| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 11.49% | 3.16% | - |
The VELA International Fund returned 3.16% net in Q2 2026, underperforming the MSCI World Ex-US Index's 10.22% return by approximately 700 basis points, with 80% of the shortfall attributable to the Technology sector. Semiconductor and AI-related stocks doubled during the quarter while the fund's technology holdings suffered from either missing the AI rally or facing AI displacement fears. The manager cut the Infineon position in half after it doubled on AI enthusiasm, as valuation discipline prevented further participation at a 64x P/E multiple. The fund initiated three new positions in Philippine banking, European event ticketing, and Austrian airline catering, all trading at attractive valuations. Healthcare was the strongest performing sector with all four holdings contributing positively as companies emerged from post-pandemic challenges. The manager reduced cash from 8.4% to 6.0% but acknowledges the deployment was poorly timed. Despite the quarterly setback, the manager maintains conviction that technology holdings trading at wide discounts to intrinsic value can generate strong double-digit returns over five years as the AI mania cools and fundamentals reassert themselves.
The fund maintains a disciplined value approach focused on identifying companies trading at significant discounts to intrinsic value across international markets, refusing to chase the AI mania despite severe short-term underperformance, with conviction that current technology holdings trading at wide discounts can generate strong double-digit returns over five years as market focus shifts from speculation to fundamentals.
The manager expects to claw back the lost ground from the AI mania-driven underperformance as valuations normalize and the value inherent in the portfolio is recognized by the market. The technology holdings that lagged badly trade at wide discounts to intrinsic value estimates and are capable of generating strong double-digit returns over the next five years. The manager worries that hostilities in the Middle East could pick up again after US midterm elections with less restraint on US actions. The tone is cautiously optimistic on the portfolio's positioning but wary of ongoing macro and geopolitical uncertainties.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 20 2026 | 2026 Q2 | 0303.HK, 7974.T, CPA, EDEN.PA, GLOB, HIK.L, IFX.DE, SRP.L, TECN SW, TKA.VI, UMG.AS | AI, Airlines, Banking, healthcare, international, semiconductors, technology, value | - | VELA International underperformed by 700 basis points in Q2 2026 as AI mania drove semiconductors higher while the fund's value-oriented technology holdings suffered. The manager sold half of Infineon after it doubled to 64x P/E and refuses to chase AI stocks at current valuations. Three new positions were initiated in undervalued Philippine banking, European ticketing, and airline catering. Healthcare delivered strong results across all holdings as post-pandemic headwinds fade. |
| Apr 21 2026 | 2026 Q1 | ABEV, ABF.L, AGI, ALLFG.L, ARCO, BAKKA.OL, DUE.DE, GLOB, GRG.L, HIK.L, IPAR, ITP.PA, JET2.L, NOMD, OGC.TO, SBRE.L, SU, TTE, UMG.AS, UNTR.JK, WIE.VI | energy, Geopolitical, gold, international, Luxury, Travel, value | - | International value manager navigated geopolitical chaos in Q1 2026 with energy and gold holdings driving performance amid Iran war. Sold top performer OceanaGold at fair value, added four new positions including luxury fragrance and travel companies. Plans to deploy 8.4% cash position into attractive individual opportunities despite ongoing macro uncertainties. |
| Oct 1 2025 | 2025 Q3 | AGI.TO, ALLFG.L, ARCO, ARGX, BAP.AX, COA.L, FEVR.L, FIE.DE, FUC.DE, GLOB, HIK.L, IFX.DE, INDV.L, JEL.HK, KRKA.L, NOMD.L, OGC, SRP.L, TECN.SW, WIE.VI | Cash, gold, healthcare, international, tariffs, value |
HIK LN TECN SW FEVR LN COA LN GLOB |
VELA International outperformed in Q3 with 7.43% returns while maintaining 9.5% defensive cash position. Added healthcare and consumer names at attractive valuations amid tariff uncertainty. Gold miners continue strong performance as insurance against systemic risks from potential Fed independence threats and record debt levels. Manager remains selective and disciplined given unresolved global policy uncertainties. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIThe manager views the current AI market as a mania, with semiconductor and AI-related stocks doubling in the quarter while non-AI technology holdings suffered. The fund has limited direct exposure to AI plays due to valuation discipline, and the manager explicitly states they cannot buy AI companies at current valuations. The manager sold Infineon after it doubled when caught up in AI enthusiasm, and views the AI displacement fears affecting software companies like WIX and Globant as overdone. |
