SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun Small Cap Strategy” fourth quarter 2025 investor letter. A copy of the letter can be downloaded here. During the quarter, the Small Cap Composite returned -2.45% on a gross basis (-2.64% net), compared to a 2.19% return for the Russell 2000 Index and a 3.26% return for the Russell 2000 Value Index. The composite has returned 6.21% on a cumulative basis (5.40% net) over the past 12 months, compared to 12.81% and 12.59% for the indices, respectively. The letter highlights the economic lessons learned during the oil price crash of 2014-15. Initially seen as a positive development for the global economy, the collapse in oil prices has since revealed fundamental weaknesses, leading to wider economic impacts beyond the energy sector. The author compares this current situation to artificial intelligence (AI), warning that while AI is now a fundamental aspect of economic planning and decision-making, its associated risks must be carefully scrutinized. As the market approaches 2026, the investment landscape is shaped by a variety of scenarios, including value compression and overcapacity in AI infrastructure, rather than inevitable outcomes. SouthernSun Asset Management maintains a disciplined, humble approach that focuses on intrinsic value and is optimistic about the future but aware of the lessons of history. In addition, please see the top five retention strategies to identify the best of these in 2025.
In a letter to investors in the fourth quarter of 2025, SouthernSun Small Cap Strategy Darling Ingredients Inc. (NYSE:DAR) highlighted as one of its leading contributors. Darling Ingredients Inc. (NYSE:DAR) is a leading company engaged in the manufacture and sale of natural ingredients from animal by-products and food waste in the feed ingredients, food ingredients, and fuel ingredients segments. On February 27, 2026, Darling Ingredients Inc. (NYSE:DAR) stock closed at $53.16 per share. Darling Ingredients Inc. (NYSE:DAR)’s one-month return was 12.27%, and its shares have grown 54.45% over the past 52 weeks. Darling Ingredients Inc. (NYSE:DAR) has a market capitalization of $8.409 billion.
SouthernSun Small Cap Strategy Darling Ingredients Inc. In 2025 Fourth Quarter Investor Letter (NYSE:DAR) made the following comments about:
“Darling Components Inc. (NYSE:DAR) was the top contributor to the small-cap strategy in the fourth quarter. DAR is the largest publicly traded company that converts edible byproducts and food waste into sustainable products and is a leading producer of renewable energy. Darling has suffered significant headwinds over the past few years, and the stock has traded in a fairly tight $30-40 range over the past twelve months. This decline, in our view, is at or near the bottom. We see several fundamental and regulatory changes that support our view that top-line and bottom-line results will increase in 2026. Recent announcements from Washington & Co. support our view. The Food and Nutrition Trade Foundation provides support for fighting oil—a natural hedge that we’ve discussed at length. Additionally, the company’s vertically integrated supply chain and low-cost positioning have proven resilient to such headwinds. We expect 4q25 results to be challenging and believe this fact is factored into today’s share price. As the cycle turns, the operational improvements made over the past few years combined with the improved asset base will, in our view, improve operating profit and discretionary cash flow. While disappointed with the performance over the past few years, we are pleased to see the stability in the business and the stock price in recent quarters and believe that some meaningful relief is on the horizon.
