Investment management company First Pacific Advisors recently released its "FPA Queens Road Small Cap Value Fund" second-quarter 2026 investor letter. A copy of the letter can be downloaded here. The Fund returned 27.02% in the first half of 2026, outperforming the Russell 2000 Value Index's 22.99% gain and the S&P 600 Index's 23.90% return. Small-cap earnings growth also began accelerating relative to large caps, while the small-cap technology sector surged nearly 100% in 26H1. The fund's technology holdings gained 72.39%, contributing 14.87 percentage points, compared with a 95.27% return and 7.10-point contribution from the benchmark's technology sector. Excluding IT and cash, the Fund contributed 12.73% versus 15.89% for the Russell 2000 Value Index; on a fully invested basis, the figures were 16.62% and 17.59%, respectively. The portfolio continued to trim appreciated technology holdings amid the AI-driven rally, while maintaining a bottom-up approach and avoiding beaten-down SaaS stocks due to the widening range of AI-related outcomes. The fund also eliminated about $62 million in capital gains during Q2 and approximately $140 million year-to-date through July, while ending the quarter with 10.2% in cash. In addition, please check the Fund's top five holdings to know its best picks in 2026.
In its second-quarter 2026 investor letter, FPA Queens Road Small Cap Value Fund highlighted stocks like Upbound Group (NASDAQ:UPBD). Upbound Group (NASDAQ:UPBD) provides consumer leasing and retail solutions through brands including Rent-A-Center, serving customers seeking flexible payment options. The one-month return of Upbound Group (NASDAQ:UPBD) was -10.86% while its shares traded between $15.82 and $28.03 over the last 52 weeks. On August 28, 2026, Upbound Group (NASDAQ:UPBD) stock closed at approximately $19.22 per share, with a market capitalization of about $1.07 billion.
FPA Queens Road Small Cap Value Fund stated the following regarding Upbound Group (NASDAQ:UPBD) in its Q2 2026 investor letter:
"Upbound Group (NASDAQ:UPBD) lends to sub-prime consumers in two primary segments: Rent-a-Center, which focuses on furniture and appliances through physical stores; and Acima, which offers last-look financing through ***** ociated retailers including electronics and tire shops ("Buy Now Pay Later"). Sub-prime consumers are struggling but Upbound's operating results remain stable. The company has been slow to de-lever after purchasing Acima in 2021 and made another incremental acquisition on Jan. 31, 2025 when it bought Brigit, an app that charges subscription fees to access payday lending. UPBD's stock is cheap at less than five times earnings. But we have been slow to add given the company's leverage and concerns regarding the Buy Now Pay Later segment".

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