Dodge & Cox Fund, an investment management company, released its first-quarter 2026 investor letter for “Dodge and Cox Stock Fund”. A copy of the letter is available to download here. U.S. equities declined broadly in Q1 2026, with the S&P 500 falling 4.3% amid inflation concerns fueled by the conflict in Iran and disruptions in global energy markets. The Russell 1000 Value index rose 2.1%, outperforming the broader indices, and the Russell 1000 Growth Index, which fell 9.78%. Higher oil prices and interest rate shift pressured growth-oriented tech stocks, leading investors to move away from growth stocks. The Fund’s Class I shares returned -1.67%, outperforming the S&P 500, while lagging the Russell 1000 Value Index’s 2.10% returns. The firm anticipates that market leadership and sector rotations could affect short-term performance while maintaining a long-term investment outlook. In addition, please check the Fund’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, The London Company Income Equity Strategy highlighted Microsoft Corporation (NASDAQ:MSFT). Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops and supports software, services, devices, and solutions, holding dominant positions in software, cloud infrastructure, generative AI, and gaming. On June 9, 2026, Microsoft Corporation (NASDAQ:MSFT) closed at $403.41 per share. One-month return of Microsoft Corporation (NASDAQ:MSFT) was -0.44%, and its shares lost 14.64% over the past 52 weeks. Microsoft Corporation (NASDAQ:MSFT) has a market capitalization of $2.99 trillion.
The London Company Income Equity Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q1 2026 investor letter:
“AI continued to dominate sentiment, as investors rewarded perceived AI “winners” and penalized perceived “losers” during the quarter, creating significant valuation dislocations. We believe a value-oriented approach is especially important in the current environment. The notable recent volatility has created opportunities in select areas, including the Software industry.
In Software, we added to the Fund’s position in Microsoft Corporation (NASDAQ:MSFT). We believe the current valuation, at 20.0 times forward earnings, does not reflect the company’s long-term growth potential and its pivotal role in the AI ecosystem.”
Microsoft Corporation (NASDAQ:MSFT) ranks second on our list of 40 Most Popular Stocks Among Hedge Funds. According to our database, 282 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the first quarter, compared to 312 in the previous quarter. In the third quarter of fiscal 2026, Microsoft Corporation (NASDAQ:MSFT) reported revenue of $82.9 billion, marking an increase of 18% and 15% in constant currency. While we acknowledge the potential of Microsoft Corporation (NASDAQ:MSFT) 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.
