Bernzott Capital Advisors recently released its Q1 2020 Investor Letter, a copy of which you can download below. The fund posted a return of -32.76% (net) for the quarter, outperforming its benchmark, the Russell 2000 Value Index which returned -35.66% in the same quarter. You should check out Bernzott Capital Advisors top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.
In the said letter, Bernzott Capital Advisors highlighted a few stocks and Douglas Dynamics Inc (NYSE:PLOW) is one of them. Douglas Dynamics is a manufacturer and up-fitter of commercial vehicle attachments and equipment. Year-to-date, PLOW stock lost 53.2% and on May 13th it had a closing price of $27.49. Its market cap is of $588.8 million. Here is what Bernzott Capital Advisors said:
“Douglas Dynamics (PLOW): PLOW, a leading manufacturer and upfitter of commercial work truck attachments and equipment, displayed topline strength in 4Q19 with a 6% y/y increase in sales and gross profit of $46.3 million compared to $44.1 million in 2018. Gross margin dropped 1% due to higher variable compensation and higher benefit and health care costs. Adjusted EBITDA was $29.9 million compared to $28.8 million for the same period last year, driven primarily by continued strong momentum in the profitable Work Truck Attachments segment. For the year, PLOW delivered excellent results. Record sales of $572 million and record EPS of $2.42. The results are impressive given below-average snowfall for the season ended March, 2019, and continued long lead times on Class 8 chassis coupled with uneven supply of Class 4 through Class 6 chassis. Cash flow remains very strong with a record amount of cash flow from operations, greatly attributable to inventory management in anticipation of tariff costs and raising prices. End of year liquidity was strong with $36 million in cash and $99 million in borrowing capacity. The dividend was raised for the 12th time in the last 10 years. The stock price, which had reached all-time highs at the end of 2019, suffered due to the domestic economy and disruption in the supply chain of parts manufactured in China. The effect of the domestic economy is impossible to handicap presently, but PLOW has previously dealt successfully with low snowfall, chassis shortage and an uncertain economy before. We believe in the long-term success of this high-quality company and maintained a full position.”
In Q4 2019, the number of bullish hedge fund positions on PLOW stock increased by about 9% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with PLOW’s upside potential.
Disclosure: None. This article is originally published at Insider Monkey.
