Rowan Street Capital’s Q1 2026 investor letter lays out a clear view of a messy market and why patient, concentrated investing still matters, with Shopify singled out as a long-term compounder despite short-term pain. The letter covers macro worries, sector rotations, performance numbers and a candid account of riding through a deep drawdown to eventual strong gains.
Rowan Street opens by describing a quarter where geopolitical tensions and higher oil prices pushed inflation worries back into the spotlight and kept interest-rate relief out of reach. That combination reshuffled investor priorities, tilting attention toward energy and cyclical names that promise steadier cash flow. Skepticism about AI’s near-term returns also crept into narratives, weighing on growth valuations even when businesses continued to perform. The firm’s own results suffered, with a notable lag versus the broader market.
On performance, Rowan Street reports a decline of 19.8% for the strategy in Q1 2026, compared with a 4.3% drop for the S&P 500, and plainly says the team is unhappy with that outcome. Rather than changing course, they emphasize a concentrated approach: buying a select group of companies they expect to compound value over the long haul. They argue that recent price weakness mainly reflects multiple compression rather than deterioration in underlying business fundamentals. That patience, they contend, is a repeatable advantage when you own durable businesses at attractive prices.
Shopify features prominently as a case study in both the pain and payoff of concentrated ownership. The letter highlights Shopify’s long-term track record of compounding and notes strong recent performance: a healthy one-month gain and a large twelve-month return, culminating in a multi-billion-dollar market cap. Rowan Street recounts entering the position in early 2022 and enduring a roughly 50% additional decline before the turnaround. Their thesis hinged on fundamentals improving even while the stock price was impaired by sentiment-driven multiple compression.
“Shopify Inc. (NASDAQ:SHOP) has been an exceptional business over time, compounding at over 40% annually since its IPO. We experienced this firsthand. After initiating our position in early 2022, the stock declined by an additional ~50%. We believed the drawdown reflected multiple compressions, not fundamental deterioration. The business continued to grow revenues, expand its merchant ecosystem, and strengthen its competitive position. The price was broken. The company was not.
It did not feel good. The best opportunities rarely do. What followed was a long and uncomfortable period of patience before payoff. The stock rebounded 124% in 2023 — and yet we were still underwater on our investment. It was not until 2024 — when Shopify generated over $1 billion in operating profit for the first time and the stock gained another 37% — that we finally got our capital back and began generating real returns. The stock then rose 51% in 2025, making it our best performer of the year… (Click here to read the full text)”
The letter’s Shopify narrative is blunt and useful: conviction often requires sitting through a stretch when your thesis looks unpopular and the price remains depressed. Rowan Street points to Shopify hitting operating profit milestones and then rallying, underscoring the value of sticking to a fundamentals-led view. They also note that hedge funds have been increasing exposure to Shopify, signaling that institutional interest remained despite the earlier drawdown. For investors, the takeaway is that company-level progress can and does outpace swings in sentiment over time.
Rowan Street also flags portfolio construction lessons that come out of the experience: focus exposures, accept volatility, and be clear about why each holding should compound value over multiple years. In a market that keeps shifting between macro narratives and the next hot theme, that discipline forces a higher bar for adding new positions. The firm admits the recent underperformance stings, but frames it as part of the cost of seeking asymmetric long-term returns. Their message is aimed at investors willing to trade near-term comfort for the chance at superior compounded outcomes.
Practically, the letter mixes market commentary with specific portfolio insights and an honest appraisal of what worked and what didn’t. It’s both a status report and a reminder that a concentrated, patient strategy is not a smooth ride. For anyone tracking Shopify or watching how managers respond to cyclical shifts and AI froth, Rowan Street’s account is a candid example of backing a position through turbulence and being rewarded when fundamentals reassert themselves.
