The London Company, an investment management company, released its second-quarter 2026 investor letter for its "Small Cap Strategy." U.S. equities rebounded in the quarter, driven by AI infrastructure spending and positive earnings. The letter can be downloaded here. Despite this optimism, rate outlook uncertainty persisted.
Technology, previously weak, surged to lead the market, especially in semiconductors, while energy declined as oil prices fell. Small caps outperformed large caps, with momentum and volatility factors leading, although quality and yield were headwinds for portfolios. The London Company Small Cap portfolio increased 12.9% during the quarter, underperforming the Russell 2000 Index's 21.5% gain, primarily due to stock selection issues.
The firm remains confident in the durable, high-quality businesses for attractive long-term compounding. Please review the Fund's top five holdings to learn more about its key selections for 2026. In its second-quarter 2026 investor letter, London Company Small Cap Strategy highlighted McGrath RentCorp (NASDAQ:MGRC).
The Strategy added McGrath RentCorp (NASDAQ:MGRC), a US-based business-to-business rental company, to its portfolio during the quarter. On September 21, 2026, McGrath RentCorp (NASDAQ:MGRC) closed at $111.76 per share. Over the past month, McGrath RentCorp (NASDAQ:MGRC) declined 2.59%, but its shares are down 6.43% over the past year.
McGrath RentCorp (NASDAQ:MGRC) has a market capitalization of $2.73 billion, and its stock has traded within a 52-week range of $94.99 to $125.83. London Company Small Cap Strategy stated the following regarding McGrath RentCorp (NASDAQ:MGRC) in its Q2 2026 investor letter: "Initiated: McGrath RentCorp (NASDAQ:MGRC) – MGRC is a leading business-to-business specialty rental company operating across modular buildings, portable storage, and electronic test equipment. It serves commercial, education, healthcare, and data center customers through a primarily recurring rental model.
Education represents roughly one third of revenue and provides stable, longer-duration leases funded through state and local bond measures. MGRC has organically grown market share from approximately 4% to 14%, generates returns on invested capital above 20%, and maintains a conservatively financed balance sheet that supports organic growth, tuck-in acquisitions, and capital return. Regional scale advantages — including deep fleet availability, internal maintenance capabilities, and regulatory expertise — allow MGRC to compete effectively on complex, higher-value projects where reliability and timely installation are more important than being the lowest-cost provider.
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