Here’s Why Greystone Capital Management Sold Xponential Fitness (XPOF)?

Greystone Capital Management, an investment management company, released its first-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter, the median account return for separate accounts managed by the firm was -7.9%, net of fees. The fund unfavorably and favorably compared to the S&P 500 and Russell 2000 returns of -4.2% and -9.5% during the quarter. Client portfolios are concentrated in small companies mostly outside major indices, leading to returns that typically differ from those indices. In addition, you can check the fund’s top 5 holdings to find out its best picks for 2025.

In its first-quarter 2025 investor letter, Greystone Capital Management highlighted stocks such as Xponential Fitness, Inc. (NYSE:XPOF), in the fourth quarter 2024 investor letter. Xponential Fitness, Inc. (NYSE:XPOF) is a North America-based boutique fitness franchisor. The one-month return of Xponential Fitness, Inc. (NYSE:XPOF) was 5.94%, and its shares lost 31.41% of their value over the last 52 weeks. On May 6, 2025, Xponential Fitness, Inc. (NYSE:XPOF) stock closed at $8.21 per share with a market capitalization of $397.438 million.

Greystone Capital Management stated the following regarding Xponential Fitness, Inc. (NYSE:XPOF) in its Q1 2025 investor letter:

“Xponential Fitness, Inc. (NYSE:XPOF) was a new position for us that I started buying in late February and spoke briefly about during our annual meeting. I won’t rehash the details, but based on our work, I was under the impression that the company’s past issues were in the rearview mirror, and with a new management team in place, the future seemed bright. We bought our shares at a wide discount to other franchise businesses, despite the high-quality business and growth prospects.

Shortly after our initial purchases, we were sucker-punched by an incredibly weak Q4 / FY24 report where XPOF announced reduced same store sales growth, a restatement of their 2023 financials, lowered guidance, and issued an outlook for studio closures and new studio openings that in no way resembled the growth path being discussed just a few months prior. To be fair, the accounting issues were benign, but open the door to more problems down the road and introduce the possibility that management knew of these issues for some time. I believe investors have been misled and as a result we sold our shares. This was an unforced error on my part that could have been avoided with patience.”

Xponential Fitness, Inc. (NYSE:XPOF) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held Xponential Fitness, Inc. (NYSE:XPOF) at the end of the fourth quarter, compared to 22 in the third quarter. Xponential Fitness, Inc. (NYSE:XPOF) reported consolidated revenue of $83.2 million in the fourth quarter 2024, down 7% from the prior year period. While we acknowledge the potential of Xponential Fitness, Inc. (NYSE:XPOF) 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 Xponential Fitness, Inc. (NYSE:XPOF) and shared Optimist Fund’s views on the company in the previous quarter. 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.