| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10.12% | -5.01% | -5.01% |
Conestoga's Small Cap Composite returned -5.01% net in Q1 2026, underperforming the Russell 2000 Growth Index's -2.81% return. Small caps initially performed well but momentum faded due to rising energy prices and geopolitical uncertainty, though they still outperformed large caps by over five percentage points. The quarter was characterized by a growing disconnect between company fundamentals and stock prices, creating challenging conditions for the strategy. Technology sector weakness, particularly in software, was the primary headwind as AI disruption concerns compressed valuations despite solid operating results. Energy was the strongest sector performer, benefiting from geopolitical tensions and higher oil prices. Defense and aerospace holdings performed well with strong order growth and backlog expansion. High-quality small caps are trading at historically low relative valuations following broad-based multiple compression, while portfolio companies continue delivering strong fundamental growth. The manager selectively reduced software exposure while maintaining focus on durable, high-quality businesses positioned for long-term value creation.
Focus on high-quality small cap businesses with durable growth characteristics, strong balance sheets, and consistent free cash flow generation that are currently trading at historically low relative valuations.
Looking ahead, markets remain sensitive to geopolitical developments and the trajectory of energy prices and inflation. In this type of environment, retaining exposure to companies which demonstrate durable, high-quality characteristics remains important. While the timing of a recovery is uncertain, similar valuation dislocations have historically been followed by periods of meaningful multiple expansion, particularly when supported by stable fundamentals.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 21 2026 | 2026 Q1 | AORT, AZTA, BL, CWST, DGII, ESE, HLIO, HLMN, LMAT, NPO, RBC, RGEN, SPSC, STVN, UTI | defense, energy, growth, Quality, small cap, software, Valuations | - | Small cap manager underperformed in Q1 2026 despite solid company fundamentals as AI disruption fears pressured software holdings and energy strength hurt relative performance. High-quality small caps trade at historically low valuations following multiple compression. Defense and aerospace holdings benefited from strong order growth. Manager maintains focus on durable businesses while selectively reducing software exposure. |
| Jan 18 2026 | 2025 Q4 | AAON, AZTA, BMI, CWAN, DGII, DSGX, FSV, KRMN, LMAT, NGEN, NOVT, RBC, RGEN, ROAD, SPSC, STVN, TREX, TRNS, VCEL, VERX | Biotechnology, credit, Performance, Quality, small caps, tariffs, volatility |
CWAN RBC RGEN FSV BMI KRMN MLAB |
Conestoga's Small Cap strategy underperformed in 2025 due to market dominance by low-quality, unprofitable stocks and minimal biotech exposure. However, quality stocks began outperforming from mid-October, and the manager expects Small Caps to outperform Large Caps given superior earnings growth prospects, valuation discounts, and pro-growth policy tailwinds. |
| Oct 13 2025 | 2025 Q3 | AAON, BCPC, CSWI, CWST, DSGX, ESE, EXPO, FSV, HLIO, HLMN, MIR, MRCY, NOVT, QTWO, RBC, ROAD, SLP, SPSC, STVN, VERX | Beta, defense, growth, profitability, Quality, small cap, software, technology |
MRCY US HLIO US ROAD US |
Conestoga's Small Cap Growth strategy faced headwinds from extreme low-quality market leadership in Q3, with unprofitable and high-beta stocks dominating returns. The firm's disciplined focus on profitable, sustainable growth companies underperformed during this speculative rally phase. Management remains confident that market leadership will eventually shift back toward quality fundamentals, positioning the strategy for future outperformance when this transition occurs. |
| Jul 22 2025 | 2025 Q2 | AAON, AGYS, BFAM, CWAN, CWST, DGII, DSGX, ESE, EXPO, FSS, FSV, JBTM, MLAB, MMSI, NEOG, NOVT, RBC, ROAD, SLP, STVN | growth, healthcare, industrials, infrastructure, Quality, small cap, tariffs, technology |
PL WLDN ROAD MEG HLMN ERII SSTI KIDS SLP |
Conestoga's quality-focused small cap strategy underperformed in 2Q25 as unprofitable, high-beta stocks led the market rally following tariff policy relief. The portfolio's emphasis on profitable companies with conservative growth characteristics faced headwinds, but management remains confident given attractive small cap valuations and improving fundamentals after years of earnings contraction. |
| May 1 2025 | 2025 Q1 | AAON, ALTR, AZTA, BCPC, CWST, DSGX, ESE, EXPO, FSV, MMM, MMSI, NEOG, PAYX, PYCR, RBC, ROAD, SPSC, SSD, TRNS, VERX | growth, industrials, Outperformance, Quality, small caps, tariffs, technology | - | Conestoga's Small Cap Growth strategy declined 11.35% in Q1 2025, modestly underperforming due to company-specific issues despite market volatility favoring their high-quality approach. Tariff concerns and technology earnings slowdown drove broad small-cap weakness. The firm believes their domestically-oriented portfolio with strong pricing power and balance sheets is well-positioned for tariff challenges and reshoring benefits. |
