| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 3.5% | 0.9% | -11.5% |
SGA's Emerging Markets Growth portfolio returned 0.9% net in Q2 2026 versus 24.1% for the MSCI EM Index, as AI infrastructure momentum drove the best quarter on record for momentum stocks, outperforming quality by 42%. AI CapEx stocks accounted for 91% of the index's Q2 returns, with memory stocks SK Hynix and Samsung returning 694% and 393% over 12 months. Despite this challenging environment, SGA's portfolio companies delivered 18% revenue growth and 20% EPS growth with 60%+ beating consensus, though valuation multiples compressed. The portfolio now trades at its steepest discount to the MSCI EM Index since 2014 inception. SGA initiated positions in Nu Bank and Disco, seeing compelling long-term growth opportunities, while exiting Tencent Music, MakeMyTrip, Bank of Central Asia, and Tata Consultancy Services. The firm views current AI beneficiaries as cyclical with questionable durability, expecting normalization as new fabrication capacity comes online in 2027-2028. With the portfolio positioned to deliver 16% revenue and 19% earnings growth over three years from predictable, non-cyclical businesses, SGA expresses high conviction that the unprecedented valuation dislocation creates fertile ground for subsequent outperformance as markets reward fundamental strength.
SGA builds high-conviction portfolios focused on quality growth businesses anticipated to achieve consistent mid-teens earnings growth with reduced variability, supported by predictable revenue and cash flow generation, with the goal of converting stable portfolio earnings growth into returns designed to protect and reliably compound client capital over time.
SGA expresses high conviction in current positioning despite extended underperformance, viewing the portfolio's steepest-ever valuation discount to the MSCI EM Index as creating fertile ground for attractive risk-adjusted returns. The firm believes conditions for a meaningful rotation toward quality EM compounders are quietly building as the AI CapEx and memory cycle faces normalization. Portfolio companies continue to deliver strong fundamental performance with 18% revenue growth and 20% EPS growth, while trading at valuations cheaper relative to the market than at any point since 2014 inception. SGA emphasizes that temporary dislocations do not invalidate enduring investment principles and that markets should reward fundamental strength over time as forces driving recent divergence begin to cool.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 29 2026 | 2026 Q2 | 1299 HK, 6146.T, 700 HK, 9983.T, BABA, BAJFINANCE.NS, CPALL.BK, GRAB, HDFCBANK.NS, HTHT, INFY, NAVER, NU, TOTS3.SA, TSM, WALMEX.MX, XP, YUMC | AI, emerging markets, Fintech, Latin America, momentum, Quality, semiconductors, value | - | SGA's EM Growth portfolio underperformed in Q2 as AI momentum stocks dominated, but portfolio companies delivered strong fundamentals with 18% revenue and 20% earnings growth. The portfolio trades at its steepest discount to the index since 2014 inception despite positioning for 19% annual earnings growth over three years. SGA views cyclical AI beneficiaries as unsustainable and maintains high conviction in quality compounders at unprecedented valuations. |
| Apr 28 2026 | 2026 Q1 | 9983.T, APOLLOHOSP.NS, HDFCBANK.NS, INFY, MMYT, SE, TCS.NS, TOTVS3.SA, TSM, XP | AI, emerging markets, energy, Geopolitical, quality growth, semiconductors, valuation | - | SGA's EM Growth portfolio underperformed in Q1 2026 due to limited AI Hardware exposure and geopolitical disruption, despite strong fundamental execution by holdings. Portfolio trades at unprecedented discount to market since inception while delivering consistent mid-teens growth. Manager expects rotation toward quality compounders as conditions build for outperformance. |
| Feb 8 2026 | 2025 Q4 | 035420.KS, 0700.HK, 1299.HK, 1398.HK, 9983.T, BABA, BJFN, CPALL.BK, CPI.JO, FEMSA, GRAB, HDFCBANK.NS, HTHT, INFY, MELI, MMYT, OR.PA, SE, SLM.JO, TCS.NS, TME, TOTS3.SA, TSM, UL, WALMEX.MX, XP, YUMC | AI, Cyclical, E-Commerce, emerging markets, Quality, semiconductors, valuation |
TSM INFY 9983 JP BABA SE GRAB TME OR FP |
SGA's Emerging Markets Growth portfolio returned 22.8% net in 2025 but underperformed cyclical-driven benchmarks. The AI boom favored momentum stocks while quality growth faced headwinds. Portfolio trades at steepest ever discount to MSCI EM as quality factor hits historically depressed levels. SGA sees meaningful upside potential as valuations normalize for businesses with pricing power and recurring revenues. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIAI infrastructure spending drove extreme momentum in memory and semiconductor stocks, with SK Hynix and Samsung returning 694% and 393% over 12 months. AI CapEx stocks accounted for 91% of MSCI EM Index returns in Q2 and 106% YTD. SGA views current AI beneficiaries as cyclical with questionable durability, expecting normalization as supply constraints ease and new capacity comes online in 2027-2028. |
