A London company released the Q1 2026 investor letter “The London Company Small-Mid Cap Strategy”. In early 2026, US equities fell, with the Russell 3000 down 4% and the S&P posting losses. A copy of the book is available for download here. The year started well with a broad rally, but sentiment took a turn for the worse in March due to the Iran conflict. Crude oil prices rose, raising inflation concerns and changing the Fed’s view from rate cuts to hikes. Large-cap growth lost double digits amid weakness in Big Tech and AI concerns in software, while small-caps appeared strong. The disintegration of the sector was extreme; Energy is up over 35%, while Tech is down over 9%. Value, Momentum, and Yield drive returns from a characteristic perspective. In this scenario, the London Small-Mid Cap Company’s portfolio declined 3.4% (-3.6% net) in the quarter compared to a 2.0% increase in the Russell 2500 Index. Relative underperformance was driven by both sector exposure and stock selection. The structural underweight in Energy and related industries was worse. In addition, please check the top five Strategy items to know your best choice in 2026.
In its investor letter for the first quarter of 2026, The London Company Small-Mid Cap Strategy highlighted Qualys, Inc. (NASDAQ:QLYS). Qualys, Inc. (NASDAQ:QLYS) is a cloud-based platform that provides information technology (IT), security, and compliance solutions. On June 10, 2026, Qualys, Inc. (NASDAQ:QLYS) closed at $110.20 per share. One-month returns for Qualys, Inc. (NASDAQ:QLYS) was 25.26%, and its shares lost 22.78% in the last 52 weeks. Qualys, Inc. (NASDAQ:QLYS) has a market capitalization of $3.88 billion.
The London Company Small-Mid Cap Strategy says the following about Qualys, Inc. (NASDAQ:QLYS) in its Q1 2026 investor letter:
“Qualys, Inc. (NASDAQ:QLYS) – Despite a strong earnings report, QLYS sold off sharply as Anthropic’s announcements about Claude’s cyber security capabilities caused a flat selloff across the internet names. We believe that QLYS maintains secure moats in its areas, and AI systems remain unsuitable for areas where mistakes carry serious consequences. A strong balance sheet and cash flow provide flexibility to invest in product innovation and drive market share gains. The risk/reward here is compelling for long-term owners.”
Qualys, Inc. (NASDAQ:QLYS) is not on our list of the 40 Most Popular Stocks Among Hedge Funds Entering 2026. According to our database, 33 hedge fund portfolios are held by Qualys, Inc. (NASDAQ:QLYS) at the end of the first quarter, compared to 34 in the previous quarter. While we acknowledge the power of Qualys, Inc. (NASDAQ:QLYS) as an investment, we believe certain AI stocks offer great potential and carry little downside risk. If you’re looking for an extremely overlooked AI stock that will benefit greatly from the Trump-era costs and sea trend, check out our free report best short term AI stock.
