Granahan Investment Management, an investment management company, released its second-quarter 2026 investor letter for its “Small Cap Core Growth Strategy”. The letter can be downloaded here. Equity markets strongly rebounded in Q2, with small-cap growth stocks significantly outperforming large-cap indexes. The strategy returned 46.7% in the quarter compared to 25.7% for the Russell 2000 Growth Index. For H1, the portfolio gained 39.4%, compared to 22.2% for the index. The outperformance was mainly due to stock selection and improving operating results, company-specific catalysts, and the re-rating of undervalued businesses. While there are concerns about a “low-quality” rally involving heavily shorted or unprofitable companies, the overall strengthening of small-cap performance has been supported by improving earnings expectations. Given the rally’s magnitude, the firm remains disciplined by trimming selected holdings, managing position sizes, and reinvesting capital in opportunities with more attractive prospective returns. Additionally, reviewing the Fund’s top five holdings could help identify its best picks for 2026.
In its second-quarter 2026 investor letter, GIM Small Cap Core Growth Strategy highlighted Onto Innovation Inc. (NYSE:ONTO). Onto Innovation Inc. (NYSE:ONTO) is a semiconductor equipment and software company that designs, develops, manufactures, and supports process control tools for macro-defect inspection and metrology. On September 24, 2026, Onto Innovation Inc. (NYSE:ONTO) closed at $279.73 per share. Over the past month, Onto Innovation Inc. (NYSE:ONTO) returned 3.30%, but its shares are up 119.26% over the past year. Onto Innovation Inc. (NYSE:ONTO) has a market capitalization of $17.09 billion, and its stock has traded within a 52-week range of $118.97 to $386.46.
GIM Focused Growth Strategy stated the following regarding Onto Innovation Inc. (NYSE:ONTO) in its Q2 2026 investor letter:
“Onto Innovation Inc. (NYSE:ONTO) was a top contributor during the quarter as investor confidence improved around the company’s exposure to advanced semiconductor manufacturing, packaging, and AI-related demand. The stock benefited from stronger expectations for industry spending, continued execution, and recognition of Onto’s differentiated position across process control and inspection markets. We trimmed the position into strength, while maintaining a constructive long-term view on the company’s growth opportunities.
Onto Innovation Inc. (NYSE:ONTO) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. According to our database, 75 hedge fund portfolios held Onto Innovation Inc. (NYSE:ONTO) at the end of the second quarter, compared to 67 in the previous quarter. While we acknowledge the potential of Onto Innovation Inc. (NYSE:ONTO) 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.
