Gabelli Investment Management Firm recently released its "Small Cap Growth Fund" second-quarter 2026 investor letter. A copy of the letter can be downloaded here. The Fund returned 14.44% in the second quarter of 2026, underperforming the Russell 2000 Index, which gained 21.49%, as well as the S&P SmallCap 600 and Lipper Small-Cap Core Funds Average.
The Fund's performance reflected weaker relative results despite gains across several portfolio holdings, while the broader small-cap market delivered a particularly strong quarter. The Fund remains focused on identifying smaller companies with attractive long-term growth potential, with its investment approach centered on fundamental research and opportunities where the market price does not fully reflect the underlying value of a business. The Fund had $1.9 billion in net assets at quarter-end and has generated a 12.18% annualized return since inception, underscoring its long-term focus despite shorter-term periods of relative underperformance.
In addition, please check the Fund's top five holdings to know its best picks in 2026. In its second-quarter 2026 investor letter, Gabelli Small Cap Growth Fund highlighted stocks like Crane Co. (NYSE:CR). Crane Co. (NYSE:CR) is a manufacturer of highly engineered components for mission-critical applications focused on aerospace, defense, space, and process industry end markets.
Its segments include Aerospace & Electronics and Process Flow Technologies. The one-month return of Crane Co. (NYSE:CR) was -2.50% while its shares traded between $159.58 and $230.50 over the last 52 weeks. On September 21, 2026, Crane Co. (NYSE:CR) stock closed at approximately $198.96 per share, with a market capitalization of about $11.62 billion.
Gabelli Small Cap Growth Fund stated the following regarding Crane Co. (NYSE:CR) in its Q2 2026 investor letter: "Crane Co. (NYSE:CR) is a manufacturer of highly engineered components for mission-critical applications focused on aerospace, defense, space and process industry end markets. As per our database, 47 hedge fund portfolios held Crane Co. (NYSE:CR) at the end of the first quarter, which was 59 in the previous quarter. While we acknowledge the risk and potential of Crane Co. (NYSE:CR) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame.
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. In another article, we covered Crane Co. (NYSE:CR) and shared our views on the company's $240 million pump deal. In addition, please check out our hedge fund investor letters Q1 2026 page for more investor letters from hedge funds and other leading investors.
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