Next Century Growth Investors, LLC, an investment Management Company, released its “Micro-Cap Strategy” first-quarter 2024 investor letter. A copy of the letter can be downloaded here. In the first quarter of 2024, the market continued 2023 momentum. The strategy returned 6.75% (net of fees) compared to a 6.60% return for the Russell Microcap Growth Index. The strategy outperformed across most sectors but underperformed in health care.  In addition, please check the fund’s top five holdings to know its best picks in 2024.

Next Century Growth Investors Micro-Cap Strategy highlighted stocks like Smith Douglas Homes Corp. (NYSE:SDHC) in the first quarter 2024 investor letter. Smith Douglas Homes Corp. (NYSE:SDHC) designs, constructs, and sells single-family homes. The one-month return of Smith Douglas Homes Corp. (NYSE:SDHC) was -16.15%, and its shares lost 22.05% of their value over the last 3 months. On June 13, 2024, Smith Douglas Homes Corp. (NYSE:SDHC) stock closed at $24.82 per share with a market capitalization of $1.273 billion.

Next Century Growth Investors Micro-Cap Strategy stated the following regarding Smith Douglas Homes Corp. (NYSE:SDHC) in its first quarter 2024 investor letter:

"Smith Douglas Homes Corp. (NYSE:SDHC) is a single-family homebuilder, primarily focused on the entry-level buyer. The company went public in January of this year. SDHC offers a strong value proposition to prospective buyers with the ability for home customizations and a below average market price point. With favorable demographics and low existing home inventory due a high percentage of existing homes being locked in at mortgage rates significantly below current market levels, SDHC is well-positioned to capture demand from the entry-level buyer. In addition and similar to other public homebuilders, SDHC has the financial strength to buydown mortgage rates for prospective buyers, which is a key advantage in this high-rate environment."

A construction team working in unison to build a single-family home in a neighborhood.

Smith Douglas Homes Corp. (NYSE:SDHC) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 20 hedge fund portfolios held Smith Douglas Homes Corp. (NYSE:SDHC) at the end of the first quarter which was 0 in the previous quarter. Smith Douglas Homes Corp. (NYSE:SDHC) reported a pre-tax income of $21.4 million in the first quarter and a $0.33 per diluted share. While we acknowledge the potential of Smith Douglas Homes Corp. (NYSE:SDHC) 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.