SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” fourth-quarter 2025 investor letter. A copy of the letter can be downloaded here. During the quarter, the Small Cap Composite returned -2.45% on a gross basis (-2.64% net) compared to 2.19% for the Russell 2000 Index and 3.26% return for the Russell 2000 Value Index. The Composite returned 6.21% on a gross basis (5.40% net) over the trailing 12 months compared to 12.81% and 12.59% for the indexes, respectively. The letter highlighted the economic lessons learned during the oil price collapse of 2014-15. Initially seen as a positive development for the global economy, the decline in oil prices later revealed underlying weaknesses, leading to broader economic impacts beyond the energy sector. The author compares this to the current situation with artificial intelligence (AI), cautioning that while AI is now a fundamental aspect of economic planning and decision-making, its associated risks must be carefully analyzed. As the market approaches 2026, the investment landscape is shaped by various scenarios, including valuation compression and overcapacity in AI infrastructure, rather than inevitable outcomes. SouthernSun Asset Management maintains a disciplined, humble approach focused on intrinsic value and is optimistic about the future but remains aware of historical lessons. In addition, please check the Strategy’s top five holdings to know its best picks in 2025.
In its fourth-quarter 2025 investor letter, SouthernSun Small Cap Strategy highlighted Darling Ingredients Inc. (NYSE:DAR) as one of its leading contributors. Darling Ingredients Inc. (NYSE:DAR) is a leading company in developing and selling natural ingredients from animal by products and food waste that operates through Feed Ingredients, Food Ingredients, and Fuel Ingredients segments. On February 27, 2026, Darling Ingredients Inc. (NYSE:DAR) stock closed at $53.16 per share. One-month return of Darling Ingredients Inc. (NYSE:DAR) was 12.27%, and its shares gained 54.45% over the past 52 weeks. Darling Ingredients Inc. (NYSE:DAR) has a market capitalization of $8.409 billion.
SouthernSun Small Cap Strategy stated the following regarding Darling Ingredients Inc. (NYSE:DAR) in its fourth quarter 2025 investor letter:
“Darling Ingredients Inc. (NYSE:DAR) was a top contributor in the Small Cap strategy in the fourth quarter. DAR is the largest publicly traded company turning edible by-products and food waste into sustainable products and a leading producer of renewable energy. Darling has faced significant headwinds over the past couple of years, and the stock traded within a fairly tight range of $30-40 over the past twelve months. This downturn is, in our opinion, at or near a bottom. We see several fundamental and regulatory changes supporting our view that top line and bottom-line results will inflect higher in 2026. Recent announcements from Washington and from the company are supportive of our view. The base Food and Feed businesses are providing support for the struggling Fuel business – a natural hedge we have long discussed. In addition, the company’s vertically integrated supply chain and low-cost position have proven resilient in the face of such headwinds. We expect results for 4q25 to be challenged and believe this reality is accounted for in today’s share price. As the cycle turns, the operational improvements made over the past couple of years together with an upgraded asset base will, in our opinion, provide a boost to operating profitability and discretionary cash flow. While frustrated with the performance over the past couple of years, we were pleased to see stabilization in the business and the stock price in recent quarters and believe some meaningful relief is on the horizon.”
Darling Ingredients Inc. (NYSE:DAR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 47 hedge fund portfolios held Darling Ingredients Inc. (NYSE:DAR) at the end of the fourth quarter, compared to 51 in the previous quarter. In Q4 2025, Darling Ingredients Inc. (NYSE:DAR) reported total sales of $1.7 billon compared to $1.4 billion in Q4 2024. While we acknowledge the risk and potential of Darling Ingredients Inc. (NYSE:DAR) 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 Darling Ingredients Inc. (NYSE:DAR) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In another article, we covered Darling Ingredients Inc. (NYSE:DAR) and shared a list of best sustainability stocks to invest in. In addition, please check out our hedge fund investor letters Q4 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.
