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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"SGA's EM Growth portfolio underperformed in Q2 as AI momentum stocks dominated, but portfolio companies delivered strong fundamentals with 18% revenue and 20% earnings growth. The portfolio trades at its steepest discount to the index since 2014 inception despite positioning for 19% annual earnings growth over three years."
SGA's Emerging Markets Growth portfolio returned 0.9% net in Q2 2026 versus 24.1% for the MSCI EM Index, as AI infrastructure momentum drove the best quarter on record for momentum stocks, outperforming quality by 42%. AI CapEx stocks accounted for 91% of the index's Q2 returns, with memory stocks SK Hynix and Samsung returning 694% and 393% over 12 months. Despite this challenging environment, SGA's portfolio companies delivered 18% revenue growth and 20% EPS growth with 60%+ beating consensus, though valuation multiples compressed. The portfolio now trades at its steepest discount to the MSCI EM Index since 2014 inception. SGA initiated positions in Nu Bank and Disco, seeing compelling long-term growth opportunities, while exiting Tencent Music, MakeMyTrip, Bank of Central Asia, and Tata Consultancy Services. The firm views current AI beneficiaries as cyclical with questionable durability, expecting normalization as new fabrication capacity comes online in 2027-2028. With the portfolio positioned to deliver 16% revenue and 19% earnings growth over three years from predictable, non-cyclical businesses, SGA expresses high conviction that the unprecedented valuation dislocation creates fertile ground for subsequent outperformance as markets reward fundamental strength.
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