Wasatch Global Investors Reports on Q1 2025 Performance and Freshpet, Inc.
Wasatch Global Investors, a prominent asset management firm, has recently published its investor letter for the first quarter of 2025, focusing on the performance of its 'Wasatch Small Cap Growth Strategy.' Investors can access a downloadable version of this letter to gain deeper insights into the firm's performance and strategic outlook.
During the first quarter of 2025, U.S. stocks experienced a notable decline as investors weighed the potential economic repercussions of new tariffs and the looming specter of government funding cuts. This uncertainty, compounded by softer economic data, significantly influenced market performance. The Russell 2000 Growth index, which tracks the performance of small-cap growth stocks, concluded the quarter with a loss of -11.12%. In this challenging environment, the Wasatch Small Cap Growth Strategy also faced headwinds, underperforming relative to its benchmark.
The investor letter sheds light on some noteworthy stock picks within the fund, with Freshpet, Inc. (NASDAQ:FRPT) being highlighted as one of its key holdings. Freshpet, based in Secaucus, New Jersey, is known for producing and distributing fresh, refrigerated pet foods and treats. However, the company faced challenges in the market, as indicated by its one-month return of -10.24% and a staggering annual loss of 25.30%. As of April 17, 2025, Freshpet's stock was trading at $77.57 per share, bringing its market capitalization to approximately $3.779 billion.
In its Q1 2025 investor letter, Wasatch expressed its perspective on Freshpet's recent performance, stating:
"Another detractor was Freshpet, Inc. (NASDAQ:FRPT), a company that sells fresh, refrigerated meals and treats for dogs and cats. Revenue growth was a little lower than the market expected in Freshpets most recently reported quarter, but we believe the stock-price reaction was overdone. We spoke with management after the earnings call and have done our own analysis of Freshpets revenue streams. Based on our own analysis, we believe the companys growth over the next several years will be far more durable than the market expects. Additionally, as the company scales, we believe gross margins will increasingly benefit from more resilient and predictable demand, leading to more efficient manufacturing."
Despite the challenges, Freshpet is not currently listed among the 30 Most Popular Stocks Among Hedge Funds. According to Wasatch's database, 40 hedge fund portfolios included Freshpet at the end of Q4 2024, a slight increase from 38 in the preceding quarter. While the potential of Freshpet as an investment is acknowledged, Wasatch's confidence leans towards artificial intelligence (AI) stocks, which they believe hold greater promise for achieving higher returns within a shorter timeframe. Investors interested in AI stocks could find value in exploring options that rival companies like NVIDIA yet trade at more attractive price-to-earnings ratios.
In conclusion, as Wasatch Global Investors navigates the complexities of the market, their insights into Freshpet, Inc. and the broader small-cap landscape provide a comprehensive overview of current investment strategies and future outlooks.