Semiconductors Valuation Technology Software |
SemiconductorsSemiconductor manufacturers doubled or more during the quarter, driven by AI infrastructure buildout. The fund's only semiconductor holding, Infineon Technologies, doubled and was subsequently cut in half as the margin of safety evaporated. The manager acknowledges missing the semiconductor opportunity a few years ago when valuations were reasonable, but maintains discipline against buying at current elevated multiples. |
AI Infineon Valuation Technology | |
BankingThe fund initiated a new position in Bank of the Philippine Islands, the second-largest bank in the Philippines by loans. Philippine banks offer strong structural profitability and rational competitive dynamics within one of Asia's fastest-growing economies. The banking sector has derated over the past decade, with BPI trading around tangible book value, presenting an attractive entry point despite elevated emerging market risks. |
Philippines Emerging Markets Retail Banking Valuation | |
Event TicketingThe fund initiated a position in CTS Eventim, the number-two global player in ticketing solutions and live entertainment production. The manager believes live events will grow at mid-to-high single-digit rates, and CTS has defensible barriers to entry with ROIC above 20%. The valuation recently fell to an attractive entry point following earnings misses and competitive concerns, trading sufficiently below intrinsic value to justify building a position. |
Entertainment Live Sports Europe ROIC | |
AirlinesCopa Holdings was the second-largest contributor, outperforming international carriers as its business was not disrupted by the Iran War. The company provides one of the best options for travel in Latin America with lower-cost service and a strong Panama hub. Despite tough macro conditions, 1Q26 operating earnings grew 21% with margin expansion, and it remains a higher-conviction holding in the fund. |
Latin America Travel Earnings | |
HealthcareThe Healthcare sector was the leading value-added contributor with strong stock selection across all four holdings. Tecan Group is rebounding from post-pandemic letdown and budget cuts, with improving demand and book-to-bill above 1.0x. Hikma Pharma rebounded strongly after a guidance downgrade, with the discount to intrinsic value remaining considerable even after the rebound. Both companies are emerging from adversity with better prospects. |
Biotechnology Medical Devices Generics Recovery | |
CateringThe fund initiated a position in Do & Co, a gourmet caterer primarily serving airlines with premium food and beverage experiences. The company benefits from long-term contracts, high margins, significant operating leverage, and ROIC in the high-teens. The position was initiated after the Iran War outbreak caused the stock to decline below intrinsic value, following a pattern the manager has observed over ten years of watching the company. |
Airlines Travel Austria ROIC | |
TariffsVTech Holdings has felt the greatest impact from tariffs over the past year as customers moved production locations to minimize tariff impact. This was reflected in recently released earnings. The company carries a 7.9% dividend yield and remains attractively valued despite the tariff headwinds. |
Trade Policy Hong Kong Manufacturing | |
| 2026 Q1 |
EnergyEnergy prices shot higher following the Iran war and Strait of Hormuz blockade affecting 20% of world energy needs. TotalEnergies and Suncor Energy led portfolio performance on stronger energy pricing. Valuations on energy names becoming stretched, with trimming potentially necessary. |
Oil Natural Gas Energy Trading Geopolitical |
GoldGold appreciated 49% over the last year and 106% over two years. Alamos Gold continued strong performance on better earnings and continued gold price strength. OceanaGold was sold as discount to intrinsic value narrowed and stock became proxy for gold price. |
Gold Gold Miners Precious Metals | |
GeopoliticalWar in Iran commenced February 28 with joint Israeli and U.S. strikes leading to Strait of Hormuz blockade. Primary, secondary, and tertiary effects just beginning to unfold. Current environment ideal for putting additional cash to work given ongoing chaos. |
Iran Middle East Sanctions Trade Policy | |
LuxuryAdded Interparfums SA, a luxury fragrance company that carved unique niche producing and marketing perfumes for global luxury brands. Stock fell back to 2019 levels despite revenues nearly doubling between 2019-2025, creating attractive valuation opportunity. |
Luxury Beauty Consumer Discretionary | |
TravelAdded Jet2 Plc, a packaged holiday and airline business with phenomenal execution and double-digit returns on capital. Trades at substantial discount to intrinsic value over next ten years, though Middle East conflict could affect jet fuel prices. |
