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Here’s How Super Micro Computer’s (SMCI) Surge Affected The Brown Capital Management Small Company Fund

Soumya Eswaran
·3 分鐘文章

Brown Capital Management, an investment management company, released its “The Brown Capital Management Small Company Fund” first quarter 2024 investor letter. A copy of the letter can be downloaded here. The Small Company Fund returned 0.48%, significantly underperforming the Russell 2000 Growth index’s 7.58% return. Following the release of the inflation report in February, the Small Company Fund experienced underperformance as investors shifted away from high-growth companies, impacting their valuations. In addition, check the fund’s top five holdings to know its best picks in 2024.

The Brown Capital Management Small Company Fund highlighted stocks like Super Micro Computer, Inc. (NASDAQ:SMCI), in the first quarter 2024 investor letter. Super Micro Computer, Inc. (NASDAQ:SMCI) develops and manufactures high-performance server and storage solutions. The one-month return of Super Micro Computer, Inc. (NASDAQ:SMCI) was -5.46%, and its shares gained 265.65% of their value over the last 52 weeks. On June 24, 2024, Super Micro Computer, Inc. (NASDAQ:SMCI) stock closed at $826.98 per share with a market capitalization of $48.425 billion.

The Brown Capital Management Small Company Fund stated the following regarding Super Micro Computer, Inc. (NASDAQ:SMCI) in its first quarter 2024 investor letter:

"We are benchmark-agnostic, so we spend our time researching current or potential EGCs, not analyzing indexes. However, this quarter there was inescapable attention on one AI-related company, Super Micro Computer, Inc. (NASDAQ:SMCI), which makes servers that hold Nvidia’s (NVDA) graphics processing units. Pundits wondered if Super Micro was the next AI “meme stock” set to soar like Nvidia. Super Micro’s stock price was up 255% in the first quarter and indeed is up a jaw-dropping 848% in the last year. Importantly, Super Micro is in the Russell 2000® Growth index, and alone accounted for over a third, or 2.82%, of the index’s 7.58% total return this quarter. However, Super Micro is not a company we could have ever owned. The company generated more than $7 billion in revenue in its last fiscal year, far above our current maximum revenue threshold. In fact, when the company came public in March 2007, it was already too large for our portfolio. Now, the company is so large that it moved into the S&P 500 index at the end of the first quarter. Nevertheless, not owning Super Micro was the largest detractor to our performance versus the index this quarter, comprising more than one-third of our underperformance. This, to us, is a reminder why an index is not always an accurate gauge of our short-term performance."

A team of technicians in a server room, testing and managing the newest server solutions.

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Super Micro Computer, Inc. (NASDAQ:SMCI) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held Super Micro Computer, Inc. (NASDAQ:SMCI) at the end of the first quarter which was 40 in the previous quarter. Super Micro Computer, Inc. (NASDAQ:SMCI) had a strong quarter, generating $3.85 billion in revenue, marking a 200% increase from the previous year's quarter. While we acknowledge the potential of Super Micro Computer, Inc. (NASDAQ:SMCI) 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.

We discussed Super Micro Computer, Inc. (NASDAQ:SMCI) in another article and shared Carillon Eagle Small Cap Growth Fund's views on the company. In addition, please check out our hedge fund investor letters Q1 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.