Here’s Why LS Small Cap Value Fund Decided to Exit Everus Construction Group (ECG)

Loomis Sayles, an investment management company, released its “Small Cap Value Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. The first quarter of 2025 saw negative returns for US equity markets, with large-cap indices outperforming small caps. Value stocks were stronger than growth stocks, driven by strong performance in financials and real estate, while growth sectors struggled. In the first quarter, the fund returned 0.16%, outperforming the Russell 2000 Value Index’s -1.06% return. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Loomis Sayles Small Cap Value Fund highlighted stocks such as Everus Construction Group, Inc. (NYSE:ECG). Everus Construction Group, Inc. (NYSE:ECG) is a US-based contracting services provider. The one-month return of Everus Construction Group, Inc. (NYSE:ECG) was -1.52%, and YTD its shares lost 8.27% of their value. On June 11, 2025, Everus Construction Group, Inc. (NYSE:ECG) stock closed at $60.31 per share, with a market capitalization of $3.076 billion.

Loomis Sayles Small Cap Value Fund stated the following regarding Everus Construction Group, Inc. (NYSE:ECG) in its Q1 2025 investor letter:

“Everus Construction Group, Inc. (NYSE:ECG) is a 2024 spin-off from the Fund’s holding of MDU Resources Group, a diversified utility holding company. We viewed Everus as a quality company that would now have control over its capital allocation policy following the spin. Everus is an electrical contractor that works on both commercial projects (including data centers) as well as utility transmission and distribution and we believed both areas had attractive growth potential. T he share price rallied significantly following the spin amid investor excitement around potential data center expansion. However, the first quarter of this year has proven more cautionary. Initial 2025 guidance from the company contained limited revenue growth projections coupled with margin declines as Everus absorbs the costs of being a public company, leading to a share price retrenchment. While the company has attractive end market exposure, we are less enthusiastic about their ability to expand margins over time and see less differentiation in their capabilities versus peers. With many ways to invest in electrification and data center growth that have greater margin opportunity, we chose to exit the position.”

Everus Construction Group, Inc. (NYSE:ECG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held Everus Construction Group, Inc. (NYSE:ECG) at the end of the first quarter, which was 39 in the previous quarter. Everus Construction Group, Inc.’s (NYSE:ECG) first quarter revenue grew 32% year-over-year to $826.6 million. While we acknowledge the potential of Everus Construction Group, Inc. (NYSE:ECG) 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 Everus Construction Group, Inc. (NYSE:ECG) and shared billionaire Rob Citrone’s small-cap stock picks with huge upside potential. 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.