| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9.8% | -1.9% | 16.2% |
| 2025 | 2024 | 2023 | 2022 | 2021 | 2020 |
|---|---|---|---|---|---|
| 16.2% | 13.5% | -1.0% | -27.7% | 5.6% | 75.6% |
The Conestoga Micro Cap Composite delivered -1.91% net returns in Q4 2025 and 16.24% for the full year, trailing the Russell Microcap Growth Index's 2.14% and 21.84% respectively. The year witnessed extreme market volatility with historically narrow leadership, as the 10 best performing stocks represented 46% of index returns. Small Cap biotech and pharmaceutical stocks dominated Q4 performance, representing 132% of index returns despite limited portfolio exposure. Standout performers included Planet Labs with 388% annual returns from defense contract wins and early profitability, and Willdan Group with 172% returns from energy efficiency and grid modernization demand. Consumer staples holdings Mama's Creations and Vita Coco delivered 69% and 44% annual returns respectively through strong brand execution. The strategy demonstrated expected downside capture during market corrections while facing headwinds from speculative rallies favoring low-quality stocks. Looking forward, Small Caps appear well-positioned with projected 32% earnings growth in 2026 and historical precedent suggesting potential rotation back to quality leadership.
Conestoga maintains focus on high-quality, profitable micro cap companies while navigating a market environment characterized by extreme volatility and narrow leadership concentration, positioning for eventual rotation back to quality as speculative rally dynamics normalize.
Looking ahead, the outlook for Small Cap stocks is bright with compelling fundamentals including projected 32% earnings growth in 2026 and current 25% discount to Large Caps. Historical precedent suggests low-quality rallies typically last roughly a full year with largest gains in first six months before ceding leadership back to high-quality stocks, providing hope that the worst headwinds may be behind us.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 18 2026 | 2025 Q4 | BLFS, BWMN, COCO, CYX, DGII, ELVA, IIIV, IRMD, MAMA, MEG, PHR, PL, PLMR, QTWO, ROAD, TKNO, TRNS, UTI, VCEL, WLDN | Biotech, consumer, defense, energy, growth, Micro Cap, Quality, small cap |
PL IRMD MAMA COCO IIIV BWMN ELVA ODD |
Small Cap biotech and pharmaceutical stocks emerged as significant outperformers in Q4, representing 132% of the Russell 2000 Growth Index's total returns despite comprising just 11% year-to-date through Q3. The portfolio had limited exposure to this sector rally, with mixed results from holdings like Alpha Teknova facing inventory normalization headwinds while IRadimed delivered record results. Defense-related stocks provided strong performance leadership throughout 2025, with Planet Labs benefiting significantly from expanding contracts in government and defense sectors. The company secured significant new contract wins and achieved profitability earlier than expected, delivering a 388% total return for the year. Energy efficiency and grid modernization themes drove strong performance, particularly through Willdan Group which capitalized on surging demand from AI-driven data center markets and large government contracts. Electrovaya also benefited from industrial electrification trends and differentiated battery technology for material handling applications. Consumer staples holdings delivered exceptional performance with strong brand momentum and execution. Mama's Creations achieved 69% annual returns through successful market share capture and new product placements at major retailers, while Vita Coco demonstrated category leadership with 44% annual returns and consistent cash generation. |
| Oct 13 2025 | 2025 Q3 | BWMN, CLMB, MAMA, OLO, PHR, PL, PLMR, QTMO, SLP, TKNO, TWST, VCEL, WLDN | Construction, Energy Efficiency, industrials, Infrastructure Spending, Micro Caps |
WLDN US BWMN US |
