| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Riverwater Partners Small Cap Strategy underperformed the Russell 2000 in Q4 2025 and full year, driven primarily by stock selection challenges in Health Care, Consumer Staples, and Industrials. The manager maintained focus on higher-quality companies with strong balance sheets and identifiable catalysts, avoiding speculative AI investments, biotech rallies, and crypto-related businesses that drove much of the market's performance. Energy was the strongest sector contributor, led by CNX Resources benefiting from natural gas price increases and AI-driven data center demand. Centrus Energy was the top annual performer, capitalizing on nuclear energy independence themes and domestic uranium enrichment demand. The portfolio added positions in infrastructure-related companies like NPK International and Kodiak Gas Services to participate in grid expansion and energy system upgrades. Looking ahead to 2026, the manager is increasingly constructive on small-cap equities, expecting a rotation toward fundamentals as lower-quality factors that drove 2025 performance prove unsustainable. Federal Reserve rate cuts should disproportionately benefit small-cap companies through improved financing conditions and accelerating earnings growth.
The manager focuses on higher-quality small-cap companies with strong balance sheets, quality fundamentals, and identifiable catalysts, avoiding speculative investments while positioning for a rotation back toward fundamentals in 2026.
Looking ahead to 2026, we are increasingly constructive on both small-cap equities broadly and high-quality small-cap businesses in particular. We believe 2026 will mark a rotation back toward fundamentals, with quality small-cap stocks outperforming not only lower-quality peers but also large-cap equities, supported by more favorable macro and earnings dynamics. We believe 2026 presents a markedly better environment for cyclical sectors and companies than defensive ones.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 14 2026 | 2025 Q4 | ADEA, AMD, ATMU, ATRC, BHST, BKH, CNX, DIS, HSTM, ITGR, KGS, LEU, LMNR, LOPE, MOD, NPKI, PLMR, STKL, VECO, WRBY | AI, financials, healthcare, infrastructure, Natural Gas, nuclear, Quality, small caps |
CNX LEU LOPE LMNR BHST KGS NPKI ADEA WRBY HSTM ITGR |
Natural gas stocks benefited from AI theme as potential winners in powering data centers. CNX Resources was the top contributor driven by weather-related price increases… |
| Oct 16 2025 | 2025 Q3 | BDC, CROX, DGII, HAE, IRDM, MOD, PFS, PLMR, PLPC, UEC, VSTS, WOR | Artificial Intelligence, Energy Transition, industrials, small caps, uranium |
UEC MOD WOR PFS DGII BDC PLPC |
Riverwaters small-cap strategy lagged the benchmark as speculative, low-quality stocks rallied, but the fund maintains focus on quality small caps exposed to secular AI and… |
| Jul 17 2025 | 2025 Q2 | - | Mean reversion, revenue growth, Sentiment, small caps, valuation | - | The commentary stresses the disconnect between small-cap fundamentals and valuations relative to large caps. Management argues faster revenue growth and attractive multiples support a strong… |
| Mar 31 2025 | 2025 Q1 | LMNR, PLMR, SNEX, WRBY | - | - | - |
| Jan 10 2025 | 2024 Q4 | NCMI | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
AIAI has become a dominant theme across major equity indices, with Nvidia leading the S&P 500, ASML dominating MSCI EAFE, and TSMC leading emerging markets. The fund benefited from AI-related dynamics, particularly through Samsung's memory products experiencing substantial price increases due to DRAM shortages driven by AI demand. |
Semiconductors Memory DRAM Technology Nvidia |
Infrastructure SpendingGerman-led defense and infrastructure spending in Europe includes €1 trillion of planned spending on defense and infrastructure. This fiscal stimulus should support mid-cap companies and sectors tied to capital expenditure, construction, and industrial modernization. |
Defense Construction Fiscal Stimulus Europe | |
Natural GasKodiak Gas Services provides mission-critical large-horsepower compression infrastructure upstream of LNG exports and downstream power demand from AI-driven data centers. The company benefits from robust demand in the Permian and other basins through long-term, take-or-pay style contracts. |
