Investment management company First Pacific Advisors recently released its “FPA Queens Road Small Cap Value Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter, the fund returned 7.48% compared to a 10.15% return for the Russell 2000 Value Index. Year-to-date, the fund returned 8.1% compared to a 9.22% return for the index. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
FPA Queens Road Small Cap Value Fund highlighted stocks like Concentrix Corporation (NASDAQ:CNXC) in the third quarter 2024 investor letter. Concentrix Corporation (NASDAQ:CNXC) offers technology-infused customer experience (CX) solutions. The one-month return of Concentrix Corporation (NASDAQ:CNXC) was -15.62%, and its shares lost 49.74% of their value over the last 52 weeks. On November 8, 2024, Concentrix Corporation (NASDAQ:CNXC) stock closed at $41.53 per share with a market capitalization of $2.692 billion.
FPA Queens Road Small Cap Value Fund stated the following regarding Concentrix Corporation (NASDAQ:CNXC) in its Q3 2024 investor letter:
“Concentrix Corporation (NASDAQ:CNXC) is one of two top customer experience (CX) vendors globally. The company began by managing call centers but has since evolved into a high-tech business process outsourcer (BPO) that also designs and runs customer-facing websites and apps, integrates the data, and optimizes a client’s customer interactions. The company was spun out from TD Synnex, another of the Fund’s core holdings, and we have always been impressed with CNXC’s innovation and growth. CX is a relatively new business model, and Concentrix has been rolling up smaller competitors. In March, 2023 they bought WebHelp, a leading European CX player, for $4.8B in cash and stock. 22 We believe the WebHelp acquisition will help consolidate an industry where Concentrix and Teleperformance are the largest players.
The market is currently concerned about the potential of artificial intelligence to disrupt Concentrix’ core call center business – all CX companies’ shares are down badly over the last two years.23 On Sep. 25, 2024 CNXC stock got hit again when they released fiscal 2024 Q3 results and took down revenue guidance – fiscal 2024 organic revenue is now expected to come in between -.5% and 1.5%. 24 Concentrix has a debt to EBITDA ratio of 3x from the Webhelp deal which will be a problem if earnings deteriorate quickly. But Concentrix now trades at less than five times adjusted EPS and is highly cash generative. We think, but don’t know, that Concentrix’ domain knowledge and integration into customers’ work flows make for meaningful switching costs and that clients will be reluctant to let AI manage the relationships with their customers. We have held on to Concentrix shares but have not added to the position.”
A digital dashboard detailing customer experience/user experience data.
Concentrix Corporation (NASDAQ:CNXC) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held Concentrix Corporation (NASDAQ:CNXC) at the end of the second quarter which was 19 in the previous quarter. Concentrix Corporation (NASDAQ:CNXC) delivered revenue of $2.4 billion in the third quarter, reflecting 2.6% in pro forma. While we acknowledge the potential of Concentrix Corporation (NASDAQ:CNXC) 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 Concentrix Corporation (NASDAQ:CNXC) and shared the list of oversold NASDAQ stocks to invest in. In its Q1 2024 investor letter, FPA Queens Road Small Cap Value Fund stated that Concentrix Corporation (NASDAQ:CNXC) stock price declined in 2024, due to weak guidance and concerns about AI disruption. 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.