SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” third quarter 2024 investor letter. A copy of the letter can be downloaded here. As the third quarter of 2024 ends, the firm considers the complex elements that have shaped global markets and influenced its investment strategies. In the third quarter, the strategy returned 10.59% on a gross basis (10.38% net) compared to a 9.27% return for the Russell 2000 Index and 10.15% for the Russell 2000 Value Index. The strategy returned 25.16% on a gross basis (24.22% net) for the trailing twelve months compared to 26.76% and 25.88% respectively for the indexes over the same period. In addition, please check the top 5 holdings of the strategy to know its best pick in 2024.

SouthernSun Small Cap Strategy highlighted stocks like Ingevity Corporation (NYSE:NGVT) in the third quarter 2024 investor letter. Headquartered in North Charleston, South Carolina, Ingevity Corporation (NYSE:NGVT) engages in the manufacturing and distribution of activated carbon products, derivative specialty chemicals, and engineered polymers. The one-month return of Ingevity Corporation (NYSE:NGVT) was 21.37%, and its shares gained 6.56% of their value over the last 52 weeks. On November 4, 2024, Ingevity Corporation (NYSE:NGVT) stock closed at $41.92 per share with a market capitalization of $1.524 billion.

SouthernSun Small Cap Strategy stated the following regarding Ingevity Corporation (NYSE:NGVT) in its Q3 2024 investor letter:

"Ingevity Corporation (NYSE:NGVT) was one of the top detractors in the Small Cap strategy in the third quarter. Ingevity manufactures specialty chemicals that are used in a wide range of industrial applications and consumer products as well as activated carbon used to reduce gasoline vapor emissions in automobiles. The company is undergoing a strategic shift to reduce its exposure to crude tall oil (CTO), a key raw material in its Performance Chemicals segment. Within the last year, Ingevity has announced the closure of two of its three refineries and is consolidating its one remaining facility. In July of this year, the company terminated its final CTO supply agreement, which resulted in a settlement charge of $100 million. In addition, after the end of Q3, the company announced the departure of John Fortson, CEO, and named Luis Fernandez-Moreno, a long-time board member, as interim CEO. While these changes have created a lot of noise in recent months, we believe that the business will be much better positioned moving forward with a significantly lower cost structure. Importantly, these strategic decisions have all related to the Performance Chemicals operating segment. The other two operating segments have not been impacted, and while the Advanced Polymer Technologies segment has experienced some headwinds due to broader weakness in industrial end markets, the Performance Materials business continues to benefit from both market and regulatory tailwinds as well operational efficiencies. We continue to assess our position in light of the recent strategic shifts and management changes including ongoing discussions with new and existing leaders."

An engineer in her office examining a blueprint, surrounded by engineering components.

Ingevity Corporation (NYSE:NGVT) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 17 hedge fund portfolios held Ingevity Corporation (NYSE:NGVT) at the end of the second quarter which was 18 in the previous quarter. Ingevity Corporation's (NYSE:NGVT) third quarter sales of $376.9 million were down 16% year-over-year. While we acknowledge the potential of Ingevity Corporation (NYSE:NGVT) 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 Ingevity Corporation (NYSE:NGVT) and shared the list of oversold small cap stocks to buy. 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.