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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Grandeur Peak's high-quality small-cap portfolios began surfacing in Q2 after years underwater, driven by strong semiconductor performance and a broad market rally favoring fundamentals over speculation. The firm rotated away from AI-threatened software into industrials and consumer franchises trading at attractive valuations."
Grandeur Peak's Q2 2026 commentary centers on the 'submerged beach ball' phenomenon - high-quality growth companies out of favor with markets eventually resurface when earnings force recognition. After an extended period of underperformance, Q2 marked a turning point with strong absolute and relative performance driven by the best broad-based global rally since 4Q 2020. Active foreign SMid-cap managers outperformed passive peers for the first time in years, and growth funds beat value peers by 6.1%. Key contributors included small-cap Semiconductors (+68.7%) where the firm has deep expertise and high conviction, and Industrials with diverse themes beyond data centers. The firm rotated away from Software due to AI-driven obsolescence risk. Consumer positions delivered strong results across geographies. Despite Q2 strength, the firm believes most of the portfolio has yet to resurface. They remain cautious on banks at elevated valuations and see selective opportunities in Chinese consumer names trading at rock-bottom valuations. The firm maintains conviction that disciplined, fundamental investing will be rewarded as quality reasserts itself.
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