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Riverwater Partners, an investment management company, released its “Micro Opportunities Strategy” Q1 2026 investor letter. A copy of the letter can be downloaded here. In Q1 2026, Riverwater Partners Micro Opportunities Strategy underperformed its benchmark. In the first quarter of 2026, rising geopolitical tensions in the Middle East and a reassessment of growth areas significantly influenced market leadership and investor sentiment. Entering 2026, the firm held a positive view of microcap equities due to improving monetary conditions and attractive valuations relative to large caps. However, recent geopolitical tensions have increased macro uncertainty. In this context, the firm plans to capitalize on dislocations by selectively investing in high-quality businesses with improved valuations to support long-term capital growth. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Riverwater Partners Micro Opportunities Strategy highlighted LSB Industries, Inc. (NYSE:LXU) in the deep dive section. LSB Industries, Inc. (NYSE:LXU) is a chemical products manufacturer that provides ammonia and urea ammonia nitrate for agricultural applications. On May 5, 2026, LSB Industries, Inc. (NYSE:LXU) closed at $15.30 per share. One-month return of LSB Industries, Inc. (NYSE:LXU) was 3.66%, and its shares gained 130.77% over the past 52 weeks. LSB Industries, Inc. (NYSE:LXU) has a market capitalization of $1.1 billion.
Riverwater Partners Micro Opportunities Strategy stated the following regarding LSB Industries, Inc. (NYSE:LXU) in its Q1 2026 investor letter:
"We added LSB Industries, Inc. (NYSE:LXU) in the first quarter. LSB Industries (LXU) is a U.S.-based pure-play nitrogen chemical producer operating three manufacturing facilities in Alabama, Arkansas, and Oklahoma, along with a nitric acid facility in Baytown, Texas operated on behalf of Covestro. The company produces ammonia, urea ammonium nitrate (UAN), and both high-density ammonium nitrate (HDAN) for mining explosives and low-density ammonium nitrate (LDAN) for agricultural fertilizer. LXU is a micro-cap “baby CF Industries”—a concentrated, higher-beta way to play the nitrogen market compared to diversified giants like CF Industries or Nutrien.
The stock has been weighed down by cyclical concerns around nitrogen pricing normalization and broader commodity market volatility. However, the market appears to be overlooking a powerful structural shift: the Strait of Hormuz blockade and Russian ammonium nitrate export suspensions have removed approximately 27% of global ammonia supply and 35% of global urea flows from the market, creating the tightest nitrogen inventory in years and driving North American benchmark prices for ammonia higher. For a company of LXU’s size, this supply dislocation has an outsized impact on margins and cash flow..." (Click here to read the full text)
LSB Industries, Inc. (NYSE:LXU) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 23 hedge fund portfolios held LSB Industries, Inc. (NYSE:LXU) at the end of the fourth quarter, up from 17 in the previous quarter. While we acknowledge the potential of LSB Industries, Inc. (NYSE:LXU) 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 LSB Industries, Inc. (NYSE:LXU) and shared the list of high growth chemical stocks to buy. 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.