Riverwater Partners released its fourth-quarter 2025 investor letter for the Micro Opportunities Strategy on January 16, 2026. The letter detailed performance challenges for both the quarter and the full year of 2025, noting the strategy failed to match benchmark results.
The underperformance was attributed to an underweight position in speculative market areas during the second half of the year. Throughout 2025, low-quality stocks with poor fundamentals outperformed the market, while the strategy's focus on high-quality stocks lagged behind broader trends.
Looking ahead to 2026, the strategy will concentrate on micro-cap companies with broader sales and growth trajectories. Riverwater Partners expressed belief that rallies in low-quality stocks will be short-lived.
The investor letter specifically mentioned Douglas Dynamics, Inc. (NYSE:PLOW) as a highlighted stock. Douglas Dynamics, a manufacturer and upfitter of commercial work truck attachments and equipment, has a market capitalization of $841.683 million.
On January 16, 2026, Douglas Dynamics stock closed at $36.53 per share. The stock posted a one-month return of 8.14% and gained 47.72% in value over the previous 52 weeks.
In the letter, Riverwater Partners described Douglas Dynamics as a leading North American manufacturer of commercial snow and ice control equipment and work truck solutions. The company serves municipal, commercial, and contractor markets through brands including FISHER®, WESTERN®, SnowEx®, Henderson®, and Dejana.
Douglas Dynamics operates through two segments: Work Truck Attachments, which is highly dependent on winter snowfall patterns, and Work Truck Solutions, which provides truck upfitting and municipal solutions with more diversified, less weather-dependent revenue streams.
According to the letter, this combination gives Douglas Dynamics a unique cyclical profile, with significant upside potential during normal winters and increasing stability as the Solutions business scales and diversification initiatives progress.
Database records show 20 hedge fund portfolios held Douglas Dynamics at the end of the third quarter of 2025, up from 18 in the previous quarter. In Q3 2025, the company reported consolidated net sales increased 25% to $162.1 million, with gross profit growing 23% to $38.1 million.