Concerns About Consumer Demand and Potential Tariff Impacted The Honest Company (HNST)
Meridian Funds, managed by ArrowMark Partners, released its 'Meridian Contrarian Fund' first quarter 2025 investor letter. A copy of the letter can be downloaded here. U.S. equities saw their weakest quarterly performance since 2022, as uncertainty about potential tariff policies affected investor sentiment and risk assets. In this environment, the fund returned -7.59% (net) during the quarter, slightly behind the -7.50% returns of the Russell 2500 Index and underperforming the -5.83% returns of the secondary benchmark, the Russell 2500 Value Index. In addition, please check the fund's top five holdings to know its best picks in 2025.
In its first-quarter 2025 investor letter, Meridian Contrarian Fund highlighted stocks such as The Honest Company, Inc. (NASDAQ:HNST). Headquartered in Los Angeles, California, The Honest Company, Inc. (NASDAQ:HNST) manufactures and sells diapers and wipes, skin and personal care, and household and wellness products. The one-month return of The Honest Company, Inc. (NASDAQ:HNST) was 4.12%, and its shares gained 84.88% of their value over the last 52 weeks. On May 28, 2025, The Honest Company, Inc. (NASDAQ:HNST) stock closed at $4.88 per share, with a market capitalization of $552.839 million.
Meridian Contrarian Fund stated the following regarding The Honest Company, Inc. (NASDAQ:HNST) in its Q1 2025 investor letter:
"The Honest Company, Inc. (NASDAQ:HNST) is a consumer products company specializing in natural baby-care consumables, cosmetics, soaps, and other household supplies. We initially invested in Honest as a contrarian investment opportunity, following post-pandemic supply chain disruptions, seeing value in the brand's authenticity and in its history of generating growth in the face of operational challenges. Despite reporting quarterly results above expectations, the stock declined due to concerns about consumer demand and potential tariff impacts. Honest manufacturers diapers in Mexico, which is USMCA compliant, and baby and cleaning wipes in China. Management has demonstrated agility in adapting supply chains, as witnessed when it re-sourced its diaper portfolio in 2024."
A close up of different packs of diapers and wipes, demonstrating the company's main product range.
The Honest Company, Inc. (NASDAQ:HNST) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 24 hedge fund portfolios held The Honest Company, Inc. (NASDAQ:HNST) at the end of the first quarter, which was 25 in the previous quarter. In Q1 2025, The Honest Company, Inc. (NASDAQ:HNST) reported $97 million in revenues, up 13% from Q1 2024. While we acknowledge the potential of The Honest Company, Inc. (NASDAQ:HNST) 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 undervalued AI stock set for massive gains.
In another article, we covered The Honest Company, Inc. (NASDAQ:HNST) and shared the list of best cosmetics stocks to buy for 2025. In its Q4 2024 investor letter, Meridian Contrarian Fund highlighted its belief in The Honest Company, Inc.'s (NASDAQ:HNST) growth potential. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.
READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
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