Choice Equities Capital Management, an investment management company, released its second-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the second quarter of 2025, Choice Equities Fund reported gains of +30.0% on a net basis, bringing year-to-date gains to +21.6%. This compares to +8.5% for the Russell 2000 and +10.9% for the S&P 500 in the quarter, and -1.8% and +6.2% returns for the indexes YTD. Moreover, the fund generated an annualized return of +13.4% since its inception in 2017, compared to +7.1% and +14.7% returns for the indexes, respectively. The market dynamics changed in the second quarter, true to the theme, things are changing quickly. The S&P rebounded to a new high at the end of the second quarter from a sharp decline. For more information on the fund’s best picks in 2025, please check its top five holdings.
In its second-quarter 2025 investor letter, Choice Equities Fund highlighted stocks such as Genius Sports Limited (NYSE:GENI). Genius Sports Limited (NYSE:GENI) is a leading provider of technology-led products and services to the sports, sports betting, and sports media industries. The one-month return of Genius Sports Limited (NYSE:GENI) was 17.80%, and its shares gained 63.52% of their value over the last 52 weeks. On August 20, 2025, Genius Sports Limited (NYSE:GENI) stock closed at $12.64 per share, with a market capitalization of $3.014 billion.
Choice Equities Fund stated the following regarding Genius Sports Limited (NYSE:GENI) in its second quarter 2025 investor letter:
“Genius Sports Limited (NYSE:GENI) – The digital gaming rights provider continues to execute as expected with several favorable developments recently occurring. In June, the NFL re-upped and extended its data rights deal with GENI to 2029, well in advance of the 2027 expiration date of the previously existing agreement. Genius also recently secured an exclusive data rights deal with the NCAA through 2032. Together, these data rights deals, as well as the lion’s share of data rights deals which were renewed last year, give the company a great deal of visibility into its data costs going forward, paving the way for future incremental revenues to flow through to the bottom line at very attractive incremental margins going forward.
With sports-betting now legal in Brazil, legalization in a handful of meaningful U.S. states still to come and a trend that favors continued growth in in-game betting where the company generates a higher take rate on bets placed, incremental revenue opportunities should continue to follow at a healthy pace in a market that itself should continue to grow at a low-double digit rate. Ad revenues are also quickly emerging as meaningful source of new revenues, with Genius’s nascent FanHub engine producing another attractive revenue stream for advertisers seeking to tie ads directly to specific players.
Recently the company has stated it is now targeting a 30% EBITDA margin by 2030, a step higher from the prior target of 25%. With strong incremental margins and attractive topline growth likely near 20% for the next several years, the company looks set to grow EBITDA at a ~30%+ CAGR for the next several years. This financial algorithm will sustain the company solidly into the Rule of 40 club (which sums EBITDA margins and revenue growth) for the foreseeable future where most peers trade at 6x sales or better. Today trading at less than 4x sales and at an increasingly wide valuation disparity relative to larger peer Sportsradar Group (SRAD), it stands to reason strong revenues and incremental profits and greater investor understanding of this company and its duopolistic industry structure will continue to provide tailwinds to shares in time.”
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Genius Sports Limited (NYSE:GENI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held Genius Sports Limited (NYSE:GENI) at the end of the first quarter, which was 32 in the previous quarter. In the second quarter, Genius Sports Limited (NYSE:GENI) generated a 24% growth in group revenue and a record high group adjusted EBITDA margin of 29%. While we acknowledge the risk and potential of Genius Sports Limited (NYSE:GENI) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Genius Sports Limited (NYSE:GENI) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Genius Sports Limited (NYSE:GENI) and shared the list of companies with at least 30% annual growth rates. In addition, please check out our hedge fund investor letters Q2 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.
