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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"GDS Investments is aggressively repositioning into high-quality businesses trading at cyclically depressed valuations while the market remains fixated on AI. The AI bubble is leaking as investors begin discriminating between winners and losers."
GDS Investments has been actively repositioning the portfolio during Q2 2026 to take advantage of a growing disconnect between price and value across the market. While a small group of AI-related technology companies continued to attract outsized investor attention, many high-quality businesses have fallen out of favor despite little change in their long-term competitive positions. The manager views this as an opportunity to upgrade the portfolio by exchanging good businesses for equally strong or stronger businesses trading at materially more attractive valuations. Early signs suggest the AI bubble is leaking rather than popped, with investors beginning to discriminate between businesses benefiting from current spending trends versus those facing higher costs and tighter margins. The manager has focused on cyclically out-of-favor opportunities like housing, acquiring businesses with durable competitive advantages, strong balance sheets, and capable management teams at prices reflecting 52-week or multi-year lows. The portfolio is positioned to benefit as market leadership broadens and valuation discipline returns as the dominant force driving returns.
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