2Q26 Partners Fund Commentary

Market stance: Southeastern says speculation has intensified and is going on record "that things have gotten crazy." They argue CAPE shows the first time in history both earnings and the multiple on them are far above long-run averages, giving index and thematic ETF owners "multiple ways to lose." AI complex: They view hyperscalers (Mag7 + Oracle, ex-semis) plus "AI-enabler" semis as unattractive, describing a "perpetual motion machine" of hyperscaler, VC and capital-raised money looping into revenue and adjusted EBITDA. Same skepticism applied to the SpaceX IPO and potential Anthropic/OpenAI IPOs. Underperformance source: Almost 90% of quarterly relative shortfall came from the IT underweight; their cheapest FCF names (Albertsons, Exor) were punished hardest — which they read as contrarian confirmation. Activism as the value catalyst: Public letter to Mattel; behind-the-scenes work at Fortune Brands (new CEO Jesse Singh); People Inc.'s bid for MGM; Delivery Hero bidding war. Portfolio wins come from FCF/share growth, multiple expansion and strategic actions rather than the market's favor. Trades: One new (unnamed) healthcare position; exited Bio-Rad and the spun-off FedEx Freight (above appraisal); trimmed Regeneron into strength; trimmed CNX post-Iran-War strength then added back lower. Mean reversion: They still believe it exists — returns are "deferred, not foregone." Bottom line: Deep-value, concentrated and deliberately positioned against the AI-driven melt-up, betting on company-specific catalysts and eventual mean reversion after a bruising year.