Three 'long-term conviction' holdings from Royce

Portfolio managers of three funds at Royce Investments, Jim Stoeffel and Andrew Palen, named three small-cap stocks “in which we have long-term conviction.” Two of them, in their view, will benefit from investments in AI, while one will gain from rising U.S. infrastructure spending.

Adtran Holdings

Adtran Holdings, which supplies communications solutions for voice and data transmission, is set to benefit from the development of AI technologies, the success of which largely depends on fiber-optic networks, Stoeffel and Palen argue. It should also gain from the replacement of Huawei equipment by a number of telecom operators due to geopolitical concerns around Chinese technology, they added.

Adtran shares have risen nearly 35% year to date.

Six Wall Street analysts rate the stock “buy,” while four recommend “hold.” The average target price of $13.77 per share implies nearly 18% upside from the close on Wednesday. Adtran was on Freedom Broker's list of small-cap stocks most widely held by hedge funds as of the end of the fourth quarter.

Lincoln Educational Services

Lincoln Educational Services Corporation, which focuses on career-oriented postsecondary education, is also positioned to benefit from AI development, according to the managers’ article on the Royce Investments website. The company trains workers in automotive, healthcare, and information technology fields. This is a growing niche where employers need hands-on specialists to perform tasks that cannot be automated or offshored, giving the company room to expand revenue, the fund managers note.

Lincoln shares have surged 60% year to date. In particular, the stock jumped after the company reported its 2025 results on February 23. It posted a 17.8% increase in revenue to $518.2 million and provided 2026 guidance, which implies revenue growth of about 13% to $580-590 million.

The stock has six Wall Street analyst ratings, all of them “buy,” while the average target price of $37.67 per share is below current levels.

Bowman Consulting Group

Bowman Consulting Group provides engineering and design services and is set to benefit from rising infrastructure spending, Stoeffel and Palen said. This includes both investment in the rapid buildout of AI data centers and government spending. In addition, the managers note that the company has low debt, stable cash flow, and a proven track record of integrating acquisitions, which creates strong opportunities in the M&A market.

Bowman shares have plunged nearly 39% over the last six months. They sold off after the company reported third-quarter results in November. Although Bowman’s financial performance improved year over year, it missed Wall Street bottom-line expectations. Stoeffel and Palen described the subsequent decline as excessive pressure on the stock and viewed it as an attractive entry point.

Wall Street is broadly positive on the company’s outlook: six analysts rate the stock “buy,” while one recommends “hold.” The average target price of $45.20 per share implies 69% upside.