Key Points
Dallas-based Meros Investment Management sold all 176,881 shares of Worthington Steel in the third quarter.
The reduction represented about $5.3 million in estimated value.
The Worthington Steel position previously accounted for 2.% of the fund’s AUM in the prior quarter.
Dallas-based Meros Investment Management fully exited its position in Worthington Steel(NYSE:WS) in the third quarter, as disclosed in its November 14 SEC filing. The move reflects a nearly $5.3 million net decrease.
What Happened
Meros Investment Management, LP disclosed in a Securities and Exchange Commission (SEC) filing dated November 14 that it sold out its entire Worthington Steel position in the third quarter. The liquidation, valued at nearly $5.3 million, removed the position from Meros’s portfolio, which now comprises 43 U.S. equity holdings.
What Else to Know
Top five holdings as of the filing:
- NYSE: DCO: $16 million (6.8% of AUM)
- NYSE: PLYM: $14.6 million (6.2% of AUM)
- NASDAQ: MGNI: $13.4 million (5.7% of AUM)
- NYSE: SEI: $11.7 million (5% of AUM)
- NASDAQ: PLAB: $11.6 million (4.9% of AUM)
As of Friday, Worthington Steel shares were priced at $35.92, down 18% over the past year and well underperforming the S&P 500, which is up 13% in the same period.
Company Overview
| Metric | Value |
|---|---|
| Price (as of market close Friday) | $35.92 |
| Market capitalization | $1.8 billion |
| Revenue (TTM) | $3.1 billion |
| Net income (TTM) | $118.6 million |
Company Snapshot
- Worthington Steel offers carbon flat-rolled steel, tailor-welded blanks, electrical steel laminations, and aluminum tailor-welded blanks to industrial customers.
- The company generates revenue primarily through steel processing, supplying value-added steel products to manufacturers across multiple sectors.
- It serves automotive, heavy truck, agriculture, construction, and energy end-markets throughout North America.
Worthington Steel, Inc. is based in Columbus, Ohio, and operates as a steel processor with a diversified product portfolio, according to company filings. Worthington Steel, Inc. serves a broad range of industrial customers in sectors including automotive, heavy truck, agriculture, construction, and energy.
Foolish Take
Following a difficult multi-year stretch for the stock, Meros' exit matters because Worthington Steel has started to post cleaner, more resilient fundamentals — raising the question of whether some investors are stepping away just as the business is stabilizing after its spin-off. The company’s most recent quarter showed 5% revenue growth to $872.9 million, alongside an expansion in operating income to $48.3 million and net earnings of $36.8 million, all up meaningfully from last year. Meanwhile, adjusted earnings per share climbed to $0.77 from $0.56, highlighting traction in core spreads even as volumes softened in certain categories.
For long-term investors, the liquidation may signal nothing more than portfolio repositioning within a volatile small-cap, especially given Meros’s relatively diversified holdings. But Worthington Steel’s vertically integrated model, strong balance sheet, and recent acquisition of the Sitem Group — now contributing to both volumes — suggest a company still early in its transformation efforts. Dividend continuity and steady margin improvement also give fundamentals-driven investors something to monitor.
Glossary
Exited its position: When an investor sells all shares of a particular holding, fully closing out that investment.
13F reportable assets under management (AUM): The total value of securities a fund must disclose in quarterly SEC Form 13F filings.
Liquidation (of a position): The process of selling off an entire investment holding, converting it to cash.
Portfolio: The collection of investments owned by an individual or institution.
Stake: The amount of ownership or investment a fund or individual holds in a company.
Value-added steel products: Steel products that have been processed or enhanced to meet specific customer requirements beyond basic steel.
Tailor welded blanks: Sheets of metal, often steel or aluminum, welded together to create custom shapes or thicknesses for manufacturers.
Electrical steel laminations: Thin steel layers used in electric motors and transformers to improve efficiency and reduce energy loss.
End-markets: The final industries or sectors that purchase and use a company's products.
TTM: The 12-month period ending with the most recent quarterly report.
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Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Ducommun. The Motley Fool recommends Magnite. The Motley Fool has a disclosure policy.
