River Road Asset Management, an investment management company released its “River Road Small Cap Value Fund” Q4 2024 investor letter. A copy of the letter can be downloaded here. In the fourth quarter, AMG River Road Small Cap Value Fund (Class N) returned 7.35% compared to -1.06% returns for the Russell 2000® Value Index. For the year 2024, the fund returned 14.07%, significantly outperforming Index return of 8.06%. Stocks rallied in November after a Republican victory but declined sharply following hawkish Fed comments. Shorter duration stocks, including small caps and value, lost most of their post-election gains by the end of December. Small caps lagged their large counter parts for eight consecutive years. For more information on the fund’s best picks in 2024, please check its top five holdings.
In its fourth quarter 2024 investor letter, River Road Small Cap Value Fund emphasized stocks such as Papa John’s International, Inc. (NASDAQ:PZZA). Papa John’s International, Inc. (NASDAQ:PZZA) operates and franchises pizza delivery and carryout restaurants. The one-month return of Papa John’s International, Inc. (NASDAQ:PZZA) was -11.90%, and its shares lost 39.58% of their value over the last 52 weeks. On March 31, 2025, Papa John’s International, Inc. (NASDAQ:PZZA) stock closed at $41.08 per share with a market capitalization of $1.344 billion.
River Road Small Cap Value Fund stated the following regarding Papa John’s International, Inc. (NASDAQ:PZZA) in its Q4 2024 investor letter:
“The holding with the lowest contribution to active return in the portfolio during Q4 was Papa John’s International, Inc. (NASDAQ:PZZA), the third-largest pizza delivery company in the world. Early in the quarter, the stock rallied on speculation it was going to be acquired by Restaurant Brands International (QSR), owner of Tim Hortons®, Burger King®, and Popeyes®. However, when a deal did not materialize the stock sold off into year-end. During the quarter, PZZA held an Investor Day where management highlighted recent progress on operational improvements, new unit growth, and franchisee profitability. New store build costs are down -20% to $500k and the average franchisee generates $150k in annual earnings before interest, taxes, depreciation, and amortization (EBITDA), indicating payback periods of less than four years and an attractive unlevered cash-on-cash return for franchisees, which should bode well for unit growth. Additionally, of the top 20 largest franchisees in the system, 80% have new store development agreements in place. The commissary business should continue to increase margins at 100 bps annually to 8%, bringing it in-line with competitor Domino’s®. This should incentivize franchisees to drive transaction growth as they will receive volume rebates. Overall, we are encouraged by these developments and believe the company is still significantly undervalued relative to its closest public peers. If management successfully executes these initiatives, we anticipate the valuation gap will close. We trimmed the position during the quarter.”

A family gathering around a delivery pizza box in the comfort of their own home.
Papa John’s International, Inc. (NASDAQ:PZZA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held Papa John’s International, Inc. (NASDAQ:PZZA) at the end of the fourth quarter compared to 24 in the third quarter. Papa John’s International, Inc.’s (NASDAQ:PZZA) global system-wide restaurant sales were $1.23 billion in the fourth quarter of 2024, down 8% in constant currency. While we acknowledge the potential of Papa John’s International, Inc. (NASDAQ:PZZA) 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.
We covered Papa John’s International, Inc. (NASDAQ:PZZA) in another article, where we shared the list of best pizza stocks to buy according to hedge funds. 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.