Small Cap Core Strategy Profile — As of 3/31/2026
Composite Performance
| Period | Gross of Fees | Net of Fees | Russell 2000 |
|---|---|---|---|
| QTD | 1.94% | 1.69% | 0.89% |
| YTD | 1.94% | 1.69% | 0.89% |
| 1 Year | 43.97% | 42.55% | 25.72% |
| 3 Years | 22.55% | 21.34% | 13.05% |
| 5 Years | 8.35% | 7.28% | 3.77% |
| 10 Years | 13.99% | 12.86% | 9.88% |
| Since Inception (1/01/1999) | 11.88% | 10.77% | 8.18% |
Overview
The Ironwood Small Cap Core strategy is designed to serve a strategic, long-term role in investment portfolios. The strategy invests in listed equity securities of U.S.-based companies and is diversified across 60–80 positions with a single position limit of 10%. We hold positions to mitigate risk and portfolio volatility as well as capture positive return potential through any market environment or economic cycle. Our areas of expertise are stock-level analysis and selection, opportunistic exploitation of stock price inefficiencies, and the ability to patiently compound capital over a long-term time horizon. Through fundamental research we seek to identify high-quality companies with the potential to create significant shareholder value before they are recognized by the broader market.
Investment Philosophy
The Ironwood Small Cap Core strategy combines our passion for identifying high-quality companies with our research and investment discipline practiced over decades to capitalize on the opportunities created by behavioral-based market actions, which are particularly pronounced in the small cap market. Volatility is a phenomenon we observe and exploit; it is not our definition of risk. As long-term investors, we focus on finding what we refer to as high Ironwood-quality companies that have the attributes that will enable them to adapt to challenges and seize opportunities that will undoubtedly arise over our holding periods. We believe effective management teams proactively manage ESG issues, and we integrate this into our assessment of quality companies and management teams. We believe a core strategy should be a strategic allocation of long-term investments and therefore manage a portfolio built stock-by-stock that has diversified exposure to earnings growth, is not predicated on a particular ‘style’ being in favor, and has the latitude to let our best-performing holdings drive portfolio return. We aim to “stack the deck” of excess returns through our rigorous focus on buying at irrationally low valuations, and then preserving the full potential of our investments by remaining patient, engaged investors with a long-term mindset.
Small Cap Core Strategy Characteristics
Strategy Highlights
Investment Universe: Russell 2000 Small Cap Index
Investment Approach
- Seeks high “Ironwood-Quality” companies through bottom-up research process.
- ‘Growth’ and ‘Value’ are basic tool sets, not philosophies, used to analyze stocks.
- Diversified exposure of 60–80 positions across 8 economic sectors.
- Exploits downside share pricing overreactions to buy stocks for long-term holds.
Ironwood ESG Company Characteristics
- E: Thoughtful management of resource use, waste reductions, and product/service impacts.
- S: Good HR, supply-chain, and community relations practices; healthy products and services.
- G: Alignment of management and board structure and practices with shareholders and with consideration of all stakeholders.
Top Ten Equity Holdings (As of 3/31/2026)
| Holding | Weight |
|---|---|
| MYR Group Inc. | 5.52% |
| Vicor Corporation | 4.55% |
| BridgeBio Pharma, Inc. | 4.21% |
| Dycom Industries, Inc. | 4.10% |
| TTM Technologies, Inc. | 3.40% |
| Cytokinetics, Incorporated | 2.96% |
| Pegasystems Inc. | 2.59% |
| Watts Water Technologies, Inc. | 2.33% |
| Somnigroup International Inc. | 2.30% |
| Tutor Perini Corporation | 2.26% |
| Total Weight in Top Ten | 34.22% |
Market Capitalization (As of 3/31/2026)
| Range | Weight |
|---|---|
| Over $5 Billion | 43.28% |
| $4 Billion – $5 Billion | 10.54% |
| $3 Billion – $4 Billion | 6.82% |
| $1.5 Billion – $3 Billion | 15.79% |
| $500 Million – $1.5 Billion | 14.42% |
| Under $500 Million | 5.81% |
| Cash | 3.34% |
Portfolio Characteristics (As of 3/31/2026)
| Metric | Value |
|---|---|
| Price/Book Value | 3.7x |
| TEV/EBITDA | 14.5x |
| TEV/Total Revenues | 2.7x |
| Price/Normalized EPS | 30.9x |
Sector Allocation (As of 3/31/2026)
| Sector | Fund | Russell 2000* |
|---|---|---|
| Consumer Discretionary | 8.81% | 8.41% |
| Consumer Staples | 5.23% | 1.81% |
| Energy | 0.49% | 6.74% |
| Health Care | 12.02% | 17.73% |
| Financial Services | 11.40% | 17.07% |
| Industrials | 30.32% | 18.18% |
| Information Technology | 24.06% | 14.14% |
| Materials | 3.93% | 4.92% |
| Utilities | 0.00% | 3.07% |
| Real Estate | 0.00% | 5.33% |
| Communication Services | 0.40% | 2.58% |
| Cash | 3.34% | 0.00% |
Small Cap Core Strategy Commentary
Market Overview
Q1 2026 reinforced a core principle of small-cap investing: volatility is not noise—it is the mechanism through which opportunity is created.
