Conestoga Capital Advisors, an asset management company, released its third-quarter 2024 investor letter. A copy of the letter can be downloaded here. At its September meeting, the Federal Reserve lowered the Federal Funds rate by 50 basis points due to weaker employment growth and moderate inflation. Equity markets welcomed the news, raising optimism for a soft landing in the U.S. economy. On September 26th, the S&P 500 Index achieved a record high, the Russell 2000 Index also moved higher over the quarter but remains roughly 10% below its all-time high. The Conestoga Small Cap Composite surged 10.09% (net) in the third quarter outperforming the Russell 2000 Growth Index’s 8.41% return. The Conestoga SMid Cap Composite returned 12.94% (net) versus the Russell 2500 Growth Index’s 6.99% return. The Conestoga Micro Cap Composite advanced 7.60% (net) but trailed the Russell Microcap Growth Index’s return of 8.57%. Finally, the Conestoga Mid Cap Composite returned 8.36% (net) outperforming the Russell Midcap Growth Index’s 6.54%. Please check the top 5 holdings of the fund for a better understanding of their best picks for 2024.

Conestoga Capital Advisors highlighted stocks like Trex Company, Inc. (NYSE:TREX), in the third quarter 2024 investor letter. Trex Company, Inc. (NYSE:TREX) manufactures and distributes composite decking, railing, and outdoor living products and accessories. The one-month return of Trex Company, Inc. (NYSE:TREX) was -9.78%, and its shares gained 11.90% of their value over the last 52 weeks. On October 21, 2024, Trex Company, Inc. (NYSE:TREX) stock closed at $62.98 per share with a market capitalization of $6.846 billion.

Conestoga Capital Advisors stated the following regarding Trex Company, Inc. (NYSE:TREX) in its Q3 2024 investor letter:

"Trex Company, Inc. (NYSE:TREX) is the market share leader in composite decking and railing and has been a long-term holding. After the stock price reached a two-year high in late March, shares sold off over the last six months given some macro concerns and several decking surveys that showed a weakening decking market. Also, TREX management lowered their guidance for earnings in the year ahead. Despite the near-term headwinds, we remain positive on TREX given the continued consumer preference for composites over wood, as well as some exciting new products from TREX such as TREX’s Lineage Decking which has heat mitigation technology."

A home exterior with a deck and railing crafted with products from the company.

Trex Company, Inc. (NYSE:TREX) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 36 hedge fund portfolios held Trex Company, Inc. (NYSE:TREX) at the end of the second quarter which was 37 in the previous quarter. Trex Company, Inc. (NYSE:TREX) reported net sales of $376 million in the second quarter, up 6% from Q2 2023. While we acknowledge the potential of Trex Company, Inc. (NYSE:TREX) 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.