AUM: $1.41 billion
Investment Strategy, Quarterly Letters & Portfolio Analysis
| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 12.7% | 24.63% | - |
Spyglass Growth Strategy returned 24.63% in Q2 2026, outperforming the Bloomberg Midcap Growth Index's 14.05% as software stocks rebounded from the first quarter selloff and geopolitical tensions eased with the US-Iran ceasefire. The portfolio's earnings growth remains above 40%, which the manager believes is at one of its strongest points in the firm's history, yet share prices have not reflected this growth, suggesting attractive valuations. Top contributors included Credo Technology, Affirm, Snowflake, AAON, and Cadence, driven by strong quarterly results and improving sentiment around AI differentiation. The manager added three new positions: QXO in building products distribution following its TopBuild acquisition, MKS in semiconductor equipment components positioned for AI-driven WFE growth, and Forgent Power Solutions in electrical equipment benefiting from datacenter buildout. Despite strong operating results with 85% of companies meeting or exceeding estimates over 16 quarters, the portfolio experienced multiple compression from AI uncertainty, passive flows, and trading volatility. The manager maintains high conviction that temporary price dislocations will resolve as fundamentals drive long-term returns, remaining patient investors anchored to company operating results rather than short-term market inefficiencies.
Spyglass invests in market-leading growth companies where strong earnings growth is not yet reflected in stock prices, creating attractive valuations. The portfolio's earnings growth is at one of its strongest points in the firm's history at above 40%, yet the portfolio is experiencing significant multiple compression despite 85% of companies meeting or exceeding consensus estimates over the past 16 quarters. The manager believes short-term factors like AI uncertainty, passive flows, and trading volatility are creating temporary price dislocations that will be resolved as the market's long-term weighing machine confirms business success.
The manager remains optimistic about opportunities ahead, focused on identifying market-leading companies led by talented entrepreneurs, trading at attractive prices, and capitalizing on megatrends that will drive future innovation and growth. Despite the eventful first half of 2026 and current multiple compression, the manager believes the operating results within portfolio companies are outpacing their respective stock prices, creating value that is not currently recognized. The manager anchors expected present values to company fundamentals and believes the long-term weighing machine of the market will eventually resolve temporary distortions, remaining patient investors in the meantime.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 17 2026 | 2026 Q2 | AAON, AFRM, CDNS, CRDO, CSGP, HUBS, MKSI, PCOR, QXO, SNOW | AI, Building Products, Data centers, earnings, growth, mid cap, semiconductors, software |
QXO FPS MKSI |
Spyglass returned 24.63% in Q2 2026 as software rebounded and geopolitical risks eased. Portfolio earnings growth above 40% represents one of the firm's strongest periods, yet multiple compression persists despite 85% of companies beating estimates. The manager added positions in QXO, MKS, and Forgent to capture AI-driven datacenter and semiconductor equipment growth. Strong fundamentals are not reflected in prices, creating attractive entry points for patient capital. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIThe manager maintains high conviction in AI-related investments following intensified research efforts. The market has taken a more discerning view of software companies post-selloff, with emerging differentiation between potential AI winners and losers. Cadence released its first agentic capabilities, which the manager believes will add an incremental growth lever. HubSpot is expected to be a net beneficiary of AI by integrating AI agents into its products. |
Software Agentic AI AI Agents Enterprise Software SaaS |
Data CentersAAON materially raised its full-year datacenter revenue targets, driven by continued strength from datacenter buildout. The manager believes the depth of the datacenter opportunity is not fully understood by most investors. QXO is positioned to benefit from datacenter buildout tailwinds. Forgent Power Solutions is at the center of a step-change in demand for electrical equipment driven by AI, with backlog growing from $2 billion to $2.4 billion in just two months. |
Electrical Equipment HVAC Infrastructure Building Products | |
