Is Red Violet (RDVT) Well Positioned for Continued Growth?

Brown Capital Management, an investment management company, released its “The Brown Capital Management Small Company Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. The Small Company Fund fared worse compared to its benchmark in the first quarter and declined 16.03% vs 11.12% decline for the Russell 2000® Growth index. The underperformance in the quarter was led by negative investor sentiment due to geopolitical shocks or the sudden deterioration of the macroeconomic outlook. In addition, check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, The Brown Capital Management Small Company Fund 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 -7.49%, and its shares gained 104.40% of their value over the last 52 weeks.  On June 9, 2025, Red Violet, Inc. (NASDAQ:RDVT) stock closed at $44.11 per share, with a market capitalization of $615.595 million.

The Brown Capital Management Small Company Fund stated the following regarding Red Violet, Inc. (NASDAQ:RDVT) in its Q1 2025 investor letter:

“In the first quarter of 2025, we added three companies, Badger Meter (BMI), Red Violet (RDVT) and TransMedics (TMDX). Red Violet, Inc. (NASDAQ:RDVT) has developed an identity verification platform that applies proprietary analytics to vast datasets of information from numerous sources in order to verify people’s identities, prevent and detect fraud, streamline customer acquisition, provide regulatory compliance and other applications. For example, banks use Red Violet to prevent fraud in digital payments and for Know Your Customer / Anti-Money Laundering regulatory compliance. Insurance companies use the platform for risk mitigation and background checks on potential customers to uncover past instances of insurance fraud, excessive or questionable claims and more. Real estate firms use the platform to uncover aliases, bankruptcies, foreclosures, etc., of potential clients. Retailers use it to identify suspicious activity and flag or block transactions, such as when multiple expensive products are ordered online and shipped to multiple different people at one address. Other customers include law enforcement, government agencies, law firms and other corporations. Red Violet generated $75 million in revenue in 2024, up 25% over the prior year, and has been profitable since 2021. The company has a strong balance sheet with $36 million in cash and no debt. We believe it is well positioned for many years of continuing growth as it sells into an estimated $5 billion total addressable market.”

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 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.