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 Generac Holdings Inc. (NYSE:GNRC). Generac Holdings Inc. (NYSE:GNRC) is a power generation equipment, energy storage systems, and other power products manufacturer and supplier. The one-month return of Generac Holdings Inc. (NYSE:GNRC) was -2.57%, and its shares lost 12.43% of their value over the last 52 weeks. On May 1, 2025, Generac Holdings Inc. (NYSE:GNRC) stock closed at $112.67 per share with a market capitalization of $6.68 billion.

Conestoga Capital Advisors stated the following regarding Generac Holdings Inc. (NYSE:GNRC) in its Q1 2025 investor letter:

"Generac Holdings Inc. (NYSE:GNRC) is a market leader in the design and manufacturing of backup generators for the residential and commercial markets. GNRC delivered solid Q4 results with both revenue and EBITDA above consensus. FY2025 guidance was slightly below street estimates. GNRC does not include any major weather events in its guidance."

A technician in protective gear repairing a huge generator at a power plant.

Generac Holdings Inc. (NYSE:GNRC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 59 hedge fund portfolios held Generac Holdings Inc. (NYSE:GNRC) at the end of the fourth quarter, compared to 40 in the third quarter. Generac Holdings Inc.'s (NYSE:GNRC) net sales increased 6% year-over-year to $942 million in the first quarter of 2025. While we acknowledge the potential of Generac Holdings Inc. (NYSE:GNRC) 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 Generac Holdings Inc. (NYSE:GNRC) and shared SouthernSun SMID Cap Strategy's 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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