | FPA Queens Road Small Cap Value Fund | SNX | TD SYNNEX | Electronics & Computer Distribution | Technology Distributors | Bull | New York Stock Exchange | business transformation, GDP growth, IT distribution, market leader, Scale Advantages, Software Services, Value Multiple | Login |
| Mar 31, 2026 | Fund Letters | FPA Queens Road Small Cap Value Fund | LFUS | Littelfuse | Electronic Components | Electronic Components | Bull | NASDAQ | Cyclical Recovery, data centers, Electronic Components, high margins, Niche Manufacturing, Returns on Capital, Tariff Navigation | Login |
| Mar 31, 2026 | Fund Letters | FPA Queens Road Small Cap Value Fund | SFM | Sprouts Farmers Market | Grocery Stores | Food & Staples Retailing | Neutral | NASDAQ | growth deceleration, Natural Organic Grocery, New Store Economics, retail, Returns on Capital, Strong Margins, Value Multiple | Login |
| Mar 31, 2026 | Fund Letters | FPA Queens Road Small Cap Value Fund | RLI | RLI Corp | Insurance - Property & Casualty | Insurance | Bull | New York Stock Exchange | combined ratio, Long-term holding, Niche markets, premium valuation, ROE, specialty insurance, underwriting discipline | Login |
| Feb 10, 2026 | Fund Letters | Steve Scruggs | SNX | TD SYNNEX Corporation | Information Technology | Technology Distributors | Bull | New York Stock Exchange | AI, cloud, consolidation, Distribution, Margins, scale, valuation, working capital | Login |
| Feb 10, 2026 | Fund Letters | Steve Scruggs | RLI | RLI Corp. | Financials | Property & Casualty Insurance | Bull | New York Stock Exchange | combined ratio, Discipline, Insurance, Quality, ROE, underwriting, valuation | Login |
| Feb 10, 2026 | Fund Letters | Steve Scruggs | NJR | New Jersey Resources Corporation | Utilities | Gas Utilities | Bull | New York Stock Exchange | dividend, Gas, infrastructure, Regulation, ROE, utility, valuation | Login |
| Feb 10, 2026 | Fund Letters | Steve Scruggs | FN | Fabrinet | Information Technology | Electronic Components | Bull | New York Stock Exchange | cable, CapEx, compounding, Concentration, datacenter, manufacturing, Optics, semiconductors, Telecom | Login |
| Feb 10, 2026 | Fund Letters | Steve Scruggs | IDCC | InterDigital, Inc. | Information Technology | Application Software | Bull | NASDAQ | automotive, buybacks, dividend, IoT, Licensing, margin, patents, royalties, Wireless | Login |
| Feb 10, 2026 | Fund Letters | Steve Scruggs | UGI | UGI Corporation | Utilities | Gas Utilities | Bull | New York Stock Exchange | balance sheet, cashflow, deleveraging, Eps, pipeline, Propane, Regulation, utility, yield | Login |
| Feb 10, 2026 | Fund Letters | Steve Scruggs | PVH | PVH Corp. | Consumer Discretionary | Apparel, Accessories & Luxury Goods | Bull | New York Stock Exchange | Apparel, brands, buybacks, cashflow, China, Inventory, Pricing, tariffs, valuation | Login |
| Feb 10, 2026 | Fund Letters | Steve Scruggs | UPBD | Upbound Group, Inc. | Financials | Consumer Finance | Bull | NASDAQ | acquisition, Credit, Default, Lending, leverage, Regulation, Subprime, turnaround, Volatility | Login |
| Feb 10, 2026 | Fund Letters | Steve Scruggs | SFBS | ServisFirst Bancshares, Inc. | Financials | Regional Banks | Bull | New York Stock Exchange | banking, Credit, Deposits, efficiency, NIM, Nonaccrual, realestate, ROE, underwriting | Login |
| Feb 10, 2026 | Fund Letters | Steve Scruggs | AAP | Advance Auto Parts, Inc. | Consumer Discretionary | Automotive Retail | Bull | New York Stock Exchange | aftermarket, Competition, Distribution, Execution, Inventory, Margins, merchandising, restructuring, turnaround | Login |
| Aug 4, 2025 | Fund Letters | Steve Scruggs | IMKTA | Ingles Markets, Incorporated | Consumer Staples | Grocery Stores | Bull | NASDAQ | Groceries, Real Estate, Rural, supermarkets, valuation | Login |
| Aug 4, 2025 | Fund Letters | Steve Scruggs | NNI | Nelnet, Inc. | Financials | Credit Services | Bull | NYSE | Book Value, capital allocation, Fintech, Servicing, Student loans | Login |
| TICKER | COMMENTARY |
|---|---|
| ARW | Arrow Electronics (ARW) is the largest semiconductor distributor globally. Arrow is larger with better financials than its closest competitor Avnet (AVT) and these companies produce a lot of cash despite some cyclicality. Arrow used its strong cash flows during the Covid component shortages (2020 through 2023) to retire roughly one-third of its outstanding shares. A year ago, Arrow was suffering from a cyclical trough and the Trump tariffs. But the industry has come roaring back and in its Q1 earnings release on May 7, ARW reported 39% YoY earnings growth and more than doubled its adjusted EPS. We have been trimming our position, but the stock trades at ~10x forward earnings and we still hold a substantial position. |
