Investment management company Cove Street Capital recently released its “Small Cap Value Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. The firm concluded an unsatisfactory fiscal year of operations. It owns a few not-so-good holdings and some delayed-gratification positions since the market generally dislikes small-cap value stocks. In the third quarter, the fund returned 3.70% (net of fees) compared to 9.27% for the Russell 2000 Index and 10.15% for the Russell 2000 Value Index. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Cove Street Capital Small Cap Value Fund highlighted stocks like OUTFRONT Media Inc. (NYSE:OUT) in the third quarter 2024 investor letter. OUTFRONT Media Inc. (NYSE:OUT) uses technology, location, and creativity to connect brands with consumers through a variety of outdoor advertising assets. The one-month return of OUTFRONT Media Inc. (NYSE:OUT) was 10.50%, and its shares gained 102.70% of their value over the last 52 weeks. On October 7, 2024, OUTFRONT Media Inc. (NYSE:OUT) stock closed at $18.00 per share with a market capitalization of $3.004 billion.
Cove Street Capital Small Cap Value Fund stated the following regarding OUTFRONT Media Inc. (NYSE:OUT) in its Q3 2024 investor letter:
“On a similar note but with the opposite result, OUTFRONT Media Inc. (NYSE:OUT) operates billboards and transit advertising displays structured as a REIT. At the end of last year, Outfront found itself in a similar position as the trio above, with headline fears about its balance sheet. It had organized its transit business to be outside of the REIT in the halcyon days before Covid, expecting the business to contribute cash flow that OUT would not have to pay out in the form of a dividend (due to REIT rules). Only for the reverse to transpire: public transportation ridership rates plummeted and Outfront had to satisfy “minimum guarantee” payments to entities like the NYC MTA with cash generated from the non-transportation billboard business that was supposed to be earmarked for dividends. Layer in a refinancing, and these concerns came to a head in 4Q23. Rather than break the REIT structure and suffer tax consequences, OUT successfully divested its Canadian billboard business, generating enough proceeds to de-lever and eliminate the balance sheet worries. The subsequent ad market recovery in 2024, particularly in local advertising and the transit business, has helped. This rebound combined with ongoing conversions of static billboards to higher-yielding digital displays provides a long runway for margin expansion and LSD-MSD revenue growth. All the while, we are earning a 6.5% dividend yield to hold the stock. We are almost at a double here.”
A busy urban street, its billboards showing advertisements for a variety of national and local brands.
OUTFRONT Media Inc. (NYSE:OUT) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held OUTFRONT Media Inc. (NYSE:OUT) at the end of the second quarter which was 30 in the previous quarter. While we acknowledge the potential of OUTFRONT Media Inc. (NYSE:OUT) 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 OUTFRONT Media Inc. (NYSE:OUT) and shared the list of best dividend stocks with over 8% dividend yield. In addition, please check out our hedge fund investor letters Q3 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.