Voyager Q1 2026 Commentary — Opportunity Through Upheaval

In many ways, the set-up for the global economy in 2026 was looking rather good until the bombings started in Iran–as evidenced by the fact that our Voyager strategy was up over +5% in January and February. After a tough March, Voyager ended the quarter down -2.26%. Now that the market has somewhat digested the military tensions in Iran, and we have seen a short-term cease fire in the middle east, Voyager is back in positive territory year to date. It is obvious, however, that some damage is already done, and higher energy prices will be a drag on consumer and business spending in the short term. Fortunately, our process of finding companies with a disciplined investment checklist always anchors our portfolios to companies with strong capital structures that can better weather increased market risks brought about during periods of geopolitical risk.

Before the events in Iran, we had already assumed that we were in an environment where geopolitical tensions would be elevated due to the tariff war started last year, the ongoing conflict between Ukraine and Russia, and the battle for economic and technological supremacy between China and the US.  For the last couple of years, we have diversified investments into international markets where we have seen corporate reforms accelerated to improve equity market returns by being more business friendly. Internationally Japan and South Korea are two markets with significant initiatives in place to improve corporate governance. Further, we have found increasingly more attractive valuations overseas than with mega cap platform companies that have helped the US outperform extensively over the last decade or so.

At home in Canada, we are happy to see Ottawa unwinding many of the regulatory challenges that have hindered business investment in Western Canada. As a result of the tensions in the middle east there is obviously a scenario where Canada benefits with its tremendous energy, material and agricultural strengths that help support an economy suffering from a real estate recession in its largest cities of Toronto and Vancouver, tariff headwinds and fears over USMCA negotiations later this year.

During the first month of the war, some of our investments in net-energy importing jurisdictions like Asia and Europe sold off more than their North American counterparts. This is because these regions do not have as much energy independence as Canada and the US. However, as you can see below, we own certain businesses in those overseas markets that will benefit longer-term from results of dislocations occurring from the Middle East war. It is exciting for us when investors simply allocate capital through Exchange Traded Funds (ETFs) and buy and sell based on macro concerns. This allows us to leverage our bottom-up research process to select companies being indiscriminately sold-off.

One example of an underfollowed and underappreciated holding in Voyager that we think will benefit longer-term from global energy security tensions is called Bilfinger from Germany. Devon met with the CEO in early 2025 and 2026 in New York at a German corporate conference, and I met with the CEO in March at a European Mid-Cap conference in London. Bilfinger has a particular expertise in consolidating skilled, domain-specific labour to help oil and gas, chemical, pharma and biopharma companies build, maintain, improve, digitize and expand their processing capabilities.

Bilfinger has operations in Europe, North America and around 4% of sales are exposed to the Middle East. Obviously, once this conflict in the middle east is behind us they will see increased repair work emerge from the damage caused by drone and missile warfare. If there is ever a peace deal done in Ukraine, they would stand to benefit immensely. Simultaneously, Bilfinger has a balance sheet with net cash that will enable them to continue to pursue tuck-in acquisitions to grow out their global footprint and servicing capabilities. We like the fact that they trade at a high single-digit free cash flow yield and below a mid-teen multiple of earnings. With over 80% of their business contracted and recurring, they have been able to steadily grow their dividend, which we already find attractive at 2.7%, especially in combination with their balance sheet and fundamentals.  Below, we have included a slide from the company’s most recent capital markets day. It illustrates their 2030 ambitions for healthy growth with improved margins and free cash flow conversion. We always like it when companies set this type of improvement objective. It drives management compensation and aligns with shareholder interests.

BILFINGER – ACCELERATING FINANCIAL PERFORMANCE

Another company that may benefit longer-term as energy users look to diversify their energy supplies away from concentration in the Middle East is a leading industrial valve production company called Rotork from the United Kingdom. I first visited this global leader and toured their plant in Bath, England over a decade ago, but the stock looked too expensive. At the time, it was following a significant growth wave in a booming oil and gas industry after China’s entry into the World Trade Organization. Since the mid-2010s, the stock has traded mostly sideways while the company has done a good job of using its strong balance sheet to invest in organic research and development. They have made their technology more appealing to other verticals, like water, nuclear power, data centers and semiconductor manufacturing processes. As you can see in the slide below, pulled from their most recent results presentation, Rotork is an excellent example of a company in our portfolio with a robust capital structure.

This was a quality company that traded at a high-twenties earnings multiple and low single-digit free cash flow yield when I first met them. Today, even though end market fundamentals are improving, the stock posts a mid-high single-digit free cash flow yield and a 2.59% dividend yield. It is also good to see them actively buying back their stock during this market sell-off.

