Q2 Performance update

If Q1 was about keeping my head down through a broad-based sell-off, Q2 was the rebound I’d been waiting for. The portfolio returned +14.9% on a total-return basis over the quarter, comfortably ahead of the FTSE AIM All-Share at +8.3% and effectively level with the S&P 500’s +15.2%. After a first quarter where almost nothing worked, it’s satisfying to watch the book do what it’s supposed to do when sentiment turns — the quality names re-rate and the special situations deliver.

The scoreboard in context

A word on the benchmarks, because context matters. The FTSE AIM All-Share is the honest yardstick for a portfolio built primarily around UK small- and micro-caps, and beating it by more than six points in a single quarter is the result I care about most. The S&P 500 is the harder comp — this quarter it had the full weight of the mega-cap rally behind it — so running level with it, rather than trailing badly, is a perfectly good outcome for a book that isn’t stuffed with the Magnificent Seven. I do include S&P 500 as I do have some US large cap names in there too.

Zoom out to the half-year and the picture flatters us a little more. Compounding the two quarters, the portfolio is up roughly 12% for the first six months of 2026, against about +1.6% for the AIM All-Share and around +10% for the S&P 500. The reason is Q1: I lost less on the way down (−2.4%, versus −6.2% for AIM and −4.3% for the S&P), and that smaller drawdown is now compounding in my favour. Not losing much when everything falls remains the most underrated edge in this game — you don’t need heroics on the upside if you’ve protected capital through the downdraught, and this half-year is a tidy illustration of that.

A quick reminder on how I measure all this: the portfolio figure is the average total return across the individual holdings, so it captures the book as a collection of decisions rather than being flattered by position sizing. To do a proper performance attribution accounting for mid period buys and sells is quite a complex task for this board(obviously I can see all of this in my portfolio value).

What drove the quarter

The standout was Advanced Medical Solutions (+47%), which I’ll come back to under trades. Alongside it, Keller (+41%) had a superb three months — the AGM update in May was, in my words at the time, “reassuringly uneventful,” and the market has finally started paying up for a 165-year-old industrial sitting in net cash for the first time in a quarter of a century. Ondine Biomedical (+40%) continued its recovery(and imminent stage 3 LANTERN results), Touchstar (+33%) and MTI Wireless (+30%) both delivered outsized moves off small bases, and Gooch & Housego (+27.5%) rewarded May’s initiation with in-line interims that kept the turnaround thesis firmly intact.

Elsewhere there was strength in depth rather than fireworks: Volex and Alphabet each up 24%, Billington +20%, Distribution Finance +16.5%, Journeo +16%, Amazon +14.4% and Deere +12.8%. When the winners are this broad it usually means the whole book is working, rather than one or two lottery tickets carrying the quarter — which is exactly how I want it to look.

Where it didn’t work

Not everything turned out as hoped. Mitie was the clear laggard at −11.5%, and I’ve made no secret of my reservations(and indeed I trimmed my positions by close to 70% at around 168p). You can see the reasoning in the dedicated post from a few weeks back). TJX slipped 5% despite a genuinely high-quality Q1 update(I’ve added a bit); sometimes a good business simply gives back a little after a strong run. The larger US quality names — Meta and Charles Schwab(added to the existing position towards the bottom at around $87), both around −1.5% — took a breather, as did Croma and BTG(I exited around 128p and renetered at 118p a few weeks later) . None of these are theses I’m losing sleep over; they’re the normal give-and-take of a diversified book.

Trades and activity

Q2 was a busy quarter on the research front, with several new names and a few refreshed write-ups.

The trade of the quarter was Advanced Medical Solutions. I initiated coverage on 19 May, days after flagging that the repeated private-equity approaches — TA Associates being the latest to walk away — were telling us something about the value on offer. The pattern mattered more than any single bid, and it was quickly vindicated: H.B. Fuller, a strategic US buyer rather than a financial one, tabled an unsolicited cash proposal, and the shares finished the quarter up 47%. Occasionally the thesis and the timing line up.

I also added a little bit to my Journeo position (initiated 24 May), an intelligent-transport-systems specialist that fits my preference for founder-led, niche-dominant small-caps; it obliged with a +16% quarter. In early June I initiated on Distribution Finance Capital (DF Capital), a young, profitable and fast-growing specialist bank in inventory finance — up 16.5% over the period and, I suspect, still early in its story. Towards the end of the quarter I also reinstated my position in Transense Technology(TRT) at 48p. 

On the existing book, I published a Keller position review (7 May), refreshed my MS International note (4 May) and formally initiated on Gooch & Housego (11 May) — three of the portfolio’s more important industrial holdings, all of which contributed to the quarter.

I also sold a bit of Volex around the 620p levels(a bit short of the £7 it reached) and bought it back around 550p recently. I think some of this was driven by technical factors such as AIM funds selling due to the main market move(on top of the usual pull back for a stock which has rallied strongly). I suspect there will be at least equal if not great purchasing of the stock when it joins the main market. I’ve calculated that trackers might end up buying around £40m.

As mentioned in some of my posts, I have been dabbling in Salesfore(yet to commit) and also CBRE(at the time when I sold Mitie). Slowly averaging into them. Will do a write up in due course.

The one that got away was Cordel. I’d sold out a couple of months earlier, then watched it pop 100% in a day on a bid. Bittersweet — but I’ll take the reminder that other people can see the value too. You can’t always get the timing right, and you certainly can’t win them all.

Looking ahead

Good start to 2026 continues the trend from 2025 where I outperformed both benchmarks(+3% against AIM and about a 1% against SP500).The book is doing what I designed it to do: a core of UK quality compounders and turnarounds (Keller, MSI, Gooch & Housego, Volex, AMS), a sleeve of higher-torque special situations and micro-caps (Ondine, Touchstar, MTI Wireless, Journeo, DF Capital), and a smaller allocation to a handful of large US franchises (Amazon, Alphabet, Deere) for ballast and global reach.

My focus into the second half is unchanged: keep the drawdowns small, let the winners run, and stay disciplined on the names — Mitie and GetBusy being the obvious ones. If AIM finally has a sustained turn in it after years in the wilderness, a portfolio built like this should be well placed to make the most of it. But I’ll let the results, not the hope, do the talking. Hope your portfolios have done even better!

As always, nothing here is advice — just my own notes on my own money. Please see the disclaimer.