Conestoga Capital Advisors, an asset management company, released its first-quarter 2025 investor letter. A copy of the letter can be downloaded here. Equity markets started the year with a rally due to optimism about a strong economy and expectations of moderating inflation and lower interest rates. However, concerns over slowing earnings from major Technology companies, geopolitical tensions, and an upcoming announcement on tariffs led to a sharp decline in equities by the end of the first quarter. Investors sought safety, driving U.S. Treasury yields down. The Conestoga Small Cap Composite returned -11.35% (net) in the first quarter compared to the Russell 2000 Growth Index’s -11.12% return. The Conestoga SMid Cap Composite returned -5.73% compared to the Russell 2500 Growth Index’s -10.80% return. The Conestoga Micro-Cap Composite returned -8.24% vs the Russell Microcap Growth Index’s return of -17.75%. Finally, the Conestoga Mid Cap Composite returned 0.96% (net), compared to the Russell Midcap Growth Index’s -7.12% return. Please check the top 5 holdings of the fund for a better understanding of their best picks for 2025.
In its first-quarter 2025 investor letter, Conestoga Capital Advisors highlighted stocks such as Q2 Holdings, Inc. (NYSE:QTWO). Q2 Holdings, Inc. (NYSE:QTWO) is a digital solutions provider to financial institutions, financial technology companies, FinTechs, and alternative finance companies. The one-month return of Q2 Holdings, Inc. (NYSE:QTWO) was -1.62%, and its shares gained 49.95% of their value over the last 52 weeks. On April 28, 2025, Q2 Holdings, Inc. (NYSE:QTWO) stock closed at $78.71 per share with a market capitalization of $4.904 billion.
Conestoga Capital Advisors stated the following regarding Q2 Holdings, Inc. (NYSE:QTWO) in its Q1 2025 investor letter:
“Based in Austin, TX, Q2 Holdings, Inc.’s (NYSE:QTWO) 4Q24 results were modestly ahead of expectations and 2025 guidance was ahead of Street expectations. The company’s revenues were up 13% and subscription growth was 16% for the quarter. The company’s 4Q24 bookings were the second best in its history. The company has shown strong improvement in EBITDA and free cash flow. With the difficult equity market backdrop and the stock’s significant appreciation in 2024 (the stock was up over 100%), the stock was subject to profit taking.”
A finance professional at their computer logging into the company’s branded digital banking platform.
Q2 Holdings, Inc. (NYSE:QTWO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held Q2 Holdings, Inc. (NYSE:QTWO) at the end of the fourth quarter, compared to 21 in the third quarter. While we acknowledge the potential of Q2 Holdings, Inc. (NYSE:QTWO) 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 Q2 Holdings, Inc. (NYSE:QTWO) and shared the list of worst performing fintech stocks to buy according to analysts. Q2 Holdings, Inc.’s (NYSE:QTWO) strong performance in the previous quarter positively impacted Conestoga Capital Advisors’ results. 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.