Here’s Why RF Capital Management Continues to Hold Sprouts Farmers Market (SFM)

RF Capital Management, an investment management company, released its first-quarter 2025 investor letter. A copy of the same can be downloaded here. RF Capital returned -2.43% net of all fees in the first quarter compared to -4.59%, -9.48%, and -0.94% returns for the S&P 500, Russell 2000, and MSCI ACWI for the same period. As of the first quarter of 2025, the portfolio’s cash position has decreased to 14.13%. However, there were variations in cash positions across the managed accounts due to differences in trading and timing.  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, RF Capital Management highlighted stocks such as Sprouts Farmers Market, Inc. (NASDAQ:SFM). Sprouts Farmers Market, Inc. (NASDAQ:SFM) is a retailer of fresh, natural, and organic food products under the Sprouts brand. The one-month return of Sprouts Farmers Market, Inc. (NASDAQ:SFM) was 3.21%, and its shares gained 112.98% of their value over the last 52 weeks. On May 7, 2025, Sprouts Farmers Market, Inc. (NASDAQ:SFM) stock closed at $167.69 per share with a market capitalization of $16.41 billion.

RF Capital Management stated the following regarding Sprouts Farmers Market, Inc. (NASDAQ:SFM) in its Q1 2025 investor letter:

“Sprouts Farmers Market, Inc. (NASDAQ:SFM) continues to perform well and has posted strong Q1 2025 results. QoQ, SFM’s net sales, comp store sales, and diluted EPS growth increased by 18.7%, 11.7%, and 61.6%, respectively.

 The high EPS growth rate may or may not be sustainable over the long term. However, SFM is currently executing at a high level. The gross and EBIT margin profile continues to improve. SFM also continues to open new stores. For FY2025, management is projecting at least 35 new stores. This is certainly doable and is actually shy of their target store count growth rate of 10%. We would like to see them hit that target, but it’s best to be prudent going forward in the current environment.

Comparable store sales growth also looks great and comes at a time when other retailers are struggling. E-commerce sales has been growing at a high rate as well. The addition of Uber Eats as a partner has certainly helped…” (Click here to read the full text)

Sprouts Farmers Market, Inc. (NASDAQ:SFM) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 47 hedge fund portfolios held Sprouts Farmers Market, Inc. (NASDAQ:SFM) at the end of the fourth quarter which was 37 in the previous quarter. Sprouts Farmers Market, Inc.’s (NASDAQ:SFM) sales rose 19% to $2.2 billion in Q1 2025. While we acknowledge the potential of Sprouts Farmers Market, Inc. (NASDAQ:SFM) 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 Sprouts Farmers Market, Inc. (NASDAQ:SFM) and shared the list of large-cap stocks from which insiders and short sellers are pulling their investments. 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.