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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"The London Company SMID Cap returned 11.8% net in Q2 but lagged the Russell 2500's 20.3% gain as momentum trumped quality. Semiconductors and AI infrastructure drove the rally, benefiting holdings like Entegris and Qualys."
The London Company SMID Cap portfolio returned 11.8% net in Q2 2026, underperforming the Russell 2500 Index which gained 20.3% as the market rewarded high-beta, momentum-driven names over quality fundamentals. The rally was fueled by AI infrastructure spending and strong earnings, with semiconductors staging a historic rebound. Top contributors included Entegris, benefiting from improving semiconductor demand and AI investment, Credit Acceptance on improving credit performance, and Qualys as cybersecurity sentiment improved. Quality was among the weakest factors, creating a headwind as only 25% of profitable Russell 2500 companies beat the benchmark. The manager made no trades during the quarter, maintaining conviction in durable, high-quality businesses positioned to compound over full cycles. Looking ahead, the outlook remains broadly constructive but increasingly cautious, as AI capex shows fragility with negative hyperscaler free cash flow, valuations are elevated, and Fed rate cuts face headwinds from sticky inflation. The manager expects more modest equity returns ahead and believes their quality-focused, high active share approach will serve as important portfolio ballast.
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