Voss Capital, LLC an investment management company, released its fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. Voss Capital’s funds, Voss Value Fund, LP, and the Voss Value Offshore Fund, Ltd returned +9.6% and +9.5% to investors net of fees and expenses respectively, in the quarter compared to a +0.3% return for the Russell 2000 Index, -1.1% return for the Russell 2000 Value Index, and +2.4% return for the S&P 500 Index. The Voss Value Master Fund’s total gross exposure stood at 184.3% and the net long exposure was 84.9% as of December 31st, 2024. The weight of the fund’s top 10 longs was 72.5% and the top 10 shorts were -14.6%. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
In its fourth quarter 2024 investor letter, Voss Capital emphasized stocks such as SolarWinds Corporation (NYSE:SWI). SolarWinds Corporation (NYSE:SWI) is a technology company that offers IT management software products. The one-month return of SolarWinds Corporation (NYSE:SWI) was 21.83%, and its shares gained 54.79% of their value over the last 52 weeks. On February 25, 2025, SolarWinds Corporation (NYSE:SWI) stock closed at $18.25 per share with a market capitalization of $3.132 billion.
Voss Capital stated the following regarding SolarWinds Corporation (NYSE:SWI) in its Q4 2024 investor letter:
“SolarWinds Corporation (NYSE:SWI) makes for an interesting case study of low expectations, as we had rarely witnessed such apathy across both the buyside and sell side, along with a strange reluctance to move on from the past cybersecurity breach in 2020 despite clear and ongoing operational execution for several years in a row. We wrote in our Q1 2024 letter that “we think the odds are elevated that the company will receive a buyout offer from a different PE fund within the next year or so.” Given the fact pattern, it was a large position for the fund and Voss was the largest active outside shareholder when the buyout was announced. SWI was undergoing a perpetual license to subscription transition with subscription ARR growth of 36% in the most recent quarter, with total ARR growth having accelerated up to 8.4% from low single digits several quarters ago, and total revenue growth improving from 0% to 5%. Where the market saw a sleepy low/no growth legacy software company, we saw a clear deleveraging story with improving net revenue retention, an ongoing acceleration of total ARR growth (driven by an efficient sales force) occurring since 2022, and a 52%+ on the software “Rule of 40” scale trading for under 9x FCF. The frequent subject of buyout rumors the last few years, SWI finally found a new home in Turn/River Capital at 5.2x EV/Revenue and 13.8x our 2025 FCF estimates, a little below our base case valuation, but a win/win for all stakeholders.”
A systems administrator sitting at their desk surrounded by computer monitors, overseeing a complex infrastructure.
SolarWinds Corporation (NYSE:SWI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 21 hedge fund portfolios held SolarWinds Corporation (NYSE:SWI) at the end of the fourth quarter compared to 19 in the third quarter. While we acknowledge the potential of SolarWinds Corporation (NYSE:SWI) 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 SolarWinds Corporation (NYSE:SWI) and shared the list of stocks billion-dollar hedge fund Voss Capital is crazy about. In addition, please check out our hedge fund investor letters Q4 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.