Nova Ltd. (NVMI) Benefitted from Increased Chip Demand

Wasatch Global Investors, an asset management company, released its “Wasatch Small Cap Growth Strategy” first-quarter 2024 investor letter. A copy of the letter can be downloaded here. During the first quarter, the strategy gained but underperformed the benchmark, the Russell 2000 Growth Index which rose 7.58%. The broader Russell 2000 Index increased 5.18% during the same period. Holdings in health care and consumer staples—and lack of exposure in materials, utilities, and communication services- contributed to the relative performance of the strategy, while holdings in information technology, consumer discretionary, and industrials detracted. In addition, you can check the top 5 holdings of the fund to know its best picks in 2024.

Wasatch Small Cap Growth Strategy highlighted stocks like Nova Ltd. (NASDAQ:NVMI), in the first quarter 2024 investor letter. Nova Ltd. (NASDAQ:NVMI) designs and develops process control systems used to manufacture semiconductors. The one-month return of Nova Ltd. (NASDAQ:NVMI) was 12.42%, and its shares gained 89.70% of their value over the last 52 weeks. On June 11, 2024, Nova Ltd. (NASDAQ:NVMI) stock closed at $224.83 per share with a market capitalization of $6.53 billion.

Wasatch Small Cap Growth Strategy stated the following regarding Nova Ltd. (NASDAQ:NVMI) in its first quarter 2024 investor letter:

"Nova Ltd. (NASDAQ:NVMI), a key provider of metrology equipment used in the production of semiconductor chips, was also a meaningful contributor. The company has benefited from surging global chip demand, which has partially resulted from needs related to AI. We own Nova based on our view that the company deploys research and capital wisely—and is well-positioned to introduce new equipment and increase market share over the next several years. This view isn’t predicated on AI trends. So, with AI euphoria becoming heightened, we sold some shares of Nova as a risk-control measure. Because semiconductor producers and related equipment manufacturers typically face cyclical demand, our approach when investing in such companies is to trim our positions on excessive optimism related to the semiconductor cycle and add to our positions on excessive pessimism."

A technician calibrating a chemical mechanical planarization machine for precise applications.

Nova Ltd. (NASDAQ:NVMI) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held Nova Ltd. (NASDAQ:NVMI) at the end of the first quarter which was 21 in the previous quarter. In the first quarter 2024, Nova Ltd. (NASDAQ:NVMI) generated 142 million in total revenues, exceeding its guidance, a 6% increase from the previous quarter and a 7% year-over-year. While we acknowledge the potential of Nova Ltd. (NASDAQ:NVMI) 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 discussed Nova Ltd. (NASDAQ:NVMI) and shared the list of high growth semiconductor stocks that are profitable in 2024. In addition, please check out our hedge fund investor letters Q1 2024 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.