Investor Summary
Fund Strategy
FUND PERFORMANCE AS OF 30th June 2026
| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 11.4% | 30.1% | 23.7% |
| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 11.4% | 30.1% | 23.7% |
Prosper Stars & Stripes generated a net return of 30.1% in Q2 2026, outperforming the Russell 2000's 21.5% return and the HFRX Equity Hedge Index's 10.3% return. The fund's long book contributed 43.2% gross return with positive alpha of 20.8%, driven by broad-based performance across the portfolio. Top contributors included Vishay Precision Group, benefiting from robotics opportunities and operational improvements, and Ambiq Micro, which reported 59% revenue growth driven by edge AI applications. The short book contributed 2.3% of alpha despite the strong market rally. The manager's outlook is constructive, supported by ongoing job growth, manageable inflation, and AI-driven infrastructure investments. Key themes include the reinvigoration of U.S. industrial supply chains, with investment in domestic manufacturing capacity tripling between 2021 and 2025, and accelerating defense spending with the U.S. defense budget expected to rise 42% in 2027. The manager is positioned in defense through Park Aerospace, Applied Aerospace & Defense, and Elmet Group, while shorting consumer electronics companies facing cost pressures from AI-driven DRAM inflation. Earnings forecasts call for exceptional growth of 23-25% in 2026 for both large and small caps, though this creates a high hurdle for the market to clear.
Roubaix Capital runs a concentrated long/short small cap equity strategy focused on exploiting structural inefficiencies in smaller companies through fundamental stock selection, maintaining 30-50 long and 30-50 short positions with consistent net exposure around 48% and no leverage.
The manager's outlook is constructive with ongoing job growth, manageable inflation, and AI investments creating healthy economic drivers. Technology and infrastructure buildouts continue to demand attention with extraordinary earnings results projected to continue. Several industries including healthcare, consumer discretionary, and staples have lagged and offer opportunities for recovery. This broadening of the economy leads to strong earnings estimates for 2026 and beyond, with technology driving the majority of growth and other areas following along. However, the bullish forecasts create a high hurdle of expectations, and the market will be contemplating these as focus turns to 2027. The manager notes that earnings leadership from the Mag 7 has waned and is shifting in large caps, adding tension below the surface. A focus on stock picking enables the manager to consider these factors without being overly reliant on macro outcomes.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Aug 11 2026 | 2026 Q2 | AADX, AMBQ, CABO, DLB, ELMT, INOD, LOGI, LPTH, OLED, PCOR, PKE, TTGT, VPG | AI, Defense Spending, earnings, Long/Short, oil, Onshoring, semiconductors, small caps | - | Roubaix delivered 30.1% net returns in Q2 2026, driven by concentrated long positions in robotics, edge AI semiconductors, and defense supply chains. The manager is positioned for the reinvigoration of U.S. industrial capacity and accelerating defense spending, with the defense budget rising 42% in 2027. Short positions target consumer electronics facing DRAM cost inflation and companies threatened by AI disruption. Earnings growth of 23-25% is forecasted for 2026. |
| May 29 2026 | 2026 Q1 | AEHR, ASAN, BLFS, ITRI, LASR, MOD, VIA, VPG | AI, defense, energy, geopolitics, Long/Short, Manufacturing, small cap | - | Small cap long/short fund delivered -5.6% in volatile Q1 marked by Middle East crisis and AI boom. Exited profitable positions in Modine and nLIGHT at targets while shorts contributed positively. Small cap earnings acceleration of 25% forecasted for 2026 supports thesis despite geopolitical and inflation headwinds. Portfolio repositioned for better risk/reward opportunities. |
| Jan 28 2026 | 2025 Q4 | ATI, EAT, GTLB, INOD, KTB, META, MSFT, PDFS, RVTY, SEAT, SITM, STUB, TKNO | AI, alpha, healthcare, Long/Short, semiconductors, small caps, value | - | Small cap long/short fund delivered +9.9% in 2025 through disciplined stock selection in structurally inefficient markets. Strong contributors from AI-beneficiary SiTime and aerospace materials provider ATI. Outlook remains constructive with monetary and fiscal tailwinds supporting small cap outperformance in 2026. Strategy focuses on mispriced opportunities with recurring revenue models and competitive moats while managing risks through balanced long/short positioning. |
