SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Smid Cap Strategy” second-quarter 2026 investor letter. A copy of the letter can be downloaded here. The second quarter of 2026 was influenced by the AI boom and the Iran War, impacting interest rates and consumer sentiment. Portfolio companies linked to high-value consumer purchases faced pressure but still aligned with positive earnings and trends. The SMID Cap Composite returned +12.47% gross (+12.28% net), underperforming the Russell 2500® and Russell 2500® Value, which returned 20.26% and 18.50% respectively. YTD, the composite returned 23.29% on a gross basis (22.44% net) versus 36.72% and 38.54% for the indexes, respectively. Despite overall market volatility, robust fundamentals were reported, particularly among AI-tied sectors. An underweight in speculative growth caused underperformance relative to the index in Q2, although exposure to the AI data center sector was maintained while profits were taken from AI investments. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its Q2 2026 investor letter, SouthernSun Smid Cap Strategy highlighted Broadridge Financial Solutions, Inc. (NYSE:BR). Broadridge Financial Solutions, Inc. (NYSE:BR) is a financial technology company that provides investor communications and solutions for the financial services industry. On July 23, 2026, Broadridge Financial Solutions, Inc. (NYSE:BR) closed at $144.40 per share, reflecting a market capitalization of $16.7 billion. Broadridge Financial Solutions, Inc. (NYSE:BR) posted a one-month return of 4.69%, while its shares lost 43.08% over the past 52 weeks.
SouthernSun Small Cap Strategy stated the following regarding Broadridge Financial Solutions, Inc. (NYSE:BR) in its Q2 2026 investor update:
“Broadridge Financial Solutions, Inc. (NYSE:BR), the leading processor of proxy voting and fixed-income trading in the U.S., was a bottom contributor in the SMID Cap strategy during the second quarter despite 7% recurring revenue growth, 11% Adjusted EPS growth, and increases to full-year guidance for both recurring revenue and Adjusted EPS. Shares appear to have fallen on two longer-dated fears: that AI will erode BR’s technology franchises and that tokenized equities will disintermediate its governance business. These pressures were amplified by a cut to closed-sales guidance, which we attribute to sales-cycle timing rather than demand destruction. In our view,both fears are overstated. Regarding AI, we believe it is highly unlikely that BR clients will in-source proxy processing. First, the risk/reward is sharply asymmetric: we believe the compliance and liability consequences of a failed proxy distribution far outweigh any marginal cost savings. Second, any broker-dealer attempting to turn proxy distribution into a profit center would likely invite a review of the very fee schedule that creates the opportunity. Finally, even a client determined to migrate would have to do so over years, not quarters (BR’s multi-year contracts make any transition gradual). On tokenization, the SEC has affirmed that tokenized securities carry the same governance and compliance obligations as traditional equities, and the vast majority of tokenized equities will, in our view, continue to flow through broker-dealers and digital platforms that are already BR’s core clients. With a conservatively leveraged balance sheet (~1.7x Net Debt/EBITDA), double-digit EPS growth guidance, and a proven management team, BR trades at just 15x fiscal 2026 Adjusted EPS, a combination we find compelling.”
Broadridge Financial Solutions, Inc. (NYSE:BR) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 44 hedge fund portfolios held Broadridge Financial Solutions, Inc. (NYSE:BR) at the end of the first quarter, up from 36 in the previous quarter. While we acknowledge the risk and potential of Broadridge Financial Solutions, Inc. (NYSE:BR) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Broadridge Financial Solutions, Inc. (NYSE:BR) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Broadridge Financial Solutions, Inc. (NYSE:BR) and shared the list of best tech stocks to invest in on the dip. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
