Strong Fundamentals Hidden by Continued Volatility
We gained almost 7% on the index this quarter, cutting into the deficit from the first half of the year. After an incredible 2025 and continued strong long-term performance, this year has been volatile and challenging. In our view, however, the most important takeaway is that our core companies continue to execute and strengthen their market positions. Given where our investments are trading today, we believe the portfolio represents a very interesting investment opportunity.
Living Through Drawdowns
I have often said that waiting is the hardest part of investing. It is also one of the reasons I believe my strategy can consistently outperform over longer periods of time.
Very few institutional investors have the incentive to endure significant drawdowns. They are mentally exhausting in a large investment organization, they affect bonuses and promotions, and they can make a strategy difficult to market. As a result, most managers try to avoid volatility.
Unfortunately, avoiding near term volatility comes with a significant cost. It requires managers to repeatedly make very difficult decisions about when to buy and sell based on short-term stock and market movements. Very few succeed because near term stock movements are unpredictable, career and compensation incentives can distort decision making, and the time spent trying to anticipate every move creates a significant opportunity cost. Trying to avoid near term volatility is one reason most investors, professional or otherwise, fail to beat their index over time.
Our goal is not to time the market. It is to own companies that can increase three to five times in value if our thesis is correct. Very few stocks accomplish that in a straight line. In fact, most stocks that generate extraordinary long-term returns experience significant reversals along the way.
Look no further than Warren Buffett. Berkshire Hathaway has been cut in half three times and has declined more than 30% six times. Did Buffett or Munger try to time those episodes? No. If two of the greatest investors of all time did not attempt to time every downturn in Berkshire, I think it would be foolish for us to believe we can consistently do so while investing in much smaller companies as outside investors.
What Matters for an Investment
“Great, Zack, you don’t trade. What do you do?”
I am constantly testing whether our investment thesis remains intact. I can accept volatility only if I continue to believe the thesis is correct. If the thesis breaks down, it is important to move on from an investment, regardless of whether the stock is up or down.
Two stocks have held back the portfolio this year, yet I believe both companies continue to strengthen their market positions despite their stock performance.
Energy Fuels has had a rough year following a huge run in 2025. I see two primary factors weighing on the stock.
First, materials stocks have been weak broadly. Energy Fuels has declined by an amount comparable to many other critical minerals companies over the past year.
Second, Energy Fuels has taken an additional nine to twelve months to secure permits and approvals, open mines, expand facilities, and assemble its mine to magnet strategy. A weak industry backdrop, combined with delays in the projects that excited investors in 2025, has made this a frustrating year.
None of this, however, changes the strategic importance of the company’s assets once they are fully operational. In fact, the available data suggests that Energy Fuels is becoming more important and increasingly differentiated from alternative solutions.
Genius Sports has also been a drag on performance. The stock sold off sharply for two primary reasons. First, investors feared that prediction markets could damage Genius Sports’ sportsbook customers. Second, Genius made an acquisition to accelerate its expansion into advertising, adding complexity to the investment story.
Prediction markets are clearly creating competition for sportsbooks such as DraftKings. It is much less clear that this hurts Genius. Genius sells official sports data to anyone who needs it to operate, including prediction markets. The company has already entered into agreements with both Polymarket and Kalshi. In other words, Genius does not necessarily care which platform wins as long as the winners use its data.
The success of the advertising strategy remains unproven. However, sports fans, particularly those actively betting on games, represent one of the few remaining highly engaged audiences for advertisers in an era of streaming and fragmented attention. At today’s valuation, we consider meaningful success in advertising to be largely a free option.
Diversification Matters
Offsetting our laggards are BGC Group and RingCentral. Both were poor performing stocks last year, only to experience significant reversals in sentiment this year.
These companies demonstrate why weak stock performance does not necessarily mean the underlying thesis is broken. When fundamentals continue to improve, investor sentiment can eventually catch up. Despite the strong performance of both stocks this year, I believe the recovery in these names is still in its early stages.
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 are always here to answer any questions, please don’t hesitate to call or email.
