Here's Why Aristotle Small Cap Equity Fund Sold Carter's (CRI)

Aristotle Capital Boston, LLC, an investment advisor, released its “Small Cap Equity Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the third quarter, the small-cap equities delivered strong results with the Russell 2000 Index reaching its first all-time high since November 2021. A favorable macroeconomic backdrop led the rally. In the quarter, the fund (Class I-2) delivered a return of 3.16% underperforming the 12.39% total return of the Russell 2000 Index. For more information on the fund’s best picks in 2025, please check its top five holdings.

In its third-quarter 2025 investor letter, Aristotle Small Cap Equity Fund highlighted stocks such as Carter’s, Inc. (NYSE:CRI). Carter’s, Inc. (NYSE:CRI) designs, sources, and markets branded children’s wear.  The one-month return of Carter’s, Inc. (NYSE:CRI) was 7.40%, and its shares lost 41.61% of their value over the last 52 weeks. On December 18, 2025, Carter’s, Inc. (NYSE:CRI) stock closed at $32.49 per share, with a market capitalization of $1.17 billion.

Aristotle Small Cap Equity Fund stated the following regarding Carter’s, Inc. (NYSE:CRI) in its third quarter 2025 investor letter:

"Carter’s, Inc. (NYSE:CRI) is a manufacturer, distributor, and retailer of infant and young children’s apparel. The position was liquidated due to deteriorated fundamental performance and an uncertain strategic outlook."

Carter’s, Inc. (NYSE:CRI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 28 hedge fund portfolios held Carter’s, Inc. (NYSE:CRI) at the end of the third quarter, compared to 31 in the previous quarter. While we acknowledge the potential of Carter’s, Inc. (NYSE:CRI) 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 Carter’s, Inc. (NYSE:CRI) and shared the list of most undervalued retail stocks to invest in. 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.