This article discusses the top 5 stock picks of Angela Aldrich’s Bayberry Capital Partners at the end of Q2. If you want to read about the fund’s recent performance and the changes it made to its portfolio during Q2, please check out 10 Best Stocks to Buy According to Angela Aldrich’s Bayberry Capital Partners.
5. Hillman Solutions Corp. (NASDAQ:HLMN)
Bayberry Capital Partners’ Stake Value: $27,086,000
Percentage of Bayberry Capital Partners’ 13F Portfolio: 8.47%
Number of Hedge Fund Holders: 18
Hillman Solutions Corp. (NASDAQ:HLMN) became an independently traded public company in July 2021 following its merger with Landcadia III, a SPAC led by Tilman Fertitta. Founded in 1964, Hillman Solutions Corp. (NASDAQ:HLMN) is a leading supplier of hardware-related products in North America. Funds tracked by Insider Monkey that initiated a stake in the company during the second quarter included Greg Eisner’s Engineers Gate Manager, Kenneth Tropin’s Graham Capital Management, and billionaire Louis Bacon’s Moore Global Investments.
On August 4, following the company’s second-quarter result announcement, analysts at Raymond James reiterated their ‘Outperform’ rating on the stock while lowering their price target to $12 from $13, which still represents a potential upside of over 66% from the stock’s current trading levels. In its fourth quarter 2021 “Small Cap Value Strategy” investor letter, ClearBridge Investments, an investment management firm, had this to say about Hillman Solutions Corp. (NASDAQ:HLMN):
“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.”
