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 Align Technology, Inc. (NASDAQ:ALGN). Align Technology, Inc. (NASDAQ:ALGN) designs, manufactures, and markets Invisalign clear aligners, and iTero intraoral scanners and services. The one-month return Align Technology, Inc. (NASDAQ:ALGN) was 14.59%, and its shares lost 38.32% of their value over the last 52 weeks. On May 1, 2025, Align Technology, Inc. (NASDAQ:ALGN) stock closed at $176.74 per share with a market capitalization of $12.939 billion.

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

"Align Technology, Inc. (NASDAQ:ALGN) is a global medical-device company that pioneered the invisible-orthodontics market with the introduction of the Invisalign® system, a clear, removable orthodontic-treatment option for straightening teeth. We have exited our position in ALGN given that revenue growth for the business has become more challenged. While ALGN remains the market share leader, it has become increasingly difficult for the company to gain additional share as new competitors have entered the market. Therefore, growth has become more captive to consumer spending cycles. The proceeds have been re-invested in higher conviction Mid Cap holdings."

An orthodontist examining a patient's teeth with a intraoral scanner, demonstrating the precision of the company's technology.

Align Technology, Inc. (NASDAQ:ALGN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 58 hedge fund portfolios held Align Technology, Inc. (NASDAQ:ALGN) at the end of the fourth quarter, compared to 50 in the third quarter. While we acknowledge the potential of Align Technology, Inc. (NASDAQ:ALGN) 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 Align Technology, Inc. (NASDAQ:ALGN) and shared the list of high-risk stocks to buy according to billionaires. 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.