Investment management company LVS Advisory, a New York City-based full-service investment firm, recently released its fourth-quarter 2022 investor letter. A copy of the same can be downloaded here. The defensive portfolio of the fund gained 3.8% (net of all fees and expenses) for the full year. It outperformed its benchmark, Barclays High-Yield Bond Index, by 15.2%. However, its Growth Portfolio declined by 35.8% (net of all fees and expenses) for the same period. For more information on the fund’s top picks in 2022, please check its top five holdings.
LVS Advisory highlighted stocks like BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) in its Q4 2022 investor letter. BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) is a warehouse club operator headquartered in Marlborough, Massachusetts. On January 5, 2023, BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) stock closed at $66.54 per share. One-month return of BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) was -5.32%, and its shares gained 1.29% of their value over the last 52 weeks. BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) has a market capitalization of $8.945 billion.
LVS Advisory made the following comment about BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) in its Q4 2022 investor letter:
“We purchased shares of BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ). BJ’s fits the description of a company that is thriving in the current economic environment and has the potential to compound value for many years to come. The business is a discount wholesale club like Costco but focused on a more middle-class income demographic (Costco tends to skew higher income). BJ’s charges an annual membership fee of $55 to $110 and delivers extreme savings of 30% on average compared to traditional grocery and general merchandise stores. This is a strong value proposition for a family that shops once or twice per month for household essentials.
Discount retailers tend to outperform during recessionary periods as well as inflationary periods when consumers are looking for bargains. During the 2008/2009 recession, discounters such as Dollar General posted strong sales comps. We studied several discount retail concepts this summer and determined that BJ’s presents the best long-term opportunity. The wholesale club model creates a sticky and differentiated customer experience because of the membership dynamics. Wholesale clubs build strong brand loyalty and have pricing power in their membership fees. Membership fee income is pure profit and provides a powerful business lever for long-term earnings growth.
Investors appreciate the quality of the wholesale club model and have awarded Costco a 32x price-to-earnings multiple. Despite BJ’s being a ‘Costco clone’, its stock only trades for 17.5x earnings – a near 50% discount(!). Finally, with just 226 store units compared to Costco’s 847 units, BJ’s has a significant opportunity to grow its store base and is currently accelerating new unit openings. Putting it all together, I believe BJ’s is an attractively priced stock with a business that is high quality, economically durable, and has a long runway to reinvest for growth.”
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BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 29 hedge fund portfolios held BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) at the end of the third quarter which was 31 in the previous quarter.
We discussed BJ’s Wholesale Club Holdings, Inc. (NYSE:BJ) in another article and shared Renaissance Investment Management’s views on the company. In addition, please check out our hedge fund investor letters Q4 2022 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.
