Arauca Capital, an investment management firm focused on a concentrated portfolio of high-quality companies, released its latest investor letter. The letter can be downloaded here. The portfolio generated a gross return of +25.26% for H1 2026. Record investor inflows were observed in the period, emphasizing a commitment to fundamentals over past performance. Significant investments included sales of Shelly and Kioxia, with the fund currently holding substantial cash reserves and short-dated bonds. AI has enhanced operations, but adoption in larger institutions remains limited. The volatile investment landscape, particularly in AI, demands a balance between patience and adaptability, with skepticism regarding the sustainability of inflated valuations in AI-related companies. Key opportunities lie in infrastructure supporting AI operations and regulatory adjustments, calling for cautious investment strategies. Please review the Fund’s top five holdings to gain insights into their key selections for 2026.
In its second-quarter 2026 investor letter, Arauca Capital highlighted Alphabet Inc. (NASDAQ:GOOG). Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, offers various platforms and services, including online search and advertising, cloud solutions, and artificial intelligence. On September 08, 2026, Alphabet Inc. (NASDAQ:GOOG) closed at $335.38 per share, reflecting a market capitalization of $4.12 trillion. Alphabet Inc. (NASDAQ:GOOG) posted a one-month return of -2.04%, while its shares gained 40.00% over the past 52 weeks.
Arauca Capital stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q2 2026 investor letter:
“Alphabet Inc. (NASDAQ:GOOG) deserves a brief explanation because our exposure combined shares with a long-dated risk reversal. As the share price moved substantially above the call strike in the period, the calls behaved increasingly like a large (in fact very large) synthetic holding and accumulated a substantial unrealised gain. The decision to exit reflected a clear change in the risk profile. Operating results remained strong, with Cloud growing more than 80% and Search around 17%, but capital expenditure was accelerating sharply, the balance sheet had become heavier, and the valuation particularly looking at free cash flow multiples completely changed. At around $370, the margin of safety that existed in the mid-$140/50s was largely gone. With the options also moving closer to expiry, a meaningful fall in the share price could have erased a substantial part of the accumulated gain or the totality of it if spot crosses the strike on the way down. I therefore decided to monetise the derivative position and sell the remaining shares.”
