Palm Valley Capital Management, an investment management firm, released the “Palm Valley Capital Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter, Palm Valley Capital Fund appreciated 0.57% compared to an 8.93% decline in the S&P SmallCap 600 and a 6.08% drop in the Morningstar Small Cap Total Return Index. Cash was 77.6% of Fund assets at the start of the quarter and 76.5% at the conclusion. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first quarter 2025 investor letter, Palm Valley Capital Fund emphasized stocks such as Flowers Foods, Inc. (NYSE:FLO). Flowers Foods, Inc. (NYSE:FLO) is a US based producer of packaged bakery food products. The one-month return of Flowers Foods, Inc. (NYSE:FLO) was -5.71%, and its shares lost 19.91% of their value over the last 52 weeks. On April 4, 2025, Flowers Foods, Inc. (NYSE:FLO) stock closed at $18.82 per share with a market capitalization of $3.909 billion.

Palm Valley Capital Fund stated the following regarding Flowers Foods, Inc. (NYSE:FLO) in its Q1 2025 investor letter:

"We started four new positions in the first quarter: Forrester Research (ticker: FORR), Monro (ticker: MNRO), Reynolds Consumer Products (ticker: REYN), and Flowers Foods, Inc. (NYSE:FLO). Each of these is a relatively small weighting in the Fund. Flowers Foods is the second largest producer of bread and bakery foods in the United States. Founded in 1919, the company’s brands include Nature’s Own, Dave’s Killer Bread, and Wonder. Flowers Foods has a long history of generating consistent sales and profit growth. As the company integrates its recent Simple Mills acquisition, earnings are expected to be flat in 2025. Nevertheless, we believe Flowers will continue to generate abundant free cash flow, sufficiently funding its dividend (5.0% current yield) and its plan to reduce debt. With Flower’s stock trading at a five-year low, its valuation has improved considerably."

A close up of a baker stirring a bowl of flour and sugar in a bakery.

Flowers Foods, Inc. (NYSE:FLO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held Flowers Foods, Inc. (NYSE:FLO) at the end of the fourth quarter which was 25 in the previous quarter. While we acknowledge the potential of Flowers Foods, Inc. (NYSE:FLO) 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.

We covered Flowers Foods, Inc. (NYSE:FLO) in another article, where we shared the list of best counter cyclical stocks to buy according to analysts. 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.