Madison Investments, an investment advisor, released its “Madison Small Cap Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The third quarter was difficult for the Small Cap Fund. The small-cap index’s performance was broad-based. The Madison Small Cap Fund (class Y) was down 1.3% in the quarter, significantly underperforming the benchmarks. The underperformance was driven by stock selection and exacerbated by a very speculative market. In addition, please check the fund’s top five holdings to know its best picks in 2025.
In its third-quarter 2025 investor letter, the Madison Small Cap Fund highlighted stocks such as Charles River Laboratories International, Inc. (NYSE:CRL). Charles River Laboratories International, Inc. (NYSE:CRL) offers drug discovery, non-clinical development, and safety testing services that operate through Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Solutions (Manufacturing) segments. The one-month return of Charles River Laboratories International, Inc. (NYSE:CRL) was -14.15%, and its shares lost 16.72% of their value over the last 52 weeks. On November 21, 2025, Charles River Laboratories International, Inc. (NYSE:CRL) stock closed at $167.64 per share, with a market capitalization of $8.25 billion.
Madison Small Cap Fund stated the following regarding Charles River Laboratories International, Inc. (NYSE:CRL) in its third quarter 2025 investor letter:
“We initiated a position in Charles River Laboratories International, Inc. (NYSE:CRL) in Q3. CRL is a high-quality company in the drug discovery and development outsourcing space with a broad range of services from basic research to contract manufacturing. The company has operating margins of 20% or more and generates substantial free cash flow. The past few years have been challenging for companies in the drug development space, as capital has become increasingly constrained and research and development spending has remained stagnant. However, CRL has the operating history and mix of businesses to be successful over the long term. The customer base is diverse and CRL benefits from the increased dynamics of outsourcing by its biopharmaceutical clients. The company’s top line has grown at a 12% compound annual rate over the last 10 years, even with the recent downturn. Management is solid, and we’ve known them for decades. We believe Charles River’s earnings power can reach approximately $15 in 2028, assuming modest growth. We also use a sum of the parts at ~12x EBITDA (earnings before interest, taxes, depreciation, and amortization) to assess the attractiveness of CRL. This implies an intrinsic value of $228. Importantly, we think we are being conservative, as we don’t build in a resumption of double-digit revenue growth in our valuation framework. However, we anticipate revenue growth of 4% from 2024 to 2028 and a modest margin recovery, aided by restructuring and cost-outs.”
Charles River Laboratories International, Inc. (NYSE:CRL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 49 hedge fund portfolios held Charles River Laboratories International, Inc. (NYSE:CRL) at the end of the second quarter, compared to 39 in the previous quarter. Charles River Laboratories International, Inc. (NYSE:CRL) reported revenue of $1 billion in the third quarter of 2025, a 0.5% decrease from Q3 2024. While we acknowledge the risk and potential of Charles River Laboratories International, Inc. (NYSE:CRL) 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 Charles River Laboratories International, Inc. (NYSE:CRL) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Charles River Laboratories International, Inc. (NYSE:CRL) and shared ClearBridge Growth Strategy’s views on the company. In addition, please check out our hedge fund investor letters Q3 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.
