Q1 Hedge Fund letter insights

Fund Letters

As a matter of tradition, fund managers write to their LPs once a quarter to update them on the fund’s performance. The format is ubiquitous and has changed little over the years. It starts with some words on performance, followed by Buffett quotes in the event of prolonged underperformance.

Then we get the part that we’re all here for: the actionable investment ideas. We’re not looking for mutual funds that allocate 2% of their AuM to their favorite Mag7. We’re looking for the quirky portfolio manager who’s put most of his LPs’ money in that one stock that he’s been studying for years. We want to read the letter from the manager who sees things differently, and who identifies investment trends that nobody is talking about.

For years, KEDM has been tracking around 600 investment letters every quarter. That’s a lot of information to work through, and you probably found the data as overwhelming as we did. Fortunately, we have a team of analysts working through those letters (of course, armed with various AI subscriptions and newly built tools) to distill them into a couple of macro takeaways and identify the best stock pitches.

A couple of weeks ago, we changed the format of our monitor. The monitor now summarizes the actionable investment ideas for you. We have decided to be a little more selective in the letters we are tracking. With most of the Q1 2026 letters now published, we have consolidated them into a single report: The first edition of the KEDM Fund Letter Insights.

Download your full copy of the 2026 Q1 letters below:

Five most consensus longs and shorts

 

No.	Most Consensus Longs	Most Consensus Shorts
1.	Microsoft (MSFT): a top holding for 8 funds – AGT, Boyar, Douglass Winthrop, Focus Wealth, Wedgewood, Mayar, Antipodes all bought or re-entered on the AI-fear de-rating	Software / SaaS / “AI wanna-bes”: Funds such as Benedetti, Black Bear, Bronte are short so-called AI wanna-bes.
2.	Amazon (AMZN): top holding for 4 funds. Main thesis on AMZN has been: a) lowest valuation in its history; b) punished for +$200bn AWS/AI capex	Private credit / BDCs / PE lenders: It has been one of the most-cited risks this quarter. Black Bear is explicitly short a private credit/PE lenders basket; QuantStreet and Lansing raised concerns over BDCs.
3.	Visa (V) and  Mastercard (MA): Top holdings for 6 and 4 funds respectively, and both are almost always held together. Appalaches made the pair its largest new investment. Also, a number of funds took the other side of the stablecoin / agentic-commerce disruption fear.	Broad US equity indices: Crescat shorted market indices via puts at 228% market-cap/GDP; Greenlight kept gross low and traded around index hedges.
4.	Meta (META): Top holding for 4 funds. Rowan Street states that META is at its most compelling level since 2022.	Consumer credit / subprime lending: Black Bear shorts buy-now-pay-later lenders; Purpose is selectively shorting US consumer names and cutting subprime/mortgage; Bronte is also short consumer lending.
5.	Constellation Software (CSU): Top holding for 4 funds. The common theme is that CSU will be systems of record that survive the AI disruption. Giverny, Deep Sail, Rowan Street all echoed the same thesis in their letters.	Long-duration US Treasuries: Noble is short 10-yr Treasury futures; TIFF deliberately remains short duration; Robotti stated the 10-year yield could reach 7%; Hoisington mentioned yields will rise anyway. Nearly every fixed-income comment leaned in similar direction.

 

Off-the-radar idea award

• Norbury Capital – Tonies SE (TNIE GR) is a razor-and-blades children’s audio-box The Toniebox is sold at no margin for €18, and additional figures and boxes could cost €200 per buyer. Given the large installed base of ~12mil Tonieboxes, future earnings power is significant.

This year, the company expects revenue to grow by more than 20%. Its EBITDA margin is also reaching double digits for the first time. In the more mature DACH region, EBITDA margins are already above 25%. Pokémon figurines and Tonieplay are expected to launch this summer.

• Bison Energy Opportunity Fund – Ensign Energy Services (ESI CN) is a Canadian drilling contractor, trading at $3.50 per share vs an estimated replacement value of $17.40. The company has tailwinds in California, where policy is shifting toward greater support, and in Venezuela. Murray Edwards and Fairfax are significant owners, with a combined 45%.

The Fund stated that the drilling companies tend to benefit with a lag when oil prices rise, as higher prices typically lead to more rig additions, higher utilization, stronger day rates, and better cash flow. Historically, rig additions have often peaked between the 40th and 70th week after an oil price increase, and we are basically in less than 10 weeks of Strait of Hormuz disruption.

