Core Insights - Conestoga Capital Advisors reported that equity markets reached new all-time highs in Q3 2025, but their Small Cap Composite underperformed the Russell 2000 Growth Index, returning -1.4% compared to the Index's 12.2% gain [1] - The gains in the Russell 2000 Growth Index were primarily driven by low-quality stocks, particularly unprofitable, high-beta names [1] Company Highlights: Mercury Systems, Inc. (NASDAQ:MRCY) - Mercury Systems, Inc. has a market capitalization of $4.691 billion and specializes in advanced electronics and subsystems for aerospace and defense [2][3] - The stock of Mercury Systems, Inc. experienced a one-month return of 1.37% and a remarkable 127.25% increase over the past 52 weeks, closing at $78.15 per share on October 15, 2025 [2] - The company reported Q4 2025 revenue of $273 million, reflecting a year-over-year increase of 9.9% [4] Market Sentiment and Performance - Investor sentiment for Mercury Systems, Inc. improved due to optimism surrounding defense spending, strong order momentum, and easing supply chain pressures, which positively impacted delivery and margins [3] - The number of hedge funds holding Mercury Systems, Inc. increased from 23 to 28 in the second quarter of 2025, indicating growing interest among institutional investors [4] - Despite the positive outlook for Mercury Systems, Conestoga Capital Advisors believes that certain AI stocks may offer greater upside potential with less downside risk [4]