Recurve Capital, an investment management company, released its Q4 2024 investor letter. A copy of the letter can be downloaded here. Recurve had an impressive performance in 2024, successfully bouncing back from the drawdown experienced in 2022 more quickly than anticipated. The fourth quarter proved to be particularly strong, achieving nearly +13% in gross returns, compared favorably to the S&P 500 (+2.1%), Nasdaq (+6.2%), and Russell 2000 (flat). 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, Recurve Capital emphasized stocks such as RH (NYSE:RH). Headquartered in Corte Madera, California, RH (NYSE:RH) is a retailer in the home furnishings market. The one-month return RH (NYSE:RH) was -0.12%, and its shares gained 61.97% of their value over the last 52 weeks. On February 5, 2024, RH (NYSE:RH) stock closed at $414.73 per share, with a market capitalization of $7.715 billion.
Recurve Capital stated the following regarding RH (NYSE:RH) in its Q4 2024 investor letter:
“RH (NYSE:RH) – 10.5% of assets as of 12/31/2024
RH is disrupting the premium and luxury furniture market by curating tasteful collections and creating direct retail relationships for designer goods and services, most of which traditionally require cumbersome and expensive designer intermediaries. It is an upscale brand delivering high-quality, turnkey products and services while supporting members with interior designer services and best-in-class delivery for customers. It also has a small but growing hospitality segment that is highly synergistic with its product business, whereby hospitality customers interact with the brand on a regular basis, enabling RH to generate revenue from its “marketing.” The brand could be many multiples larger than it is today, and it would still be a small player in its end markets.
RH is in the middle innings of a post-Covid rebound powered by an aggressive brand refresh that should position it for multi-year growth CAGRs above its pre-Covid 8-12% growth algorithm. It also has embarked on an aggressive international launch plan which has hurt margins by frontloading launch costs ahead of meaningful revenue growth, but those markets should be nice contributors in the coming years.
We pencil out medium-term EPS scenarios ranging from $40-60, depending on the shape of the growth curve as the refresh cycle matures. This is an unusually wide range of outcomes, but we see the stock trading in the range of fair to highly attractive given the fundamental backdrop amidst an uncertain industry backdrop.”
A customer happily browsing aisles of high-end furniture in a large showroom.
RH (NYSE:RH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held RH (NYSE:RH) at the end of the third quarter which was 39 in the previous quarter. The fiscal third quarter results of RH (NYSE:RH) reflected its guidance with revenues increasing 8.1%, adjusted operating margin of 15% and adjusted EBITDA margin of 20.8%. While we acknowledge the potential of RH (NYSE:RH) 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 RH (NYSE:RH) and shared the list of stocks Jim Cramer recently discussed. 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.