SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” first quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter, the strategy returned -11.32% on a gross basis (-11.48% net) compared to a -9.48% return for the Russell 2000 Index and -7.74% for the Russell 2000 Value Index. The strategy returned -12.55% on a gross basis (-13.21% net) for the trailing twelve months compared to -4.01% and -3.12% respectively for the indexes over the same period. In addition, please check the top 5 holdings of the strategy to know its best pick in 2025.
In its first-quarter 2025 investor letter, SouthernSun Small Cap Strategy highlighted stocks such as Extreme Networks, Inc. (NASDAQ:EXTR). Extreme Networks, Inc. (NASDAQ:EXTR) develops and markets network infrastructure equipment and related software. The one-month return of Extreme Networks, Inc. (NASDAQ:EXTR) was -5.59%, and its shares gained 8.14% of their value over the last 52 weeks. On April 25, 2025, Extreme Networks, Inc. (NASDAQ:EXTR) stock closed at $12.49 per share with a market capitalization of $1.658 billion.
SouthernSun Small Cap Strategy stated the following regarding Extreme Networks, Inc. (NASDAQ:EXTR) in its Q1 2025 investor letter:
“Extreme Networks, Inc. (NASDAQ:EXTR) was a new addition to the Small Cap strategy in the first quarter of 2025. Extreme Networks is one of the top 3 players in the networking industry. While the industry has been dominated by Cisco and Hewlett Packard (HPE), who together have >60% share, both Cisco and HPE have developed their product/ architecture with “data-centers” in mind. However, EXTR has taken a different tact and developed their architecture with a distributed environment as their target market. We believe EXTR has the opportunity to grow revenues in the low double-digit range and disrupt the industry due to product, distribution, and pricing advantages.
Extreme Networks believes that they have the best fabric-technology product for distributed networks, and we believe that they are well positioned for growth (especially in some specific market verticals) as customers adopt WiFi 6E and WiFi 7 which add capacity, security and cloud-based services. We believe EXTR offers the best technology for college campuses, stadiums, hospitals, trade fairs, and many distributed operational environments such as factories and distribution centers operating a plethora of Internet of Things (IoT) devices related to automation and shop floor applications. EXTR’s opportunity for growth may also come due to Cisco’s and HP’s reputably poor customer service, and because both of the large players are currently distracted by the integration of large acquisitions…” (Click here to read the full text)
A customer service person helping a client with a complex network issue, illustrating the customer support of the communication equipment company.
Extreme Networks, Inc. (NASDAQ:EXTR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held Extreme Networks, Inc. (NASDAQ:EXTR) at the end of the fourth quarter, compared to 29 in the third quarter. While we acknowledge the potential of Extreme Networks, Inc. (NASDAQ:EXTR) 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 covered Extreme Networks, Inc. (NASDAQ:EXTR) and shared the list of best small cap tech stocks to buy. In addition, please check out our hedge fund investor letters Q1 2025 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.