A Small-Cap Comeback Story: Middle-Market Investor With Checkered Past Hits New 52-Week High. Time to Buy?

The U.S. war in Iran is two weeks away from its six-month anniversary. Originally scheduled to last weeks, it looks ready to go on for years. Eventually, there have to be global economic consequences. Doesn’t it? 

Who knows. I’ll leave that to the economists to debate. 

What I do know is that all three major U.S. exchanges lost ground on Tuesday: S&P 500 (-0.32%), Dow (-0.34%), and Nasdaq (-0.60%) were all down on new worries about higher oil prices. 

In yesterday’s trading, 109 NYSE stocks hit new 52-week highs, while 92 hit new 52-week lows. On the Nasdaq, new 52-week highs outnumbered lows 231 to 103. 

Those are interesting numbers. I’ve been writing about new 52-week highs and lows for a while now (about 19 months); they suggest to me that stocks aren’t nearly as overheated as investors (myself included) might think. 

In very buoyant times, there have been times when the ratio between highs and lows has been far greater. This is good news for people thinking about adding new money to the markets right now. 

Going through Barrons list of stocks hitting new 52-week highs yesterday, a name I used to follow a long time ago, Compass Diversified Holdings (CODI), hit $13.24, its 21st new 52-week high of the past 12 months. Its shares are up 157% in 2026. 

No longer a penny stock, CODI’s 2.4 million shares traded sparked my curiosity: Is the middle-market, permanent-capital investment vehicle back from the wilderness?

It may be. Here’s why. 

CODI’s Best Investment

Compass Diversified Holdings LLC and the Compass Diversified Holdings statutory trust were both formed in November 2005 to acquire and manage North American middle-market businesses. 

As its 2025 10-K states, it looks for four things in these middle-market businesses: 1) they operate in industries with long-term macroeconomic growth opportunities, 2) they have positive and stable cash flows, (3) they face minimal threats of technological or competitive obsolescence, and (4) they have strong management teams largely in place. 

Generally, they focus on branded consumer and industrial businesses. I first came upon CODI a year or two before it spun off Fox Factory Holding (FOXF) in August 2013. Compass paid $80.9 million for a controlling stake (approximately 76%) in the manufacturer of high-performance suspension products. Between the initial IPO in 2013 and the final sale of FOXF shares in March 2017, it generated $527 million in total proceeds, a 551% return over nine years — a big win. 

Interestingly, Fox Factory stock is up just 39% since the IPO 13 years ago, suggesting its timing was good on its exit.  

CODI’s Worst Investment

The worst investment led to CODI shares losing 32% of their value since May 2025.

Compass acquired Lugano Diamonds & Jewelry Inc. in September 2021, valuing the one-of-a-kind jewelry manufacturer at an enterprise value of $256 million. Lugano’s existing management retained a significant minority stake in the business. 

“We are excited to bring a growing, luxury goods brand like Lugano to the CODI portfolio of niche-branded consumer subsidiaries,” CODI CEO Elias Sabo said in the company’s press release announcing the acquisition.

The problems with Lugano began in early May 2025 when Compass announced that the board’s audit committee was investigating Lugano’s financing, accounting, and inventory practices. Lugano’s CEO, Moti Ferder, subsequently resigned his position and fled to Israel. 

The board’s investigation concluded that Ferder had undertaken a “deliberate and systemic fraud.” By this time, I had long forgotten about CODI.

As a result of this investigation, the company was forced to restate its financial statements for the years 2022, 2023, and 2024. 

“We are pleased to have completed this extensive restatement process. The financial and accounting fraud perpetrated by the former CEO of Lugano Holding, Inc. (“Lugano”) was pervasive, complex and isolated to Lugano. Our restatement is an important step in putting this chapter behind us,” Sabo said in its Dec. 8, 2025, press release closing the company’s worst investment in its nearly 21-year history. 

While the ordeal is not completely over, the financial losses are capped at $974 million -- $256 million purchase price plus $718.2 million in secured debt -- CODI is in the process of recovering a small amount from Lugano’s liquidation. 

Compass Diversified’s Future

In addition to the Lugano cloud that’s hung over CODI for the past 16 months, there was another issue that held back investors. 

Compass Diversified had an external manager, Compass Group Management LLC, which charged CODI an annual 2% fixed base management fee. That fee wouldn’t be controversial if there weren’t a billion-dollar hole in the company’s financials. 

On July 13, the company announced amendments to the Management Services Agreement with Compass Group Management LLC. The most important change: the agreement reduces the annual base management fee to 1.25% of the CODI’s current ANA (adjusted net assets) up to $3 billion, falling from there, and capped at $30 million for 2027. In addition, there is a 0.125% share alignment award to encourage the external manager to own CODI stock. 

Under the old base management fee, CODI would pay $88.75 million for $5 billion in ANA; under the new base management fee, it would pay $60 million, 26% lower than previously. Further, with a $30 million cap, it would drop by half again.

In Q2 2026, its management fees were $13.82 million, down from $19.04 million a year earlier. That was due to a lower ANA from the deconsolidation of Lugano in November 2025 and the sale of its Sterno business in May. 

Under the new agreement, it would have paid approximately $ 8.62 million, 38% lower than what it actually paid, increasing its operating income in the second quarter by about 20%. 

Is that enough to make me recommend CODI stock? No, but if you’re new to the CODI story, it should be enough to make you dig a little closer. 

If you’re somewhat risk-averse, a much more appropriate investment would be the VanEck Alternative Asset Manager ETF (GPZ), which tracks the performance of the MarketVector Alternative Asset Managers Index (MVAALTTR). The index tracks the performance of alternative asset managers such as Blackstone (BX) and Brookfield (BN).