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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Black Bear underperformed in Q2 amid market concentration in mega-cap tech, but the manager sees an unusually wide gap between price and value. The portfolio owns cash-generative energy, commodity, and housing businesses at sensible valuations while shorting overleveraged businesses with unrealistic expectations."
Black Bear Value Fund returned -10.4% in Q2 2026 and +1.5% year-to-date, underperforming benchmarks amid extraordinary market optimism concentrated in the largest securities. The manager remains confident in the long-term opportunity despite deep dissatisfaction with recent results, believing the gap between performance and underlying portfolio value has become unusually wide. The portfolio remains heavily invested across energy and commodities—natural gas, oil, thermal coal, and metallurgical coal—where years of capital underinvestment have created structurally tight markets vulnerable to supply disruptions or demand increases. Holdings also include businesses positioned to benefit from structural housing shortages and select financial services turnarounds. Many portfolio companies are emerging from capital investment cycles into cash-generative phases, generating substantial free cash flow, paying dividends, and repurchasing shares. The short book, maintained at 43% equity exposure with increased high-yield credit shorts, targets businesses with excessive leverage, unrealistic expectations, or deteriorating competitive positions, including private credit lenders, AI wannabes, troubled banks, buy-now-pay-later lenders, and legacy data centers. The manager believes defensive positioning remains prudent and expects patience to be rewarded.
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