A Month of Two Distinct Halves

From the Portfolio Manager

A Month of Two Distinct Halves

July was a month of two distinct halves. The front half commenced with the celebration of a remarkable 250th American Independence Day and settled into a World Cup group stage that proved more engrossing on the geopolitical map than on the pitch. The second half brought renewed hostilities in the Middle East — and with it a fresh round of financial market volatility. We examine the defining themes below, together with Helianth's positioning for the months ahead.

America is two hundred and fifty years young. A core tenet of our investment philosophy remains that the United States is the best place to invest on the planet. Yes, there are other options, and America is an imperfect experiment. However, it has been and remains the best place to safely grow one's nest egg: the sheer size and liquidity of its capital markets, and a risk-reward culture that attracts talent from every corner of the Earth, make it so. America is worth celebrating. The political friction we observe today is not a sign of decline — it is a proud testament to America's enduring strength.

Spain outclassed Argentina's disciplined defensive set-up for World Cup glory in New Jersey. The most compelling story from the tournament was Cape Verde — the smallest nation in the competition — which held both finalists to draws on the strength of a heroic performance from a veteran goalkeeper, an inspiration for the over-the-hill gang near and far. The world was then jolted from its summer routine by renewed warfare in the Middle East, which threw a wet blanket on the multi-month recovery in investor sentiment. The earnings season that followed has unlocked a few new concerns, and a few new opportunities.

"It often pays to have gray hair and diverse experience in this business. Bring it on."

The Investment Case

Rates, Risk, and the Discipline of Staying Selective

We may need to talk about the Federal Reserve again. A new regime at the Fed is intent on allowing the market to sort out the hard parts on its own, after nearly twenty years of aggressive monetary policy that had effectively offloaded deep thinking about interest rates from the broader investing community. We are now back to a place where interest rate risk is squarely in play. Chairman Warsh is intent on making us work for it again. That is a healthy development, though there will be an adjustment period — a generation of investment professionals has had limited experience with market-led interest rate risk.

A somewhat predictable downdraft in AI stock valuations has claimed its first notable casualty. A prominent AI-focused fund — one that had been a celebrated beneficiary of the AI era's gains — suffered a sharp and public unwinding in the waning days of July. Over-leverage and excessive concentration, the original sins of investing, were again the culprits. Whether this proves to be the first ripple of a broader correction, or a contained wash-out of overspeculation, time will tell.

Helianth has been a meaningful beneficiary of the AI era, and we remain constructively invested in many of the leading names. We are, however, positioned as conservatively as we have been in some time — a posture we have been deliberately building throughout this month. The landscape presents higher equity volatility at elevated valuations, alongside higher bond yields and their attendant rate risk. We are carrying more cash than is typical, and weightings have been selectively reduced. We remain in a measured, selective mode — but positioned to act decisively when high-probability opportunities present themselves for the patient, long-term investor. Enjoy the balance of your summer, and please reach out if anything changes in your world or you have questions about your portfolio.

The Biggest Game in the World

From the Portfolio Manager

The Deepest Market in the World

The biggest sporting event in the world is being held in North America this year. The FIFA World Cup is taking over screens around the globe, and the question of which nation's footballers will be anointed champions remains open. I do know that if trophies were awarded for the deepest capital markets, the United States would win going away. In the past month, U.S. markets easily digested record issuance from a few of the major AI players at a scale that is genuinely striking. Alphabet raised approximately $80 billion overnight, and SpaceX raised approximately $75 billion just days later. These are large numbers, and there is more in the pipeline. They speak to a core tenet of our investment strategy: the U.S. financial markets represent the best opportunities in the world. The AI era we have been invested in for just over three years continues to power the move — and the volatility.

"There is almost always a bubble in something. Sometimes it is a bubble in fear, other times a bubble in optimism. The trick is not getting swept up in the hype."

The Investment Case

Is It a Bubble?

The question on everyone's mind now is whether this is a bubble. In a narrow sense, yes — and that is not new information. The market is always overreacting to good news and bad. There is almost always a bubble in something; it is in the very nature of capitalism to produce extremes. Sometimes there is a bubble in fear. Other times there is a bubble in optimism. The winds are always blowing in one direction or another, and there are rarely clear road signs telling us where we are on that continuum. The discipline is to avoid getting swept up in the hype and to remain grounded in the fundamentals. That is not always easy. Mistakes are inevitable. It is, and always will be, the way.

Portfolio Positioning

Reflecting at the Halfway Point

We are now at the halfway mark of 2026. Given the volatility the portfolio has weathered this year, we are holding our own — but there is work ahead over the next six months. Going into July, you will notice a bit more cash in the portfolio than is typical. The recent run has provided opportunities to reposition and to take some profits.

