Conestoga Capital Advisors, an established asset management firm, recently published its third-quarter 2026 investor letter, offering a detailed analysis of the current macroeconomic environment impacting small-cap equities. The letter highlighted that while 2026 began on a strong note, the third quarter presented a series of challenges, including rising oil prices, persistent inflation, and a Federal Reserve rate hike in September. These factors collectively led to a 9.4% decline in the Russell 2000 Growth Index, contrasting with a 2.3% gain in the S&P 500 during the same period. Despite these headwinds, small-cap stocks have managed a 10.7% increase year-to-date, although they still lag behind large-cap stocks, which have risen 12.7%.
Conestoga’s Micro Cap Composite demonstrated resilience by declining only 0.83% net, compared to a 12.15% fall in its benchmark, resulting in a year-to-date return of 12.50%. This outperformance was largely attributed to strategic stock selection in the Health Care and Technology sectors, where software holdings notably increased by 16.8%. The firm remains optimistic about the operational capabilities of its portfolio companies as it moves into the fourth quarter.
A key contributor to Conestoga’s portfolio performance is Twist Bioscience Corporation (NASDAQ:TWST), a leader in the biotechnology sector recognized for its innovative synthetic DNA-based products. As of October 28, 2026, Twist Bioscience’s stock closed at $173.45 per share, with a market capitalization of $11.42 billion. Despite experiencing a 7.83% decline over the past month, the company’s stock has impressively surged by 456.05% over the past year1.
Twist Bioscience’s success in the third quarter was driven by escalating demand across its various end markets, including biotechnology, pharmaceutical research, and next-generation sequencing applications. The company’s growth trajectory was further supported by the market’s perception of Twist as a potential leader in AI applications, which contributed to a rise in its stock valuation. Additionally, the company reported improved gross margins and increased its full-year revenue guidance by $12 million, reinforcing investor confidence2.
While Twist Bioscience is not listed among the 40 most popular stocks among hedge funds, it has garnered increased interest, with 42 hedge fund portfolios holding the company at the end of the second quarter, up from 30 in the previous quarter. Although Twist Bioscience shows significant promise as an investment, some analysts suggest that other AI stocks may offer greater potential for upside with less associated risk. For investors interested in undervalued AI stocks that could benefit from trends such as Trump-era tariffs and onshoring, there may be opportunities in other areas.
In related discussions, the Alger Small Cap Growth Fund has also shared its perspectives on Twist Bioscience, underscoring the company’s potential within the biotechnology sector. For further insights, investors can explore additional hedge fund investor letters from the third quarter of 2026.
Overall, Twist Bioscience Corporation’s performance in the third quarter underscores the robust demand for its products across key sectors, positioning the company for continued growth. As the biotechnology industry continues to evolve, Twist Bioscience’s innovative approach to synthetic DNA and its applications in AI and next-generation sequencing are likely to remain focal points for investors. The company’s ability to adapt to market demands and leverage its technological advancements will be crucial in maintaining its competitive edge in the rapidly growing biotechnology landscape.
Footnotes:
- Twist Bioscience’s stock performance over the past year has been significant, reflecting strong market interest. Source.
- The company’s increased revenue guidance and improved margins have contributed to investor confidence. Source.
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