Polen Capital, an investment management company, released its “Polen U.S. Small Company Growth Strategy” fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. According to the Russell 2000 Growth Index, U.S. small cap growth stocks experienced a 1.7% increase in the fourth quarter and a 15% rise for the year 2024. In what proved to be a tumultuous quarter, small caps surged over 10% following the U.S. Presidential election in November, but nearly all of those gains were lost in December as the U.S. Federal Reserve indicated a more gradual reduction in interest rates expected in 2025. In the fourth quarter, the fund delivered 5.09% gross, and 4.73% net of fees compared to a 1.70% return for the Russell 2000 Growth Index. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2024.
In its fourth quarter 2024 investor letter, Polen U.S. Small Company Growth Strategy emphasized stocks such as Option Care Health, Inc. (NASDAQ:OPCH). Option Care Health, Inc. (NASDAQ:OPCH) provides home and alternate site infusion services. The one-month return Option Care Health, Inc. (NASDAQ:OPCH) was 30.24%, and its shares lost 3.05% of their value over the last 52 weeks. On February 5, 2024, Option Care Health, Inc. (NASDAQ:OPCH) stock closed at $31.32 per share, with a market capitalization of $5.33 billion.
Polen U.S. Small Company Growth Strategy stated the following regarding Option Care Health, Inc. (NASDAQ:OPCH) in its Q4 2024 investor letter:
“The most significant detractors from the Portfolio’s relative performance in the quarter were Insight Enterprises, AMN Healthcare Services, and Option Care Health, Inc. (NASDAQ:OPCH). The most significant absolute detractors were Insight Enterprises, Installed Building Products, and Option Health Care
Option Care Health is a healthcare company that provides home and center-based infusions. During the quarter, the company’s reported results raised red flags about its ability to sustain growth and margins, given drug pricing pressure from the Inflation Reduction Act (IRA) and increased biosimilar competition. Historically, Option Care has effectively navigated biosimilar competition and, in some cases, even benefited; however, we believe these dynamics are evolving, making future outcomes harder to predict. Since we believe biosimilars will continue to gain traction, this leaves the Flywheel in question for Option Care, which ultimately compelled us to eliminate the position in favor of better opportunities in new ideas and existing holdings.
As noted earlier, we exited our position in Option Care Health after reported results raised red flags about their ability to sustain growth and margins with drug pricing pressure from the Inflation Reduction Act (IRA) and increased biosimilar competition. The price curve of expensive drugs exiting exclusivity has been far steeper than a year ago—we concede this will be more challenging to predict than we initially anticipated. Thus, Option Care is not a good fit for our strategy.”
A home infusion nurse in full PPE gown delivering treatments to a patient in their own home.
Option Care Health, Inc. (NASDAQ:OPCH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held Option Care Health, Inc. (NASDAQ:OPCH) at the end of the third quarter which was 31 in the previous quarter. Option Care Health, Inc. (NASDAQ:OPCH) delivered a strong third quarter with revenue growth of 17%. While we acknowledge the potential of Option Care Health, Inc. (NASDAQ:OPCH) 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 Option Care Health, Inc. (NASDAQ:OPCH) and shared the list of best booming stocks to invest. Polen U.S. Small Company Growth Strategy established a position in Option Care Health, Inc. (NASDAQ:OPCH) during Q2 2024. 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.