Leonardo DRS (DRS) Gained from the E-Drive and Golden Dome Initiative
Madison Small Cap Fund, managed by Madison Funds, released its Q1 2026 investor letter. A copy of the letter is available to download here. The Madison Small Cap Fund (class I) increased by 0.10% in the first quarter, trailing behind the Russell 2000 Index (up 0.89%) and the Russell 2500 Index (up 2.04%). Despite slightly underperforming the benchmark in the quarter, core positions and IT investments showed solid performance. From a style perspective, value stocks outperformed growth, with the Russell 2000 Value Index rising ~4.5% and the Russell 2000 Growth Index falling almost 3%. The outperformance of the value is driven by weakness in speculative names aligning with the Fund’s style and preference for quality, profitable franchises. The Fund believes the market volatility, influenced by AI concerns and geopolitical tensions, presents a potential opportunity for patient investors. Please review the Fund’s top five holdings to gain insights into their key selections for 2026.
In its first-quarter 2026 investor letter, Madison Small Cap Fund Strategy highlighted Leonardo DRS, Inc. (NASDAQ:DRS). Leonardo DRS, Inc. (NASDAQ:DRS) is a leading US-based defense technology company that provides electronic products and systems, and support services to US military and allied forces. On June 10, 2026, Leonardo DRS, Inc. (NASDAQ:DRS) closed at $49.69 per share. One-month return of Leonardo DRS, Inc. (NASDAQ:DRS) was 18.57%, and its shares gained 6.80% over the past 52 weeks. Leonardo DRS, Inc. (NASDAQ:DRS) has a market capitalization of $13.26 billion.
Madison Small Cap Fund stated the following regarding Leonardo DRS, Inc. (NASDAQ:DRS) in its Q1 2026 investor letter:
"Our investments in energy, materials, and defense had solid absolute performance in the quarter. We’d like to highlight Leonardo DRS, Inc. (NASDAQ:DRS), an investment we made in 2023. This smid-cap defense prime contractor has delivered better than expected results, driven by its electronic propulsion drive on the Columbia submarine platform, and has further opportunity in the Golden Dome initiative. The Golden Dome is a missile defense program championed by the Trump Administration to protect America’s airspace using a mix of space assets to track and target incoming attacks. DRS will be a provider for missile warning satellites, the tracking portion of this program. This is a well-managed company that is benefiting from the diversification of the Department of War’s procurement away from larger prime contractors with multiple opportunities to drive revenues in growing areas of US and allied defense spending."
Leonardo DRS, Inc. (NASDAQ:DRS) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 28 hedge fund portfolios held Leonardo DRS, Inc. (NASDAQ:DRS) at the end of the first quarter, compared to 35 in the previous quarter. While we acknowledge the potential of Leonardo DRS, Inc. (NASDAQ:DRS) 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.
In another article, we covered Leonardo DRS, Inc. (NASDAQ:DRS) and shared the list of best performing defense stocks so far in 2026. 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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Disclosure: None. This article is originally published at Insider Monkey.