SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” second-quarter 2026 investor letter. A copy of the letter can be downloaded here. The second quarter of 2026 was driven by the AI boom and the Iran War, affecting interest rates, oil, commodities, and consumer sentiment. The riskiest market segments performed robustly in the quarter, primarily driven by technology and industrial firms linked to the AI arms race. Some portfolio companies linked to high-value consumer purchases faced pressure but still aligned with positive earnings and trends. The Small Cap Composite returned +10.79% on a gross basis +10.58% net) in the second quarter versus the Russell 2000®, which returned 21.49%, and the Russell 2000® Value, which returned 17.19%, over the same period. The composite returned 27.10% on a gross basis (26.13% net) versus 40.78% and 43.01% for the indexes. The fund underperformed the index due to the underweight position in speculative growth. In addition, please check the Strategy’s top five holdings to know its best picks in 2026.
In its Q2 2026 investor letter, SouthernSun Small Cap Strategy highlighted Dorman Products, Inc. (NASDAQ:DORM) as a notable contributor. Headquartered in Colmar, Pennsylvania, Dorman Products, Inc. (NASDAQ:DORM) is an aftermarket automotive products supplier. On July 23, 2026, Dorman Products, Inc. (NASDAQ:DORM) closed at $132.35 per share, reflecting a market capitalization of $3.95 billion. Dorman Products, Inc. (NASDAQ:DORM) posted a one-month return of -1.74%, while its shares gained 8.44% over the past 52 weeks.
SouthernSun Small Cap Strategy stated the following regarding Dorman Products, Inc. (NASDAQ:DORM) in its Q2 2026 investor update:
“Dorman Products, Inc. (NASDAQ:DORM) was a top contributor in the Small Cap strategy during the second quarter. For the first quarter ended March 28, 2026, the company reported net sales of $528.8 million, up 4.2% year-over-year, with revenue modestly ahead of consensus expectations. Adjusted diluted EPS of $1.57 was in line with estimates, though down 22% year-over-year, driven primarily by significant margin compression as tariff-related costs peaked during the quarter. Gross margin declined to 36.0% from 40.9% in the prior-year period, reflecting the full impact of tariff headwinds that management estimated at approximately $1.25 per share on an annualized basis. Management reaffirmed full-year 2026 guidance, calling for net sales growth of 7%–9% and adjusted diluted EPS of $8.10–$8.50, citing confidence across all three segments and positive point-of-sale trends that have remained consistently mid-single digit throughout recent quarters. In our opinion, the share price recovery during the quarter reflected investor recognition that the Q1 margin trough was largely a timing phenomenon — tariff costs are expected to abate as the year progresses and operational mitigation initiatives take effect — rather than a structural deterioration in the underlying business. We continue to believe the core Light Duty franchise benefits from a compelling new product pipeline, ongoing OE FIX innovation, and the durable long-term tailwind of an aging vehicle fleet.”
Dorman Products, Inc. (NASDAQ:DORM) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 20 hedge fund portfolios held Dorman Products, Inc. (NASDAQ:DORM) at the end of the first quarter, up from 21 in the previous quarter. In Q1 2026, Dorman Products, Inc. (NASDAQ:DORM) reported consolidated net sales of $529 million, an increase of 4% compared to Q1 2025. While we acknowledge the risk and potential of Dorman Products, Inc. (NASDAQ:DORM) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Dorman Products, Inc. (NASDAQ:DORM) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Dorman Products, Inc. (NASDAQ:DORM) and shared FPA Queens Road Small Cap Value Fund’s views on the company. In addition, please check out our hedge fund investor letters Q2 2026 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.
