SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” first quarter 2023 investor letter. A copy of the same can be downloaded here. In the first quarter, the strategy returned 4.22% on a gross basis compared to a 2.74% return for the Russell 2000 Index and -0.66% for the Russell 2000 Value Index. Since its inception, the strategy has continued to outperform both indexes on an annualized gross and net basis. In addition, please check the top 5 holdings of the strategy to know its best pick in 2023.
SouthernSun Small Cap Strategy highlighted stocks like The Timken Company (NYSE:TKR) in the first quarter 2023 investor letter. Headquartered in North Canton, Ohio, The Timken Company (NYSE:TKR) is a global manufacturer of engineered bearings and power transmission products. On May 3, 2023, The Timken Company (NYSE:TKR) stock closed at $76.66 per share. One-month return of The Timken Company (NYSE:TKR) was 4.03%, and its shares gained 25.94% of their value over the last 52 weeks. The Timken Company (NYSE:TKR) has a market capitalization of $5.567 billion.
SouthernSun Small Cap Strategy made the following comment about The Timken Company (NYSE:TKR) in its Q1 2023 investor letter:
“The Timken Company (NYSE:TKR), a global leader in engineered bearings and industrial motion products, was a top contributor again this quarter, reporting 10% organic sales growth and 56% Adjusted EPS growth in the fourth quarter of 2022 compared to the same period the previous year. The company saw growth across most of its end markets and expects a continuation in 2023 with guidance of mid-single digit growth in sales and Adjusted EPS. A secularly growing renewable energy business has also become TKR’s largest end market. Financial flexibility remains adequate with net debt/EBITDA at 1.9x and significant free cash flow expected in 2023, driven by improved working capital and higher earnings. We continue to believe TKR is a durable, niche-dominant company, run by a rational and owner-oriented management team. We would highlight that the company has increasingly become more diversified and higher margin since it spun off Timken Steel in 2014. Despite this increase in quality, the business still trades at a multiple roughly in line with its post-spin valuation. While the investment meets our return hurdle without multiple expansion, we believe a recognition by the market of this increase in quality provides potential upside.”
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The Timken Company (NYSE:TKR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held The Timken Company (NYSE:TKR) at the end of the fourth quarter which was 26 in the previous quarter.
We discussed The Timken Company (NYSE:TKR) in another article and shared the list of best hardware stocks to buy. In addition, please check out our hedge fund investor letters Q1 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.