AI infrastructure Memory Semiconductors Hyperscaler CapEx |
Semiconductor CycleMemory stocks experienced parabolic rallies driven by temporary supply shortages and elevated ASP hikes in conventional DRAM, not sustainable HBM demand. New fabrication capacity from Micron, Samsung, and others comes online 2027-2028, creating typical supply-side dynamics that precede corrections. SGA believes cyclicality is not dead but merely sleeping, with speculation reaching fever pitch levels. |
Memory DRAM HBM Fabrication capacity Cyclicality | |
MomentumQ2 2026 marked the best quarter on record for Momentum stocks, outperforming Quality by 42% and returning 65% absolute. This represents the 100th percentile reading in history for both absolute and relative performance. The extreme narrowness of market leadership created significant headwinds for quality-focused portfolios, though SGA's holdings demonstrated resilience during intermittent momentum reversals. |
Momentum stocks Quality stocks Market leadership Retail trading | |
QualitySGA's quality compounders delivered 18% revenue growth and 20% EPS growth in Q2, with 60%+ of holdings beating consensus despite valuation compression. The portfolio trades at the steepest discount to MSCI EM Index since 2014 inception. SGA emphasizes that durability and sustainable growth have become more valuable in an era of AI disruption, though recent market dynamics have favored cyclical stocks. |
Quality growth Durability Valuation discount Earnings growth | |
ValueThe portfolio's valuation relative to the market has never been better since inception over a decade ago, with the steepest discount to MSCI EM Index in the strategy's history. Despite solid fundamental performance, valuation multiples compressed YTD due to investor sentiment favoring AI momentum. SGA views this dislocation as emblematic of sentiment rather than deteriorating business quality, creating fertile ground for subsequent outperformance. |
Valuation Discount Dislocation Opportunity | |
FinTechSGA initiated a new position in Nu Holdings, a leading digital banking platform with structurally lower costs and proprietary data capabilities. Nu's pricing power is driven by 30,000+ data points per active user, with 60%+ using it as their primary account. The company is positioned to deliver 30% revenue and earnings growth over three years, supported by low penetration in core Latin American markets and expansion into Mexico, Colombia, and the United States. |
Digital banking Nu Holdings Latin America Underbanked | |
Semi EquipmentSGA initiated a position in Disco, the leading provider of cutting, grinding, and thinning equipment with 70-80% market share. Disco benefits from AI-driven demand for advanced semiconductor packaging (HBM, hybrid bonding, 3D packaging), with 30-40% recurring revenue from consumables. The company is positioned to deliver low-20% revenue growth and high-20% earnings growth over three years as packaging complexity increases. |
Disco KKM equipment Advanced packaging HBM Recurring revenue | |
OilHigher oil prices posed significant headwinds for oil-importing economies including Southeast Asia and India earlier in the year, weighing on several portfolio holdings. The signing of the U.S.-Iran Memorandum of Understanding on June 14th led to the reopening of the Strait of Hormuz and Brent crude falling from peaks above $120 to approximately $80, though the risk of re-escalation remains. |
Oil prices Brent crude Strait of Hormuz Geopolitical risk | |
| 2026 Q1 |
AIManager sees AI infrastructure spending continuing with hyperscalers investing $650B in 2026, up from $400B in 2025. Holds TSMC as the key beneficiary due to its monopoly on high-performance compute chip production. Avoids memory providers like SK Hynix and Samsung despite strong performance due to commodity-like pricing dynamics and supply increases. Views AI disruption concerns for IT services companies as overly simplistic. |
Semiconductors TSMC Memory Infrastructure |
SemiconductorsPortfolio has limited participation in AI Hardware trade through TSMC position only. Memory providers saw massive gains but manager questions pricing power as supply increases 50% in 2026. TSMC benefits from technological leadership and monopoly position in high-performance compute chips with disciplined capacity expansion. |
TSMC Memory Foundries AI | |
