Portfolio Update
Signals in the Noise: Q2 Results and Company Updates
We’re using this space to share quick updates on our portfolio between our longer, more detailed quarterly commentaries. The second quarter brought plenty of earnings reports and company updates, which, as expected, created some short-term volatility. We leaned into that volatility where we saw opportunities and reduced exposure where valuations felt stretched or fundamentals had shifted.
Sylogist was one of the disappointments this quarter. Growth hasn’t materialized as management promised, and their credibility with investors has suffered. We concluded the stock was fairly valued around $8 and sold our position. Now, OneMove Capital has called for a special meeting to overhaul the board. While activism could spark change, we don’t see an easy fix; in fact, it could be more distraction than solution. Management isn’t incompetent, but their growth narrative needs a rethink. We may revisit the story once expectations are reset and there is greater value on offer, but for now, we’re on the sidelines.
North American Construction Group also delivered a weak quarter, though its challenges were mostly one-off and beyond management’s control. Having watched this team navigate everything from wildfires to aggressive competition, we know they can be nimble and overcome challenges. We remain confident in their long-term execution and used the pullback to add to our position.
We took a similar opportunistic approach elsewhere. Foraco International’s results were as expected—better than Q1 but still below last year—as its South American business repositions for growth. The market seems to be overlooking strong margins, contract wins, and disciplined execution. We see Foraco as a highly asymmetric way to gain mining exposure without betting on a single commodity, region or mining company – so we added to our stake. We also increased our position in Firan Technology Group, which we believe is well positioned to benefit from the aerospace recovery, defense spending tailwinds, and its recent FLYHT acquisition. Larger peer TTM Technologies’ re-rating from 6x EV/EBITDA to 12x underscores the market’s growing appreciation for long-duration programs, and we think Firan is even better positioned.
Not every winner stayed in the portfolio. Andean Precious Metals, which we bought earlier this year for its strong balance sheet and compelling valuation, has rallied so sharply that the stock now trades beyond our fair value range. Future upside would depend heavily on commodity prices, much of which we believe is already reflected in the share price. We exited with a ~240% gain since March—a textbook example of being cautious when others are greedy.
Some investments require more patience. BQE Water continues to impress us with its strong technical services division, even as some investors sell due to a lack of immediate operational revenue. We’re content to wait, as the company trades at an attractive valuation despite having compelling growth prospects. Mattr’s quarter was more complex, with cautious guidance around copper tariffs weighing on shares. We see multiple levers for management to pull and believe recent multi-year investments are just beginning to bear fruit, reinforcing our long-term conviction. Atlas Engineered Products has also struggled with cyclical headwinds, testing investor patience. But while others are fearful, we see a company using this downturn to strengthen its position. We added significantly to our stake, confident that when building activity rebounds, AEP will emerge as a leader. It’s never easy to buy when others are selling, but our research-driven, long-term approach gives us conviction—and helps mitigate the risk of being wrong.
Colabor Group faced what can only be described as a perfect storm: softer growth, a repriced contract, a delayed acquisition closing, a cyberattack, and a temporary forbearance agreement with lenders. We believe most of these challenges are temporary and expect the Alimplus acquisition to be a powerful growth driver over time, helping Colabor scale and deleverage. For patient investors, this is deep-value territory. Execution will be key, but we anticipate a much stronger business 12 months from now.
Velan shareholders had positive news. Flowserve, its larger peer, had been pursuing Chart Industries earlier this year until Baker Hughes intervened with a higher bid. Flowserve’s US$266M break-fee provides both the capital and the incentive to revisit a potential bid for Velan.
While the market overall feels fully priced, we continue to hunt for opportunities where expectations are too low, or growth is misunderstood. Bargains are scarce, but we’re uncovering pockets of value and making progress on new ideas. Stay tuned.