Diamond Hill Capital, a First Eagle Investment Management company, issued its Q1 2026 investor letter for its “Small Cap Strategy”. A copy of the letter can be downloaded here. Small caps started 2026 strong, following 2025, but pulled back late in the quarter due to geopolitical tensions, with the US and Israel acting against Iran. The Russell 2000 gained 0.89%, outperforming the Russell 1000’s 4.18% decline. Energy was the leading sector, up 38% as oil prices surged amid supply fears. The strategy returned 3.41% (net) vs. the Russell 2000’s 0.89%. The Fund focuses on resilient businesses amid volatility, aiming to navigate uncertainty and capitalize on market opportunities. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Diamond Hill Small Cap Strategy highlighted Ducommun Incorporated (NYSE:DCO) as a leading contributor. Headquartered in Costa Mesa, California, Ducommun Incorporated (NYSE:DCO) provides engineering and manufacturing services to the aerospace, defense, industrial, and medical industries. On May 4, 2026, Ducommun Incorporated (NYSE:DCO) closed at $137.01 per share. One-month return of Ducommun Incorporated (NYSE:DCO) was 1.94%, and its shares gained 125.12% over the past 52 weeks. Ducommun Incorporated (NYSE:DCO) has a market capitalization of $2.05 billion.
Diamond Hill Small Cap Strategy stated the following regarding Ducommun Incorporated (NYSE:DCO) in its Q1 2026 investor letter:
“Shares of aerospace and defense manufacturer Ducommun Incorporated (NYSE:DCO) rose as its missile franchise, representing roughly 25% of its defense revenue, is directly benefiting from the Pentagon’s spending acceleration. Additionally, the company’s expansion into engineered products creates pricing power and margin expansion that traditional manufacturers cannot replicate, allowing the company to grow end markets while expanding profitability in a rising defense spending environment.”
Ducommun Incorporated (NYSE:DCO) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 24 hedge fund portfolios held Ducommun Incorporated (NYSE:DCO) at the end of the fourth quarter, up from 18 in the previous quarter. While we acknowledge the risk and potential of Ducommun Incorporated (NYSE:DCO) 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 Ducommun Incorporated (NYSE:DCO) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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.