Micro-caps rallied sharply amid risk-on sentiment, driven by illiquid and unprofitable stocks. Conestogas industrial holdingsespecially engineering, defense, and environmental firmsoutperformed on infrastructure spending tailwinds, while healthcare and software detracted. The letter emphasizes durable growth from clean-energy consulting and engineering projects benefiting from federal investment. |
| Jul 22 2025 | 2025 Q2 | ERII, HLMN, KIDS, MEG, OLO, PL, ROAD, SLP, SSTI, TWST, WLDN | earnings, growth, Micro Caps, profitability, volatility | TWST | The letter discusses high-quality growth investing in micro-cap companies during a period of extreme volatility and narrow market leadership. While speculative and unprofitable stocks led short-term rallies, Conestoga stresses that durable revenue growth and profitability drive long-term returns. The outlook favors disciplined growth as earnings cycles recover. |
| May 1 2025 | 2025 Q1 | ERII, KIDS, MEG, OLO, PLMR, SSTI, TKNO, TRNS, VCEL, WLDN | - | - | |
| Dec 31 2024 | 2024 Q4 | ERII, MEG, NABL, NVEE, ODFL, OLO, PCTY, PL, ROAD, TBRD CN, TFX, TKNO, TRNS, UTI | - | - | |
| Oct 23 2024 | 2024 Q3 | BWMN, COCO, ERII, MAMA, MEG, PRO, QTWO, ROAD, SLP, TKNO, USPH, WLDN | - | - | |
| Jun 30 2024 | 2024 Q2 | BLFS, CYRX, DGII, DH, ERII, MEG, MLAB, MODN, PRO, QTWO, SLP, SSTI, TKNO, TRNS, UTI | - | - | |
| Apr 15 2024 | 2024 Q1 | BWMN, DGII, NVEE, PLMR, PLOW, ROAD, SMLR, SSTO, TKNO, VCEL, WLDN | - | - | |
| Dec 31 2023 | 2023 Q4 | DGII, IRMD, MLAB, OLO, PHR, PL, PLOW, QTQO, ROAD, SMLR, SSTI | - | - | |
| Sep 30 2023 | 2023 Q3 | BLFS, DGII, DH, MODN, NSTG, PHR, PRO, ROAD, TBRD CN, TRNS, WLDN | - | - | |
| Jun 30 2023 | 2023 Q2 | CYRX, DGII, HCAT, MEG, MLAB, NSTG, OLO, PL, ROAD, SSTI, USPH, VCEL | - | - | |
| May 23 2023 | 2023 Q1 | CYRX, MEG, MODN, NVEE, OLO, SSTI, TBRD CN, TKNO, TRNS, USPH | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
BiotechnologyHealthcare industry positioned for catch-up growth after several years of below-trend performance. Government spending expected to increase relative to feared cuts, with companies signaling improvement in revenue growth. Focus on 'picks & shovels' businesses serving the industry. |
Life Science Tools Pharmaceuticals CRO & CDMO Healthcare Research |
Consumer StaplesConsumer Staples was the epicenter of underperformance as investors showed no appetite for defensive businesses in a pro-cyclical, speculative bull market. The sector now trades at historically steep discounts despite facing perceived challenges including input cost inflation, GLP-1 impacts, and tariff supply chain effects. |
Defensive Valuation Discount Inflation Tariffs | |
DefenseThe team initiated a position in Curtiss-Wright, believing the company is entering a period where multiple near-term growth drivers are converging, including rising defense budgets, commercial aerospace production ramps, nuclear power plant life extensions and new builds, and submarine production. |
Defense Budgets Aerospace Nuclear Submarines | |
Energy TransitionThe portfolio maintains significant exposure to electrification themes through companies like Bloom Energy, which provides clean, reliable power solutions for AI data centers. The energy transition represents a structural opportunity as companies race to build power infrastructure to support growing electricity demands from AI workloads. |
Electrification Clean Energy Power Generation Fuel Cells Grid Infrastructure | |
| 2025 Q3 |
InfrastructureDigital 9 Infrastructure holds telecom infrastructure assets including Arqiva stake. Despite poor 2025 performance, potential capital returns and asset sales could unlock value. Infrastructure assets provide defensive characteristics. |
Telecom Infrastructure Digital Infrastructure |
Micro Caps |
||
| 2025 Q2 |
Growth |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Oct 13, 2025 | Fund Letters | David Neiderer | WLDN US | Willdan Group, Inc. | Industrials | Engineering & Construction Services | Bull | NASDAQ | backlog, energy efficiency, growth, infrastructure, Margins, Sustainability, valuation | Login |
| Oct 13, 2025 | Fund Letters | David Neiderer | BWMN US | Bowman Consulting Group, Ltd. | Industrials | Engineering & Construction Services | Bull | NASDAQ | backlog, engineering, growth, infrastructure, M&A, Margins, valuation | Login |
