SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” second quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, the strategy returned 7.85% on a gross basis (7.65% net) compared to a 5.21% return for the Russell 2000 Index and 3.18% for the Russell 2000 Value Index. The strategy returned 24.28% on a gross basis (23.36% net) over the trailing twelve months compared to 12.31% and 6.01%, respectively, for the indexes. 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 Boot Barn Holdings, Inc. (NYSE:BOOT) in the second quarter 2023 investor letter. Headquartered in Irvine, California, Boot Barn Holdings, Inc. (NYSE:BOOT) is a lifestyle retail chain. On August 1, 2023, Boot Barn Holdings, Inc. (NYSE:BOOT) stock closed at $92.56 per share. One-month return of Boot Barn Holdings, Inc. (NYSE:BOOT) was 6.47%, and its shares gained 45.58% of their value over the last 52 weeks. Boot Barn Holdings, Inc. (NYSE:BOOT) has a market capitalization of $2.74 billion.
SouthernSun Small Cap Strategy made the following comment about Boot Barn Holdings, Inc. (NYSE:BOOT) in its second quarter 2023 investor letter:
“We added Boot Barn Holdings, Inc. (NYSE:BOOT) to the Small Cap portfolio in the second quarter. BOOT is the largest retail chain devoted to western and work-related footwear, apparel, and accessories in the U.S. They believe that they have a $40 billion addressable market, and they focus their marketing and sales effort on four customer segments: work, western, country, and fashion (the smallest segment). The majority of their sales are for work-related products, which we believe will hold up relatively well even through a downturn. With 356 stores in 41 states, they are more than three times the size of their next largest competitor (in terms of store count), and because of their scale, we believe Boot Barn can offer competitive pricing and a very broad selection with good availability for customers – so in terms of niche dominance, BOOT is the biggest player in a fragmented industry with strong and growing margins and significant brand loyalty. A notable part of our investment thesis is confidence in their ability to grow. We see a path from 356 stores (currently) to 900 stores over the next 7-10 years by growing their store count more than 10% annually – a level this team has shown the capacity to achieve over a number of years. As you may remember, we owned Tractor Supply Company (TSCO) for many years and see a lot of similarities in these businesses and their footprint/target customers. TSCO has more than 2000 stores and is one data point that suggests BOOT has a long runway for growth.
As you know, a company’s financial flexibility is also very important to us; BOOT has a solid balance sheet and currently has more cash than long-term debt. We believe they can fund the opening of new stores with internally-generated cash flow and project that the investment in each new store should pay back in less than two years. Over the past six months, our team has met with the CEO and the rest of the management team multiple times, and we have learned a lot about their customers, real estate, pricing and retail strategies, competition, and corporate culture. We have gained confidence that their leadership is focused on the right initiatives: 1) expanding their store base; 2) driving same store sales growth; 3) continuing their omni-channel leadership; and 4) building out their higher margin exclusive brands. They have taken their exclusive brands from 16% in 2019 to 34% of overall sales in the most recent trailing twelve months with more room for growth over time. In short, we are confident that Boot Barn is a good fit for our portfolio and has a long runway for growing shareholder value.”
Boot Barn Holdings, Inc. (NYSE:BOOT) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 34 hedge fund portfolios held Boot Barn Holdings, Inc. (NYSE:BOOT) at the end of first quarter which was 27 in the previous quarter.
We discussed Boot Barn Holdings, Inc. (NYSE:BOOT) in another article and shared JPMorgan’s top performing stock picks for 2023. In addition, please check out our hedge fund investor letters Q2 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.
