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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Riverwater underperformed in Q2 2026 as small-caps posted their best first half since 1991, driven by AI exuberance reminiscent of 1999. The manager maintained discipline by avoiding SanDisk's 720% surge, a cyclical memory stock outside their mandate."
Riverwater's Sustainable Value Strategy underperformed in Q2 2026 as small-cap stocks achieved their best first-half performance since 1991, driven almost entirely by speculative excess in AI-exposed names. The Russell 2500 Value Index rose 17% in the quarter, with technology surging 75%, but the shortfall came from disciplined avoidance of SanDisk, a cyclical memory semiconductor that appreciated 720% year-to-date and comprised nearly 5% of the benchmark. The manager refused to own SanDisk as it exceeded their market cap threshold and represents a commodity business with poor through-cycle returns, prioritizing mandate discipline over short-term performance. Loss-makers outperformed profitable companies by over 1200 basis points in the quarter, marking the highest-beta quarter for Russell 2000 in over a decade. Technology holdings led by Veeco Instruments contributed strongly in absolute terms but trailed the benchmark's 75% sector surge. The manager maintains conviction in quality-focused investing, believing the portfolio is well-positioned for eventual normalization of market leadership despite current headwinds from speculative market conditions.
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