The Wasatch Long/Short Alpha Fund, managed by Wasatch Global Advisors, has recently published its Q1 2026 investor letter, which is available to download here. A shift in investor sentiment led to a market correction and increased volatility in U.S. small- and mid-cap stocks during the first quarter. Despite this, enthusiasm for AI continued to support companies involved in infrastructure development. The situation intensified in the quarter due to the conflict in Iran, causing investors to consider the potential for rising oil prices and their wider implications on the global economy. In this context, the Russell 2500 Index returned 2.04% in the quarter, while the Wasatch Long/Short Alpha Fund—Investor Class surpassed this performance with a rise of 4.16%, supported by the outperformance of its short positions. In addition, please check the firm’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Wasatch Long/Short Alpha Fund highlighted Lumentum Holdings Inc. (NASDAQ:LITE). Lumentum Holdings Inc. (NASDAQ:LITE) is a leading technology company that manufactures and sells optical and photonic products. On June 2, 2026, Lumentum Holdings Inc. (NASDAQ:LITE) closed at $1,029.15 per share. One-month return of Lumentum Holdings Inc. (NASDAQ:LITE) was 3.70%, and its shares gained 1,119.72% over the past 52 weeks. Lumentum Holdings Inc. (NASDAQ:LITE) has a market capitalization of $76.15 billion.
Wasatch Long/Short Alpha Fund stated the following regarding Lumentum Holdings Inc. (NASDAQ:LITE) in its Q1 2026 investor letter:
“Turning to short positions, detractors from Fund performance were those stocks that rose in price. One of the largest detractors among our shorts was Lumentum Holdings Inc. (NASDAQ:LITE). We hold the short position to offset the risk of some of our long holdings tied to the AI buildout. We believe the short position in Lumentum will help to mitigate the downside should the stocks of companies tied to AI infrastructure sell off broadly. But on a fundamental basis, we don’t think Lumentum has as powerful an economic engine as some of our long holdings tied to the AI buildout, nor do we think Lumentum will be as profitable.”
Lumentum Holdings Inc. (NASDAQ:LITE) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 57 hedge fund portfolios held Lumentum Holdings Inc. (NASDAQ:LITE) at the end of the first quarter, up from 56 in the previous quarter. While we acknowledge the risk and potential of Lumentum Holdings Inc. (NASDAQ:LITE) 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 Lumentum Holdings Inc. (NASDAQ:LITE) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Lumentum Holdings Inc. (NASDAQ:LITE) and shared the list of best AI infrastructure stocks to buy according to hedge funds. 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.
