A 35% gain in six months is the kind of print that tempts investors to declare victory. It is also the moment to recommit to process.
The growth trade has been generous, helped by a strong earnings season for software and the still booming buildout around artificial intelligence.
That momentum lifted multiple holdings at once and pushed the overall portfolio meaningfully higher.
It also increased concentration risk and pulled valuations to levels that demand more proof in coming quarters.
The task now is to lock in resilience without abandoning the engines of compounding that just delivered the outperformance.
What fueled the surge was not only revenue growth
Multiples expanded as investors paid up for scarcity, leadership, and a cleaner earnings path. Chip suppliers tied to high performance computing and the data center enjoyed fresh estimate upgrades.
Cloud platforms with sticky recurring revenue printed steady net retention and better expense control.
Select cybersecurity names reached scale and turned operating leverage into free cash flow. Winners beget winners, and the winners got bigger inside the portfolio.
That success created new liabilities, and a handful of positions now account for an outsized share of total risk.
Correlations among top holdings rose as they became more exposed to the same narrative about training capacity, inference demand, and enterprise software budgets. If sentiment swings against any piece of that story, the entire block could correct together.
The margin of safety is thinner when price gains come faster than fundamental change. It is not enough to like the businesses. Position sizing must reflect what is already priced in.
The next six months call for a measured rebalance, and the plan is to trim positions where the thesis is intact but the risk-reward has shifted, and to recycle capital into names with improving fundamentals that have not fully rerated.
The screen tilts toward companies showing durable double digit revenue growth, expanding gross margin, and rising free cash flow conversion, while avoiding those that rely on capitalized costs or aggressive stock based compensation to mask dilution.
That approach keeps the portfolio growth focused while refreshing its shelf life.
Picks and shovels around the AI stack beyond headline silicon still have room, including power management, networking, and specialty components that benefit from capacity adds regardless of who wins share at the top.
Software platforms that monetize usage rather than seats can defend margins even if hiring slows. Security vendors that have crossed the chasm to platform status look capable of mixing price and attach to sustain growth.
These are not contrarian ideas, but they are less crowded than the marquee names that dominated the last leg. Balance also argues for selective exposure to small and mid cap growth where valuations remain comparatively reasonable.
If rates stabilize and liquidity conditions improve, the quality end of that universe can close part of the gap to large cap leaders.
Clean balance sheets, clear pathways to sustained profitability, and evidence of pricing power come first. Where those boxes are checked, even modest multiple normalization can add to return without relying on perfection.
Risk controls will tighten, and a modest cash buffer provides flexibility around volatile earnings windows. Sizing around binary catalysts will be smaller than in the past six months.
Positions that miss two consecutive quarters of execution against their own guidance will face automatic review. If top line decelerates and is not offset by better unit economics, capital will move to stronger hands.
Currency exposure will be watched more closely given mixed revenue footprints in the United States and Canada, and hedges will be used selectively when swings threaten to swamp company level progress.
It is an affirmation that strong stretches are the right time to make the portfolio sturdier. The compounding engines remain the same. Digital transformation is not pausing.
Demand for compute, security, and productivity continues to expand. The difference is that the portfolio will earn its upside with a more balanced mix and a clearer sell discipline.
The scoreboard looks good today, but the priority is to make sure it looks good next year. That means respecting what the market has already rewarded, resisting the urge to chase every new narrative, and getting paid for the risk taken.
The first half gave the portfolio momentum, and the next half requires craft.
