Riverwater Partners, an investment management company, released its “Small Cap Strategy” Q1 2026 investor letter. A copy of the letter can be downloaded here. In Q1 2026, the Riverwater Small Cap Strategy outperformed the Russell 2000 Index. The quarter rewarded patience and discipline. The first quarter of 2026 saw a significant shift in market leadership and risk perceptions, due to geopolitical tensions in the Middle East and concerns over sustainable growth in the software and AI sectors. Additionally, private credit markets are under stress. In this environment, the firm is concentrating on identifying market dislocations caused by what it perceives as indiscriminate selling, particularly in AI-related areas. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Riverwater Partners Small Cap Strategy highlighted stocks like Tennant Company (NYSE:TNC). Tennant Company (NYSE:TNC) is a leading manufacturer and marketer of floor cleaning equipment that offers manual and autonomous mechanized cleaning equipment for industrial and commercial use. On May 5, 2026, Tennant Company (NYSE:TNC) closed at $82.63 per share. One-month return of Tennant Company (NYSE:TNC) was 10.45%, and its shares gained 16.74% over the past 52 weeks. Tennant Company (NYSE:TNC) has a market capitalization of $1.41 billion.
Riverwater Partners Small Cap Strategy stated the following regarding Tennant Company (NYSE:TNC) in its Q1 2026 investor letter:
We divested from Tennant Company (NYSE:TNC) during the quarter following a significant ERP system implementation failure that halted customer orders for a three-week period. With the system still not fully recovered, we remain concerned about the potential for strained client relationships or the necessity of offering discounts to retain major accounts.
Tennant Company (NYSE:TNC) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 22 hedge fund portfolios held Tennant Company (NYSE:TNC) at the end of the fourth quarter, up from 20 in the previous quarter. While we acknowledge the potential of Tennant Company (NYSE:TNC) 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 another article, we covered Tennant Company (NYSE:TNC) and shared the list of stocks from dividend kings list. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.