LNG Energy Infrastructure Compression Permian Energy | |
NuclearPosition in Uranium Energy as the largest licensed uranium miner in the U.S., positioned to benefit from renewed focus on nuclear power as long-term energy solution and U.S. efforts to strengthen domestic nuclear fuel supply chains for national security. |
Uranium Mining Nuclear Power Energy Security Domestic Supply National Security | |
| 2025 Q3 |
AIAI has become a dominant theme across major equity indices, with Nvidia leading the S&P 500, ASML dominating MSCI EAFE, and TSMC leading emerging markets. The fund benefited from AI-related dynamics, particularly through Samsung's memory products experiencing substantial price increases due to DRAM shortages driven by AI demand. |
Semiconductors Memory DRAM Technology Nvidia |
Small CapsConcentrated portfolio of small-cap companies with limited sell-side coverage and institutional ownership. Invests where most institutional managers cannot or will not participate, allowing for asymmetric return potential. 44% of Russell 2000 stocks have zero Wall Street coverage, creating mispriced opportunities. |
Russell 2000 Limited Coverage Institutional Asymmetric Mispriced | |
| 2025 Q2 |
ValuationAI-related companies continue to command premium valuations while other sectors remain reasonably priced. This valuation divide continues to guide investment activity, with the fund remaining wary of companies trading at exceedingly high valuations that imply exceptional multi-year earnings growth. |
Premium Divide Discipline Stretched Reasonable |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jan 14, 2026 | Fund Letters | Adam Peck | LEU | Centrus Energy Corp. | Energy | Nuclear Fuel | Bull | New York Stock Exchange | Contracts, energysecurity, Enrichment, Nuclear, Policy | Login |
| Jan 14, 2026 | Fund Letters | Adam Peck | LOPE | Grand Canyon Education, Inc. | Consumer Discretionary | Education Services | Bull | NASDAQ | compounder, Education, Enrollment, Regulation, ROIC | Login |
| Jan 14, 2026 | Fund Letters | Adam Peck | LMNR | Limoneira Company | Consumer Staples | Agricultural Products | Bull | NASDAQ | agriculture, Assetvalue, Avocados, Longcycle, Supply | Login |
| Jan 14, 2026 | Fund Letters | Adam Peck | BHST | BioHarvest Sciences Inc. | Health Care | Biotechnology | Bull | NASDAQ | biotechnology, growth, Nutraceuticals, platform, Sustainability | Login |
| Jan 14, 2026 | Fund Letters | Adam Peck | KGS | Kodiak Gas Services, Inc. | Energy | Oil & Gas Equipment & Services | Bull | New York Stock Exchange | Compression, Contracts, Freecashflow, infrastructure, Naturalgas | Login |
| Jan 14, 2026 | Fund Letters | Adam Peck | NPKI | NPK International Inc. | Industrials | Commercial Services & Supplies | Bull | NASDAQ | Electrification, Freecashflow, infrastructure, Margins, Mats | Login |
| Jan 14, 2026 | Fund Letters | Adam Peck | ADEA | Adeia Inc. | Information Technology | Semiconductor IP | Bull | NASDAQ | Ip, Licensing, litigation, royalties, semiconductors | Login |
| Jan 14, 2026 | Fund Letters | Adam Peck | WRBY | Warby Parker Inc. | Consumer Discretionary | Specialty Retail | Bull | New York Stock Exchange | Eyewear, Margins, Omnichannel, retail, ROIC | Login |
| Oct 16, 2025 | Fund Letters | Adam Peck | UEC | Uranium Energy Corp. | Materials | Uranium & Nuclear Energy | Bull | NYSE | Commodities, infrastructure, nuclear energy, Policy, uranium | Login |
| Jan 14, 2026 | Fund Letters | Adam Peck | HSTM | HealthStream, Inc. | Health Care | Health Care Technology | Bear | NASDAQ | Commercialization, Execution, healthcare, Software | Login |
| Oct 16, 2025 | Fund Letters | Adam Peck | MOD | Modine Manufacturing Co. | Consumer Discretionary | Industrial Machinery | Bull | NYSE | AI, data centers, growth, manufacturing, semiconductors, thermal management | Login |
| Jan 14, 2026 | Fund Letters | Adam Peck | ITGR | Integer Holdings Corporation | Health Care | Medical Devices | Bear | New York Stock Exchange | Execution, guidance, Medtech, visibility | Login |
| Oct 16, 2025 | Fund Letters | Adam Peck | WOR | Worthington Enterprises Inc. | Materials | Industrial Manufacturing | Bull | NYSE | growth, Industrial, IoT, manufacturing, Reshoring | Login |
| Oct 16, 2025 | Fund Letters | Adam Peck | PFS | Provident Financial Services Inc. | Financials | Banks | Bull | NYSE | Banks, consolidation, dividends, growth, Lending, Value | Login |
