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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"FAM Small Cap underperformed in Q2 by avoiding AI data center plays the manager views as lacking moats. The portfolio trades at severely discounted valuations with double-digit earnings growth projected."
The FAM Small Cap Fund returned 9.51% in Q2 2026, underperforming the Russell 2000 Index which gained 21.49%. The underperformance was primarily driven by the fund's lack of exposure to lower-quality technology businesses tied to AI data center buildouts, which the manager views as lacking sustainable competitive moats despite current demand spikes. The strategy is trading at discounted valuations with many stocks severely undervalued, attracting attention through potential M&A activity. Portfolio holdings are projected to grow earnings in the double digits in 2026. Top contributors included Frontdoor, benefiting from increased home warranty demand, and Landstar System, which rallied on recovering freight markets. The fund initiated a position in Ryan Specialty Holdings during market weakness, encouraged by long-term prospects and insider buying. The manager expects elevated portfolio activity in the second half as market volatility creates opportunities to add selectively to existing holdings and initiate new positions while trimming as valuations evolve.
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