Q2 2026 - Quarterly Report Commentary
Hosking Partners is a London boutique founded in 2013 by Jeremy Hosking, a portfolio manager at Marathon Asset Management for over 25 years. It runs a single global equity strategy built on the capital-cycle, supply-side approach — contrarian, long-term, and unusually diversified (350+ holdings) under a multi-counsellor model, managing around $5.5bn.
In plain words
The market is experiencing one of the biggest momentum rallies in history, with 85% of gains coming from AI-related stocks. Four stocks alone (Nvidia, Micron, Broadcom, Sandisk) are expected to contribute 40% of S&P 500 earnings growth. The author argues this extreme concentration won't last; markets will refocus on 'capital cycle' analysis—looking at which industries face shortages and need new investment, such as memory chips, power, and defense. A contrarian strategy that diversifies across sectors briefly lagged during the Q2 sentiment surge but still beat the global index by 13.5% over the past year. Worth reading for a reminder that supply bottlenecks, not just AI, could be the next big opportunity.
At a Glance
The report argues that the market is experiencing one of the largest momentum markets in modern history, with extreme AI concentration, but long-term capital cycle analysis will regain dominance. The strategy’s adherence to contrarian diversification has delivered considerable excess returns even after short-term underperformance — stance: [cautiously optimistic].
- Q2 net return 11.7%, year-to-date 15.3%, outperforming the MSCI ACWI benchmark by 4.0 percentage points; excess return over the past 12 months reached 13.5%.
- 85% of market returns were contributed by stocks benefiting from AI spending. Nvidia, Micron, Broadcom, and Sandisk together will contribute 40 percentage points to S&P 500 earnings growth.
- Global market focus is shifting to shortages and bottlenecks in memory semiconductors, critical minerals, electricity, and defense. Capital cycle analysis is re-emerging as the dominant framework.
- The strategy briefly lagged the benchmark by 3.2 percentage points in Q2 as “animal spirits” drove an ACWI rebound of nearly 15%, but the diversified contrarian allocation proved its long-term resilience in extreme market conditions.
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Position Moves
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| Instrument | Direction | Author's Stance in One Sentence | Key Data |
|---|---|---|---|
| Nvidia | Not explicitly stated | One of the four stocks with the highest AI momentum concentration; the author does not directly express a view but notes it as a major contributor to market returns | Together with Micron, Broadcom, and Sandisk — contributes 40 percentage points to S&P 500 earnings growth |
| Micron | Not explicitly stated | Same as above | Same as above |
| Broadcom | Not explicitly stated | Same as above | Same as above |
| Sandisk | Not explicitly stated | Same as above | Same as above |
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Q2 Net Return of 11.7%, Year-to-Date Excess Return of 4%
The Hosking Partners strategy achieved a net return of 11.7% in Q2 2026 and 15.3% year-to-date, outperforming the MSCI ACWI by 4.0 percentage points, but briefly lagged the benchmark in Q2 due to a sudden surge in market sentiment. The author notes: "After materially outperforming the MSCI ACWI benchmark in the first quarter, the strategy’s double digit returns in the second quarter trailed the benchmark as a near-term return to animal spirits drove a nearly 15% rebound for the ACWI." — meaning: "After significantly outperforming the MSCI ACWI benchmark in the first quarter, the strategy's double-digit returns in the second quarter trailed the benchmark, as a short-term return of 'animal spirits' drove a nearly 15% rebound in the ACWI." Despite quarterly volatility, the strategy has outperformed the benchmark by 13.5% over the past 12 months, reflecting the advantages of diversified contrarian investing in an uncertain environment.
The Market Is Returning to Traditional Capital Cycle Investing
Bar chart of net U.S. equity issuance, showing data from 1999 to 2027, with 2027 projected at a record USD 1.2 trillion
The author argues that the current bottleneck shortages and capital expenditure boom mark the return of capital cycle analysis as the dominant market force, requiring investors to relearn the underlying logic of cost of capital and supply constraints. The article notes that over the past year, global market focus has been on "shortages and bottlenecks across memory semiconductors, critical minerals, power, and defence." The author cites Michael Godfrey: "The exuberance we see in markets today is an important part of investors re-learning fundamentals." — meaning: "The exuberance we see in markets today is an important part of investors re-learning fundamentals." This environment of surging demand meeting short-term supply inelasticity drives investors to analyze industry structure and new capacity cycles to determine whether improvements in capital returns can be sustained.
AI Beneficiary Stocks Contribute 85% of Returns, Differentiated Strategy Wins Long Term
AI spending beneficiaries have captured 85% of the market's return this year, with four stocks contributing 40 percentage points to S&P 500 earnings growth, but the strategy still achieved 13.5% excess returns over the past 12 months through contrarian positioning. The author states: "We are experiencing one of the biggest momentum markets in the modern history of equities. AI spending beneficiaries have produced 85% of the market’s return this year." — meaning: "We are experiencing one of the biggest momentum markets in the modern history of equities. AI spending beneficiaries have produced 85% of the market's return this year." Based on analyst expectations, these stocks will contribute nearly half of S&P 500 earnings growth, with Nvidia, Micron, Broadcom, and Sandisk alone accounting for 40 percentage points. Against such concentration, the strategy underperformed the ACWI benchmark by 3.2% in Q2, but its 13.5% excess return over the past 12 months demonstrates the long-term value of a highly diversified strategy in the face of short-term extreme market conditions.