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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Small-cap fund down 10% as AI fears crushed software holdings despite strong underlying earnings growth. Manager sees opportunity in compressed valuations of high-quality businesses, adding to conviction names while maintaining disciplined approach."
The FAM Small Cap Fund returned -10.01% in Q1 2026 versus the Russell 2000's 0.89% gain, underperforming due to AI disruption fears that particularly hurt software-as-a-service companies. Five of the fund's six worst performers were SaaS companies caught in the 'SaaSpocalypse' narrative, while energy and low-quality stocks rallied amid Middle East military operations. Despite this headwind, the manager emphasizes that earnings growth across portfolio holdings remains strong at approximately 10%, while valuation multiples have compressed to levels below historical norms. Element Solutions and Landstar System were top contributors, benefiting from data center demand and transportation market improvement respectively. The fund added to seven high-conviction holdings and maintained about 5% cash. Management remains committed to their long-term discipline of owning high-quality businesses with healthy balance sheets, ample cash flow, and pricing power, viewing current conditions as potentially creating attractive entry points for long-term compounding as market sentiment eventually normalizes.
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