Investment management company Cove Street Capital recently released its “Small Cap Value Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. The firm concluded an unsatisfactory fiscal year of operations. It owns a few not-so-good holdings and some delayed-gratification positions since the market generally dislikes small-cap value stocks. In the third quarter, the fund returned 3.70% (net of fees) compared to 9.27% for the Russell 2000 Index and 10.15% for the Russell 2000 Value Index. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Cove Street Capital Small Cap Value Fund highlighted stocks like Red Violet, Inc. (NASDAQ:RDVT), in the third quarter 2024 investor letter. Red Violet, Inc. (NASDAQ:RDVT) is a software and services company focuses on proprietary technologies and applying analytical capabilities to deliver identity intelligence. The one-month return of Red Violet, Inc. (NASDAQ:RDVT) was -9.46%, and its shares gained 24.26% of their value over the last 52 weeks. On October 7, 2024, Red Violet, Inc. (NASDAQ:RDVT) stock closed at $25.76 per share with a market capitalization of $372.492 million.
Cove Street Capital Small Cap Value Fund stated the following regarding Red Violet, Inc. (NASDAQ:RDVT) in its Q3 2024 investor letter:
“Lastly, Red Violet, Inc. (NASDAQ:RDVT), a position we added earlier in the year, has gotten off to a strong start for us. We tried to buy this several times, but there was simply not enough stock liquidity to get a position. That resolved itself as we stayed in the loop and were able to take down the lion’s share of a block trade by one of the former founders. Red Violet is focused on being an “arms dealer” of personal identity data that powers a litany of other data service solutions. They do this for a variety of end-markets: financial/corporate (AML, KYC), real estate, collections, investigative, retail, etc. The Red Violet management team built two of the other three players in the industry and have “gotten the gang back together,” only this time they have built a cloud-first architecture and have high inside ownership. In its most recent quarter, Red Violet reported 30% revenue growth and 36% AEBITDA margins on the back of a rebound in their collections business as government support programs from the pandemic era wind down. Red Violet has also shown early signs of success in inching upmarket to larger enterprise customers and demonstrated progress moving into new verticals with large TAMs: marketing services and government contracts. These investments have yet to bear fruit but bode well for future growth prospects.”
A technician inserting a credit card into a point-of-sale machine for identity authentication.
Red Violet, Inc. (NASDAQ:RDVT) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 9 hedge fund portfolios held Red Violet, Inc. (NASDAQ:RDVT) at the end of the second quarter which was 9 in the previous quarter. Red Violet, Inc.’s (NASDAQ:RDVT) revenue increased 30% to a record $19.1 million in the second quarter 2024. While we acknowledge the potential of Red Violet, Inc. (NASDAQ:RDVT) 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 discussed Red Violet, Inc. (NASDAQ:RDVT) and shared Cove Street Capital Small Cap Value Fund’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2024 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.