| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 5.8% | 7.6% | -3.7% |
SGA's International Growth portfolio returned 7.6% net in Q2 2026, underperforming the MSCI ACWI ex USA's 14.5% return as extreme momentum leadership and AI infrastructure spending drove parabolic rallies in memory and semiconductor stocks the portfolio does not own. Despite the challenging environment, portfolio fundamentals remained strong with median revenue and EPS growth of 10% each and 60% of holdings beating consensus expectations. The portfolio now trades near its steepest discount to the benchmark since inception, with an Enterprise Yield of 3.4% supporting double-digit absolute return potential. ARM Holdings and TSMC were top contributors, combining for 6.6% of portfolio returns, while Alibaba, AIA Group, and Yum China detracted on China-related concerns. New positions were initiated in Schneider Electric and Disco to capture long-term growth in electrification and advanced semiconductor packaging. The portfolio is positioned to deliver approximately 12% revenue growth and 17% earnings growth annually over three years from predictable, non-cyclical businesses. As the AI CapEx cycle matures and memory cyclicality reasserts itself, SGA believes conditions are building for meaningful rotation toward quality international compounders trading at historically attractive valuations.
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 a return profile designed to protect and reliably compound client capital over time.
After three years in which momentum, capital intensity, and narrative have been rewarded, SGA's international compounders now trade near their steepest-ever discount to the MSCI ACWI ex-US on forward P/E. The businesses have not deteriorated, and the portfolio is positioned to deliver approximately 12% revenue growth and 17% earnings growth annually over three years from predictable, non-cyclical businesses. As the AI CapEx cycle matures and the memory cycle reminds us that cyclicality is rarely abolished, the conditions for a meaningful rotation toward quality international compounders are quietly building. The portfolio is comprised of high-quality businesses that are growing, generating substantial cashflows, and strengthening their competitive positions, trading at valuations that are among the most attractive relative to the market than at nearly any point since the portfolio's inception.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 29 2026 | 2026 Q2 | 6098.T, 6146.T, 9983.T, ARM, CP.TO, FMX, GALD SW, LIN, OR.PA, SE, SRT3.DE, TSM, UMG.AS | AI, growth, international, momentum, Quality, semiconductors, valuation | 6146.T | SGA's International Growth portfolio delivered 7.6% net in Q2 but underperformed as extreme momentum in AI infrastructure and memory stocks dominated markets. Portfolio fundamentals remained strong with 10% median growth and 60% of holdings beating estimates, yet valuations compressed to near-record discounts versus the benchmark. With 3.4% Enterprise Yield and positioning for 12% revenue and 17% earnings growth over three years, the firm sees compelling opportunity as quality compounders trade at historically attractive levels. |
| Apr 28 2026 | 2026 Q1 | ADYEY, ARM, HDB, LIN, SAP, SPOT, TSM | AI, energy, Geopolitical, growth, international, Quality, semiconductors, valuation | - | SGA's international growth strategy underperformed in Q1 2026 due to limited AI hardware exposure and energy conflict dynamics, but portfolio fundamentals remain strong with companies delivering consistent growth. Trading at most attractive valuation versus market since 2017, manager sees compelling setup for quality compounders as momentum conditions moderate and rotation toward predictable growth accelerates. |
| Feb 8 2026 | 2025 Q4 | 1299.HK, 6098.T, 9983.T, ADYEN.AS, ALC, AON, ARM, BABA, CP, DSY.PA, EXPN.L, FEMSAUBD.MX, GALD, GRAB, HDFCBANK.NS, HEIA.AS, HLN.L, INFY, LIN, MELI, OR.PA, SAP, SE, SGE.L, SHOP, SRT3.DE, STE, TEAM, TSM, UL, UMG.AS, WALMEX.MX, WCN, YUMC | AI, Cyclical, E-Commerce, growth, international, Quality, Southeast Asia, valuation |
9983 JP SRT GR DSY FP ARM TEAM |
SGA International Growth underperformed in Q4 as cyclical assets dominated quality growth strategies. Despite challenging year, portfolio maintains strong long-term track record with 6.4% net annualized returns since inception. Quality factor now at historically depressed levels creates attractive setup for 2026. New Southeast Asian positions in Sea Limited and Grab Holdings reflect conviction in regional e-commerce growth opportunities. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIAI infrastructure spending drove Q2 market surge, with hyperscaler CapEx guidance supporting parabolic rallies in memory, CPU, and networking equipment providers. SGA views current AI-related shortages as benefiting both high- and low-quality companies temporarily, with spillover beneficiaries and cyclical memory providers enjoying unsustainable margin levels. The firm believes AI will have significantly positive long-term impacts but implementation will take time, making companies currently categorized as AI losers actually high-quality compounders. |
