Conestoga Capital Advisors, an asset management company, released its third-quarter 2025 investor letter. A copy of the letter can be downloaded here. Equity markets continued their momentum that began in early April, reaching new all-time highs in the third quarter. In the quarter, the Conestoga Small Cap Composite returned -1.4% net-of-fees, underperforming the Russell 2000 Growth Index’s impressive 12.2% gain. Most of the Index’s gains come from low-quality stock leadership, where unprofitable, high-beta names have considerably outperformed. Please check the top 5 holdings of the fund for a better understanding of their best picks for 2025.
In its third-quarter 2025 investor letter, Conestoga Capital Advisors highlighted stocks such as Mercury Systems, Inc. (NASDAQ:MRCY). Mercury Systems, Inc. (NASDAQ:MRCY), with a market capitalization of $4.691 billion, is a technology company that manufactures and sells components, products, modules, and subsystems for the aerospace and defense industries. The one-month return of Mercury Systems, Inc. (NASDAQ:MRCY) was 1.37%, and its shares gained 127.25% of their value over the last 52 weeks. On October 15, 2025, Mercury Systems, Inc. (NASDAQ:MRCY) stock closed at $78.15 per share.
Conestoga Capital Advisors stated the following regarding Mercury Systems, Inc. (NASDAQ:MRCY) in its third quarter 2025 investor letter:
“Mercury Systems, Inc. (NASDAQ:MRCY) is a leading designer and manufacturer of advanced electronics and subsystems for aerospace and defense applications. Shares of MRCY traded sharply higher on optimism around defense spending, strong order momentum, and easing supply chain pressures that improved delivery and margins. Investor sentiment also improved with expectations of accelerating growth in secure, mission-critical defense electronics.”
Mercury Systems, Inc. (NASDAQ:MRCY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 28 hedge fund portfolios held Mercury Systems, Inc. (NASDAQ:MRCY) at the end of the second quarter, up from 23 in the previous quarter. In the fiscal fourth quarter of 2025, Mercury Systems, Inc. (NASDAQ:MRCY) generated revenue of $273 million, up 9.9% year-over-year. While we acknowledge the potential of Mercury Systems, Inc. (NASDAQ:MRCY) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
