Merion Road adds Frequency Electronics as aerospace demand drives small-cap outperformance

Merion Road Capital Management reported that its Merion Road Small Cap Fund gained 3.1% in the first quarter of 2026, outperforming the Russell 2000 index, which rose 0.9%. The firm attributed the outperformance to strong contributions from holdings driven by accelerating aerospace demand and margin expansion. In contrast, the firm’s long-only large-cap portfolio declined 3.7% amid broader market weakness reflected in the S&P 500.

In its Q1 2026 Investor Letter, Merion Road highlighted a new position in Frequency Electronics Inc (NASDAQ: FEIM). The firm cited the company’s leadership in high-precision time and frequency devices, noting its critical role in defence and space applications where GPS signals are unavailable. Merion Road stated it continues to position itself around long-term tailwinds in aerospace, defence, and advanced technologies, citing rising global military spending and geopolitical tensions as key drivers.

Frequency Electronics develops precision timing, frequency control, and synchronization products used in satellites, telecommunications, and defence applications. The company utilises quartz and rubidium oscillation to enable system location and navigation in GPS-denied environments, as well as for wireless, secure communication. Merion Road noted that FEIM systems have been used in missions to all of the sun’s known planets, on the moon, and on the Apollo missions, Space Shuttle, and International Space Station.

The firm highlighted the longevity of the technology, noting that oscillators launched on Voyager 2 nearly 50 years ago continue to function. Revenue breakdown for the company shows approximately 40% comes from government satellites, 55% from government non-space applications which are mostly military in nature, and the remainder from commercial and industrial customers.

As of the end of the fourth quarter, 11 hedge fund portfolios held Frequency Electronics Inc, unchanged from the previous quarter. On May 15, 2026, FEIM stock closed at approximately $57.18 per share. The shares traded between $17.51 and $64.99 over the last 52 weeks, with a one-month return of 2.75%. Merion Road stated FEIM has a market capitalisation of about $562.76 billion.