| Oct 16, 2025 | Fund Letters | Adam Peck | DGII | Digi International Inc. | Information Technology | Internet of Things (IoT) | Bull | NASDAQ | AI, Automation, Connectivity, Industrial technology, IoT | Login |
| Oct 16, 2025 | Fund Letters | Adam Peck | BDC | Belden Inc. | Information Technology | Communications Equipment | Bull | NYSE | AI, Automation, Connectivity, infrastructure, Networking, Software | Login |
| Oct 16, 2025 | Fund Letters | Adam Peck | PLPC | Preformed Line Products Co. | Industrials | Electrical Equipment & Components | Bull | NASDAQ | broadband, Electrification, infrastructure, manufacturing, Power, utilities | Login |
| Jan 14, 2026 | Fund Letters | Adam Peck | CNX | CNX Resources Corporation | Energy | Oil & Gas Exploration & Production | Bull | New York Stock Exchange | buybacks, energy, Freecashflow, Naturalgas, Volumes | Login |
| TICKER | COMMENTARY |
|---|---|
| ADEA | We initiated a position in Adeia, Inc. (ADEA) in the fourth quarter. ADEA licenses intellectual property (IP) to its customers for use in their media and semiconductor products and services. Spun out of Xperi Inc. (XPER) in 2022, ADEA has a broad range of media customers as licensees. Additionally, hybrid bonding is becoming a key technology used by semiconductor manufacturers as complexity increases. ADEA's IP is currently licensed by the major memory players, with several logic players also interested. |
| AMD | AMD was mentioned as an example of businesses that already make money, have shown they can do so through cycles and are priced so that we do not need everything to go right. |
| BHST | During the fourth quarter, the team initiated a position in BioHarvest Sciences Inc. The BHST story has been on our radar for approximately 18 months, with multiple meetings with the CEO both in person and virtually. The firm participated in the company's recent secondary offering at a discount to its recent trading valuation. BHST's Botanical Synthesis platform is particularly compelling—it grows plant cells in a proprietary BioHarvester for use in food, beverage, pharma, and cosmetics products. This technology enables the mass production of plant phytochemicals without the need for a vast environmental footprint—a compelling sustainability story. |
| BKH | 3Q earnings exceeded expectations. BKH increased its data center pipeline guidance from 1 GW to 3 GW+, which is expected to be a long-term driver of EPS growth. |
| CNX | CNX Resources Corporation was our top contributor for the quarter. Natural gas prices rose into the end of the quarter. The gain was largely weather-driven and with $5/mcf levels viewed as unsustainable in our long-term projections—CNX benefited in the short-term from a favorable near-term pricing backdrop. At the same time, the company continued to execute consistently, delivering on production targets, generating strong free cash flow, and returning capital through a disciplined and accretive share repurchase program, which together supported multiple expansion. |
| DIS | We sold our long-term holding in Disney, reflecting our view that consumer discretionary spending could remain under pressure if cost-of-living conditions stay tight, especially at a time when the company is spending significantly on Parks and Resorts. |
| ITGR | Integer Holdings Corporation (ITGR), which specializes in the design, development, and production of medical technologies and components. In late October, Integer's stock sank more than 30% after the company significantly lowered its outlook for growth and margin expansion in 2026, as several products experienced slower market adoption than was expected. But management expects these headwinds to be short-lived, with a robust portfolio of higher growth and margin products coming to market, which should allow the company to get back on track. The company still expects to outgrow its industry peers by 2% while growing earnings before interest and taxes (EBIT) at twice the rate of sales. Even better, the company announced a $200 million stock repurchase authorization after the selloff, increasing our conviction that the shares are materially undervalued. This confidence drove us to increase our exposure to Integer in the quarter. |
