What Makes MGP Ingredients (MGPI) an Attractive Investment Opportunity?
SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun SMID Cap Strategy” second quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, the strategy returned 11.26% on a gross basis (11.04% net) compared to a 5.22% return for the Russell 2500 Index and 4.37% for the Russell 2500 Value Index. Since its inception, the strategy has continued to outperform both indexes on an annualized gross and net basis. The strategy returned 27.17% on a gross basis (26.29% net) over the trailing twelve months compared to 13.58% and 10.37% returns for indexes, respectively. In addition, please check the top 5 holdings of the strategy to know its best pick in 2023.
SouthernSun SMID Cap Strategy highlighted stocks like MGP Ingredients, Inc. (NASDAQ:MGPI) in the second quarter 2023 investor letter. Headquartered in Atchison, Kansas, MGP Ingredients, Inc. (NASDAQ:MGPI) is a supplier of distilled spirits, branded spirits, and food ingredients. On August 1, 2023, MGP Ingredients, Inc. (NASDAQ:MGPI) stock closed at $114.19 per share. One-month return of MGP Ingredients, Inc. (NASDAQ:MGPI) was 6.96%, and its shares gained 11.41% of their value over the last 52 weeks. MGP Ingredients, Inc. (NASDAQ:MGPI) has a market capitalization of $2.495 billion.
SouthernSun SMID Cap Strategy made the following comment about MGP Ingredients, Inc. (NASDAQ:MGPI) in its second quarter 2023 investor letter:
"We initiated a position in MGP Ingredients, Inc. (NASDAQ:MGPI) in April of 2023. MGPI is a leading supplier of premium distilled spirits and specialty wheat starches and proteins in the U.S. MGPI operates through three distinct segments, each of which has attractive opportunities for growth. Through its distilling solutions segment, MGPI is a leading supplier of distilled spirits, facilitating the creation of bourbons, rye whiskeys, American single malt whiskey, distilled gins and vodkas. U.S. spirits have gained significant share of total beverage alcohol over the last decade on a revenue basis, and American whiskey volumes, in particular, have experienced strong growth, driven in part by the growth of craft brands. In our opinion, these trends in consumption habits tend to be generational, which suggests that this recent demand strength is sustainable. MGPI maintains a large inventory of distilled spirits of various ages, which is used to produce its own branded spirits and sold to both multinational and craft producers of branded spirits. The time and capital required to age new distillate is significant, and that capital is often better used in marketing new brands, and MGPI is in a unique position to serve this market. As of the end of the first quarter of 2023, the vast majority of MGPI’s new distillate capacity was contracted for both this year and next as well as the majority of its aged distillate for this year.
In addition to its distillation capabilities, MGPI also develops its own branded spirits, and the branded spirits segment provides a platform for both organic and acquisitive growth opportunities. Building individual spirits brands can be challenging, in part due to the three-tier distribution system in the U.S., which requires individual brands to comply with various state laws and state-licensed distributors. In 2021, MGPI acquired Luxco, Inc., which significantly expanded its portfolio of branded spirits and brought with it distribution capabilities across all 50 states. Since acquiring Luxco, MGPI has continued to expand its distilling capacity and increase sales of its premium, super premium and ultra premium brands, which generate higher gross margins than other portfolio brands. In June of 2023, MGPI announced the acquisition of Penelope Bourbon, adding a popular, growing bourbon brand to the portfolio. This transaction is the first tangible example of how we believe management will leverage its national distribution platform and existing distillation capacity to bring other brands into the fold. We expect acquisitions like this one to be a key element of the future value creation opportunity…” (Click here to read the full text)
Public Domain/Pixabay
MGP Ingredients, Inc. (NASDAQ:MGPI) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held MGP Ingredients, Inc. (NASDAQ:MGPI) at the end of first quarter which was 25 in the previous quarter.
We discussed MGP Ingredients, Inc. (NASDAQ:MGPI) in another article and shared the list of vegan stocks billionaires are purchasing. 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.
