Riverwater Partners Q3 2026 Small Cap Macro Letter
This past spring marked a decade since Riverwater opened its doors, and we were delighted to celebrate the milestone with our valued clients and friends a few weeks ago.
Since the Sustainable Value strategy’s inception in 2016, it has outperformed theRussell 2500 Value Indexnet of fees, with lower volatility as measured by standard deviation and beta, although results have varied from year to year.1 It’s enlightening to look back and reflect on how much the world has changed in just ten years.
In 2016, interest rates were near zero, few adults had ever experienced a global airborne pandemic, and artificial intelligence was just beginning to move from science fiction to the real world.
Most small-cap companies were not reporting on sustainability initiatives, and we often had to explain to management teams the benefits of doing so.
Fast forward to today, and we are navigating an environment marked by elevated inflation and higher interest rates, the scars of COVID, an economy now firmly driven by AI, and widespread market appreciation for sustainable business practices.
Our team is asking: What will the next ten years look like, and how must our approach evolve to satisfy our core mission? There is no way to see out that far, but we don’t think it’s necessary to.
We have built a team, a process, and a framework that we believe can adapt to the ever-changing world and deliver results over the long term.
Thinking long term while managing capital in the short term can be frustrating, especially in markets as narrow as today’s.
Investors have become almost singularly focused on AI, energy, and companies that haven’t yet turned profitable, leaving high-quality companies in other sectors largely overlooked.
We began building exposure to AI infrastructure, semiconductor capital equipment and optical components early in the buildout for our small-cap strategies, and those holdings were key performance drivers over the past year in those strategies.
As valuations outpaced sales and cash flows, we trimmed or sold most of those positions, which pushed turnover above our historical norm.
We have redeployed that capital into companies we believe offer more attractive long-term risk and reward.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
Comments
Post a Comment