SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” first quarter 2023 investor letter. A copy of the same can be downloaded here. In the first quarter, the strategy returned 4.22% on a gross basis compared to a 2.74% return for the Russell 2000 Index and -0.66% for the Russell 2000 Value Index. Since its inception, the strategy has continued to outperform both indexes on an annualized gross and net basis. 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 Live Oak Bancshares, Inc. (NYSE:LOB) in the first quarter 2023 investor letter. Headquartered in Wilmington, North Carolina, Live Oak Bancshares, Inc. (NYSE:LOB) is a bank holding company. On May 3, 2023, Live Oak Bancshares, Inc. (NYSE:LOB) stock closed at $21.70 per share. One-month return of Live Oak Bancshares, Inc. (NYSE:LOB) was -10.74%, and its shares lost 50.52% of their value over the last 52 weeks. Live Oak Bancshares, Inc. (NYSE:LOB) has a market capitalization of $966.538 million.
SouthernSun Small Cap Strategy made the following comment about Live Oak Bancshares, Inc. (NYSE:LOB) in its Q1 2023 investor letter:
“Live Oak Bancshares, Inc. (NYSE:LOB), a small regional bank focused on small business lending throughout the U.S., was the top detractor for the quarter. Live Oak operates a unique, branchless banking model and is the largest originator of SBA loans in the U.S. Live Oak executed well throughout 2022, originating over $4 billion of loans and leases, which resulted in 24% loan growth for the year. Despite strong growth in the loan portfolio, net charge-offs as a percentage of average loans was only 0.14%. Live Oak’s cumulative loss rate on SBA 7(a) loans from 2013 through 2022 is 0.30% compared to the SBA 7(a) program total loss rate of 3.89%. Live Oak also realized $148 million in gains on two of its fintech investments through its Live Oak Ventures subsidiary. Through the end of 2022, Live Oak Ventures has invested $52 million of cash into 12 fintech businesses and received $163 million in cash proceeds from exits. Based on the most recent transaction data, the estimated implied value of the remaining investments at 12/31/2022 was $158 million. We believe management has a strong track record of prudently investing in fintech startups and using the value created through them to boost its capital base as gains are realized. During the first quarter, Live Oak traded down in sympathy with the broader banking sector. Because it operates a branchless model, Live Oak primarily gathers its deposits via high-cost CD’s and savings accounts. Live Oak’s average balance as of 12/31/2022 was $62 thousand per personal account and $129 thousand per business account, both well below the FDIC insured amount of $250 thousand per account. In addition, 18% of Live Oak’s total deposits were uninsured as of 12/31/2022 compared to the U.S. banking industry average of 44%. We believe that Live Oak’s unique operating model, strong liquidity position and experienced and prudent management team position it well to maintain and grow its presence in the small business lending market.”
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Live Oak Bancshares, Inc. (NYSE:LOB) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held Live Oak Bancshares, Inc. (NYSE:LOB) at the end of the fourth quarter which was 20 in the previous quarter.
We discussed Live Oak Bancshares, Inc. (NYSE:LOB) in another article and shared Diamond Hill Capital’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q1 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.