Hyperscalers Memory Infrastructure CapEx Data Centers |
SemiconductorsThe semiconductor complex, led by SK Hynix, TSMC, Samsung Electronics, and ASML, powered international indices in Q2. SGA owns TSMC and ARM Holdings, which combined contributed 6.6% of portfolio returns. The firm initiated a position in Disco, the leading provider of cutting, grinding, and thinning equipment with 70-80% market share, positioned at the intersection of advanced semiconductor packaging trends including HBM, hybrid bonding, and silicon photonics. |
TSMC Memory Foundries Equipment Packaging | |
MomentumMomentum leadership returned with vengeance in Q2 2026, with the performance gap between momentum and quality indices internationally the widest in over 25 years. The Philadelphia Semiconductor Index returned 88% for the quarter while the Memory ETF returned 166% after launch in early April. SGA views the extreme narrowness of market leadership and momentum backdrop as a relative headwind, with quality growth going completely unrewarded outside the narrow group of AI-related winners. |
Market Leadership Narrowness Speculation Quality | |
QualityPortfolio fundamentals remain strong with median revenue and EPS growth of approximately 10% each, as 60% of holdings beat consensus expectations. Despite solid fundamentals, the majority of holdings saw valuation multiples compress year to date. The portfolio trades near the steepest discount to MSCI ACWI ex USA since inception. SGA emphasizes that temporary dislocations do not invalidate enduring investment principles and that markets should reward fundamental strength over time. |
Fundamentals Valuation Compounding Durability | |
ValuationThe portfolio's current Enterprise Yield is 3.4% with ample valuation support, laying foundation for healthy double-digit absolute return potential in the years to come. The portfolio's valuation relative to the market is near its most attractive historical levels. SGA views current cheap valuations coupled with durable growth as a potent combination for future returns, echoing lessons from the TMT boom. |
Enterprise Yield Discount Opportunity TMT | |
MemoryMemory companies have seen resurgence given importance to AI workloads, with Micron rising nine-fold in three years. The bull case rests on High Bandwidth Memory, a specialized oligopolistic segment dominated by SK Hynix, Micron, and Samsung. However, SGA is skeptical, noting strong stock performance has been driven overwhelmingly by sharp ASP hikes in conventional DRAM, not HBM. New fabrication capacity comes online in 2027-2028, the supply-side dynamic that has reliably preceded every prior correction. SGA worries about increasingly volatile moves and possible spillover effects. |
HBM DRAM Cyclicality ASP Capacity | |
Energy TransitionSGA initiated a position in Schneider Electric, a global leader in energy management and industrial automation focused on enabling efficient and reliable use of electricity across buildings, infrastructure, industrial applications, and data centers. Schneider is well-positioned to benefit from rising electricity demand driven by electrification, AI-related data center investment, aging electrical infrastructure, and distributed energy systems globally. AI datacenter-related revenues are expected to demonstrate continued strong growth momentum. |
Electrification Data Centers Infrastructure Automation | |
ChinaAlibaba was 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. AIA Group came under pressure following Mainland China and Hong Kong regulatory measures related to overseas investment accounts and cross-border securities activities. Yum China reported flat same store sales approximately one percentage point below expectations due to calendar timing around Chinese New Year. |
Regulation Cloud Consumer Insurance | |
| 2026 Q1 |
AIAI infrastructure spending continued to drive market performance through February, with hyperscalers committing over $650 billion in 2026 CapEx. However, geopolitical risks in March led to AI momentum pullback. SGA sees AI disruption risks for some holdings but believes companies like Infosys, Universal Music Group, and SAP are adapting to reinforce competitive advantages rather than being displaced. |
Infrastructure CapEx Disruption Adaptation Hyperscalers |
SemiconductorsMemory providers like SK Hynix and Samsung saw massive gains through February on supply constraints and HBM demand, but corrected 30% in March. SGA avoids memory providers due to boom-bust cycles and commodity pricing, preferring TSMC's monopolistic position in high-performance compute chip production with technological leadership and careful capacity expansion. |
Memory HBM Supply Foundries Cycles | |