| VSH | Vishay Intertechnology (VSH) makes passive electronic components and discrete semiconductors (resistors, inductors, capacitors, MOSFETs, diodes, etc). Although the industry is cyclical, competitive dynamics are stable and VSH benefits from incremental growth from electric vehicles and industrial electrification. A year ago, the industry was struggling from a cyclical downturn following the excesses and component hoarding of the Covid era. The stock declined again when President Trump announced his tariffs in April 2025. But the industry has come roaring back; VSH's Q1 earnings release on May 13 announced a year-over-year sales increase of 17%, strength across all end markets and distribution channels, and a book-to-bill ratio of 1.34. Vishay is also incrementally selling to data centers. We believe the stock may have gotten caught up in the AI trade and have aggressively reduced our position. Vishay is controlled by the Zandman / Shoshani family through super voting B shares. After struggling through the financial crisis, the family ran the company extremely conservatively and for cash flow. But starting in 2023, Vishay elevated its lead salesman, Joel Smejkal, to CEO and announced plans to change its notably staid culture and start investing in growth. These investments took down margins and cash flow in 2024 and 2025 as the industry was troughing out. Vishay's share price fell from the mid $20s in 2024 to as low as $10/sh in 2025. We added to our position in a measured way knowing that Vishay was making significant changes with uncertain payoffs. This year, revenue and bookings have surged upward and Vishay's share price has followed. From a low of ~$10/sh last year, the stock traded above $60/sh in June (it has since given back some of those gains). Margins are still depressed, but in valuation terms, the EV/sales increased from a little over .5x to roughly 3x. Although we trimmed our position several times, Vishay was our largest winner for the first half of this year. The jury is still out on Vishay's cultural reset and investment program, but the price has come back down and we are comfortable continuing to hold a less than 2% position. |
| LFUS | Littelfuse (LFUS) manufactures niche electrical components including fuses, sensors, passives and semiconductors that are sold into a broad array of end markets. Mid-single digit organic growth is supplemented by tuck in acquisitions and the company has high teens operating margins and strong returns on capital. We significantly added to our position in April 2025 when the stock declined on tariff fears. Since then, LFUS's share price has more than doubled as the company demonstrated it could navigate tariffs, sales and orders accelerated out of their post-Covid trough, and the company recorded incremental sales into data centers. Arrow and Littelfuse are very well run and we expect them to be compounders for many years. |
| SNX | TD Synnex (SNX) is the largest IT distributor globally. Twenty years ago, this meant getting PCs, peripherals, servers and networking equipment from the OEM manufacturer to the corporate customers' offices. But the business has evolved and Synnex has used its position as a middleman to add additional products such as software, security, cloud licenses and services. Its predecessor companies (Tech Data and Synnex merged in 2021) were long time holdings of the Fund since 2010 and have consistently been among our largest holdings. TD Synnex (SNX) is the largest IT distributor globally. The company has done a good job diversifying away from its historical position in hardware (PCs, peripherals, servers, networking equipment, etc.) and into software, security and services. TD Synnex is modestly levered and uses its cash flow to repurchase shares and pay dividends. On Mar 31, the company reported blow out earnings and provided financials for Hyve, its data center business. Hyve is growing billings at a nearly 100% annualized rate and is on track to contribute ~$700m of operating earnings this year. These numbers were higher than investors anticipated and the stock has performed very well since their release. We think that TD Synnex is exceptionally well run, has scale and scope advantages versus smaller competitors and that profits will continue to grow with IT spending at a GDP+ rate. We have trimmed our position, but SNX trades at roughly 13x forward earnings and continues to be a top 5 holding for the Fund. Synnex has always had an entrepreneurial culture and has incubated several adjacent businesses over the years. One of these businesses, Hyve, helps build data centers by combining custom engineering, assembly and integration with TD Synnex's core sourcing and distribution functions. This is obviously a very in demand service – Hyve growth has exploded from a single digit percentage of SNX's sales in 2024 to almost 30% of expected operating income in 2026. The share price has followed earnings growth higher and SNX's market cap broached ~$20B in June. On the one hand TD Synnex is in the right place at the right time. But SNX has been an exceptional compounder for the Fund for over a decade – management always found smart ways to grow and improve the business. |
| PLUS | ePlus (PLUS) is a value added reseller (VAR) with a similar business model, but lighter on holding inventory and heavier on the customer consultation, and was a 2025 addition to the portfolio. We like that these companies are broadly exposed to corporate IT spending and tend to grow faster and with less volatility than the industrial distributors. |
