Here's Why FPA Queens Road Small Cap Value Fund Started Trimming Sprouts Farmers Market (SFM)

Investment management company First Pacific Advisors recently released its “FPA Queens Road Small Cap Value Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the third quarter, the fund returned 7.46% compared to a 12.60% return for the Russell 2000 Value Index. In the first three quarters of 2025, the Fund returned 13.77%, compared to 9.04% for the index. As the firm’s focus is on a diligent, disciplined, and patient process, it expects the fund to outperform in down markets and trail in speculative markets. Additionally, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its third-quarter 2025 investor letter, the FPA Queens Road Small Cap Value Fund highlighted stocks such as Sprouts Farmers Market, Inc. (NASDAQ:SFM). Sprouts Farmers Market, Inc. (NASDAQ:SFM) is a retailer of fresh, natural, and organic food products under the Sprouts brand. The one-month return of Sprouts Farmers Market, Inc. (NASDAQ:SFM) was -23.38%, and its shares lost 44.70% of their value over the last 52 weeks. On November 21, 2025, Sprouts Farmers Market, Inc. (NASDAQ:SFM) stock closed at $81.83 per share, with a market capitalization of $7.997 billion.

FPA Queens Road Small Cap Value Fund stated the following regarding Sprouts Farmers Market, Inc. (NASDAQ:SFM) in its third quarter 2025 investor letter:

"Sprouts Farmers Market, Inc. (NASDAQ:SFM) is a supermarket chain focusing on fresh, natural , and organic products. The company has strong operating margins, attractive returns on capital , and excellent new store economics. 13 Sprouts accelerated its unit growth from 12 stores a year to 33 stores in 2024 on a base of roughly 400 stores – very attractive unit economic growth. Through April of this year, SFM’s stock performed extremely well in concert with strong operating results and rising earnings estimates. But sales growth, and the SFM share price, have lagged since. We began trimming our position and taking gains in the third quarter of 2024 as t he company’s valuation entered the upper end of our “range of reasonableness.”

Sprouts Farmers Market, Inc. (NASDAQ:SFM) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 54 hedge fund portfolios held Sprouts Farmers Market, Inc. (NASDAQ:SFM) at the end of the second quarter, which was 50 in the previous quarter. Sprouts Farmers Market, Inc.’s (NASDAQ:SFM) sales rose 13% to $2.2 billion, in Q3 2025. While we acknowledge the potential of Sprouts Farmers Market, Inc. (NASDAQ:SFM) 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 Sprouts Farmers Market, Inc. (NASDAQ:SFM) and shared the list of stocks to buy with over 50% upside potential. In addition, please check out our hedge fund investor letters Q3 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.