Middle Coast Investing, an investment advisor firm, released its second-quarter 2026 investor letter. A copy of the letter can be downloaded here. Q2 marked the S&P 500’s best quarter since Q2 2020, yet underlying market dynamics remained unchanged. The letter highlighted that the market’s performance continued to rely on trends and baskets rather than company fundamentals. Significant events happened in Q2, including the theoretical end of the U.S. war with Iran and SpaceX’s record IPO. Despite the positive sentiment, mega-cap tech companies performed poorly while semiconductor stocks and other data center buildout-related stocks rallied. The portfolio returned 12.5% in the second quarter compared to 14.9% for the S&P 500 Index, while YTD the fund returned 7.7% compared to 9.6% for the Index. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its second-quarter 2026 investor letter, Middle Coast Investing highlighted Microsoft Corporation (NASDAQ:MSFT). Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops and supports software, services, devices, and solutions, holding dominant positions in software, cloud infrastructure, generative AI, and gaming. On July 7, 2026, Microsoft Corporation (NASDAQ:MSFT) closed at $388.84 per share. One-month return of Microsoft Corporation (NASDAQ:MSFT) was -2.14%, and its shares lost 22.77% over the past 52 weeks. Microsoft Corporation (NASDAQ:MSFT) has a market capitalization of $2.89 trillion.
Middle Coast Investing stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2026 investor letter:
“We talked about software companies as a popular target for AI consequences. While the leading software companies have fended off the apocalypse for another quarter, there are plenty of other scrutinized industries. Any type of middleman business (like a marketplace), suppliers of possibly generic data, businesses whose edge is ‘their people’, and then at a second tier, businesses who provide services or supplies to these businesses (commercial real estate related businesses get hit from two angles, for example). One funny footnote here is that Microsoft Corporation (NASDAQ:MSFT) has drifted from hyperscaler AI winner to this basket due to its huge software business. It may not be a coincidence that we bought some shares in Microsoft to add big tech exposure for a couple clients this quarter.
Microsoft Corporation (NASDAQ:MSFT) ranks second on our list of 40 Most Popular Stocks Among Hedge Funds. According to our database, 282 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the first quarter, compared to 312 in the previous quarter. In the third quarter of fiscal 2026, Microsoft Corporation (NASDAQ:MSFT) reported revenue of $82.9 billion, marking an increase of 18% and 15% in constant currency. While we acknowledge the risk and potential of Microsoft Corporation (NASDAQ:MSFT) 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 Microsoft Corporation (NASDAQ:MSFT) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Microsoft Corporation (NASDAQ:MSFT) and shared the list of AI stocks on Wall Street’s radar. 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.
