Q2 2026 Performance Review

A Message From Our CEO:

Organized in May 2024, the TreeTop Wealth Fund Inc. (TTWF) is a finance organization using a contrarian philosophy toward investing. The fund aims to outperform major indexes, including the S&P 500, Dow Jones Industrial Average, Nasdaq 100, and the Russell 2000, by single to double-digit percentage points every year.

With roughly 10 years of investment experience, our CEO, Daniel Schwarz-Ruso, has generated roughly 600% since his portfolio’s inception. As Daniel always likes to say: investing with the Tree Top Wealth Fund means that, “one hundred dollars today may be worth two hundred tomorrow, and you didn’t do a single thing— isn’t that facinating.”

Tree Top Wealth Fund Q2 2026 Performance Commentary

The second quarter of 2026 produced mixed but ultimately encouraging results for the Tree Top Wealth Fund. Western Digital, Talen Energy, and IBM generated strong gains, while Oracle remained relatively flat despite excellent operating results. FMC was the portfolio’s primary detractor as weakness across the agricultural industry continued to pressure its business and share price.

From April 1 through June 30, Western Digital gained approximately 114.5%, Talen Energy increased 17.1%, and IBM rose 15.7%. Oracle finished the quarter approximately 0.9% higher, while FMC declined approximately 32.9%. These figures reflect stock-price changes and exclude dividends.

Western Digital

Western Digital was TTWF’s strongest performer during the quarter. The company continued to benefit from rapidly expanding demand for high-capacity storage as cloud providers and artificial-intelligence companies generate and retain increasing amounts of data.

Western Digital reported fiscal third-quarter revenue of $3.34 billion, representing growth of 45% from the prior year. Gross margin expanded to 50.2%, while operating income increased 57% to $1.19 billion. These results demonstrated that Western Digital is benefiting not only from higher demand, but also from improved pricing, operating leverage, and disciplined execution.

Although the stock’s rapid appreciation may lead to greater volatility in Q3, the underlying investment thesis remains strong. Artificial intelligence does not operate only through processors and data centers—it also requires enormous amounts of reliable storage. Western Digital remains well positioned to benefit from that long-term need.

Oracle

Oracle’s stock was nearly unchanged during Q2, but its financial results were anything but flat. The company reported quarterly revenue of $19.2 billion, an increase of 21%, while total cloud revenue grew 47%. Most notably, Oracle Cloud Infrastructure revenue increased 93%, and remaining performance obligations reached a record $638 billion.

Oracle’s muted stock performance appears to reflect investor concerns surrounding the enormous capital required to build its AI infrastructure. Oracle generated record operating cash flow during fiscal 2026, but free cash flow was negative as the company invested aggressively in additional cloud capacity. The company also expects to raise approximately $40 billion through a combination of debt and equity financing during fiscal 2027.

We believe the market is focusing heavily on the cost of Oracle’s expansion while under-appreciating the size and quality of its contracted demand. Oracle expects first-quarter fiscal 2027 revenue growth of 27% to 29% and cloud growth of approximately 58% to 64%. As the company converts its enormous backlog into revenue, we believe Q3 could produce a meaningful revaluation of the stock.

IBM

IBM delivered a strong quarter for shareholders, gaining approximately 15.7%. The company continues to transform itself into a higher-quality software, hybrid-cloud, and artificial-intelligence business supported by predictable recurring revenue.

IBM reported second-quarter revenue of $17.2 billion. Software revenue increased 5%, with Red Hat growing 11% and the company’s Data division growing 19%. Consulting remained flat, while Infrastructure revenue declined 7%, primarily because of weakness in IBM Z. However, distributed infrastructure grew 37%, and IBM reported strong demand for its Power and Storage offerings.

IBM is not the fastest-growing technology company in the portfolio, but it remains one of the most durable. Its software portfolio, customer relationships, dividend, and growing AI capabilities create a combination of stability and upside. We expect continued software growth, productivity improvements, and integration of recent acquisitions to support results in Q3.

Talen Energy

Talen Energy gained approximately 17.1% during the quarter as investors continued to recognize the increasing value of dependable power generation in an economy being reshaped by artificial intelligence and data-center development.

