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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Wedgewood underperformed in Q2 as momentum stocks dominated, but the manager is doubling down on hyperscalers, viewing their massive AI capex as rational given 30%+ returns and investment gains hedging component inflation. Taiwan Semiconductor and Alphabet drove performance."
Wedgewood Partners returned 9.4% in Q2 2026 versus 15.2% for the S&P 500, bringing YTD returns to 2.5% versus 10.2%. The fund significantly underperformed momentum-driven indices, which gained 90% over 15 months versus the fund's 25%, as high-quality stocks experienced their worst underperformance since 1999. Despite this, the manager increased positions in hyperscalers (Alphabet, Amazon, Meta, Microsoft), arguing their massive AI capex spending is rational given 30%+ returns on capital and that unrealized investment gains in SpaceX, Anthropic, and OpenAI effectively hedge against DRAM inflation. Top contributors included Taiwan Semiconductor, Alphabet, and United Rentals, driven by AI infrastructure demand. The manager warns semiconductor stocks are at cyclical peaks with potential oversupply by 2028, despite historic profit growth at companies like SK Hynix and Micron. New positions include Hermès, viewed as a rare luxury brand with genuine pricing power from nearly 200 years of artisanal craftsmanship and constrained supply. The fund continues fishing in the quality pond, recently adding Chubb and Progressive, viewing current underperformance as opportunity.
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