EnergyMilitary conflict in Iran disrupted global energy markets, pushing Brent crude above $100 from $70. Energy stocks outperformed significantly in March as the immediate beneficiaries of higher oil prices. The disruption affected oil-importing economies like Southeast Asia and India, weighing on consumer spending and business sentiment. |
Geopolitical Oil Disruption Prices Conflict | |
GrowthSGA's portfolio companies delivered 11% and 14% revenue and earnings growth in the latest quarter, consistent with historical averages. The portfolio is expected to generate 16% growth over the next three years while valuations are becoming increasingly attractive. Portfolio trades at discount to market not seen since 2017 despite strong fundamental execution. |
Earnings Revenue Compounding Valuation Execution | |
QualitySGA emphasizes owning high-quality businesses with predictable revenue and cash flow generation. Despite fundamental delivery, portfolio holdings experienced 10% contraction in price-to-earnings multiples due to sentiment and style rotation. Manager believes quality compounders are positioned for outperformance as momentum conditions moderate. |
Fundamentals Predictable Multiples Rotation Compounders | |
| 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 Teams Valuation |
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 Streaming Networks Spinoffs | |
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 higher earnings and possible company split-up. |
Utilities Energy Infrastructure Reserves Valuation | |
AIGabelli acknowledges AI's transformative impact but warns of potential disappointment for investors, comparing it to historical technological revolutions with speculative bubbles. He expects AI will touch everything but sees challenges in identifying winners versus losers, favoring experiences and manufacturing over direct AI plays. |
Technology Innovation Disruption Valuation Risk | |
AerospaceAlbany International is highlighted for its aerospace composites business supplying lightweight parts for LEAP engines. The company is exploring strategic alternatives and potential spin-off of its structures assembly business, which could unlock value through separation of mature and high-growth segments. |
Defense Manufacturing Composites Spinoffs Restructuring |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jul 29, 2026 | Fund Letters | SGA - International Growth | - | Schneider Electric | Internet Retail | Electrical Components & Equipment | Bull | - | AI infrastructure, data centers, electrical equipment, Electrification, Energy Management, Europe, growth, Industrial automation, services, Software | Login |
| Jul 29, 2026 | Fund Letters | SGA - International Growth | 6146.T | Disco Corporation | Semiconductor Equipment & Materials | Semiconductor Equipment | Bull | Japan Exchange Group (Tokyo Stock Exchange) | Advanced Packaging, AI infrastructure, Consumables, growth, HBM, high margins, Japan, recurring revenue, semiconductor equipment, Wafer Processing | Login |
| Feb 8, 2026 | Fund Letters | Tucker Brown | 9983 JP | Fast Retailing Co., Ltd. | Consumer Discretionary | Apparel Retail | Bull | New York Stock Exchange | China, fashion, Japan, Moat, retail | Login |
| Feb 8, 2026 | Fund Letters | Tucker Brown | SRT GR | Sartorius AG | Health Care | Life Sciences Tools & Services | Bull | Xetra | Bioprocessing, Consumables, earnings growth, lifesciences, Margins | Login |
| Feb 8, 2026 | Fund Letters | Tucker Brown | DSY FP | Dassault Systemes SE | Information Technology | Application Software | Bull | Euronext Stock Exchange | engineering, Lifecycle, SaaS, Software, Subscriptions | Login |
| Feb 8, 2026 | Fund Letters | Tucker Brown | ARM | Arm Holdings plc | Information Technology | Semiconductors | Bull | NASDAQ | AI, architecture, datacenters, royalties, semiconductors | Login |
| Feb 8, 2026 | Fund Letters | Tucker Brown | TEAM | Atlassian Corp. | Information Technology | Application Software | Bear | NASDAQ | AI, Collaboration, Rotation, Software, uncertainty | Login |
| TICKER | COMMENTARY |
|---|---|
| ARM | Arm Holdings, leading designer and licensor of CPU architectures and related subsystems, was a top contributor to performance again this quarter. The company delivered solid quarterly results, including 20% revenue growth and 12% profit growth, with continued strength in licensing activity and sustained royalty expansion despite a tougher comparison period. Management guidance reinforced confidence in maintaining roughly 20% revenue growth, supported by increasing demand for Arm-based CPUs and expanding adoption across data center and AI workloads, which helped offset expected weakness in handset markets. Confidence was further supported by evidence of strong CPU demand, improving share gains versus x86 architectures, and growing customer traction, including an expanding roster of signed partners and management's confidence in achieving long-term revenue targets. With strong pricing power, highly recurring revenues, and expanding royalty rates as Arm captures more value across the compute stack, we continue to view the company as a high-quality, long-term compounder well-positioned to benefit from the proliferation of AI and power efficient computing. We trimmed the position to a below-average weight due to valuation considerations following the stock's strong performance. |
