Conestoga Capital Advisors' Small Cap Composite Portfolio returned -5.01% net-of-fees in the first quarter of 2026, trailing the Russell 2000 Growth Index's -2.81% decline. The fund faced headwinds from software stocks amid valuation compression. Positive contributions came from industrial holdings.
The Conestoga Small Cap Composite delivered a net-of-fees return of -5.01% for the first quarter ending March 31, 2026, compared to the Russell 2000 Growth Index's -2.81%. Fund managers attributed the underperformance primarily to challenges in the technology sector, where software stocks saw broad declines due to valuation pressures and waning investor interest in future earnings projections. This created a disconnect between strong company fundamentals and stock prices, complicating relative performance amid market weakness. Stock selection proved most effective in the industrials sector, with gains across 14 of the portfolio's 21 holdings in that area. Managers noted that top performers benefited from robust backlogs and order-driven demand, offering clear visibility into near-term earnings. Conestoga Capital Advisors highlighted that such periods of market turbulence have historically favored their strategy, though specifics on future positioning were not detailed in the commentary.