Conestoga Capital Advisors recently shared insights from their fourth-quarter 2025 investor letter, underscoring the strong performance of US equities throughout the year despite underlying market volatility. While the firm's Small Cap Strategy saw a slight decline of -1.89% net of fees in Q4 2025, lagging behind the Russell 2000 Growth Index's 1.22% return, their strategic picks reveal a continued focus on companies with robust fundamentals. Amidst a quarter characterized by fluctuating market conditions and a persistent, albeit decelerating, rally in 'low quality' stocks, the firm emphasized their key selections for the year, including a notable focus on Badger Meter, Inc.
Badger Meter, Inc. (BMI) stands out as a prominent player in the municipal water utility sector, specializing in flow measurement, quality control, and communication technologies. As of February 18, 2026, BMI shares were valued at $158.20. The company experienced an 8% increase in total sales in Q4 2025, reaching $221 million, demonstrating steady operational growth. Conestoga Capital Advisors lauded BMI for its high-quality attributes, including its dominant position in an oligopolistic water-metering market, provision of essential solutions, consistent replacement-driven recurring revenue, a healthy capital structure, and effective management. These factors contribute to BMI's capacity for sustained growth and value creation through various economic cycles, as highlighted in the investor letter. However, it's worth noting that BMI's stock has seen a one-month return of -8.09% and a twelve-month decline of 27.49%, and its presence in hedge fund portfolios decreased slightly from 32 to 28 during the third quarter. Despite this, the investment firm recognizes BMI's enduring potential, while also exploring AI stocks that promise higher upside and reduced downside risk, particularly those poised to benefit from evolving trade policies and domestic manufacturing trends.
The trajectory of Badger Meter, Inc. reflects a broader market narrative where traditional, essential service providers with strong business models continue to deliver value, even as disruptive technologies like AI emerge as new frontiers for investment. The company's commitment to innovation in smart-metering solutions for water utilities aligns with global sustainability efforts and the increasing demand for efficient resource management. This dual focus on reliability and forward-thinking technology positions BMI favorably for long-term relevance and success. For investors, the balance between stable, high-quality enterprises and high-growth opportunities in emerging sectors remains a crucial consideration, highlighting the dynamic nature of today's investment landscape.