Aristotle Capital Boston, LLC, an investment advisor, released its "Small Cap Equity Fund" Q2 2026 investor letter. A copy of the letter can be downloaded here. The Fund returned 13.69% in the second quarter of 2026, trailing the Russell 2000 Index's 21.49% gain as security selection in information technology and industrials weighed on performance despite positive allocation effects. Top contributors included MACOM Technology Solutions and Mercury Systems, which benefited from strong demand in semiconductor, aerospace, and defense markets, while Alamos Gold and Huron Consulting Group detracted due to operational challenges, weaker gold prices, and investor concerns surrounding artificial intelligence disruption. During the quarter, the fund initiated positions in IPG Photonics and UMB Financial, citing opportunities tied to advanced manufacturing, automation, reshoring trends, and diversified financial services, while exiting Americold Realty Trust, Byline Bancorp, and Verra Mobility. Looking ahead, management remains constructive on U.S. small-cap equities, noting that valuations remain attractive relative to large caps and that earnings growth is expected to accelerate into late 2026 and 2027. Factors such as increased merger and acquisition activity, improving domestic manufacturing due to reshoring and infrastructure investments, and a favorable regulatory environment are expected to support this asset class in the long term. In addition, please check the Fund's top five holdings to know its best picks in 2026.
In its second-quarter 2026 investor letter, Aristotle Small Cap Equity Fund highlighted stocks like Mercury Systems, Inc. (NASDAQ:MRCY). Mercury Systems, Inc. (NASDAQ:MRCY) develops advanced computing, signal-processing, and electronic systems for defense and aerospace applications. The one-month return of Mercury Systems, Inc. (NASDAQ:MRCY) was -9.51% while its shares traded between $65.04 and $128.45 over the last 52 weeks. On August 19, 2026, Mercury Systems, Inc. (NASDAQ:MRCY) stock closed at approximately $101.25 per share, with a market capitalization of about $6.65 billion.
Aristotle Small Cap Equity Fund stated the following regarding Mercury Systems, Inc. (NASDAQ:MRCY) in its Q2 2026 investor letter:
Mercury Systems, Inc. (NASDAQ:MRCY) is a developer of mission critical computing, signal processing, software and secure electronics technologies used in aerospace and defense applications. The stock was rewarded for the company's successful acceleration of deliveries on several high priority defense programs, alongside continued progress on its restructuring initiatives and cost reduction efforts. We maintain our position as we believe Mercury Systems is emerging from a multi-year operational reset, with improving execution, expanding margins and lower leverage. In addition, we believe the stock is trading at attractive valuations relative to its normalized earnings power given the strong underlying demand across its aerospace and defense end markets, which should continue to create shareholder value over time.