Overview
- Conestoga’s Q1 2026 investor letter, spotlighted Tuesday, reports the Small Cap Composite fell 5.01% versus a 2.81% drop for the Russell 2000 Growth.
- The firm links the tougher quarter to Middle East unrest that lifted energy costs and to changing interest-rate expectations, with Energy, Basic Materials, and Industrials holding up better than pressured software names.
- Conestoga rebalanced its portfolio by starting a position in Enpro, which it sees benefiting from stronger end markets and a more focused portfolio, and by exiting Vertex and Hillman after slower growth reduced the appeal of their valuations.
- Legence remains a focus as an AI data-center infrastructure play, with a $3.7 billion backlog that rose 49% year over year and reflects demand for complex cooling and power systems.
- Company-level signals were mixed, with Azenta’s gross margin down 380 basis points on weaker volumes and project costs, while Helios expanded gross margin by 350 basis points as improving volumes boosted cost absorption.