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 Trex Company, Inc. (NYSE:TREX) and explained its insights for the company. Founded in 1996, Trex Company, Inc. (NYSE:TREX) is a Winchester, Virginia-based boarding company with a $6.8 billion market capitalization. Trex Company, Inc. (NYSE:TREX) delivered a -55.04% return since the beginning of the year, while its 12-month returns are down by -36.91%. The stock closed at $60.71 per share on May 20, 2022.
Here is what Baron Small Cap Fund has to say about Trex Company, Inc. (NYSE:TREX) in its Q1 2022 investor letter:
“Trex Company, Inc. (NYSE:TREX) is the leading provider of composite decking materials, which are taking market share from wood. Like SiteOne and Floor & Decor, the stock fell significantly this quarter over concerns about the impact higher mortgage rates could have on sales and because the stock has been a darling, trading at a high multiple. The company reported great results for 2021, with revenues, EBITDA, and EPS up 36%, 40%, and 38%, respectively. The demand outlook for composite decking remains strong, as the product continues to take market share and Trex leads the industry with 50% market share. Trex has added significant new capacity to support growth for the next five years, but startup costs and some other logistical challenges have modestly dampened margins. We acknowledge that if the economy were to slow and consumers radically reorient spending away from fixing their homes, that growth might slow, but the stock is now trading at 18 times our earnings estimate for next year, which is really low for a business of this quality, with this track record, and this opportunity for future growth.”
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Our calculations show that Trex Company, Inc. (NYSE:TREX) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Trex Company, Inc. (NYSE:TREX) was in 28 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 21 funds in the previous quarter. Trex Company, Inc. (NYSE:TREX) delivered a -28.93% return in the past 3 months.
In March 2022, we also shared another hedge fund’s views on Trex Company, Inc. (NYSE:TREX) 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.
