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.
From a responsible business perspective, Warby Parker is a certified B Corp, with the objective of providing access to products and services that promote vision and eye health while positively impacting the communities in which it operates. A notable initiative is its “Buy a Pair, Give a Pair” program, which has distributed millions of pairs of glasses to people in need for every pair purchased.
Since it is topical, tariffs do impact WRBY’s business. Roughly 20% of WRBY’s cost of goods sold come from China. However, management has stated that they have flexibility in moving the supply chain, and we believe WRBY has pricing power to offset some of the tariffs if they are applied more broadly outside of China.”
A woman wearing a stylish pair of eyeglasses walking through a shopping center.
Warby Parker Inc. (NYSE:WRBY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held Warby Parker Inc. (NYSE:WRBY) at the end of the first quarter, which was 34 in the previous quarter. In the first quarter of 2025, Warby Parker Inc. (NYSE:WRBY) reported revenue of $223.8 million, up 11.9% year-over-year. While we acknowledge the potential of Warby Parker Inc. (NYSE:WRBY) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.
In another article, we covered Warby Parker Inc. (NYSE:WRBY) and shared the list of stocks that Jim Cramer got right in his predictions. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of WRBY as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
