A Confluence of Headwinds Affected Palomar (PLMR) in Q3

Core Insights - Riverwater Partners' Small Cap Strategy reported solid results in Q3 2025 but lagged behind the benchmark due to market preference for lower-quality companies [1] - The strategy focuses on higher-quality companies with strong fundamentals and a clear path to profitability, positioning itself well for future challenges [1] Company Performance - Palomar Holdings, Inc. (NASDAQ:PLMR) has a market capitalization of $3.362 billion, with a one-month return of -3.16% and a 52-week gain of 12.93% [2] - On December 15, 2025, Palomar's stock closed at $125.52 per share [2] Underperformance Analysis - Palomar's stock underperformance in Q3 2025 is attributed to weaker commercial market pricing, a shift away from defensive sectors, and concerns about underwriting margin compression [3] - Rate reductions in commercial earthquake and property markets have pressured premium renewal yields, impacting growth [3] - Despite challenges, Palomar has strong visibility into premium growth through multi-year rate plans and expansion into diversified lines like casualty and crop insurance [3] Financial Results - In Q3 2025, Palomar reported adjusted net income of $55.2 million or $2.01 per share, compared to $32.4 million or $1.23 per share in Q3 2024 [4] - The increase in adjusted net income indicates potential for growth, although some analysts suggest that certain AI stocks may offer greater upside potential [4]