Here’s Why Third Avenue Management Sold Cal-Maine Foods (CALM) in Q4

Third Avenue Management, an investment management company based in New York City, released its “Small-Cap Value Fund” fourth quarter 2022 investor letter. A copy of the same can be downloaded here. The fund returned 10.85% in the fourth quarter compared to an 8.42% rise for the Russell 2000 Value Index. In 2022, the Fund returned -1.82% compared to a decline of 14.48% for the benchmark index. In the Morningstar Small Cap Value category, the fund’s 2022 performance was ranked in the top 8% among 481 funds based on total returns. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.

Third Avenue Management highlighted stocks like Cal-Maine Foods, Inc. (NASDAQ:CALM) in the Q4 2022 investor letter. Headquartered in Ridgeland, Mississippi, Cal-Maine Foods, Inc. (NASDAQ:CALM) operates as a specialty shell egg company that produces, grades, packages, markets, and distributes shell eggs. On January 20, 2023, Cal-Maine Foods, Inc. (NASDAQ:CALM) stock closed at $54.67 per share. One-month return of Cal-Maine Foods, Inc. (NASDAQ:CALM) was -15.41%, and its shares gained 36.44% of their value over the last 52 weeks. Cal-Maine Foods, Inc. (NASDAQ:CALM) has a market capitalization of $2.675 billion.

Third Avenue Management made the following comment about Cal-Maine Foods, Inc. (NASDAQ:CALM) in its Q4 2022 investor letter:

"BrightSphere Investment Group, and Cal-Maine Foods, Inc. (NASDAQ:CALM) were eliminated. BrightSphere and Cal Maine were both prototypical time-arbitrage/special situation investments. At the time of original purchase, asset manager, BrightSphere was undergoing a transformation leading to a series of asset sales in 2021. A large portion of the proceeds were returned via a tender offer in December 2021. After shares rose roughly 25% in the fourth quarter, the remaining position was monetized to redeploy into other more attractive securities. Egg producer, Cal Maine, was purchased during the depths of Covid at a deeply discounted valuation. As inflation grips the economy, Cal Maine has benefitted from consumers flocking to cheap sources of protein. In addition, an outbreak of bird flu in the US has disrupted supply. Fortunately, Cal Maine’s flock was spared from bird flu and the company was able to benefit from higher prices without experiencing supply disruptions. Cal Maine’s share price rose 70% in 2022 reaching a valuation meaningfully above our estimate of net asset value. Like BrightSphere, the position was eliminated to raise capital for better opportunities. Selling is not a decision Fund Management takes lightly. The time-arbitrage/ special situation bucket is comprised of companies where the thesis is dependent on an event of change in cycle dynamics. In both cases, the thesis played out as expected and given the valuation improvement, the securities were no longer a good fit for the portfolio."


Cal-Maine Foods, Inc. (NASDAQ:CALM) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 27 hedge fund portfolios held Cal-Maine Foods, Inc. (NASDAQ:CALM) at the end of the third quarter which was 22 in the previous quarter.

We discussed Cal-Maine Foods, Inc. (NASDAQ:CALM) in another article and shared the list of biggest agriculture stocks. In addition, please check out our hedge fund investor letters Q4 2022 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.