Q1 2026 Investor Audibles: Open Square Capital, JDP Capital

Open Square Capital's Q1 2026 letter, written by Nelson Wu, opens with a geopolitical analysis of the U.S. decision to strike Iran on February 28th, which Wu argues was driven by overconfidence following Operation Midnight Hammer and Venezuela's regime change. In retaliation, Iran's IRGC closed the Strait of Hormuz, creating what Wu describes as a supply disruption eclipsing COVID in scale. The fund returned 47.7% for the quarter versus the S&P 500's loss of 4.3%, with gains split roughly evenly before and after March.

Wu provides a detailed breakdown of the oil supply disruption. The Strait closure cut off approximately 20 million barrels per day of oil product flow, with Saudi Arabia and UAE only able to reroute 2 million barrels via pipeline, leaving an 11 million barrel per day gap. Unlike COVID's demand shock, this is an evolving supply shock with a 'garden hose' lag effect — oil already in transit took weeks to deplete existing inventories in Asia and Europe. Producers were forced to shut in approximately 11 million barrels per day of production once on-land storage filled. Wu estimates total barrels lost at 700-800 million, consistent with IEA data cited in the letter projecting 360 million barrels lost in March and 440 million in April. A simple calculation assuming just 20% of lost barrels impact OECD inventories points to $100/barrel oil as fair value, with Wu arguing $90/barrel is realistic even accounting for political jawboning.

On Occidental Petroleum (Oxy), Wu holds warrants and equity, and reports the stock rose from around $50 pre-conflict to $65 by quarter end before retreating to $55. Oxy cut its capex plan, generating an extra $1.2 billion in free cash flow for 2026. Wu's base case at $65 WTI implies $5.2 billion in free cash flow and a $50 share price; at $100 oil and an 8x multiple, the stock could reach $120. Oxy's warrants (strike at $22, currently ~$35) could rise to $58 under the bull case.

Open Square also initiated a position in Valeris (VAL), the offshore drilling company, primarily as a way to own TransOcean (RIG) at an implied price of $5.32 per share via the announced merger. The RIG-VAL deal combines a heavily indebted but high-quality drillship operator with a lightly indebted jackup operator, reducing RIG's net debt-to-EBITDA from 3.7x to 2.6x and projecting $1.4 billion in combined free cash flow. Wu sees post-war offshore drilling demand as a long-term catalyst. The fund also fully exited Peloton after subscriber counts disappointed and energy cost uncertainty raised concerns about consumer spending on discretionary fitness products.

JDP Capital's Q1 2026 letter, written by Jeremy Deal, reports a 15.1% loss for the quarter. Deal frames the current environment — AI disruption fears, the Iran war, and oil price spikes — as creating extreme fear similar to the Liberation Day sell-off in early 2025, which he views as a buying opportunity rather than a structural impairment to business value. He argues the S&P 500's composition has shifted dramatically from energy-intensive industrials toward technology and IP-driven businesses, making it less vulnerable to oil shocks than in the 1970s. He also notes the U.S. is now a net energy exporter.

Deal's investment framework, called the 'survivor and thriver' criteria, emphasizes business durability, management quality, reinvestment runway, and balance sheet strength. He highlights Amazon as an example of a company being punished for aggressive reinvestment despite strong underlying demand, noting it trades at its lowest-ever valuation. He exited Caesars Entertainment after reports of a potential fire-sale buyout involving CEO Tom Riegh, expressing disappointment about governance and minority shareholder treatment, drawing parallels to Golden Entertainment's controversial buyout.

Deal's main new position is MercadoLibre (MELI), acquired at approximately $1,600/share ($85 billion equity value), which he describes as less than 1x GMV and 18x estimated 2026 earnings. He sees MELI as a classic survivor and thriver: dominant e-commerce and fintech platform across 18 Latin American countries, growing GMV 37% with items sold up 43%. MELI's fintech arm, Mercado Pago, is compounding at over 40% and has become one of Latin America's largest digital financial institutions. Deal argues e-commerce penetration in LATAM is roughly half U.S./UK/China levels, and a young, underbanked population of 650 million provides a long growth runway. The stock had declined roughly 40% prior to purchase, partly due to the Iran war's impact on emerging market sentiment.