EnergyMilitary conflict in Iran disrupted energy markets, pushing Brent crude above $100 from $70. Energy stocks outperformed significantly in March. Higher oil prices pose headwinds for oil-importing economies in Southeast Asia and India, adding inflationary pressures and weighing on consumer spending. |
Oil Geopolitical Inflation Iran | |
E-commercePortfolio's e-commerce platform companies experienced broad-based weakness during the quarter. Sea Limited was a top detractor despite strong GMV growth due to margin pressure from elevated investments in logistics and fulfillment. Manager maintains conviction in long-term growth drivers across low-penetration markets. |
Sea Limited Southeast Asia Logistics | |
TravelMakeMyTrip faced supply-side constraints including aircraft shortages and regulatory issues disrupting domestic air travel. Macroeconomic pressures from rupee depreciation and Iran conflict reduced international travel demand. Manager liquidated position after quarter-end due to planned India listing creating holding company discount risks. |
India Airlines Regulation | |
| 2025 Q4 |
Live SportsMario Gabelli emphasizes live entertainment and sports as major investment themes, citing massive viewership numbers and recommending Atlanta Braves Holdings, Madison Square Garden Sports, and Manchester United as core positions. He views sports teams as increasingly attractive to institutional investors with significant upside potential. |
Sports Entertainment Media Valuation Teams |
MediaGabelli recommends Fox and Versant Media Group as media investments, highlighting Fox's sports broadcasting rights including NFL and World Cup coverage, along with strong buyback programs. Versant was recently spun off from Comcast and presents opportunities due to index fund selling pressure. |
Broadcasting Content Spinoffs Buybacks Sports Rights | |
Natural GasNational Fuel Gas is recommended based on its substantial mineral ownership in the Appalachian Basin overlying Marcellus and Utica shales. Gabelli sees unappreciated value in strategically located gas reserves near population centers, with potential for significant free cash flow generation. |
Utilities Energy Reserves Infrastructure Valuation | |
AIWhile acknowledging AI's transformative impact and comparing it to historical technological revolutions, Gabelli warns of potential disappointment for investors and draws parallels to the late 1990s tech boom. He expects AI-related stocks could face significant corrections. |
Technology Disruption Valuation Bubble Innovation |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | TSM | Taiwan Semiconductor Manufacturing Co Ltd | Information Technology | Semiconductor Manufacturing | Bull | New York Stock Exchange | AI, CapEx, Foundry, Margins, semiconductors | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | INFY | Infosys Ltd | Information Technology | IT Services | Bull | National Stock Exchange of India | AI, cashflow, Itservices, Margins, Outsourcing | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | 9983 JP | Fast Retailing Co Ltd | Consumer Discretionary | Apparel Retail | Bull | New York Stock Exchange | Apparel, Branding, growth, Margins, supply chain | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | BABA | Alibaba Group Holding Ltd | Consumer Discretionary | E-Commerce | Bull | New York Stock Exchange | AI, cloud, ecommerce, Investment cycle, scale | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | SE | Sea Ltd | Consumer Discretionary | Internet Retail | Bull | New York Stock Exchange | ecommerce, Emerging markets, Fintech, Logistics, platform | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | GRAB | Grab Holdings Ltd | Industrials | Passenger Ground Transportation | Bull | NASDAQ | deliveries, Fintech, Margins, mobility, Provisions | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | TME | Tencent Music Entertainment Group | Communication Services | Interactive Media & Services | Bull | New York Stock Exchange | Competition, Content, Margins, monetization, Streaming | Login |
| Feb 8, 2026 | Fund Letters | HRISHIKESH (HK) GUPTA | OR FP | L’Oréal SA | Consumer Staples | Personal Care Products | Bear | Euronext Stock Exchange | Beauty, growth, innovation, Rotation, valuation | Login |
| TICKER | COMMENTARY |
|---|---|