| Dec 31 2024 | 2024 Q4 | AAPL, AMZN, EXPO, FOXF, GOOG, JBT, META, MSFT, MSTR, NVDA, PRO, ROAD, SITE, SLP, SMCI, SPSC, SSD, TRNS, TSLA, VCEL | AI, growth, infrastructure, small cap, software, technology, valuation | - | Conestoga's small cap strategy underperformed in 2024 due to AI speculation favoring hardware stocks they avoided. The firm sold Fox Factory and sees Construction Partners benefiting from infrastructure spending. Management believes small caps are better positioned for 2025 given significant valuation gaps versus large caps that historically lead to small cap outperformance periods. |
| Oct 23 2024 | 2024 Q3 | AAON, ALTR, CSWI, CWST, DSGX, EXPO, FOXF, FSV, GWRE, NOVT, NRC, OFLX, PRO, QTWO, ROAD, SLP, SPSC, SSD, TREX, VCEL | growth, HVAC, industrials, infrastructure, small cap, software, technology | - | Conestoga's Small Cap strategy outperformed in Q3 despite high volatility, driven by strong Industrials selection particularly in infrastructure-benefited names. Fed rate cuts support small cap outlook historically. Technology software overweight weighed on results while avoiding Energy helped. Portfolio positioned for small cap outperformance versus large caps given earnings growth expectations and attractive relative valuations. |
| Jun 30 2024 | 2024 Q2 | AGYS, ALTR, CWST, DGII, DH, DSGX.TO, EXPO, LMAT, MMSI, MODN, MSA, PYCR, RGEN, SITE, SLP, SPXC, SSD, STVN, TREX, ULS | Bioprocessing, growth, healthcare, industrials, small caps, software, technology | - | Conestoga's small cap strategy underperformed in Q2 amid what management calls peak pessimism for the asset class. Despite current headwinds, they see opportunity in relative valuations near early 2000s lows and question the permanence of large cap tech dominance, maintaining conviction in long-term outperformance potential. |
| Apr 15 2024 | 2024 Q1 | AAPL, AXON, CCCS, CWST, DGII, EXPO, MRCY, MSTR, NEOG, NVDA, PLOW, PRO, PYCR, ROAD, SLP, SMCI, SPSC, TSLA, VCEL, WK | growth, healthcare, industrials, infrastructure, small cap, technology | - | Small cap growth strategy underperformed in Q1 due to lack of exposure to AI beneficiaries Super Micro Computer and MicroStrategy. Technology stock selection challenged returns while waste management and healthcare provided bright spots. Manager maintains conviction in small cap valuations despite 14-year underperformance cycle, selectively adding quality SaaS platforms while trimming oversized positions. |
| Dec 31 2023 | 2023 Q4 | AAON, ALTR, AQUA, BCPC, BL, CWST, DGII, DSGX, FOXF, HLIO, LMAT, MODN, PYCR, RBC, SITE, SSD, STVN, TREX, VCEL, XYL | Construction, growth, healthcare, industrials, Quality, small cap, technology | - | Conestoga's small cap strategy outperformed for 2023 despite Q4 underperformance as rate cut expectations favored longer duration stocks. Strong industrial holdings like Simpson Manufacturing and AAON drove gains while avoiding Energy sector helped. Manager remains bullish on small cap valuations at multi-decade lows versus large caps and maintains focus on quality companies with sustainable earnings growth. |
| Sep 30 2023 | 2023 Q3 | ALTR, AZTA, CSWI, CWAN, CWST, DGII, FICO, HLIO, MLAB, MODN, NOVT, NRC, OMCL, PRO, RGEN, ROAD, SPSC, SSD, TRNS, VERX | growth, healthcare, industrials, Quality, small cap, technology | - | Conestoga's small cap strategy outperformed in Q3 2023's declining market through quality stock selection, emphasizing profitable companies with strong balance sheets. Despite continued large cap outperformance, the firm maintains conviction in an eventual small cap cycle as valuations become more attractive. Their focus on higher-quality businesses positions portfolios defensively for higher interest rates and potential recession. |
| Jun 30 2023 | 2023 Q2 | AAPL, AXON, BL, DSGX, FICO, FOXF, FSS, LMAT, MLAB, MRCY, MSFT, NOVT, PYCR, RBC, ROAD, SITE, SPSC, SSD, TREX, WSO | growth, industrials, Performance, small cap, technology | - | Conestoga's Small Cap strategy underperformed in Q2 2023 due to negative stock selection in Industrials and lack of exposure to surging computer hardware. Supply chain disruptions and defense budget uncertainty weighed on key holdings like Mercury Systems. The firm maintains conviction in its high quality conservative growth approach targeting companies capable of multi-cycle growth. |
| May 23 2023 | 2023 Q1 | AAON, ALTR, AXON, AZTA, CWAN, CWST, DGII, DSGX, EXPO, FOXF, FSV, MMM, MODN, NEOG, NOVT, PLOW, QTWO, SPSC, SSD, STVN | Banking, growth, healthcare, industrials, Performance, Quality, small cap, technology | DGII | Conestoga Small Cap outperformed 12.26% vs 6.07% benchmark despite banking sector turmoil from Silicon Valley Bank collapse. Technology rotation and healthcare strength drove performance while Energy underweight helped. Banking instability may tighten financial conditions and increase recession risk, favoring quality companies with strong balance sheets and sustainable growth. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
Small CapsSmall Cap equities initially performed well but momentum faded in February due to rising energy prices and geopolitical uncertainty. Despite elevated volatility, Small Caps outperformed Large Caps by more than five percentage points, suggesting the long-anticipated broadening of market leadership beyond Mega Cap stocks may be delayed rather than derailed. |
