Baron Funds, an asset management firm, published its “Baron Small Cap Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. Baron Small Cap Fund (the “Fund”) did poorly in the first quarter, on both an absolute and relative basis. The Fund was down 15.68% (Institutional Shares), trailing the Russell 2000 Growth Index, which lost 12.63%, and the S&P 500 Index, which fell 4.60%. The Fund’s longer-term performance is still admirable gaining 10.76% per year, on an annualized basis, over its almost 25-year history and besting the returns of its benchmark index for all relevant time periods. Try to spend some time looking at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Baron Small Cap Fund mentioned Floor & Decor Holdings, Inc. (NYSE:FND) and explained its insights for the company. Founded in 2000, Floor & Decor Holdings, Inc. (NYSE:FND) is an Atlanta, Georgia-based specialty retail company with a $7.2 billion market capitalization. Floor & Decor Holdings, Inc. (NYSE:FND) delivered a -47.44% return since the beginning of the year, while its 12-month returns are down by -31.33%. The stock closed at $68.33 per share on May 19, 2022.
Here is what Baron Small Cap Fund has to say about Floor & Decor Holdings, Inc. (NYSE:FND) in its Q1 2022 investor letter:
“Floor & Decor Holdings, Inc. (NYSE:FND), the category-killing retailer of hard surface flooring, fell this quarter because of concern that higher interest rates would hurt its near-term results and because the stock had traded at a premium valuation (well deserved, in our opinion). Floor & Decor reported strong results for the fourth quarter and 2021, as EBITDA grew 50% and earnings grew 44%. Same-store sales grew 27%, some of which was aided by increased prices to pass on higher costs. The company is guiding to more modest growth this year but for very strong long-term growth of about 25% per year, as the store base grows from 160 today towards a goal of over 400. We are cognizant of market concerns that consumers will spend more on services than goods in the near future and that higher rates could negatively impact sales on the margin, but we don’t think the effect will be significant. Floor & Decor is taking massive market share, should be able to continue to pass on higher costs, and has major competitive advantages. We certainly do not believe that the near-term headwinds will change the long-term growth path of the company. The stock has traded down to just over 20 times our estimate for earnings in 2023, which is half its historical trading multiple. The stock is trading at 10 times what we project the company will earn in five years. And there should be lots of growth from that point.”
Scanrail1/Shutterstock.com
Our calculations show that Floor & Decor Holdings, Inc. (NYSE:FND) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Floor & Decor Holdings, Inc. (NYSE:FND) was in 36 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 33 funds in the previous quarter. Floor & Decor Holdings, Inc. (NYSE:FND) delivered a -31.45% return in the past 3 months.
In May 2022, we also shared another hedge fund’s views on Floor & Decor Holdings, Inc. (NYSE:FND) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
