Conestoga Capital Advisors, an asset management company, released its third-quarter 2024 investor letter. A copy of the letter can be downloaded here. At its September meeting, the Federal Reserve lowered the Federal Funds rate by 50 basis points due to weaker employment growth and moderate inflation. Equity markets welcomed the news, raising optimism for a soft landing in the U.S. economy. On September 26th, the S&P 500 Index achieved a record high, the Russell 2000 Index also moved higher over the quarter but remains roughly 10% below its all-time high. The Conestoga Small Cap Composite surged 10.09% (net) in the third quarter outperforming the Russell 2000 Growth Index’s 8.41% return. The Conestoga SMid Cap Composite returned 12.94% (net) versus the Russell 2500 Growth Index’s 6.99% return. The Conestoga Micro Cap Composite advanced 7.60% (net) but trailed the Russell Microcap Growth Index’s return of 8.57%. Finally, the Conestoga Mid Cap Composite returned 8.36% (net) outperforming the Russell Midcap Growth Index’s 6.54%. Please check the top 5 holdings of the fund for a better understanding of their best picks for 2024.

Conestoga Capital Advisors highlighted stocks like Five9, Inc. (NASDAQ:FIVN), in the third quarter 2024 investor letter. Five9, Inc. (NASDAQ:FIVN) provides intelligent cloud software for contact centers. The one-month return of Five9, Inc. (NASDAQ:FIVN) was 8.57%, and its shares lost 48.22% of their value over the last 52 weeks. On October 22, 2024, Five9, Inc. (NASDAQ:FIVN) stock closed at $30.16 per share with a market capitalization of $2.254 billion.

Conestoga Capital Advisors stated the following regarding Five9, Inc. (NASDAQ:FIVN) in its Q3 2024 investor letter:

"Five9, Inc. (NASDAQ:FIVN) is a leading provider of cloud contact center software, serving over 350,000 contact center agents. Despite record bookings and signing their largest ever deal, FIVN has seen revenue decelerate to the low-teens, with net revenue retention falling. Optimism around AI is just starting to feed into the financials, but bears point to the potential of fewer contact center agents as a looming headwind. Conestoga lost confidence in which outcome could materialize and removed FIVN from client portfolios."

An IT engineer working on a laptop as planograms for a cloud-based virtual contact center platform appear on the monitor.

Five9, Inc. (NASDAQ:FIVN) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held Five9, Inc. (NASDAQ:FIVN) at the end of the second quarter which was 38 in the previous quarter. In the second quarter, Five9, Inc. (NASDAQ:FIVN) reported $252.1 million in revenues, up 13.10% year-over-year. While we acknowledge the potential of Five9, Inc. (NASDAQ:FIVN) 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.