Quarterly Client Letter: Q2 2026
A recent article in The Economist on the mixed blessings of the AI revolution said, “…it is fiendishly difficult to discern who will profit the most. The railway boom of the late 19th century and the dotcom boom of the late 20th century were both built on useful technologies that also cost many investors their shirts.” During the 1990s, at the time of the dotcom boom, many of us underestimated how transformative the Internet would become. Even the top executives of some of the companies most involved were unable to divine the scale and timing of the coming changes. Many of the discussions we have in our Investment Committee meetings revolve around whether or not the world is experiencing just such a moment in history with the advent of AI. As an AI agnostic and a non-digital native, I have to confess to being in sympathy with what F. Scott Fitzgerald meant when he wrote, “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.”
So far in 2026, the year has been a mixed one for investors such as ourselves, who prefer consistency and stability to chaos and confusion. A short list of the headlines that have given us macro headaches every morning is: the Strait of Hormuz blockade, the war in Ukraine, and the threatened decoupling from an important but often dysfunctional NATO. Also, inflation has risen from 2.4% a year ago to a recent 4.2%. At the same time, however, the economy has gradually picked up speed according to the ISM Manufacturing Index, showing a reading that indicates expansion rather than contraction.
A number of the companies we own in our Model Portfolio* were just ranked at the top of the Wall Street Journal’s Best Companies for the Future, with high scores in “AI readiness, innovation, talent readiness, financial fitness, resilience and agility.” We waited patiently and did bottom-up analysis of all of these long-term holdings. Some have had a noticeable pullback of their stock quotes in the first six months of this year, which has adversely affected our performance. It has been hard to attribute the decline in their prices to any one thing, but they were and still are highly valued and most are spending large amounts of money on the various requirements of participating in AI. This illustrates, once again, how vital it is when researching new investments to be vigilant about paying a rationally arrived-at price for a business we intend to keep for years. It also shows what a wonderful asset a large cash position can be in turbulent times like the present. Warren Buffett knew it while accumulating his $397 billion cash hoard as he approaches his 96th birthday, thereby putting Berkshire Hathaway into the enviable position of not only having a fortress balance sheet but also possessing a formidable cash hoard to take advantage of the inevitable stock market downturn.
The best way for us at Peak to deal with times of great uncertainty, aside from stockpiling cash and building bond and U.S. Treasury Note ladders, is to adhere to the basic value investing discipline of bottom-up analysis and ignore the siren song of top-down speculators. These are the folks who are valuing SpaceX at $2 trillion although it makes no money. They are apparently willing to pay the price of 100 times SpaceX’s sales based on Elon Musk’s remarkable ability to pull rabbits out of a hat throughout the past two decades, and he just might be able to do it again. In the meantime, we will be content to watch from the sidelines and wonder if his very profitable Starlink business, in addition to SpaceX, might help provide the basis for another speculative success. That is an investment game which is fascinating and potentially rewarding but whose rules, if any, we don’t understand and are not willing to abide by.
As always, we continue to place the interests of our clients first and we appreciate the trust you have placed in us and will continue to work hard to earn it.
Best regards,
Noel F. Bennett
*The Model Portfolio is not a real cash portfolio. It represents the core direction of our portfolio management strategies. Individual client portfolios are managed in accordance with the clients’ specific objectives and constraints. Historical information is available upon request.
Advisory Services offered through Peak Asset Management, LLC, an SEC registered investment advisor. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This content is developed from sources believed to be providing accurate information and may have been developed and produced by a third party to provide information on a topic that may be of interest. This third party is not affiliated with Peak Asset Management. It is not our intention to state or imply in any manner that past results are an indication of future performance. Copyright © 2026 Peak Asset Management