The year began with strong momentum, as the Russell 2000 advanced 6.2% through the first two months. That strength reversed sharply in March following the outbreak of war with Iran, driving a 5.0% decline for the month and highlighting the market’s sensitivity to geopolitical shocks.
Against this backdrop, the Ironwood Small Cap Core Strategy returned 1.94% gross of fees (1.69% net), outperforming the Russell 2000’s 0.89% return by 105 basis points gross (80 basis points net). While quarterly results are inherently variable, periods of dislocation such as March often create the conditions for future returns.
Strategy Performance
Over longer periods, results are driven not by short-term market movements, but by the consistent application of a disciplined investment process.
We are pleased to report that the strategy was ranked #1 in the PSN database of 156 U.S. Small Cap Core strategies for the three-year period ending December 31, 2025. During this period, the strategy generated an average annual return of 24.60% gross of fees (23.37% net of fees), materially exceeding the Russell 2000’s 13.73% annual return.
We view this outcome not as an endpoint, but as a byproduct of a process that emphasizes valuation, discipline, patience, and a willingness to act when markets become dislocated.
Investment Philosophy: Discipline in the Face of Volatility
Our approach is grounded in a set of enduring principles that guide decision-making across market cycles:
- We invest in high-quality businesses—what we refer to as High I-Q (Ironwood Quality) companies—that possess durable competitive advantages, strong balance sheets, and the ability to grow shareholder value over extended periods.
- We seek to purchase these businesses when they are mispriced, often during periods of stress, controversy, or temporary operational setbacks that create a disconnect between price and value.
- Our research process is continuous and hands-on. We monitor company developments closely through SEC filings, earnings calls, and direct engagement with management teams, maintaining a current and informed view of each investment.
- Risk management is achieved through diversification and disciplined position sizing. New investments are typically initiated at modest weights, allowing conviction to build over time as the thesis is validated.
- Patience is central to our process. We are long-term investors, and we believe that meaningful wealth creation comes from allowing strong businesses the time required to execute their strategic plans.
- At the same time, we remain intellectually curious and humble. Markets are complex and often irrational, and our goal is not to predict outcomes with certainty, but to make rational decisions in environments where others may not.
Outlook
The economic outlook entering 2026 was broadly constructive, with expectations for continued expansion and the potential for interest rate easing. The emergence of geopolitical conflict in the Middle East has introduced a new layer of uncertainty, particularly through its impact on energy markets and inflation expectations.
We do not attempt to forecast the duration or resolution of such events. Instead, we focus on how market reactions to uncertainty create opportunity.
Sharp market dislocations—such as those experienced in March—often lead to indiscriminate selling, creating attractive entry points in high-quality businesses whose long-term prospects remain intact. For companies with strong fundamentals, adaptable business models, and prudent capital allocation, these environments can be particularly compelling.
Periods like this reinforce the importance of our approach: maintaining discipline, focusing on fundamentals, and acting selectively when valuations become attractive.
Portfolio Activity and Positioning
Portfolio activity during the quarter reflected a consistent theme: selectively adding to high-quality businesses where short-term volatility created attractive entry points.
We initiated a new position in Goosehead Insurance (GSHD) and added to existing positions including Extreme Networks (EXTR), Beacon Financial Corp. (BBT), Impinj Inc. (PI), Pagaya Technologies (PGY), and Porch Group, Inc. (PRCH). In each case, we believe market volatility provided an opportunity to increase exposure at attractive valuations.
We exited our position in Seres Therapeutics (MCRB) during the quarter as our assessment of the risk profile evolved.
We trimmed our position in iShares Russell 2000 ETF (IWM).
Long-Term Track Record
The strategy reached a new all-time high during Q1 and, since inception, has compounded capital approximately 21 times for our initial investors. This long-term outcome underscores the importance of maintaining a consistent process through varying market environments.
+11.88% average annual return (gross) since inception, vs. +8.18% for Russell 2000 Index
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Source: Advent. Past performance is not indicative of future results.
Top Contributors
Performance during the quarter was driven by a range of companies benefiting from both company-specific developments and broader industry trends.
- Vicor Corporation (VICR) delivered strong returns driven by growth in licensing revenues and improved capacity utilization.
- MYR Group Inc. (MYRG) benefited from sustained demand for electrical infrastructure, particularly related to AI-driven data center expansion.
- TTM Technologies, Inc. (TTMI) saw broad-based strength across its end markets, including data center, aerospace, and medical applications.
- Darling Ingredients Inc. (DAR) benefited from higher energy prices, which improved the economics of its renewable diesel operations.
- LSB Industries, Inc. (LXU) gained as fertilizer pricing increased in response to global supply disruptions.