Small Cap Russell 2000 Outperformance Volatility Leadership |
QualityHigh quality small cap equities are currently trading at or near historically low relative valuation levels following broad-based multiple contraction. Portfolio companies have continued to deliver strong sales and EBITDA growth relative to benchmarks. The manager emphasizes retaining exposure to companies with durable, high-quality characteristics including higher ROIC, strong balance sheets, and consistent free cash flow. |
Quality Valuations ROIC Balance Sheets Free Cash Flow | |
EnergyEnergy was far and away the strongest performing sector with gains that were the fourth-best quarterly relative performance by a leading sector since 1985. Rising geopolitical tensions including escalation of conflict involving Iran contributed to higher oil prices and strong returns across energy-related equities. The firm's lack of exposure to the space detracted from relative performance. |
Energy Oil Prices Geopolitical Sector Performance | |
AIInvestor sentiment toward software companies weakened as markets increasingly focused on the potential for AI-driven disruption to compress traditional software moats and long-term growth expectations. Several software holdings were swept up in significant underperformance as investors question long-term viability in the age of AI. The firm selectively reduced its overweight to software during the quarter. |
AI Software Disruption Moats Valuations | |
DefenseSeveral holdings benefited from continued strength in aerospace and defense where demand remains robust and increasingly visible through growing backlogs. The mix shift toward higher-value programs supported both growth and profitability. Companies like ESCO Technologies and RBC Bearings saw meaningful acceleration in orders and program activity. |
Defense Aerospace Backlog Programs Orders | |
| 2025 Q4 |
Small CapsSmall Caps achieved nearly 9% earnings growth in 2025 and are projected to grow by an additional 32% in 2026, contrasting with 13% growth expected for Large Caps. Small Caps are trading at a nearly 25% discount to Large Caps. The firm believes there is a compelling case for Small Caps to outperform Large Caps for the first time since 2020, potentially heralding a new extended cycle of Small Cap outperformance. |
Small Caps Earnings Growth Valuation Discount Outperformance |
QualityThe market experienced extreme leadership concentrated in historically narrow segments, with low-quality, high-beta, speculative stocks dominating returns during the April to October rally. High-quality stocks like those held by Conestoga gradually started to close the gap, with profitable stocks outperforming unprofitable counterparts by over 5% from mid-October to year-end. Historically, new Small Cap bull markets start with low-quality leadership before high-quality stocks reclaim leadership. |
Quality Profitable Stocks Market Leadership Bull Markets | |
BiotechnologySmall Cap Biotech/Pharmaceutical stocks emerged as significant outperformers in the fourth quarter, representing 132% of the Russell 2000 Growth Index's total returns in Q4 alone, after comprising just 11% through the third quarter. The gains in Small Cap Biotech/Pharmaceutical stocks more than offset combined losses in Technology, Industrial, and Consumer Discretionary stocks. Conestoga had limited exposure to this sector, which negatively impacted relative performance. |
Biotechnology Pharmaceuticals Sector Rotation Outperformance | |
Trade PolicyThe White House announced a comprehensive new tariff strategy in February, causing stock prices to plummet by over 20% in a matter of weeks. By early April, potential modifications to tariff policies that could mitigate their impact led to a dramatic turnaround, with the Russell 2000 Growth Index surging nearly 50% over the next six months. The market's reaction to tariff policy changes was a major driver of volatility throughout 2025. |
Tariffs Trade Policy Market Volatility Policy Impact | |
Credit StressConcerns about credit quality in the private credit and regional banking sectors emerged in the fourth quarter, underscored by the bankruptcy filing of auto parts supplier First Brands and allegations of fraud at subprime auto lender Tricolor. JPMorgan CEO Jamie Dimon remarked that 'when you see one cockroach, there are probably more,' highlighting systemic credit concerns. These developments triggered a 10% correction in the Russell 2000 Growth Index. |
Credit Quality Banking Private Credit Bankruptcy | |
| 2025 Q3 |
Small CapsSmall cap stocks reached new all-time highs in Q3, with the Russell 2000 Index rising 12% and significantly outperforming the S&P 500. The rally has been characterized by historically narrow leadership, with the top 20 performing stocks representing 78% of the Russell 2000 Growth Index's overall gains year-to-date. This extreme concentration exceeds even the COVID rally period when the top 20 stocks made up just 39% of returns. |
Russell 2000 Outperformance Concentration Leadership |
