The London Company released its Q1 2026 investor letter for “The London Company Small-Mid Cap Strategy”. In early 2026, US equities declined, with the Russell 3000 falling 4% and the S&P posting losses. A copy of the letter is available to download here. The year started positively with a broad rally, but sentiment reversed in March due to the Iran conflict. Crude oil prices rose, raising inflation concerns and shifting the Fed’s outlook from rate cuts to hikes. Large-cap growth suffered double-digit losses amid weakness in Big Tech and AI concerns in software, while small caps proved resilient. Sector dispersion was extreme; Energy surged over 35%, while Tech fell over 9%. Value, Momentum, and Yield drove returns from a factor perspective. In this environment, the London Company Small-Mid Cap portfolio declined 3.4% (-3.6% net) in the quarter vs. a 2.0% increase in the Russell 2500 Index. The relative underperformance was driven by both sector exposure and stock selection. Structural underweight to Energy and commodity-linked industries was a significant detractor. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, The London Company Small-Mid Cap Strategy highlighted Qualys, Inc. (NASDAQ:QLYS). Qualys, Inc. (NASDAQ:QLYS) is a cloud-based platform that provides information technology (IT), security, and compliance solutions. On June 10, 2026, Qualys, Inc. (NASDAQ:QLYS) closed at $110.20 per share. One-month return of Qualys, Inc. (NASDAQ:QLYS) was 25.26%, and its shares lost 22.78% over the past 52 weeks. Qualys, Inc. (NASDAQ:QLYS) has a market capitalization of $3.88 billion.
The London Company Small-Mid Cap Strategy stated the following regarding Qualys, Inc. (NASDAQ:QLYS) in its Q1 2026 investor letter:
“Qualys, Inc. (NASDAQ:QLYS) – Despite a strong earnings report, QLYS sold off sharply as Anthropic’s announcements around Claude’s cybersecurity capabilities triggered indiscriminate selling across cyber names. We believe QLYS maintains defensible moats in its niches, and AI systems remain unsuitable for domains where errors carry severe consequences. The strong balance sheet and cash generation provide flexibility to invest in product innovation and drive market share gains. The risk/reward here is compelling for long-term holders.”
Qualys, Inc. (NASDAQ:QLYS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 33 hedge fund portfolios held Qualys, Inc. (NASDAQ:QLYS) at the end of the first quarter, compared to 34 in the previous quarter. While we acknowledge the risk and potential of Qualys, Inc. (NASDAQ:QLYS) 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 QUALYS, INC. (NASDAQ:QLYS) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Qualys, Inc. (NASDAQ:QLYS) and shared the list of best cybersecurity stocks to invest in according to analysts. In addition, please check out our hedge fund investor letters Q1 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.