• Praetorian Capital and Night Watch have both been publicly bullish on Marex (MRX), a futures clearing and commodities trading company. Marex is a structural beneficiary of three converging forces: (1) elevated commodity volatility, (2) rising counterparty/clearing demand, and (3) consolidation of mid-market commodity players. Night Watch disclosed that it allocated 14% of the Fund to MRX; thus, it is putting real capital behind its conviction.
• Plural Investing – Douglas Dynamics (PLOW) is the dominant US/Canada professional snowplow maker (~50% share), with two unusually warm winters causing underperformance that’s now reversing. The reverse is likely to happen this year. We collected data from 54 weather stations across PLOW’s key markets and interviewed dozens of dealers and smaller OEMs. Many dealers sold out this winter for the first time in years. Our analysis of the industry’s replacement cycle also suggests substantial pent-up demand that is now returning.

The Fund also sees limited risk in the investment, even when FCF does not grow; the stock trades at 18x trailing FCF, in line with its historical average multiple.

• Quercus Fund – Braskem Idesa is a distressed petrochemical bond. The bonds were trading at 60% of par as of the writing of this letter, and since then, the company filed for Chapter 11. Diego stated that in the event of bankruptcy, Carlos Slim, one of the richest men in Latin America, who owns 25% of the equity and a significant portion of the debt, might become the majority owner.

At face value, its net debt sums USD 2bn (only two bonds, a very simple structure), and the Braskem Idesa plant is less than 10 years old, and has just completed a major maintenance turnaround. Its replacement cost is over USD 4bn. The Fund’s thesis is that the bonds offer a compelling asymmetric opportunity with a bumpy, potentially long ride.

 

Potential new thematics:

1. AI Power / Grid Bottleneck

We guess this one is for the momentum investor. While investing used to be about moats, it has shifted to being about bottlenecks. AI bottlenecks. What started at GPUs has now shifted to anything that touches semis or power. Not our forte, so we are happy to refer you to some stock-specific pitches by other PMs.

h/t Michael Fritzel

• Green Ash mentioned that Bloom Energy (BE), GE Vernova (GEV), and Siemens Energy (ENR GR) are monopolistic choke-point businesses, well-positioned to benefit from energy volume growth rather than price
• Titan Wealth had a write-up on RWE AG (RWE GR), of which 80% of the power-purchase agreement is now data center driven, and the company plans €35 bn capex to 2031
• Purpose Investment Partners expressed its thesis via Enbridge (ENB CN) preferred to benefit explicitly from data-center and natural-gas demand
• Torre Financial mentioned that Comfort Systems (FIX) has had a record-level backlog due to data-center demand
• O’Keefe Stevens said Corning (GLW) signed a $6b multi-year agreement with META for optical fiber, cable, and connectivity for US data centers

2. Software Survivors

Meanwhile, the value investors are flocking to the companies that, rightly or wrongly, ended up in an AI loser basket. This is essentially a long list of specific software companies that would survive AI. The general theme is that companies with consumption-priced services, regulatory-integrated and software with proprietary data will be reinforced by AI, not disrupted.

• Constellation Software (CSU CN) – Giverny, Deep Sail, Rowan Street
• Dynatrace (DT) – Starboard
• FactSet (FDS) – Pelican Bay
• Jack Henry (JKHY) – Upslope Capital
• Amdocs (DOX) – Palm Valley
• WiseTech (WTC AU) – LHC Capital
• Salesforce (CRM) – Penn Davis, Antipodes
• Oracle (ORCL), Unity Software (U) – White Falcon
• GitLab (GTLB), Intuit (INTU) – Minotaur Global Fund
• Palantir (PLTR), ServiceNow (NOW) – Vision Capital

3. Global Rearmament

We’re bullish on European defense names. But the rearmament trade is global. Here are some other names you can use to play the theme.

• Third Point initiated a new position in Indra Sistemas (IDR SM), Spain’s national champion, whose backlog has nearly quadrupled.
• Jemekk Hedge Fund is bullish on CAE (CAE), MDA Space (MDA), and RTX Corp (RTX) as potential beneficiaries of Canadian NORAD and the NATO 5%-of-GDP re-rating.
• 1851 Capital is long Duratec (DUR AU), a mining and defense contractor benefiting from AUKUS defense spending over the next 2-5 years.
• Merion Road built a new position in Frequency Electronics (FEIM), a 65-year-old missile defense company with advanced tech for electronic warfare and quantum sensing.
• Minotaur Global Fund thinks the share price weakness is a valuation reset, not a thesis break, and is long Rheinmetall (RHM GR) amid strong growth in EU defense spending.