QualityThe current market environment has been challenging for high-quality growth strategies as low-quality factors have dominated. Unprofitable stocks in the Russell 2000 Growth Index outperformed profitable peers by 1600 basis points in Q3, while the highest beta quintile gained 24% and represented over half of the Index's returns. Conestoga's high-quality conservative growth approach focuses on profitable companies with sustainable earnings growth. |
Profitability Beta Sustainable Growth Conservative | |
DefenseDefense spending optimism drove strong performance in defense-related holdings. Mercury Systems benefited from expectations of accelerating growth in secure, mission-critical defense electronics, strong order momentum, and easing supply chain pressures that improved delivery and margins. The defense sector showed resilience amid broader market volatility. |
Defense Electronics Order Momentum Supply Chain | |
| 2025 Q2 |
Infrastructure SpendingFederal infrastructure investment is driving robust demand in road maintenance and infrastructure markets. Construction Partners has been a leader in seven of the past nine quarters due to this infrastructure spending. The company reported solid fiscal 2Q results with organic revenue increases and record backlog figures. |
Infrastructure Construction Federal Roads Backlog |
Trade PolicyTariff policies created significant market volatility during the quarter, with Liberation Day announcements causing initial declines followed by relief rallies. Multiple portfolio companies were impacted by tariff concerns, including Descartes Systems, Simulations Plus, Merit Medical, and Mesa Laboratories citing Chinese operations exposure. |
Tariffs China Trade Policy Volatility | |
QualityThe portfolio emphasizes profitable companies with conservative growth characteristics, which proved challenging during periods when unprofitable, high-beta stocks outperformed. Loss-making stocks in the Russell 2000 rose 13.1% while profitable companies rose 6.8%, creating headwinds for the high-quality growth approach. |
Profitability Conservative Beta Fundamentals Growth | |
| 2025 Q1 |
Small CapsSmall capitalization stocks declined nearly 11% in the first quarter and were down roughly 20% from their post-election highs in November 2024. The firm expects their investment approach to outperform in periods of heightened uncertainty, which proved true as their strategies outperformed benchmarks during the quarter's volatility. |
Russell 2000 Volatility Outperformance Uncertainty Growth |
Trade PolicyThe President's announcement that tariffs would be detailed in early April pushed equities sharply lower. The firm believes their companies are well positioned to handle tariff challenges through pricing power, supply chain repositioning, and strong balance sheets. They expect small cap companies to benefit from reshoring that is expected to take place because of the tariffs. |
Tariffs Supply Chain Pricing Power Reshoring Balance Sheets | |
QualityThe portfolio benefited from high-quality factor leadership as profitable companies measured by Return on Invested Capital and EBITDA margins declined less significantly than their high beta, non-earning counterparts. Conestoga's emphasis on higher-quality, conservative growth companies was key to relative outperformance. |
ROIC EBITDA Profitability Conservative Growth High Quality | |
| 2024 Q4 |
AIEnthusiasm for all things related to Artificial Intelligence created what Conestoga believes to be a more speculative investing environment, which proved challenging for their investment strategies. The lack of exposure to computer hardware industry, which surged over 100% in the Russell 2000 Growth Index on AI-related hardware enthusiasm, was a key source of underperformance. |
Hardware Speculation Computer |
Small CapsConestoga believes small cap stocks are better positioned headed into 2025, maintaining this outlook since early 2023. Large caps outperformance over the past 14 years has caused price-earnings ratios for large caps to rise well above those of small caps. A valuation gap as large as the one that existed in November 2024 has historically been followed by periods of small cap outperformance in 96% of all periods since 1968. |
Valuation Outperformance Positioning | |
Infrastructure SpendingConstruction Partners has been a leader in six of the past seven quarters, driven by robust demand in the road maintenance and infrastructure market, partially driven by the infrastructure investment made by the Federal government. The company made a platform acquisition in Texas that boosted revenue by $530 million at a margin of over 22%. |
Roads Federal Construction | |
SoftwareWithin the software industry, which Conestoga emphasizes for its higher levels of profitability and recurring revenue, several positions underperformed including PROS Holdings, Simulations Plus, and SPS Commerce. However, Q2 Holdings rose over 100% in 2024 and offset some negative effects. |
Recurring Profitability SaaS | |
| 2024 Q3 |
Infrastructure SpendingU.S. infrastructure spending has benefited companies like Construction Partners in two ways: the level of demand and funding available, and supply tightness in hot mixed asphalt plants creating better pricing and expanding margins. Infrastructure spending programs continue to drive growth across multiple portfolio holdings. |
