5 Best Multibagger Stocks to Buy for 2024

2. Builders FirstSource, Inc. (NYSE:BLDR)

Number of Hedge Fund Holders: 51

1-Year Share Price Gain as of July 7: 121.91%

Builders FirstSource, Inc. (NYSE:BLDR) is a Texas-based company that manufactures and provides building supplies and construction services. The company is expected to announce its second quarter 2023 results on August 2. In Q1, Builders FirstSource, Inc. (NYSE:BLDR) provided net sales guidance between the range of $4.0 billion to $4.2 billion, adjusted EBITDA to be in a range of $525 million to $575 million, and adjusted EBITDA margin to be in a range of 13.1% to 13.7% for the second quarter.

On July 5, Wedbush analyst Jay McCanless reaffirmed an Outperform rating on Builders FirstSource, Inc. (NYSE:BLDR) and raised his price target from $135 to $175. The analyst’s price target represents a 31.48% upside to the company’s stock price of $133.10 as of the market close on July 7th. In the last twelve months, Builders FirstSource, Inc. (NYSE:BLDR)’s share price has been up by nearly 122%.

Builders FirstSource, Inc. (NYSE:BLDR) was held by 51 hedge funds in Q1 2023, with a combined stake value of $1.136 billion.

Black Bear Value Partners made the following comment about Builders FirstSource, Inc. (NYSE:BLDR) in its first quarter 2023 investor letter:

“Builders FirstSource, Inc. (NYSE:BLDR) is a manufacturer and supplier of building materials with a focus on residential construction. Historically this business was cyclical with minimal pricing power as the primary products sold were lumber and other non-value-add housing materials. Since the GFC, BLDR has focused on growing their value-add business that is now 40%+ of the topline. The company has modest leverage and has been using their abundant free-cash-flow to buy in over 30% of the stock in the last 18 months.

While mortgage rates are higher, they are not unusual versus history. The low rates of the last 5-10 years are the outlier. We have a structural shortage of housing in the USA. With existing homeowners locked into lowrate mortgages, the aspiring homeowner may increasingly need to find a home from a homebuilder. The next 6-12 months could be rocky as people adjust to the increase in pricing and rates. Eventually the housing market should adjust to the new normal (or rates could go down).

Normalized free-cash-flow per share looks to be in the range of $8-$12 per year. At quarter end pricing of ~$89 that implies a free-cash-flow yield of 9-13%. If we owned this business privately and someone offered us a this annual cash-flow yield, we would be jumping at it!”