The London Company, an investment management company, released its second-quarter 2026 investor letter for its "Small-Mid Cap Strategy." The letter can be downloaded here. U.S. equities rebounded sharply in Q2, with the Russell 3000 gaining 15.4%, supported by AI infrastructure spending, strong earnings, and easing Middle East tensions. Technology led the rally as semiconductors recovered, while Energy and defensive sectors lagged. The portfolio returned 12.1% gross and 11.8% net compared with a 20.3% gain in the Russell 2500 Index. Stock selection weighed on relative performance, as high-beta and high-volatility stocks dominated returns while Quality remained weak, although results improved in June as market participation broadened. Looking ahead, resilient earnings and AI productivity support a constructive outlook, but negative hyperscaler cash flow, sticky inflation, geopolitical risks, index concentration, and elevated valuations warrant caution. The strategy continues to emphasize quality, downside protection, and active management. Additionally, reviewing the Fund's top five holdings could also highlight its best ideas for 2026.
In its second-quarter 2026 investor letter, London Company SMID Cap Strategy highlighted Churchill Downs Incorporated (NASDAQ:CHDN). Churchill Downs Incorporated (NASDAQ:CHDN) operates live and historical racing entertainment venues, online wagering businesses, and regional casino gaming properties in the United States. On August 26, 2026, Churchill Downs Incorporated (NASDAQ:CHDN) closed at $87.57 per share. Over the past month, Credit Acceptance Corporation (NASDAQ:CACC) returned 4.40%, while its shares have declined 16.08% in the last 52 weeks. Credit Acceptance Corporation (NASDAQ:CACC) has a market capitalization of $6.10 billion.
London Company SMID Cap Strategy stated the following regarding Churchill Downs Incorporated (NASDAQ:CHDN) in its Q2 2026 investor letter:
"Churchill Downs Incorporated (NASDAQ:CHDN) declined despite solid operating results as Derby Week growth fell slightly short of elevated investor expectations. The business continues to execute well, supported by strong Historical Racing Machine growth, improving leverage, and healthy cash flow generation. We believe the recent weakness is disconnected from the underlying fundamentals and remain confident in the company's ability to compound earnings through disciplined capital allocation, pricing power, and continued investment in its differentiated gaming and racing **** ets."

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