SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” fourth quarter 2023 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the strategy increased 9.65% on a gross basis (9.44% net) compared to a 14.03% return for the Russell 2000 Index and 15.26% for the Russell 2000 Value Index. The strategy returned 13.93% on a gross basis (13.09% net) for the trailing twelve months compared to 16.93% and 14.65% 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 2023.
SouthernSun Small Cap Strategy featured stocks such as Live Oak Bancshares, Inc. (NYSE:LOB) in the fourth quarter 2023 investor letter. Headquartered in Wilmington, North Carolina, Live Oak Bancshares, Inc. (NYSE:LOB) is a bank holding company for Live Oak Banking Company that offers commercial banking products and services. On February 20, 2024, Live Oak Bancshares, Inc. (NYSE:LOB) stock closed at $39.59 per share. One-month return of Live Oak Bancshares, Inc. (NYSE:LOB) was -6.85%, and its shares gained 14.03% of their value over the last 52 weeks. Live Oak Bancshares, Inc. (NYSE:LOB) has a market capitalization of $1.766 billion.
SouthernSun Small Cap Strategy stated the following regarding Live Oak Bancshares, Inc. (NYSE:LOB) in its fourth quarter 2023 investor letter:
“Live Oak Bancshares, Inc. (NYSE:LOB), a technology-enabled, small business lender and the largest originator of loans guaranteed by the Small Business Administration, was the top performer in the Small Cap strategy in the fourth quarter. Live Oak reported strong third quarter results with quarterly loan production of more than $1 billion. Net interest margin of 3.37% was up slightly from second quarter and in-line with management expectations as upward pressure on deposit costs moderated while rates on recent loan originations continued to increase. Credit metrics remain consistent with historical trends and the Unguaranteed Allowance for Credit Losses at the end of the third quarter was 2.32% of Unguaranteed Loans and Leases as compared to the 1.25% median for the industry. Tier 1 Capital to Unguaranteed Loans and Leases ratio was 17.5% at the end of the third quarter. Live Oak’s business model has continued to prove resilient through recent turmoil in the banking sector. During the fourth quarter, as the Federal Reserve indicated that it was likely done raising its benchmark interest rate and may even start cutting rates in 2024, Live Oak’s stock price increased on expectations of easier financing conditions for small businesses. While we would expect Live Oak to perform well if credit conditions continue to ease, we are confident in management’s ability to grow the balance sheet in a prudent manner regardless of the macro environment. Live Oak has a unique cost structure with no physical bank branches (other than its corporate headquarters), and with the recent investment in back office and technology support already baked into the expense base, we believe the bank is poised to grow earnings as it continues to grow the loan book. We also believe competitors may have shied away from small business lending recently as they face both challenges growing deposits and increasing costs of deposits. Live Oak is in an enviable position to leverage its unique model while pursuing its three tenets of soundness, profitability and growth to create long-term value for shareholders.”
A line of customers in a bank’s lobby, utilizing services provided by the bank.
Live Oak Bancshares, Inc. (NYSE:LOB) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, Live Oak Bancshares, Inc. (NYSE:LOB) was held by 8 hedge fund portfolios, down from 10 in the previous quarter, according to our database.
We discussed Live Oak Bancshares, Inc. (NYSE:LOB) in another article and shared Diamond Hill Small Cap Fund’s views on the company. In addition, please check out our hedge fund investor letters Q4 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.
