SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” first quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter, the strategy returned -11.32% on a gross basis (-11.48% net) compared to a -9.48% return for the Russell 2000 Index and -7.74% for the Russell 2000 Value Index. The strategy returned -12.55% on a gross basis (-13.21% net) for the trailing twelve months compared to -4.01% and -3.12% 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 2025.
In its first-quarter 2025 investor letter, SouthernSun Small Cap Strategy highlighted stocks such as Polaris Inc. (NYSE:PII). Polaris Inc. (NYSE: PII) is a manufacturer of powersports vehicles, operating through three segments: Off-Road, On-Road, and Marine. The one-month return of Polaris Inc. (NYSE:PII) was -16.07%, and its shares lost 60.41% of their value over the last 52 weeks. On April 25, 2025, Polaris Inc. (NYSE:PII) stock closed at $34.36 per share with a market capitalization of $1.968 billion.
SouthernSun Small Cap Strategy stated the following regarding Polaris Inc. (NYSE:PII) in its Q1 2025 investor letter:
“We exited our position in Polaris Inc. (NYSE:PII) in the first quarter. Outsized tariff risk was the key reason for our exit. To put it in perspective, in 2024 Polaris generated $506 million in EBITDA; they currently manufacture approximately $2 billion of product in Mexico with additional products and parts coming from Asia/China. Although we suspect they will work hard to minimize the impacts and move production around, we cannot clearly quantify the impact at this point. Polaris has struggled over the past few years due to slower demand exacerbated by high levels of channel inventory. Consumers have been reluctant to make big-ticket discretionary purchases after the impact that inflation has had on their discretionary income and in this environment of higher interest rates. With the magnitude of PII’s tariff risk, a balance sheet with less flexibility than we would like, and a weak outlook for consumers, we chose to exit the position and allocate cash to new and existing holdings in the portfolio.”
A motorcyclist enjoying the open road on a sunny day.
Polaris Inc. (NYSE:PII) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 26 hedge fund portfolios held Polaris Inc. (NYSE:PII) at the end of the fourth quarter compared to 20 in the third quarter. In the fourth quarter of 2024, Polaris Inc.’s (NYSE:PII) sales declined 23% compared to previous year. Similar to Q3, the primary reason for sales decline was the company’s decision to lower dealer inventory during the second half of the year by reducing product shipments to dealers. While we acknowledge the potential of Polaris Inc. (NYSE:PII) 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 covered Polaris Inc. (NYSE:PII) and shared the list of best boating stocks to buy. In addition, please check out our hedge fund investor letters Q1 2025 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.