Stock Take Season 2026 - Part 1
Is this finally the rotation we have been waiting for? The last 2 weeks of 'duration ping pong' have been exhausting. The 🐿️'s 'Monday' Morning Notes. Year 4; Week 26 of 2026.
It’s that time of the year again. The 🐿️’s annual ‘drains up’ review of inventory! Part 2 will come in tomorrow’s ‘Start the Week’ note, with Part 3 in next weekend’s editions.
First, a quick retrospective.
I don’t think that the 🐿️ is alone in feeling relieved that Q2 had ended. A sea of green for most risk assets - many of which we had trimmed ahead of and after the onset of the Iran war - interspersed with deep red patches in the places where we had remained overweight (especially energy).
By contrast, Q1 was certainly this rodent’s favorite type of equity market. January through March saw the dividend yield, low volatility and value factors dominate the US equity leaderboard. From April onwards, unless you were ‘max long’ high beta and momentum stocks, you were struggling.
The story of the quarter was of course memory. Hats off to the HBM bulls and to the team at Roundhill. Their DRAM 0.00%↑ ETF (launched in April) topped $25bn of AUM at the end of June - edging out Blackrock’s spot Bitcoin ETF IBIT 0.00%↑ in most of the ‘fastest to raise’ leaderboards. My back-of-envelope math has Roundhill collecting around $260m in management fees (for a 9 stock long-only portfolio!) since launch.
Then we had the first 2 days of July (although did bounce on Friday!)…
For me, it is ETF closures that are typically a more reliable timing signal for bottoms than launches are for tops. I well remember VanEck shuttering its coal ETF in December 2020 just weeks before global coal prices embarked on a massive multi-year bull run. Then last May Range closed its Offshore Oil Services ETF (OFOS). Those drillship stocks promptly doubled!
On the launch side, who can forget the flurry of ‘hot innovation sector’ ETFs brought out during the Covid tech peak in late 2020 / early 2021 - only for many of them to underperform and then be withdrawn after being destroyed by the 2022 hiking cycle. The track record of thematic ETFs is no bueno.
The 🐿️ will be interested to see the answer to this poll - it will be one pointer to as to whether or not - just perhaps! - memory chips are cyclical after all…
There are obviously 2 factors which which will impact that close of year AUM - share outstanding for the ETF and the path of memory stocks. Don’t forget that SK Hynix plans to drop $29bn of ADR free float into the market later this month. By the way, the 🐿️ had a front row seat 25 years ago for Hynix’s $1.25bn GDR offering in May 2001. Will be retelling that hairy tale over the next couple of weeks.
So, where does this leave us as we look forward to Q3. Let’s review the first half scorecard, staring with the beta portfolio.
