Soumya Eswaran

Mon, Jun 30, 2025, 5:29 AM4 min read

Riverwater Partners, an investment management company, released its “Small Cap Strategy” Q1 2025 investor letter. A copy of the letter can be downloaded here. The Small Cap Core Strategy outperformed the Russell 2000 in Q1 2025, driven by strong stock selection and sector allocation. Within this strategy, the firm focuses on bottom-up fundamental research rather than making top-down macroeconomic bets. While much of the market discourse today is centered on tariffs and U.S. fiscal policy, the firm’s focus remains on identifying high-quality companies. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its first-quarter 2025 investor letter, Riverwater Partners Small Cap Strategy highlighted stocks such as Warby Parker Inc. (NYSE:WRBY). Incorporated in 2009, Warby Parker Inc. (NYSE:WRBY) provides eyewear products. The one-month return of Warby Parker Inc. (NYSE:WRBY) was 1.91%, and its shares gained 37.93% of their value over the last 52 weeks. On June 27, 2025, Warby Parker Inc. (NYSE:WRBY) stock closed at $21.89 per share, with a market capitalization of $2.658 billion.

Riverwater Partners Small Cap Strategy stated the following regarding Warby Parker Inc. (NYSE:WRBY) in its Q1 2025 investor letter:

"Warby Parker Inc. (NYSE:WRBY) is a multichannel direct-to consumer lifestyle brand that specializes in selling affordable eyewear, including prescription eyeglasses, sunglasses, and contact lenses, as well as providing eye exams and vision tests directly to consumers through its retail stores and e-commerce platform. We believe WRBY is an attractive investment because of its consistent market share gains, strong revenue growth, and EBITDA expansion relative to its peer group. The company has potential for long-term growth given the size of the US eyewear market at around $66 billion. WRBY currently only holds a 1% market share, and we believe its ability to capture share is high. We see WRBY growing in the mid-teens and expanding its return on invested capital to greater than 20% in the future. Furthermore, WRBY's recent partnership with Target is seen as a material store expansion opportunity. We believe WRBY can grow store count further than analysts currently estimate.