Investment management company First Pacific Advisors recently released its “FPA Queens Road Small Cap Value Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter, the fund returned 7.48% compared to a 10.15% return for the Russell 2000 Value Index. Year-to-date, the fund returned 8.1% compared to a 9.22% return for the index. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
FPA Queens Road Small Cap Value Fund highlighted stocks like Darling Ingredients Inc. (NYSE:DAR), in the third quarter 2024 investor letter. Darling Ingredients Inc. (NYSE:DAR) develops, produces, and sells natural ingredients from edible and inedible bio-nutrients. The one-month return of Darling Ingredients Inc. (NYSE:DAR) was 10.72%, and its shares lost 0.34% of their value over the last 52 weeks. On November 8, 2024, Darling Ingredients Inc. (NYSE:DAR) stock closed at $40.68 per share with a market capitalization of $6.47 billion.
FPA Queens Road Small Cap Value Fund stated the following regarding Darling Ingredients Inc. (NYSE:DAR) in its Q3 2024 investor letter:
“Darling Ingredients Inc. (NYSE:DAR) is the world’s largest rendering operation with about 17% of the global market and a higher share in the core U.S. market.30 The business is one part industrial where scale and route density are big advantages – they collect unused animal waste from slaughterhouses and butchers. But the business is also one part commodity producer – their plants process this waste into fats, bone meal and ingredients that trade at prices set by the global markets. Finally, DAR’s Diamond Green Diesel joint venture with Valero turns animal fats into green energy – a business that benefits from renewables subsidies and tax credits. The company took on debt to make three large acquisitions in 2022, adding additional complexity as DAR integrates the acquisitions and de-levers. The stock has sold off on weakness in DAR’s commodity end markets, falling renewable identification number (RIN) prices, and lower earnings and guidance reported over the past year.
We first purchased Darling shares in 2008 and have watched as CEO Randy Stuewe has grown Darling from a minnow to a global behemoth. As of September 30, 2024, Darling trades at approximately 10x normal earnings and, despite the company’s commodity exposure and organizational complexity, we are comfortable holding a mid-sized position.”
A selection of pet food ingredients being prepared in a kitchen for quality and safety testing.
Darling Ingredients Inc. (NYSE:DAR) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held Darling Ingredients Inc. (NYSE:DAR) at the end of the second quarter which was 24 in the previous quarter. While we acknowledge the potential of Darling Ingredients Inc. (NYSE:DAR) 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 Darling Ingredients Inc. (NYSE:DAR) and shared Piper Sandler’s top technical stock picks and the top stocks. In the previous quarter investor letter, FPA Queens Road Small Cap Value Fund shared its optimism about Darling Ingredients Inc.’s (NYSE:DAR) long-term growth potential despite commodity price volatility and integration challenges. 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.