Alternatively, several positions weighed on performance. Producer and supplier of sand, U.S. Silica Holdings, Inc. (NYSE:SLCA) traded -26.48% lower due to investor concerns regarding the supply and demand mix for silica and noise around potential slowdowns in activity in the second half of 2019, due to rising labor costs, trucking congestion and outflow capacity. We believe the market is overestimating the volume and delivery time of silica coming to market and although there have been announcements for mines coming on line in West Texas, the competitors lack the capital required to begin production. SLCA is insulated from some of these issues due to their national footprint and close proximity of its mines to major rail lines and waterways. In addition, SLCA has received commitments from several customers to prepay for volume at attractive margins. Beyond supply concerns, investors continue to underappreciate the company’s industrial business relative to competitors. We believe the contributions from these less volatile return businesses such as the investment in SandBox and EP Minerals, and the company’s stable balance sheet has SLCA positioned for favorable risk/reward going forward. At current levels, SLCA is trading at a 63% discount to our estimate of private market value and we have been adding to our position on weakness.
From John Rogers (Trades, Portfolio)' Ariel Fund third-quarter 2018 shareholder commentary.
