Brown Capital Management, an investment management company, released its “The Brown Capital Management Small Company Fund” second quarter 2025 investor letter. A copy of the letter can be downloaded here. The small-cap US stocks rebounded in the second quarter following a challenging first quarter. The Small Company Fund returned 8.59% in the second quarter, lagging the Russell 2000® Growth index’s 11.97% return. The underperformance in the quarter occurred in the last few weeks of the period. In addition, check the fund’s top five holdings to know its best picks in 2025.
In its second-quarter 2025 investor letter, The Brown Capital Management Small Company Fund highlighted stocks such as RxSight, Inc. (NASDAQ:RXST). RxSight, Inc. (NASDAQ:RXST) is a commercial-stage medical device company that specializes in light-adjustable intraocular lenses (LAL) used in cataract surgery. The one-month return of RxSight, Inc. (NASDAQ:RXST) was 9.66%, and its shares lost 83.24% of their value over the last 52 weeks. On September 12, 2025, RxSight, Inc. (NASDAQ:RXST) stock closed at $9.31 per share, with a market capitalization of $380.928 million.
The Brown Capital Management Small Company Fund stated the following regarding RxSight, Inc. (NASDAQ:RXST) in its second quarter 2025 investor letter:
“Among the detractors to performance in the second quarter of 2025 were Bio-Techne (TECH) and RxSight, Inc. (NASDAQ:RXST).
RxSight is the first and only commercially available light adjustable lens (LAL) currently on the market for cataract surgery. LAL is a type of premium intraocular lens (IOL) that allows for adjustment of the lenses post-surgery. RxSight enables this by using proprietary photosensitive material in its lenses that changes shape in response to specific patterns of UV light from an RxSight light source. This allows a physician to fine-tune a patient’s vision following cataract surgery to achieve optimal results. In addition to providing improved vision to patients, RxSight’s premium lenses are also more profitable to the operating physician when compared to traditional monofocal lenses. Adoption of premium IOLs has been growing in recent years, but with only 20% penetration in the U.S. and 11% globally, we think adoption rates could grow significantly over the long term.
On April 3, 2025, RxSight preannounced first quarter revenue of $37.9 million vs. $39.1 million consensus, a 3% miss. This is the first time RxSight missed expectations since going public in 2021. RxSight also reduced guidance for fiscal year 2025 from a range of $185 million to $197 million (32% to 41% year-over-year growth) to a range of $160 million to $175 million (14% to 25% growth). We believe a confluence of weakening macro conditions and competitor product launches led to its miss and guidance reduction. Investors reacted strongly to this negative news, with some fearing that RxSight has saturated the U.S. market. RxSight reaffirmed its 2025 guidance in its first quarter 2025 earnings call, but investors need to see these results delivered in 2025 before rewarding it. We do not believe RxSight has saturated the U.S. market as it currently has just 10% share of the premium IOL market. We think this market share can grow to a range of 30% to 40% longer term, thanks to its superior product, strong patient and physician value proposition, and experienced management team.”
RxSight, Inc. (NASDAQ:RXST) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 29 hedge fund portfolios held RxSight, Inc. (NASDAQ:RXST) at the end of the second quarter, compared to 28 in the previous quarter. In the second quarter, RxSight, Inc. (NASDAQ:RXST) generated revenue of $33.6 million, down 4% compared to $34.9 million in the year ago quarter and down 11% compared to $37.9 million in the first quarter of 2025. While we acknowledge the risk and potential of RxSight, Inc. (NASDAQ:RXST) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RxSight, Inc. (NASDAQ:RXST) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.
READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.
Disclosure: None. This article is originally published at Insider Monkey.
