Elevated Freight and Material Costs Affected Dorman Products (DORM)
SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” second quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, the strategy returned 7.85% on a gross basis (7.65% net) compared to a 5.21% return for the Russell 2000 Index and 3.18% for the Russell 2000 Value Index. The strategy returned 24.28% on a gross basis (23.36% net) over the trailing twelve months compared to 12.31% and 6.01%, respectively, for the indexes. In addition, please check the top 5 holdings of the strategy to know its best pick in 2023.
SouthernSun Small Cap Strategy highlighted stocks like Dorman Products, Inc. (NASDAQ:DORM) in the second quarter 2023 investor letter. Headquartered in Colmar, Pennsylvania, Dorman Products, Inc. (NASDAQ:DORM) is an automotive parts supplier. On August 1, 2023, Dorman Products, Inc. (NASDAQ:DORM) stock closed at $86.71 per share. One-month return of Dorman Products, Inc. (NASDAQ:DORM) was 13.66%, and its shares lost 12.78% of their value over the last 52 weeks. Dorman Products, Inc. (NASDAQ:DORM) has a market capitalization of $2.729 billion.
SouthernSun Small Cap Strategy made the following comment about Dorman Products, Inc. (NASDAQ:DORM) in its second quarter 2023 investor letter:
"Dorman Products, Inc. (NASDAQ:DORM) was one of the top detractors in the Small Cap strategy in the second quarter. Dorman Products is a leading designer and manufacturer of automotive and heavy-duty aftermarket replacement parts. Dorman implements a robust research and development process to identify parts that are prone to fail and only available from original manufacturers to design better performing replacement solutions. The company has been facing gross margin pressure for several quarters now due to elevated freight and material costs. In addition, costs associated with accounts receivable factoring have increased in line with interest rates, resulting in elevated SG&A expenses. These pressures contributed to disappointing first quarter results, which weighed on the stock price. However, freight costs have decreased significantly over the last year, and management believes that gross margins will improve as lower inventory costs work their way through the income statement. Management is focused on paying down debt related to the acquisition of SuperATV last year to mitigate higher interest expense. As the total number and average age of vehicles in operation continue to increase, we believe the long-term demand trends for after-market auto parts remain attractive. In addition, the acquisition of SuperATV allows Dorman to diversify its end market exposure and leverage its new product development process in an attractive market adjacent to their core market."
Dorman Products, Inc. (NASDAQ:DORM) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 13 hedge fund portfolios held Dorman Products, Inc. (NASDAQ:DORM) at the end of first quarter which was 14 in the previous quarter.
We discussed Dorman Products, Inc. (NASDAQ:DORM) in another article and shared Third Avenue Management's views on the company in Q2 2022. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
Suggested Articles:
Disclosure: None. This article is originally published at Insider Monkey.
