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 Vericel Corporation (NASDAQ:VCEL). Vericel Corporation (NASDAQ:VCEL) is a commercial-stage biopharmaceutical company. The one-month return of Vericel Corporation (NASDAQ:VCEL) was -8.65%, and its shares lost 14.19% of their value over the last 52 weeks. On April 29, 2025, Vericel Corporation (NASDAQ:VCEL) stock closed at $39.36 per share with a market capitalization of $1.973 billion.

Conestoga Capital Advisors stated the following regarding Vericel Corporation (NASDAQ:VCEL) in its Q1 2025 investor letter:

"Vericel Corporation (NASDAQ:VCEL) develops advanced cell therapies for the sports medicine and severe burn care market. VCEL reported inline results for the fourth quarter as burn care revenue continues to be difficult to predict and was weak in the quarter. MACI, the company’s lead growth engine, did not outperform expectations, despite the recent extension into delivery arthroscopically. Management did not predict an acceleration in MACI growth for 2025 despite that additional growth opportunity, leaving some questions in terms of its effect on overall growth."

A lab worker holding a vial of biopharmaceuticals for cellular therapies.

Vericel Corporation (NASDAQ:VCEL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held Vericel Corporation (NASDAQ:VCEL) at the end of the fourth quarter, compared to 15 in the third quarter. In the fourth quarter Vericel Corporation (NASDAQ:VCEL) reported record quarterly revenue of over $75 million. While we acknowledge the potential of Vericel Corporation (NASDAQ:VCEL) 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 Vericel Corporation (NASDAQ:VCEL) and shared Conestoga Capital Advisors' views on the company in the previous quarter. 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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