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 started with optimism about the domestic economy and attractive small-cap valuations, but was marked by volatility amid geopolitical unrest in the Middle East and shifting expectations for interest rates. This unrest drove up energy prices and created a cautious global market. 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 first quarter saw high volatility in the Russell Microcap Growth Index, which rose over +11% by late January, then fell -18% to a -4.25% quarter-end loss, compared to -7.14% for the Conestoga Micro Cap Composite. Initial positive relative performance declined as the war in the Middle East escalated, leading investors to unwind popular momentum trades and to cover significant short positions in biotechnology. 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 Graham Corporation (NYSE:GHM) as a newly added position. Graham Corporation (NYSE:GHM) is a leading manufacturer of mission-critical engineering products, including fluid, power, heat transfer, and vacuum technologies for chemical and petrochemical processing, defense, space, petroleum refining, cryogenic, and energy industries. On May 7, 2026, Graham Corporation (NYSE:GHM) closed at $97.08 per share. One-month return of Graham Corporation (NYSE:GHM) was 6.58%, and its shares gained 178.41% over the past 52 weeks. Graham Corporation (NYSE:GHM) has a market capitalization of $1.08 billion.
Conestoga Capital Advisors stated the following regarding Graham Corporation (NYSE:GHM) in its Q1 2026 investor letter:
“Graham Corporation (NYSE:GHM) designs and manufactures mission-critical fluid, power, and thermal management systems for defense and industrial applications. The company continues to benefit from improving demand within its defense end markets, supported by a growing backlog and increased program visibility. Ongoing operational improvements and mix shift toward higher-value programs provide a pathway to enhanced profitability.”
Graham Corporation (NYSE:GHM) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 15 hedge fund portfolios held Graham Corporation (NYSE:GHM) at the end of the fourth quarter, up from 16 in the previous quarter. While we acknowledge the risk and potential of Graham Corporation (NYSE:GHM) 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 Graham Corporation (NYSE:GHM) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Graham Corporation (NYSE:GHM) and shared the list of best HVAC stocks to buy. 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.
