Polen Capital, an investment management company, released its “Polen U.S. Small Company Growth Strategy” third-quarter 2024 investor letter. A copy of the letter can be downloaded here. The third quarter had a strong finish for U.S. small-cap equities, driven by interest rate reductions and fading recessionary concerns. In the third quarter, the fund delivered 7.65% gross, and 7.35% net of fees compared to an 8.41% return for the Russell 2000 Growth Index. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2024.
Polen U.S. Small Company Growth Strategy highlighted stocks like E.l.f. Beauty, Inc. (NYSE:ELF), in the third quarter 2024 investor letter. E.l.f. Beauty, Inc. (NYSE:ELF) is a beauty company that offers cosmetic and skin care products. The one-month return of E.l.f. Beauty, Inc. (NYSE:ELF) was 7.84%, and its shares gained 9.18% of their value over the last 52 weeks. On November 15, 2024, E.l.f. Beauty, Inc. (NYSE:ELF) stock closed at $121.33 per share with a market capitalization of $6.835 billion.
Polen U.S. Small Company Growth Strategy stated the following regarding E.l.f. Beauty, Inc. (NYSE:ELF) in its Q3 2024 investor letter:
“The Portfolio’s top detractors were Progyny, elf Beauty, and Alarm.com. E.l.f. Beauty, Inc. (NYSE:ELF), a discount beauty company focused on cosmetics and skincare, is a new addition to the Portfolio this quarter. Please see Portfolio Activity below for further detail. We are intrigued by the company’s impressive track record for growth, margins, and returns on capital. While elf has reported significant results all year, shares came under pressure, in our view, as short-term investors primarily appeared to anticipate a slowdown in revenue growth, possibly due to investor concerns of market saturation, economic conditions, and valuation concerns, among other factors. While we are confident in how we underwrote our initial investment for returns above the portfolio average, the stock has come under even more pressure than we anticipated. We used this weakness to add to our position. We’re intrigued by the strength elf has experienced across its retailer and ecommerce channels, particularly in taking market share in a challenging consumer environment, given their relatively inexpensive prices vs. competitors.
elf Beauty, described above, is a discount beauty company focused on cosmetics and skincare. We find the company’s reputation for quality, innovation, and prices below mass cosmetics brands to be uniquely positioned. While this combination of innovation, quality, and value has led to compelling growth, we still believe it’s early days for the company. elf’s brand awareness is significantly less than that of more prominent players; it is still adding shelf space, expanding its product portfolio, and entering the skincare market. elf is also still a US-focused business, with some early signs of international success. The company’s financial profile is strong, and we expect EPS to grow by 25% over the long term.”
A close up of the lip and eye products from the company on a model in a fashion and beauty shoot.
E.l.f. Beauty, Inc. (NYSE:ELF) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held E.l.f. Beauty, Inc. (NYSE:ELF) at the end of the second quarter which was 33 in the previous quarter. E.l.f. Beauty, Inc.’s (NYSE:ELF) revenue grew 40% year-over-year in the fiscal second quarter of 2025. While we acknowledge the potential of E.l.f. Beauty, Inc. (NYSE:ELF) 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 E.l.f. Beauty, Inc. (NYSE:ELF) and shared the list of best vegan stocks to buy according to hedge funds. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.
Disclosure: None. This article is originally published at Insider Monkey.