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Diamond Hill Capital, a First Eagle Investment Management company, issued its Q1 2026 investor letter for its “Small Cap Strategy”. A copy of the letter can be downloaded here. Small caps started 2026 strong, following 2025, but pulled back late in the quarter due to geopolitical tensions, with the US and Israel acting against Iran. The Russell 2000 gained 0.89%, outperforming the Russell 1000’s 4.18% decline. Energy was the leading sector, up 38% as oil prices surged amid supply fears. The strategy returned 3.41% (net) vs. the Russell 2000’s 0.89%. The Fund focuses on resilient businesses amid volatility, aiming to navigate uncertainty and capitalize on market opportunities. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Diamond Hill Small Cap Strategy highlighted LSI Industries Inc. (NASDAQ:LYTS) as a newly added position. LSI Industries Inc. (NASDAQ:LYTS) is a US-based manufacturer and distributor of non-residential lighting and retail display solutions. On May 4, 2026, LSI Industries Inc. (NASDAQ:LYTS) closed at $23.27 per share. One-month return of LSI Industries Inc. (NASDAQ:LYTS) was 23.78%, and its shares gained 50.32% over the past 52 weeks. LSI Industries Inc. (NASDAQ:LYTS) has a market capitalization of $852.84 million.
Diamond Hill Small Cap Strategy stated the following regarding LSI Industries Inc. (NASDAQ:LYTS) in its Q1 2026 investor letter:
"LSI Industries Inc. (NASDAQ:LYTS) is a leading North American provider of commercial and industrial lighting and custom display solutions. Under CEO Jim Clark, who joined in November 2018, the company has shifted away from commoditized, off-the-shelf products toward higher-value, more differentiated solutions. We are attracted to the company’s resilient business model, strong cash generation, growing mix of stickier service-driven revenue and disciplined management team, which has driven consistent organic growth, product innovation and strategic acquisitions."
LSI Industries Inc. (NASDAQ:LYTS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 20 hedge fund portfolios held LSI Industries Inc. (NASDAQ:LYTS) at the end of the fourth quarter, compared to 24 in the previous quarter. While we acknowledge the potential of LSI Industries Inc. (NASDAQ:LYTS) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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.