Heartland Advisors, an investment management company, released its “Heartland Value Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. The fund was down 3.21% during the quarter compared to the Russell 2000 Value Index’s 3.64% loss. Stock selection was mixed during the period. In addition, you can check the top 5 holdings of the fund to know its best picks in 2024.
Heartland Value Fund highlighted stocks like Hexcel Corporation (NYSE:HXL), in the second quarter 2024 investor letter. Hexcel Corporation (NYSE:HXL) manufactures carbon fibers, structural reinforcements, honeycomb structures, resins, and composite materials and parts for commercial aerospace, space and defense, and industrial applications. The one-month return of Hexcel Corporation (NYSE:HXL) was 4.86%, and its shares lost 13.55% of their value over the last 52 weeks. On July 12, 2024, Hexcel Corporation (NYSE:HXL) stock closed at $66.72 per share with a market capitalization of $5.545 billion.
Heartland Value Fund stated the following regarding Hexcel Corporation (NYSE:HXL) in its Q2 2024 investor letter:
“While opportunities aren’t necessarily plentiful, we try to take advantage of them when they arise. A good example is Hexcel Corporation (NYSE:HXL), a new position added during the quarter. We didn’t have any holdings in the aerospace & defense portion of the Industrials sector entering the period. Admittedly, this is not a huge sub-industry group; in fact, it only makes up a little more than 1% of the Russell 2000 Value Index. But we are mindful that deviating from our benchmark’s weightings detracts from our stock picking and potentially adds risk and volatility to our Strategy.
The good news for us was the shares took a hit in early April, after the market reacted negatively to the announced appointment of Tom Gentile as Chief Executive Officer. Gentile formerly served as CEO of Spirit AeroSystems, a major aerospace supplier that ran into production challenges and quality issues on parts produced for Boeing. Investors clearly did not like the hire, but we felt the reaction was excessive. Gentile inherited bad contracts at Spirit, and the HXL Board of Directors has significant experience in the aerospace & defense space, so we feel confident they understand the implications of their decision.
Hexcel seems to be in the 3rd inning of a long-term recovery. The company is diversifying into new defense production, where its composites are critical for stealth platforms. The sweet spot for the business, however, is in wide-body aircrafts (such as the Airbus A350 or Boeing 787) that help airlines lower their unit costs. This segment has yet to bounce back from the global pandemic, so there is still runway for HXL’s rebound. Yet the shares are attractively priced relative to cash flow, trading below prior aerospace M&A multiples. Management seems to agree, as there has been a healthy dose of insider buying activity lately, including on the part of its outgoing CEO, who recently purchased nearly $1 million in company stock.”
An engineer inspecting the assembly of an aircraft wing, intricately designed components in the background.
Hexcel Corporation (NYSE:HXL) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held Hexcel Corporation (NYSE:HXL) at the end of the first quarter which was 27 in the previous quarter. The first quarter sales of Hexcel Corporation (NYSE:HXL) were more than $472 million, representing a 3% increase year over year. While we acknowledge the potential of Hexcel Corporation (NYSE:HXL) 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 discussed Hexcel Corporation (NYSE:HXL) and shared TimesSquare Capital U.S. Mid Cap Growth Strategy’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q2 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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