Investment management company First Pacific Advisors recently released its “FPA Queens Road Small Cap Value Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund returned -2.62% compared to a -3.64% return for the Russell 2000 Value Index. In the first half of 2024, the fund returned 0.65% versus -0.85% for the index. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
FPA Queens Road Small Cap Value Fund highlighted stocks like Darling Ingredients Inc. (NYSE:DAR), in the second quarter 2024 investor letter. Darling Ingredients Inc. (NYSE:DAR) develops, produces, and sells natural ingredients from edible and inedible bio-nutrients. The one-month return of Darling Ingredients Inc. (NYSE:DAR) was 6.85%, and its shares lost 35.19% of their value over the last 52 weeks. On August 13, 2024, Darling Ingredients Inc. (NYSE:DAR) stock closed at $40.58 per share with a market capitalization of $6.453 billion.
FPA Queens Road Small Cap Value Fund stated the following regarding Darling Ingredients Inc. (NYSE:DAR) in its Q2 2024 investor letter:
“Darling Ingredients Inc. (NYSE:DAR) is the world’s largest rendering operation with about 17% of the global market and a higher share in the core U.S. market. The business is one part industrial where scale and route density are big advantages – they collect unused animal waste from slaughterhouses and butchers, and one part commodity – their plants process this waste into fats, bone meal and ingredients that trade at prices set by the global commodity markets. Finally, DAR’s Diamond Green Diesel joint venture with Valero turns animal fats into green energy – a business that benefits from renewables subsidies and tax credits. The company took on debt to make three large acquisitions in 2022, adding additional complexity as DAR integrates the acquisitions and de-levers. The stock has sold off because of weakness in DAR’s commodity end markets, falling renewable identification number (RIN) prices, and lower earnings and guidance reported for the second and third quarters of 2023. 25 We first purchased Darling shares in 2008 and have watched as CEO Randy Stuewe has grown Darling from a minnow to a global behemoth. As of June 30, 2024, Darling trades at approximately 10x normal earnings and, despite the company’s commodity exposure and organizational complexity, we are comfortable holding a mid-sized position.”
A selection of pet food ingredients being prepared in a kitchen for quality and safety testing.
Darling Ingredients Inc. (NYSE:DAR) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 24 hedge fund portfolios held Darling Ingredients Inc. (NYSE:DAR) at the end of the first quarter which was 34 in the previous quarter. Net sales of Darling Ingredients Inc. (NYSE:DAR) for Q2 2024 were $1.5 billion compared to $1.8 billion for Q2 2023. While we acknowledge the potential of Darling Ingredients Inc. (NYSE:DAR) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Darling Ingredients Inc. (NYSE:DAR) and shared SouthernSun Small Cap Strategy’s views on the company. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.
READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.
Disclosure: None. This article is originally published at Insider Monkey.