Bottom Detractors
Detractors during the quarter were primarily driven by valuation adjustments and changing market sentiment rather than fundamental deterioration.
- Impinj, Inc. (PI) declined following a period of strong performance, as valuation levels reset. We view the long-term opportunity as intact and added to the position.
- Pegasystems Inc. (PEGA) declined amid concerns about AI-related disruption in the software industry. We continue to monitor the evolving landscape closely.
- Somnigroup International Inc. (SGI) stock experienced selling pressure despite strong operating results, reflecting broader concerns about consumer spending.
- SPS Commerce, Inc. (SPSC) and Zscaler, Inc. (ZS) both declined as growth expectations moderated and valuations adjusted accordingly.
In several of these cases, we used the weakness to selectively increase exposure where our long-term conviction remains strong.
Portfolio Changes
New Position
- Goosehead Insurance, Inc. (GSHD) — We initiated a position in Goosehead, a rapidly growing independent insurance distribution platform. The company’s model—focused on broad carrier access and a high-service client experience—positions it well in an environment where rising insurance premiums are likely to drive increased consumer shopping behavior. We believe the market underappreciates the company’s long-term growth potential and scalability.
Additions to Existing Positions
- Extreme Networks, Inc. (EXTR) — We added to Extreme Networks as recent market weakness created an attractive entry point despite continued solid operating performance.
- Beacon Financial Corporation (BBT) — We increased our position following the merger of Berkshire Hills and Brookline Bank, where we see meaningful opportunities for cost synergies and improved profitability.
- Pagaya Technologies Ltd. (PGY) — We added to Pagaya following a pullback related to tighter credit standards, which we view as a prudent long-term decision.
- Porch Group, Inc. (PRCH) — We added to Porch Group as we continue to build our position.
- Impinj, Inc. (PI) — We added to Impinj as valuation became more attractive following the recent decline, while the company’s leadership position in RFID technology remains intact.
Sales
- Seres Therapeutics, Inc. (MCRB) — We exited our position as our assessment of the company’s risk profile changed.
- iShares Russell 2000 ETF (IWM) — We trimmed our position.
Closing Perspective
Environments such as those experienced in Q1 are a reminder that volatility is an inherent feature of small-cap investing, not a flaw.
Our focus remains unchanged: identifying high-quality businesses, purchasing them at attractive valuations, and allowing time for their underlying value to be realized. We believe this disciplined approach, applied consistently over time, remains the most reliable path to good long-term investment performance.
Footnotes to Performance
Awarded February 18, 2026. PSN is not a client, and no compensation was paid or received in exchange for the ranking. Register for free to view the full PSN Top Guns recipient list and award at https://psn.fi.informais.com/.
Ironwood Investment Management®, LLC (Ironwood) is an independently managed investment advisory firm providing investment advisory services to institutional clients, mutual funds, and high-net-worth clients. The firm is a registered investment adviser with the Securities and Exchange Commission. SEC Registration does not imply a certain level of skill or training. Accounts in the Small Cap Core composite include separately managed, fully discretionary, fee-paying portfolios. Portfolios are invested in undervalued securities, the majority of which will have market capitalizations under $2.5 billion at cost, including securities with growth and/or value characteristics. Securities are considered undervalued when management believes the current share price does not accurately reflect the long-term economic value of the underlying company.
Ironwood Investment Management, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. Ironwood Investment Management, LLC has been independently verified for the periods January 1, 1999 through December 31, 2021. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. The Small Cap Core composite has had a performance examination for the periods July 1, 2002 to December 31, 2021. The verification and performance examination reports are available upon request.
GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. The creation date of the composite: July 2002. Performance inception date of the composite: January 1, 1999. Prior to July 2002, portfolios were included in the composite when at least 75% of the portfolio was invested in equity securities and when at least 75% of the portfolio was invested according to the investment style of the composite. Subsequent to July 2002, portfolios are included in the composite after the first full month of being fully invested. Returns are presented gross and net of management fees and include the reinvestment of all income. Net returns are calculated based on the highest fee of 1.00%. Investment management fees are 1.00% on the first $25 million, 0.90% on the next $25 million, 0.80% on the next $50 million, and 0.75% over $100 million on an annual basis and a client’s return will be reduced by these and other related expenses. The actual fee charged to an individual portfolio may vary by size and type of portfolio and may be negotiated. Actual investment advisory fees incurred by clients may vary.
The Russell 2000 Index consists of the 2000 smallest stocks in the Russell 3000 Index that represents approximately 8% of the U.S. equity market capitalization. The indices have been reconstituted annually since 1989. Ironwood returns and Index performance reflect reinvested interest income and dividends, in U.S. dollars. A list of composite descriptions and a list of limited distribution pooled fund descriptions are available upon request. Past performance is not indicative of future results. Policies for valuing investments, calculating performance and preparing GIPS Reports are available upon request. Prior to May 2006, the Firm was known as Ironwood Capital Management, LLC.