Conestoga Capital Advisors, an asset management company, released its second-quarter 2026 investor letter. A copy of the letter can be downloaded here. The letter reports a positive market shift towards Small Caps, with the Russell 2000 Index achieving its best first half since 1991 and the Russell 2000 Growth Index up 25.7% in Q2, fueled by AI enthusiasm and semiconductor stocks. However, market leadership was uneven, mirroring the Tech Bubble: high-beta stocks outperformed while high-quality companies lagged, affecting Conestoga’s quality-focused strategies. Management expressed confidence in long-term outcomes, noting that speculative leadership won’t last as monetary policy tightens and market breadth improves. The firm remains committed to high-quality growth businesses, expecting these to regain favor as leadership broadens. The Conestoga Micro-Cap Composite achieved a solid second quarter with a 22.16% net return, although it underperformed the Russell Microcap Growth Index’s 28.98% return. During this period, Micro-Cap Growth surpassed all major equity benchmarks, which reflects improved investor sentiment towards smaller-cap stocks, but the gains were primarily driven by a limited set of high-beta, high-momentum stocks. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its Q2 2026 investor letter, Conestoga Capital Advisors highlighted U.S. Physical Therapy, Inc. (NYSE:USPH). U.S. Physical Therapy, Inc. (NYSE:USPH), an outpatient physical therapy clinic operator, was sold from the portfolio during the quarter. On August 6, 2026, U.S. Physical Therapy, Inc. (NYSE:USPH) closed at $76.46 per share, reflecting a market capitalization of $1.164. U.S. Physical Therapy, Inc. (NYSE:USPH) posted a one‑month return of 5.40%, while its shares lost 12.80% over the past 52 weeks.”
Conestoga Capital Advisors stated the following regarding U.S. Physical Therapy, Inc. (NYSE:USPH) in its Q2 2026 investor letter:
“U.S. Physical Therapy, Inc. (NYSE:USPH) operates outpatient physical therapy clinics and provides industrial injury prevention services. We sold the position as labor cost pressures, reimbursement uncertainty, and slower margin expansion tempered our long-term return expectations despite continued solid demand for rehabilitation services. While management remains focused on driving growth through acquisitions and new hospital partnerships, we believed other healthcare investments offered more compelling upside.”
U.S. Physical Therapy, Inc. (NYSE:USPH) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 13 hedge fund portfolios held U.S. Physical Therapy, Inc. (NYSE:USPH) at the end of the first quarter, the same as in the previous quarter. While we acknowledge the risk and potential of U.S. Physical Therapy, Inc. (NYSE:USPH) 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 U.S. Physical Therapy, Inc. (NYSE:USPH) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered U.S. Physical Therapy, Inc. (NYSE:USPH) and shared the list of best medical care facilities stocks to buy according to analysts. In addition, please check out our hedge fund investor letters Q2 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.
