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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 Procore Technologies, Inc. (NYSE:PCOR). Procore Technologies, Inc. (NYSE:PCOR) is a technology company that provides a cloud-based construction management platform and related software products. On June 11, 2026, Procore Technologies, Inc. (NYSE:PCOR) closed at $42.20 per share. One-month return of Procore Technologies, Inc. (NYSE:PCOR) was -8.91%, and its shares lost 34.25% over the past 52 weeks. Procore Technologies, Inc. (NYSE:PCOR) has a market capitalization of $6.37 billion.

Madison Small Cap Fund stated the following regarding Procore Technologies, Inc. (NYSE:PCOR) in its Q1 2026 investor letter:

"We initiated a new position in the construction management software company Procore Technologies, Inc. (NYSE:PCOR) (~$9B market cap). Procore is a “system of record” for the construction industry, connecting owners, general contractors, and specialty contractors on a single digital platform. It generates recurring revenue via a tiered subscription based on the customer’s total annual construction volume (ACV). This pricing model is a powerful lever: as customers build more, Procore’s revenue grows without additional sales effort. The business is characterized by high gross margins (~80%) and strong customer stickiness (95% retention rate). Procore’s formidable moat stems from classic “network effects”— project collaborators are often introduced to the software by the general contractor, creating a low-cost customer-acquisition funnel. The construction industry is large and underpenetrated by digital automation, providing a long runway for compounding growth at high returns. Our intrinsic value estimate for PCOR is $95."

Procore Technologies, Inc. (NYSE:PCOR) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 35 hedge fund portfolios held Procore Technologies, Inc. (NYSE:PCOR) at the end of the first quarter, compared to 45 in the previous quarter. Procore Technologies, Inc. (NYSE:PCOR) reported total revenue of $359 million in Q1 2026, marking an increase of 15.7% year-over-year. While we acknowledge the potential of Procore Technologies, Inc. (NYSE:PCOR) 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 Procore Technologies, Inc. (NYSE:PCOR) and shared Wasatch Long/Short Alpha Fund's views on the company. 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.