Sprouts Farmers Market (SFM): A Strong Company with Smart Capital Deployment

Investment management company First Pacific Advisors recently released its “FPA Queens Road Small Cap Value Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter, the fund returned -2.51% compared to a -7.74% return for the Russell 2000 Value Index. President Trump announced his tariffs on April 2nd, causing equity markets to decline sharply and increasing volatility. Additionally, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its first-quarter 2025 investor letter, FPA Queens Road Small Cap Value Fund 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 -1.20%, and its shares gained 104.09% of their value over the last 52 weeks. On May 21, 2025, Sprouts Farmers Market, Inc. (NASDAQ:SFM) stock closed at $164.68 per share with a market capitalization of $16.115 billion.

FPA Queens Road Small Cap Value Fund stated the following regarding Sprouts Farmers Market, Inc. (NASDAQ:SFM) in its Q1 2025 investor letter:

“Sprouts Farmers Market, Inc. (NASDAQ:SFM) is a grocer focusing on fresh, natural and organic products. The company has best-in-class margins, attractive returns on capital and great new store economics. Sprouts accelerated its unit growth from 12 stores a year to 33 stores in 2024 on a base of roughly 400 stores. Over the past year, SFM’s stock has performed extremely well after reporting consistently strong operating results and from a low initial valuation.11 We have been trimming our position since the third quarter of 2024 and, as of quarter end, Sprouts sat just outside the top ten holdings. Although SFM’s share price has increased faster than bottom line results, we believe SFM still trades in the “range of reasonableness” for a high-quality, non-cyclical franchise that can reinvest capital at attractive rates of return.”

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 undervalued AI stock set for massive gains.

In another article, we covered Sprouts Farmers Market, Inc. (NASDAQ:SFM) and shared the list of best stocks to buy according to Jim Simons’ Renaissance Technologies. In its Q1 2025 investor letter, RF Capital Management highlighted Sprouts Farmers Market, Inc.’s (NASDAQ:SFM) promising long-term outlook. 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.