Crossroads Capital LLC, an investment management company released its fourth quarter 2024 investor letter. A copy of the letter can be downloaded here. The Crossroads Capital Investment Partners, LP returned 3.5% net of all fees and expenses, bringing YTD net returns to 5.7%. The fund has compounded at 14.8% and 14.7% net, respectively, since inception, and over the last five years outperforming its most suitable benchmarks, as well as the S&P 500. In addition, please check the fund’s top five holdings to know its best picks in 2024.

In its fourth quarter 2024 investor letter, Crossroads Capital emphasized stocks such as Magnite, Inc. (NASDAQ:MGNI). Magnite, Inc. (NASDAQ:MGNI) operates an independent omnichannel sell-side advertising platform. The one-month return of Magnite, Inc. (NASDAQ:MGNI) was -17.05%, and its shares gained 24.60% of their value over the last 52 weeks. On March 3, 2025, Magnite, Inc. (NASDAQ:MGNI) stock closed at $14.69 per share with a market capitalization of $2.254 billion.

Crossroads Capital stated the following regarding Magnite, Inc. (NASDAQ:MGNI) in its Q4 2024 investor letter:

"Magnite, Inc. (NASDAQ:MGNI) is the largest independent programmatic Sell-Side Platform (SSP), an entity that provides technology solutions to automate the purchase and sale of digital advertising inventory on behalf of publishers. The company arose from the merger of The Rubicon Project and Telaria in 2020. It then acquired a CTV competitor SpotX in early 2021 to become the third-biggest CTV SSP, after Comcast’s Freewheel and the Darth Vader of the AdTech world, Google. Critically, Magnite stands today as the key enabler of Connected TV advertising for streaming platforms, an increasingly crucial revenue source for media parent companies around the world.

The company’s contract win with Netflix is proof of its differentiation in the space, and was something we expected after hearing back in early 2023 that Microsoft’s Xandr ad tech stack wasn’t capable of true CTV ad delivery. The company has impressive incremental EBITDA margins (75%+), and after spending the last few years consolidating its acquisitions, is in a place to capitalize on growth opportunities, generating cash flow far in excess of current market expectations.

Nonetheless, the company trades on a single-digit multiple of this year’s estimated EBITDA, with minimal credit applied to Netflix onboarding programmatic advertising. That’s strange, if only because the Netflix ad tier is likely to deliver $6 billion in ad spend next year, and half of that may go through Magnite with low-single-digit take rates (3.5 to 5.0%). Should this occur with incremental margins they have shown in the past, the company could see EBITDA rise by over $70 million next year, implying 30%+ growth from Netflix alone. Better yet, with the success of Netflix’s programmatic endeavors, other media customers may accelerate adoption of the same type of programmatic infrastructure/services with MGNI that were previously just tertiary monetization activities..." (Click here to read the full text)

A marketing manager examining a publisher's digital inventory on a laptop.

Magnite, Inc. (NASDAQ:MGNI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held Magnite, Inc. (NASDAQ:MGNI) at the end of the fourth quarter compared to 20 in the third quarter. Magnite, Inc. (NASDAQ:MGNI) reported net income of $36 million in the fourth quarter of 2024 compared to net income of $31 million in Q4 2023. While we acknowledge the potential of Magnite, Inc. (NASDAQ:MGNI) 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 Magnite, Inc. (NASDAQ:MGNI) and shared Crossroads Capital’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q4 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.