| Nov 11 2025 | 2025 Q3 | AGYS, BRBR, GDYN, JACK, KLG, PKE, RAL, TATT, TRNS | aerospace, AI, defense, healthcare, Long/Short, small caps, technology | TATT | Strong Q3 performance driven by aerospace and defense investments amid structural market opportunities in small caps. Manager sees favorable setup for 2026 with Fed easing, AI productivity gains, and broadening earnings recovery. Key risks include trade tensions and job market softening. Increased healthcare exposure while shorting consumer companies vulnerable to changing preferences and GLP-1 disruption. |
| Aug 19 2025 | 2025 Q2 | AGYS, AZTA, BIO, EXPO, FTAI, HELE, KRMN, LASR, MGNI, PACK, SPHR, TATT, TKNO | aerospace, AI, Biotechnology, defense, Long/Short, Rate Cuts, small caps, tariffs | - | Strong Q2 recovery with +9.6% returns driven by broad-based long book success, particularly in digital advertising and hospitality software. Fund maintains aerospace and defense focus while increasing healthcare exposure. Constructive outlook supported by pro-business fiscal policies, expected rate cuts, and improving small cap fundamentals after years of cyclical headwinds. |
| Apr 24 2025 | 2025 Q1 | AMSC, COLD, FLYW, FTRE, HELE, KRMN, KRNT, LH, MTLS, NSIT, PAYX, PYRC, RGEN, RHP, SARO, TLN, TRS, XMTR | Biotechnology, defense, energy, Long/Short, Onshoring, small caps, tariffs, Trade Policy | - | Fund returned -9.7% in Q1 as aggressive tariff policy derailed small cap recovery thesis, with policy uncertainty reaching crisis levels. Portfolio positioned for cyclical improvement was hurt by sector rotation and individual stock selection. Manager adjusted risk profile while maintaining focus on structural inefficiencies in small caps, expecting volatility to create opportunities despite macro headwinds from trade disruption. |
| Dec 31 2024 | 2024 Q4 | ALGM, BE, BELFB, BIRK, CCB, ENS, FTAI, KNF, MIR, NCNO, ORION, PACK, PKX, PRTY, RGLD, SRAD, STAA, TALEN, TEKK | healthcare, industrials, Long/Short, mid cap, small cap, technology | - | Stars & Stripes outperformed Russell 2000 in December through strong short positioning despite long book weakness. The fund maintains 46% net exposure in US mid/small caps, benefiting from healthcare shorts and select consumer positions while facing headwinds in industrials and technology holdings amid shifting Fed rate expectations. |
| Nov 7 2024 | 2024 Q3 | BIO, BLFS, CRS, DOCS, FLT, FND, FOXF, NR, PCT, RGEN, SHC, UPWK, WEX | aerospace, healthcare, infrastructure, interest rates, Long/Short, Recession, semiconductors, small cap | - | Small cap long/short fund outperformed in volatile Q3, delivering -2.0% versus Russell 2000's -5.1% decline. Strong performance from aerospace and infrastructure holdings, successful short exits. Economic resilience continues but faces headwinds from persistent inflation, global weakness, and geopolitical tensions. Portfolio positioned to capitalize on rolling industry cycles and small cap inefficiencies while maintaining disciplined risk management. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIAI investments are a significant contributor to overall economic growth and manufacturing spend. The manager sees AI as both an opportunity and a risk, noting extreme day-to-day market moves around semiconductors and software depending on sentiment. The manager views Procore as an enabler and beneficiary of AI rather than a casualty, while shorting companies like Innodata due to threats from recursive self-improvement in frontier models. |
Semiconductors Software Infrastructure Automation Edge Computing |
Defense SpendingThe U.S. defense budget is expected to rise 42% in 2027, driven by the need to replenish stockpiles and modernize capabilities following conflicts that demonstrated the revolution in warfare. The manager is invested in this theme through Park Aerospace, Applied Aerospace & Defense, and Elmet Group, all positioned to benefit from increased production of munitions, domestic supply chain requirements, and the shift toward agile, attritable weapons systems. |
Defense Munitions Supply Chain Aerospace Military | |
OnshoringInvestment in domestic manufacturing capacity has tripled between 2021 and 2025, with the reinvigoration of the U.S. industrial supply base strengthening as a theme. The manager highlights LightPath Technologies' exit from China and positioning to benefit from domestic procurement requirements, particularly as China has restricted exports of germanium. The building of domestic supply chains is expected to benefit companies like Elmet Group. |
