Riverwater Partners, an investment management firm, has released its “Small Cap Strategy” Q2 2025 investor letter, shedding light on the performance of various holdings, including Knife River Corporation (NYSE:KNF). The letter indicates that the Small Cap Core Strategy did not keep pace with the Russell 2000 index in the second quarter, largely due to a focus on defensive stocks and a market preference for lower-quality companies.
In the same report, Riverwater highlighted Knife River Corporation as a significant player in the construction materials and contracting sector. Based in the United States, Knife River specializes in aggregates and operates across 14 states. As of September 08, 2025, the company’s shares closed at $80.18 each, with a market capitalization of $4.543 billion. Over the past month, Knife River’s stock experienced a decline of 13.76%, though it managed to gain 4.14% over the last year.
Investment Insights and Market Position
According to Riverwater Partners, Knife River Corporation benefits from a robust position in the market. The firm boasts 1.2 billion tons of aggregate reserves and operates over 360 material sites. These assets enable Knife River to play a crucial role in infrastructure projects, including roads, bridges, and airport runways. The company stands to gain significantly from the Infrastructure Investment and Jobs Act, which has yet to allocate 62% of its funds in Knife River’s core markets.
The company has reported a backlog of $938.7 million, predominantly in public-sector projects. Since its spin-off from MDU Resources Group, Inc. in 2023, Knife River has successfully expanded its EBITDA margins by 460 basis points. Further improvements are anticipated through its The EDGE program, which focuses on pricing, throughput, and efficiency while also pursuing strategic mergers and acquisitions.
Riverwater’s analysis suggests that Knife River offers substantial long-term value, especially in light of the nation’s pressing infrastructure needs. This optimistic outlook is tempered by the fact that Knife River Corporation does not rank among the top 30 most popular stocks among hedge funds. At the end of the second quarter, 24 hedge fund portfolios included Knife River, a decrease from 28 in the prior quarter.
Comparative Investment Landscape
While acknowledging the potential risks associated with investing in Knife River, Riverwater Partners expresses a preference for certain artificial intelligence stocks, which they believe may provide greater returns within a shorter timeframe. Their report highlights investments that could yield up to 10,000% upside potential, positioning these AI stocks as more appealing options compared to Knife River.
In a previous article, more details were shared regarding Knife River Corporation, along with a list of promising mid-cap materials stocks. Investors seeking further insights can explore Riverwater Partners’ Q2 2025 hedge fund investor letters for additional perspectives from other leading investors.
Overall, Riverwater Partners’ evaluation of Knife River Corporation emphasizes both the risks and opportunities presented by its operational strengths in a critical market environment. As infrastructure demands grow, stakeholders may find Knife River an intriguing option, albeit one to weigh carefully against emerging investment trends in technology.