Infrastructure Construction Asphalt Funding Demand |
AIArtificial Intelligence is driving growth across multiple portfolio companies. Exponent benefits from AI-related consulting in wearables technologies, battery manufacturing, and advanced driver capabilities. The technology represents a secular growth market for specialized consulting services. |
AI Consulting Technology Growth Secular | |
SoftwareSoftware companies showed mixed performance with strong results from Q2 Holdings in digital banking services, while PROS Holdings faced challenges from elongated sales cycles. The software industry remains a significant overweight in the portfolio despite some headwinds. |
Software SaaS Digital Banking Sales | |
HVACHVAC companies like CSW Industrials and AAON performed well, with CSW benefiting from residential heating and ventilation maintenance markets, while AAON saw strength in data center markets and resolution of earlier production issues leading to increased efficiencies. |
HVAC Residential Data Centers Maintenance Production | |
| 2024 Q2 |
Small CapsManager discusses the current period as peak pessimism for small caps, with private equity and delayed IPOs shrinking the universe. However, they believe the current prophecy of permanent large cap tech dominance has the cautionary ring of 'it's different this time' and note that relative valuations hover near early 2000s lows. |
Valuation Outperformance Private Equity IPO Technology |
SoftwareThe software industry has been negatively impacted by perceived shift in spending to AI-related hardware. However, Conestoga's software holdings outperformed the Index software industry, with companies like Altair Engineering, Descartes Systems, and Simulations Plus being top contributors. |
AI Hardware Enterprise SaaS Simulation | |
HealthcareHealth Care was challenging with negative stock selection effects. Stevanato Group fell after raising equity capital and missing quarterly results, while Repligen reported results that beat revenue expectations but fell short on earnings. The bioprocessing market shows slow recovery. |
Bioprocessing Medical Devices Pharmaceuticals CDMO Biopharma | |
| 2024 Q1 |
Infrastructure SpendingThe Infrastructure Investment and Jobs Act (IIJA) is creating significant demand for construction, repair, and maintenance of America's surface infrastructure. Construction Partners has benefited with 13 consecutive quarters of backlog growth as strong demand offsets seasonal weakness. |
Infrastructure Construction IIJA Backlog Surface |
AIArtificial intelligence-related stocks have surged, with Super Micro Computer rising from $5 billion to $60 billion market cap. The AI boom has created significant market concentration effects, though Conestoga lacks exposure to these high-flying names due to market cap constraints. |
Artificial Intelligence SMCI Market Cap Technology Growth | |
Waste ManagementWaste management companies performed well given the consistency of their business models. Casella Waste Systems proved out favorable price vs. cost dynamics, improved labor conditions, and solid volumes in Q4 earnings. |
Waste Consistency Pricing Labor Volumes | |
| 2023 Q4 |
Small CapsConestoga remains positive on long-term expectations for relative performance of small caps over large caps, noting that relative valuations of small caps to large caps continues to sit near multi-decade lows. The market capitalization of the top five stocks in the S&P 500 Index is now three times the market capitalization of the entire Russell 2000 Index, representing unusual market breadth narrowness. |
Valuation Outperformance Market Breadth Russell 2000 S&P 500 |
QualityConestoga remains steadfast in seeking companies that can generate longer-term, sustainable growth in earnings, coupled with balance sheet strength and capable management teams. They believe a portfolio of higher quality companies with durable competitive advantages will serve clients well in the years ahead. |
Earnings Growth Balance Sheet Management Competitive Advantages Sustainable | |
ConstructionSeveral construction-related holdings performed well, including Simpson Manufacturing which exceeded revenue and earnings expectations and benefited from lower interest rates improving market sentiment for housing-related stocks. The company designs and manufactures connectors, fasteners, and anchors used in residential and commercial construction. |
Housing Interest Rates Residential Commercial Building Materials | |
| 2023 Q3 |
QualityConestoga emphasizes profitable companies with lower debt levels relative to benchmarks, which they believe positions their strategies for outperformance in an economy facing higher interest rates and potential recession. Higher-quality companies enjoyed stronger relative performance in the third quarter. |
Profitability Balance Sheet Debt Levels Quality Metrics |
Small CapsThe firm maintains expectations for a new small cap cycle after twelve years of underperformance relative to large caps. They note that small cap valuations relative to large caps have become more appealing, despite their forecast proving early so far. |
