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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 Energy Recovery, Inc. (NASDAQ:ERII). Energy Recovery, Inc. (NASDAQ:ERII) develops, manufactures, and distributes energy efficiency technology solutions. The one-month return of Energy Recovery, Inc. (NASDAQ:ERII) was -2.84%, and its shares gained 5.12% of their value over the last 52 weeks. On April 29, 2025, Energy Recovery, Inc. (NASDAQ:ERII) stock closed at $15.40 per share, with a market capitalization of $843.244 million.
Conestoga Capital Advisors stated the following regarding Energy Recovery, Inc. (NASDAQ:ERII) in its Q1 2025 investor letter:
"Energy Recovery, Inc. (NASDAQ:ERII) is a global leader in energy efficiency technology through its proprietary pressure exchanger technology. After announcing its strategic roadmap in November and setting expectations for new products to ramp over a longer period, the stock recovered in the first quarter. ERII announced strong fourth quarter results, with profitability notably outperforming expectations on the back of strong gross margin expansion. Guidance for 2025 was reiterated. ERII also announced an additional $30 million stock buyback program."
A treatment plant with a large industrial wastewater treatment pipe in the foreground.
Energy Recovery, Inc. (NASDAQ:ERII) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 15 hedge fund portfolios held Energy Recovery, Inc. (NASDAQ:ERII) at the end of the fourth quarter, compared to 12 in the third quarter. While we acknowledge the potential of Energy Recovery, Inc. (NASDAQ:ERII) 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.