Home Hedge Funds Should You Hold Builders FirstSource (BLDR)?

Should You Hold Builders FirstSource (BLDR)?

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Bonhoeffer Capital Management, an asset management company, released its third-quarter 2023 investor letter. A copy of the same can be downloaded here. In industries experiencing economic downturns, Bonhoeffer Fund has replaced slower-growing companies with superior, expanding corporations and is still seeking out comparable prospects. The United States, South Korea, the United Kingdom, Canada, South Africa, and the Philippines were the countries to which the firm had the greatest exposure as of September 30, 2023. Consumer products, telecom/media, real estate/infrastructure, and distribution were the industries with the biggest exposures. In addition, please check the fund’s top five holdings to know its best picks in 2023.

Bonhoeffer Capital Management highlighted stocks like Builders FirstSource, Inc. (NYSE:BLDR) in the third quarter 2023 investor letter. Based in Irving, Texas, Builders FirstSource, Inc. (NYSE:BLDR) is a building material, manufactured components, and construction services provider. On January 2, 2024, Builders FirstSource, Inc. (NYSE:BLDR) stock closed at $165.38 per share. One-month return of Builders FirstSource, Inc. (NYSE:BLDR) was 13.87%, and its shares gained 148.06% of their value over the last 52 weeks. Builders FirstSource, Inc. (NYSE:BLDR) has a market capitalization of $20.399 billion.

In its Q3 2023 investor letter, Bonhoeffer Capital Management stated the following regarding Builders FirstSource, Inc. (NYSE:BLDR):

“Over the past 12 months, interest rates have been increasing, which has reduced the economics of this strategy; but a large spread still exists if assets can be purchased at the right price. Increasing interest rates has affected the returns on public LBO firms. Some firms, like Builders FirstSource, Inc. (NYSE:BLDR) (described below), have reacted to higher interest rates by moderating their use of debt in their expansion plans.

Builders FirstSource, a portfolio holding, is an example of a private LBO. Given BLDR’s current valuation of an 11% earnings yield and, more importantly, a five-year forward earnings yield of 15%, buybacks are accretive. The net income annual growth is expected to be between 17-20% over the next four years based upon management’s guidance. This net income growth would imply a 17-20% total return before changes to the current modest valuation of 9x earnings. Below is the history of BLDR’s RoIC and RoIIC…” (Click here to read the full text)

A crane lifting a truss during the construction of a new building.

Builders FirstSource, Inc. (NYSE:BLDR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 53 hedge fund portfolios held Builders FirstSource, Inc. (NYSE:BLDR) at the end of third quarter which was 57 in the previous quarter.

We discussed Builders FirstSource, Inc. (NYSE:BLDR) in another article and shared White Brook Capital Partners’ views on the company. In addition, please check out our hedge fund investor letters Q3 2023 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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