Here's What Pulled Back Shake Shack (SHAK) in Q3

Madison Investments, an investment advisor, released its “Madison Small Cap Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. The third quarter was difficult for the Small Cap Fund.  The small-cap index’s performance was broad-based. The Madison Small Cap Fund (class Y) was down 1.3% in the quarter, significantly underperforming the benchmarks. The underperformance was driven by stock selection and exacerbated by a very speculative market. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-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 -8.87%, and its shares lost 31.96% of their value over the last 52 weeks. On November 20, 2025, Shake Shack Inc. (NYSE:SHAK) stock closed at $83.70 per share, with a market capitalization of $3.573 billion.

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

"Our Consumer Staples and Discretionary stocks underperformed in the quarter. The consumer continues to be resilient but somewhat choosy with where they spend. In our portfolio, Shake Shack Inc. (NYSE:SHAK) pulled back sharply in the quarter, giving back some of its outperformance from Q2. Even though Shake Shack’s traffic more or less met analysts’ expectations this quarter, those expectations had been fairly aggressive, and growing worries about the job market are heightening fears that future customer traffic could soften. We continue to like the long-term opportunity for SHAK to improve its store level margins and drive traffic even in a tough consumer environment."

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 $367.4 million in the third quarter of 2025, marking 15.9% year-over-year increase. 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 the list of stocks Jim Cramer discussed recently. 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.