| SYNA | We originally bought Synaptics (SYNA) in 2012 for exposure to its legacy business of designing chips that power touch controls and haptics for consumer electronics. But starting in 2020, the company began developing Astra - an integrated sensing, processing and communication solution to enable the industrial internet or internet of things (IoT). It turns out that Astra has an additional application in running AI processing on the edge – a function that was validated when Synaptics signed an extensive collaboration and co-development deal with Google Labs in 2025. On June 25, Synaptics agreed to be acquired by On Semi (ON) in an all stocks deal worth $7B. Synaptics, a manufacturer of chips for internet of things (IoT) and edge processing, agreed to be acquired by ON Semi (ON) in an all stock deal on June 25. |
| FN | Fabrinet (FN) is the leading manufacturer of optical networking modules for telecom equipment and data centers. We have written about Fabrinet at length in previous letters – FN has been a top contributor to our performance since 2023 when the company announced Nvidia as a 10% customer and datacenter sales started skyrocketing. Similar to TD Synnex, when we first bought Fabrinet in 2014, we didn't anticipate AI and massive data center spending. But we did think that the world was going to need a lot more high bandwidth communication and that Fabrinet seemed to be the best at manufacturing it. The stock performance has been exceptional and we have trimmed all the way up – Fabrinet now sits in the portfolio at a less than 1% position due to valuation. Fabrinet (FN) is a contract manufacturer that specializes in optical networking equipment and modules. This is complex work at small scales, and Fabrinet dominates its niche. The company has experienced impressive historical revenue growth and increased operating margins. Fabrinet's highest bandwidth products are finding increasing demand in data centers, especially those data centers used to train artificial intelligence models. In 2023, Fabrinet disclosed that Nvidia is a 10% customer. FN's stock price roughly doubled from last year on rising expectations for data center spending. We believe such spending, as capitalized in FN's stock price, may have gotten ahead of itself and have been trimming. But the need for high bandwidth networking will continue, Fabrinet dominates its core telecom and data center markets and has prudently diversified into a handful of other niches that reward precise assembly at small scale. We continue to hold a small position in Fabrinet. Fabrinet makes optical networking equipment and their datacenter business has grown to roughly half of sales. |
| VNT | Vontier (VNT) is a Q2 purchase we will discuss in the next section. Its core business is manufacturing tanks, pumps and payment systems for gas stations. VNT is categorized by GICS as a technology company, but we think that it is an industrial. Vontier (VNT) manufactures tanks, pumps and payment systems for gas stations. The company was a 2021 spinoff from Fortive, which itself was the spinoff of Danaher's lower growth industrial assets. Since 2021, Vontier has been dealing with headwinds following a pull forward of sales from changing payment standards (EMV) and reorganizing the disparate collection of businesses that were originally acquired by Danaher. At their November 2025 Investor Day, Vontier made the cogent argument that they benefit from potential sales to the growing convenience store end market. We believe that shares are attractively priced at roughly 9x earnings. |
| IDCC | Interdigital (IDCC) owns an expansive collection of wireless patents. Most of their revenue comes from licensing agreements with smart phone manufacturers, but the company has also started licensing to consumer electronics, auto, industrial and media companies. CEO Liren Chen joined in 2021 from Qualcom and has done an exceptional job ramping up the pace of licensing deals. The stock price has followed earnings growth higher and IDCC was a top performer for the Fund in 2023, 2024 and 2025. We have trimmed all the way up but still hold a less than 2% position in IDCC. |
| QRVO | Qorvo (QRVO) makes semiconductors used in wireless communications. Its business always traded cheaply due to customer concentration but Qorvo seems to be protected by its specialized knowledge and know-how. When QRVO agreed to be acquired by competitor Skyworks (SWKS) in late 2025 in a cash and stock deal, we sold our position. |
| JBTM | We made significant additions to our holding in JBT Marel (JBTM) and UGI Corp (UGI). JBT Marel manufactures food processing equipment and has a history of impressive earnings consistency and growth in a relatively non-cyclical end market. |
| UGI | UGI, a regulated gas utility serving Pennsylvania and West Virginia, also owns a collection of pipelines and unregulated propane distribution businesses in the U.S. and Europe. We think the company has done an impressive job resetting after problems in their Amerigas propane business led to an increase in their debt metrics. Shares were available at an attractive price of ~11x earnings. |