| Jul 22, 2025 | Fund Letters | David Neiderer | TWST | Twist Bioscience Corp. | Health Care | Biotechnology | Bull | NASDAQ | Antibodies, DNA, Ngs, profitability, Syntheticbiology | Login |
| Jan 18, 2026 | Fund Letters | David Neiderer | PL | Planet Labs PBC | Industrials | Commercial Services & Supplies | Bull | New York Stock Exchange | backlog, defense contracts, Geospatial Data, operating leverage, Satellite Imagery | Login |
| Jan 18, 2026 | Fund Letters | David Neiderer | IRMD | IRadimed Corporation | Health Care | Health Care Equipment | Bull | NASDAQ | dividends, earnings growth, Healthcare Technology, Medical devices, Niche Leadership | Login |
| Jan 18, 2026 | Fund Letters | David Neiderer | MAMA | Mama’s Creations, Inc. | Consumer Staples | Packaged Foods | Bull | NASDAQ | Acquisitions, brand growth, consumer staples, margin leverage, retail expansion | Login |
| Jan 18, 2026 | Fund Letters | David Neiderer | COCO | Vita Coco Company, Inc. | Consumer Staples | Beverages | Bull | NASDAQ | Beverages, Brand Power, cash generation, consumer demand, Pricing Discipline | Login |
| Jan 18, 2026 | Fund Letters | David Neiderer | IIIV | i3 Verticals, Inc. | Information Technology | Application Software | Neutral | NASDAQ | execution risk, growth visibility, public sector, recurring revenue, vertical software | Login |
| Jan 18, 2026 | Fund Letters | David Neiderer | BWMN | Bowman Consulting Group Ltd. | Industrials | Engineering & Construction Services | Neutral | NASDAQ | consolidation, engineering, execution risk, Infrastructure Services, project pipeline | Login |
| Jan 18, 2026 | Fund Letters | David Neiderer | ELVA | Electrovaya, Inc. | Industrials | Electrical Equipment | Bull | New York Stock Exchange | battery technology, Electrification, Industrial Mobility, Manufacturing Scale, order growth | Login |
| Jan 18, 2026 | Fund Letters | David Neiderer | ODD | Oddity Tech Ltd. | Consumer Discretionary | Personal Care Products | Bull | NASDAQ | Artificial Intelligence, Beauty Technology, Consumer Data, direct-to-consumer, operating margins | Login |
| TICKER | COMMENTARY |
|---|---|
| BWMN | BWMN provides multi-disciplinary engineering, planning, and consulting services to the built environment. Shares retraced gains in the fourth quarter after the company reported third-quarter revenue that significantly missed consensus estimates, despite an earnings beat. The revenue shortfall, combined with subsequent insider selling activity in December, contributed to negative sentiment. Bowman Consulting Group, Ltd. (BWMN) also suffered after reporting weaker-than-expected third quarter revenue results which weighed on investor sentiment in what had been a strong year-to-date performer. |
| COCO | Coconut beverage producer Vita Coco returned nearly +25% for the quarter on better-than-expected earnings and reduced concerns around potential tariff risks. |
| DGII | DGII provides connectivity solutions, including routers, gateways, and embedded systems. The stock performed well in the quarter as recurring services revenue grew faster than expected and margins expanded with mix shift toward software and subscriptions. Improved demand visibility in industrial and infrastructure end markets, along with disciplined expense management, supported earnings upside. |
| ELVA | ELVA designs and manufactures lithium-ion battery systems for industrial mobility and energy storage applications. Shares traded higher as order activity strengthened and progress toward commercial scale improved revenue visibility. Advancements in customer adoption and manufacturing execution supported optimism around future growth. The market responded positively to their differentiated battery technology and increasing exposure to electrification trends across material handling and industrial end markets. |