Small Cap Cycle Relative Valuation Russell 2000 Market Cap | |
| 2023 Q2 |
AIInvestor enthusiasm for Artificial Intelligence drove performance of seven large technology stocks that were responsible for nearly all of the S&P 500's return in the first six months of 2023. The portfolio suffered from lack of exposure to the computer hardware industry which was up almost 75% over three months. |
Technology Hardware Software |
Supply ChainMultiple portfolio companies faced supply chain disruptions including Mercury Systems hampered by supply chain issues and delays in defense programs, and Mesa Laboratories impacted by supply chain constraints in their calibrations solutions division. |
Defense Industrial Manufacturing | |
Defense SpendingDefense sector faced headwinds with Mercury Systems hampered by delays in defense programs advancing with budget uncertainty. The company announced strategic alternatives consideration but ultimately was not purchased and CEO resigned. |
Defense Budget Government | |
Waste ManagementCasella Waste Systems performed well as the strategy's sole position in Utilities sector. The company raised additional capital through secondary offering to support acquisitions in adjacent markets, positioning for long-term revenue and earnings growth. |
Utilities Acquisitions Growth | |
| 2023 Q1 |
BankingSilicon Valley Bank's unprecedented depositor flight and transition to FDIC receivership created banking sector turmoil. Rising interest rates created asset-liability mismatches for many banks, with depositors seeking higher returns while limiting uninsured deposits. Small- to medium-sized banks saw sharp stock price declines as investors reassessed viability and future earnings. |
Regional Banks Credit Stress Deposits Interest Rates |
TechnologyTechnology sector benefited from rotation back to growth stocks after underperforming in 2022. Higher-growth stocks rebounded as market favored profitable companies over unprofitable ones. Software companies like ALTR, SPSC, and MODN showed resilience to macroeconomic pressures with strong revenue growth and margin expansion. |
Software Growth Cloud Enterprise Software | |
HVACAAON demonstrated strong performance with 86% sales growth and successful supply chain management. The company continued to show significant gross margin improvement and maintained strong demand with backlogs up over 110%. HVAC equipment manufacturers benefited from pricing power and operational efficiency. |
Industrial Equipment Pricing Power Supply Chain | |
HealthcareHealthcare sector showed positive performance with medical supplies companies like West Pharmaceuticals and Stevenato Group posting strong results. The sector benefited from underweight positioning in weak-performing biotechnology industry. Companies demonstrated resilience in core business operations despite COVID-related revenue normalization. |
Medical Devices Biotechnology Life Sciences |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Mar 31, 2023 | Fund Letters | Conestoga Small Cap Composite | DGII | Digi International, Inc. | Technology Hardware & Equipment | Communications Equipment | Bull | NASDAQ | Asset Monitoring, Enterprise software, IoT, recurring revenue, SaaS, subscription model, technology hardware, Wireless Communication | Login |
| Jan 18, 2026 | Fund Letters | Bob Mitchell | CWAN | Clearwater Analytics Holdings, Inc. | Information Technology | Application Software | Bull | New York Stock Exchange | Client Retention, Investment Operations, recurring revenue, Software Acquisition | Login |
| Jan 18, 2026 | Fund Letters | Bob Mitchell | RBC | RBC Bearings, Inc. | Industrials | Industrial Machinery | Bull | New York Stock Exchange | Aerospace, Defense, Free Cash Flow, operating leverage, Precision Manufacturing | Login |
| Jan 18, 2026 | Fund Letters | Bob Mitchell | RGEN | Repligen Corp. | Health Care | Life Sciences Tools & Services | Bull | NASDAQ | biologics, Bioprocessing, Consumables, Destocking, operating leverage | Login |
| Jan 18, 2026 | Fund Letters | Bob Mitchell | FSV | FirstService Corp. | Real Estate | Real Estate Services | Bear | NASDAQ | execution risk, organic growth, Property-services, recurring revenue | Login |
| Jan 18, 2026 | Fund Letters | Bob Mitchell | BMI | Badger Meter, Inc. | Information Technology | Electronic Equipment & Instruments | Bull | New York Stock Exchange | Free Cash Flow, recurring revenue, Smart Metering, Water infrastructure | Login |
| Jan 18, 2026 | Fund Letters | Bob Mitchell | KRMN | Karman Holdings, Inc. | Industrials | Aerospace & Defense | Bull | NASDAQ | Defense, Ip Protection, Long-Cycle Programs, Sole Source | Login |
| Jan 18, 2026 | Fund Letters | Bob Mitchell | MLAB | Mesa Laboratories, Inc. | Health Care | Life Sciences Tools & Services | Bear | NASDAQ | Acquisitions, Life Sciences Tools, margin pressure, Organic Growth Constraints | Login |
| Oct 13, 2025 | Fund Letters | Bob Mitchell | MRCY US | Mercury Systems, Inc. | Industrials | Aerospace & Defense | Bull | NASDAQ | Aerospace, backlog, Defense, electronics, growth, Margins, Modernization | Login |
