Conestoga Capital Advisors, an asset management company, released its first-quarter 2026 investor letter. A copy of the letter can be downloaded here. The first quarter of 2026 began with optimism about the domestic economy and attractive Small Cap valuations, but was impacted by volatility from Middle East geopolitical unrest and changing interest rate expectations. This unrest drove energy prices up and created cautious global markets. Energy, Basic Materials, and Industrials performed well, while software companies faced challenges due to AI disruption concerns. Market sensitivity to geopolitical events, energy prices, and inflation remains high. The Conestoga Small Cap Composite fell 5.01%, underperforming the Russell 2000 Growth’s -2.81% return. The decline was driven by negative stock selection and headwinds in Technology and Health Care, with sector allocation benefits insufficient to offset losses. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Conestoga Capital Advisors highlighted Digi International Inc. (NASDAQ:DGII) as a notable contributor. Digi International Inc. (NASDAQ:DGII) is an Internet of Things technology provider specializing in connectivity products, services, and solutions. On April 27, 2026, Digi International Inc. (NASDAQ:DGII) closed at $56.36 per share. One-month return of Digi International Inc. (NASDAQ:DGII) was 16.93%, and its shares gained 102.88% over the past 52 weeks. Digi International Inc. (NASDAQ:DGII) has a market capitalization of $2.12 billion.
Conestoga Capital Advisors stated the following regarding Digi International Inc. (NASDAQ:DGII) in its Q1 2026 investor letter:
“Digi International Inc. (NASDAQ: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.”
Digi International Inc. (NASDAQ:DGII) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 20 hedge fund portfolios held Digi International Inc. (NASDAQ:DGII) at the end of the fourth quarter, up from 16 in the previous quarter. In the first quarter of 2026, Digi International Inc. (NASDAQ:DGII) delivered record revenue of $122 million, marking an increase of 18% year over year. While we acknowledge the risk and potential of Digi International Inc. (NASDAQ:DGII) 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 Digi International Inc. (NASDAQ:DGII) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Digi International Inc. (NASDAQ:DGII) and shared the list of best Internet of Things (IoT) stocks to buy. Digi International Inc. (NASDAQ:DGII) contributed to Conestoga Capital Advisors performance in Q4 2025. 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.