Manufacturing Supply Chain Domestic Industrial Capacity | |
Semiconductor CycleThe Philadelphia Semiconductor Index posted its best quarterly return in its history during Q2 2026 as the AI and semiconductor trade reasserted itself. The manager invested in Ambiq Micro, which reported 59% revenue growth in Q1 2026 and guided for 75% growth in Q2, but exited the position as prices met bullish targets. The manager also notes rising DRAM costs creating pressure on consumer electronics pricing. |
Semiconductors Memory AI Edge Computing Chips | |
OilOil prices spiked well past $100 per barrel during Q2 2026 due to Middle East conflict, renewing inflationary pressure before easing in mid-June following a memorandum of understanding. The conflict completely collapsed in July, sending oil prices rallying back over $100. Energy was the negative outlier in the Russell 2000 at -10.1% in Q2, giving back a portion of Q1 gains as the ceasefire drove down crude oil prices. |
Energy Crude Geopolitics Inflation Commodities | |
InflationHigher oil prices renewed inflationary pressure during the quarter, which is always a challenge for risk assets, particularly equities sensitive to rate moves and long-term growth assumptions. Expectations for interest rate hikes rose over the course of the quarter, reflecting elevated commodity prices. The manager notes cost pressures on technology components like DRAM resulting in higher prices for consumer electronics, which would impact back-to-school and holiday spending. |
Rates Commodities Consumer Pricing Fed | |
EarningsS&P 500 earnings forecasts call for several years of earnings growth with nearly 25% in 2026, while small cap companies are forecasted to grow earnings 23% in 2026 and another 20%+ in 2027. This level of earnings growth is exceptional, particularly considering the economy is not exiting a recession. Unusually, bullish earnings forecasts began the year in the mid-teens and have been revised up to the 20s, creating a high hurdle for the market to contemplate. |
Growth Forecasts Revisions Fundamentals Expectations | |
Small CapsThe Russell 2000 gained 21.5% in Q2, its strongest quarter since the pandemic rebound, significantly outpacing the S&P 500's recovery of 15.2%. Information Technology surged 57.8% in Q2 as the AI trade reignited. The manager believes smaller companies remain a reliable source of mispriced investment opportunities that are either overlooked or not practical investments for larger firms, with structural inefficiencies likely to move even more in their favor over time. |
Russell 2000 Inefficiency Alpha Opportunity Mispricing | |
| 2026 Q1 |
AIAI investment boom driving GDP growth with 17% business spending growth. Manager sees AI as defining the current business cycle with implications for productivity, job market, and inflation. Views current AI capex cycle as historically significant though not anomalous by past technology boom standards. |
Data Centers Semiconductors Infrastructure Productivity |
DefenseDefense spending remains a strategic priority with directed energy systems offering compelling economics. Manager invested in nLIGHT for laser applications and York Space Systems for satellite infrastructure, though exited both positions after hitting targets or due to visibility concerns. |
Space Defense Electronics Government IT | |
EnergyGeopolitical conflicts in Middle East caused oil prices to roughly double from pre-conflict levels due to Strait of Hormuz closure. Energy was the positive outlier in Russell 2000, rising 37.9% in Q1. Energy crises historically precede economic slowdowns. |
Oil Geopolitical Risk Supply Disruption | |
Small CapsSmall cap earnings growth forecasted to rise 25% in 2026 followed by 10%+ in 2027, marking sustained recovery. Small caps have underperformed large caps for much of past decade but showing improvement. Manager sees structural advantages in small cap universe due to reduced competition and inefficiencies. |
Earnings Value Market Inefficiency | |
RoboticsConvergence of robotics market growth with manufacturing recovery creating opportunities. Vishay Precision Group working with multiple humanoid robotics manufacturers. Humanoid robotics industry expected to begin scaling and grow substantially, expanding addressable markets. |
