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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Vulcan Value Partners - Small Cap 2026 Q2 Investor Letter | Buyside Digest

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Primary Source Intelligence • Q2 2026 Letter Analysis

Vulcan Value Partners - Small Cap Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Vulcan Value Partners - Small Cap. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+13.3%

YTD+5.6%

Annualized+7.3%

Positioning StanceNEUTRAL

Market CapSmallCap

GeographyUS

Digest Analysis

Quick Take

"The strategy added Badger Meter and TPG at significant discounts driven by market overreactions. MillerKnoll, Fortune Brands, and Littelfuse contributed materially."

Executive Summary

Vulcan Value Partners Small Cap strategy returned 13.3% net in Q2 2026, bringing YTD returns to 5.6% net. The portfolio added two new positions: Badger Meter, the dominant North American water meter manufacturer with 85% replacement demand and strong infrastructure tailwinds, and TPG, an alternative asset manager growing fee earning AUM 23% despite a 35% stock decline driven by AI disruption fears the manager views as overreaction. Park Hotels was sold to reallocate capital. Material contributors included PROG Holdings, MillerKnoll, Fortune Brands Innovations, Ituran, and Littelfuse. MillerKnoll rebounded strongly with North American Contract segment exceeding expectations while remaining one of the most discounted holdings. Fortune Brands announced respected new CEO Jesse Singh and initiated strategic review of composite decking. Genpact was the sole detractor, discarded by the market as an AI disruption candidate, though the manager believes AI adoption complexity strengthens rather than diminishes Genpact's value proposition. Price to value ratios remained virtually unchanged as strong business performance and disciplined capital reallocation offset market gains. The manager personally added capital and encourages long-term investors to do the same.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

72%

CautiousHigh

High Conviction (72%)

The portfolio holds concentrated positions with MillerKnoll described as commanding significant weight due to being one of the most discounted businesses. Manager names and sizes specific holdings, discusses detailed business fundamentals, and provides clear investment theses for each position. The manager personally added capital and explicitly encourages clients to do the same, demonstrating strong conviction. However, the strategy holds 10-25 positions across small cap names with some hedging language around market conditions and selective deployment. The letter discusses multiple scenarios and acknowledges uncertainty around AI disruption risks. Score reflects high-moderate conviction with clear theses and concentrated positioning, but not the extreme conviction of a 5-10 name portfolio with maximum sizing.

Growth Outlook

15%

BearishBullish

Bearish (15%)

Manager describes companies as deeply out of favor and acknowledges the market is arguably overvalued and not cheap by almost any metric. However, the manager views this as creating fantastic opportunities for serious long-term investors to buy quality businesses at significant discounts. The tone is cautiously constructive, acknowledging current market challenges while seeing selective value. Score reflects mild positive outlook driven by opportunity identification rather than broad market optimism.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

Manager is selectively adding to positions when price to value ratios become more attractive, as evidenced by adding to Ryan and TransDigm early in the quarter. The manager personally added capital at the end of Q1 and encourages clients to follow suit. However, the strategy also sold positions like Park Hotels, Sdiptech, and Littelfuse to reallocate to more discounted names, indicating disciplined rather than aggressive deployment. The portfolio remains concentrated in high-conviction positions but is not maximally deployed. Score reflects moderate risk-on positioning with selective capital deployment.

Capital Deployment

25%

De-riskingDeploying

De-risking (25%)

Manager added two new positions (Badger Meter and TPG) and added to existing positions (Ryan and TransDigm) when price to value ratios became attractive. However, the strategy also sold three positions (Park Hotels, Sdiptech, Littelfuse) to reallocate capital to more discounted names. This represents capital rotation rather than net new deployment. No cash level changes are disclosed. The manager personally added capital and encourages clients to do so, but the portfolio activity suggests reallocation within existing capital rather than aggressive net deployment. Score reflects modest net positive deployment through selective additions offset by disciplined sales.

Forward Guidance

35%

CautiousExpansionary

Cautious (35%)

Manager explicitly states it is an excellent time to add capital and personally did so at the end of Q1, encouraging long-term investors to follow. However, the letter emphasizes patience and discipline, with capital reallocation from less discounted to more discounted names rather than aggressive new deployment. The manager is watching for attractive entry points and adding selectively when price to value ratios warrant, but is not describing urgent deployment. Score reflects selective adding bias with emphasis on discipline over urgency.

Language Signal

50%

BearishBullish

Balanced (50%)

Language is predominantly opportunity-focused with terms like fantastic opportunity, excellent time to add capital, compelling, attractive margins of safety, and thrilled appearing frequently. The manager describes businesses as exceptional, outstanding, and wonderful trading at significant discounts. However, the letter also acknowledges companies are deeply out of favor and the market is overvalued, providing some balance. The net language is clearly more bullish than bearish, emphasizing mispricing and value creation opportunities. Score reflects moderately bullish directional language with some cautionary context.

Perceived Risk

35%

Low RiskElevated

Moderate Risk (35%)

Manager acknowledges the market is arguably overvalued and not cheap by almost any metric. AI disruption risks are mentioned multiple times across TPG, Genpact, and the broader portfolio, with the manager stating they continue to monitor AI disruption risks across all portfolio companies and MVP businesses. However, these risks are discussed as market overreactions creating opportunities rather than genuine threats. The letter mentions post-Covid comparisons, weak mortgage markets, and mixed environments but does not dwell on systemic risks or provide detailed downside scenarios. Risk discussion is present but not central to the narrative. Score reflects moderate risk acknowledgment with specific factors identified but reframed as opportunities.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

Manager describes the current environment as a fantastic opportunity for serious long-term investors and states it is an excellent time to add capital. The letter highlights multiple new positions added (Badger Meter, TPG) and describes finding businesses at roughly 50 cents on the dollar. Manager emphasizes having assembled portfolios with extremely attractive margins of safety owning some of the best businesses in the world. The tone suggests abundant opportunities within the small cap value universe despite broader market overvaluation. However, the manager also notes companies are deeply out of favor and sold some positions to reallocate, suggesting selectivity is still required. Score reflects a rich opportunity set within the manager's defined universe with multiple compelling ideas identified.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

Manager explicitly states focus is on long-term capital appreciation and places no weight on short-term results. The letter emphasizes five-year investment lens multiple times and encourages clients to consider at least a five-year time horizon. Manager discusses steady value compounding and describes holding through short-term volatility. Businesses are evaluated on their ability to consistently produce free cash flow through the five-year investment lens. However, the strategy does discuss quarterly results, near-term catalysts like CEO changes and strategic reviews, and responds to short-term price volatility by adding to positions. The time horizon is clearly multi-year but not permanent capital or decade-plus. Score reflects multi-year thesis with 3-5 year expected realization period and willingness to hold through volatility.