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Conestoga Capital Advisors, an asset management company, released its first-quarter 2025 investor letter. A copy of the letter can be downloaded here. Equity markets started the year with a rally due to optimism about a strong economy and expectations of moderating inflation and lower interest rates. However, concerns over slowing earnings from major Technology companies, geopolitical tensions, and an upcoming announcement on tariffs led to a sharp decline in equities by the end of the first quarter. Investors sought safety, driving U.S. Treasury yields down. The Conestoga Small Cap Composite returned -11.35% (net) in the first quarter compared to the Russell 2000 Growth Index’s -11.12% return. The Conestoga SMid Cap Composite returned -5.73% compared to the Russell 2500 Growth Index’s -10.80% return. The Conestoga Micro-Cap Composite returned -8.24% vs the Russell Microcap Growth Index’s return of -17.75%. Finally, the Conestoga Mid Cap Composite returned 0.96% (net), compared to the Russell Midcap Growth Index’s -7.12% return. Please check the top 5 holdings of the fund for a better understanding of their best picks for 2025.
In its first-quarter 2025 investor letter, Conestoga Capital Advisors highlighted stocks such as AAON, Inc. (NASDAQ:AAON). AAON, Inc. (NASDAQ:AAON), with a market capitalization of $7.22 billion, engages in engineering, manufacturing, marketing, and selling air conditioning and heating equipment. The one-month return of AAON, Inc. (NASDAQ:AAON) was 13.64%, and its shares lost 5.39% of their value over the last 52 weeks. On April 28, 2025, AAON, Inc. (NASDAQ:AAON) stock closed at $88.79 per share.
Conestoga Capital Advisors stated the following regarding AAON, Inc. (NASDAQ:AAON) in its Q1 2025 investor letter:
"AAON, Inc.'s (NASDAQ:AAON) 4Q24 results and 2025 financial guidance was significantly below the market’s expectations. The company’s results were adversely impacted by the transition in the HVAC industry to a new refrigerant that requires a new building code. This transition caused a pause in orders during the 4Q as customers worked through old inventory. The company also had manufacturing inefficiencies in its Washington BASX facility and significant expansion expenses for its liquid cooling facility in Memphis, TN. We believe these issues are temporary in nature and while there may be a quarter or two of choppiness, AAON’s medium and long-term prospects remain solid."
A technician surrounded by complex chillers and data center cooling solutions.
AAON, Inc. (NASDAQ:AAON) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held AAON, Inc. (NASDAQ:AAON) at the end of the fourth quarter which was 18 in the previous quarter. While we acknowledge the potential of AAON, Inc. (NASDAQ:AAON) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.