With Kind Regards,
Zack Perry
Small Cap Q3 2026 Commentary
Zack Perry
Strong Fundamentals Hidden by Continued Volatility
We gained almost 7% on the index this quarter, cutting into the deficit from the first half of the year. After an incredible 2025 and continued strong long-term performance, this year has been volatile and challenging. In our view, however, the most important takeaway is that our core companies continue to execute and strengthen their market positions. Given where our investments are trading today, we believe the portfolio represents a very interesting investment opportunity.
Living Through Drawdowns
I have often said that waiting is the hardest part of investing. It is also one of the reasons I believe my strategy can consistently outperform over longer periods of time.
Very few institutional investors have the incentive to endure significant drawdowns. They are mentally exhausting in a large investment organization, they affect bonuses and promotions, and they can make a strategy difficult to market. As a result, most managers try to avoid volatility.
Unfortunately, avoiding near term volatility comes with a significant cost. It requires managers to repeatedly make very difficult decisions about when to buy and sell based on short-term stock and market movements. Very few succeed because near term stock movements are unpredictable, career and compensation incentives can distort decision making, and the time spent trying to anticipate every move creates a significant opportunity cost. Trying to avoid near term volatility is one reason most investors, professional or otherwise, fail to beat their index over time.
Our goal is not to time the market. It is to own companies that can increase three to five times in value if our thesis is correct. Very few stocks accomplish that in a straight line. In fact, most stocks that generate extraordinary long-term returns experience significant reversals along the way.
Look no further than Warren Buffett. Berkshire Hathaway has been cut in half three times and has declined more than 30% six times. Did Buffett or Munger try to time those episodes? No. If two of the greatest investors of all time did not attempt to time every downturn in Berkshire, I think it would be foolish for us to believe we can consistently do so while investing in much smaller companies as outside investors.
What Matters for an Investment
“Great, Zack, you don’t trade. What do you do?”
I am constantly testing whether our investment thesis remains intact. I can accept volatility only if I continue to believe the thesis is correct. If the thesis breaks down, it is important to move on from an investment, regardless of whether the stock is up or down.
Two stocks have held back the portfolio this year, yet I believe both companies continue to strengthen their market positions despite their stock performance.
Energy Fuels has had a rough year following a huge run in 2025. I see two primary factors weighing on the stock.
First, materials stocks have been weak broadly. Energy Fuels has declined by an amount comparable to many other critical minerals companies over the past year.
Second, Energy Fuels has taken an additional nine to twelve months to secure permits and approvals, open mines, expand facilities, and assemble its mine to magnet strategy. A weak industry backdrop, combined with delays in the projects that excited investors in 2025, has made this a frustrating year.
None of this, however, changes the strategic importance of the company’s assets once they are fully operational. In fact, the available data suggests that Energy Fuels is becoming more important and increasingly differentiated from alternative solutions.
Genius Sports has also been a drag on performance. The stock sold off sharply for two primary reasons. First, investors feared that prediction markets could damage Genius Sports’ sportsbook customers. Second, Genius made an acquisition to accelerate its expansion into advertising, adding complexity to the investment story.
Prediction markets are clearly creating competition for sportsbooks such as DraftKings. It is much less clear that this hurts Genius. Genius sells official sports data to anyone who needs it to operate, including prediction markets. The company has already entered into agreements with both Polymarket and Kalshi. In other words, Genius does not necessarily care which platform wins as long as the winners use its data.
The success of the advertising strategy remains unproven. However, sports fans, particularly those actively betting on games, represent one of the few remaining highly engaged audiences for advertisers in an era of streaming and fragmented attention. At today’s valuation, we consider meaningful success in advertising to be largely a free option.
Diversification Matters
Offsetting our laggards are BGC Group and RingCentral. Both were poor performing stocks last year, only to experience significant reversals in sentiment this year.
These companies demonstrate why weak stock performance does not necessarily mean the underlying thesis is broken. When fundamentals continue to improve, investor sentiment can eventually catch up. Despite the strong performance of both stocks this year, I believe the recovery in these names is still in its early stages.
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 are 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 Wealth Management, LLC”), 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 Wealth Management, LLC 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 Wealth Management, LLC 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 Wealth Management, LLC. 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.
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