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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
Buyside Digest is not affiliated with, and does not endorse, Smoak Capital Management. This analysis is provided for institutional research purposes only and is not investment advice.
"Smoak Capital lost 4.35% in 1H 2026, lagging the S&P 500's 10.2% as AI stocks dominated. The manager deliberately avoids AI, focusing instead on severely undervalued Korean and Japanese small caps improving capital allocation."
Smoak Capital returned -4.35% net in 1H 2026 versus the S&P 500's 10.2% gain, with underperformance driven by the manager's deliberate avoidance of AI-related stocks that powered most of the index's return. The manager views AI as in the too-hard pile and instead focuses on undervalued small-cap opportunities in South Korea and Japan. South Korea's comprehensive market reforms, including mandatory treasury share cancellation, expanded fiduciary duties, and high dividend tax incentives, are driving meaningful capital allocation improvements, though closing the Korea Discount will take years. Top performers included InBody, a Korean body composition device leader benefiting from GLP-1 adoption, trading at only 7.6x EV/2026e EBIT despite 86% YoY operating income growth, and QEPC, which was sold near fair value. Worst performers included Azeus Systems and PHI Group, though the manager remains comfortable holding both as undervalued with strong fundamentals. The fund has delivered 34% annualized returns since inception versus 15.3% for the S&P 500, turning $100,000 into over $1 million. The manager expects continued focus on undervalued small caps committed to capital allocation improvements.
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