Longleaf Partners, managed by Southeastern Asset Management, released its second-quarter 2026 investor letter for its “Small-Cap Fund”. A copy of the letter can be downloaded here. The letter states that the portfolio holdings are attractive now based on both P/V and P/FCF metrics; however, market winners have gone far higher than fair value. The Fund returned -2.47% in the quarter, underperforming the 21.49% return for the Russell 2000 Index and the 17.19% gain for the Russell 2000 Value Index. The underperformance in the quarter was driven by unexpected moves primarily in the IT and industrials sectors and market favor for speculative stocks. The Firm’s investment approach focuses on median, unweighted multiples, prioritizing growth in free cash flow per share, the potential for multiple expansion, and strategic initiatives. In addition, please check the Fund’s top five holdings to know its best picks in 2026.
In its Q2 2026 investor letter, Longleaf Partners Small-Cap Fund highlighted Empire State Realty Trust, Inc. (NYSE:ESRT). Empire State Realty Trust, Inc. (NYSE:ESRT) is a NYC-focused REIT that owns and operates office, retail, and multifamily assets. On July 13, 2026, Empire State Realty Trust, Inc. (NYSE:ESRT) closed at $5.54 per share, reflecting a market capitalization of $1.69 billion. Empire State Realty Trust, Inc. (NYSE:ESRT) posted a one-month return of 3.36%, and its shares lost 30.49% over the past 52 weeks.
Longleaf Partners Small-Cap Fund stated the following regarding Empire State Realty Trust, Inc. (NYSE:ESRT) in its Q2 2026 investor update:
“Alexander’s and Empire State Realty Trust, Inc. (NYSE:ESRT) – New York real estate companies Alexander’s and Empire State Realty Trust both contributed in the quarter. Alexander’s was the bigger contributor, as the company closed the previously announced asset sale of a non core property while signing a lease with Target to get its key shopping center in Queens fully-leased. It is getting harder for the market to ignore the steady FCF power and strong balance sheet of this company. Empire State also contributed but on a lesser scale in the quarter as the company closed a great asset sale itself that implies a value for the rest of its business that is over 2x the current share price. Both companies are on offense and able to continue closing their price to value gaps.”
Empire State Realty Trust, Inc. (NYSE:ESRT) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 16 hedge fund portfolios held Empire State Realty Trust, Inc. (NYSE:ESRT) at the end of the first quarter, compared to 17 in the previous quarter. While we acknowledge the risk and potential of Empire State Realty Trust, Inc. (NYSE:ESRT) 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 Empire State Realty Trust, Inc. (NYSE:ESRT) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Empire State Realty Trust, Inc. (NYSE:ESRT) and shared Longleaf Partners Small-Cap Fund’s views on the company in the previous quarter. 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.
