Merion Road Capital, an investment advisor, released its second-quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, Merion Road Small Cap Fund returned 5.2% compared to a 5.3% return for the Russell 2000 Index and 2.1% for the Barclay Hedge Fund Index. Furthermore, MRCM Long Only Large Cap returned 13.4% compared to an 8.7% return for the S&P 500 Index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Merion Road Capital highlighted stocks like Distribution Solutions Group, Inc. (NASDAQ:DSGR) in the second quarter 2023 investor letter. Headquartered in Chicago, Illinois, Distribution Solutions Group, Inc. (NASDAQ:DSGR) is a specialty distribution company. On July 18, 2023, Distribution Solutions Group, Inc. (NASDAQ:DSGR) stock closed at $53.50 per share. One-month return of Distribution Solutions Group, Inc. (NASDAQ:DSGR) was 1.06%, and its shares gained 5.34% of their value over the last 52 weeks. Distribution Solutions Group, Inc. (NASDAQ:DSGR) has a market capitalization of $1.249 billion.
Merion Road Capital made the following comment about Distribution Solutions Group, Inc. (NASDAQ:DSGR) in its second quarter 2023 investor letter:
“During the quarter I built a position in Distribution Solutions Group, Inc. (NASDAQ:DSGR) ahead of their rights offering. In addition to exercising our basic subscription rights I put in for over-subscription and was pleasantly surprised to receive additional shares. DSGR is a specialty distribution platform formed when Lawson Products combined with two privately held entities, Gexpro Services and TestEquity in early 2022. Lawson is a North American industrial MRO distributor serving 80k customers across a range of industries including manufacturing, automotive, government/military, and construction. Lawson maintains cabinets at the customer location that they frequently restock with a myriad of low-ASP products. This allows their customer to reduce downtime and streamline product management. Gexpro is a global specialty distributor of highly specified products serving manufacturers in various markets including renewables, power generation, aerospace/defense, and consumer/industrial. Lastly TestEquity is a global distributor of electronic production supplies and test and measurement solutions into aerospace/defense, industrial electronics, semiconductor production, and wireless communication. In aggregate these can be described as low churn, highly recurring business models.
While DSGR is organized as a platform company with the three entities retaining prior leadership, they have a strong a focus on leveraging the benefits of the three entities. This includes things like corporate synergies in IT and insurance, leadership incentives for cross-selling, and enhanced go to market strategies. Since they closed the merger, DSGR has grown revenue organically at a mid-teens rate and consolidated EBITDA margins have expanded nicely. Importantly, DSGR has a fully built-out M&A team with a disciplined investment framework around risk and returns and a developed pipeline. Management is fully aligned with shareholders as they own 10% of the company, while the former owner of Gexpro and TestEquity, Luther King Capital Management (“LKCM”) owns another 65%. LKCM has significant experience investing in distribution companies and brings financial expertise to the table…” (Click here to read the full text)
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Distribution Solutions Group, Inc. (NASDAQ:DSGR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 7 hedge fund portfolios held Distribution Solutions Group, Inc. (NASDAQ:DSGR) at the end of first quarter which was 8 in the previous quarter. 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.
