Polen Capital, an investment management company, released its “Polen US SMID Company Growth Strategy” fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. SMID cap stocks initially rose by more than 10% following November’s U.S. Presidential election, in another volatile quarter. However, they relinquished nearly all of those gains in December, as the U.S. Federal Reserve signaled that interest rate cuts would occur more slowly than anticipated, with reductions expected to start in 2025. Against this backdrop, the fund returned 3.0% gross, and 2.7% net of fees compared to the Russell 2500 Growth Index return of 2.4%. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2024.
Polen US SMID Company Growth Strategy highlighted stocks like Pure Storage, Inc. (NYSE:PSTG), in the fourth quarter 2024 investor letter. Pure Storage, Inc. (NYSE:PSTG) offers data storage and management technologies, products, and services. The one-month return of Pure Storage, Inc. (NYSE:PSTG) was 5.02%, and its shares gained 61.83% of their value over the last 52 weeks. On January 31, 2024, Pure Storage, Inc. (NYSE:PSTG) stock closed at $67.79 per share with a market capitalization of $22.116 billion.
Polen US SMID Company Growth Strategy stated the following regarding Pure Storage, Inc. (NYSE:PSTG) in its Q4 2024 investor letter:
“Pure Storage, Inc. (NYSE:PSTG) provides data storage solutions primarily to enterprise customers with private clouds and, more recently, hyperscalers. Pure stands out as a high-performance, all-flash storage provider with no legacy hard disk business. Its competitive advantage stems from its DirectFlash modules, the custom-built NAND flash chips managed by the company’s proprietary Purity software. DirectFlash’s advantages include higher storage capacity, longer life span, and better performance with lower latency. This translates to a premium, high-performance offering that generates high gross margins of ~70%, which we expect to grow over time. Although enterprise data storage demand has been muted compared to computing or server demand, we believe storage demand will accelerate, driven by GenAI and overall IT spending recovery. Historically, enterprise customers have been willing to pay up for performance, while hyperscalers opted for low-cost, bulk storage solutions. This dynamic is shifting as Pure’s all-flash storage system allows for superior energy savings compared to traditional hard disc storage. As a result, Pure has won its first hyperscaler contract, and we expect such success to continue. The net result is growing EPS and cash flow. We expect Pure’s earnings to grow at a 20% CAGR with increasing returns on invested capital.”
A closeup of a computer monitor displaying a complex software interface used in data protection services.
Pure Storage, Inc. (NYSE:PSTG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held Pure Storage, Inc. (NYSE:PSTG) at the end of the third quarter which was 38 in the previous quarter. Pure Storage, Inc.’s (NYSE:PSTG) third quarter revenue grew 9% year-over-year to $831 million. While we acknowledge the potential of Pure Storage, Inc. (NYSE:PSTG) 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 Pure Storage, Inc. (NYSE:PSTG) and shared the list of AI stocks that are making waves on Wall Street. 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.