Riverwater Partners, an investment management company, released its “Sustainable Value Strategy” Q1 2026 investor letter. A copy of the letter can be downloaded here. In Q1 2026, the Riverwater Sustainable Value Strategy underperformed the Russell 2500 Value Index. The underperformance was driven entirely by stock selection, while sector allocation contributed positively. The quarter demonstrated a strong small-cap market with an 11.1% return until February, but later the strategy lagged by over 5%, following geopolitical events. Despite this, relative performance improved, indicating strong downside protection. Looking ahead, the firm anticipates a shift back to fundamentals expected to favor high-quality small-cap stocks over lower-quality peers and large-cap equities. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its first-quarter 2026 investor letter, Riverwater Sustainable Value Strategy highlighted Sprouts Farmers Market, Inc. (NASDAQ:SFM) as a newly added position. Sprouts Farmers Market, Inc. (NASDAQ:SFM) is a US-based retailer of fresh, natural, and organic food products under the Sprouts brand. On April 20, 2026, Sprouts Farmers Market, Inc. (NASDAQ:SFM) closed at $74.35 per share. One-month return of Sprouts Farmers Market, Inc. (NASDAQ:SFM) was -1.72%, and its shares lost 54.47% over the past 52 weeks. Sprouts Farmers Market, Inc. (NASDAQ:SFM) has a market capitalization of $7.03 billion.
Riverwater Sustainable Value Strategy stated the following regarding Sprouts Farmers Market, Inc. (NASDAQ:SFM) in its Q1 2026 investor letter:
“Sprouts Farmers Market, Inc. (NASDAQ:SFM) is a specialty grocery retailer focused on fresh, natural, and organic foods. Its unique health-focused stores built around its farm-stand heritage differentiate it from conventional grocers and position it to capitalize on the secular consumer shift toward better-for-you food. With stores in 25 states nationwide, the company is executing a long-term ~10% store growth algorithm, including into underpenetrated markets across the Northeast and Midwest.
The stock retreated meaningfully from its 2025 peak as comparable store sales decelerated due to macro-driven consumer caution. We are confident in the underlying business given its best-in-class gross margins, curated product selection driving customer loyalty, and improving fundamentals through private label expansion and supply chain self-distribution. We like that it trades at a below market multiple of 13.9x 2026 estimated earnings, but still is on track to continue its double digit earnings growth algorithm.”