Robust Demand Lifted Xylem (XYL) in Q3

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. The Mid Cap Composite returned -3.2% net-of-fees in the third quarter, compared to a 2.8% gain for the Russell Midcap Growth Index. The strategy’s focus on high-quality, profitable companies struggled to keep pace in the quarter amid risk-on dominance. 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 Xylem Inc. (NYSE:XYL). Headquartered in Washington, District of Columbia, Xylem Inc. (NYSE:XYL) designs, manufactures, and services engineered products and solutions for the utility, industrial, and residential and commercial building services. The one-month return of Xylem Inc. (NYSE:XYL) was 4.05%, and its shares gained 11.74% of their value over the last 52 weeks. On October 21, 2025, Xylem Inc. (NYSE:XYL) stock closed at $147.19 per share, with a market capitalization of $35.827 billion.

Conestoga Capital Advisors stated the following regarding Xylem Inc. (NYSE:XYL) in its third quarter 2025 investor letter:

"Xylem Inc. (NYSE:XYL) designs and manufactures water technology equipment and solutions, including pumps, treatment systems, analytics, and smart infrastructure technology. The stock has performed well on robust demand for water infrastructure and utility solutions. Strong order momentum in wastewater, analytics, and smart metering segments lifted backlog and revenue visibility. Margin improvement from cost synergies following the Evoqua acquisition further enhanced earnings."

Xylem Inc. (NYSE:XYL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 45 hedge fund portfolios held Xylem Inc. (NYSE:XYL) at the end of the second quarter, compared to 39 in the previous quarter.  While we acknowledge the potential of Xylem Inc. (NYSE:XYL) 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 Xylem Inc. (NYSE:XYL) and shared the list of best stocks to buy and hold for a lifetime. In addition, please check out our hedge fund investor letters Q3 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.