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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Q2 2026 marked an AI-driven mania rivaling the dotcom bubble. Semiconductors surged 88% to become 20% of the S&P 500 on record leverage—margin debt at $1.5 trillion, hedge fund exposure at 98th percentile."
The Invenomic Fund returned -20.48% in Q2 2026 versus +15.28% for the S&P 1500, driven by extreme market bifurcation between AI winners and losers. The Philadelphia Semiconductor Index surged 88% in the quarter, its strongest ever, pushing semiconductor weight to nearly 20% of the S&P 500—double the dotcom peak. The manager views this as a cyclical earnings bolus being mispriced as sustainable growth. Momentum had its second-best quarter in history, fueled by record leverage: margin debt hit $1.5 trillion, hedge fund gross exposure reached the 98th percentile at 320%, and leveraged ETF assets crossed $200 billion. The Buffett Indicator registered an all-time high of 235%, while the S&P 500 dividend yield hit a record low of 1.05%. The fund is positioned long perceived AI losers and short AI winners, expecting a sharp reversal when hyperscalers cut capex. Individual stock volatility is at historic highs relative to index volatility, masking extreme risk. The manager anticipates turbulent rotation toward quality free cash flow generators as leverage unwinds.
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