SouthernSun Asset Management, LLC, an investment management firm, recently released its “SouthernSun Small Cap Strategy” first quarter 2025 investor letter. The strategy saw a return of -11.32% on a gross basis (-11.48% net) in the first quarter, as compared to -9.48% for the Russell 2000 Index and -7.74% for the Russell 2000 Value Index. Over the trailing twelve months, the strategy returned -12.55% on a gross basis (-13.21% net), while the indexes returned -4.01% and -3.12% respectively.
One of the highlighted stocks in the investor letter is Boot Barn Holdings, Inc. (NYSE:BOOT), a lifestyle retail chain offering western and work-related footwear, apparel, and accessories. Despite a one-month return of -4.51% and a 6.56% decrease in share value over the last 52 weeks, Boot Barn Holdings, Inc. (NYSE:BOOT) closed at $102.59 per share on April 25, 2025, with a market capitalization of $3.139 billion.
In the investor letter, SouthernSun Small Cap Strategy discussed Boot Barn Holdings, Inc. (NYSE:BOOT) as the top detractor in the strategy due to recent challenges faced by the company. However, they noted that the company has shown excellent results over longer periods, with EBITDA/share growing at a 23% CAGR in the last 5 years. Despite concerns about consumer health and rising import costs due to tariffs, management believes they can offset these impacts through pricing strategies. They also highlighted Boot Barn Holdings, Inc. (NYSE:BOOT)’s strong market position, growth plans, margin improvements, and clean balance sheet.
While Boot Barn Holdings, Inc. (NYSE:BOOT) may not be among the 30 Most Popular Stocks Among Hedge Funds, it is held in 29 hedge fund portfolios. In the third quarter of fiscal 2025, the company saw a 16.9% increase in net sales to $608 million. While the potential for Boot Barn Holdings, Inc. (NYSE:BOOT) as an investment is acknowledged, SouthernSun Asset Management, LLC believes that AI stocks offer greater promise for higher returns in a shorter timeframe. They recommend exploring AI stocks like NVIDIA, or the cheapest AI stock that trades at less than 5 times its earnings for potential investment opportunities.
The investor letter provides valuable insights into the performance and potential of Boot Barn Holdings, Inc. (NYSE:BOOT) within the SouthernSun Small Cap Strategy portfolio. Investors looking for opportunities in the small-cap space may find the analysis and recommendations in the letter beneficial for making informed investment decisions.