Automation Industrial Machinery Manufacturing | |
| 2025 Q4 |
AIAI investment cycle continues driving economic growth and market gains. Revenue per employee increasing at large AI companies supports the investment thesis. AI spend levels comparable to past tech investment expansions. |
Artificial Intelligence Data Centers Investment Cycle Productivity Technology |
Small CapsSmall caps expected to grow at better pace than large caps in 2026. Long period of underperformance relative to large caps may end with better profit growth. Strong start to 2026 supported by easing monetary conditions. |
Russell 2000 Underperformance Profit Growth Valuation Recovery | |
SemiconductorsSemiconductor industry experiencing high growth from normal demand and AI buildout. PDF Solutions positioned at nexus of strong industry trends with e-probe business seeing order pickup for 3-D semiconductor structures. |
Chip Demand 3D Structures Supply Chain Yields Growth | |
HealthcareHealthcare positioned for catch-up growth after years of below-trend performance. Government spending expected to increase relative to feared cuts. Many companies signaling improvement in revenue growth outlook. |
Life Sciences Research Spending Recovery Growth Diagnostics | |
RatesFed lowered overnight rate by 25 basis points in December, third cut in 2025. Futures market anticipates one or two more cuts in 2026. Three cuts in 2025 likely to be added to in 2026 as monetary policy tailwind. |
Federal Reserve Rate Cuts Monetary Policy Easing Tailwind | |
| 2025 Q3 |
AerospaceThe fund sees significant opportunities in aerospace companies, particularly those benefiting from maintenance cycles and growth in auxiliary power units. TAT Technologies is positioned to capture market share in the B737 and A320 family aircraft markets with a total addressable market of $2.5 billion. |
MRO APU Aircraft Defense OEM |
Defense SpendingDefense-related investments are benefiting from increased procurement needs, particularly in missile systems. Park Aerospace has exposure to Patriot missile systems where the US Army is looking to increase procurement by 4x from current depleted levels. |
Patriot Missiles Military Procurement Defense | |
AIAI is viewed as a major productivity driver that has contributed approximately 1% to GDP growth. The manager expects AI investments to lead to improved labor productivity and margin expansion, though acknowledges the full benefits are yet to be realized. |
Productivity GDP Automation Technology Margins | |
Small CapsThe manager believes small caps remain attractive with supportive valuations and improving earnings outlook for 2026. Historical cycles suggest extended periods of relative outperformance when trends shift, supported by monetary easing and broadening earnings growth. |
Valuations Earnings Outperformance Cycles Monetary | |
GLP1GLP-1 weight loss medications are disrupting traditional food and beverage consumption patterns, reducing average calorie intake by 16-39%. This creates challenges for legacy food companies and restaurants while creating opportunities for protein-focused businesses. |
Weight Loss Consumption Food Disruption Protein | |
| 2025 Q2 |
DefenseDefense spending has strengthened with clearer priorities, particularly in missile and drone defense reflecting modern warfare evolution. The fund identified nLIGHT as a beneficiary of increased spending on laser-based anti-missile and anti-drone systems, which offer cost-efficient solutions with low cost per shot and unlimited magazine capacity. |
Defense Spending Laser Technology Missile Defense Drone Defense Golden Dome |
AerospaceThe fund consistently invests in aerospace given its steady growth, attractive margins for value-added suppliers, regulatory barriers to entry, and emphasis on quality. Recent investments include TAT Technologies for MRO services in commercial aerospace, capitalizing on growing demand while incumbents hesitate to expand capacity. |
MRO Commercial Aviation Auxiliary Power Units Aerospace Components Aviation Services | |
BiotechnologyBioprocessing is entering a period of sustained recovery after years of underperformance. The fund increased exposure through positions like Bio-Rad Laboratories and Alpha Teknova, believing many headwinds are now reflected in valuations and the sector is positioned for recovery. |
Bioprocessing Life Science Tools Drug Development Commercial Stage Sartorius | |