ROTORK – PROACTIVE AND FOCUSED CAPITAL ALLOCATION

Whenever I have been asked to predict where oil prices are heading, I say that it is impossible to know; it is always dependent on how much supply OPEC members such as Saudi Arabia want to release into global markets. I have seen oil prices at $10 a barrel during the Asian financial crisis in February of 1998, $147 a barrel in July of 2008, and less than zero during April of 2020 during Covid. A week ago oil was back above $100 a barrel and at the time of this writing, it is back in the low 90’s, driven by temporary relief from a 2-week ceasefire. Due to the extreme volatility, we never make energy-related businesses much more than 10% of our portfolio. Instead, we diversify into other industries. Some of these, like healthcare, are impacted less by energy input cost pressures. One such company we invested in during March was PolyPeptide Group, which is a picks-and-shovels company upstream of the biotech and pharmaceutical industries.

PolyPeptide went public in 2021, as they were benefiting immensely from their use cases in Covid vaccines and Covid testing. The stock went public at 64 Swiss francs and traded as high as 136. Thanks to the March sell-off, the stock was trading in the mid 20s (over 75% below peak in 2021), which points to significant market inefficiencies for a business that is now twice as big. Currently, the business has 30 pharma and biotech customers with drugs in Phase Three trials. For reference, Phase Three drugs that use PolyPeptide historically have an approval success rate of over 50%. Thus, we anticipate a high likelihood that the company will have a steady runway of growth for the rest of the decade across an expanding set of new customers.

Drug discovery companies are one of the more likely beneficiaries of Artificial Intelligence (AI) advancements since AI will help better model how drugs interact with proteins, interpret lab results quicker, run scenarios humans might miss with regards to side effects etc.  AI won’t completely replace humans, but it will complement and amplify their scientific capabilities.

Like most small companies that can grow volumes, we expect a significant margin expansion moving forward. At present, the company is guiding for 20-25% revenue growth based on opportunities across solutions for oncology, central nervous systems, and infectious diseases as well as cardiovascular, gastrointestinal and immunology indicators. Their current sales are also benefitting from GLP-1s, oral peptides, multi-agonists and combination therapies. We like that the company is trading near a high single-digit EBIT/EV yield, mid-teen earnings multiple, and moving toward free cash flow in 2028. We always like buying companies that are cheaper than the market, outgrowing the market and better capitalized: PolyPeptide has only 141M francs in debt versus a 1B franc market cap.

POLYPEPTIDE’S REVENUE GROWTH

In looking for opportunities created by selling of Exchange Traded Funds (ETFs) throughout march, where many members of mis-attributed baskets were indiscriminately sold off, we looked specifically to software for massively dislocated and idiosyncratic opportunities.

Devon and I have long felt that the software industry is misunderstood and, across many verticals, completely misclassified. If you look at the index construction of IGV—one of the most popular Software ETFs in global markets—you would find companies from every part of the enterprise and cloud stacks sitting shoulder-to-shoulder with video game publishers, semiconductor EDA tools, bitcoin treasury companies, industrial manufacturers with internal software services, and cybersecurity suites. All of these verticals have completely different dynamics, both in day-to-day operations, ability to improve fundamentals and free cash flow, exposure to AI, and exposure to current qualitative tailwinds and headwinds. However, they have been grouped into a messy basket of equities under the broad umbrella of “software” in order to broadly create a risk on tool for the wider sector. When there is fear, and this basket sells off, there is an incredible opportunity to buy specific software theses that we have met and identified as qualitative winners with secular tailwinds.

Of the top 20 holdings in this “software” index into the selloffs, sorted by their largest business segments, there are: 4 enterprise cloud companies, 2 enterprise data/AI companies, 3 cybersecurity companies, 2 CRMs, 2 video game publishers, and 7 companies that are unable to be sorted because they operate in a niche vertical. One of them, Roper Technologies, is more of an industrial equipment company, yet there it stands as the 17^th largest holding in this “software” index. Many of these top 20 holdings outside of the broader classification of “enterprise software” operate in verticals where they can grow consistently or above expectations through the end of the decade, regardless of AI’s adoption pace in the enterprise space, due to their niche or non participation. These businesses followed IGV as it sold off at an index level, especially weighted to megacaps like Microsoft, and Oracle, and premium stocks like Palantir. IGV was down 3.29% over the course of March and was down about 9% from the peak close on March 6^th. On a year-to-date basis, IGV is down approximately 24%, and down 27% peak-trough.

