SouthernSun Asset Management, LLC, an investment management firm, released its “SouthernSun SMID Cap Strategy” first quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter, the strategy returned -8.60% on a gross basis (-8.76% net compared to a -7.50% return for the Russell 2500 Index and -5.83% for the Russell 2500 Value Index. The fund returned -9.41% on a gross basis (-10.06% net) over the trailing 12 months compared to -3.11% and -1.47% returns for the indexes, respectively, over the same period. In addition, please check the top 5 holdings of the strategy to know its best pick in 2025.

In its first-quarter 2025 investor letter, SouthernSun SMID Cap Strategy highlighted stocks such as U.S. Physical Therapy, Inc. (NYSE:USPH). U.S. Physical Therapy, Inc. (NYSE:USPH) is an outpatient physical therapy clinic operator. The one-month return of U.S. Physical Therapy, Inc. (NYSE:USPH) was -1.55%, and its shares lost 30.14% of their value over the last 52 weeks. On April 28, 2025, U.S. Physical Therapy, Inc. (NYSE:USPH) stock closed at $71.24 per share with a market capitalization of $1.082 billion.

SouthernSun SMID Cap Strategy stated the following regarding U.S. Physical Therapy, Inc. (NYSE:USPH) in its Q1 2025 investor letter:

"U.S. Physical Therapy, Inc. (NYSE:USPH) was a top detractor in the SMID Cap strategy. Many things are going well at USPH; they have grown the top line at a 10% CAGR for the past 5 years, seen continued strong demand and improving productivity at their clinics, and the Industrial Injury Prevention business has shown good organic growth. However, in our opinion, they have two challenges: first, wages for front office and for clinical employees continue to rise; second, even though they have had good results in their negotiations with private payers (i.e. insurance companies), Medicare had yet another series of reimbursement cuts this year, and Medicare is about 30% of their business. As a result, EBITDA has been flat to declining (slightly) over the past 5 years. 2025 is the last year of mandated Medicare reimbursement cuts, and we believe management can navigate the rate environment as we move forward. In addition, we can see that the challenges in the market have adversely affected competition, and we believe USPH is in a position to grow it’s moat in this current environment."Waystar Holding Corp. (WAY): Among Top Insider Sales Last Month

A healthcare professional providing physical therapy to an elderly patient.

U.S. Physical Therapy, Inc. (NYSE:USPH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 16 hedge fund portfolios held U.S. Physical Therapy, Inc. (NYSE:USPH) at the end of the fourth quarter, compared to 16 in the third quarter. While we acknowledge the potential of U.S. Physical Therapy, Inc. (NYSE:USPH) 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.

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In addition, please check out our hedge fund investor letters Q1 2025 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.

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