Night Watch Investment Management, an investment management firm, released its first-quarter 2026 investor letter. A copy of the letter is available to download here. In Q1 2026, Night Watch Investment Management LP appreciated by 2.69% net of fees in a volatile environment. The market experiences volatility influenced by narratives, with initial AI disruptions affecting companies, though the portfolio benefited due to limited exposure. Subsequently, the war in Iran led to increased oil prices and corrections in physical businesses. The portfolio strategy emphasizes discovering individual businesses poised for earnings growth and understanding key market drivers to adapt swiftly to changing conditions. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Night Watch Investment Management highlighted AAR Corp. (NYSE:AIR) as a notable contributor. AAR Corp. (NYSE:AIR) is a leading aviation services company that provides aftermarket aviation solutions to commercial aviation, government, and defense markets. On June 9, 2026, AAR Corp. (NYSE:AIR) closed at $120.13 per share. One-month return of AAR Corp. (NYSE:AIR) was 11.78%, and its shares gained 76.12% over the past 52 weeks. AAR Corp. (NYSE:AIR) has a market capitalization of $4.77 billion.
Night Watch Investment Management stated the following regarding AAR Corp. (NYSE:AIR) in its Q1 2026 investor letter:
“AAR Corp. (NYSE:AIR) was another strong performer which, fortunately, was an oversized (~9%) position for us. AAR provides after-market maintenance services for airplanes. We believe this company is benefitting from an aging fleet of airplanes, caused by Boeing’s and Airbus’ inability to satisfy industry demand. At the same time the company is making a transformation from low value add heavy maintenance of airframes, to higher margin component repair and distribution services. During the last quarter reported at the end of March, they also noted that government defense contracts are now 30% of the total business, currently growing at a 50% rate. In other words, we believe this company benefits from a multi-year industry tailwind and a company transformation, and any potential war is mildly beneficial to their earnings.”
AAR Corp. (NYSE:AIR) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 35 hedge fund portfolios held AAR Corp. (NYSE:AIR) at the end of the first quarter, compared to 36 in the previous quarter. While we acknowledge the potential of AAR Corp. (NYSE:AIR) 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.
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