Semiconductor CycleMKS is positioned at the center of a generational, AI-driven semiconductor equipment upcycle. The manager expects WFE spend to grow from approximately $110 billion in 2025 toward $175 billion or more by 2027. The shift toward chiplets and high-bandwidth memory is adding a second growth driver through advanced packaging demand. Credo's optical product traction and copper product portfolio are gaining investor confidence in the duration of opportunity. |
Semi Equipment Memory Packaging Connectivity Chips WFE | |
SoftwareSoftware stocks rebounded after the first quarter 'SaaS-pocalypse,' though the sector experienced broader pessimism around AI threats during Q2. The manager notes 85% of portfolio companies have met or exceeded top line consensus estimates over the past 16 quarters. Despite strong operating results, the portfolio is experiencing significant multiple compression. Snowflake raised guidance specifically attributing the increase to early AI product traction. |
SaaS Cloud Enterprise Software CRM Vertical Software | |
EarningsThe manager believes the level of earnings growth in the Spyglass portfolio is currently at one of its strongest points in the firm's history, staying above 40% even as profitable companies have increased as a share of the portfolio. The vast majority of portfolio companies met or exceeded consensus revenue and earnings estimates in Q2. However, share prices have yet to reflect this earnings growth, suggesting the portfolio trades at an attractive valuation. |
Growth Valuation Quality Fundamentals | |
Energy TransitionUS electricity demand is experiencing a step-change after 25 years of flat demand, driven by AI, reshoring, and electrification. Forgent's addressable market is expected to grow from $29 billion in 2025 to $75 billion by 2030. The manager views this as one of the most concentrated secular capital spending cycles in US industrials. Electrical equipment is a small fraction of datacenter capex but critical, with customers optimizing on availability and reliability rather than price. |
Electrical Equipment Grid Upgrade Infrastructure Power Equipment | |
FinTechAffirm's quarterly results exceeded expectations, with Card gross merchandise volume growing 146% year-over-year to $2.13 billion and active cardholders increasing 130% year-over-year. After a difficult start to the year driven by geopolitical risks and consumer concerns, sentiment recovered following the US-Iran ceasefire and more stable macroeconomic outlook. The management team's growth outlook and profitability framework articulated at the investor forum was well-received. |
BNPL Payments Consumer Finance Digital Banking | |
Building ProductsQXO's business mix is split evenly between repair/remodeling and new construction, which the manager believes underpins durable demand. The company benefits from structural housing undersupply, aging stock, demand for energy efficiency, and datacenter buildout. Following the TopBuild acquisition, QXO is now the dominant player in North America including #1 in insulation, #2 in roofing, and #1 in waterproofing. The manager expects the company to organically double acquired-business earnings within 3-5 years. |
Distribution Roofing Insulation Construction M&A |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jul 17, 2026 | Fund Letters | Spyglass Growth Strategy | QXO | QXO, Inc. | Industrial Distribution | Trading Companies & Distributors | Bull | New York Stock Exchange | Building Products, construction, datacenter, Distribution, EBITDA growth, Housing, Insulation, M&A, market leader, Repair & Remodeling, Roofing, technology adoption, Waterproofing | Login |
| Jul 17, 2026 | Fund Letters | Spyglass Growth Strategy | FPS | Forgent Power Solutions, Inc. | Electrical Equipment & Parts | Electrical Components & Equipment | Bull | New York Stock Exchange | AI infrastructure, capacity expansion, datacenter, electrical equipment, Electrification, Engineered-to-Order, Free Cash Flow, IPO, manufacturing, Power Grid, Reshoring, Roll-up, Switchgear, Transformers | Login |
| Jul 17, 2026 | Fund Letters | Spyglass Growth Strategy | MKSI | MKS Inc. | Scientific & Technical Instruments | Semiconductor Equipment | Bull | NASDAQ | Advanced Packaging, AI, Chiplets, Components, Cyclical Recovery, deleveraging, High-Bandwidth Memory, margin expansion, Photonics, RF Power, semiconductor equipment, Vacuum Systems, Wafer Fabrication | Login |
| TICKER | COMMENTARY |
|---|---|