Talen entered Q2 with significant momentum. First-quarter adjusted EBITDA reached $473 million, compared with $200 million in the prior-year period, while adjusted free cash flow increased to $350 million from $87 million. The company also reaffirmed its full-year adjusted EBITDA guidance of $1.75 billion to $2.05 billion.

In June, Talen completed its acquisition of three Western PJM generation assets. Management expects the transaction to increase cash flow per share by more than 15% and strengthen its ability to generate more than $40 per share in annual free cash flow by 2028.

Talen’s complete Q2 financial results are scheduled to be released on August 5, 2026, so our current assessment is based on its stock performance and strategic developments during the quarter. Nevertheless, the long-term thesis remains compelling: AI and data centers require enormous amounts of reliable electricity, while the construction of new generation capacity remains expensive and time-consuming. Talen already owns the assets capable of supplying that demand.

FMC Corporation

FMC was TTWF’s weakest holding during Q2. Revenue declined 17%, organic revenue fell 22%, and adjusted EBITDA decreased 26%. Agricultural customers continued to face strained economics, while lower volumes, pricing pressure, reduced partner orders, and weakness in legacy products weighed heavily on results.

Despite these challenges, FMC generated $363 million in operating cash flow during the quarter and completed several actions intended to strengthen its balance sheet. The company announced transactions expected to generate approximately $1 billion for debt reduction, including the sale of its India commercial business, a licensing agreement with Corteva, a property sale-leaseback, and an equity investment from Tessenderlo Group.

We do not expect every problem at FMC to disappear immediately. Management expects Q3 to remain challenging, with certain distributor orders shifting into Q4. However, the company expects a return to year-over-year revenue and EBITDA growth during the fourth quarter.

Our optimism is therefore based on stabilization rather than an immediate return to peak earnings. If FMC successfully reduces debt, controls costs, and continues growing its newer active ingredients, the market may begin pricing in the expected Q4 recovery before the improvement is fully reflected in reported results.

Macroeconomic Environment

The second quarter was defined by several competing forces. Tariffs, rising energy costs associated with conflict in the Middle East, and continued spending on artificial-intelligence infrastructure contributed to renewed inflationary pressure.

The Federal Reserve maintained the federal-funds target range at 3.50% to 3.75% in June, signaling that policymakers remained cautious about inflation. Economic growth also slowed to an annualized rate of approximately 1.5% during Q2. However, underlying domestic demand remained healthier than the headline figure suggested, supported by consumer spending and significant business investment in AI infrastructure.

June inflation data provided some encouragement. Headline CPI declined 0.4% during the month, while core CPI increased 2.6% over the preceding 12 months. Although overall inflation remains elevated, the moderation in core inflation may eventually provide the Federal Reserve with greater flexibility if the trend continues.

Q3 2026 Outlook

We enter Q3 with a cautiously optimistic outlook.

The continued buildout of artificial-intelligence infrastructure directly supports several TTWF holdings. Oracle provides the cloud capacity, Western Digital stores the resulting data, IBM supplies enterprise software and hybrid-cloud infrastructure, and Talen Energy provides the electricity required to operate increasingly power-intensive data centers.

We expect Western Digital and Talen Energy to remain supported by strong structural demand, although both stocks may experience volatility following their substantial appreciation. IBM should continue benefiting from growth in software, Red Hat, data products, and AI-related services.

Oracle represents one of the portfolio’s most compelling potential recovery opportunities. Its share price has not kept pace with the growth of its cloud business or its enormous contracted backlog. Greater clarity surrounding financing, capital spending, and backlog conversion could allow investors to refocus on the strength of the underlying business.

FMC remains the portfolio’s most challenging position, but also one of its most contrarian. The company’s depressed valuation reflects significant pessimism. Successful debt reduction, improved cost control, growth from newer products, and evidence of stabilization could produce a meaningful recovery, although the clearest operational improvement is currently expected in Q4 rather than Q3.

Volatility will undoubtedly continue. Tariffs, geopolitical conflict, energy prices, inflation, and Federal Reserve policy remain important risks. However, volatility also creates opportunity. TTWF will continue focusing on fundamentally strong or strategically valuable businesses whose long-term potential is being overlooked because of short-term uncertainty.

Our philosophy remains unchanged: ignore temporary noise, examine the underlying business, and take advantage of market inefficiencies when price and value separate.

For any questions, please contact us at treetopwealthfund@gmail.com.

Thank you,

The Tree Top Wealth Fund