The curated database of hedge funds that publish investor letters. Research by geography, strategy, and schools of thought.
| # | Fund | Strategy | Style | Geography | AUM | Latest Letter |
|---|---|---|---|---|---|---|
The Merion Road Small Cap Fund returned 16.6% in Q2 2026, bringing YTD performance to 20.1%. The manager continues to focus on boring industrial companies with dominant market positions and attractive free cash flow multiples, explicitly avoiding AI infrastructure despite its recent popularity. The quarter featured broad-based gains from long-term holdings including Bel Fuse, Butler National, and Monarch Cement. Frequency Electronics performed well after announcing backlog exceeding $100mm and strong three-year guidance. The manager is actively adding to Honeywell Aerospace following its separation from Honeywell, viewing conservative management guidance and uninspiring sell-side initiation reports as setting a low bar for future performance. The stock trades at a valuation discount to peers. The manager also released a joint open letter to United Bancorporation of Alabama's Board addressing concerns about capital allocation and expense growth, escalating an activism campaign that has gained media attention. The Long Only portfolio returned 3.9% for the quarter but remains essentially flat year-to-date.
The fund focuses on boring industrial companies with dominant market positions, strong organic and inorganic growth opportunities, and attractive free cash flow multiples, while actively avoiding trendy sectors like AI infrastructure.
Manager expects Honeywell Aerospace to have opportunity to exceed conservative guidance over the next several years. The activism campaign at United Bancorporation of Alabama suggests ongoing engagement on capital allocation and expense management issues.
As of Jul 23, 2026
Aaron Jacob Sallen serves as the Founder and Chief Investment Officer of Merion Road Capital Management, bringing extensive experience in principal investing, private equity, and event-driven strategies. He holds a B.A. (Cum Laude) from Dartmouth College (2006) and an M.B.A. from The University of Chicago (2012), with professional experience including roles as an analyst at Napier Park Global Capital (2012-2016) and in principal investing at Macquarie Capital. Since founding the firm in July 2016, Sallen has focused on small-cap and special situations investing, leveraging his expertise in event-driven opportunities that larger funds often overlook. He is registered with CRD# 4927878 and maintains licenses as an Investment Adviser Representative in Florida and Pennsylvania with no disciplinary disclosures. As the owner and manager of MRCM GP, LLC, Sallen actively manages the investment portfolio, dedicating approximately 100 hours per month to investment activities. Under his leadership, the Merion Road Small Cap Fund has delivered 15.1% net annualized returns since inception, outperforming major benchmarks.
Lead Portfolio Manager
Moderate Conviction Bullish
Market Conviction
The manager demonstrates moderate-high conviction through concentrated positions in named holdings like Bel Fuse, Butler National, Monarch Cement, and Frequency Electronics described as long-term holdings. He is actively adding to Honeywell Aerospace with specific valuation and catalyst reasoning. The activism campaign at United Bancorporation of Alabama shows strong conviction in engagement. However, the letter does not provide explicit position sizing or state these are the largest positions in the portfolio. The fund structure is small cap focused, suggesting some concentration, but the exact number of holdings is not disclosed. The language is decisive but not extreme.
Growth Outlook
The manager focuses entirely on bottom-up stock-specific narratives, providing no explicit commentary or outlook on the broader macroeconomic environment or equity market valuations. Thus, a neutral score of 0.50 is assigned.
Risk Appetite
The manager actively built new long positions (FEIM, HON) and maintains high-conviction holdings in small-cap stocks like BUKS, showing a constructive, risk-on posture.
Capital Deployment
The manager is actively adding to Honeywell Aerospace this month, indicating selective deployment. He also bought Frequency Electronics in Q1. However, he exited a speculative long position during the quarter, suggesting some capital rotation. No cash level changes are disclosed, and the overall activity appears to be rotation and selective additions rather than broad deployment or de-risking. The net effect is mildly positive deployment in specific opportunities without evidence of significant cash level changes.
Forward Guidance
The manager is actively scaling positions, having recently built a new stake in FEIM and a starter position in HON. This demonstrates an active stance toward capital deployment.
Language Signal
The letter contains balanced language. Positive terms include attractive free cash flow multiples, strong guidance, notable gains, and performed well. Negative or cautious language includes foolish to chase trends, lackluster trading, uninspiring reports, and concerns about capital allocation and expense growth at United Bancorporation of Alabama. The manager's explicit rejection of AI infrastructure as in vogue adds a contrarian, cautious element. Overall, the language leans mildly positive but is tempered by selectivity and caution about market trends.
Perceived Risk
Perceived risk is low-to-moderate (0.40). The manager mentions geopolitical tensions and conflicts, but views them primarily as positive tailwinds for his defense-oriented holdings rather than systemic macro risks to the portfolio.
Opportunity Density
The manager is finding selective opportunities, particularly in Honeywell Aerospace post-spinoff, and has identified multiple long-term holdings that performed well. The activism campaign at United Bancorporation of Alabama suggests he is actively identifying value creation opportunities. However, the explicit avoidance of AI infrastructure and the focus on boring industrials suggests he is being selective rather than finding opportunities broadly across markets. The tone indicates a decent but not abundant opportunity set, requiring patience and selectivity.
Time Horizon
The manager describes Bel Fuse, Butler National, and Monarch Cement as long-term holdings, indicating a multi-year time horizon. For Honeywell Aerospace, he references a low bar set for the next several years, suggesting a 2-3 year thesis. Frequency Electronics is discussed with reference to 3-year guidance. The activism campaign at United Bancorporation of Alabama implies a patient, multi-year engagement. There is no evidence of near-term catalyst dependency or trading mentality. The overall time horizon appears to be 2-5 years for thesis realization, consistent with a value-oriented small cap strategy.
Top Conviction Themes
Key Catalysts
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