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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Small-cap strategy outperformed Russell 2000 in Q1 through specialty insurance winners PLMR and BOW in attractive E&S market. Added WRBY eyewear despite China tariff exposure."
Riverwater Partners' Small Cap Strategy outperformed the Russell 2000 in Q1 2025 through strong stock selection and favorable sector allocation. The strategy emphasizes bottom-up fundamental research, focusing on high-quality companies with growing sales and improving returns on capital. Financials were the top-performing sector, driven by specialty insurance holdings PLMR and BOW in the attractive E&S space. PLMR was the top contributor with strong Q4 results and successful acquisition of FIA. Consumer Staples underperformed due to LMNR's strategic review conclusion. New additions include WRBY, a direct-to-consumer eyewear brand with significant market share opportunity, despite tariff headwinds affecting 20% of COGS from China. The manager maintains a defensive stance given severe tariff announcements creating bear market conditions. However, volatility may present opportunities to acquire quality businesses at discounted valuations. Small-caps may benefit from domestic economic resilience and lower global risk exposure as 2025 progresses, supporting the strategy's focus on undervalued businesses with durable operating models.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
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