GreenWood Investors LLC, an investment management firm, released its second quarter 2022 investor letter. A copy of the same can be downloaded here. The portfolio was not performed as per the standard in the second quarter. The US-denominated Global Micro Fund was down 16.6% in the quarter, and its euro-denominated Luxembourg fund returned -17.0%. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
GreenWood Investors discussed stocks like RH (NYSE:RH) in the second quarter investor letter. Headquartered in Corte Madera, California, RH (NYSE:RH) is a home furnishing retailer. September 16, 2022, RH (NYSE:RH) stock closed at $257.65 per share. One-month return of RH (NYSE:RH) was -12.09% and its shares lost 61.39% of their value over the last 52 weeks. RH (NYSE:RH) has a market capitalization of $6.113 billion.
Here is what GreenWood Investors specifically said about RH (NYSE:RH) in its Q2 2022 investor letter:
“Gary Friedman, the owner manager of RH (NYSE:RH), has been talking about the company climbing the luxury mountain over the past few years. Wall Street is skeptical RH can hold its leading margin profile after elevated demand during Covid, and it surely doubts that it is a luxury company, at 10x earnings. We’ve been looking to get involved in the housing ecosystem given the dramatic selloff in the sector over the past year, and our first investment here is via RH. Demographically, we expect US household formation to remain very strong after a decade of underinvestment in housing supply. Gary strategically with-held new product launches in the aftermath of Covid, when times were easiest, and is now releasing a new premium product lineup. We believe there is a lot of latent pricing power in home furnishing, and while high interest rates are trapping people in a home they would otherwise possibly leave, we believe the consumer, particularly the high-end consumer, will look to continue to upgrade their homes.
The truest test of Gary’s quest to make RH a true luxury company is in fact a recession. One of the reasons why there are few, if any, American luxury businesses, is that without a family controlling the company, optimizer-oriented management teams cannot withstand the pain that comes from not discounting a product line into weak demand. We can’t recall a single American company that has “destroyed” inventory like the French luxury companies in the face of a recession. Many have tried. Few, if any, have succeeded.
Anchored by Gary’s 21% ownership of the company, RH has a good chance. And not only is it not tempted in the current volatile environment to discount, but he is actually raising price. With a buyback authorized for over 30% of the shares outstanding, Friedman is also not shying away from making bold investments in the current environment. He is aggressively expanding galleries and introducing new marquee Europeans properties. The combined product launch cadence, increased prices, aggressive footprint investments and forthcoming share repurchases, not to mention low valuation, made us move off the sidelines and take a position in RH. While we are certainly not hoping for a recession, we are excited that such an environment could solidify Gary’s mission to make RH a rare American luxury brand.”
Copyright: sayhmog / 123RF Stock Photo
RH (NYSE:RH) is in not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 59 hedge fund portfolios held RH (NYSE:RH) at the end of the second quarter which was 63 in the previous quarter.
We discussed RH (NYSE:RH) in another article and shared GoodHaven Capital Management’s 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.
