Investment management company Cove Street Capital recently released its “Small Cap Value Fund” second quarter 2023 investor letter. A copy of the same can be downloaded here. On a relative and absolute basis, the fund continued its solid upward movement in the second quarter and returned 14.8% compared to 5.21% for the Russell 2000 Index and 3.18% for the Russell 2000 Value Index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Cove Street Capital highlighted stocks like Ducommun Incorporated (NYSE:DCO) in the second quarter 2023 investor letter. Headquartered in Santa Ana, California, Ducommun Incorporated (NYSE:DCO) provides engineering and manufacturing services to the aerospace, defense, industrial, and medical industries. On July 11, 2023, Ducommun Incorporated (NYSE:DCO) stock closed at $46.62 per share. One-month return of Ducommun Incorporated (NYSE:DCO) was 4.41%, and its shares gained 10.79% of their value over the last 52 weeks. Ducommun Incorporated (NYSE:DCO) has a market capitalization of $678.065 million.
Cove Street Capital made the following comment about Ducommun Incorporated (NYSE:DCO) in its second quarter 2023 investor letter:
“In a hugely disappointing move, the management of Ducommun Incorporated (NYSE:DCO) priced a secondary offering of stock at an approximately 17% discount from where it was trading and worse, hired Goldman Sachs to execute it. Goldman predictably did zero work to understand the shareholder base and likely sold it to its largest commission paying hedge fund customers. This was an egregiously dumb corporate finance move that had the dual role of antagonizing its existing shareholder base. Our guess is simply CEO ego, and prior relationships with Goldman, which has near zero “feel” for doing work in the small cap space. They seriously gave this as a reason, “We wanted more liquidity in our stock.”(To encourage more day trading?) We hope they are reading this. Our value for the company predictably dropped 17%, but remains materially above current levels. Good investment management skills include not trading on “at the moment” emotional biases, which we can assume you can infer here, so we did not sell out of anger and disappointment. But clearly DCO moves from what we thought had “Buffett” compounding ability to a “Graham” – sell at our price target bucket. There is a solid tailwind in both commercial aerospace and defense here, and it is disappointing to see management trying to snatch defeat from the jaws of victory.”
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Ducommun Incorporated (NYSE:DCO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 13 hedge fund portfolios held Ducommun Incorporated (NYSE:DCO) at the end of first quarter which was 13 in the previous quarter.
We discussed Ducommun Incorporated (NYSE:DCO) in another article and shared the list of best small-cap defense stocks to buy. 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.
