SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” first quarter 2024 investor letter. A copy of the letter can be downloaded here. In the first quarter, the strategy increased 7.01% on a gross basis (6.83% net) compared to a 5.18% return for the Russell 2000 Index and 2.90% for the Russell 2000 Value Index. The strategy returned 16.98% on a gross basis (16.13% net) for the trailing twelve months compared to 19.71% and 18.75% 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 2024.
SouthernSun Small Cap Strategy featured stocks like Dycom Industries, Inc. (NYSE:DY) in the first quarter 2024 investor letter. Headquartered in Palm Beach Gardens, Florida, Dycom Industries, Inc. (NYSE:DY) provides contracting services to the telecommunications infrastructure and utility industries. On May 1, 2024, Dycom Industries, Inc. (NYSE:DY) stock closed at $139.50 per share. One-month return of Dycom Industries, Inc. (NYSE:DY) was 0.14%, and its shares gained 52.99% of their value over the last 52 weeks. Dycom Industries, Inc. (NYSE:DY) has a market capitalization of $4.099 billion.
SouthernSun Small Cap Strategy stated the following regarding Dycom Industries, Inc. (NYSE:DY) in its first quarter 2024 investor letter:
“Dycom Industries, Inc. (NYSE:DY), a leading provider of engineering and construction services to the telecommunications and utility industries, was the top contributor in the Small Cap strategy in the first quarter. Although results were slightly below management expectations due to severe winter weather, two large customers (AT&T and Frontier) returned to sequential growth, and management expects this trend to continue in 2024. More broadly, the demand for fiber construction over the next few years continues to look bright as both private and public capital enters the industry. Private equity continues to make investment in fiber assets via various channels, and the open access business model has emerged as a viable alternative to carrier owned networks. Some large carriers have even indicated they are willing to partner to build fiber networks, e.g., AT&T’s joint venture with Blackrock in 2022, and recent rumors of a T-Mobile joint venture with Lumos Networks. Beyond private investment, there is significant public funding committed to fiber through the ARPA, RDOF, and BEAD programs. Although the $40 billion BEAD program has progressed slower than initially expected, management now expects deployments to begin in 2025. We expect this program to be a multi-year tailwind to the industry. Profitability at DY has increased over the last few quarters, and we believe there is further room for margin expansion by leveraging SG&A expenses as revenue grows. Management continues to operate the company well and allocate capital effectively while maintaining financial flexibility (Net Debt/Adj. EBITDA of 1.4x, the lowest level in over 10 years). As we have stated in past commentary, with only ~43% of the homes in the U.S. passed with fiber, we continue to believe there is a long runway for fiber penetration, and DY is well-positioned to engineer, construct and maintain these fiber networks.”
A team of construction workers managing a complex engineering project.
Dycom Industries, Inc. (NYSE:DY) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database at the end of the fourth quarter, Dycom Industries, Inc. (NYSE:DY) was held by 24 hedge fund portfolios, compared to 19 in the previous quarter.
We previously discussed Dycom Industries, Inc. (NYSE:DY) in another article, where we shared SouthernSun Small Cap Strategy’s views on the company. In addition, please check out our hedge fund investor letters Q1 2024 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.
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