Eagle Capital Management, an investment management company, released its first quarter 2026 investor letter. A copy of the letter is available to download here. The letter notes that individual stocks and subsectors are now more reactive to sentiments, reducing market efficiency but creating opportunities to add value. Over the last decade, multi-asset managers, or pods, have grown significantly, operating with leverage, tight risk controls, and quickly cutting losers, often relying on earnings momentum. Growth managers have outperformed value managers, attracting flows; retail investors increasingly chase momentum, reducing overall diversity and amplifying momentum’s influence. It’s more valuable to find controversial or underexplored assets early and benefit as earnings grow. Eagle has capitalized on this trend, expecting continued opportunities. Investments should consider probabilities, building portfolios for various outcomes rather than betting on one, which allows for compound growth. The Strategy is generating strong long-term absolute returns. Please review the Strategy’s top five holdings to gain insights into their key selections for 2026.
In its first-quarter 2026 investor letter, Eagle Capital Management highlighted stocks like SAP SE (NYSE:SAP). Headquartered in Walldorf, Germany, SAP SE (NYSE:SAP) is a leading enterprise application and business solutions provider. On May 20, 2026, SAP SE (NYSE:SAP) closed at $179.89 per share. One-month return of SAP SE (NYSE:SAP) was 7.04%, and its shares lost 41.72% over the past 52 weeks. SAP SE (NYSE:SAP) has a market capitalization of $212.08 billion.
Eagle Capital Management stated the following regarding SAP SE (NYSE:SAP) in its Q1 2026 investor letter:
“SAP SE (NYSE:SAP), Workday, and Intuit are highly entrenched application software businesses. SAP’s ERP software is among the stickiest and most durable businesses in the world. Software is lately controversial due to AI-driven disruption. AI is deflationary for engineering costs and will change many workflows in how software is used. The technology is widening the distribution of 5- to 10-year outcomes for these businesses. In some cases, the central tendency shifts lower; in others, it’s stable or even shifts upward. The entire space has sold off over the past year, and we believe the recovery will be more heterogeneous than the decline. Many businesses will be impaired, but a number will likely benefit.
We have positioned ourselves with companies that we expect to be comparatively resilient, that also have idiosyncratic earnings growth paths or call options. SAP will face tougher competition in its peripheral products, but its core is highly defensible, and we think it will grow rapidly over the next five years, driven by its cloud migration.”
SAP SE (NYSE:SAP) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 36 hedge fund portfolios held SAP SE (NYSE:SAP) at the end of the fourth quarter, up from 34 in the previous quarter. While we acknowledge the risk and potential of SAP SE (NYSE:SAP) 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 SAP SE (NYSE:SAP) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered SAP SE (NYSE:SAP) and shared the list of AI stocks that are about to explode. 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.