| KGS | Kodiak Gas Services is a 'picks-and-shovels' play on the U.S. natural gas boom. The company provides mission-critical large-horsepower compression infrastructure that sits upstream of LNG exports and downstream power demand from AI-driven data centers. In our view, Kodiak's long-term, take-or-pay style contracts, high fleet utilization, and structurally tight compression market can translate robust demand in the Permian and other basins into steady EBITDA growth, rising discretionary cash flow, and a high-single-digit total return profile before any multiple expansion. |
| LEU | Centrus Energy (LEU) was our top performer for the year as the market increasingly recognized its unique strategic positioning at the nexus of U.S. national security, nuclear energy independence, and next-generation reactor deployment. As the only U.S.-owned and licensed producer of both LEU and HALEU (high-assay low-enriched uranium), Centrus is a critical beneficiary of the structural shift away from Russian nuclear fuel supply and toward domestic enrichment, a theme reinforced by strong bipartisan and Department of Energy support. This thesis was validated when Centrus was awarded approximately $900 million on January 5, 2026 (subsequent to quarter-end) by the Department of Energy to build out additional enrichment capacity, materially strengthening its long-term earnings visibility and strategic value. Following the significant re-rating, we exited the position in full as we believe a substantial portion of the favorable policy, contract, and growth outlook has now been reflected in the share price. |
| LMNR | Limoneira Company (LMNR) declined 14% in the quarter and was our largest detractor for the full year. The agricultural company's stock has been pressured by the cessation of a strategic alternatives review and by weaker cash flows stemming from a reorganization of its citrus business. Despite the disappointing price action, we continue to believe the company's land and water rights are significantly undervalued relative to the current stock price. We expect non-core asset sales in 2026 as well as improved cash flows from its citrus operations. |
| LOPE | Grand Canyon Education, Inc. (LOPE) was the portfolio's top underperformer in the fourth quarter, despite reporting solid operating results that were largely in line with expectations. The stock's weakness was driven less by company-specific fundamentals and more by negative read-throughs from peers and competitors that reported weaker-than-expected enrollment trends. In addition, potential, and eventual, government shutdown during the quarter created an external overhang, raising concerns around Title IV funding flows, even though LOPE's direct exposure remains limited. These factors contributed to multiple compression and overshadowed the company's strong execution and resilient demand profile. Notwithstanding the recent selloff, we continue to view LOPE as a high-quality compounder with a compelling long-term growth runway and consistently high returns on invested capital. |
| NPKI | During the quarter, we added NPK International Inc., a manufacturer, renter, and seller of composite matting solutions primarily serving utility and energy-related end markets. We view NPKI as a differentiated way to participate in the multi-year infrastructure buildout required to support grid expansion, electrification, and energy system upgrades. As new infrastructure is constructed, composite mats provide a stable working surface that protects the environment while offering meaningful advantages over traditional timber mats, including longer useful life, easier transportation, and superior long-term cost efficiency. |
| WRBY | It was a rollercoaster ride for shares in Warby Parker, which ended the quarter down by -22%. The online eyewear retailer's shares slid down sharply through October as the market was cautious ahead of November's fiscal quarterly report, and we added to our position. Warby reported lower-than-expected sales, though better margins led to higher earnings. After speaking with management, we believe Warby's core operations were stable, and the prevailing stock price undervalued the benefits from 2026's Google's smart glasses launch. Toward the end of the year, enthusiasm for smart glasses lifted Warby's shares, and we trimmed the position. |
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