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 Dycom Industries, Inc. (NYSE:DY) in the second quarter 2023 investor letter. Headquartered in Palm Beach Gardens, Florida, Dycom Industries, Inc. (NYSE:DY) provides contracting services to the telecommunications infrastructure and utility industries. On August 1, 2023, Dycom Industries, Inc. (NYSE:DY) stock closed at $100.81 per share. One-month return of Dycom Industries, Inc. (NYSE:DY) was -10.15%, and its shares lost 3.68% of their value over the last 52 weeks. Dycom Industries, Inc. (NYSE:DY) has a market capitalization of $2.956 billion.
SouthernSun Small Cap Strategy made the following comment about Dycom Industries, Inc. (NYSE:DY) in its second quarter 2023 investor letter:
“Dycom Industries, Inc. (NYSE:DY), a leading provider of engineering and construction services to the telecommunications and utility industries, was the top contributor in the Small Cap strategy in the second quarter. The company reported 19% top-line growth driven by strong demand from its smaller customers, as well as strong growth from two of its larger customers: Frontier and Lumen. This performance was particularly impressive given revenues from its largest customer (AT&T) were slightly lower year over year. Profitability continued to increase toward more historical levels with EBITDA margins expanding 360bps to 10.9%, contributing to a 78% increase in EBITDA. Although these are solid margins for Dycom, we suspect there may be further room for expansion as Dycom’s customer base widens and industry capacity remains tight. High-speed fiber connection cable only passes by ~43% of the homes in the U.S., so we continue to believe fiber penetration has a long way to go driven by the exponential increase in data consumption. Furthermore, many of the rural and low-income areas that were once uneconomical to pass with fiber are now in play thanks to unprecedented government funding through the ARPA, RDOF, and BEAD programs. In summary, Steve Nielsen’s (CEO since 1999) comments on the most recent earnings call reflect our enthusiasm for DY: “if you look at the next 5 or 10 years in this industry, it’s going to be more exciting than any time certainly in my career and probably ever.”
Photo by Scott Blake on Unsplash
Dycom Industries, Inc. (NYSE:DY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 30 hedge fund portfolios held Dycom Industries, Inc. (NYSE:DY) at the end of first quarter which was 22 in the previous quarter.
We discussed Dycom Industries, Inc. (NYSE:DY) in another article and shared the list of stocks Kettle Hill Capital Management is buying. 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.
