SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” third quarter 2023 investor letter. A copy of the same can be downloaded here. In the third quarter, the strategy returned -7.56% on a gross basis (-7.73% net) compared to a -5.13% return for the Russell 2000 Index and -2.96% for the Russell 2000 Value Index. The strategy returned 15.46% on a gross basis (14.61% net) over the trailing twelve months compared to 8.93% and 7.84%, respectively, for the indexes over the same period. In addition, please check the top 5 holdings of the strategy to know its best pick in 2023.
SouthernSun Small Cap Strategy highlighted stocks like Darling Ingredients Inc. (NYSE:DAR) in the third quarter 2023 investor letter. Headquartered in Irving, Texas, Darling Ingredients Inc. (NYSE:DAR) produces natural ingredients from edible and inedible bio-nutrients. On October 26, 2023, Darling Ingredients Inc. (NYSE:DAR) stock closed at $41.25 per share. One-month return of Darling Ingredients Inc. (NYSE:DAR) was -20.98%, and its shares lost 47.07% of their value over the last 52 weeks. Darling Ingredients Inc. (NYSE:DAR) has a market capitalization of $6.579 billion.
SouthernSun Small Cap Strategy made the following comment about Darling Ingredients Inc. (NYSE:DAR) in its Q3 2023 investor letter:
“Darling Ingredients Inc. (NYSE:DAR), the largest publicly traded company turning edible by-products and food waste into sustainable products and a leading producer of renewable energy, was one of the top detractors in the Small Cap strategy in the third quarter. The stock has been under increased pressure in recent weeks, as fears regarding new industry supply of renewable diesel and the lack of government support have increased. We have been owners of Darling for over 17 years, and the story has always been a bit complicated for short-term traders. Over time and through thoughtful leadership and capital allocation, the company has built a vertically integrated growth engine with attractive returns on capital while consolidating the industry and driving innovation. We expect EBITDA to grow year over year >50% in 2023 and continue to expand over the next 2-3 years as recent M&A and growth capex drive deleveraging and free cash flow. The company is currently constructing Sustainable Aviation Fuel (SAF) capacity expected to come online in 4Q24 and is evaluating further SAF expansion for the future, as growth and incentives in that market provide significant margin expansion and return on investment. With EBITDA approaching $2 billion next year and the enterprise value of the business at quarter end of ~$12.8 billion, the stock is trading at its lowest EV/EBITDA multiple since 2012. Other valuation methodologies suggest a similarly low multiple relative to history. We look for continued execution and strong fundamentals to trump headline noise over the coming years and produce a sufficient return for shareholders.”
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Darling Ingredients Inc. (NYSE:DAR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held Darling Ingredients Inc. (NYSE:DAR) at the end of second quarter which was 29 in the previous quarter.
We discussed Darling Ingredients Inc. (NYSE:DAR) in another article and shared Aristotle Large Cap Growth Strategy’s views on the company. In addition, please check out our hedge fund investor letters Q3 2023 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.