Airlines Travel Leisure | |
| 2025 Q3 |
GoldGold serves as insurance against credit destruction and declining confidence in financial authorities. Current environment supports gold due to high US debt levels, potential Federal Reserve independence threats, and geopolitical tensions from Russia sanctions. Gold miners provide leveraged exposure with focus on low-risk jurisdictions and organic growth. |
Gold Miners Monetary Metal Insurance Credit Confidence |
Trade PolicyTariff implementation remains unsettled with consensus around full effects hitting in 2026. Uncertainty around tariff rates and legality creates planning difficulties for businesses. This breaks 40-year free trade paradigm and represents direct challenge to globalization. |
Tariffs Globalization Uncertainty Planning | |
PharmaceuticalsAdded Hikma Pharmaceuticals for contract manufacturing capacity to help foreign companies avoid tariffs through domestic production. Tecan Group offers laboratory automation exposure at significant discount due to temporary headwinds including Chinese order weakness and research defunding. |
Contract Manufacturing Laboratory Automation Tariff Avoidance |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 1, 2025 | Fund Letters | Bob Sharpe | HIK LN | Hikma Pharmaceuticals PLC | Health Care | Pharmaceuticals | Bull | NYSE | Capacity, Generics, Injectables, Margins, tariffs | Login |
| Oct 1, 2025 | Fund Letters | Bob Sharpe | TECN SW | Tecan Group AG | Health Care | Medical Instruments & Supplies | Bull | Swiss Exchange | Automation, lifesciences, R&D, recovery, valuation | Login |
| Oct 1, 2025 | Fund Letters | Bob Sharpe | FEVR LN | Fever-Tree Drinks PLC | Consumer Staples | Soft Drinks | Bull | NYSE | Beverages, Branding, Distribution, Margins, recovery | Login |
| Oct 1, 2025 | Fund Letters | Bob Sharpe | COA LN | Coats Group PLC | Materials | Apparel, Footwear Components | Bull | NYSE | Footwear, Integration, Margins, scale, Textiles | Login |
| Oct 1, 2025 | Fund Letters | Bob Sharpe | GLOB | Globant S.A. | Information Technology | IT Consulting & Other Services | Bull | NYSE | AI, Digital, Itservices, transformation, valuation | Login |
| TICKER | COMMENTARY |
|---|---|
| IFX.DE | Infineon Technologies (Technology), the German power semiconductor manufacturer, doubled in the quarter, leading the list of contributors. While much of its business is driven by the automotive and industrial end markets, its growing exposure to AI infrastructure buildout grabbed the attention of the all things AI crowd looking for laggards. The Fund benefited, and near quarter-end we cut the position in half as the margin of safety evaporated, and future, longer-term returns looked average at best. Infineon was initially purchased in September 2022 when the P/E multiple was a reasonable 16x, and the subsequent average P/E multiple over the next three years was 19x. Now the P/E is 64x. |
| CPA | Copa Holdings (Industrial; CPA), the Panamanian airline, outperformed several international airline carriers since its business was not disrupted by the Iran War. Copa provides one of the best options for travel in Latin America, given its lower-cost service and strong hub of operations in Panama, allowing it to gain share guided by its best-in-class management team. Despite the tough macro environment, 1Q26 operating earnings grew 21%, and operating margins expanded by 80 basis points, notwithstanding the 8% increase in jet fuel prices. Revenues increased 17%, and pricing was positive even with a hefty 14% increase in capacity. It remains a higher-conviction holding in the Fund. |
| TECN.SW | Tecan Group (Health Care; TECN) was the third-best contributor in the quarter. Tecan is a Swiss company and a leading provider of laboratory equipment, liquid handling, and OEM instrumentation solutions for in-vitro diagnostics, life science research, and medical device markets. At time of purchase, Tecan had fallen 80% from the stock's 2021 high. The fundamentals for Tecan are finally rebounding from the double-barrel blast of the post-pandemic letdown and the Trump Administration budget-cutting actions hitting medical research funds. The company's recent 1Q26 update shows underlying demand continuing to improve, along with better order growth with a book-to-bill ratio greater than 1.0x across both segments. Management reaffirmed FY26 guidance, and the expected return remains at a healthy double-digit level despite the appreciation this quarter. |
| HIK.L | Hikma Pharma (Health Care; HIK) was the fifth-best contributor in the quarter. Hikma is a specialty UK generic pharma company with strength in Branded generics and a high-margin Injectables segment. Hikma rebounded from a large guidance downgrade in February on a good earnings result in April and reiterated its new guidance. The nice rebound demonstrated how skittish investor sentiment was following the initial downgrade, which we used as an opportunity to add to the position. The discount to our estimate of intrinsic value (IV) was extremely wide, and, like the health care names above, even after the stock price rebound, the discount to estimated IV remains considerable. |
