Conestoga Capital Advisors, an asset management company, released its fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. For the second consecutive year, U.S. equity indices ended the year with double-digit returns after generating modest returns in the fourth quarter of 2024. Conestoga’s investment plans were hindered by the enthusiasm for everything artificial intelligence (AI) related, which the firm believes led to a more speculative investing climate. The Conestoga Small Cap Composite surged 1.67% (net) in the fourth quarter compared to the Russell 2000 Growth Index’s 1.70% return. The Conestoga SMid Cap Composite returned -0.68% (net) trailing the Russell 2500 Growth Index’s 2.43% return. The Conestoga Micro Cap Composite advanced 9.91% (net) vs the Russell Microcap Growth Index’s return of 11.55%. Finally, the Conestoga Mid Cap Composite returned -4.63% (net) underperforming the Russell Midcap Growth Index’s 8.14% return. Please check the top 5 holdings of the fund for a better understanding of their best picks for 2024.
In its fourth quarter 2024 investor letter, Conestoga Capital Advisors emphasized 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 3.41%, and its shares lost 5.95% of their value over the last 52 weeks. On February 11, 2025, Energy Recovery, Inc. (NASDAQ:ERII) stock closed at $14.86 per share, with a market capitalization of $860.3 million.
Conestoga Capital Advisors stated the following regarding Energy Recovery, Inc. (NASDAQ:ERII) in its Q4 2024 investor letter:
“Energy Recovery, Inc. (NASDAQ:ERII) is a global leader in energy efficiency technology through its proprietary pressure exchanger technology. After being a leader in the third quarter, which was our first quarter of ownership, the stock declined in the fourth quarter. ERII reported a solid third quarter, with revenue and adjusted EBITDA ahead of expectations with positive commentary around their opportunity to enter the CO2 market. However, in mid-November, they held an investor webinar and introduced five-year financial targets below expectations, with 2025 falling notably short. The company is executing a plan to drive $5 million in cost savings and initiated a $50 million share buyback.”
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, 12 hedge fund portfolios held Energy Recovery, Inc. (NASDAQ:ERII) at the end of the third quarter which was 14 in the previous 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.
In another article we discussed Energy Recovery, Inc. (NASDAQ:ERII) and shared Conestoga Capital Advisors’ views on the company in the previous quarter. 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.