Group 1 - TimesSquare Capital Management's "U.S. Small Cap Growth Strategy" reported a gross return of 2.26% and a net return of 2.01% for Q3 2025, significantly underperforming the Russell 2000 Growth Index, which returned 12.19% [1] - All asset classes except fixed income outside the U.S. posted positive returns during the quarter [1] - Inspire Medical Systems, Inc. (NYSE:INSP) experienced a one-month return of -32.57% and a 52-week loss of 56.01%, closing at $94.76 per share with a market capitalization of $2.802 billion on January 5, 2026 [2] Group 2 - Merus, a biopharma company, saw a 79% increase in shares due to positive clinical trial results, while Inspire Medical Systems faced a -38% loss in the same period, leading to an exit from the position by TimesSquare Capital [3] - Inspire Medical Systems reported revenue of $224.5 million for Q3 2025, reflecting a 10% increase from Q3 2024, but is not among the 30 most popular stocks among hedge funds, with 48 hedge fund portfolios holding its shares at the end of Q3 2025 [4] - The company is viewed as having potential, but certain AI stocks are considered to offer greater upside potential and less downside risk [4]

Core Insights - The Mairs & Power Small Cap Fund reported a return of 2.06% in the first nine months of 2025, underperforming against benchmarks such as the Russell 2000 Total Returns Index, which increased by 10.39% [1] - The market remains concentrated in 2025, with a few dominant mega-cap stocks related to artificial intelligence driving most favorable outcomes [1] Fund Performance - The fund's performance lagged behind the S&P Small Cap 600 TR, which rose by 4.24%, and the Morningstar U.S. Fund Small Blend, which returned 6.15% [1] Company Focus: Inspire Medical Systems, Inc. - Inspire Medical Systems, Inc. (NYSE:INSP) is highlighted as a medical technology company specializing in minimally invasive solutions for obstructive sleep apnea [2] - The stock of Inspire Medical Systems experienced a one-month return of 61.41%, but it lost 26.28% over the last 52 weeks, closing at $140.07 per share with a market capitalization of $4.142 billion on December 10, 2025 [2] Performance Challenges - Inspire Medical Systems was noted as a detractor from relative performance due to challenges related to increased GLP-1 usage, new product rollout issues, and delays with billing software and reimbursement codes [3] Hedge Fund Interest - Inspire Medical Systems is not among the 30 most popular stocks among hedge funds, with 48 hedge fund portfolios holding the stock at the end of Q3 2025, up from 34 in the previous quarter [4] Financial Performance - In Q3 2025, Inspire Medical Systems reported revenue of $224.5 million, marking a 10% increase from Q3 2024 [4] - Despite the potential of Inspire Medical Systems as an investment, certain AI stocks are considered to offer greater upside potential and less downside risk [4]