Carillon Eagle Small Cap Growth Fund Q1 2026 Portfolio Review

Applied Optoelectronics reported a healthy quarter and said it is winning major new orders from large hyperscale customers, a positive signal for revenue momentum. Powell Industries also secured several large data center wins, reinforcing demand tied to AI and infrastructure buildouts alongside steady utility awards. Vital Farms is facing a temporary egg-market supply glut after avian flu quickly subsided, which creates a short-term pricing headwind.

Analysis

AAOI and POWL both point to the same underlying capital cycle: hyperscalers are still front-loading network and power-related capex, and the beneficiaries are shifting from the obvious semiconductor names into less crowded picks-and-shovels exposure. The second-order winner set is broader than the headlines imply: optical/interconnect suppliers, rack power, switchgear, and thermal management vendors should all see better bid support as customers prioritize deployment speed over cost discipline. That argues for continued multiple support in the niche infrastructure complex even if the broader tech tape is choppy.

The setup for POWL is particularly interesting because data center demand tends to carry better visibility and margin quality than the typical utility backlog. Large awards can act as a revenue bridge for several quarters and, more importantly, de-risk capacity expansion decisions for adjacent suppliers. The main risk is that these orders are lumpy and can create a false sense of sustained growth; if hyperscaler spending pauses for even one quarter, names tied to project timing can re-rate quickly because the market usually pays for backlog durability, not just backlog size.

VITL is the opposite of a structural story: this looks like a temporary inventory and pricing dislocation rather than a demand collapse. Supply normalization after an avian-flu shock can still hurt near-term realized pricing because retail and wholesale buyers tend to keep inventories lean once the shortage premium disappears. The contrarian point is that a glut often sets up better mid-cycle economics later, but only if the company can avoid a margin reset before the market sees the inventory burn-through; the pain window is likely measured in weeks to a few months, not years.

Key Decisions for Investors

• Add to AAOI on any post-print consolidation; time horizon 3-6 months. Risk/reward favors the upside if hyperscale order intake converts into backlog confidence, but trim if the stock starts pricing in peak-to-trough capex volatility rather than sustained demand.
• Overweight POWL versus broader industrials or utility equipment peers for the next 1-2 quarters. Use a pair trade: long POWL / short a lower-growth electrical equipment name to isolate data-center backlog optionality while limiting beta.
• Avoid chasing VITL here; wait for evidence of inventory digestion over the next 1-2 months before re-entering. If long-term, prefer scaling in only after gross margin compression shows signs of bottoming.
• For event-driven investors, consider a call spread in AAOI or POWL rather than outright stock to capture follow-through from order momentum while capping downside if hyperscaler capex sentiment cools.
• If VITL weakens further on margin compression, look for a tactical short only into guidance resets; the risk/reward is better after the market fully prices the temporary supply overhang rather than on the first sign of weakness.