The Honest Company (HNST) Fell Due to Cautious Guidance

HNST -2.42%

Meridian Funds, managed by ArrowMark Partners, released its “Meridian Contrarian Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. Equities hit a record high in the third quarter, fueled by continued gains in technology and falling bond yields. Easing tariff rhetoric and renewed AI infrastructure investments boosted large tech stocks. In mid-September U.S. Federal Reserve lowered rates by 25 basis points. In this environment, the fund returned 6.72% (net) during the quarter, underperforming the 9.00% returns of the Russell 2500 Index and 8.18% returns of the secondary benchmark, the Russell 2500 Value Index. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, Meridian Contrarian Fund highlighted stocks such as The Honest Company, Inc. (NASDAQ:HNST). Headquartered in Los Angeles, California, The Honest Company, Inc. (NASDAQ:HNST) manufactures and sells diapers and wipes, skin and personal care, and household and wellness products. The one-month return of The Honest Company, Inc. (NASDAQ:HNST) was -19.94%, and its shares lost 67.71% of their value over the last 52 weeks. On November 28, 2025, The Honest Company, Inc. (NASDAQ:HNST) stock closed at $2.69 per share, with a market capitalization of $300.717 million.

Meridian Contrarian Fund stated the following regarding The Honest Company, Inc. (NASDAQ:HNST) in its third quarter 2025 investor letter:

"The Honest Company, Inc. (NASDAQ:HNST) is a consumer products company specializing in natural baby-care consumables, beauty, and other household supplies. We initially invested in Honest as a contrarian investment opportunity following post pandemic supply chain disruptions, seeing value in the brand’s authenticity and in its history of growth despite operational challenges. Despite reporting quarterly results above expectations, the stock declined as the company took a cautious approach to guidance for the remainder of the year. We continue to hold our position as we expect that Honest’s strong management team and unique product offering will see growing consumer distribution and growth well into 2026 and beyond."

The Honest Company, Inc. (NASDAQ:HNST) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 18 hedge fund portfolios held The Honest Company, Inc. (NASDAQ:HNST) at the end of the third quarter, the same as in the previous quarter. The Honest Company, Inc. (NASDAQ:HNST) reported revenue of $93 million, down 7% year-over-year. While we acknowledge the potential of The Honest Company, Inc. (NASDAQ:HNST) 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 The Honest Company, Inc. (NASDAQ:HNST) and shared Meridian Contrarian Fund's views on the company in the previous quarter. 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.