River Road Asset Management, an investment management company released its “River Road Small-Mid Cap Value Fund” Q4 2024 investor letter. A copy of the letter can be downloaded here. In the fourth quarter, AMG River Road Small Cap Value Fund (Class N) returned 3.67% compared to -0.26% returns for the Russell 2500TM Value Index. For the year 2024, the fund returned 12.46% compared to the Index return of 10.98%. For more information on the fund’s best picks in 2024, please check its top five holdings.
In its fourth quarter 2024 investor letter, River Road Small-Mid Cap Value Fund emphasized stocks such as Lithia Motors, Inc. (NYSE:LAD). Lithia Motors, Inc. (NYSE:LAD) is a global automotive retailer that operates through Vehicle Operations and Financing Operations segments. The one-month return Lithia Motors, Inc. (NYSE:LAD) was -6.35%, and its shares gained 4.19% of their value over the last 52 weeks. On April 1, 2025, Lithia Motors, Inc. (NYSE:LAD) stock closed at $296.83 per share with a market capitalization of $7.798 billion.
River Road Small-Mid Cap Value Fund stated the following regarding Lithia Motors, Inc. (NYSE:LAD) in its Q4 2024 investor letter:
“Another top contributor during the quarter was Lithia Motors, Inc. (NYSE:LAD) one of the largest global automotive retailers operating in North America and the United Kingdom. In late June, the auto industry was impacted by a cyberattack on CDK Global’s dealership management system, which runs all back-office functions at Lithia as well as over 85% of all franchised dealers in the United States. In its Q2 2024 earnings release, LAD reported a -6.4% decline in same-store sales, driven primarily by a -4.7% decline in new vehicle units as LAD was not able to process sale transactions late in the quarter due to the CDK outage. Despite lower same-store sales, LAD outperformed expectations as its cost reduction initiatives and a shift in capital allocation resulted in sequential margin improvement and a lower share count. The company achieved its $150MM in annualized cost savings target ahead of schedule and now expects to double these savings by the end of 2024 through further inventory optimization and reductions. This will result in the all-important SG&A as a percentage gross profit declining to the mid-60s range and in line with LAD’s long-term target. Acquisitions have added $27B in annualized revenues since 2020, ahead of LAD’s goal of adding $25B in acquired revenues by 2025. Given the current high private market multiples for auto dealerships, LAD’s management has shifted its capital allocation toward share repurchases, buying back 2.9% of the company in Q2. With low net leverage of 2.3x and year-to-date free cash flow of $740MM, we expect management to continue repurchasing shares aggressively. During the quarter, we added to the position prior to its Q2 results.”
A customer in a store, examining a new vehicle on the showroom floor.
Lithia Motors, Inc. (NYSE:LAD) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 45 hedge fund portfolios held Lithia Motors, Inc. (NYSE:LAD) at the end of the fourth quarter compared to 43 in the third quarter. While we acknowledge the potential of Lithia Motors, Inc. (NYSE:LAD) 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 as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
We covered Lithia Motors, Inc. (NYSE:LAD) in another article, where we shared the list of most promising car stocks according to hedge funds. In addition, please check out our hedge fund investor letters Q4 2024 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.