Crossroads Capital LLC, an investment management firm, released its Q1 2026 investor letter. You can download a copy here. The Fund increased 4.2% net of fees and expenses during the quarter. Since its founding, the fund has compounded at a gross rate of 21.3% and a net rate of 17.1%. At the end of March 20206, the fund’s delta-free overall adjusted gross and net exposures were 114.1% and 73.3%, respectively. The letter noted that stable market trends from 20205 onwards were disrupted by geopolitical tensions linked to Trump’s increasingly unpredictable foreign policy, causing the S&P 500 to fall about 4.3%. However, first-quarter fundamentals aligned with broader trends. Overall, the company is satisfied with its portfolio and is maintaining its position as special situations begin to accelerate. Also, check out the Fund’s top five holdings to learn your best picks in 2026.
In its Q1 2026 investor letter, Crossroads Capital highlighted Merlin, Inc. (NASDAQ:MRLN). Merlin, Inc. (NASDAQ:MRLN) is an aerospace and defense company known for its AI-powered aircraft autonomous flight systems and software. On May 22, 2026, Merlin, Inc. (NASDAQ:MRLN) closed at $7.09 per share. Merlin, Inc. (NASDAQ:MRLN)’s monthly performance was -37.81% and its stock lost 30.29% in the past 52 weeks. Merlin, Inc. (NASDAQ:MRLN) has a market capitalization of $684.36 million.
Crossroads Capital stated the following regarding Merlin, Inc. (NASDAQ:MRLN) in its Q1 2026 investor letter:
“Our biggest contributor was Merlin, Inc. (NASDAQ:MRLN), which contributed to 40% of our first quarter net earnings,2 as it began trading as a public company in mid-March and we both closed the short position in the common as our rights converted and took advantage of the volatility of the early days. We detailed our thesis at length in a published research report,3 but the initial price action is consistent with what we expected: a “small public float, locked-in insiders” and a market that has not yet done the work on a name that entered through the SPAC channel, the only channel that institutional investors have been trained to ignore. “We suspect the pricing review has only just begun, so the company is firmly in both our special situations category and our emerging compounds category if milestones are met.”
Merlin, Inc. (NASDAQ:MRLN) is not on our list of the 40 most popular stocks among hedge funds heading into 2026. While we recognize the potential of Merlin, Inc. (NASDAQ:MRLN) 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’s also benefiting significantly from Trump-era tariffs and the offshoring trend, check out our free report on best short-term AI stock.