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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 ESCO Technologies Inc. (NYSE:ESE). ESCO Technologies Inc. (NYSE:ESE) is a global distributor of engineered filtration and fluid control products, and integrated propulsion systems. The one-month return of ESCO Technologies Inc. (NYSE:ESE) was -2.50%, and its shares gained 49.09% of their value over the last 52 weeks. On April 28, 2025, ESCO Technologies Inc. (NYSE:ESE) stock closed at $155.14 per share with a market capitalization of $4.004 billion.
Conestoga Capital Advisors stated the following regarding ESCO Technologies Inc. (NYSE:ESE) in its Q1 2025 investor letter:
"ESCO Technologies Inc. (NYSE:ESE) is a diversified industrial that provides diagnostic equipment to utility companies, filtration/flow devices to the aerospace/defense industry and develops testing equipment for the electronics/telecommunication segments. ESE reported strong Q4 results with a nice recovery in its Test segment with orders in the quarter up a 43% year-over-year. Also, the recently announced acquisition of SM&P, which expands ESE’s defense business, has been very well received by the market."
An industrial tech facility with robotic arms for precision machining components.
ESCO Technologies Inc. (NYSE:ESE) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 12 hedge fund portfolios held ESCO Technologies Inc. (NYSE:ESE) at the end of the fourth quarter, compared to 8 in the third quarter. While we acknowledge the potential of ESCO Technologies Inc. (NYSE:ESE) 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.