4. Hillman Solutions Corp. (NASDAQ:HLMN)
Number of Hedge Fund Holders: 18
Hillman Solutions Corp. (NASDAQ:HLMN) is a Cincinnati-based provider of simple hardware solutions that caters to the complex needs of its customers through 42,000 locations across the US.
The analysts believed that the Q2 2022 earnings season would bring a reduction in Hillman Solutions Corp.’s (NASDAQ:HLMN) financial guidance for Q3 2022 and the full year 2022 to reflect the potential weakness observed in the home building and building product segment. However, Hillman Solutions Corp. (NASDAQ:HLMN) maintained its 2022 revenue guidance in the range of $1.5 billion to $1.6 billion as opposed to the consensus estimate of $1.5 billion when the company reported its Q2 2022 results on August 3. Furthermore, the company maintained its free cash flow (FCF) guidance of $120 million to $130 million. Hillman Solutions Corp. (NASDAQ:HLMN) is working on expanding its product portfolio and is expected to gain greater market share in the coming years.
ClearBridge Investments shared its bullish outlook on Hillman Solutions Corp. (NASDAQ:HLMN) in its Q4 2021 investor letter. Here’s what the firm said:
“We completely agree with Ben Graham’s alleged assessment: “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” In 2021 we observed votes being cast against companies based solely on how and when they raised capital, as if the choice of financing vehicle overrides the longterm value creation of the underlying business. The Initial Public Offerings Class of 2021 and companies that raised capital by merging with Special-Purpose Acquisition Companies (SPACs) were two such areas that detracted from the Strategy’s performance. Over time we trust that the value of each of the businesses underlying these holdings will be reflected as the “weighting machine” resumes operation. Of course, many IPOs and SPAC acquisitions were immature businesses — often just concepts — that shouldn’t be public, but with so many deals done, there are sure to be babies in that bathwater.
One such example is Hillman Solutions, which concluded the process of merging with Landcadia Holdings III (a SPAC) in mid2021. Hillman is a hardware distributor and provider of automation tools (for example, key making and knife sharpening) to retailers in the U.S. In the short term, supply chain issues have impacted the business while the treatment of SPAC-related warrants appears to have been a focus for bearish investors. In the long-term, Hillman is well-positioned to continue growing given the quality and labor alternative provided by its services. Despite a recent decline, Hillman’s fill rates (i.e., in-stock inventory) remain the highest in the industry, which should lead to market share gains and likely entry into additional product categories. Hillman’s business model, which includes taking over inventory, distribution and floor staffing, as well as solutions such as automated self-service kiosks, helps to address one of the main pressure points in its customers’ business: labor. Meanwhile the expectations for future growth and profitability discounted in Hillman’s current stock price are extremely modest relative to its potential.”