| CRDO | Credo Technology Group Holding Ltd (CRDO), a provider of high-speed electrical and optical connectivity solutions, was a top contributor during the second quarter. Credo reported first-quarter results in June, exceeding consensus expectations for both revenue and earnings. The share price had been rallying since April, which we believe reflects a broader narrative re-rating by investors encouraged by the Company's increasing optical product traction along with confidence in the duration of the opportunity that the Company's current portfolio of copper product addresses. Although we trimmed our position size due to share price appreciation, Credo remains a core position, and we continue to believe that investor expectations underestimate the earnings power of the business. |
| AFRM | Affirm Holdings, Inc. (AFRM), a financial technology company, was a top contributor during the second quarter. Affirm reported quarterly results in May that exceeded consensus expectations for both revenue and earnings. Notably, we were pleased to see Affirm Card gross merchandise volume grow 146% year-over-year to $2.13 billion and active cardholders increase 130% year-over-year to 4.4 million. After a difficult start to the year for the stock, which we believe was driven by geopolitical risks and fears around the potential for a weakening consumer given the crosscurrents in the US economy, sentiment appears to have recovered following the US-Iran ceasefire and a more stable macroeconomic outlook. We were also pleased with the management team's growth outlook and profitability framework which was articulated at the Company's investor forum in May. Affirm remains a significant position for the portfolio. |
| SNOW | Snowflake Inc. (SNOW), a provider of cloud data warehouse software, was a top contributor during the second quarter. Snowflake's first-quarter results exceeded consensus expectations for both revenue and earnings. We continue to be impressed by the Company's product innovation, and, importantly, Snowflake saw enough traction with one of its early AI products to raise guidance while attributing the increase specifically to that product. We believe Snowflake's long-term potential remains misunderstood by most investors. While we trimmed our position size during the quarter due to share price appreciation, Snowflake remains a core position. |
| AAON | AAON, Inc. (AAON), a commercial and industrial HVAC solutions provider, was a top contributor during the second quarter. AAON reported first-quarter results in May, exceeding consensus expectations for both revenue and earnings, and materially raising its full-year datacenter revenue targets, which seemed to help improve investor sentiment. We were encouraged by the Company's backlog, driven by continued strength from the datacenter buildout, as well as improving margins, which we expect to build as capacity absorption improves. We continue to believe the depth of the data center opportunity is not fully understood by most investors. |
| CDNS | Cadence Design Systems, Inc. (CDNS), a provider of software and hardware solutions for designing electronic systems, was a top contributor during the second quarter. Cadence's first-quarter results exceeded consensus expectations for both revenue and earnings. The Company also released its first agentic capabilities, and we believe this will add an incremental growth lever to the Company's existing opportunity. |
| CSGP | CoStar Group, Inc. (CSGP), a provider of software solutions in the global real estate industry, was a bottom contributor during the second quarter. CoStar reported first-quarter results that surpassed consensus expectations for both revenue and profitability, marking the 60th consecutive quarter of double-digit revenue growth. While we viewed the quarterly results positively, we believe the market focused on softer net new bookings which weighed on shares. We remain focused on Homes.com subscriber growth as a key component of our long-term model. We believe the stock is trading at a meaningful discount to a conservative set of expectations, but given the sustained underperformance of the stock, we continue to perform enhanced due diligence on the Company. |
| HUBS | HubSpot, Inc. (HUBS), a provider of front-office software to the small and medium-sized business (SMB) market, was a bottom contributor during the second quarter. Despite exceeding consensus revenue and earnings expectations, the share price declined amid broader pessimism around the software sector due to the perceived threat of AI. However, our research gives us confidence that by integrating tools like AI agents into its products, HubSpot will ultimately prove to be a net beneficiary of AI, by offering a superior value proposition to its customers. |
