Recurve Capital, an investment management company, released its Q4 2024 investor letter. A copy of the letter can be downloaded here. Recurve had an impressive performance in 2024, successfully bouncing back from the drawdown experienced in 2022 more quickly than anticipated. The fourth quarter proved to be particularly strong, achieving nearly +13% in gross returns, compared favorably to the S&P 500 (+2.1%), Nasdaq (+6.2%), and Russell 2000 (flat). In addition, you can check the fund’s top 5 holdings to find out its best picks for 2024.
In its fourth quarter 2024 investor letter, Recurve Capital emphasized stocks such as Wayfair Inc. (NYSE:W). Headquartered in Boston, Massachusetts, Wayfair Inc. (NYSE:W) is an online home furnishing store. The one-month return Wayfair Inc. (NYSE:W) was 6.57%, and its shares lost 6.36% of their value over the last 52 weeks. On February 5, 2024, Wayfair Inc. (NYSE:W) stock closed at $48.31 per share, with a market capitalization of $6.054 billion.
Recurve Capital stated the following regarding Wayfair Inc. (NYSE:W) in its Q4 2024 investor letter:
“Wayfair Inc. (NYSE:W) – 6.4% of assets as of 12/31/2024
Wayfair is building a disruptive platform in the home furnishings market. It brings a purpose-built, best-in-class hybrid marketplace with verticalized capabilities where they can facilitate supplier onramps and differentiation to consumers – ocean freight, logistics, storage, fulfillment, and delivery. Wayfair opens the enormous global supplier base of home goods (historically more B2B oriented) to retail customers in a B2C format and uses its marketplace model to drive competition among suppliers and improve value delivered to consumers. It then uses its vertical infrastructure to power high-quality delivery services, ensuring high customer satisfaction and high repeat customer rates.
The company’s improved post-Covid discipline has demonstrated the quality and scalability of its business model. Wayfair’s future valuation is highly dependent on how quickly it can grow revenues which is how it will more rapidly expand margins and generate significant free cash flow. This is the primary area we’ve been wrong so far. After years of severe pressure across the category in the post[1]Covid era, how Wayfair and the home goods industry rebounds will be significant inputs for future IRRs. I expect an eventual return to LDD revenue growth, accompanied by disciplined cost controls and attractive mid-teens or better incremental margins (vs. around 5% today). I estimate the stock is trading at about 20x my estimate of 2026 FCF/share, and about 6x my estimate of 2028 FCF/share…” (Click here to read the full text)
An elegant home décor with a stunning furniture piece, showcasing the company’s premium online selections.
Wayfair Inc. (NYSE:W) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 52 hedge fund portfolios held Wayfair Inc. (NYSE:W) at the end of the third quarter which was 46 in the previous quarter. While we acknowledge the potential of Wayfair Inc. (NYSE:W) 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.
In another article we discussed Wayfair Inc. (NYSE:W) and shared Optimist Fund’s views on the company. In addition, please check out our hedge fund investor letters Q3 2024 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.