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 SPS Commerce, Inc. (NASDAQ:SPSC). Headquartered in Minneapolis, Minnesota, SPS Commerce, Inc. (NASDAQ:SPSC) offers cloud-based supply chain management solutions. The one-month return of SPS Commerce, Inc. (NASDAQ:SPSC) was 5.12%, and its shares lost 23.53% of their value over the last 52 weeks. On April 28, 2025, SPS Commerce, Inc. (NASDAQ:SPSC) stock closed at $139.53 per share with a market capitalization of $5.299 billion.

Conestoga Capital Advisors stated the following regarding SPS Commerce, Inc. (NASDAQ:SPSC) in its Q1 2025 investor letter:

"Shares declined by 14% on the date SPS Commerce, Inc. (NASDAQ:SPSC) announced fourth quarter earnings. New CEO Chad Collins has been active in acquiring technologies to help SPSC broadens its set of offerings. This coincides with a moderate deceleration in organic growth that has investors questioning management’s revenue growth target and, more specifically, how much will be organic. SPSC has historically grown through a combination of wallet share expansion and new customer additions. While typically balanced, this has shifted to mostly wallet share growth, raising another question with investors around new logo acquisition."Is SPS Commerce Inc. (SPSC) The Best 52-Week Low Stock To Buy Now According to Short Sellers?

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SPS Commerce, Inc. (NASDAQ:SPSC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held SPS Commerce, Inc. (NASDAQ:SPSC) at the end of the fourth quarter, compared to 27 in the third quarter. SPS Commerce, Inc.'s (NASDAQ:SPSC) first quarter revenue grew 21% to $181.5 million and recurring revenue grew 23%. While we acknowledge the potential of SPS Commerce, Inc. (NASDAQ:SPSC) 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.

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In another article, we covered SPS Commerce, Inc. (NASDAQ:SPSC) and shared the list of worst performing software stocks to buy according to analysts. 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.

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