| TSM | Taiwan Semiconductor Manufacturing Company (TSMC), the world's leading semiconductor foundry, was a top contributor to performance during the quarter. Shares were supported by sustained strength in demand for advanced logic and compute, with customers across AI accelerators and CPUs continuing to require additional capacity. TSMC remains firmly positioned at the leading edge of semiconductor manufacturing, benefiting from secular demand across high performance computing, smartphones, automotive, and AI applications. Its technology leadership and scale support sustained double digit growth, with revenue increasingly driven by recurring and repeatable categories that reduce cyclicality. Given TSMC's dominant competitive position, deep customer entrenchment, and the continued global need for advanced compute, TSMC remains well-positioned to deliver strong double-digit revenue and earnings growth over the coming years. |
| 9983.T | Fast Retailing, the Japanese apparel holding company behind Uniqlo, GU, and Global Brands such as Theory and J Brands, was a top contributor to performance during the quarter. The company reported strong first-half fiscal 2026 results, with revenue up 22% aided by a low single digit FX benefit, gross margin expansion of 110 basis points, and business profit growth of 37%. China, a source of investor concern in recent quarters given macro softness, delivered mid-single digit constant currency growth in the first half, with management guiding to higher revenue and profit in the second half and double-digit profit growth for the full fiscal year. We continue to view Fast Retailing as a strong long term investment given its scale driven competitive advantages, where a vertically integrated model and global supply chain enable efficient design, sourcing, and distribution, supporting consistently low-priced, high-quality products that drive repeat purchases, repeatable revenue, and global brand loyalty. With proven profitability in Japan, China, and South Korea and a multi-year opportunity to scale in Southeast Asia, Europe, and the U.S., Fast Retailing has a long runway for growth supporting low double-digit revenue growth over the next three years. |
| BAJFINANCE.NS | Bajaj Finance, the largest non-banking finance company in India, was a top contributor to performance during the quarter. The company reported strong fiscal year results in late April despite a more challenging macro backdrop driven by higher oil prices. The company delivered FY2026 loan growth of 22%, high-teens fee income growth, in-line credit costs, and profit growth of 24%, with net interest margin only slightly lower due to rate cuts. Management's FY2027 guidance was equally reassuring, calling for 20% to 22% loan growth, modest operating expense leverage, lower credit costs, and 20%+ profit growth, reinforcing that the underlying business remains healthy through the cycle. The delivery was particularly notable given macro headwinds and helped validate the durability of the franchise, which is supported by a low cost of funding, significant scale, and a trusted brand that has allowed Bajaj to sustain very attractive net interest margins across economic cycles. |
| BABA | Alibaba was a detractor from performance during the quarter. Shares were pressured by investor concerns surrounding reports of a proposed government-backed nationwide AI data center and computing network initiative in China, raising concerns about potential future competition for private cloud providers. Alibaba's quarterly results showed cloud revenue growth accelerating to 38% year-over-year, supported by increasing adoption of AI-related services, while cloud margins improved slightly to 9.1%. However, profitability remained pressured by elevated investment in the Qwen consumer AI app and continued cash burn on the quick commerce build-out, though management indicated that earnings headwinds are beginning to stabilize and that losses in quick commerce are improving as unit economics strengthen. Our conversations with the company, industry contacts, and Gartner similarly suggest Alibaba's cloud position remains very well positioned, with enterprises continuing to demand full-stack services and model-as-a-service expected to become the primary growth driver going forward. Execution on core commerce is improving, market share is stabilizing, and management's more comprehensive AI strategy spanning enterprise services, consumer services, Qwen, and in-house chip design is beginning to show results. |
| YUMC | Yum China was a detractor from performance during the quarter. The company reported first quarter results with same store sales flat and approximately one percentage point below expectations due to calendar timing around the Chinese New Year and spring holidays that shifted demand out of March, though April showed offsetting strength. Beneath the headlines, unit growth accelerated to 13% with 40% of new units franchised, operating profit grew 6% in constant currency, and EPS rose 11% on a constant currency basis. The company remains on track to deliver double-digit profit growth and return $1.5 billion to shareholders this year, representing an approximately 9% yield. We continue to view Yum China favorably given its competitive advantages in supply chain, digital engagement, and execution excellence, and a long runway to significantly grow unit count over time supported by low penetration levels and compelling two-to-three-year new unit payback economics. |
