Portfolio Update
Improved portfolio, performance update, and how we find attractive risk/reward opportunities through thematic & bottom-up investing
Our stock portfolio is now up 30% YTD and 114% since launch, 10 months ago.
Real-time portfolio performance here on Plutus
Investors are actively replicating the portfolio on Plutus, with over US$1M allocated to it. Plutus allows users to automatically invest in model portfolios and handles trade execution.
We have also improved our portfolio, called the Aurelion Index. Paid subscribers now have access to real-time positions, current portfolio weights, and receive updates on all trades as they are made here.
A recurring question is why it is called the “Aurelion Index” if it is a stock portfolio and not an index. The reason is that we originally started it as a way to track the performance of our stock research, essentially an “index” of all our research. It began as a simple tracking tool that calculated the returns of all stocks with a “Buy-Rating”. Over time, it evolved into a stock portfolio with actively managed weights, where higher conviction leads to higher weightings, that can now be accessed in real time by our paid subscribers here on Substack. Of course, each stock is also supported by in-depth research.
If you want to know who’s behind the portfolio and its returns, you can access our team page.
Aurelion Research publishes independent equity research and a model portfolio. We do not manage money. Investors can choose to replicate the portfolio through Plutus, a SEC-registered investment adviser.
Table of Contents
Introduction
Performance Overview
Portfolio Characteristics
Combining Bottom-Up and Thematic Investing
Risk/Reward Framework
Current Portfolio
Portfolio Characteristics
The portfolio consists of small to mid-cap global stocks. It is long-only, with no leverage or derivatives, and focuses primarily on U.S. companies.
We typically focus on companies in the US$1B to US$15B market cap range. The main reasons are twofold. First, there is sufficient trading volume to avoid getting stuck in a position. Second, we believe this segment is full of overlooked quality companies. Many of them are undercovered, and we believe that discussions with management teams and insights from industry experts allow us to identify quality businesses before the market recognizes them.
In terms of sectors, the portfolio is highly diversified across industrials, tech, healthcare, consumer, materials, and commodity-related equities.
Because we are Canadian, we do have a few Canadian-listed companies in the portfolio. This makes firsthand research easier, but we also believe the Canadian equity market has been underinvested over the last decade and that the winds are beginning to turn. We have a primer on this coming soon.
Performance Overview
As of May 10, 2026, our portfolio is up 29.5% YTD.
This is 16.1% above our benchmark, the MSCI World Small Cap Index, which is up 13.3% since the start of 2026.
We discuss Q1 and 2025 in further detail in the posts below:
A driver of our performance over the last month has been Marex (NASDAQ: MRX), which is up 60% since our report. This is a rare stock we have been public about, and we continue to see upside. We discuss it further in the report below.
Combining Bottom-Up and Thematic Investing
An important reason behind our past performance and the difference between us and the rest of the market is that we combine both top-down and bottom-up approaches. This means we view the large themes impacting broader industries as key drivers (top-down), and then conduct in-depth research on specific companies within those themes (bottom-up).
For example, we were bullish on nickel prices in April 2026, which have already started to rise.
And to express this view, we selected what we believe is the best nickel producer: Canada Nickel Company (CNC). Through our bottom-up research, we believe the company can outperform even if nickel prices perform poorly, which is a rare level of conviction to have in this space.
However, we think this style of investing can sometimes become a trap.
If you barely understand the theme and only take a quick look at the company, you often have no edge over the market. Knowing a little about the broader theme and a little about the company is worse than deeply understanding only one of the two. That is why we keep a concentrated approach to our portfolio. We only hold what we truly believe in and understand.
In many stocks, even if the business is excellent and generating significant cash flow, you can still lose money if you have no view on the broader macro environment and themes shaping the company.
A great example is SaaS right now. Some of these companies are beating expectations, generating strong cash flow, and improving ROI, yet are still being hammered by the broader SaaS theme. We discuss our view on SaaS further here, and we do currently hold a few SaaS positions.
Risk/Reward Framework
In our view, an investor’s risk/reward framework is the most important part of the investment decision.
Most of our holdings are based on this framework: quality businesses with competitive advantages that generate cash flow, either facing short-term headwinds that create an attractive entry point or simply being overlooked by the market.
We believe this is key to sustaining returns over the long run. Anyone can buy a group of risky stocks and perform well for a few months or even a year. We strongly believe that real cash generation, rather than hype, limits, although never completely removes, the downside risk of a stock.
First, if you invest in a company with a real competitive advantage, or moat, the goodwill on its balance sheet is not just an accounting figure but a tangible value that competitors cannot easily replicate. A competitive advantage gives you greater confidence that the company will continue to exist and generate cash flow over the next decade.
Then there is free cash flow generation. Not EBITDA or EPS, but actual cash generated by the business at the end of the year. For quality businesses, this cash flow generation creates almost a “price floor,” where the company could become an attractive acquisition target below a certain valuation. This is where DCFs and financial models are highly relevant, which we do for every portfolio stock.
The trap is focusing on EBITDA without analyzing how much of that EBITDA is converted into cash flow. Some businesses convert more than 100%, while others convert only 20%. This has a major impact on valuation, yet the market often does not spend enough time understanding these dynamics because cash generation can be volatile, especially in smaller equities.
A great example of this is ZOOMD. The CEO was pitching the stock to us at the Planet Micro Cap conference in Toronto. There was no real moat, and the business operated in adtech, a highly competitive industry. Cash flow generation was strong in certain quarters but highly uncertain overall, and there was little visibility into where the business was heading. Once the company lost its growth narrative and the hype faded, the stock crashed from $2.60 at the time of the conference to $0.50.
An example of a company with a clear moat and strong cash flow generation is Bruker Corporation. They manufacture some of the best scientific instruments on the market, including nuclear magnetic resonance machines that can cost more than $2M. Scientific research workflows are deeply integrated with these machines, creating long product life cycles and recurring revenue streams.
However, the company faced several short-term issues simultaneously in 2025. The stock was heavily impacted, with investors worrying that it would lose its “small-cap compounder” profile. Because we had strong conviction that the company would continue to grow and generate substantial cash flow in the future, we believed the stock was near a bottom and decided to underwrite the opportunity. We exited the position in January 2026.
Current Portfolio
Paid Substack subscribers can access the real-time portfolio here (please scroll to the bottom of that page).
You will also receive our trades through the Substack chat here.
A reminder of what you get as a paid subscriber:
~2 reports per week. Stock ideas, thematic research, commodity, and more.
Full access to our entire library of reports. Currently 100+ reports.
Live access to our actively managed portfolio: the Aurelion Index. All stocks are backed by in-depth research.
Access to our real-time trades & rationale. As a reminder, this is not investment advice, please conduct your own research.
Our latest stock addition:
Questions? Reach us directly on Substack or at contact@aurelionresearch.com.