AIAI presents both opportunities and threats across sectors. While large companies benefit from AI spending boom accounting for up to half of GDP growth, AI also creates disruption risks for consulting firms through systematic reference capabilities and increased time efficiency in background work. |
Artificial Intelligence AI Spending Expert Consulting Automation Efficiency | |
AdvertisingDigital advertising is experiencing a long tail transition from linear to streaming TV. Magnite, as the leading independent supply-side platform, benefits from this shift and potential DOJ antitrust remedies against Google, which could increase market share opportunities significantly. |
Digital Advertising Connected TV Supply Side Platform Streaming Antitrust | |
Trade PolicyTariff shock on Liberation Day created unprecedented uncertainty with rates so high the situation escalated from trade war to trade embargo. The ever-changing tariff narrative continues to yield surprises, though effects on businesses have been limited as companies proactively factor costs into outlooks. |
Tariffs Trade War Trade Embargo Economic Uncertainty Business Impact | |
| 2025 Q1 |
Trade PolicyThe administration announced tariff rates far higher than anticipated on April 2nd, reverting the U.S. to protectionist policies not seen for 100 years. Policy uncertainty measures shot to near record highs, creating large negative impacts on stock, bond and currency markets. Businesses face increased costs from higher tariffs and supply chain adjustments. |
Tariffs Protectionism Supply Chain Policy Uncertainty Trade War |
Small CapsSmall caps significantly underperformed large caps during the quarter, entering a bear market with a peak-to-trough decline just shy of 30%. The fund believes small caps had a better opportunity to improve relative to the market due to cyclical recovery expectations and sustained underperformance. |
Russell 2000 Underperformance Bear Market Cyclical Recovery Valuation | |
DefenseThe fund has invested in several defense stocks that will benefit from stability in overall defense spending and shifting priorities that emphasize the navy and modernizing weapon systems. Examples include Karman Holdings which supplies subsystems for space, missiles, and hypersonic weapons. |
Defense Spending Modernization Space Missiles Navy | |
OnshoringOne goal of trade policy is to onshore manufacturing of key goods. Investment announcements have been made to produce more goods in the U.S., though the investment needed will take years to have impact and require skilled workforce. Companies like Xometry and Kornit Digital benefit from localized production trends. |
Manufacturing Domestic Production Supply Chain Localization Investment | |
Energy TransitionTalen Energy's crown jewel Susquehanna nuclear power plant signed a long-term power purchase agreement with Amazon Web Services for 960 MW. Given demand for clean energy and AI datacenters, nuclear assets have scarcity value in the PJM market with limited new generation capacity expected by 2030. |
Nuclear Clean Energy Data Centers Power Purchase Agreement Grid Capacity | |
BiotechnologyThe life science tools industry experienced headwinds from post-COVID de-stocking but shows green shoots with Repligen's pharma and consumable orders increasing mid-to-high teens. Near-record 64 new drug approvals in 2024 suggest the post-COVID hangover is ending. |
Life Science Tools Drug Development Bioprocessing Post-COVID Recovery FDA Approvals | |
| 2024 Q3 |
SemiconductorsThe semiconductor industry has experienced a 20%+ decline in revenues similar to past industry cycles, following supply shortages that drove demand to unsustainably high levels during the pandemic. The manager sees opportunities in this rolling cycle as the industry normalizes from previous boom-bust dynamics. |
Semiconductor Cycle Supply Chain Cyclical Recovery Industry Normalization Revenue Decline |
AerospaceCommercial aerospace benefits from barriers to entry created by regulation, long production cycles and high switching costs, enabling value-added suppliers to earn high margins. The industry faces a long duration expansion cycle due to high travel demand and unusual supply depression during recent years. |
Commercial Aviation Supply Chain Barriers to Entry Travel Demand Production Cycles | |
Infrastructure SpendingU.S. infrastructure spending is rising, creating high demand for composite mats and related services. The manager expects this trend to continue, supporting companies that provide infrastructure-related products and services with positive operating leverage. |
