Riverwater Partners, an investment management company, released its 'Small Cap Strategy' Q2 2026 investor letter. The letter can be downloaded here. The Small Cap Strategy underperformed the Russell 2000 in the second quarter as the benchmark experienced one of its strongest risk-on rallies in recent memory, although the strategy remained ahead year-to-date. The quarter was defined by accelerating AI investment, energy market disruptions, and renewed investor appetite for higher-beta stocks, creating headwinds for the firm's quality-focused approach and healthcare positioning. Despite this, stock selection contributed positively in energy, materials, and financials, while healthcare and consumer discretionary detracted due to the fund's disciplined avoidance of speculative businesses. Looking ahead, the firm remains cautiously optimistic, focusing on opportunities created by market dislocations, including AI infrastructure enablers, select consumer companies, healthcare innovators, and energy businesses trading below intrinsic value. The strategy continues to emphasize high-quality companies with strong management teams and attractive valuations, positioning the portfolio for a potential rotation away from speculative market leadership. In addition, please check the Strategy's top five holdings to know its best picks in 2026.
In its second-quarter 2026 investor letter, Riverwater Partners Small Cap Strategy highlighted NetScout Systems, Inc. (NASDAQ:NTCT) as a new addition. NetScout Systems, Inc. (NASDAQ:NTCT) provides carrier service ******* urance, cybersecurity, and Distributed Denial-of-Service (DDoS) solutions to protect digital business services against disruptions. On August 31, 2026, NetScout Systems, Inc. (NASDAQ:NTCT) closed at $38.83 per share. The one-month return of NetScout Systems, Inc. (NASDAQ:NTCT) was -8.01% and its shares gained 57.59% over the past 52 weeks. NetScout Systems, Inc. (NASDAQ:NTCT) has a market capitalization of $2.82 billion with a 52-week trading range between $24.27 - $45.28.
Riverwater Partners Small Cap Strategy stated the following regarding NetScout Systems, Inc. (NASDAQ:NTCT) in its Q2 2026 investor letter:
"We initiated a position in NetScout Systems, Inc. (NASDAQ:NTCT) in April. Founded in 1984, NetScout Systems, Inc. (NTCT), with a stated mission of "Guardians of A Connected World," has been a technology innovator providing service ******* urance and cybersecurity solutions based on its pioneering deep packet inspection technology at scale. While high-growth competitors trade at significant premiums, NetScout offers a more attractive valuation for what we view as a durable software business with deeply embedded customer relationships among the Fortune 500. Its deep packet inspection technology is increasingly critical as enterprises navigate complex digital transformations, cloud migrations, and a heightened threat landscape. We view NTCT as a disciplined way to gain exposure to secular technology ta