Avanos Medical (AVNS): Positioned for Growth Under New Leadership

Diamond Hill Capital, an investment management company, released its “Small Cap Fund” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. In Q1, markets were uneven due to the new presidential administration's activity, leading to concern about the future. The Russell 3000 Index fell by 4.7% in Q1, the first quarterly loss since Q3 2023. Diamond Hill Small Cap Fund returned -11.56% in Q1, trailing the Russell 2000 Index’s -9.48% return. For more information on the fund’s top picks in 2025, please check its top five holdings.

In its first-quarter 2025 investor letter, Diamond Hill Small Cap Fund highlighted stocks such as Avanos Medical, Inc. (NYSE:AVNS). Avanos Medical, Inc. (NYSE:AVNS) is a medical technology company that offers medical device solutions. The one-month return of Avanos Medical, Inc. (NYSE:AVNS) was -1.61%, and its shares lost 37.62% of their value over the last 52 weeks.  On May 5, 2025, Avanos Medical, Inc. (NYSE:AVNS) stock closed at $12.19 per share with a market capitalization of $560.779 million.

Diamond Hill Small Cap Fund stated the following regarding Avanos Medical, Inc. (NYSE:AVNS) in its Q1 2025 investor letter:

"As volatility picked up sharply in the quarter, we were active in the portfolio — and we anticipate that as volatility continues into Q2, we will likewise attempt to capitalize on compelling opportunities to reposition the portfolio for the period ahead. We initiated three new positions in Q1, including in Helios Technologies, Titan America and Avanos Medical, Inc. (NYSE:AVNS).

Avanos Medical’s technology portfolio includes innovative pain management and respiratory and digestive health product offerings, which have good organic growth profiles — including post-operative pain-management solutions, minimally invasive interventional (or chronic) pain therapies, closed airway suction systems and enteral feeding tubes. Recently, the company has made significant progress cutting costs and augmenting its product portfolio to improve growth and profitability. However, as it has struggled to perform consistently, shares have been pressured to a point at which we find the valuation compelling, particularly given its core products have strong positions in inherently attractive areas of the medical technology industry that we expect to grow. We believe Avanos is well-positioned under new leadership to utilize its clean balance sheet to deploy capital via accretive M&A and share repurchases."

Avanos Medical, Inc. (NYSE:AVNS) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 19 hedge fund portfolios held Avanos Medical, Inc. (NYSE:AVNS) at the end of the fourth quarter, compared to 13 in the third quarter. While we acknowledge the potential of Avanos Medical, Inc. (NYSE:AVNS) 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 covered Avanos Medical, Inc. (NYSE:AVNS) and shared Rewey Asset Management's views on the company in the previous quarter. 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.