Aristotle Capital Management, an independent/employee-owned investment management organization, published its “Aristotle Capital Management Value Equity Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. For the first quarter of 2022, Aristotle Capital’s Value Equity Composite posted a total return of -7.19% gross of fees (-7.26% net of fees), underperforming the -0.74% return of the Russell 1000 Value Index and the -4.60% return of the S&P 500 Index. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Aristotle Capital Management Value Equity mentioned Oshkosh Corporation (NYSE:OSK) and explained its insights for the company. Founded in 1917, Oshkosh Corporation (NYSE:OSK) is an Oshkosh, Wisconsin-based industrial company with a $6.0 billion market capitalization. Oshkosh Corporation (NYSE:OSK) delivered a -19.02% return since the beginning of the year, while its 12-month returns are down by -30.09%. The stock closed at $91.29 per share on May 25, 2022.
Here is what Aristotle Capital Management Value Equity has to say about Oshkosh Corporation (NYSE:OSK) in its Q1 2022 investor letter:
“Oshkosh is typically a North American market share leader in its respective equipment types and supplies a wide swath of industries and end customers. For instance, it is the global leader in aerial work platforms through its JLG brand. It is also the largest light defense truck supplier to the U.S military, with its Joint Light Tactical Vehicle (JLTV) chosen to replace the Humvee in 2015.
We had previously owned Oshkosh in our Value Equity portfolios for the better part of a decade. As long-time admirers of the company’s quality characteristics, and through our diligent process continuing to closely follow as management creates ways to improve, we have once again found an opportunity to be investors.
High-Quality Business
Some of the quality characteristics we have identified for Oshkosh include:
-Pricing power stemming from its leading market share positions in nearly every business segment, vital nature of its products and industry concentration;
-Diversified product line and customer base, as well as high barriers to entry in many of its businesses, such as fire trucks, aircraft rescue vehicles and defense; and
-Consistent positive FREE cash flow generation, even during the 2008 financial crisis when most of its segments faced the steepest downturn in a generation.
Attractive Valuation
Through market share gains, we expect operating margins and FREE cash flow to be higher on a normalized basis. Thus, we believe Oshkosh shares are offered at a discount to our estimates of the company’s intrinsic value.
Compelling Catalysts
Catalysts we have identified for Oshkosh, which we believe will cause its stock price to appreciate over our three- to five-year investment horizon, include:
-Further innovation and technological improvements, particularly in the electrification of its vehicles, which could drive additional demand;
-Continued rollout of its recently awarded U.S. Postal Service vehicle contract and market share gains for its JLG aerial work platforms;
-Increased international orders for its JLTV military trucks as countries around the world replace aging Humvee fleets. In addition, further development of its aftermarket business can help improve profitability; and
-Strong balance sheet can give management the ability to run a balanced capital allocation strategy that advances organic growth and returns cash to shareholders.”
Photo by Kevin Schmid on Unsplash
Our calculations show that Oshkosh Corporation (NYSE:OSK) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Oshkosh Corporation (NYSE:OSK) was in 28 hedge fund portfolios at the end of the first quarter of 2022, compared to 26 funds in the previous quarter. Oshkosh Corporation (NYSE:OSK) delivered a -13.34% return in the past 3 months.
In December 2021, we also shared another hedge fund’s views on Oshkosh Corporation (NYSE:OSK) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
