Here’s Riverwater Partners Micro Opportunities Strategy’s Thesis for Red Violet (RDVT)

Riverwater Partners, an investment management company, released its “Micro Opportunities Strategy” Q1 2025 investor letter. A copy of the letter can be downloaded here. The strategy generated positive relative results in the first quarter, outperforming the benchmark. The results were driven by owning higher-quality companies compared to those in the microcap benchmark. Both stock selection and sector allocation contributed to the outperformance of the strategy in the quarter. 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, Riverwater Partners Micro Opportunities Strategy highlighted stocks such as Red Violet, Inc. (NASDAQ:RDVT). Red Violet, Inc. (NASDAQ:RDVT) is an analytics and information solutions company. The one-month return of Red Violet, Inc. (NASDAQ:RDVT) was 2.59%, and its shares gained 93.24% of their value over the last 52 weeks.  On June 30, 2025, Red Violet, Inc. (NASDAQ:RDVT) stock closed at $49.20 per share, with a market capitalization of $686.63 million.

Riverwater Partners Micro Opportunities Strategy stated the following regarding Red Violet, Inc. (NASDAQ:RDVT) in its Q1 2025 investor letter:

“Red Violet, Inc. (NASDAQ:RDVT) provides advanced data analytics and identity intelligence solutions through its two main platforms: FOREWARN, a safety tool for real estate professionals, and Interactive Data Inc. (IDI), an analytics platform serving multiple industries with applications in identity verification, fraud prevention, compliance, and due diligence.

While FOREWARN has reached approximately 50% market penetration, IDI remains underpenetrated and offers significant expansion potential across both industry verticals and existing clients. The total addressable market continues to grow with the increasing relevance of big data, cybersecurity, and cloud-based technologies.

RDVT’s management team brings a strong track record, having built and sold two previous companies in this domain. The current platform’s cloud-native, machine-learning-enabled architecture is scalable and well-positioned for enterprise adoption. As RDVT gains market share, its recurring revenue base and high margins support a premium valuation.”

Red Violet, Inc. (NASDAQ:RDVT) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held Red Violet, Inc. (NASDAQ:RDVT) at the end of the first quarter, which was 14 in the previous quarter. Red Violet, Inc.’s (NASDAQ:RDVT) first quarter revenue increased 26% to a record $22 million. While we acknowledge the potential of Red Violet, Inc. (NASDAQ:RDVT) 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 undervalued AI stock set for massive gains.

In another article, we covered Red Violet, Inc. (NASDAQ:RDVT) and shared Brown Capital Management Small Company Fund’s views on the company. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of RDVT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.