Investment management company First Pacific Advisors recently released its "FPA Queens Road Small Cap Value Fund" Q3 2026 investor letter. A copy of the letter can be downloaded here . The Fund returned -7.62% in the third quarter of 2026, underperforming the Russell 2000 Value Index, which fell 4.91%. However, the Fund's year-to-date return of 17.35% exceeded the benchmark's 16.96%. Portfolio managers attributed the quarterly underperformance primarily to the Fund's lack of exposure to Energy and Healthcare, and weakness in consumer discretionary holdings. They noted that recent small-cap gains had been driven largely by speculative stocks, including loss-making companies and biotechnology businesses, while profitable small-cap companies continued to trade at attractive valuations relative to larger peers. During the quarter, the fund reduced its exposure to appreciated technology stocks and invested in established businesses with sound fundamentals and reasonable valuations. Looking ahead, the managers acknowledged continued market volatility but remained confident in the Fund's long-term prospects, emphasizing that discipline, patience, and a focus on business fundamentals would help the portfolio navigate speculative market conditions. In addition, please check the Fund's top five holdings to know its best picks in 2026.
In its third-quarter 2026 investor letter, FPA Queens Road Small Cap Value Fund highlighted stocks like Upbound Group, Inc. (NASDAQ: UPBD ). Upbound Group, Inc. (NASDAQ:UPBD) provides consumer financing and lease-to-own services through two primary businesses: Rent-A-Center, which offers furniture and appliances through physical stores, and Acima, which provides financing through retail partners. The one-month return of Upbound Group, Inc. (NASDAQ:UPBD) was 44.59% while its shares traded between $14.98 and $23.98 over the last 52 weeks. On October 30, 2026, Upbound Group, Inc. (NASDAQ:UPBD) stock closed at approximately $20.70 per share, with a market capitalization of about $1.33 billion.
FPA Queens Road Small Cap Value Fund stated the following regarding Upbound Group, Inc. (NASDAQ:UPBD) in its Q3 2026 investor letter:
" Upbound Group, Inc. (NASDAQ:UPBD)lends to sub-prime consumers in two primary segments: Rent-a-Center, which focuses on furniture and appliances through physical stores; and Acima, which offers last-look financing through associated retailers including electronics and tire shops. Sub-prime consumers are struggling, but Upbound's operating results have held up. The company has been slow to de-lever after purchasing Acima in 2021. Shares are cheap, but we have been slow to add given the company's leverage and questions about its business model."
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Upbound Group, Inc. (NASDAQ:UPBD) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026 . As per our database, 26 hedge fund portfolios held Upbound Group, Inc. (NASDAQ:UPBD) at the end of the second quarter, which was 25 in the previous quarter. While we acknowledge the risk and potential of Upbound Group, Inc. (NASDAQ:UPBD) 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 Upbound Group, Inc. (NASDAQ:UPBD) and shared FPA Queens Road Small Cap Value Fund's views on the company. In addition, please check out our hedge fund investor letters Q3 2026 page for more investor letters from hedge funds and other leading investors.
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This article is originally published at Insider Monkey .
