We recently compiled a list of the 10 Best Small-Cap Stocks to Buy Now According to Minerva Advisors. In this article, we are going to take a look at where DLH Holdings Corp. (NASDAQ:DLHC) stands against the other small-cap stocks.
Established in the fourth quarter of 2002, Minerva Advisors, based in Pennsylvania, is an activist hedge fund managed by David Cohen. The firm specializes in equity investments, concentrating on small-cap and micro-cap value companies listed in the United States. Minerva Advisors employs a variety of investment strategies, including long bias, market dislocation exploitation, event-driven approaches, long-short strategies, thrift conversions, merger arbitrage, and capital structure arbitrage. From time to time, David Cohen launches activist campaigns targeting small portfolio companies in which Minerva Advisors holds relatively large equity stakes. One such example is the newspaper publisher A. H. Belo which was trading at around $4 per share when the stock had $2.58 in net cash per share on its balance sheet as well as other assets with a combined value of more than $4, hence valuing the company’s publishing business at zero.
David P. Cohen holds dual roles as President and Chief Compliance Officer at Minerva Advisors LLC, where he manages investment portfolios and research activities. His expertise lies in investing in small-cap and micro-cap companies, both in the U.S. and internationally, focusing particularly on the industrial and financial sectors. Cohen is the sole managing member of Minerva.
Before his tenure at Minerva, Mr. Cohen founded and served as President of Athena Capital Management, Inc. from 1988 to 2011. Athena later merged with Minerva Advisors. His career began as a research analyst and portfolio manager at a Philadelphia-based investment partnership from 1984 to 1988. Beyond his professional roles, Cohen has extensive board experience. He has been a member of the board of directors at CampusWorks, Inc. since 2011 and previously served on the board of Penn-America Group, a publicly held insurance company, from 1993 to 1997. Cohen earned his undergraduate degree from Haverford College, grounding his career in a solid academic foundation.
Minerva Advisors manages nearly $300 million in discretionary assets, as reported in their Form ADV filed in March 2024. The fund serves 7 clients and recently disclosed holdings of $163 million in managed 13F securities for Q1 2024, with its top ten holdings making up 62.67% of the portfolio.
Our Methodology
The stocks discussed in this article are part of Minerva Advisors’ investment portfolio as of the first quarter of 2024. To provide readers with comprehensive insights into these companies, we’ve included analyst ratings and other pertinent details. Additionally, we highlight the number of hedge fund investors involved in each company. Why focus on the stocks that hedge funds invest in? Our research shows that mimicking the top picks of the best hedge funds can lead to market-beating returns. Our quarterly newsletter’s strategy, which selects 14 small-cap and large-cap stocks each quarter, has returned 275% since May 2014, outperforming its benchmark by 150 percentage points. (see more details here)
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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.”
Overall DLHC ranks 9th on our list of the best small-cap stocks to buy. You can visit 10 Best Small-Cap Stocks to Buy Now According to Minerva Advisors to see the other small-cap stocks that are on hedge funds’ radar. While we acknowledge the potential of DLHC 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 more promising than DLHC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ ALSO: 7 Best AI Value Stocks That are ‘Money Machines’ According to NYU’s Aswath Damodaran and Analyst Says These 10 Stocks Can Benefit if Donald Trump Wins US Election 2024.
Disclosure: None. This article is originally published at Insider Monkey.