Overall, portfolio performance has been decent, and there is always room for improvement. The new HIM proprietary machine-learning tools are showing genuine promise. Performance has been affected by our ongoing commitment to the software sector. Despite continued uncertainty about the future of software in an AI-augmented world, software remains essential. AI can do a great many things, but where the stakes are high, it remains worth the investment to have systems designed and maintained by professionals. That view has been echoed across the AI industry. We remain steadfast, and we are paying close attention to what the companies we own in the sector are saying and doing.

In On the Action

From the Portfolio Manager

Stepping into the Future

May was another solid month for the portfolio as the market delivered another healthy measure of reward for the patience endured over the winter. This month's headline is also a double entendre. We are decidedly in on the action given the buoyant equity-market backdrop, as the AI-led expansion continues to gather pace. May will also mark the month that Helianth went all-in on artificial intelligence and machine learning as a professional tool. Since May 4th, I have been deeply engaged in deploying newly available technology to build Helianth-specific investment tools — custom automations designed to expand our investable universe and systematize the research process I have developed over decades. There will always be a human judgment layer between you and the AI. It is a tool to make better decisions, not a substitute for experience. I am beginning to see results that suggest the investment of time and capital will allow Helianth to cast both a wider and a finer-meshed net in our never-ending pursuit of better returns. Success will be defined in the numbers in the second half of 2026.

"There will always be a human air gap between you and the AI. It is a tool to make better decisions, not a substitute for human judgment and hard-fought experience."

The Investment Case

Casting a Wider, Finer-Meshed Net

The work underway at Helianth is straightforward in goal but ambitious in scope: build a set of proprietary, AI-augmented tools that expand the universe of companies we can credibly evaluate, while systematizing the research process refined over decades. The throughput improves. The discipline does not.

A wider net surfaces more candidates. A finer mesh keeps the quality bar high. Together, they produce more qualified names without lowering the threshold for what earns a place in the portfolio. That is the version of AI leverage we are pursuing — not faster trading or automated client interactions, but more thorough coverage of the public markets applied through the same framework that has driven our results to date.

The numbers alone will tell us whether the investment of time and capital has paid off. Initial signals are encouraging. The verdict comes in the second half of 2026 and beyond. In the meantime, the commitment remains what it has always been: disciplined process, human judgment at every decision point, and a portfolio built one name at a time.

Volatility Cuts Both Ways

From the Portfolio Manager

Staying Engaged Through the Turn

April marked a meaningful recovery for the portfolio. The preceding months brought their share of challenges. Months like April are precisely why we remain invested and committed to our strategy. The same volatility that weighed on the portfolio through the winter has been its ally this spring. Volatility cuts both ways. Ultimately, investors are compensated for enduring it — though acknowledging that is considerably easier than living through it.

The software industry's ongoing assimilation of artificial intelligence continues to present challenges, even as the broader AI infrastructure build-out advances at a rapid pace. Geopolitical tensions remain elevated across multiple regions. The rate of change across industries and economies continues to accelerate. As I noted in last month's update, the most important work — and the hardest — remains staying engaged through uncertainty.

"The same volatility that made for a difficult winter has been the portfolio's ally this spring. Volatility cuts both ways. Investors are compensated for enduring it."

The Investment Case

On AI Valuations: Scarcity Matters

Looking ahead to the summer, the first large-scale IPOs of the AI era are entering the pipeline. Much has been written about an "AI Bubble." Most of that commentary misses a critical point: there are still very few pure-play AI names available in the public markets. Current valuations reflect both the scarcity of investable AI positions and the scale of demand for them. This is a fundamental component of any sound valuation framework.

Every valuation has both a mathematical dimension and a scarcity dimension. Distinguishing between the two — and weighting each appropriately — is where active judgment matters most. Opportunities to invest at low valuations on both measures simultaneously are rare. We apply disciplined judgment in the areas where the math alone does not provide a clear answer.

The market is always giving feedback, but it is not always telling the truth. The essential part is having a well-thought-out methodology and applying it strategically and consistently over significant time periods. This is the challenge in investment management. It is very gratifying when it works.

An Uncomfortable Yet Vaguely Familiar Feeling

From the Portfolio Manager

We Have Been Here Before.

The opening three months of 2026 bear an uncomfortable resemblance to the same period a year ago and similar scenarios years ago. Asset prices are under pressure. Sentiment is moving toward extremes. The 'flight or fight' instinct to reduce risk is growing louder within the space between our ears. Twelve months ago, the "Tariff Tantrum" drove the S&P 500 sharply lower, pushed bearish sentiment to levels last seen in early 2020, and generated a cascade of downside earnings revisions. By year-end, markets recovered fully and set new highs. What changed was not the tariff regime. It remains elevated and unpredictable. The big change was the market's ability to price a new equilibrium, and the valuation compression that accompanied the tantrum created the launching pad for that recovery.

Today's composition of headwinds is different. The escalating conflict involving Iran has introduced a genuine geopolitical risk premium: energy price volatility, widened credit spreads, and multiple compression in rate-sensitive sectors are all real and measurable. We acknowledge them plainly. However, the architecture of the moment — a geopolitical shock, compressed valuations, elevated fear, a narrative that extrapolates the worst-case scenario — sounds quite familiar, and the historical record on what follows the doomscroll is not very ambiguous.

