Black Bear Value Partners, an investment management firm, published its fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. Black Bear Value Fund returned -9.4% in December and -1.4% in 2024 and the S&P 500 returned -2.4% in December and +25.0% in 2024. HFRI Value Index returned -1.2% in December and +11.5% in 2024. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Black Bear Value Partners highlighted stocks like Builders FirstSource, Inc. (NYSE:BLDR) in the fourth quarter 2024 investor letter. Based in Irving, Texas, Builders FirstSource, Inc. (NYSE:BLDR) is a building material, manufactured components, and construction services provider. The one-month return of Builders FirstSource, Inc. (NYSE:BLDR) was -5.85%, and its shares lost 9.14% of their value over the last 52 weeks. On January 13, 2025, Builders FirstSource, Inc. (NYSE:BLDR) stock closed at $146.47 per share with a market capitalization of $16.857 billion.
Black Bear Value Partners stated the following regarding Builders FirstSource, Inc. (NYSE:BLDR) in its Q4 2024 investor letter:
“Builders FirstSource, Inc. (NYSE:BLDR) declined 23% in the month of December after housing fears returned to the market. This mirrored the selloff experienced during COVID as short-term mortgage rate fears returned. I viewed this as a prime buying opportunity and added a meaningful amount of stock.
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 40% of the stock in the last 33 months.
Our long-term thesis remains intact as there is a structural shortage of housing in the USA. Higher mortgage rates reduce the supply of existing home supply as homeowners are locked into low-rate mortgages. As we have seen in recent history, the overall pie of housing activity may shrink, with new homebuilders capturing an increasing share of home sales. Homebuilders can buy-down the mortgage to a lower rate and accept a lower, yet still healthy margin on the home sale.”
A crane lifting a truss during the construction of a new building.
Builders FirstSource, Inc. (NYSE:BLDR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 55 hedge fund portfolios held Builders FirstSource, Inc. (NYSE:BLDR) at the end of the third quarter which was 59 in the previous quarter. Builders FirstSource, Inc.’s (NYSE:BLDR) third quarter sales were $4.2 billion, a decrease of 6.7% compared to Q3 2023. While we acknowledge the potential of Builders FirstSource, Inc. (NYSE:BLDR) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Builders FirstSource, Inc. (NYSE:BLDR) and shared ClearBridge All Cap Growth Strategy’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q4 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.