Maximus’ (MMS) Tech Capabilities and Beaten-Down Valuation Point to M&A Upside

Third Avenue Management , an investment management company, released its second-quarter 2026 investor letter for the "Third Avenue Small-Cap Value Fund". You can download the letter here . The Third Avenue Small-Cap Value Fund returned 12.85% in Q2 2026, outperforming the MSCI USA Small Cap Value Index (12.61%) but underperforming the Russell 2000 Value Index (17.19%). Year-to-date, the Fund has returned 21.72%, compared to 15.91% for the MSCI and 22.99% for the Russell index. Over three and five years, the Fund's annualized returns are 17.76% and 12.37%, respectively. The second quarter's performance benefited from diversified sources, despite challenges in certain sectors, such as offshore energy services. The management's high-conviction approach balances concentration and diversification, focusing on undervaluation and quality for downside protection. Although the Fund's absolute return was strong, it lagged behind indices like the Russell 2000, which saw significant momentum in sectors like technology, particularly semiconductors. U.S. small-cap stocks have recently outperformed large caps, signaling a shift in market dynamics. The Fund is positioned to capitalize on ongoing opportunities from recent volatility and potential consolidation in the small-cap space. Please review the Fund's top five holdings to learn more about its key selections for 2026.

In its second-quarter 2026 investor letter, Third Avenue Small-Cap Value Fund highlighted Maximus, Inc. (NYSE: MMS ). Maximus, Inc. (NYSE:MMS) is a leading government services company, and the fund initiated a position in the stock during the quarter. On September 21, 2026, Maximus, Inc. (NYSE:MMS) closed at $55.97 per share. Over the past month, Maximus, Inc. (NYSE:MMS) declined 4.37%, but its shares are down 36.07% over the past year. Maximus, Inc. (NYSE:MMS) has a market capitalization of $2.93 billion, and its stock has traded within a 52-week range of $52.73 to $100.00.

Third Avenue Small-Cap Value Fund stated the following regarding Maximus, Inc. (NYSE:MMS) in its Q2 2026 investor letter:

"Maximus, Inc. (NYSE:MMS), headquartered in McLean Virgina, has over its fifty-year history grown to be one of the twenty largest government contractors, either public or private. This technology-forward consultant designs, owns and maintains the software stack for government entities, notably the IRS, the SEC's EDGAR filings database and real-time referencing of the TSA's "no fly" list, to name a few. Despite Maximus' federal business revenue growing more than 8% in 2025, pessimism related the D.O.G.E. narratives have been unforgiving for Maximus' share price, as well as the broader government consulting industry. Further clouding the perception around Maximus in 2026 has been the lapses in government funding and generalized fear of artificial intelligence disintermediation. At the current valuation we believe there is an attractive opportunity to invest in a technology leader in its field, which provides considerable subject matter expertise and institutional knowledge in the design, implementation and administration of government programs. In addition to an absence of evidence of any operational impact related to the above-mentioned fears, management's recent operational guidance and very substantial share buyback authorization both inspire confidence. Furthermore, Maximus' management team also expressed confidence that operating margins will increase in 2026 due to its own internal use of artificial intelligence. One recent example is Maximus' Veterans Affairs benefits administration business. Maximus receives a wide array of medical records from various benefits providers in myriad hard copy and digital file formats. Maximus has recently built a unique capability to harmonize unstructured data into uniform entries and now processes ten million pages of medical records every day in the Amazon cloud. Improving technological capabilities allows Maximus to process faster and more accurately, resulting in significantly reduced headcount and cost…" ( Click here to read the full text )

"Maximus, Inc. (NYSE:MMS), headquartered in McLean Virgina, has over its fifty-year history grown to be one of the twenty largest government contractors, either public or private. This technology-forward consultant designs, owns and maintains the software stack for government entities, notably the IRS, the SEC's EDGAR filings database and real-time referencing of the TSA's "no fly" list, to name a few. Despite Maximus' federal business revenue growing more than 8% in 2025, pessimism related the D.O.G.E. narratives have been unforgiving for Maximus' share price, as well as the broader government consulting industry. Further clouding the perception around Maximus in 2026 has been the lapses in government funding and generalized fear of artificial intelligence disintermediation.

At the current valuation we believe there is an attractive opportunity to invest in a technology leader in its field, which provides considerable subject matter expertise and institutional knowledge in the design, implementation and administration of government programs. In addition to an absence of evidence of any operational impact related to the above-mentioned fears, management's recent operational guidance and very substantial share buyback authorization both inspire confidence. Furthermore, Maximus' management team also expressed confidence that operating margins will increase in 2026 due to its own internal use of artificial intelligence. One recent example is Maximus' Veterans Affairs benefits administration business. Maximus receives a wide array of medical records from various benefits providers in myriad hard copy and digital file formats. Maximus has recently built a unique capability to harmonize unstructured data into uniform entries and now processes ten million pages of medical records every day in the Amazon cloud. Improving technological capabilities allows Maximus to process faster and more accurately, resulting in significantly reduced headcount and cost…" ( Click here to read the full text )