First Advantage Corporation (FA) declined due to the Uncertain Macroeconomic Environment

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 First Advantage Corporation (NASDAQ:FA). First Advantage Corporation (NASDAQ:FA) is a global provider of employment background screening, identity, and verification solutions. The one-month return of First Advantage Corporation (NASDAQ:FA) was 11.66%, and its shares lost 10.59% of their value over the last 52 weeks. On May 05, 2024, First Advantage Corporation (NASDAQ:FA) stock closed at $14.83 per share with a market capitalization of $2.575 billion.

Diamond Hill Small Cap Fund stated the following regarding First Advantage Corporation (NASDAQ:FA) in its Q1 2025 investor letter:

"Other bottom Q1 contributors included First Advantage Corporation (NASDAQ:FA), Civitas Resources and Allegiant Travel. First Advantage, which provides employment background screening, identity and verification solutions, faces pressure related to the uncertain macroeconomic environment, which could weigh on demand for background screenings in 2025. Further, it is amid its integration of recent acquisition Sterling Check Corp., which has leveraged the balance sheet for the time being."

First Advantage Corporation (NASDAQ:FA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held First Advantage Corporation (NASDAQ:FA) at the end of the fourth quarter, compared to 15 in the third quarter. First Advantage Corporation's (NASDAQ:FA) pro forma revenues for the fourth quarter of 2024 were $375 million, up 0.9% year-over-year. While we acknowledge the potential of First Advantage Corporation (NASDAQ:FA) 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 First Advantage Corporation (NASDAQ:FA) and shared Optimist Fund'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.