Infrastructure Government Spending Composite Materials Construction Operating Leverage | |
BiotechnologyHealthcare sector growth is supported by aging population and improving treatment options, but faces pressure from higher interest rates affecting funding and broad inventory destocking. The pandemic encouraged aggressive spending that continues to normalize, creating opportunities as conditions improve. |
Healthcare Aging Demographics Medical Devices Funding Pressure Inventory Destocking |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Nov 11, 2025 | Fund Letters | Christopher Hillary | TATT | TAT Technologies Ltd. | Industrials | Aerospace & Defense | Bull | NASDAQ | Aerospace, aftermarket, Apus, Defense, growth, MRO, valuation | Login |
| TICKER | COMMENTARY |
|---|---|
| VPG | Vishay Precision Group (VPG) was the largest contributor to our long book during the second quarter of 2026. Vishay's core technologies, bulk metal foil resistors and bonded foil strain gauges, are niche, designed-in sensor solutions embedded in precision instruments, such as semiconductor test equipment and aerospace, medical, military, and robotics applications. Vishay has done a lot of work during the industrial downturn to improve its footprint to have more profitable growth as the industrial economy recovers after years of tepid performance. In addition, Vishay is pursuing a substantial secular growth opportunity in humanoid robotics, with $500 to $1,200 in content per robot. Management is executing on both sides of the ledger: cutting costs while strengthening the leadership bench with new Chief Operating Officer and Chief Product Officer roles. Together, these initiatives are expected to lift gross margins and EBITDA margins from 39% and 8% in 2025 toward long-term targets of 46% and 20% over the next several years. We reduced and then exited our position in Vishay during the quarter but still see good value in the business predicated on the cadence of robotics market development. |
| AMBQ | Ambiq Micro (AMBQ) was the second-best contributor to our long book during the quarter. Ambiq is a fabless semiconductor company that designs ultra-low power systems-on-chip (SoCs) for edge AI applications. The company's proprietary design approach delivers two to five times lower power consumption than competing solutions, a decisive advantage in battery-constrained devices like wearables, where customers include Garmin, Google, and Huawei. In semiconductors, we look for companies levered to two enduring themes: lower power consumption and miniaturization. In January, the company raised equity, signaling a step-change in revenue growth. After posting 2% year-over-year revenue growth in Q4 2025, the company reported 59% growth in Q1 2026 and guided for 75% growth for Q2. We ascribed a high single digit multiple of sales to the shares, but as the price met our bullish targets, like many stocks in this part of the market, we exited our position. |
| PCOR | Procore Technologies (PCOR) was the largest detractor from our long book during the second quarter. Procore sells cloud-based project management software into the commercial construction industry. Its platform is the system of record for construction projects (drawings, schedules, budgets, change orders) connecting owners, general contractors, and subcontractors in a single, shared workspace. While the market's concern is AI agents replace traditional seat-based software, we see Procore as an enabler and beneficiary of AI rather than a casualty. Its revenue model is aligned with customers; the company charges by project volume, not by seat, allowing unlimited users across its constituencies. It also provides mission-critical collaboration software to an industry that has been slow to adopt technology. A proprietary data set and more than three million users help position the company to deliver AI solutions that we believe its customers will want from their existing system of record. The fundamentals supported our thesis: Q1 results, reported May 5th, showed revenue growth of nearly 16% and free cash flow growth of 20%, in addition to management raising its full-year guidance. We exited our position during the quarter in keeping with our stop-loss discipline but have subsequently reinvested. |
