10 Best Small-Cap Stocks to Buy Now According to Minerva Advisors

9. DLH Holdings Corp. (NASDAQ:DLHC)

Number of Hedge Fund Holders: 10

At the end of the first quarter of 2024, DLH Holdings Corp. (NASDAQ:DLHC) reported GAAP earnings per share of $0.12, which was $0.01 below analysts’ expectations. However, DLH Holdings Corp. (NASDAQ:DLHC) exceeded revenue forecasts, generating $101 million, which was $2 million more than expected. Regulatory filings reveal that Minerva Advisors held 505,581 shares of DLH Holdings Corp. (NASDAQ:DLHC) at the end of the first quarter of 2024. These shares were valued at $6,653,446, representing 4.07% of their portfolio.

Cove Street Capital stated the following regarding DLH Holdings Corp. (NASDAQ:DLHC) in its fourth quarter 2023 investor letter:

“DLH Holdings Corp. (NASDAQ:DLHC) is a consultant that provides a wide range of services to various Federal health agencies such as the Veterans Administration and Centers for Disease Control. It offers public health and life sciences services and has added high margin cybersecurity capabilities via its acquisition of Grove Resources late in 2022. This is an asset-lite, high free cash flowing business with generally sticky 3 to 5 year contracts. This company trades at a discount to its peers—despite having best in class margins—largely due to an overhang from a high revenue but low margin incumbent contract that the government continues to drag its feet on re-awarding. Our research indicates the stock continues to be priced for a “worst case” scenario with respect to this renewal, and other likely outcomes present a high-upside case. Furthermore, management has been astutely using cash to acquire smaller players in adjacent capabilities—such as Grove—to diversify revenue across more contracts. CEO Zach Parker came in seven years ago when the company was doing $2m in EBITDA; we expect them to deliver ~$45m in EBITDA in FY24. DLHC was a top performer for us in the fourth quarter as the management team continues to execute on its strategy and positions the company to be sold to a larger player.”