# Palm Valley Capital Fund Q3 2026 Performance

> Palm Valley Capital Fund outperformed small caps in Q3 2026 despite record wealth inequality.
- Title: Palm Valley Capital Fund Q3 2026 Performance · Seekingalpha
- Summary: Palm Valley Capital Fund outperformed small caps in Q3 2026 despite record wealth inequality. Palm Valley Capital Fund increased 1.61% in Q3 2026 while small…
- Keywords: palm valley capital fund, q3 2026, small cap, ai wealth gap, s&p smallcap 600, magnificent seven, reynolds consumer products, flowers foods, gentex corp, clorox, avista corporation, smithfield foods
- Source: Seekingalpha — https://seekingalpha.com/article/4951861-palm-valley-capital-fund-q3-2026-letter
- Author: Palm Valley Capital Management
- Published: 2026-10-04T19:18:00+00:00
- Read time: 2 min
- Topics: palm valley capital fund, q3 2026, small cap, ai wealth gap, s&p smallcap 600, magnificent seven, reynolds consumer products, flowers foods, gentex corp, clorox, avista corporation, smithfield foods
## Q3 2026 Performance
Palm Valley Capital Fund increased 1.61% compared to a 7.93% decrease for the S&P SmallCap 600 Index and a 5.60% fall in the Morningstar Small Cap Total Return Index.
## AI Wealth Gap
Labor's share of GDP has fallen to a record low while superstar firms with fat margins and declining tax rates have thrived.
## Tech Sector Performance
72 out of 74 S&P tech firms had positive operating profit over the trailing year while only 120 out of 219 Russell tech constituents did.
## AI Market Impact
The market cap of the GICS tech sector plus Alphabet, Amazon, and Meta Platforms equals total U.S. household owners' equity in real estate.
## Wealth Inequality
The richest 1% owns 13.4% of property and 51% of equities while the poorest half owns 0.6% of stocks.
## AI Investment Boom
The median IT operating margin in the S&P 500 is nearly 24% compared to a 7% median margin for the Russell 2000's Info Tech sector.
## AI Market Valuations
The median Enterprise Value to EBIT multiple for profitable nonfinancial firms in the Russell 3000 is 20x, near record highs.
## Key Holdings
Rayonier, Kelly Services, LKQ Corp, Amdocs, ManpowerGroup, Farmland Partners, Domino's Pizza Group, Flowers Foods, Reynolds Consumer Products, and Carters are top holdings.
## Gentex Corp
Gentex is the leading global automotive supplier of automatic-dimming rearview mirrors with advanced features including Full Display Mirrors.
## Clorox Performance
Clorox shares fell after reporting results with comparison challenges due to customers accelerating purchases ahead of an ERP implementation.
## Smithfield Foods
Smithfield Foods is the leading U.S. pork producer with 87% ownership by WH Group, facing weaker demand amid higher feed costs.
## Avista Corporation
Avista serves 429,000 electric and 386,000 natural gas customers across Washington, Idaho, and Oregon with a 13.5x estimated earnings valuation.
## Q3 Performance Drivers
Kelly Services, ManpowerGroup, and Amdocs contributed most positively to Q3 returns with improved staffing sector volumes and AI-driven business transformations.
## Q3 Underperformers
Rayonier, Flowers Foods, and Reynolds Consumer Products contributed most negatively to Q3 performance with weakening lumber prices and rising costs.
## AI Investment Risks
The AI ecosystem faces regulatory challenges as frontier labs seek a regulatory moat amid concerns about capital consolidation.
## The Future
Richer today can mean poorer tomorrow as economic progress redistributes wealth through asset price changes and interest rate shifts.
## Key takeaway

Palm Valley Capital Fund increased 1.61% in Q3 2026 while small caps fell 7.93% as AI-driven wealth gaps widened.