Madison Investments, an investment advisor, released its “Madison Small Cap Fund” fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. The Madison Small Cap Fund completed a great year in the fourth quarter. For the fourth quarter and the entire year, the fund generated strong absolute and relative returns. Growth continued to beat value, while large caps continued to outperform small caps on average. In the fourth quarter, the fund (class I) returned 4.04% outperforming a (0.33%) return for the Russell 2000 Index and a (0.62%) return for the Russell 2500 Index. The outperformance was driven by stock selection and favorable allocation. In addition, looking at the entire year, the performance exceeded benchmarks by an even greater margin. Despite the Russell 2000 Index’s 11.55% annual gain, the fund outpaced the benchmark by a whopping 900 basis points, reporting a 22% overall return. Although advantageous sector allocation also helped, stock selection accounted for the vast bulk of the outperformance. In addition, you can check the fund’s top 5 holdings to know its best picks in 2024.
In its fourth quarter 2024 investor letter, Madison Small Cap Fund emphasized stocks such as Knowles Corporation (NYSE:KN). Knowles Corporation (NYSE:KN) provides capacitors, radio frequency (RF) filtering products, balanced armature speakers, micro-acoustic microphones, and audio solutions. The one-month return of Knowles Corporation (NYSE:KN) was -10.21%, and its shares gained 9.85% of their value over the last 52 weeks. On February 14, 2025, Knowles Corporation (NYSE:KN) stock closed at $18.29 per share with a market capitalization of $1.611 billion.
Madison Small Cap Fund stated the following regarding Knowles Corporation (NYSE:KN) in its Q4 2024 investor letter:
“We established a new investment position in Knowles Corporation (NYSE:KN). Knowles supplies advanced micro-acoustic, audio processing, and precision device solutions. The underlying technologies are capacitors and RF filters. The company recently sold its low-margin consumer-facing business, which sold components into Apple’s ear pods, the proceeds to pay down debt and reinvest in higher margin, more durable Industrial and medical businesses that should command a higher valuation. We believe the moats in their industrial and medical business are substantial and believe the intrinsic value for the stock is $27.”
A research and development lab, assembling a network of high-performance capacitors.
Knowles Corporation (NYSE:KN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 13 hedge fund portfolios held Knowles Corporation (NYSE:KN) at the end of the third quarter which was 15 in the previous quarter. In the fourth quarter, Knowles Corporation (NYSE:KN) generated $143 million in revenues which was within the guided range. While we acknowledge the potential of Knowles Corporation (NYSE:KN) 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 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.