| NTB | The Bank of N.T. Butterfield and Sons (NTB) owns attractive deposit and wealth management franchises in the Caribbean financial centers of Cayman and Bermuda. The bank has a very attractive return on equity despite investing in low risk assets. On May 28, Butterfield announced a deal to acquire CIBC's Caribbean franchises for 1.1x book and 9x earnings, roughly doubling the size of the business. The deal will provide some growth and further consolidate Butterfield's attractive Caribbean markets but adds some operational and balance sheet risk. Still, Butterfield remains a well-run banking franchise and were pleased to be able to accumulate shares at less than 10x earnings. |
| UTL | Unitil (UTL) is a well run and diversified utility serving Maine, New Hampshire and Northern Massachusetts. These are attractive regulatory jurisdictions and the company does a good job converting investments in their rate base into GAAP earnings. Unitil is also making attractive acquisitions – Bangor Gas, Maine Natural Gas and two water utilities in New Hampshire and Maine for the price of roughly 1.25x rate base. The company believes that it can continue to grow EPS at a 5% - 7% clip, in line with their history. Our enthusiasm for the shares is only tempered by the company's small size and limited liquidity. |
| SFM | Sprouts Farmers Market (SFM) is a supermarket chain focusing on fresh, natural, and organic products. The company has strong operating margins, attractive returns on capital, and excellent new store economics. Through April 2025, SFM's stock performed extremely well in concert with strong revenue growth and rising earnings estimates. As SFM's valuation increased, we trimmed our position in late 2024 and early 2025. Then, when growth slowed in the second half of 2025, SFM's share price collapsed. Today, SFM trades at a low-teens multiple of forward earnings and we are comfortable holding a mid-sized position. |
| RLI | RLI Corp (RLI) is a specialty property and casualty insurer. The company is extremely selective in writing business. Its diversified lines include niche-y areas such as school buses, Hawaii homeowners, and surety. RLI's unique culture, incentive structures and willingness to walk away from unprofitable business have historically led to exceptional financial performance. From 2015 through 2024, the company's combined ratio averaged 89.3% and its ROE averaged 16.6% despite being weighed down by excess capital. We have owned RLI since 2011 and the stock usually commands a premium valuation. We were pleased to be able to add to our position at roughly 20x this year's earnings. |
| GPK | Graphic Packaging (GPK) is a vertically integrated paper packaging manufacturer with plants in the U.S. and Europe. The company is suffering from a combination of weak industry fundamentals, massive cost overruns at its new Waco, TX recycled paperboard plant, and too much debt. In October, CFO Stephen Scherger left to join Amcor and then in December, long-time CEO Mike Doss left under acrimonious circumstances. Although this is a riskier position in the portfolio we are encouraged by GPK's product offerings focused on the current plastic to paper trend in consumer and retail packaging. We currently hold a less than 50 bp position in GPK. |
| CNXC | Concentrix (CNXC) is one of two top customer experience (CX) vendors globally. The company began by managing call centers but has since evolved into a high-tech business process outsourcer (BPO) that also designs and runs customer-facing websites and apps, integrates the data, and optimizes a client's customer interactions. The March, 2023 acquisition of WebHelp helped consolidate the industry but left the company with roughly three turns of debt. Over the past two years, growth and margins have declined, and the market is concerned that Concentrix's core businesses are being disrupted by AI. We are encouraged by increasing demand for the companies iX Suite product which integrates AI across their broad portfolio of offerings. The company trades at very low valuation multiples, but we share the market's concern and currently hold less than 50 bps of CNXC. |
| UPBD | Upbound Group (UPBD) lends to sub-prime consumers in two primary segments: Rent-a-Center, which focuses on furniture and appliances through physical stores; and Acima, which offers last-look financing through associated retailers including electronics and tire shops (Buy Now Pay Later). Sub-prime consumers are struggling but Upbound's operating results remain stable. The company has been slow to de-lever after purchasing Acima in 2021 and made another incremental acquisition on Jan. 31, 2025 when it bought Brigit, an app that charges subscription fees to access payday lending. UPBD's stock is cheap at less than five times earnings. But we have been slow to add given the company's leverage and concerns regarding the Buy Now Pay Later segment. |
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