Voya Investment Management, an investment management company, released its second-quarter 2026 investor letter for its "Voya MI Dynamic Small Cap Fund." A copy of the letter can be downloaded here. US Equity markets rebounded strongly in the second quarter of 2026, recovering from geopolitical tensions that nearly pushed the S&P 500 Index into correction territory. Technology dominated the landscape, powered by increasing AI adoption, while industrials benefited from strong capital expenditure.
Small-cap and growth stocks outperformed; investors grew selective amid concerns about returns, competition, and regulation. The Fund outperformed the Index, benefitting from stock selection in energy, consumer discretionary, and health care sectors. Overall market performance could become more volatile due to rising costs and increased supply from IPOs and secondary issuances.
Additionally, reviewing the Fund's top five holdings could help identify its best picks for 2026. In its Q2 2026 investor letter, Voya MI Dynamic Small Cap Fund highlighted Flowserve Corporation (NYSE:FLS), which accounted for 1.38% of the portfolio, detracted from performance during the quarter. Flowserve Corporation (NYSE:FLS) is an industrial company that focuses on industrial flow management equipment.
On August 14, 2026, Flowserve Corporation (NYSE:FLS) closed at $80.87 per share. The one-month return of Flowserve Corporation (NYSE:FLS) was 21.17%, and its shares gained 51.95% over the past 52 weeks. Flowserve Corporation (NYSE:FLS) has a market capitalization of $10.28 billion.
Voya MI Dynamic Small Cap Fund stated the following regarding Flowserve Corporation (NYSE:FLS) in its Q2 2026 investor letter: "Our position in non-benchmark stock Flowserve Corporation (NYSE:FLS). was driven by the machine learning models' positive view of its valuation (earnings before interest, taxes, depreciation, and amortization (EBITDA)) and short interest features. Flowserve, a supplier of industrial pumps and valves, had a negative impact on performance. Shares weakened after declining organic sales, reduced growth outlook, and activist investor pressure questioning management execution." Flowserve Corporation (NYSE:FLS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026.
According to our database, 48 hedge fund portfolios held Flowserve Corporation (NYSE:FLS) at the end of the first quarter, compared to 51 in the previous quarter. While we acknowledge the potential of Flowserve Corporation (NYSE:FLS) 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.
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