Black Bear Value Partners, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. The fund had a 35% return for the full year of 2021, compared to its benchmark, the S&P 500, and the HFRI Index which had a 28.7% and 14.8% return for the same period. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Black Bear Value Partners, in its Q4 2021 investor letter, mentioned Builders FirstSource, Inc. (NASDAQ:BLDR) and discussed its stance on the firm. Founded in 1998, Builders FirstSource, Inc. (NASDAQ:BLDR) is a Dallas, Texas-based millwork company with a $10.5 billion market capitalization, and is currently spearheaded by its CEO, Dave Flitman. Builders FirstSource, Inc. (NASDAQ:BLDR) delivered a -30.15% return since the beginning of the year, while its 12-month returns are up by 23.20%. The stock closed at $59.87 per share on April 07, 2022.
Here is what Black Bear Value Partners has to say about Builders FirstSource, Inc. (NASDAQ:BLDR) in its Q4 2021 investor letter:
“Builders FirstSource is a supplier and manufacturer of building materials for professional home builders, subcontractors, remodelers, and consumers. Their products include factory-built roof and floor trusses, wall panels and stairs, vinyl windows, and custom millwork. Please refer to some of the discussions on GRBK above. The fundamental discussion about homebuilders applies to BLDR. As more homes are built across the country, there will be an increased need for scaled sourcing of products to homebuilders. There is a large amount of fragmentation in the supply chain which provides BLDR a long runway for acquisitions and realistic synergies.
The management team has de-levered the business from above 5x to 1-2x and has been using their prodigious free cash flow to both acquire new businesses and buy in their stock. While I historically always liked their business, their historic high-debt levels gave me pause. They have right sized their balance sheet and are taking a very thoughtful view on capital allocation on behalf of shareholders.
BLDR should be able to generate $7-$10 a share in cash in the medium term with significant upside if they can scale through acquisition and/or further penetrate existing markets. We own it at a 10-14% free-cash flow yield so little growth is needed for us to compound value at high rates.”
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Our calculations show that Builders FirstSource, Inc. (NASDAQ:BLDR) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Builders FirstSource, Inc. (NASDAQ:BLDR) was in 59 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 53 funds in the previous quarter. Builders FirstSource, Inc. (NASDAQ:BLDR) delivered a -23.86% return in the past 3 months.
In October 2021, we also shared another hedge fund’s views on Builders FirstSource, Inc. (NASDAQ:BLDR) in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