| Oct 13, 2025 | Fund Letters | Bob Mitchell | HLIO US | Helios Technologies, Inc. | Industrials | Machinery | Bull | NYSE | growth, Hydraulics, machinery, Margins, restructuring, valuation | Login |
| Oct 13, 2025 | Fund Letters | Bob Mitchell | ROAD US | Construction Partners, Inc. | Industrials | Construction & Engineering | Bull | NASDAQ | backlog, construction, growth, infrastructure, Margins, Projects, valuation | Login |
| Jul 22, 2025 | Fund Letters | Bob Mitchell | PL | Planet Labs PBC | Industrials | Aerospace & Defense | Bull | NYSE | cashflow, Defense, Demand, Geospatial, Satellites | Login |
| Jul 22, 2025 | Fund Letters | Bob Mitchell | WLDN | Willdan Group, Inc. | Industrials | Consulting Services | Bull | NASDAQ | Electrification, Grid, growth, infrastructure, utilities | Login |
| Jul 22, 2025 | Fund Letters | Bob Mitchell | ROAD | Construction Partners, Inc. | Industrials | Construction & Engineering | Bull | NASDAQ | backlog, construction, growth, infrastructure, Margins | Login |
| Jul 22, 2025 | Fund Letters | Bob Mitchell | MEG | Montrose Environmental Group, Inc. | Industrials | Environmental & Facilities Services | Bull | NYSE | Compliance, Environmental, growth, Remediation, services | Login |
| Jul 22, 2025 | Fund Letters | Bob Mitchell | HLMN | Hillman Solutions Corp. | Consumer Discretionary | Building Products | Bear | NASDAQ | Costs, Hardware, Margins, retail, tariffs | Login |
| Jul 22, 2025 | Fund Letters | Bob Mitchell | ERII | Energy Recovery, Inc. | Industrials | Electrical Components & Equipment | Bear | NASDAQ | Desalination, energy, Execution, tariffs, Volatility | Login |
| Jul 22, 2025 | Fund Letters | Bob Mitchell | SSTI | SoundThinking, Inc. | Information Technology | Application Software | Bear | NASDAQ | AI, Demand, Municipalities, Publicsafety, SaaS | Login |
| Jul 22, 2025 | Fund Letters | Bob Mitchell | KIDS | OrthoPediatrics Corp. | Health Care | Health Care Equipment | Bull | NASDAQ | growth, guidance, Implants, Margins, Pediatrics | Login |
| Jul 22, 2025 | Fund Letters | Bob Mitchell | SLP | Simulations Plus, Inc. | Health Care | Life Sciences Tools & Services | Bear | NASDAQ | Demand, Drugdevelopment, Margins, restructuring, Software | Login |
| TICKER | COMMENTARY |
|---|---|
| ESE | ESE is a provider of highly engineered products across aerospace, defense, and utility end markets. The stock reacted to a clear inflection in demand, with orders accelerating sharply and driving a meaningful step-up in backlog and forward visibility. Strength was broad-based but particularly pronounced in Aerospace & Defense, where program activity continues to build. Investors responded to the improving growth trajectory and increased confidence in sustainability, with entered orders up 143% in the quarter. |
| LMAT | LMAT develops and manufactures devices for the treatment of vascular disease. The quarter reinforced the company's ability to consistently convert steady procedure-driven demand into outsized profit growth, supported by pricing and disciplined expense management. Operating leverage was the key driver of the stock, with operating income increasing 47% on mid-teens revenue growth. Investors rewarded the combination of steady execution and high visibility in a volatile market. |
| RBC | RBC produces highly engineered bearings and components for aerospace, defense, and industrial markets. Performance was driven by continued strength in aerospace and defense, where demand remains robust and increasingly visible through a growing backlog. The mix shift toward higher-value programs supported both growth and profitability, with aerospace and defense revenue increasing over 40% in the quarter. Investors were drawn to the combination of long-cycle exposure and consistent execution in an otherwise mixed industrial backdrop. |
| DGII | DGII is a provider of IoT connectivity products, software, and services. Shares moved higher following a strong earnings report that reinforced improving business momentum and a more durable growth profile. The quarter reflected broad-based demand and continued progress in shifting toward higher-margin recurring revenue streams, with operating leverage supporting profitability, as revenue increased 18% YoY. Solid execution and an improving outlook further supported investor confidence. |
| HLIO | HLIO manufactures motion control and electronic control solutions for industrial applications. Shares moved higher as the business began to show signs of stabilization following a period of pressure, with improving volumes driving better cost absorption. That dynamic supported a meaningful improvement in profitability, including a 350 basis point expansion in gross margin. Investors appeared to be positioning for a cyclical recovery as fundamentals inflect and operational execution improves. The changes the new CEO has made in the last 12 months have improved the operating and financial results of the company. |
| STVN | STVN provides drug containment and delivery solutions to pharmaceutical and biotechnology companies. The stock struggled as investors weighed solid results against a mixed underlying business mix and moderating growth profile. While margins improved and high-value solutions continued to scale, overall revenue growth remained relatively modest at 5% in the quarter. Continued weakness in the Engineering segment and a transition toward higher-value products contributed to a more tempered market reaction. The stock is also pressured by the decline of oral vs. GLP-1s. |
