Arquitos Capital Returns 64.8% in Q2 2026, Bringing YTD Gain to 52.9%, 22.4% CAGR ITD; Big Gains On Liquidia

Arquitos Capital Management returned 64.8% net of fees in the second quarter of 2026, lifting its year-to-date gain to 52.9% and its trailing twelve-month return to 116.2%. Since the fund’s April 10, 2012 inception, Arquitos has generated a 17.4% annualized net return, portfolio manager Steven Kiel wrote in the firm’s Q2 2026 letter to partners. Below is the letter in full.

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Founded April 10, 2012. Annualized returns as of June 30, 2026.

Dear Partner:

Arquitos returned 64.8% net of fees in the second quarter of 2026, bringing the year-to-date return to 52.9%. Individual returns will vary based on timing of investment. Please check your statement for specific results.

Several years ago, one of my investors remarked that Arquitos had an unusually strong slugging percentage. The largest positions had higher returns than the smaller holdings. This phenomenon was on full display this quarter. May was our strongest month in our more than 14-year history, and June was our third strongest month. Our net return over the trailing twelve months is 116.2%.

This increase was primarily due to our investment in Liquidia. We primarily owned, and continue to own, long-dated, in the money call options. Liquidia has been our largest position over the past year when taking into account the underlying equity value of the call options. It was also our best performing holding. Liquidia’s stock increased in value fivefold over the past year.

Our largest positions should be the companies we know the best, have the most confidence in, and which are the most undervalued. Those factors should make those investments less risky. We have enough of a track record now to prove that point. Liquidia is only the latest example.

Back in 2013 to 2017, we had ALJ Regional Holdings (ALJJ). In 2015 to 2017, it was Intrawest Resorts (SNOW). In 2017 to 2022, we had MMA Capital (MMAC). Our only counterexample is ENDI, but even ENDI is up 150% over ten years and even more if you consider the price of our initial purchase.

In baseball, most hitters with a high slugging percentage hit a lot of home runs but also strike out a lot. It doesn’t have to be like that in investing. In fact, it is better to try to hit singles and doubles and wait for a perfect pitch to swing big. Doing this doesn’t increase our chances of striking out. It decreases it. Warren Buffett had a great example. He pointed to Ted Williams’ book, “The Science of Hitting.” Williams figured out his batting average when swinging at the location of each pitch in the strike zone. To be consistently successful, a hitter would need to mostly lay off swinging unless the pitch was in the location where he had the most success.

Buffett also noted that we have even more of an advantage as investors because there are no called strikes in our game. We can wait and wait and wait and only swing when our chance of success is vastly higher than the chance of failure.

This is why Arquitos has a high slugging percentage. We swing at the best pitch for us, and we swing for the fences with that pitch. It is also why the portfolio must be concentrated. As mentioned before, we have had four big winners in our history: ALJJ, MMAC, SNOW, and now Liquidia. That is only four companies in 14+ years, and we held each of them between three and six years.

Let’s look at the current situation.