Riverwater Partners, an investment management company, released its “Micro Opportunities Strategy” Q2 2026 investor letter. A copy of the letter is available to download here. In Q2 2026, the Micro Opportunities strategy underperformed the Russell Microcap Index, despite a positive absolute result. The benchmark performed well during a speculative period for micro caps. Over the past twelve months, the strategy has lagged behind the index. Industrials was the best-performing sector while Information Technology lagged. An accelerating artificial intelligence buildout and a persistent geopolitical supply shock drove the market in the quarter. While the micro-cap rally exhibited speculative traits with significant returns in areas avoided by design. The Fund’s focus remains on owning profitable, well-managed small businesses at reasonable prices rather than pursuing fleeting market trends. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its Q2 2026 investor letter, Riverwater Micro Opportunities Strategy highlighted LSB Industries, Inc. (NYSE:LXU). LSB Industries, Inc. (NYSE:LXU), a chemical products manufacturer that provides ammonia and urea ammonia nitrate for agricultural applications, detracted from the Fund’s performance during the quarter. On July 24, 2026, LSB Industries, Inc. (NYSE:LXU) closed at $12.24 per share, reflecting a market capitalization of $880.53 million. LSB Industries, Inc. (NYSE:LXU) posted a one-month return of 13.97%, while its shares gained 41.67% over the past 52 weeks.
Riverwater Micro Opportunities Strategy stated the following regarding LSB Industries, Inc. (NYSE:LXU) in its Q2 2026 investor update:
“LSB Industries, Inc. (NYSE:LXU), the nitrogen products producer, declined approximately 28% and was the portfolio’s largest detractor. We originally owned LSB for its leverage to the disrupted global nitrogen supply, a thesis that worked well while the Middle East conflict kept capacity offline. When peace negotiations progressed in mid June, curtailed supply began returning to the market, and the shares sold off. We think the move to the downside is an overreaction and LXU will benefit from the disruption. We also think the market is missing the significant free cash flow they will generate over the near and mid-term.”
LSB Industries, Inc. (NYSE:LXU) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 38 hedge fund portfolios held LSB Industries, Inc. (NYSE:LXU) at the end of the first quarter, up from 23 in the previous quarter. While we acknowledge the risk and potential of LSB Industries, Inc. (NYSE:LXU) 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 LSB Industries, Inc. (NYSE:LXU) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered LSB Industries, Inc. (NYSE:LXU) and shared Riverwater Partners Micro Opportunities Strategy’s views on the company in the previous quarter. 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.
