Madison Small Cap Fund: Cogent Communications (CCOI) is Experiencing Early Growing Pains

Madison Investments, an investment advisor, released its “Madison Small Cap Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The second quarter started as a continuation of the first quarter. As the liberation day tariffs were catastrophic, sending both equities and treasuries steeply lower. Later, the administration set a pause in the tariff implementation, which led equities to rebound, supported by better-than-expected macroeconomic data, particularly regarding inflation and employment. The Russell 2000 Index is up 8.5% for the quarter and down only 1.79% year-to-date. The Madison Small Cap Fund (class Y) returned 4.42% in the quarter, lagging the Russell 2000 and Russell 2500. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Madison Small Cap Fund highlighted stocks such as Cogent Communications Holdings, Inc. (NASDAQ:CCOI). Cogent Communications Holdings, Inc. (NASDAQ:CCOI) provides high-speed Internet access, private network, and data center colocation space services. The one-month return of Cogent Communications Holdings, Inc. (NASDAQ:CCOI) was 0.35%, and its shares lost 48.00% of their value over the last 52 weeks. On September 17, 2025, Cogent Communications Holdings, Inc. (NASDAQ:CCOI) stock closed at $37.65 per share, with a market capitalization of $1.852 billion.

Madison Small Cap Fund stated the following regarding Cogent Communications Holdings, Inc. (NASDAQ:CCOI) in its second quarter 2025 investor letter:

"Our underperformance was largely driven by stock selection in Information Technology and Consumer Staples. Info Tech led the rally post liberation day, however our stocks lagged. Our worst performing IT stock was Cogent Communications Holdings, Inc. (NASDAQ:CCOI). CCOI is an internet service provider that carries nearly 25% of the world’s internet traffic on its global network. The company recently announced the addition of a new service for existing customers called Wavelength Services, which provide high-capacity, low-latency networking connections using advanced optical technology that allows multiple, private, high-capacity circuits to be delivered over a single pair of optical fibers. Wavelength Services provides dedicated, secure bandwidth with a high degree of reliability. Expectations were high for this new service as a growth driver and the company missed those expectations slightly, sending the stock sharply lower. After several meetings and conversations with management, we’ve since used this weakness as an opportunity to add to our investment in CCOI as we believe this is an overreaction to a small but fast growing revenue line that’s experiencing some early growing pains.

Cogent Communications Holdings, Inc. (NASDAQ:CCOI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 30 hedge fund portfolios held Cogent Communications Holdings, Inc. (NASDAQ:CCOI) at the end of the second quarter, compared to 30 in the previous quarter. While we acknowledge the potential of Cogent Communications Holdings, Inc. (NASDAQ:CCOI) 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 Cogent Communications Holdings, Inc. (NASDAQ:CCOI) and shared Alphyn Capital Management's views on the company. In addition, please check out our hedge fund investor letters Q2 2025 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.