*NAV per share as of Apr 3 is to highlight the extreme volatility markets have faced due to the US-Iran War.
Executive Summary
The first quarter of 2026 was defined by significant market volatility driven by an escalating geopolitical environment.
Rising oil prices and uncertainty surrounding the duration of the U.S.–Iran conflict weighed heavily on broader financial markets, which experienced a sustained downtrend across major indices. Against this backdrop, Thrive Financial Partners
continued to generate strong positive returns for our investors.
Our strategy remained disciplined and focused, allocating capital toward targeted equity positions in the defense sector where we identified clear structural tailwinds. During this period of heightened uncertainty, we initiated and built conviction in a company we believe is meaningfully undervalued with significant long-term growth potential.
Market Commentary
Equities
Small- and mid-cap stocks outperformed large caps during Q1, driven by a rotation away from AI-adjacent mega-cap names and a broader unwind of premium valuations in the software and private credit space.
This created a favorable entry environment for targeted small-cap positions.
Rates & Inflation
We expect inflation to remain elevated in the near term. With the Strait of Hormuz closed for most of March, the Federal Reserve remains cautious on rate reductions, a key variable we are actively monitoring.
Portfolio Highlights
Top Contributors:
- Red Cat Holdings Inc. (RCAT): Benefited from expected contract wins with the Department of Defense.
- Coda Octopus Group Inc. (CODA): Benefited from accelerating growth in the submarine sector. We
intend to rebuild this position ahead of Q2 earnings.
New Position
Unusual Machines Inc. (NYSE American: UMAC)
During the quarter, we initiated a new position in Unusual Machines (UMAC), a U.S.-based manufacturer of drone components and the only fully vertically integrated, NDAA-compliant domestic drone parts producer.
Our conviction is rooted in a straightforward supply-demand imbalance: demand for U.S.-made drone components is significantly outpacing domestic production capacity. A confluence of structural catalysts has effectively created a protected domestic market with no credible near-term competition:
- The FCC’s December 2025 ban on new licenses for foreign-made drone parts.
- Removal of major Chinese suppliers from the approved vendor list.
- The Department of Defense’s $1.1 billion Drone Dominance procurement program.
UMAC is uniquely positioned to capture a disproportionate share of this demand, manufacturing motors, headsets, cameras, and batteries entirely within the United States at a moment when every drone OEM is competing for government contracts that require a domestic supply chain. We believe the current price meaningfully undervalues the business given the structural tailwinds ahead.
Risk Management & Outlook
Our disciplined approach continues to emphasize downside protection while seeking asymmetric upside opportunities. We entered UMAC at a technically and fundamentally favorable level where we believe downside is limited and meaningful upside remains available.
Key risks under active monitoring:
- Sustained geopolitical escalation impacting energy prices and consumer sentiment.
- Inflationary pressures are delaying Federal Reserve rate reductions.
- Consumer spending slowdown affecting broader market multiples.
Closing Remarks
At Thrive Financial Partners, our priority remains delivering consistent, risk-adjusted returns above benchmark while protecting client capital. We are proud of the results achieved this quarter and remain focused on building on this momentum in the quarters ahead.
We appreciate your continued trust and partnership, and look forward to sharing further updates as the year progresses.