Here are Ace River Capital’s Updates on its Top Position, RCI Hospitality (RICK)

Ace River Capital, an investment management company, released its first-quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund returned -14.37% in the first quarter, compared to -4.3% and -9.5% returns for the S&P 500 (SPX) and the Russell 2000 (RTY), respectively. The firm’s goal is to maintain a focused portfolio of small and micro-cap companies with distinct advantages and growth potential within their respective sectors. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its first-quarter 2025 investor letter, Ace River Capital highlighted stocks such as RCI Hospitality Holdings, Inc. (NASDAQ:RICK). Headquartered in Houston, Texas, RCI Hospitality Holdings, Inc. (NASDAQ:RICK) owns and operates clubs and restaurants. The one-month return of RCI Hospitality Holdings, Inc. (NASDAQ:RICK) was 9.47%, and its shares lost 20.91% of their value over the last 52 weeks. On May 7, 2025, RCI Hospitality Holdings, Inc. (NASDAQ:RICK) stock closed at $40.82 per share with a market capitalization of $361.946 million.

Ace River Capital stated the following regarding RCI Hospitality Holdings, Inc. (NASDAQ:RICK) in its Q1 2025 investor letter:

“The fund’s top position is RCI Hospitality Holdings, Inc. (NASDAQ:RICK). RICK is the only publicly traded owner of adult nightclubs in the US. Currently they own 57 clubs across 13 states and an additional 14 sports-bar restaurants with the “Bombshells” concept. With few municipalities issuing new adult entertainment licenses these businesses function as local monopolies with excellent unit economics. There are roughly 2200 clubs across the country and RICK estimates that 500 of which would meet their criteria for acquisition. These clubs have limited potential buyers with RICK establishing themselves as the buyer of choice for any club owners looking to sell. This provides a long runway for growth.

The company announced the acquisition of Platinum West Gentlemen’s Club in West Columbia, South Carolina on 4/8/25. The purchase price totaled $8.0 million with $5.5 million cash and $2.5 million seller financing at 7%. This is the second club addition of the year and its all the standard criteria of the “Back to Basics’ Capital Allocation Plan” the company has committed to. The company plans to utilize 40% of free cash flow to grow with club acquisitions and the remaining funds will go towards share buybacks, debt reduction, or dividends…” (Click here to read the full text)

A bustling nightclub filled with energy, illuminated by mesmerizing lights and the thumping beat of the dance music.

RCI Hospitality Holdings, Inc. (NASDAQ:RICK) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 10 hedge fund portfolios held RCI Hospitality Holdings, Inc. (NASDAQ:RICK) at the end of the fourth quarter, compared to 9 in the third quarter. While we acknowledge the potential of RCI Hospitality Holdings, Inc. (NASDAQ:RICK) 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 covered RCI Hospitality Holdings, Inc. (NASDAQ:RICK) and shared the list of most expensive stocks insiders are buying recently. In its Q2 2024 letter, the fund shared its expectations for RCI Hospitality Holdings, Inc.’s (NASDAQ:RICK) expansion of its club portfolio and the launch of the AdmireMe platform. In addition, please check out our hedge fund investor letters Q1 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.