| TTGT | TechTarget (TTGT) was the largest contributor to our short book during the quarter. The company monetizes the purchase research behavior of enterprise IT buyers by operating a network of websites where buyers register to consume technical content, then selling those intent signals as leads to IT vendors. We first shorted the company after it completed a value-destroying acquisition in December 2024 that led to significant impairment charges in Q1 2025 and again in Q1 2026. We believe AI is likely to dismantle search-based discovery and commoditize content, the two pillars of TechTarget's value propositions. Results have validated our concerns, with management describing its market as mature, with 2% to 3% top-line growth, and EBITDA margins that peaked in 2022 falling to 7% in Q1 2026. Notably, revenue growth began deteriorating before ChatGPT launched in November 2022, suggesting that problems run deeper than AI alone. We continue to believe generative AI will weigh on TechTarget's prospects and remain short the company. |
| CABO | Cable One (CABO) was the second largest contributor to our short book during the quarter. Cable One provides cable broadband in rural markets, where it once enjoyed pricing power and high barriers to entry. But industries are dynamic and new competition has changed the company's position. Our process kept Cable One on our focus list through that transformation and allowed us to revisit it repeatedly; we have shorted the stock five times over the last four years. Increasing competition is an excellent short driver, and Cable One faced pressure from multiple directions at once, including fiber overbuilders, fixed wireless, and satellite internet. Broadband is a commodity, so when lower-priced alternatives entered its markets, Cable One had no meaningful way to differentiate and began losing share. In Q1 2026, the company reported a 7% revenue decline and an earnings decline of approximately 33%. Management compounded the damage by recognizing the shift late and allocating capital to asset purchases at peak multiples. The combination of leverage, subscriber losses, and falling prices have pressured margins and now threatens the company's terminal value. We covered our position during the quarter. |
| INOD | Innodata (INOD) was the largest detractor in our short book during the quarter. Innodata sells human-powered data to companies that build AI models. Clients pay the company to manufacture training data, evaluate model outputs, and run trust and safety operations. Innodata presents itself as a software company, but the work is delivered primarily by a large offshore workforce. Its gross margins tell the real story: approximately 44% in Q1 2026 (squarely in services territory) versus the 70%+ typical of software. We see several threats to the durability of their business model. First, customer concentration is extreme, with the largest client accounting for 56% of Q1 revenue. Second, since it is essentially curating data, Innodata's moat is narrow; it competes not only with rivals like Mercor, Scale AI, Surge, and Turing but potentially with its own customers. Third, revenue is project-based and more episodic than subscription or output-based models. Finally, frontier models are approaching recursive self-improvement, in which models generate their own training signal and require less human input to advance, an existential threat to Innodata. Despite our concerns, the company reported an exceptional quarter, with revenue up 54% year over year, gross margins expanding 600 basis points, and EBITDA margins reaching 28%. We accepted our loss and covered the position in accordance with our stop-loss framework. |
| LPTH | The market for space communication is large and growing. Within that market, LightPath Technologies (LPTH) is a provider of camera lens technology, a high value component for sensing applications. Legacy contracts were for heat-seeking missiles, while current growth is driven by intelligence and missile defense, counter UAS systems, and longer-term next generation projects including the Golden Dome initiative. This is a key need for the U.S. and one that the government wants to procure from domestic firms. LightPath has exited China, which was once half of the company's operations. Further, China has restricted exports of germanium, a key input for high power IR and optical lenses. LightPath's Black Diamond technology avoids the use of germanium entirely, positioning the company favorable amid these restrictions. At the same time, LightPath is successfully migrating from a component supplier to a system supplier. This movement up the value chain is a classic strategy that drives revenue and margin expansion. In LightPath's case, this shifts the value of their content from under $50 per component in its legacy business, to $50 to $500 in recent business, to $1,000 to $500,000 in its current and prospective business. Given the high level of industry growth, the need for domestic supply chains, and an exponential increase in content value, we believe the company's revenue target of $150 million in the medium term, and double that in the long-term, are credible corporate goals. |
