Core Insights - Riverwater Partners' Small Cap Strategy reported solid results for Q3 2025 but lagged behind the benchmark due to the market's 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 challenging market conditions [1] - Vestis Corporation (NYSE:VSTS) was highlighted as a stock of interest, showing a one-month return of 38.46% but a significant 53.07% decline over the past 52 weeks [2] Company Analysis - Vestis Corporation is undergoing a business turnaround, which is expected to take longer than initially anticipated, compounded by a debt overhang that may hinder reinvestment [3] - The company is not among the 30 most popular stocks among hedge funds, with 27 hedge fund portfolios holding its shares at the end of Q3 2025, down from 34 in the previous quarter [4] - While Vestis Corporation has potential, the company is viewed as less favorable compared to certain AI stocks that are believed to offer greater upside potential and lower downside risk [4]

Core Insights - Riverwater Partners' Small Cap Strategy underperformed the Russell 2000 in Q2 2025 due to a focus on defensive holdings and market preference for low-quality companies [1] - Vestis Corporation (NYSE:VSTS) experienced significant challenges, including a sharp decline in revenue and a net loss, leading to a 71.04% decrease in share value over the past year [2][3] Company Performance - Vestis Corporation's one-month return was -2.29%, with shares closing at $4.26 on September 08, 2025, and a market capitalization of $561.638 million [2] - The company's fiscal third quarter revenue decreased by 3.5% year-over-year to $674 million, indicating ongoing financial difficulties [4] Strategic Moves - In response to financial stress, Vestis eliminated its dividend and amended its credit agreement to improve liquidity, reflecting diminished investor confidence [3] - Despite holding a small position in Vestis, the company may consider selling if the situation does not improve [3] Hedge Fund Interest - Vestis Corporation was held by 34 hedge fund portfolios at the end of Q2 2025, down from 48 in the previous quarter, indicating reduced interest among institutional investors [4]