Riverwater Partners Small Cap Strategy Sold Its Stake in HealthStream (HSTM)

Riverwater Partners, an investment management company, released its “Small Cap Strategy” Q4 2025 investor letter. A copy of the letter can be downloaded here. The Strategy underperformed the Russell 2000 Index during the fourth quarter as well as in FY2025. The stock selection drove the underperformance of the Strategy in the quarter. The strategy’s emphasis on high-quality stocks lagged behind broader market trends. However, the firm expects the environment to be more favorable for high-quality businesses in 2026. In addition, please check the Strategy’s top five holdings to know its best picks in 2025.

In its fourth-quarter 2025 investor letter, Riverwater Partners Small Cap Strategy highlighted stocks like HealthStream, Inc. (NASDAQ:HSTM). HealthStream, Inc. (NASDAQ:HSTM) is a US-based healthcare company that provides Software-as-a-Service (SaaS) based applications for healthcare organizations. HealthStream, Inc. (NASDAQ:HSTM) shares traded between $21.00 and $34.24 over the past 52 weeks. On January 22, 2026, HealthStream, Inc. (NASDAQ:HSTM) stock closed at $21.47 per share. One-month return of HealthStream, Inc. (NASDAQ:HSTM) was -9.06%, and its shares lost 18.40% of their value over the last three months. HealthStream, Inc. (NASDAQ:HSTM) has a market capitalization of $636.975 million.

Riverwater Partners Small Cap Strategy stated the following regarding HealthStream, Inc. (NASDAQ:HSTM) in its fourth quarter 2025 investor letter:

“HealthStream, Inc. (NASDAQ:HSTM): We sold our position in HealthStream Inc. during the quarter. While we believe the company has developed the healthcare industry’s largest ecosystem of platform-delivered workforce solutions that empowers healthcare professionals to do what they do best: deliver excellence in patient care, HSTM has faced challenges with commercialization of the offering. We may revisit the stock if we see evidence of commercial traction.”

HealthStream, Inc. (HSTM): AI-Powered Learning for Healthcare Professionals

HealthStream, Inc. (NASDAQ:HSTM) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 11 hedge fund portfolios held HealthStream, Inc. (NASDAQ:HSTM) at the end of the third quarter, compared to 12 in the previous quarter.While we acknowledge the risk and potential of HealthStream, Inc. (NASDAQ:HSTM) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than HealthStream, Inc. (NASDAQ:HSTM) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered HealthStream, Inc. (NASDAQ:HSTM) and shared Riverwater Small Cap Strategy’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q4 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.