| PKE | We are also invested in Park Aerospace (PKE) which derives more than half of its revenues from defense and is expected to grow materially from here. Park Aerospace is expanding capacity to meet demand for the highly used and highly capable PAC-3 anti-missile system, with production expected to triple. As commercial aerospace continues to grow and defense spending accelerates, Park Aerospace's earnings power continues to rise. |
| AADX | We are also invested in Applied Aerospace & Defense (AADX). Applied Aerospace participates in many of the fastest growing programs in defense as a sole sourced, IP-rich component supplier, enabling high (and rising) EBITDA margins. We believe bookings can accelerate and drive revenues, earnings, and the multiple higher. |
| ELMT | Elmet's critical materials division supplies inputs for the U.S. military supply chain that are essential to production and increasingly must be sourced domestically, steering business towards the company. We believe the building of domestic supply chains can benefit Elmet and drive better-than-forecast earnings growth as they grow organically and deploy their underutilized balance sheet to broaden their businesses. |
| OLED | One theme that has had success is the ongoing pressure caused by the investment boom in AI crowding out spending in other areas. We have shorted Universal Display Corp (OLED), Dolby Laboratories (DLB), and Logitech International (LOGI) on this theme. We believe cost pressures on technology components such as DRAM to result in higher prices for consumer electronics. This would have a significant impact on back-to-school and holiday spending, the key periods for these companies' end markets. We expect the forecasts that these companies are providing at this time of the year to prove optimistic, as tech cost inflation is unusual. Further, we believe the so-called K-shaped economy, where consumers have felt the pressure of rising costs of living, will continue to squeeze discretionary purchases like these. Rising prices make it nearly impossible to use discounts to stimulate sales, compounding the pressure. |
| DLB | One theme that has had success is the ongoing pressure caused by the investment boom in AI crowding out spending in other areas. We have shorted Universal Display Corp (OLED), Dolby Laboratories (DLB), and Logitech International (LOGI) on this theme. We believe cost pressures on technology components such as DRAM to result in higher prices for consumer electronics. This would have a significant impact on back-to-school and holiday spending, the key periods for these companies' end markets. We expect the forecasts that these companies are providing at this time of the year to prove optimistic, as tech cost inflation is unusual. Further, we believe the so-called K-shaped economy, where consumers have felt the pressure of rising costs of living, will continue to squeeze discretionary purchases like these. Rising prices make it nearly impossible to use discounts to stimulate sales, compounding the pressure. |
| LOGI | One theme that has had success is the ongoing pressure caused by the investment boom in AI crowding out spending in other areas. We have shorted Universal Display Corp (OLED), Dolby Laboratories (DLB), and Logitech International (LOGI) on this theme. We believe cost pressures on technology components such as DRAM to result in higher prices for consumer electronics. This would have a significant impact on back-to-school and holiday spending, the key periods for these companies' end markets. We expect the forecasts that these companies are providing at this time of the year to prove optimistic, as tech cost inflation is unusual. Further, we believe the so-called K-shaped economy, where consumers have felt the pressure of rising costs of living, will continue to squeeze discretionary purchases like these. Rising prices make it nearly impossible to use discounts to stimulate sales, compounding the pressure. |
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