Sleep Well Portfolio (Feb 2026) - Software AI risk Assessed
Five losers out of 13 holdings; Cutting the most disrupted by AI. SWI: 9% vs S&P500: 56% since inception. 5 months of underperformance. Excited for 2026.
Sleep Well Portfolio consists of time-tested leaders. We screen them using a rigorous checklist and track their theses regularly to determine when to buy. So far, we have made one mistake, five losers, and 21 out of 36 transactions have been profitable. All about us here.
Summary of Feb 2026
In January, I defended SaaS from AI risks for its incredible high switching costs and then further explained in the Best Buy series why they were also hard to operate even if AI can replicate the software part.
In Febuary, software continued to decline in Febuary. I have conducted a detailed AI risk assessment for all holdings. The finding showed AI is largely immaterial to 10 out of 12 businesses. However, I need to cut one holding - SPS Commerce (this week) and monitor one closely. I’ll also add more to two (patiently).
I could be wrong, of course! Valuation is at its lowest since IPO, and this particular business has also implemented its own AI capabilities.
However,
Its data structure is the problem! Deterministic, rule-based, and repetitive. SaaS with the same data structure, and with limited switching costs and network effects advantages, is likely to suffer the same fate.
Let’s look at the details of why I am trimming before we report the portfolio performance.
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