| IIIV | IIIV delivers integrated software and payment solutions to the public sector and healthcare markets. The stock faced pressure during the quarter after management issued a conservative growth forecast for fiscal 2026. The company cited timing delays in project implementations within its utilities and transportation verticals as a primary factor. i3 Verticals, Inc. (IIIV) sagged after providing lower than expected near-term guidance in their quarterly results, but we believe the longer-term outlook remains bright given their positioning for strong recurring revenue growth. |
| IRMD | IRMD develops, manufactures, and markets MRI-compatible medical devices, including infusion pump systems and patient monitors. The company delivered record third-quarter revenue and earnings, prompting management to raise full-year guidance. This strong operational performance, combined with the announcement of a special cash dividend, underscored the company's financial health and commitment to shareholder returns. |
| MAMA | stocks scaling very nicely and entering the small-cap sweet spot (REAL, MAMA, CBLL, KRMD). |
| PHR | PHR provides a SaaS-based platform that automates patient intake, payments, and clinical data for healthcare organizations. The stock declined in the fourth quarter following the release of fiscal third-quarter results. While PHR exceeded estimates for both revenue and earnings, the company provided forward revenue guidance that was viewed as conservative by investors, prompting valuation compression. Phreesia, Inc. (PHR) also struggled in the quarter on back of more conservative forward guidance provided in their third quarter results, though we were encouraged by their improving profitability and expanding network of clients. |
| PL | Top 3 contributors to absolute performance: ATEC, PL, AGX |
| ROAD | ROAD is a vertically integrated civil infrastructure company constructing roadways and highways across the Sunbelt. The stock underperformed during the quarter following the release of fiscal fourth-quarter results, where earnings per share missed analyst estimates. |
| TKNO | Alpha Teknova (TKNO) was the largest detractor in our long book during the fourth quarter. Alpha Teknova is a leading producer of critical reagents for the discovery, development, and commercialization of novel therapies, vaccines, and molecular diagnostics. One of our favorite archetypes is companies that make the 'picks & shovels' of their industry. Alpha Teknova doesn't invent new medicines or vaccines, but it provides the tools like reagents and lab supplies for over 3,000 biotech customers to grow cells, mix chemical reactions, and run experiments. We believe the beauty of its business model is that Alpha Teknova's products generate recurring revenues with high switching costs since customers do not want to refile technical paperwork with the FDA on their drug development programs. Unfortunately, the company has faced macro headwinds, including a multi-year pandemic hangover, a poor biotech funding environment, and concerns about government and academic spending priorities, all of which have caused customer caution. Based on our analysis, we believe Alpha Teknova's recurring revenue model and end‑market positioning offer compelling upside potential as industry conditions normalize. |
| TRNS | while Transcat, Inc. (TRNS) saw persistent organic service revenue weakness and margin compression following a series of acquisitions which weighed on profitability and investor sentiment. |
| UTI | Top 3 detractors to absolute performance: UTI, INOD, AMSC |
| VCEL | Vericel is a medical device company specializing in cartilage repair and burn care. VCEL's autologous cartilage repair product is differentiated and value-added for younger patients with knee cartilage defects of 2-4 cm. The company recently swung to profitability, and we see margin expansion as revenue ramps. Our intrinsic value estimate is $50 per share. |
| WLDN | Willdan Group, Inc. (WLDN) posted a full year total return of 172%, successfully capitalizing on surging demand for energy efficiency and grid modernization services, particularly from the AI-driven data center market and large government contracts. |
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