SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun SMID Cap Strategy” first quarter 2023 investor letter. A copy of the same can be downloaded here. In the first quarter, the strategy returned 5.47% on a gross basis compared to a 3.39% return for the Russell 2500 Index and 1.40% for the Russell 2500 Value Index. Since its inception, the strategy has continued to outperform both indexes on an annualized gross and net basis. The strategy returned 1.52% on a gross basis over the trailing twelve months compared to -10.39% and -10.53% returns for indexes respectively. In addition, please check the top 5 holdings of the strategy to know its best pick in 2023.
SouthernSun SMID Cap Strategy highlighted stocks like Watsco, Inc. (NYSE:WSO) in the first quarter 2023 investor letter. Headquartered in Miami, Florida, Watsco, Inc. (NYSE:WSO) distributes air conditioning, heating, refrigeration equipment, and related parts and supplies. On May 5, 2023, Watsco, Inc. (NYSE:WSO) stock closed at $336.71 per share. One-month return of Watsco, Inc. (NYSE:WSO) was 9.76%, and its shares gained 32.16% of their value over the last 52 weeks. Watsco, Inc. (NYSE:WSO) has a market capitalization of $13.095 billion.
SouthernSun SMID Cap Strategy made the following comment about Watsco, Inc. (NYSE:WSO) in its Q1 2023 investor letter:
“Watsco, Inc. (NYSE:WSO), the largest distributor of air conditioning, heating and refrigeration products in North America, was the top contributor this quarter, delivering record sales (+5%) and adjusted EPS (+16%) in the fourth quarter and capping off the second consecutive year of strong growth. Although the pace of growth will likely moderate in 2023 as work from home and government stimulus tailwinds subside, roughly 80% of the business is driven by repair and replace and should be fairly stable whatever the economic environment. Management continues to focus on the long term, investing in proprietary technology solutions for contractors despite the near-term burden to profitability. We believe the company’s long-term incentive plan, which grants restricted shares that only vest toward the end of an employee’s career (usually age 62 or older), aligns management’s interests with long-term shareholders and results in decisions like the tech investments mentioned above. The business remains conservatively capitalized with a net cash financial position, which should enable Watsco to pursue almost any-sized acquisition in the fragmented North American HVAC distribution market. Overall, we continue to believe Watsco has a long runway for growth, an owner-oriented culture and competitive advantages that increase with scale.”
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Watsco, Inc. (NYSE:WSO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 32 hedge fund portfolios held Watsco, Inc. (NYSE:WSO) at the end of the fourth quarter which was 26 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.
