Should You Sell The AZEK Company (AZEK)?

Artisan Partners, an investment management company, released its “Artisan Small Cap Fund” second quarter 2022 investor letter. A copy of the same can be downloaded here. In the second quarter, its Investor Class fund ARTSX returned -21.52%, Advisor Class fund APDSX posted a return of -21.48%, and Institutional Class fund APHSX returned -21.47%, compared to a return of -19.25% for the Russell 2000 Growth Index. In addition, please check the fund’s top five holdings to know its best picks in 2022.

In the second quarter 2022 investor letter, Artisan Partners discussed stocks like The AZEK Company Inc. (NYSE:AZEK). Headquartered in Chicago, Illinois, The AZEK Company Inc. (NYSE:AZEK) engages in the business of building products. On September 28, 2022, The AZEK Company Inc. (NYSE:AZEK) stock closed at $16.78 per share. One-month return of The AZEK Company Inc. (NYSE:AZEK) was -8.05% and its shares lost 54.48% of their value over the last 52 weeks. The AZEK Company Inc. (NYSE:AZEK) has a market capitalization of $2.553 billion.

Here is what Artisan Partners specifically said about The AZEK Company Inc. (NYSE:AZEK) in its Q2 2022 investor letter:

“The AZEK Company Inc. (NYSE:AZEK) is the second-largest designer and manufacturer of composite decking and railings. Our thesis has been predicated on the company capturing share from the wooden deck market, which is ~80% of the volume sold. AZEK’s products are superior to wood as they are maintenance free throughout their useful lives, and they carry 25-year performance and 50-year color warranties. The company’s recent quarterly results demonstrated solid top-line growth and no signs of distributor or consumer pullback in composite decking. Despite this, shares were weaker on fears the rise in mortgage rates could significantly curtail demand for the company’s outdoor products. Furthermore, the inflationary environment may make it difficult for AZEK to pass along price increases to its customers to maintain its margin profiles. While we share these consumer related concerns, we believe the longer-term composite decking profit cycle potential remains compelling. That said, we exited our position in favor of another composite decking provider in our portfolio, Trex, who we believe has stronger franchise characteristics—leading provider of alternative decking (AZEK is #2), a unique ability to utilize recycled materials to produce a low-cost product and strong brand awareness—and whose profit cycle we believe could prove more durable over the near-to-intermediate term.”

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The AZEK Company Inc. (NYSE:AZEK) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held The AZEK Company Inc. (NYSE:AZEK) at the end of the second quarter which was 33 in the previous quarter.

We discussed The AZEK Company Inc. (NYSE:AZEK) in another article and shared Baron Funds’ views on the company. In addition, please check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other leading investors.

Disclosure: None. This article is originally published at Insider Monkey.