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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Constructive on micro-cap value and non-AI beneficiaries, taking profits in outperforming semiconductor names to redeploy into discounted software, regional banks, and surgery center operators."
During the second quarter of 2026, the Integrity Micro Cap Value Equity Strategy delivered strong performance, advancing 25.25% net of fees compared to 23.20% for the Russell Microcap Value Index. Year-to-date through June 30, 2026, the strategy generated 36.65% net of fees versus 30.30% for its benchmark. Performance during the period was led by substantial gains across Information Technology, Financials, Energy, and Consumer Discretionary holdings, which comfortably offset detractions stemming from Industrials, Health Care, and Communication Services holdings. Portfolio sector weights underwent meaningful adjustments around the Russell index reconstitution, resulting in increased weightings to Consumer Discretionary, Financials, Health Care, Real Estate, and Communication Services, while Technology, Industrials, and Energy exposures declined. From a macroeconomic perspective, the strategy maintains a disciplined value posture amid elevated enthusiasm surrounding the artificial intelligence investment cycle. The manager highlights stretched valuations across popular AI beneficiaries and instead identifies compelling asymmetric opportunities across the neglected side of the trade, particularly in software, financial services, and healthcare franchises that are insulated from AI disruption or poised to improve their competitive position. Concurrently, the team emphasizes historical mean-reversion trends, citing data where early-year small-cap outperformance frequently persists across subsequent months as asset flows rotate out of crowded mega-cap momentum trades back into historically undervalued segments. Portfolio turnover reflected both benchmark rebalancing rules and disciplined capital allocation. Key contributors during the quarter included Vishay Precision Group, Cohu, and Ethos Technologies, the latter of which was liquidated to harvest gains following a significant rally. Technology winners such as Veeco Instruments, Bel Fuse, and Ichor Holdings were exited as their market capitalizations exceeded mandate thresholds. In their place, the team established positions in turnaround opportunities such as NETGEAR and Xerox Holdings, bolstered software exposure via Progress Software, Mitek Systems, and Rapid7, and added selective regional banking franchises including Southern First Bancshares and Isabella Bank.
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