Sleep Well Portfolio (Mar 2026) - Busy month of buying depressed 'AI Immune' businesses, #24 Pick Coming
Six losers out of 12 holdings; Cut the most disrupted by AI. Bought three 'AI Immune' picks: SWI: 9% vs S&P500: 56% since inception. 6 months of underperformance. Excited for 2026.
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Summary of March 2026
It’s been three months of relentless decline of software stocks due to the ‘AI kills software’ narrative, and of course, recently, the Iran war.
The impact of wars is broad and deep when they're prolonged and out of our control; however, AI-fear narratives are defensible, particularly for businesses with high switching costs and are hard to operate, even if AI could replicate the software. In February, our detailed AI risk assessment found that 10 out of 12 holding businesses are AI-immune.
As a result, in March, I cut the most vulnerable - SPS Commerce and used the proceeds to add to the three most immune. I am planning to add to my latest pick, Intuitive Surgical #23, and my new pick #24, which I will have the write-up for in a week's time.
The challenge, of course, is that I will continue to look wrong. The market can remain irrational longer than my patience. The last time software companies had a prolonged decline was the Ukraine war, which coincided with the post-COVID SaaS business hangover. It lasted a year and a half for some of our business. But then they rebounded spectacularly between mid 2023 and mid 2025.
Today, the valuation of all these businesses is also at its lowest since their IPOs. They could still fall further; however, looking beyond 5-10 years, I believe they will benefit from AI, and I will be more prepared to capture the gains once it rebounds again.
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