| EDEN.PA | Edenred (Financials; EDEN) was the fourth-best contributor in the quarter, appreciating off what we expect to be its low following an over 70% decline from its peak in 2023. The company is the leading employee benefits and fleet payments network, linking 60 million end users to 2 million merchants across 45 countries. Regulatory reforms in France, Italy, and Brazil stoked investor fears that fee caps could spread to other geographies. We believe the steep stock price decline fully reflects the likely actions these regulatory bodies could take, and the market reflected the demise of the industry, in our opinion. The share price rose during the quarter as results continued to progress well with limited change on the regulatory front. In mid-June, news outlets reported private equity interest in the company, which further boosted the stock price. |
| GLOB | Globant (GLOB) suffered from the AI displacement debate—the argument that AI will subsume their businesses, eventually. Globant is an IT consultant headquartered in Uruguay with a focus on bespoke software development. IT consultants did well during the pandemic, helping businesses set up their work-from-home networks and related services. Ultimately, the post-pandemic lull arrived when IT consultants saw earnings flatten out and P/E multiples contracted, sending stock prices lower. As AI came onto the scene in 2025, the market de-rated the valuation of IT consultants even further. Eventually, corporates delayed IT projects to reassess their IT needs under AI. We initiated a position in Globant in September 2025 when it was trading at an 11x P/E ratio, not knowing it would fall to 6x. Meanwhile, the company reported results for the last two quarters that exceeded expectations. It currently generates a free cash flow margin of 10% with a free cash flow yield exceeding 18% (vs. 10-year industry average of 6.0%), an inordinately bearish reading. |
| 7974.T | Nintendo (7974), the Japanese entertainment company best known for its video game and console business, made the detractors list because we prematurely rebuilt the position back to a normal size. Nintendo was previously a large portfolio position in front of the launch of the new Switch 2 console. The shares appreciated significantly leading up to the release of the new video game console. Among the euphoria, we took the opportunity to reduce the position sizing as enthusiasm grew and shares finally retreated as excitement started to fade in late 2025, furthered this quarter by the company's weaker-than-anticipated fiscal year forecast (ending March 2027) and underwhelming near-term game release pipeline. We remain highly constructive on the company, with it trading at a significant discount to our intrinsic value estimate. |
| SRP.L | Serco (SRP), the UK-based outsourcing company, made the detractors list by undergoing a stealth decline, with no market-moving news stories or poor earnings announcements. We had trimmed the position early in 2026 as its position size was too large based on our expected return forecast. The company had a track record in the last two years of beating expectations and raising guidance, which did not happen with its 2Q26 preview announcement. However, the stock price steadily slid during the quarter, and the best theory relates to some UK regulatory changes and turmoil in the British government. The UK Government published a procurement policy note requiring central government departments to conduct a Public Interest Test before procurement, and departments with large contracts must develop a five-year Insourcing Strategy. The stock price remains below our intrinsic value estimate with a hefty double-digit expected return. |
| 0303.HK | VTech Holdings (0303), the Hong Kong-based contract manufacturer, has felt the greatest brunt from tariffs in the past year as its customers have moved production locations around to minimize the impact of tariffs. This was reflected in its recently released earnings report. The company carries a 7.9% dividend yield and remains attractively valued, by our estimation. |
| TKA.VI | Communications provided modest added value on the positive stock selection effects recorded for Telekom Austria (TKA), the incumbent telecom operator in Austria. |
| UMG.AS | Communications provided modest added value on the positive stock selection effects recorded for Universal Music (UMG), the Dutch music entertainment company. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
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