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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Disciplined focus on durable economic toll collectors, initiating longs in Deutsche Börse and Ferrovial while navigating multiple compression across non-AI compounders amid narrow market breadth."
YCG Investment's Q3 2026 letter addresses persistent headwinds facing non-AI, old-economy compounders amid an exceptionally narrow market environment where the median S&P 500 equity traded roughly 16% below its 52-week peak. Management draws explicit parallels to the late-1990s dot-com bubble, underscoring that coordinated market enthusiasm and fear of missing out have temporarily driven extreme valuation divergence between capital-intensive AI beneficiaries and durable cash-flow tollbooths. Fund performance numbers were not publicly itemized in the letter, but management noted that while the S&P 500 returned 2.30% and the S&P Global Broad Market Index gained 1.15%, strategy performance experienced relative pressure consistent with historical technology boom cycles. The portfolio maintains long-term orientation without deploying speculative capital into unproven technological shifts. The investment team emphasizes a macro regime defined by elevated, volatile interest rates and cyclical inflation, viewing these conditions as natural economic tests that highlight durable moats. The strategy categorizes holdings into recession-resistant economic toll collectors that possess durable supply constraints, pricing power above inflation, and mission-critical positions within large end markets. While higher bond yields have recently compressed valuation multiples across capital-efficient and levered compounders such as building materials and aerospace parts suppliers, management highlights that aggregate underlying business operations, revenue yields, and corporate margins continue to expand. Portfolio activity during the quarter featured two new long additions: European exchange and clearing operator Deutsche Börse AG, along with international infrastructure and managed-lane toll concessionaire Ferrovial SE. Management actively re-underwrote several established positions, defending holdings in Copart following operational improvements at competitor IAA and affirming TransDigm despite rate-driven multiple contraction. Conversely, the team acknowledged a significant thesis headwind in Fair Isaac Corporation (FICO) after the FHFA revised mortgage credit scoring rules to equalize VantageScore, though they project an eventual stable pricing duopoly.
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