Madison Small Cap Fund, managed by Madison Funds, released its Q1 2026 investor letter. A copy of the letter is available to download here. The Madison Small Cap Fund (class I) increased by 0.10% in the first quarter, trailing behind the Russell 2000 Index (up 0.89%) and the Russell 2500 Index (up 2.04%). Despite slightly underperforming the benchmark in the quarter, core positions and IT investments showed solid performance. From a style perspective, value stocks outperformed growth, with the Russell 2000 Value Index rising ~4.5% and the Russell 2000 Growth Index falling almost 3%. The outperformance of the value is driven by weakness in speculative names aligning with the Fund’s style and preference for quality, profitable franchises. The Fund believes the market volatility, influenced by AI concerns and geopolitical tensions, presents a potential opportunity for patient investors. Please review the Fund’s top five holdings to gain insights into their key selections for 2026.
In its first-quarter 2026 investor letter, Madison Small Cap Fund Strategy highlighted SiteOne Landscape Supply, Inc. (NYSE:SITE) as a newly added position. SiteOne Landscape Supply, Inc. (NYSE:SITE) is a leading distributor of landscape supplies. On June 11, 2026, SiteOne Landscape Supply, Inc. (NYSE:SITE) closed at $106.88 per share. One-month return of SiteOne Landscape Supply, Inc. (NYSE:SITE) was -9.04%, and its shares lost 10.01% over the past 52 weeks. SiteOne Landscape Supply, Inc. (NYSE:SITE) has a market capitalization of $4.74 billion.
Madison Small Cap Fund stated the following regarding SiteOne Landscape Supply, Inc. (NYSE:SITE) in its Q1 2026 investor letter:
“We initiated a new investment position in specialty distributor SiteOne Landscape Supply, Inc. (NYSE:SITE), the largest and only scaled consolidator in the landscape supply industry. SiteOne controls 18% of this $26 billion industry and has been growing revenue at a low double-digit compound annual growth rate (CAGR) over the past several years. SITE has the highest gross margins of any distributor following years of pricing initiatives (600 basis points of improvement since 2014), reflecting its defensive competitive moat and limited competition. After years of investment in sales and marketing, the company has a significant opportunity to expand its operating margin, which should help it overcome potential cyclical headwinds and drive earnings growth. Management has gained credibility in delivering on this thesis, with several quarters of margin expansion in a somewhat depressed end-market environment. The company has formidable network effect-style moats, including a highly fragmented customer and supplier base. No single customer accounts for over 2% of sales, and the top ten customers account for less than 5% of total sales. No other competitor has the reach SiteOne has built, making it the most important intermediary for suppliers and buyers alike. SITE’s breadth of offerings and purchasing power makes them an invaluable resource for local landscapers and suppliers. Management has a solid track record in mergers and acquisitions (M&A). Their network-effect moat is amplified through M&A, as scale begets scale. SiteOne is 3x the size of its nearest competitor and larger than numbers 2-10 combined. We conservatively estimate the intrinsic value to be $160.”
SiteOne Landscape Supply, Inc. (NYSE:SITE) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 30 hedge fund portfolios held SiteOne Landscape Supply, Inc. (NYSE:SITE) at the end of the first quarter, compared to 42 in the previous quarter. In Q1 2026, SiteOne Landscape Supply, Inc.’s (NYSE:SITE) net sales totaled $940 million, essentially flat year-over-year, with organic daily sales declining 1%. While we acknowledge the risk and potential of SiteOne Landscape Supply, Inc. (NYSE:SITE) 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 SITEONE LANDSCAPE SUPPLY, INC. (NYSE:SITE) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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.
