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| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
In this letter dated March 17, 2026, Headwaters Capital reviews the extreme market concentration of 2025, where 65% of the Russell 2000's returns came from AI infrastructure plays and the remainder from speculative, unprofitable companies. Highlighting historic valuation disparities, the letter argues that passive small-cap indexes carry high risk due to their exposure to AI CAPEX and unprofitable stocks, advocating instead for active management. Finally, the author announces a significant business update: starting April 1, 2026, they will join ZWJ Investment Counsel (an Atlanta-based firm managing $4.2 billion) as a Portfolio Manager, carrying forward their active, long-term investment philosophy.
Earnings are the long-term driver of stock prices, meaning speculative trades in unprofitable companies will eventually reverse, creating a strong opportunity for active managers focused on undervalued quality businesses.
The manager views the current market as highly concentrated with historic valuation disparities. Passive indexes, especially small-cap, are highly exposed to risky AI CAPEX speculation and unprofitable companies. Consequently, active portfolio management is expected to deliver significant value going forward.
As of Mar 17, 2026
Christopher Godfrey founded Headwaters Capital Management in September 2020 after 7 years investing in small and mid cap public equities for Invesco's Small Cap Growth and Small Cap Core mutual funds. His time at Invesco provided valuable experience as a fundamental equity investor along with diverse sector and industry coverage responsibilities. Godfrey's approach balances optimism with skepticism: While he has a naturally optimistic view toward the public equity market, he approaches each potential investment with a skeptical lens that was honed through his credit training as a commercial lender at Regions Bank from 2007-2011. This credit background built a solid foundation for fundamental company analysis and continues to serve as a valuable ballast to his growth investment philosophy. Godfrey graduated with a BA in Economics from Washington & Lee University in 2006 and an MBA from Emory's Goizueta Business School in 2013, and is also a CFA Charterholder.
Lead Portfolio Manager
High Conviction Bullish
Market Conviction
High-conviction positioning: The manager warns of extreme market concentration in AI and speculative stocks, advocating for active management before announcing their transition to ZWJ Investment Counsel as a P...
Growth Outlook
Market outlook remains low conviction: The manager warns of extreme market concentration in AI and speculative stocks, advocating for active management before announcing their transition to ZWJ Investment Counsel as a P...
Risk Appetite
Risk appetite posture is low conviction: The manager warns of extreme market concentration in AI and speculative stocks, advocating for active management before announcing their transition to ZWJ Investment Counsel as a P...
Capital Deployment
Manager actively deployed capital into high-conviction opportunities. The manager warns of extreme market concentration in AI and speculative stocks, advocating for active management before announcing their transition to ZWJ Investment Counsel as a P...
Forward Guidance
Forward guidance signal: The manager warns of extreme market concentration in AI and speculative stocks, advocating for active management before announcing their transition to ZWJ Investment Counsel as a P...
Language Signal
Tone analysis indicates above average conviction language: The manager warns of extreme market concentration in AI and speculative stocks, advocating for active management before announcing their transition to ZWJ Investment Counsel as a P...
Perceived Risk
Perceived risk level is evaluated as high conviction. The manager warns of extreme market concentration in AI and speculative stocks, advocating for active management before announcing their transition to ZWJ Investment Counsel as a P...
Opportunity Density
Opportunity density index indicates above average conviction actionable entry points. The manager warns of extreme market concentration in AI and speculative stocks, advocating for active management before announcing their transition to ZWJ Investment Counsel as a P...
Time Horizon
Investment time horizon reflects a high conviction orientation. The manager warns of extreme market concentration in AI and speculative stocks, advocating for active management before announcing their transition to ZWJ Investment Counsel as a P...
Top Conviction Themes
Key Catalysts
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