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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Sycamore Mid Cap Value underperformed in Q2 2026 as extreme AI-driven concentration penalized diversified value managers. The strategy avoided parabolic semiconductor and tech hardware stocks on valuation discipline, costing 323 basis points."
Sycamore Mid Cap Value Equity underperformed the Russell Midcap Value Index in Q2 2026, returning 9.56% net versus 13.40% for the benchmark. The quarter was dominated by extreme concentration in AI-linked semiconductor and technology hardware stocks, which rose 88% and 144% respectively, explaining a disproportionate share of index returns. The manager's disciplined value approach led them to avoid or trim these high-multiple names, resulting in 323 basis points of underperformance from not owning Technology Hardware alone. Top contributors included Molina Healthcare, which rallied on improved managed care fundamentals, and Microchip Technology, benefiting from aerospace and defense demand. Energy holdings Devon Energy and Expand Energy were top detractors as oil prices declined. The manager expresses deep skepticism about AI valuations, circular financing arrangements, and speculative excess, comparing current dynamics to historical bubbles. They highlight systemic risks including record household equity exposure, all-time high margin debt, and extreme retail participation in leveraged ETFs. The manager believes prudent investors should consider de-risking AI exposure and rotating into neglected areas, warning that elevated expectations leave little room for disappointment.
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