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 Warby Parker Inc. (NYSE:WRBY). Incorporated in 2009, Warby Parker Inc. (NYSE:WRBY) is an eyewear brand that offers eyewear products across United States and Canada. Warby Parker Inc. (NYSE:WRBY) shares traded between $13.63 and $31.00 over the past 52 weeks. On January 22, 2026, Warby Parker Inc. (NYSE:WRBY) stock closed at $26.75 per share. One-month return of Warby Parker Inc. (NYSE:WRBY) was 10.63%, and its shares gained 25.82% of their value over the last three months. Warby Parker Inc. (NYSE:WRBY) has a market capitalization of $3.268 billion.
Riverwater Partners Small Cap Strategy stated the following regarding Warby Parker Inc. (NYSE:WRBY) in its fourth quarter 2025 investor letter:
“Warby Parker Inc. (NYSE:WRBY) is a compelling long-term growth opportunity built on a differentiated, vertically integrated eyewear and vision-care platform. The company has significant room to expand both units and economics. It holds roughly 1% share of the $66 billion U.S. eyewear market and continues to scale its omnichannel footprint. New stores drive higher conversion, more efficient customer acquisition, and stronger lifetime value—especially as more locations add in-house eye exams and optometrists. Eyewear replacement cycles of two to three years create durable, recurring demand. After recent delays in discretionary purchases, this demand should normalize. WRBY could also benefit in 2026 from larger tax refunds and easing consumer pressure.
A key driver of the earnings inflection is margin expansion. Stores with eye exams consistently generate higher sales per customer. Management is increasing optometrist density across the fleet, improving productivity and fixed-cost leverage. Insurance participation is also rising. Expanded in-network coverage boosts conversion and repeat purchases, particularly for higher-value prescription lenses and contacts. Tariffs have been a headwind due to WRBY’s sourcing exposure, but potential removal would provide a meaningful margin tailwind in 2026, accelerating EBITDA (earnings before interest, taxes, depreciation, and amortization) expansion as revenue scales faster than operating costs…” (Click here to read the full text)
Warby Parker Inc. (NYSE:WRBY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 31 hedge fund portfolios held Warby Parker Inc. (NYSE:WRBY) at the end of the third quarter, up from 34 in the previous quarter. Warby Parker Inc. (NYSE:WRBY) announced third-quarter 2025 revenue of $221.7 million, reflecting a 15.2% year-over-year increase. While we acknowledge the risk and potential of Warby Parker Inc. (NYSE:WRBY) 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 Warby Parker Inc. (NYSE:WRBY) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Warby Parker Inc. (NYSE:WRBY) and shared the list of stocks delivered 18-190% gains. 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.
