SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” first quarter 2024 investor letter. A copy of the letter can be downloaded here. In the first quarter, the strategy increased 7.01% on a gross basis (6.83% net) compared to a 5.18% return for the Russell 2000 Index and 2.90% for the Russell 2000 Value Index. The strategy returned 16.98% on a gross basis (16.13% net) for the trailing twelve months compared to 19.71% and 18.75% respectively for the indexes over the same period. In addition, please check the top 5 holdings of the strategy to know its best pick in 2024.
SouthernSun Small Cap Strategy featured stocks like MGP Ingredients, Inc. (NASDAQ:MGPI) in the first quarter 2024 investor letter. Headquartered in Atchison, Kansas, MGP Ingredients, Inc. (NASDAQ:MGPI) produces and distributes distilled spirits, branded spirits, and food ingredients. On May 1, 2024, MGP Ingredients, Inc. (NASDAQ:MGPI) stock closed at $78.25 per share. One-month return of MGP Ingredients, Inc. (NASDAQ:MGPI) was -5.44%, and its shares lost 22.19% of their value over the last 52 weeks. MGP Ingredients, Inc. (NASDAQ:MGPI) has a market capitalization of $1.722 billion.
SouthernSun Small Cap Strategy stated the following regarding MGP Ingredients, Inc. (NASDAQ:MGPI) in its first quarter 2024 investor letter:
“MGP Ingredients, Inc. (NASDAQ:MGPI), a leading provider of distilled spirits, branded spirits and food ingredient solutions, was one of the top detractors in the Small Cap strategy in the first quarter. During the quarter, MGPI reported strong fourth quarter results including gross margin expansion in all three of its business segments, and sales of brown goods were up 26% in 2023. Management noted that 2023 new distillate sales outpaced aged distillate sales for the first time since 2020, and they expect this trend to continue. New distillate carries a lower gross margin profile than aged, but customers contract for new distillate volumes for several years as opposed to aged distillate, which is primarily sold in the spot market. Management believes the shift to more new distillate sales will provide greater visibility into cash flows and lower the risk profile of the distilling solutions segment. However, the market seemed to react negatively to this news based on the slightly lower gross margin expectations. We recently visited with Brandon Gall, CFO, and Chief Commercial Officer, Amel Pasagic, at the company’s Lux Row Distillery in Bardstown, KY, to discuss MGPI’s path to continued margin expansion for the overall business. We believe the company has ample opportunity to grow both the top line and margins, as the team continues to build out the portfolio of premium, super premium and ultra premium products in its branded spirits segment. Additionally, while the ingredient solutions segment is a smaller piece of the overall business, we believe the company is poised to grow sales of specialty wheat proteins and starches as it ramps up production at its recently completed texturized protein production facility in Atchison, KS. We expect 2024 to be another year of investment as the company builds new warehouses to support growth in both the distilling solutions and branded spirits segments. These investments are supported by strong cash generated by the business, and we believe they will produce even stronger cash flow in 2025 and beyond.”
A close-up of an iconic bottle of branded spirit produced by the distillery.
MGP Ingredients, Inc. (NASDAQ:MGPI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database at the end of the fourth quarter, MGP Ingredients, Inc. (NASDAQ:MGPI) was held by 21 hedge fund portfolios, compared to 19 in the previous quarter.
We previously discussed MGP Ingredients, Inc. (NASDAQ:MGPI) in another article, where we shared the list of highest quality rice brands in 2024. In addition, please check out our hedge fund investor letters Q1 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.
