Rowan Street Capital's Investment Journey with Spotify (SPOT)

Rowan Street Capital, an investment management company, released its second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The first half of 2025 was strong for Rowan Street, with its fund up +20.1% (net) YTD, marking a remarkable three-year run. Since mid-2022, the fund has compounded capital at about 51.7% (net) annually, with a +249% total return. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its second quarter 2025 investor letter, Rowan Street Capital highlighted stocks such as Spotify Technology S.A. (NYSE:SPOT). Headquartered in Luxembourg City, Luxembourg, Spotify Technology S.A. (NYSE:SPOT) offers audio streaming subscription services. The one-month return of Spotify Technology S.A. (NYSE:SPOT) was -0.65%, and its shares have appreciated by 143.16% over the past 52 weeks. On July 16, 2025, Spotify Technology S.A. (NYSE:SPOT) closed at $705.55 per share, with a market capitalization of $144.677 billion.

Rowan Street Capital stated the following regarding Spotify Technology S.A. (NYSE:SPOT) in its second quarter 2025 investor letter:

"Listed in the table below are our core holdings, sorted by the length of our holding period. As you can see, we have been shareholders of Meta Platforms (META) and Spotify Technology S.A. (NYSE:SPOT) for over 7 years — a holding period that we aim for when we make an initial purchase. Our internal rate of return (IRR) on both investments has exceeded 20% annually

This resonates deeply with our experience. Two of our longest-term holdings — Meta Platforms and Spotify — have each compounded at over 20% annually and generated over 4x returns for our fund over 7+ years. But the journey to those returns was anything but smooth

Spotify (SPOT) might have been even more psychologically challenging. We first invested in 2018, and for a time the stock advanced meaningfully — only to then drop over 75% during the brutal 2022 drawdown. By 2023, five years into our holding period, our cumulative return on the position had round-tripped to zero. Imagine holding a company you deeply believe in for half a decade — and having nothing to show for it on paper. That’s a true test of conviction. At the time, we published this article on Seeking Alpha: Spotify: A Favorite Idea That’s Extremely Mispriced, laying out our thesis while the stock was deeply out of favor — a thesis that ultimately proved to be both accurate and highly rewarding. From those 2022 lows, Spotify went on to appreciate nearly 10x, powerfully validating the discipline to stay the course."

Spotify Technology S.A. (NYSE:SPOT) is in 25th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 106 hedge fund portfolios held Spotify Technology S.A. (NYSE:SPOT) at the end of the first quarter, which was 101 in the previous quarter. In Q1 2025, Spotify Technology S.A. (NYSE:SPOT) generated a total revenue of $4.2 billion, reflecting a year-over-year growth of 15% on a constant currency basis. While we acknowledge the potential of FI as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Spotify Technology S.A. (NYSE:SPOT) and shared the list of best large cap stocks to buy. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: The Best and Worst Dow Stocks for the Next 12 Months and 10 Unstoppable Stocks That Could Double Your Money.

Disclosure: None. This article is originally published at Insider Monkey.