 

4. Hong Kong re-platforming

Longriver Investment Partners identified Hong Kong as “re-platformed,” meaning the city is structurally the same, but its foundations have been significantly changed over the last few years. Specifically, a) the old Hong Kong ran on foreign capital, which has now basically withdrawn, and the mainland capital accounts for a significant portion; b) the resident base was eroding with a collapsing birth rate and net migration, which now got backfilled with mainland talents and their families; c) the local pricing power has also been replaced by mainland reference prices via cross-border consumption. The Fund identified Futu Holdings (FUTU) as one way to play this shift in Hong Kong.

5. The SPAC liquidation-yield cycle (RLH Capital)

RLH Capital argued that the market is at an inflection point, with elevated issuance outpacing transaction activity and offering better downside protection. In other words, investors are being paid to wait. Worth reading if you are into SPACs.

 

The Macro Bros

At the end of the day, if you’ve got the macro picture correct, you’ll probably make a lot of money. While some fund managers seem to hold on to one macro view for an entire career, we’re still eager to listen to the industry’s greats.

1. Massif Capital’s letter introduced the shift from geology-first to geography-first in the commodity regime. The main question is no longer whether the molecule can be pumped, but whether the sovereign allows it to leave and the hull to clear the strait. This view is rejected by the consensus, which treats the Iran War as a temporary supply shock rather than a structural break. The Fund is positioned in critical-mineral developers, and one of its highest-conviction names is Allied Critical Metals (ACM CN).

 

2. Robotti Value Investors called for persistent 5–6% inflation that pushes the 10-year toward a 7% yield and for repricing all financial assets, while arguing that reflexive buy-the-dip behavior systematically misprices large-scale risk. The Fund is investing in offshore oil & gas services, which are overlooked and abandoned corners of the market. The Fund is bullish on Tidewater (TDW).

 

3. Horizon Kinetics elaborated on the term “the abyss at the mountain’s edge”, which states that crowd behavior is a permanent feature of markets. There’s only so much capital available at any given time, so when money moves en masse to greener pastures, there must be capital outflows from other sectors, eventually creating a deficit. The Fund is long asset-light, royalty companies that earn revenue by taking a cut in their customers’ revenue without doing any heavy lifting, such as Wheaton Precious Metals (WPM CN), Texas Pacific Land (TPL), and Altius Minerals (ALS CN).

 

4. Eagle Point Capital’s letter was an interesting read with memorable comparisons – cockroaches vs. pandas. Cockroach-like businesses are hard to kill and can persist for years, whilst Panda businesses are cute and cuddly yet struggle to adapt to even minor changes. The Fund prefers physical-infrastructure cockroaches, such as McKesson (MCK), AutoZone (AZO), and Dollar General (DG), over fragile tech pandas like Nvidia (NVDA) and Taiwan Semiconductor (TSMC), using Chegg’s post-ChatGPT collapse as a cautionary tale.

 

5. Van Der Mandele Arar Fund’s Q1 update was worth reading on TurboQuant and helium shortages. SK hynix (000660 KS) has made tremendous technological progress in the AI memory stack and has become a leading supplier to NVDA. Yet a possible helium shortage due to the Strait of Hormuz situation threatens chip production. Another breakthrough – TurboQuant by Google compresses data by a factor of 6 with no loss, making on-device AI affordable.

 

YOLO-award

Sometimes, high-conviction weights are a signal. Sometimes it only signals that the fund manager is a complete degen. We don’t judge. We merely flag the YOLO calls.

No.	Fund name	Allocation in the fund	Ticker	Thesis
1	Recurve Capital	47.7%	Carvana (CVNA)	Carvana is perceived by some investors as highly cyclical, largely because of the sharp decline in 2022. However, used car sales are not particularly cyclical. This is one of the reasons I am comfortable holding the stock.
2	JB Global Capital	~50%	Alibaba (BABA)	Alibaba’s strength in Cloud, which grew 36% year-over-year and accelerated from 29% growth last quarter. BABA is moving toward more aggressive monetization of its AI portfolio.
3	Focus Capital	Increased size x5	Burford Capital (BUR LN)	YPF reversal halved the stock price. The company has ~$1B market cap vs. a $1.8–2.25B portfolio compounding at 19–27%, plus Sysco-antitrust optionality ($1–2B) and residual YPF. The market grossly overreacted and acted based on its conviction.
4	McIntyre Partnerships	>20%	QuidelOrtho (QDEL)	At the current stock price of ~$11. The stock will earn $4 on 2028 FCF. Applying the peer multiples (Siemens Healthineers, ABT, Roche, and DHR) of x20, the stock could trade at ~80$.
5	Open Insights Capital	n/a	OXY warrants	OXY demonstrated its ability to leverage its vast operating base and generate significant cash flow. Management finally got out of its own way. The team shelved its original growth-focused capex plans and instead cut spending, which should generate an additional $1.2 billion of free cash flow in 2026.