Longleaf Partners, managed by Southeastern Asset Management, released its “Small-Cap Fund” second-quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund delivered -4.24% in the second quarter compared to a 3.22% return for the Russell 3000 Index and -3.28% for the Russell 2000 Index. It was a difficult quarter for small-cap stocks. Since inception, the fund’s goal has been to provide long-term, double-digit absolute returns. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Longleaf Partners Small-Cap Fund highlighted stocks like PotlatchDeltic Corporation (NASDAQ:PCH) in the second quarter 2024 investor letter. PotlatchDeltic Corporation (NASDAQ:PCH) is a Real Estate Investment Trust (REIT) that owns nearly 2.2 million acres of timberlands. The one-month return of PotlatchDeltic Corporation (NASDAQ:PCH) was 20.43%, and its shares lost 11.64% of their value over the last 52 weeks. On July 30, 2024, PotlatchDeltic Corporation (NASDAQ:PCH) stock closed at $45.16 per share with a market capitalization of $3.563 billion.
Longleaf Partners Small-Cap Fund stated the following regarding PotlatchDeltic Corporation (NASDAQ:PCH) in its Q2 2024 investor letter:
“PotlatchDeltic Corporation (NASDAQ:PCH) – Timberland and mill company PotlatchDeltic was a detractor after we initiated a position in the first quarter. We have owned this company in various forms over the years, including Potlatch in the late 2000s/early 2010s, Deltic twice before and post-merger PotlatchDeltic in the late 2010s/early 2020s. We have the opportunity to invest again because the stock market is overly focused on the challenging near-term housing market. This most impacts the lumber mill segment, which is less than 20% of our appraisal. The company’s mills are currently operating at break-even, which is commendable in such a tough environment, demonstrating cost efficiency relative to peers. Long-term value will be driven by the vast majority of the value that comes from high-quality timberlands in the southern US and Idaho. While log prices are depressed currently, timberland has a long history of growing value and alternative use development that is not currently recognized in the stock price. For example, the growing solar market is driving developers to pay $10,000 to $15,000 per acre for land we previously valued at $1,500 to $2,000 per acre. Additionally, PotlatchDeltic has a strong management team that we know well, with a proven history and the ability to buy back stock at a significant discount to the private market net asset value. Meanwhile, we benefit from a solid, tax-efficient dividend.”
Aerial view of a timberland with lush green trees and sunlight filtering through the branches.
PotlatchDeltic Corporation (NASDAQ:PCH) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held PotlatchDeltic Corporation (NASDAQ:PCH) at the end of the first quarter which was 12 in the previous quarter. PotlatchDeltic Corporation (NASDAQ:PCH) reported adjusted EBITDA of 30 million in Q1 2024 compared to $41 million in Q4 2023. While we acknowledge the potential of PotlatchDeltic Corporation (NASDAQ:PCH) 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.
In another article, we discussed PotlatchDeltic Corporation (NASDAQ:PCH) and shared the list of best land and timber stocks to invest in. In addition, please check out our hedge fund investor letters Q2 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.
