Investment management company Cove Street Capital recently released its “Small Cap Value Fund” third quarter 2023 investor letter. A copy of the same can be downloaded here. During the calendar third quarter of 2023, financial markets were chaotic, causing CSC shareholders to lose some gains from the first half, both relatively and absolutely. In the third quarter, the fund delivered -7.48% compared to a -5.13% return for the Russell 2000 Index and a -2.96% return for the Russell 2000 Value Index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Cove Street Small Cap Value Fund highlighted stocks like American Software, Inc. (NASDAQ:AMSWA) in the third quarter 2023 investor letter. Headquartered in Atlanta, Georgia, American Software, Inc. (NASDAQ:AMSWA) develops and markets supply chain management and enterprise software solutions. On October 9, 2023, American Software, Inc. (NASDAQ:AMSWA) stock closed at $10.90 per share. One-month return of American Software, Inc. (NASDAQ:AMSWA) was -2.05%, and its shares lost 27.33% of their value over the last 52 weeks. American Software, Inc. (NASDAQ:AMSWA) has a market capitalization of $375.83 million.
Cove Street Small Cap Value Fund made the following comment about American Software, Inc. (NASDAQ:AMSWA) in its Q3 2023 investor letter:
“We initiated a position in American Software, Inc. (NASDAQ:AMSWA), the owner of supply chain planning software Logility. This software enables digital supply chain optimization with the most popular use case in product demand planning and primarily services consumer goods, food and beverage, and retail customers who are managing business-to-consumer (B2C) supply chains. This business generates lots of cash, boasts high returns on invested capital (ROIC), and is very sticky – once you train your team on the software and have all your relevant inputs embedded in the program, you are unlikely to switch.
This business trades at a discount to its peer set for reasons that stem from the founder’s controlling B-class shares in the company. He is 88 years old. The company has been overly conservative with its balance sheet, under-investing in growth and dragging its feet on acquisitions. Demand for supply chain software has surged following Covid, and yet this company continues to pay a dividend. Furthermore, the niche that Logility services is going through a goods recession. They are seeing sales cycles elongate while they are trying to move customers to the cloud. The investment community has punished the stock so far in 2023.
We see a catalyst to resolving these issues as the company publicly stated that they are conducting a process to convert the B shares of Founder Jim Edenfield into A shares. We have engaged with management on how to conduct the process and believe the resolution of this share conversion will eliminate a large overhang on the stock and enable a much more efficient use of capital going forward. We are already seeing signs of progress with a recent acquisition, a divestiture of a non-core business, and the adoption of a 10b5-1 trading plan for a share repurchase program. This company ultimately operates in a dynamic and fast growing industry that is consolidating. With the removal of Edenfield’s control, we see a sale to a larger player as a potential outcome.”
An enterprise user sending a text message from their smartphone, displaying the company’s messaging and SMS services. Editorial photo for a financial news article. 8k. –ar 16:9
American Software, Inc. (NASDAQ:AMSWA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 14 hedge fund portfolios held American Software, Inc. (NASDAQ:AMSWA) at the end of the second quarter, which was 13 in the previous quarter. In addition, please check out our hedge fund investor letters Q3 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.
