Palm Valley Capital Management, an investment management firm, released “Palm Valley Capital Fund” second quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, Palm Valley Capital Fund returned 1.62% compared to a 3.38% rise for the S&P SmallCap 600 Index and a 5.60% return for the Morningstar Small Cap Index. The fund’s securities returned 4.78% before fees and the impact of cash during the quarter. Also, the fund ended the period with 82% held in cash equivalents. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Palm Valley Capital Fund highlighted stocks like Advance Auto Parts, Inc. (NYSE:AAP) in the second quarter 2023 investor letter. Based in Raleigh, North Carolina, Advance Auto Parts, Inc. (NYSE:AAP) is an automotive replacement parts and accessories provider. On July 5, 2023, Advance Auto Parts, Inc. (NYSE:AAP) stock closed at $71.16 per share. One-month return of Advance Auto Parts, Inc. (NYSE:AAP) was 9.92%, and its shares lost 61.32% of their value over the last 52 weeks. Advance Auto Parts, Inc. (NYSE:AAP)has a market capitalization of $ 4.23 billion.
Palm Valley Capital Fund made the following comment about Advance Auto Parts, Inc. (NYSE:AAP) in its second quarter 2023 investor letter:
“We acquired small stakes in two new names during the quarter: Advance Auto Parts, Inc. (NYSE:AAP) and TrueBlue (ticker: TBI). Advance Auto Parts is an automotive aftermarket parts provider serving professional installers and do-it-yourself customers. Palm Valley briefly owned the stock during the 2020 lockdowns, when the shares quickly reached our valuation. Advance has almost 5,000 U.S. locations. Margins for the business have been inferior to those of O’Reilly and AutoZone, two leading competitors. This is due both to customer mix and operating efficiency.
The shares of Advance plummeted from a high of $230 reached in January 2022 to the $60’s in June 2023. Profitability is being negatively impacted by pricing decisions designed to bolster market share in the professional sales channel. As a result, the firm reduced earnings guidance and its dividend. Auto parts retailers have historically been recession-resistant and are benefiting from the expanding average age of vehicles. While there remain risks, such as growth in electric vehicles that require fewer parts, we believe Advance’s stock is cheap based on normalized earnings. Furthermore, we expect its balance sheet to improve later this year as inventories decline and operating margins rise.”
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Advance Auto Parts, Inc. (NYSE:AAP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 38 hedge fund portfolios held Advance Auto Parts, Inc. (NYSE:AAP) at the end of first quarter 2023 which was 39 in the previous quarter.
We discussed Advance Auto Parts, Inc. (NYSE:AAP) in another article and shared the list of worst-performing S&P 500 stocks in 2023. 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.