| PCOR | Procore Technologies, Inc. (PCOR), a provider of cloud-based construction management software, was a bottom contributor during the second quarter. Procore's first-quarter results exceeded consensus expectations for both revenue and earnings. However, we believe Procore was also caught up in the broader selloff across the software sector, with investors seeming to want clear evidence of accelerating growth. As the new management team settles in, we continue to believe Procore's underlying momentum remains intact, supported by a widening data moat and an emerging AI monetization opportunity. |
| QXO | QXO, Inc. (QXO), a distributor of roofing, waterproofing and complementary building products, was a bottom contributor during the second quarter. Following our entry point in April, QXO announced it would acquire TopBuild, the largest distributor and installer of insulation and related building products in North America, for $17 billion. We believe this deal, financed through QXO stock and debt, led to investor concerns around the Company's capital structure and integration risk. However, our thesis for QXO remains largely unchanged. The Company's business is split approximately evenly between repair/remodeling and new construction. We believe this mix underpins durable demand for years to come. We also see QXO benefitting from tailwinds like structural housing undersupply, aging stock, demand for energy efficiency, and the datacenter buildout. We believe QXO holds significant competitive advantages from its national scale combined with local execution, supplier procurement leverage, and an embedded daily job site presence. We also appreciate that the Company is seemingly intent on applying technological best practices in what we consider to be an under-digitized industry, which we think will help further widen its moat over local distributors. With the acquisition concluded, the Company is now the dominant player in North America, including #1 in insulation, #2 in roofing, and #1 in waterproofing. We believe QXO is in a prime position to execute on its plan to improve margins on legacy operations while organically doubling acquired-business earnings within 3-5 years, compounding EBITDA at a double-digit rate. We are excited to have the opportunity to own this growth story at what we consider to be an attractive valuation. |
| MKSI | MKS Inc. (MKSI), a semiconductor capital equipment components supplier, was a new position during the second quarter. Semiconductor chips are produced on wafer fabrication equipment ('WFE') which are sold by firms such as Applied Materials, Lam Research, Tokyo Electron, KLA, and ASML. This equipment in turn relies on vacuum, gas delivery, RF power, and photonics subsystems which MKS supplies, and the Company holds the #1 or #2 share position in products touching approximately 85% of WFE spend. We see these as sticky, specified-in positions that gain content as chips grow more complex. Through a full cycle, our research indicates MKS's semiconductor revenue has historically run at 2-2.5% of WFE spend, but the ratio compressed to roughly 1.5% between 2023-25 as customers digested excess inventory, and not because MKS lost share. We believe with inventories having now normalized, this intensity is reverting back to historical norms at the same moment AI is driving WFE spend from approximately $110 billion in 2025 toward what we expect will be $175 billion or more by 2027. We see the shift toward chiplets and high-bandwidth memory also adding a second growth driver by inflecting demand for advanced packaging, where we view MKS as a leader in laser via drilling and electroplating chemistry. We think the market currently penalizes MKS for its NAND exposure, yet NAND capital spending remains near trough levels after the last cycle's overcapacity, so a recovery there would represent upside to our numbers rather than a risk we are paying for. In our view, MKS has been treated as a levered cyclical by investors since its acquisition of Atotech in 2022 brought net leverage to a peak of roughly 4.5x, which we suspect kept many institutional investors on the sidelines and left the stock at a significant discount in its price-to-earnings multiple among semiconductor capital equipment peers. At our point of entry, we valued MKS at approximately 25x forward earnings versus approximately 40x for the tool makers it supplies. We believe both sources of the discount are resolving, and we expect net leverage will fall below 2x in 2026 and under 1x by 2027, while revenue will grow from $3.9 billion in fiscal year 2025 to more than $6 billion by fiscal year 2027, and operating margins will expand from roughly 21% toward the high-20s range, driving earnings power of $20 or more per share in 2027-28. We view MKS as a mission-critical supplier at the center of a generational, AI-driven semiconductor equipment upcycle, and we are excited to own it in our portfolio at what we consider an attractive valuation. |
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