Investment management company Vulcan Value Partners recently released its first-quarter 2026 investor letter. A copy of the letter can be downloaded here. The firm focuses on improving long-term returns and lowering risk over short-term results. In the quarter, the Large Cap Composite (Net) returned -14.1%, the Small Cap Composite (Net) returned -6.8%, the Focus Composite (Net) returned -19.1%, the Focus Plus Composite (Net) returned -19.1% as well as the All-Cap Composite (Net) returned -13.5%. Throughout 2025 and escalating to the first quarter of 2026, the market is experiencing heightened volatility related to AI’s potential, leading to mispricing of some strong companies. The current market turbulence presents opportunities for long-term investors willing to accept short-term volatility in stable-valued companies and improve the margin of safety. The letter identified businesses into three groups with perceived /real AI disruption risk: Software, Alternative Asset Managers, and indirectly impacted businesses. The firm highlights that its investment strategy aims to leverage this volatility to reduce risk and increase returns in the long term. In addition, please check the Firm’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Vulcan Value Partners highlighted stocks like CoStar Group, Inc. (NASDAQ:CSGP). CoStar Group, Inc. (NASDAQ:CSGP) is an information, analytics, and online marketplace services provider for commercial and residential property markets. On April 21, 2026, CoStar Group, Inc. (NASDAQ:CSGP) closed at $38.91 per share. One-month return of CoStar Group, Inc. (NASDAQ:CSGP) was -6.04%, and its shares lost 52.45% over the past 52 weeks. CoStar Group, Inc. (NASDAQ:CSGP) has a market capitalization of $16.49 billion.
Vulcan Value Partners stated the following regarding CoStar Group, Inc. (NASDAQ:CSGP) in its Q1 2026 investor letter:
“CoStar Group, Inc. (NASDAQ:CSGP) is a premier information services provider to the commercial and residential real estate industries. Its core businesses are dominant, have high barriers to entry, produce copious amounts of free cash flow, and historically have grown at a double digit rate. We bought CoStar because of these businesses. Several years ago, after we purchased CoStar, the company bought Homes.com. They have taken virtually all of the company’s free cash flow and reinvested it into Homes.com in an attempt to disrupt the residential brokerage portal industry. Stated simply, it has not worked and the company continues to reinvest virtually all of its free cash flow into Homes.com, which management now says will not be profitable until 2030, 8 years after it launched the business. We no longer qualify CoStar Group for investment because of poor capital allocation. Following our discipline we sold it to reallocate capital into more discounted companies with better management teams.”
CoStar Group, Inc. (NASDAQ:CSGP) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 58 hedge fund portfolios held CoStar Group, Inc. (NASDAQ:CSGP) at the end of the fourth quarter, up from 57 in the previous quarter. While we acknowledge the risk and potential of CoStar Group, Inc. (NASDAQ:CSGP) 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 CoStar Group, Inc. (NASDAQ:CSGP) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered CoStar Group, Inc. (NASDAQ:CSGP) and shared Third Point Management’s views on the company. 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.
