Graco (GGG) Slid Despite Healthy Profitability and Improving Backlog Trends

Graco (GGG) Slid Despite Healthy Profitability and Improving Backlog Trends

Thu, August 6, 2026 at 5:04 PM GMT+3 3 min read

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Conestoga Capital Advisors, an asset management company, released its second-quarter 2026 investor letter. A copy of the letter can be downloaded here. The letter reports a positive market shift towards Small Caps, with the Russell 2000 Index achieving its best first half since 1991 and the Russell 2000 Growth Index up 25.7% in Q2, fueled by AI enthusiasm and semiconductor stocks. However, market leadership was uneven, with high-beta stocks outperforming while quality companies lagged, affecting Conestoga's strategies. Management is confident that speculative leadership won't endure as monetary policy tightens and expects high-quality growth businesses to regain prominence as market leadership broadens. The Conestoga SMid Cap Composite returned 7.04% (net) in the second quarter, underperforming the Russell 2500 Growth Index, which returned 24.02%. A combination of factor and sector-specific headwinds drove the underperformance, along with stock selection challenges, particularly within Technology and Industrials. In addition, please check the Strategy's top five holdings to know its best picks in 2026.

In its Q2 2026 investor letter, Conestoga Capital Advisors highlighted Graco Inc. (NYSE:GGG). Graco Inc. (NYSE:GGG), a leading manufacturer and marketer of systems and equipment used to move, measure, mix, control, dispense, and spray fluid and powder materials, detracted from portfolio performance during the quarter. On August 5, 2026, Graco Inc. (NYSE:GGG) closed at $82.50 per share, reflecting a market capitalization of $13.36 billion. Graco Inc. (NYSE:GGG) posted a one-month return of 12.72%, while its shares lost 1.68% over the past 52 weeks.

Conestoga Capital Advisors stated the following regarding Graco Inc. (NYSE:GGG) in its Q2 2026 investor letter:

"Graco Inc. (NYSE:GGG) manufactures fluid handling systems and equipment for industrial, construction, and process applications. The stock underperformed as investors focused on slowing organic demand across several end markets, particularly in contractor and industrial equipment, despite healthy profitability and improving backlog trends. While first quarter organic sales declined 3%, management noted bookings strengthened throughout the quarter, supporting expectations for improving demand over the balance of the year."

Graco Inc. (NYSE:GGG) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 37 hedge fund portfolios held Graco Inc. (NYSE:GGG) at the end of the first quarter, up from 35 in the previous quarter. While we acknowledge the potential of Graco Inc. (NYSE:GGG) 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 thebest short-term AI stock.

In another article, we covered Graco Inc. (NYSE:GGG) and shared a bullish thesis on the company. In addition, please check out our hedge fund investor letters Q2 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.