EV Content and Data Center Expansion Strengthen Allegro Microsystems’ (ALGM) Long-Term Thesis

Conestoga Capital Advisors , an asset management company, released its third-quarter 2026 investor letter. The letter can be downloaded here . In 2026, Small Caps initially outperformed but faced challenges in the third quarter, marked by the Russell 2000 Growth Index's -9.4% decline versus the S&P 500's +2.3% rise. Factors such as rising Treasury yields and higher oil prices due to geopolitical tensions, especially in Iran, played a role. The Federal Reserve's policy shifts influenced market sentiment, leading to a selloff in AI and semiconductor stocks, although a stable Fed outlook provided a temporary recovery. The Conestoga Small Cap Composite fell -11.22% in the quarter, underperforming the Russell 2000 Growth Index's -9.39% return, impacted by exposure to struggling sectors like Industrials and Consumer Discretionary, while Health Care and Technology showed resilience. The firm remains committed to owning high-quality companies with strong competitive moats and resilient growth, driving long-term value creation. Also, check the Fund's top five holdings to see its best picks for 2026.

In its Q3 2026 investor letter, Conestoga Capital Advisors highlighted Allegro MicroSystems, Inc. (NASDAQ: ALGM ). Allegro MicroSystems, Inc. (NASDAQ:ALGM) is a semiconductor company that develops sensor integrated circuits (ICs) and application-specific power ICs for sensing, motion control, and power management functions. On October 28, 2026, Allegro MicroSystems, Inc. (NASDAQ:ALGM) closed at $35.37 per share with a market capitalization of $6.59 billion. Reflecting the recent momentum, Allegro MicroSystems, Inc. (NASDAQ:ALGM) posted a 34.08% YTD gain, trading within a 52-week range of $22.41 to $71.77.

Conestoga Capital Advisors stated the following regarding Allegro MicroSystems, Inc. (NASDAQ:ALGM) in its Q3 2026 investor letter:

"Allegro MicroSystems, Inc.(NASDAQ:ALGM) makes sensing and power semiconductors, primarily for automotive and industrial customers. We initiated a position because vehicle electrification, driver assistance systems and other electronic features are increasing chip content per vehicle. Lengthy qualification cycles make ALGM's chips difficult to replace once incorporated into a vehicle's design. Data centers offer another opportunity through chips used in cooling fans and power supplies. This business reached a record 17% of sales in the June quarter. Bookings have risen for seven straight quarters, and we believe rising chip content in vehicles and growing data-center demand to support long-term growth."