| AZTA | AZTA provides life sciences solutions focused on sample management and multiomics services. Shares declined as results highlighted ongoing operational challenges and uneven execution. While revenue was broadly in line, profitability came under pressure, with gross margin declining 380 basis points due to weaker volumes and project-related costs. Management acknowledged the turnaround remains in progress, and investors appeared focused on the lack of near-term improvement and continued variability in performance. |
| RGEN | RGEN develops bioprocessing technologies used in the production of biologic drugs. Despite a solid quarter, the stock underperformed as investors focused on a more measured outlook and lingering concerns around end-market demand. While the company delivered 14% organic growth, guidance for 2026 called for a more moderate growth range and incorporated headwinds in gene therapy. The combination of strong recent performance but tempered forward expectations led to a more cautious investor response. |
| CWST | CWST provides solid waste collection, recycling, and resource management services. The stock underperformed as investors are growing impatient with the company's margin trajectory. While Casella closed the year on a high note with 60 basis points of improvement in EBITDA margin, including 100 bps organic, the company guided to just 0-40 basis points in F26. This is the below the 25-50 basis points previewed on the third quarter earnings call and attributable largely to the pending closure of one of its landfills in New Hampshire. We expect to see upside to this guidance through gains at its most challenged Mid Atlantic region. |
| BL | BL provides cloud-based solutions that automate and control the financial close process for corporate accounting departments. Despite reporting a strong fourth quarter of 2025 with a significant EPS beat and 22% bookings growth, the stock lagged in early 2026. This underperformance was primarily due to conservative full-year 2026 revenue guidance of 9-10%, as the company continues to transition customers to its new platform pricing model. In addition, BL was swept up in the significant underperformance of the software industry in the first quarter as investors question long-term viability in the age of AI. |
| NPO | NPO is a provider of highly engineered industrial products serving semiconductor, energy, and general industrial markets. We initiated a position as the company continues to benefit from improving end-market demand and a more focused portfolio following recent divestitures. The business is increasingly aligned with higher-growth, higher-margin segments, and we see a clearer path to sustained earnings expansion supported by strong execution and favorable secular trends. |
| UTI | UTI provides workforce education and training across skilled trades, transportation, and healthcare. We purchased shares in the company as enrollment trends and program demand continue to strengthen, supported by a favorable labor backdrop. The company's expanding campus footprint and new program offerings provide a long runway for growth, while improving scale is beginning to translate into better operating leverage. |
| AORT | AORT develops, manufactures, and distributes specialized products used in cardiac and vascular surgery. Products include stent grafts, mechanical heart valves, surgical sealants, and tissues. The company continues to build momentum across its core product portfolio, supported by new product launches, strong clinical data, and PMA approvals. The business is increasingly focused on complex aortic repair, which we believe can drive consistent growth and margin improvement over time. |
| SPSC | SPSC provides cloud-based supply chain management software that standardizes data exchange between retailers and suppliers. Despite a beat on Q4 2025 earnings, management issued a softer 2026 outlook, projecting revenue growth to decelerate to 7%—a notable step down from its historical mid-teens trajectory. This slowdown, combined with sequential declines in their 3P customer segment and lengthening sales cycles, affirmed concerns we have about the company's remaining total addressable market and its ability to sustain growth. |
| HLMN | HLMN is a leading North American provider of hardware-related products—such as fasteners, keys, and engraving—and merchandising services for major home improvement retailers. We exited the position as secular headwinds began to weigh on the company's growth profile. Persistently low housing turnover in the U.S. has significantly restricted Repair and Remodel (R&R) spending, a primary driver for HLMN's hardware and protective segments. With 2026 revenue guidance moderating to 6% and an increasing reliance on M&A to offset sluggish organic volume, we believe the stock's valuation now fully captures its steady-state potential, leading us to reallocate capital to more dynamic growth opportunities. |
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