Giverny Capital Asset Management, LLC, an investment management company, recently published its fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. The portfolio continued its strong performance in the fourth quarter, but trailed the S&P 500 Index. The portfolio returned 0.78% compared to a 2.41% return for the S&P 500 Total Return Index in the quarter. The fund returned 21.09% in 2024 compared to the 25.02% return for the Index during the same period. For more information on the fund’s top picks in 2024, please check its top five holdings.
In its fourth quarter 2024 investor letter, Giverny Capital Asset Management emphasized stocks such as Installed Building Products, Inc. (NYSE:IBP). Installed Building Products, Inc. (NYSE:IBP) engages in the installation of insulation, waterproofing, fire-stopping, fireproofing, garage doors, rain gutters, window blinds, shower doors, closet shelving and mirrors, and other products. The one-month return Installed Building Products, Inc. (NYSE:IBP) was 11.23%, and its shares lost 7.46% of their value over the last 52 weeks. On February 6, 2024, Installed Building Products, Inc. (NYSE:IBP) stock closed at $191.32 per share, with a market capitalization of $5.336 billion.
Giverny Capital Asset Management stated the following regarding Installed Building Products, Inc. (NYSE:IBP) in its Q4 2024 investor letter:
“Installed Building Products, Inc. (NYSE:IBP), purchased in 2022. IBP is a prosaic business, installing fiberglass insulation into new homes, apartment buildings and commercial structures. The key to its success is that fiberglass is manufactured in super-heated furnaces that cannot be turned on and off efficiently. When a manufacturer opens a plant, it produces fiberglass 24 hours a day, 365 days a year. The producers need large customers to absorb those volumes, and they grant those buyers significant discounts. We believe IBP buys fiberglass for about 20% less than smaller customers do. Not even giant homebuilders like DR Horton or Pulte can command the discounts IBP receives, as IBP installs insulation in about 30% of all newly built US homes.
As a result, IBP says it can install insulation in a new home, including labor, for less than a homebuilder can buy the fiberglass. Further, most big homebuilders are trying to reduce their permanent workforce, moving more work to subcontractors. To complement its insulation offering, IBP has been acquiring other types of installers, including gutters, garage doors and shelving. These additional offerings allow homebuilders to consolidate their subcontractors, simplifying their operations. We believe CEO Jeff Edwards, whose family owns 16% of the stock, is building a terrific company that thrives by offering great value to homebuilder customers and by using scale benefits of procurement to reward shareholders. US home starts are low right now, and IBP trades for about 17x earnings, a modest multiple of mildly depressed earnings. Market cap: $5.5 billion.”
A construction worker installing a garage door in a new residential home.
Installed Building Products, Inc. (NYSE:IBP) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held Installed Building Products, Inc. (NYSE:IBP) at the end of the third quarter which was 31 in the previous quarter. Consolidated net revenue of Installed Building Products, Inc. (NYSE:IBP) for the third quarter increased 8% to an all-time record of $761 million compared to $707 million for Q3 2023. While we acknowledge the potential of Installed Building Products, Inc. (NYSE:IBP) 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 Installed Building Products, Inc. (NYSE:IBP) and shared Baron Small Cap Fund’s views on the company. In addition, please check out our hedge fund investor letters Q3 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.