We are of the opinion that this emerging narrative of the death of software and the collapse of software creation costs—especially every time we see an iteration in AI technology—has created massive dislocations in certain unaffected or actively mitigating companies. As a result, we took this index level sell-off as an opportunity to position ourselves into software companies that we feel have bigger moats against AI disruption or will operate in an agnostic industry altogether for the foreseeable future. While these companies react negatively to overblown AI news events, we think that some of them ultimately can double or triple in size fundamentally and should emerge as winners on the other side of this confusing tech landscape. Further, they can capitalize on AI’s efficiency in software creating to expand their margins simultaneously. Two such companies that we own and were positioned to buy more of into the sell-off were Kinaxis and Take Two Entertainment.

Take Two operates in an industry that we feel is not affected by any AI tools that we have seen recently released or that we think will be released into the end of the decade. The premise that all of us will be consuming entirely AI-made entertainment on any time frame in the next decade is, in our opinion, an overestimation. AI tools will increasingly be used to empower human creatives, but despite attempts to make all-in-one creative models, we have yet to see anything stick.  In fact, creative-empowering AI tools would help the margin expansion of companies like Take Two, with the advantage of existing platforms, data, scale, and multiple Hundred-Million-unit sale IPs.

The value of blockbuster IP in entertainment is something we have already been made intimately aware of through our investment in Imax, something we have previously spoken about at length. Consumers post-covid have resonated more with high-quality, original entertainment projects over formulaic releases with massive budgets, which have begun to fall flat for studios like Disney and video game companies like Ubisoft and even to some degree Activision under the hood of Microsoft. We believe that the same trend has formed in video games, an industry that has become even more formulaic than media over the last decade. Last year, the top 10 worldwide movies represented 44.07% of global box office revenue, and 49.7% of ex-US box office revenue. In a similar vein, last year the top 10 newly released video game titles represented 48.57% of total unit sales, with Battlefield 6, a high-budget, long-term project multi-million-unit sale IP from EA, taking the spot for highest revenue and likely leading to the finalization of their takeout. We are of the opinion that Take Two, which has long had a history of outperforming during major releases, is poised for significant growth this year with their release of “Grand Theft Auto 6,” the first release of the biggest IP in gaming history for over a decade. Take Two has an EBIT/EV yield of 4.07% and is estimated to grow free cash flow from $321.6 M this year to $1.6 B next year. Despite this, it was down 7.3% in March and has traded off 23.2% year-to-date. Since the low of about $188 in March, it has traded back over $200.

For Kinaxis, while we cannot say that their supply chain industry is necessarily agnostic to AI and software development changes, they exist in an interesting group of software companies that we feel have secured themselves a larger moat against disruption. In software, we feel disruption will come from both directions—up market and down market. Middle market software companies will have to combat new entrants who can be faster moving and leverage new technologies more flexibly, whilst also protecting their TAM from upmarket competition who will be able to expand their total software suite and leverage the power of their platforms and existing market share to cross-sell. However, we feel there is a middle ground of defensible software businesses that have historically had little to no competition in a niche market. We feel that this has allowed them to build advantages in both data and domain expertise over their down-market competitors, while not necessarily representing a large enough TAM for a bigger adjacent competitor to justify developing a new vertical and disrupt down market.

Kinaxis, who as of last quarter posted a 95% customer retention rate, is in a sticky part of their customer’s stack and is an integral tool in the collection and use of a company’s data, the lifeblood of a business in the AI world herein. Further, their data advantage from decades of supply chain orchestration allows them to show tangible ROI benefits to their customers and dissuades ripping and replacing of their software with a potential upgrade from a competitor trying to cross-sell. See below their slide on KPI ROI for their customers from their most recent earnings deck, as well as a slide demonstrating the breadth of their customer base and domain expertise, what we feel is another moat against quick disruption.

KINAXIS – CUSTOMERS

KINAXIS – THE CONCURRENCY EFFECT

While Kinaxis operates in a market that is fragmented and somewhat placing a ceiling on their year-over-year growth and ability to scale quickly, they still boast a high-teens run rate year after year and have forecasted a 16% CAGR into the end of the decade. In a software market where less-protected businesses are growing or shrinking with massive swings of volatility quarter-to-quarter, especially as they try to navigate the disruption coming from both directions, these companies can be bastions of consistent growth in a predictable vertical that still has upsides to the benefits of AI. We love opportunities where we can buy differentiated “software” businesses with potential to double or triple the size of their business into the end of the decade at attractive valuations. AI fears have given us many such opportunities. It also gives us confidence to invest when we have seen Kinaxis recently supersize their buyback program since they have net cash on their balance sheet.

Since the launch of ChatGPT in November 2022, we have been asking company after company how they are using AI to improve their future profitability. Based on my experience in the 1990s and early 2000s Nasdaq bubble, there comes a point when it becomes more profitable to own the companies that are “enabled” by the new technology versus the “enablers.” As always, we want to find growth in free cash flow and earnings, but do not want to pay too much for it.