| 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. We maintained an above-average weight position during the quarter. |
| 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. We trimmed the position on the recent strength to a below-average weight. |
| 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. We remain confident in the improving execution in Alibaba's core businesses, growing AI adoption, and its unique position as a provider of large language models, cloud infrastructure, and enterprise solutions. We maintained a below-average weight position. |
| 1299.HK | AIA Group, a leading pan-Asian life insurer, was a detractor from performance during the quarter. The stock came under pressure in early June following a series of Mainland China and Hong Kong regulatory measures related to overseas investment accounts and cross-border securities activities, which created uncertainty around the flow of Mainland Chinese capital into Hong Kong financial products. Hong Kong-linked financials, including AIA, sold off on the initial headlines even though these actions related to cross-border securities trading and investment accounts rather than regulated insurance products. Approximately half of AIA's Hong Kong business can be attributed to mainland Chinese customers, but importantly, premiums for AIA products are funded from bank accounts held in Hong Kong, not from investment accounts. Thus, so far it appears there is no change to the regulatory framework governing mainland visitor insurance business, without any indication that new regulations target investments embedded within insurance products. Historically, we have seen that tighter regulations benefit scaled players with strong compliance processes, which we view as supportive of AIA's long-term positioning. During the quarter, the company reported solid first-quarter sales, with value of new business growth of 13% in constant currency and annualized new premium growth exceeding 16%, driven by particularly strong performance in China and Hong Kong. While lower interest rates in China, macroeconomic uncertainty, and regulatory developments remain considerations, AIA's diversified geographic footprint, focus on higher-margin protection products, and long runway for insurance penetration across Asia underpin an attractive long-term growth opportunity. We added to the position on weakness, maintaining an above-average weight. |
| 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. We added to the position on weakness, maintaining a below-average weight. |
| SU2.SI | We initiated a position in Schneider Electric, a global leader in energy management and industrial automation focused on enabling the efficient and reliable use of electricity across buildings, infrastructure, industrial applications, and data centers. The company offers a broad portfolio of electrical distribution equipment, automation and control systems, software, and services. Its business is primarily driven by the energy management segment, which accounts for roughly 80% of revenue across low- and medium-voltage products and secure power, while industrial automation contributes the remaining 20% through hardware, controls, and software serving both discrete and process industries. Schneider benefits from a large installed base, broad product portfolio, and global distribution network built on decades-long relationships with distributors and contractors. These advantages support customer retention, create meaningful switching costs, and underpin the company's ability to pass through pricing. Repeatable revenue is supported by a high teens mix of software and services, ongoing maintenance and replacement demand, and renovation activity, while continued investments in software and connected products should further strengthen customer relationships over time. As one of the very few players capable of delivering end-to-end electrical solutions and services at scale, Schneider is well-positioned to benefit from rising electricity demand driven by electrification, AI-related data center investment, aging electrical infrastructure, and distributed energy systems globally. The AI datacenter-related revenues are expected to demonstrate continued strong growth momentum driven by robust customer backlog, while the buildings and non-AI industrials are near cyclical lows offering recovery upside. |
| 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. These technologies represent critical bottlenecks to future AI scaling, creating a significant opportunity for Disco to increase both equipment content and consumables demand over time. |
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