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 Transcat, Inc. (NASDAQ:TRNS). Transcat, Inc. (NASDAQ:TRNS) offers calibration and laboratory instrument services. The one-month return of Transcat, Inc. (NASDAQ:TRNS) was 6.71%, and its shares lost 25.19% of their value over the last 52 weeks. On April 29, 2025, Transcat, Inc. (NASDAQ:TRNS) stock closed at $80.42 per share with a market capitalization of $748.668 million.

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

"Transcat, Inc. (NASDAQ:TRNS) engages in the provision of calibration and laboratory instrument services. TRNS reported weaker than expected operating results for Q3 Fiscal 2025. Softer revenue was in part driven by holiday timing as Christmas closures decreased quarter-end activity. In addition, Transcat Solutions, formally Nexa, was materially slower than year ago levels. Despite the near-term headwinds, management sees a path to return organic revenue growth to historic levels, potentially as early as the first half of fiscal 2026, which begins in April 2025."

A technician inspecting a complex instrument, relics of advanced technology in the backdrop.

Transcat, Inc. (NASDAQ:TRNS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 11 hedge fund portfolios held Transcat, Inc. (NASDAQ:TRNS) at the end of the fourth quarter which was 10 in the previous quarter. In the fiscal third quarter of 2025, Transcat, Inc.’s (NASDAQ:TRNS) consolidated revenue was up 2% to $66.8 million however, organic revenue fell 4% from prior year quarter. While we acknowledge the potential of Transcat, Inc. (NASDAQ:TRNS) 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 covered Transcat, Inc. (NASDAQ:TRNS) and shared Headwaters Capital Management's views on the company. 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.