Back in the 1990s when I was a young analyst coming out of school, I was equipped with advanced database skills versus my “dinosaur” bosses who were still learning how to use spreadsheets. At that time, I remember asking company management teams how they were using Oracle and Sybase databases to better organize data and take share away from their peers. Certain companies, like Amazon or Capital One, that figured out databases before their peers garnered a significant competitive advantage. I will always remember meeting Jeff Bezos at a tech conference in 1997, when Amazon was a private company. I rushed back to tell my bosses that we should buy the Amazon IPO, since he was the first to organize books into an efficient and easily searchable online database. He was a pioneer in the online storefronts, catalogues and e-commerce industry that we all use every day.

Today, many of those same mega cap pioneers who successfully transitioned into platform capitalist strategies are some of the best companies in the world, with significant potential to increase the size and quality of their businesses with the technology to come from AI. However, there are times when good companies do not make good investments. One of my favorite companies of all time is Microsoft. There is no other supplier name that I hear mentioned more often when I talk and tour companies from many industries. For example, over the last year I have heard that companies are adopting and using co-pilot, the newest tool to perpetuate their massive share in enterprise software. However, I have seen some deteriorating financial metrics in Microsoft’s recent quarterly conference calls.  

With the stock down 22% year-to-date, which was a heavy pressure on software as whole, investors are starting to assume that the impressive improvements over the last decade at Microsoft will not be continued incrementally in the next 5 years. These include:

• Cap ex to sales ratio getting worse 

• Gross margins appear to have peaked 

• The balance sheet no longer has net cash  

• Sales to cap ex is intensifying which means lower return on invested capital 

• FCF margin is heading south – this will mean less FCF to buyback stock unless they issue increasing amounts of debt 

Looking at the last 10 years of Microsoft, their future estimates through 2030 represent some deterioration in fundamentals, regardless of their leadership in any qualitative capacity.

MICROSOFT – FINANCIAL ANALYSIS

AVERAGE SOFTWARE EV/NTM SALES MULTIPLE

In general, we will continue to be prudent in our approach to tech and disruption, understanding that many of these mega cap companies in the U.S. have ballooned their valuations in lieu of a legitimate widespread bear narrative. We feel that fact is starting to change, especially with the use of debt financing over free cash flow, and our prudence has left us with a suite of diversified ideas for Voyager that are not contingent solely on current generations of AI finding adoption under deteriorating fundamentals and increasing leverage.

Obviously, higher energy prices will be a headwind for economic growth and can be viewed as almost equivalent to an interest rate increase. Longer-term we feel this Iranian conflict and subsequent comments around NATO support from the U.S. will likely be inflationary as countries will need to take concrete steps to provision self-sufficiency for energy , food and military security.  I read with interest this quote from the CEO of Total Energies from France who said:

“It’s clear to me if this crisis lasts more than three or four months it becomes a systemic problem for the world. We cannot have 20% of the crude oil, which is exported globally, stranded in the Gulf and 20% of the LNG capacity stranded, without any consequence” (see Bloomberg article: “The Strait of Hormuz Oil Shock Is Now Heading West”, 30 March 2026).

Before the events in Iran, we were already starting to see signs that credit markets were experiencing stress. We were already assuming at Wealhouse that you were not getting paid enough to stretch for balance sheet risk and there was a high probability of increased debt defaults in the high yield markets. 

I will always remember where I was on 9/11 and how the invasion of Iraq in March of 2003 occurred. Obviously, this current set of global conflicts are different. However, those events heavily influenced why I allocate my family’s savings across all three of Wealhouse’s diversified strategies with reduced correlations. I started writing these comments as I was flying back from an extensive research trip to meet UK and European companies. At some point during this flight, as anticipated, the pilot advised passengers to fasten their seat belts due to turbulence.

These macro risks, turbulence, and March’s macro volatility are precisely why we call Amplus, Lions Bay and Voyager the modern-day balanced fund.  In the 1990s the bond market was not faced with problems like high government deficits, high government tensions, energy transition mistakes, etc. We were not assuming that 2026 was going to see a pronounced credit cycle like we saw in 2008 or 2011 but if oil prices spike like we saw in 2008, then there are increased risks which make us vigilant around liquidity of our investments.

I have had the most investment success finding small companies that can become bigger. Also, by being contrarian. It may sound counter-intuitive, but when bad things happen, it is what allows us to truly take advantage of all the bottom-up research meetings you can see below, which we conducted during Q1. Fewer and fewer of our investor peers are doing the leg work demonstrated below. This is a significant proprietary advantage for the Voyager strategy.

Q1’26 COMPANY MEETINGS FOR SCOTT

Q1’26 COMPANY MEETINGS FOR DEVON