Should You Be Excited About Shake Shack's (SHAK) Long-Term Prospects?

Madison Investments, an investment advisor, released its “Madison Small Cap Fund” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The second quarter started as a continuation of the first quarter. As the liberation day tariffs were catastrophic, sending both equities and treasuries steeply lower. Later, the administration set a pause in the tariff implementation, which led equities to rebound, supported by better-than-expected macroeconomic data, particularly regarding inflation and employment. The Russell 2000 Index is up 8.5% for the quarter and down only 1.79% year-to-date. The Madison Small Cap Fund (class Y) returned 4.42% in the quarter, lagging the Russell 2000 and Russell 2500. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Madison Small Cap Fund highlighted stocks such as Shake Shack Inc. (NYSE:SHAK). Shake Shack Inc. (NYSE:SHAK) owns, operates, and licenses Shake Shack restaurants. The one-month return of Shake Shack Inc. (NYSE:SHAK) was -1.54%, and its shares lost 7.90% of their value over the last 52 weeks. On September 17, 2025, Shake Shack Inc. (NYSE:SHAK) stock closed at $98.99 per share, with a market capitalization of $4.226 billion.

Madison Small Cap Fund stated the following regarding Shake Shack Inc. (NYSE:SHAK) in its second quarter 2025 investor letter:

"Although Consumer Staples were challenged, our Consumer Discretionary investments stood out in terms of positive performance. Although tariff fears initially hurt some of our discretionary stocks, especially those with global supply chains, our best performing stock in aggregate was Shake Shack Inc. (NYSE:SHAK). SHAK’s Q1 results outpaced restaurant giants Chipotle (CMG) and McDonalds (MCD). Recent menu innovations, marketing investments, and operating initiatives are driving greater returns on investments, and the company has a long runway to grow units and compound those returns. Even though we’ve taken some profits, we consider this a core investment position and are excited about the long term prospects for the shares."

Shake Shack Inc. (NYSE:SHAK) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 34 hedge fund portfolios held Shake Shack Inc. (NYSE:SHAK) at the end of the second quarter, compared to 39 in the previous quarter. Shake Shack Inc. (NYSE:SHAK) reported total revenue of $356.5 million in the second quarter of 2025, exceeding the guidance range. While we acknowledge the potential of Shake Shack Inc. (NYSE:SHAK) 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.

In another article, we covered Shake Shack Inc. (NYSE:SHAK) and shared Carillon Eagle Small Cap Growth Fund's views on the company. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.