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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"REQ Global Compounders fell 5.0% in H1 2026 as AI rotation pressured software holdings despite strong fundamentals—portfolio companies grew EBITA 14% while the fund trades at 17.7x NTM, the lowest valuation since inception. Aerospace holdings HEICO and Diploma surged on booming demand."
REQ Global Compounders returned -5.0% in H1 2026, bringing since-inception returns to 41.4%, as AI-driven rotation out of software into semiconductors created the single largest performance detractor despite strong underlying business performance. The Constellation Software family delivered healthy recurring organic growth while aerospace holdings HEICO and Diploma benefited from booming demand, with HEICO posting record results on 41% earnings growth. Portfolio companies continued compounding EBITA at mid-teens rates with median Q1 earnings growth of 14% on 6% organic growth. The fund trades at 17.7x NTM EBITA, one of the lowest valuations since inception, creating what management views as one of the most attractive entry points in years. The manager added two new industrial distribution positions—Applied Industrial Technologies and DiscoverIE—both proven acquirers with decade-plus M&A track records, while trimming Amphenol due to AI concentration and demanding valuation. Management emphasizes the gap between fundamental performance and share price performance is as wide as it has been for many years, with conviction in long-term compounding potential only strengthened despite near-term underperformance.
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