Offside Portfolio: Monthly Review

Hey Partner,

The Offside portfolio closed its second month of operations since our June inception, and our performance has been stellar despite:

Sadly, not many advisors made it out of July as their positions went up in smoke.

Leopold Aschenbrenner’s Situational Awareness, and countless financial media creators are a good example of this.

Today’s monthly report isn’t just a performance update.

It’s a breakdown of what actually worked, what surprised me, what I got wrong, and how those lessons are shaping up our positioning for the months ahead.

Transparency matters.

That’s why you’ll receive this report at the end of every month.

July is over, let’s get into it.

The portfolio is up on an unrealized cash gain of 16.4%, or 8.5% net for the account.

We have realized $719 of profits as our S&P futures and long./short equity plays have successfully delivered on our initial ideas.

We remain over 50% in cash as we look to ramp up our exposure in the areas we believe can outperform in the second half of 2026.

As always, our philosophy is centered around the following pillars:

Let’s review each one:

We are not interested in our own opinion of the future, but on the collective wisdom of the market.

Our job is to judge the market’s wisdom as overconfident or overly pessimistic.

We do this through an expectations framework, where the first question we ask is:

Some companies require 50% revenue growth every year for a decade (why we avoid most of the semi/memory names - they are now over 30% off their highs.)

Others are expected to see 1.5% revenue growth for the same decade (why we bought Domino’s Pizza - now up over 20% from the lows.)

Our framework requires us to understand what will drive GDP over the next 12-18 months, and start our research in the industries responsible for driving the economy.

One of our most powerful tools is factor timing and exposure, where we are able to concentrate on factors that we expect will start leading, and reduce in the ones we expect will lag.

E.g. Momentum has now given up 20% from its highs, while value is now up 15% from the lows.

All of our due diligence centers on our ability to understand a business thoroughly, so that we can foresee risks and opportunities embedded in their financials and expectations around them.

Failing to understand a business and all of its mechanics leads us to skip an idea and move on, simple as that.

Successfully understanding the business allows us to better forecast earnings and operations, leading us to a more accurate valuation target backed by other professional Wall Street analysts.

Ever since June of 2026 (our inception date), there has been a major factor shift in the market.

Value started to tick higher while growth and momentum sold off (essentially, the AI trade).

So while I would like to take 100% credit for my investment picks, you need to know that a large part of our performance has come from this factor shift and our selection around them.

Should momentum return, then appropriate diversification and risk-management measures will be implemented to protect our capital.

Still,

I believe the value and quality factor of the market remain severely undersold, creating an attractive rotational opportunity to profit from.

Therefore, the majority of our research and ideas will be centered around these oversold factors.

I have dragged out our factor positioning in blue for reference.

All blue-shaded names are part of a value/quality sleeve centered around the software beatdown.

The reason goes beyond the fundamentals, as I believe for every $1.00 that is long the semis/memory trade, roughly $0.30 goes short software as a hedge.

Meaning,

A continued rotation out of growth/momentum should continue to deliver a satisfactory result from these picks.

For Pepsi and Domino’s Pizza, this is part of another such spread trade in the mirror to the GLP-1 boom.

The rest, in yellow, represent our growth sleeve.

These are smaller weights by design, as they rely on successfully reporting the sorts of growth the market now expects from them.

While we can easily hedge the risks around these expectations, great management begins with positioning.

We have a software concentration/correlation risk.

This is one of the facts I’d like to point out as a driver for future drawdowns and increased volatility exposure.

An outcome I am actively working to mitigate.

As you can see, our recent consumer names like:

Have all served as great diversifiers, as their correlation is low (and negative in some cases) compared to the software concentration.

Future additions will ideally offer the same benefit to our software concentration, where a 50%+ cash sleeve can also act as a great diversifier.

So far, we are well within the appropriate risk management framework we like to employ.

Our average asset volatility is of 18.2%, roughly in line with the average VIX value over the past two months.

In other words,

We are in line with the expected performance curve of the S&P 500.

Yet, due to our correlation management efforts…

The portfolio’s volatility is only of 5.3%, well below the VIX while still outperforming the S&P 500.

As a result, we have achieved our median target Sharpe of 1.5x.

New positions will allow us to manage correlations in a away that can improve our portfolio volatility with the same Sharpe.

Simply put,

We are looking to take on more risk without necessarily affecting our future performance.

Fortunately,

There are no red flags to point out, as this month was pretty smooth sailing on our end.

Thank you for being a part of our community!

As a token of my appreciation,

Here’s a 7-day free trial to Offside Premium.

You will access live portfolio updates, position alerts, deep dive research, and 1-1 direct support in our community!

See you in next month’s portfolio update.

Until next time,

OFFSIDE RESEARCH

Against the Tape, Ahead of the Curve.