Michigan-based investment advisor Cedar Grove Capital Management recently released its first quarter 2026 investor letter. A copy of the letter can be downloaded here. Cedar Grove Capital Management’s Multi-Strategy Composite posted a -23.0% net return since inception, compared to -5.6% for the Russell 2000, -5.9% for the Russell Microcap, and -5.5% for the S&P 500. Timing is key for early fund success, yet predicting external shocks during volatile macroeconomic periods is impossible. Rather than speculate on macro risks, it’s advisable to invest in strong companies at reasonable prices with good growth prospects. The recent downturn, called a “SaaS apocalypse,” was an opportunity to buy quality stocks that were undervalued despite better fundamentals and potential AI-driven gains. In February and early March, nearly all portfolio holdings reported strong earnings. However, the outbreak of war in Iran quickly overshadowed these gains, causing a rapid market selloff. While macro factors hurt performance in Q1, the firm is confident that its companies will do well in Q2 and beyond. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Cedar Grove Capital Management highlighted stocks such as The RealReal, Inc. (NASDAQ:REAL). The RealReal, Inc. (NASDAQ:REAL) is a leading online marketplace for the resale of luxury goods. The one-month return of The RealReal, Inc. (NASDAQ:REAL) was 42.30%, and its shares gained 128.53% of their value over the last 52 weeks. On April 16, 2026, The RealReal, Inc. (NASDAQ:REAL) stock closed at $11.33 per share, with a market capitalization of $1.45 billion.
Cedar Grove Capital Management stated the following regarding The RealReal, Inc. (NASDAQ:REAL) in its Q1 2026 investor letter:
“The RealReal, Inc. (NASDAQ:REAL): The RealReal is a domestic omnichannel luxury resale retailer that is capitalizing on the second-hand fashion movement that is taking the U.S. by storm. While many investors are worried about traditional luxury retailers facing various headwinds (LVMH just had their worst year since the GFC), and the value oriented consumer getting squeezed from the opposite end, REAL gets misunderstood as falling into one or both of those categories. We feel like this understanding is incorrect, and REAL operates in its own unique category (second-hand luxury) that is growing almost twice as fast as regular luxury (11.6% vs 5.2%).
Even though REAL operates in its own category, the company’s business model only works if it’s able to expand its supply in order to drive more demand. A delicate balance between the two. REAL has already done well to unlock further supply from customers across the country (tariff-free), which has driven higher gross merchandise value (GMV), revenue, and adjusted EBITDA. With the help of AI being able to increase throughout for product authentications and listings, operating leverage has started to show. The company is once again guiding for a double-digit topline growth year with ~200bps of adjusted EBITDA margin expansion in FY’26. With strong tailwinds, growth in GMV, and margin expansion, REAL should be able to capitalize on the massive consumer shift to second-hand merchandise and the benefits of AI.”
The RealReal, Inc. (NASDAQ:REAL) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 45 hedge fund portfolios held The RealReal, Inc. (NASDAQ:REAL) at the end of the fourth quarter, up from 42 in the previous quarter. In Q4 2025, The RealReal, Inc. (NASDAQ:REAL) reported total revenue of $194 million, marking an increase of 18% year-over-year. While we acknowledge the risk and potential of The RealReal, Inc. (NASDAQ:REAL) 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 The RealReal, Inc. (NASDAQ:REAL) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered The RealReal, Inc. (NASDAQ:REAL) and shared the list of best luxury 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.
