8) NN, Inc. (NASDAQ:NNBR)
Number of Hedge Fund Holders: 7
NN, Inc. (NASDAQ:NNBR) designs, manufactures, and sells high-precision components and assemblies for various end markets.
Wall Street believes that much of NN, Inc. (NASDAQ:NNBR)’s growth is expected to come from the Chinese market as the company plans to tap into its vast industrial and consumer base and leverage favorable trends in manufacturing, infrastructure, and innovation. China’s position as a global leader in manufacturing offers NN, Inc. (NASDAQ:NNBR) opportunities to supply components for various industries.
NN, Inc. (NASDAQ:NNBR) continues to expect strength in the Chinese market, despite a slowing economy. The company’s focus on innovation, such as the new rear-wheel steering product, should contribute to future success. Notably, a new rear-wheel steering product was launched in collaboration with Tier 1 suppliers in China. Amidst slowness in the economy, government incentives and increased vehicle production are benefiting NN, Inc. (NASDAQ:NNBR)’s business in the region.
China’s strong government support for EVs and clean energy initiatives is expected to create increased demand for components and materials related to EV production, like precision bearings, lightweight materials, or energy storage systems. Furthermore, China’s focus on upgrading its industrial base via initiatives such as “Made in China 2025” emphasizes the need for high-quality, precision-engineered components that NN, Inc. (NASDAQ:NNBR) specializes in.
Greystone Capital Management, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“During the quarter I sold our entire stake in NN, Inc. (NASDAQ:NNBR), despite our recent purchases along with my optimism about the investment. The reasons for the sale are two-fold. First, we made two new investments recently, one toward the end of last quarter and the other in Q3, which represent much better uses of capital than our smaller position in NNBR.
Second, I’ve been doing a fair amount of reflection on past portfolio mistakes and successes, leading me to the realization that owning higher quality businesses, with no room for anything else, is my desired path forward. NNBR is not a great business. A potentially great investment, but not a great business. There is a big difference. One is a shorter-term return stream with a fixed valuation / price target, and a larger than desired room for error. The other is what your portfolios should contain if we want to maximize long-term results. To date, my biggest investment mistakes have been selling quality businesses too early and replacing them with lower quality businesses under the guise of cheapness/opportunity cost. Our returns would be much better if I stopped doing this. Moving forward, I think it’s prudent to focus on (and own) higher quality businesses that can compound their value over a long period of time. I am currently penning more thoughts on this topic which I look forward to sharing once complete.”
