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 Paylocity Holding Corporation (NASDAQ:PCTY). Headquartered in Schaumburg, Illinois, Paylocity Holding Corporation (NASDAQ:PCTY) is a software company that provides cloud-based human capital management and payroll software solutions. Paylocity Holding Corporation's one-month return (NASDAQ:PCTY) was 1.32%, and its shares gained 28.87% of their value over the last 52 weeks. On April 29, 2025, Paylocity Holding Corporation (NASDAQ:PCTY) stock closed at $192.33 per share with a market capitalization of $10.749 billion.

Conestoga Capital Advisors stated the following regarding Paylocity Holding Corporation (NASDAQ:PCTY) in its Q1 2025 investor letter:

"Based in Arlington Heights, IL, Paylocity Holding Corporation (NASDAQ:PCTY) is a leading cloud based provider of payroll, human capital management (HCM), and spend management solutions serving approximately 40,000 clients primarily within the 100 to 5,000 employee market segments (Conestoga uses PCTY for our own payroll processing). Following PYCR's acquisition by Paychex in January, we added PCTY, a former small cap holding, seeing an attractive entry point after 4Q market volatility. We remain bullish given PCTY’s robust growth trajectory, substantial recurring revenue, and sustained margin expansion opportunities driven by increasing product adoption and scale efficiencies."

A business operations manager, looking over the expense management system that helps simplifies the financials for the company.

Paylocity Holding Corporation (NASDAQ:PCTY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held Paylocity Holding Corporation (NASDAQ:PCTY) at the end of the fourth quarter compared to 39 in the third quarter. Paylocity Holding Corporation’s (NASDAQ:PCTY) strong results continued in the fiscal second quarter of 2025, with recurring and other revenue growing by 17%. While we acknowledge the potential of Paylocity Holding Corporation (NASDAQ:PCTY) 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 Paylocity Holding Corporation (NASDAQ:PCTY) and shared Wasatch Small Cap Growth Strategy'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.