Positive Returns in an Uncertain World
We had a strong start to the year despite ongoing geopolitical tensions and rapid developments in artificial intelligence. Our small cap strategy continues to serve its intended role, providing both diversification and attractive long-term returns.
During the quarter, large-cap technology stocks struggled, pulling major indexes into negative territory. While underlying growth for these businesses remains solid, elevated valuations, rising competition, particularly from AI, and increasing capital intensity have begun to weigh on investor sentiment.
More important than short-term performance is the level of concentration many investors unknowingly carry. A handful of technology companies now represent a significant portion of major indices. As a result, portfolios that appear diversified, through exposure to the S&P 500 or global equity benchmarks, are often far more dependent on a narrow group of companies than investors realize.
Our portfolio looks nothing like the S&P 500 Index or any other general global equity index. Although the fortunes of our investments are not immune to economic weakness and poor market sentiment, their business fortunes are determined by different variables than big tech. This makes our portfolio a wonderful complement to any diversified equity portfolio.
Beyond diversification, our returns over the past 6 plus years have significantly outperformed the broader small cap market. We invite you to compare our record to any manager or index over that period.
Concentration in a Volatile Market
We run a concentrated portfolio, which can understandably give some investors pause. A concentrated equity portfolio carries relatively greater company-specific risk than a more diversified portfolio. However, concentration does not mean lack of diversification.
By design, our holdings are intentionally distinct from one another, with limited overlap in business drivers. At the same time, our companies are executing well and maintain the financial strength to navigate a range of economic environments, including a potential downturn.
While no portfolio is immune to macro pressures, our investments are positioned to benefit from durable, company-specific growth that extends beyond any single business cycle.
The past six years have tested the portfolio across multiple environments, a pandemic, a liquidity-driven rally, a bear market, and geopolitical uncertainty; and yet it has delivered strong results.
2026 Predictions . . .
“Forecasts may tell you about the forecaster; they tell you nothing about the future.” Warren Buffett.
After only three months, I think most forecasts have probably been thrown out the window. We continue to focus on investments that don’t require us to outthink the market over the next few quarters. What I wrote in my last write up still stands and I’ll repeat it here.
My expectations over the next couple of years are below and they make me optimistic:
- Portfolio companies should continue to grow revenue, earnings, and cash flow.
- If those fundamentals materialize, markets should eventually reprice the stocks higher, even if the timing is unpredictable.
- The number of holdings is likely to grow as we whittle down our largest positions. Over the past two years, the portfolio became more concentrated for good reasons:
- Our highest-conviction ideas warranted larger allocations.
- Diversification was preserved, as our two largest holdings, BGC and UUUU, have no fundamental overlap, a fact underscored by their divergent performance over the past two years.
Valuable for the Modern Portfolio
The characteristics of our strategy are increasingly relevant in today’s market. With performance heavily influenced by large cap indexes, algorithmic trading, and short-term positioning, it has become more difficult to find strategies that are both fundamentally driven and genuinely differentiated.
We’re always here to answer any questions, please don’t hesitate to call or email.
With Kind Regards,
Zack Perry
Small Cap Q1 2026 Commentary
Zack Perry
Positive Returns in an Uncertain World
We had a strong start to the year despite ongoing geopolitical tensions and rapid developments in artificial intelligence. Our small cap strategy continues to serve its intended role, providing both diversification and attractive long-term returns.
During the quarter, large-cap technology stocks struggled, pulling major indexes into negative territory. While underlying growth for these businesses remains solid, elevated valuations, rising competition, particularly from AI, and increasing capital intensity have begun to weigh on investor sentiment.
More important than short-term performance is the level of concentration many investors unknowingly carry. A handful of technology companies now represent a significant portion of major indices. As a result, portfolios that appear diversified, through exposure to the S&P 500 or global equity benchmarks, are often far more dependent on a narrow group of companies than investors realize.
Our portfolio looks nothing like the S&P 500 Index or any other general global equity index. Although the fortunes of our investments are not immune to economic weakness and poor market sentiment, their business fortunes are determined by different variables than big tech. This makes our portfolio a wonderful complement to any diversified equity portfolio.
Beyond diversification, our returns over the past 6 plus years have significantly outperformed the broader small cap market. We invite you to compare our record to any manager or index over that period.
Concentration in a Volatile Market
We run a concentrated portfolio, which can understandably give some investors pause. A concentrated equity portfolio carries relatively greater company-specific risk than a more diversified portfolio. However, concentration does not mean lack of diversification.
By design, our holdings are intentionally distinct from one another, with limited overlap in business drivers. At the same time, our companies are executing well and maintain the financial strength to navigate a range of economic environments, including a potential downturn.
While no portfolio is immune to macro pressures, our investments are positioned to benefit from durable, company-specific growth that extends beyond any single business cycle.
The past six years have tested the portfolio across multiple environments, a pandemic, a liquidity-driven rally, a bear market, and geopolitical uncertainty; and yet it has delivered strong results.
2026 Predictions . . .
“Forecasts may tell you about the forecaster; they tell you nothing about the future.” Warren Buffett.
After only three months, I think most forecasts have probably been thrown out the window. We continue to focus on investments that don’t require us to outthink the market over the next few quarters. What I wrote in my last write up still stands and I’ll repeat it here.
My expectations over the next couple of years are below and they make me optimistic:
Valuable for the Modern Portfolio
The characteristics of our strategy are increasingly relevant in today’s market. With performance heavily influenced by large cap indexes, algorithmic trading, and short-term positioning, it has become more difficult to find strategies that are both fundamentally driven and genuinely differentiated.
We’re always here to answer any questions, please don’t hesitate to call or email.
With Kind Regards,
Zack Perry
Disclosure and Source
Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is confidential and is for the use of the intended recipient only. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any Investment decisions. The information contained herein was carefully compiled from sources believed to be reliable, but Robertson Stephens cannot guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. Past performance does not guarantee future results. Forward-looking performance targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are speculative and involve substantial risks including significant loss of principal, high illiquidity, long time horizons, uneven growth rates, high fees, onerous tax consequences, limited transparency and limited regulation. Alternative investments are not suitable for all investors and are only available to qualified investors. Please refer to the private placement memorandum for a complete listing and description of terms and risks.
Net returns include a hypothetical Robertson Stephens annual investment advisory fee. Actual client fee will vary based on the rate agreed upon with the client as documented in the individual client investment advisory agreement. Fees act to reduce portfolio level returns and increase portfolio expenses. See the chart below for a visual illustration of the effect of advisory fees on investment returns over time.
Hypothetical growth of $100,000 to show the effect of advisory fees on investment returns over time
Performance may be compared to several indices. Broad-based securities indices are unmanaged and are not subject to fees and expenses typically associated with managed accounts or investment funds. The number and types of securities found in an index can differ greatly from that of the accounts held in the strategy shown. The benchmarks/indices are chosen based on similar risk between the benchmark and the respective investments. The benchmarks have not been selected to represent that an investor’s performance would follow them closely, but rather to allow for comparison of an investor’s performance to that of well-known and widely recognized indices. Investments cannot be made directly in an index.
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