| NU | We initiated a new position in Nu Holdings, a leading digital banking platform operating across Brazil, Mexico, Colombia, the Cayman Islands, and the United States. The company has built a full-service financial ecosystem spanning credit cards, deposits, personal loans, insurance, investments, and payments, all delivered through a digital-first, cloud-based platform that enables structurally lower costs and a superior customer experience. Nu's pricing power is driven by a structurally lower cost base and proprietary data capabilities, with more than 30,000 data points per active user supporting more effective underwriting and competitive pricing. Customer engagement is exceptionally high, with more than 60% of customers using Nu as their primary account, reinforcing brand trust and making the platform difficult to displace. Recurring revenue is supported by consistent transaction activity from primary banking relationships, while a short-duration loan book of cards at 5 to 6 weeks and unsecured loans at 5 to 7 months allows for rapid repricing and active credit management across cycles. Growth is underpinned by low penetration in core markets and large underbanked populations, with a long runway to keep gaining market share and expand average revenue per active customer through cross-selling higher value products, while continuing to scale in Mexico and Colombia. We believe Nu is well-positioned to deliver about 30% revenue and earnings growth over the next three years supported by highly recurring transaction activity anchored in primary bank status, and a long runway for growth as it continues to expand addressable markets and gain share from incumbents in its key markets. |
| 6146.T | We initiated a position in Disco, the leading provider of cutting, grinding, and thinning (Kiru, Kezuru, Migaku, 'KKM') equipment used in semiconductor manufacturing, where it commands approximately 70-80% market share. Disco's technologies are critical to producing advanced semiconductors, particularly as the industry shifts toward increasingly complex packaging architectures required for artificial intelligence, high-bandwidth memory (HBM), hybrid bonding, and silicon photonics. Approximately 30-40% of revenue is generated from consumables, maintenance parts, and services tied to a large installed base of equipment with useful lives of five to ten years that is continuously upgraded to support new applications such as silicon carbide (SiC) and optics. In addition, frequently replaced consumables such as blades and laser heads are typically replaced every one to two years, creating a highly predictable stream of recurring revenue. Disco also benefits from exceptional pricing power as KKM processes are often performed after substantial front-end semiconductor investments have already been made and customers prioritize performance and yield over equipment cost. This has enabled the company to sustain industry-leading gross margins of roughly 70% and net margins above 30%. We believe Disco is uniquely positioned at the intersection of several powerful long-term growth drivers. The continued proliferation of AI is driving demand for advanced semiconductor packaging (HBM, CoWoS, hybrid bonding, 3D and 3.5D packaging, co-packaged optics), all of which require meaningfully greater complexity. As semiconductor packaging becomes increasingly complex, the number of processing steps and equipment intensity per wafer rises substantially, creating an attractive runway for sustained revenue and earnings growth. With dominant market share, highly recurring revenues, industry-leading profitability, and exposure to some of the most important secular growth trends in semiconductors, we believe Disco is well positioned to deliver low-20% revenue growth and high-20% earnings growth over the next three years. |
| 700.HK | Tencent Music Entertainment (TME), a leading Chinese music streaming company, was liquidated during the quarter. The company continues to benefit from its scale, strong content ecosystem, and growing portfolio of services that support user engagement and monetization. However, increased competition from ByteDance's Soda Music has begun to narrow TME's historical content advantage, contributing to slower subscription growth and creating greater uncertainty around the sustainability of pricing power and longer-term growth. |
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