Riverwater Partners released its fourth-quarter 2025 investor letter for the Micro Opportunities Strategy. The strategy underperformed its benchmark in both the fourth quarter and the full year of 2025. Underweight exposure in speculative market areas contributed to the underperformance during the second half of the year.
Low-quality stocks with poor fundamentals outperformed the market throughout the year. The strategy's focus on high-quality stocks lagged behind broader market trends. Looking ahead to 2026, the strategy will concentrate on micro-cap companies with broader sales and growth trajectories. Riverwater Partners believes rallies in low-quality stocks will be short-lived.
In the investor letter, Riverwater Partners identified American Vanguard Corporation as one of the performance detractors. American Vanguard Corporation manufactures chemical, biological, and biorational products for agricultural, commercial, and consumer uses.
The company's stock returned 10.82% over one month but lost 15.35% over the last 52 weeks. On January 16, 2026, American Vanguard Corporation stock closed at $4.30 per share, giving it a market capitalization of $122.413 million.
Riverwater Partners stated in the letter: "American Vanguard Corporation underperformed during the quarter despite clear evidence of operational improvement. Since the appointment of a new CEO, management has executed on a turnaround plan that has meaningfully strengthened the business, though the stock price has moved in the opposite direction—an example of the inefficiencies often present in micro-cap equities."
The letter continued: "Inventory levels have been materially reduced and are now more manageable, declining approximately 20% year over year, while gross margins expanded sharply to 29% from 15%. Adjusted EBITDA improved to $8 million from $2 million in the prior year, reflecting better execution, cost discipline, and pricing."
Riverwater Partners added: "While we remain cognizant of the risks inherent in the agricultural end markets, we believe AVD is clearly on a path toward a significantly stronger and more durable operating profile than the market currently reflects."
Seventeen hedge fund portfolios held American Vanguard Corporation at the end of the third quarter of 2025, down from nineteen in the previous quarter. The company reported revenue of $119 million in Q3 2025, compared to $118 million in Q3 2024.