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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Forager deliberately sat out the AI bubble, returning negative 5.7% while markets soared on euphoria the manager views as unsustainable. The fund exited AI beneficiaries like Comfort Systems as valuations became too steep and cut the Fiserv mistake after management instability confirmed deeper problems."
The Forager International Shares Fund returned negative 5.7% for the year ending June 2026, significantly underperforming its benchmark as the AI bubble inflated to extreme levels exemplified by SpaceX's US$2 trillion IPO valuation. The manager deliberately avoided participating in the AI mania, instead selling what little exposure the fund had as valuations became unsustainable. The largest detractor was Fiserv, a 3.9% loss reflecting a process mistake where the manager held on despite deteriorating fundamentals and management instability. Japanese software holdings also suffered as global AI fears drove indiscriminate selling despite strong operating performance and improving corporate governance. Winners included Marex Group, ING Groep, and Linamar Corporation, all benefiting from specific operational catalysts. The manager draws parallels to the 2000 dot-com crash, noting today's hysteria is isolated to AI while other areas offer attractive valuations. The portfolio has been actively repositioned, clearing out fully valued winners and mistakes to concentrate in mispriced opportunities including Japanese software, European banks, and other cash-generative value stocks. The manager expects continued short-term underperformance but is positioned to profit when the bubble bursts.
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