"The question is not whether the geopolitical risk is real — it is — but whether it is permanent. History is fairly consistent on this point: it is not."

The Investment Case

Optimism Is Not Magic Thinking. It Is a Data-Driven Recipe for Future Returns.

A brief review of four comparable geopolitical or policy shocks of the past fifty-three years clearly makes the case for a constructive outlook on asset prices. In each instance, equities recovered and the investor who held through was rewarded. The market reaction has consistently overshot the fundamental damage to the economy.

Persistent pessimism is not a conservative strategy, but it can be an expensive one. The companies we own do not necessarily cease to be profitable because of the news cycle. Their earnings power, pricing power, and long-term competitive position remain intact. What is temporarily impaired is the multiple the market is willing to pay for those earnings because of the fog of war. Optimism, defined this way, is not an emotional posture. It is the posture that long-run data supports.

Portfolio Positioning

How We Are Positioned

Our portfolios enter this period of uncertainty without leverage and without speculative positions on geopolitical outcomes or commodities. We hold a portfolio of high-quality businesses we know well and own at valuations we find attractive given the growth opportunity laid out in the coming years. On the fixed income side, high-quality bonds are providing the ballast they were purchased to provide.

However, we are, and will remain, deficit hawks with concerns about the global rise in interest rates. It is worth noting that energy supply shocks do not necessarily lead to persistent inflation — it takes the coincidence of major policy blunders to bring that to the forefront. When valuations become genuinely attractive, we are prepared to add selectively. We cannot reliably time the bottom during adverse environments. We look for valuation opportunities and remain optimistic.

As always, I am available to discuss any of these topics in greater detail. Please reach out to discuss your concerns, your portfolio, or the broader environment.

Digging In, Digging Out

From the Portfolio Manager

Crack That Whip.

There is an ancient annual spring festival celebrated in the Swiss valleys primarily where the tiny language of Romansh is still spoken by the locals. Calandamarz is celebrated on the first day of March. The tradition features the children of each village coming together in traditional costumes and making a huge racket clanging huge cowbells and singing while parading in the town squares. The villagers use it as an excuse to have a traditional meal and quaff a few beers. The boys crack long whips — a difficult and dangerous skill to master, especially for a boy. They do this to scare off winter so that spring will come at last.

In the old days, before ski tourism, winter was a test of survival for the farm animals and the people who lived in isolation in these remote valleys. It is a celebration. The little village where I take my annual ski holiday celebrates this holiday enthusiastically. I think we all should crack the whip this year to scare off this winter as well. The winter has been challenging for investors as the AI boogeyman has been stalking one industry after another, testing valuations and investor nerves.

"Challenging times are the best of times with this mindset. Challenges endured lead to satisfaction. Winter is ending. Spring is coming."

Portfolio Positioning

Resilience Through the Drawdown

Despite repeated avalanches of rather dire predictions of the longer-term effects of AI on various industries, the portfolio has fared well. The portfolio has not been unscathed, but the drawdown in valuations has enabled access to some new names that have been too expensive in the recent past. It ought not to be a news item to investors that the stock market is volatile. This should be a given. We build portfolios with this as the starting point.

It is still unnerving to have the market question the very tenets of so many business models. Ultimately, the market is doing what the market does best — allocate capital through the collective wisdom of the crowd. This process is the part of that I find most fascinating. Challenging times are the best of times with this mindset.

Winter's Chill

From the Portfolio Manager

The AI Moment and Your Portfolio

The last few months have been challenging for a few of the software companies that have played an important role in the portfolio for the past several years. Technological advancement involves disruption of incumbent players by newer, more efficient solutions. The AI Moment we are living in is accelerating the pace of change. We embrace and depend on that phenomenon. It is an advantage for active management of the portfolio.

While I try to avoid using wonky tradecraft and calling out individual companies in these monthly updates, I am diving in with both feet here because it speaks directly to the performance of your portfolio. The agent of change in the software industry is a private company with technology that is demonstrably good at writing computer code — heretofore the domain of very smart engineers. You may have heard it referred to as "Vibe Coding."

"The near-term result is a reduction in the expense of creating and maintaining software because AI makes engineers more efficient — lowering costs and increasing profits. The effects appear to cancel each other out."

Portfolio Positioning

Holding Through the Rough Patch

Software stocks have been under pressure for the past three months as market participants have questioned the viability of their cash flows in a world where anyone can effectively write their own programs instead of paying for the use of someone else's proprietary code. I do not think that is a near-term reality, but I acknowledge it is a legitimate longer-term concern that could affect the terminal value of the valuation.

It is my belief that the near-term result is a reduction in the expense of creating and maintaining software because the AI technology makes engineers more efficient, lowering costs and increasing profits. The effects appear to cancel each other out. This is why we have held on through the current rough patch in the sector and are looking to the current quarter for signs this trend is abating.