Fred Alger Management, an investment management company, released its “Alger Small Cap Focus Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. Changing trade, monetary, and fiscal policies increased volatility in US stocks. The emergence of artificial intelligence (AI) models from China added to the uncertainty. Against this backdrop, the class A shares of the fund underperformed the Russell 2000 Growth Index. The Communication Services and Energy sectors contributed to the relative performance of the fund in the quarter, while the Health Care and Information Technology sectors detracted. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.
In its first-quarter 2025 investor letter, Alger Small Cap Focus Fund highlighted stocks such as FTAI Aviation Ltd. (NASDAQ:FTAI). FTAI Aviation Ltd. (NASDAQ:FTAI) owns and acquires aviation and offshore energy equipment for transportation, operating through the Aviation Leasing and Aerospace Products segments. The one-month return of FTAI Aviation Ltd. (NASDAQ:FTAI) was -12.84%, and its shares gained 36.62% of their value over the last 52 weeks. On April 17, 2025, FTAI Aviation Ltd. (NASDAQ:FTAI) stock closed at $93.00 per share with a market capitalization of $9.538 billion.
Alger Small Cap Focus Fund stated the following regarding FTAI Aviation Ltd. (NASAQ:FTAI) in its Q1 2025 investor letter:
“FTAI Aviation Ltd. (NASAQ:FTAI) is a global aviation company specializing in the acquisition, leasing, and sales of aircraft and aircraft engines, particularly focused on CFM56 and V2500 engines. The company operates through two main segments: Aviation Leasing, which manages and leases aviation assets generating rental income, and Aerospace Products, which develops, manufactures, repairs, and sells aircraft engines and aftermarket components. FTAI primarily earns revenue from leasing fees, equipment sales, and maintenance services. We believe FTAI has established a differentiated business model that maximizes profits from a highly attractive niche within the aerospace aftermarket—used CFM56 jet engines, which dominate short- to medium haul flights globally. During the quarter, shares detracted from performance following a short-seller report alleging that actual maintenance revenue and individual engine module sales were materially lower than reported, claiming FTAI inflated Aerospace Products revenues by categorizing one-time engine sales as Maintenance, Repair, and Overhaul (MRO) revenue, and suggesting profitability was driven more by asset sales than genuine value-added services. In response, FTAI’s board commissioned an independent audit, which cleared the company of all allegations, allowing FTAI to file its annual report on time. Aside from the short-seller impact, shares were also pressured by broader market trends as investors rotated away from last year’s strong performers. Despite these near-term challenges, we remain confident in FTAI’s fundamentals and believe it represents one of the best investment opportunities to capitalize on the multi-year commercial aerospace cycle.”
