Congratulations to the Carolina Hurricanes, our 2026 Stanley Cup Champions! Last month we noted their run to the Finals was a timely reminder that patience and perseverance are rewarded, twenty years later, that patience finally paid off. As we turn the calendar to the second half of the year, there’s a lesson in there for investors as well.
Markets had a strong quarter and finished with their best performance since 2020. Despite higher oil prices, concerns about AI valuations, and ongoing global uncertainty, the S&P 500 finished higher. Much of the strength came from technology stocks, particularly semiconductor companies that power artificial intelligence. These chip stocks have been on an extraordinary run, up 94% so far in 2026, compared to a 9% gain for the S&P 500. In fact, they’re on pace for the strongest six-month period of outperformance in history, including the dot-com bubble.
While it’s exciting to see innovation driving growth, valuations in many AI-related stocks have risen sharply. The market has also become quite concentrated, with the ten largest companies now making up over 41% of the S&P 500. When a small group of stocks drives most of the gains, it can lead to greater volatility if those companies stumble.
The blockbuster SpaceX IPO is adding to the excitement. In many cases, founders and early investors are eager to sell shares to a willing and enthusiastic public at the highest possible price. This natural dynamic can push valuations higher during the excitement of an IPO. Because insiders know the business best, history has shown that better entry points for outside investors often appear later, once the hype has cooled and more information becomes available.
Since 1992, we have chosen not to participate in IPOs. New companies typically don’t have a long enough track record of audited financial results for our valuation model to work effectively. Our model depends on reviewing years of real financial performance to determine whether a stock is fairly valued. Without that history, we would be speculating instead of making informed investment decisions. Instead, we focus on established companies where we can analyze proven results and invest with greater confidence.
Our investment approach stays consistent regardless of market conditions. We don’t chase whatever is performing well at the moment or try to time short-term market moves. Instead, we focus on high-quality businesses with strong earnings power, solid balance sheets, and lasting competitive advantages. When attractive opportunities are hard to find, we remain patient rather than lowering our standards. We don’t need the entire market to be cheap, we only need to identify a handful of well-run, fairly valued companies to build a diversified portfolio.
This disciplined approach is especially valuable in today’s environment. By focusing on quality businesses at reasonable prices, we aim to deliver strong results over the long term while managing risk effectively.
As always, we’d rather be patient and right than fast and wrong. In an environment where excitement around certain stocks and IPOs can run high, we remain committed to our disciplined approach, focusing on high-quality businesses at reasonable prices rather than chasing short-term trends. Thank you for your continued trust. It’s a privilege to manage your capital with this long-term mindset.
