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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Constructive on essential picks-and-shovels AI infrastructure and resilient non-tech compounders like Heico, while avoiding crowded mega-cap momentum and utilizing attractive Treasury yields for balanced asset allocation."
During the third quarter of 2026, broader equity performance was characterized by severe internal bifurcation. The headline S&P 500 gained 2.30% while the equal-weighted index dropped 1.87% and small-cap equities declined over 7%, underscoring deteriorating breadth and intense index concentration. Net strategy performance was not explicitly disclosed in the letter, but management noted that refusing to chase narrow market leadership in mega-cap technology served as a performance headwind as tech-adjacent names expanded to nearly half the benchmark weighting. Macroeconomic conditions reflected resilient underlying demand alongside persistent cost hurdles. Real GDP expanded at an annualized 2.2% with consumer spending advancing, yet persistent inflation pushed August PCE to 3.4% and induced a Federal Reserve rate hike to 3.75%-4.00%. In response to high borrowing costs and Brent crude hovering near $100 per barrel, the strategy prioritizes businesses with strong balance sheets capable of organically funding operations and distributions rather than relying on external financing. Portfolio positioning remains anchored around two core pillars: critical infrastructure supporting artificial intelligence computing requirements and durable non-technology compounders. The manager highlighted longstanding core position Heico ($HEI-A), emphasizing that despite achieving record operational results, the shares have decoupled from the cap-weighted market. Concurrently, elevated 10-year and 30-year Treasury yields above 5% present disciplined opportunities to construct bond ladders for client capital preservation.
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