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Investment management company First Pacific Advisors recently released its “FPA Queens Road Small Cap Value Fund” first-quarter 2026 investor letter. A copy of the letter can be downloaded here. In a volatile but positive quarter, the FPA Queens Road Small Cap Value Fund (“Fund”) returned 6.07%, beating the Russell 2000 Value Index’s 4.96%. The Fund expects better performance in down markets and underperformance in speculative ones due to its disciplined approach. Amid ongoing global commodity shocks, political issues, and economic fallout from the Iran conflict, the letter discusses small-caps and the firm's long-term investment strategy. In Q1, the fund continued to rebalance the portfolio towards higher-quality holdings, focusing on balance sheet strength, earnings consistency, and returns on capital. In addition, please check the Fund’s top five holdings to know its best picks in 2026.

In its first-quarter 2026 investor letter, FPA Queens Road Small Cap Value Fund highlighted stocks like RLI Corp. (NYSE:RLI). RLI Corp. (NYSE:RLI) is an insurance holding company. On May 11, 2026, RLI Corp. (NYSE:RLI) stock closed at $48.34 per share. One-month return of RLI Corp. (NYSE:RLI) was -16.41%, and its shares are down 34.99% over the past twelve months. RLI Corp. (NYSE:RLI) has a market capitalization of $4.44 billion.

FPA Queens Road Small Cap Value Fund stated the following regarding RLI Corp. (NYSE:RLI) in its Q1 2026 investor letter:

"RLI Corp. (NYSE:RLI) is a specialty property and casualty insurer. The company is extremely selective in writing business. Its diversified lines include niche-y areas such as school buses, Hawaii homeowners, and surety. RLI’s unique culture, incentive structures and willingness to walk away from unprofitable business have historically led to exceptional financial performance. From 2015 through 2024, the company’s combined ratio has averaged 89.3% and its ROE has averaged 16.6% despite being weighed down by excess capital.11 We have owned RLI since 2011 and the stock usually commands a premium valuation – we were pleased to be able to add to our position at roughly 20x this year’s earnings."

RLI Corp. (NYSE:RLI) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 26 hedge fund portfolios held RLI Corp. (NYSE:RLI) at the end of the fourth quarter, compared t0 36 in the previous quarter. While we acknowledge the potential of RLI Corp. (NYSE:RLI) 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 RLI Corp. (NYSE:RLI) and shared FPA Queens Road Small Cap Value Fund's views on the company last quarter. 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.