Black Bear Value Partners, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of +1.6% was recorded by the fund for the first quarter of 2022 increasing its year-to-date return to +1.9%. Meanwhile, its benchmarks, the S&P 500 and HFRI Index delivered a +3.7% and +0.2% returns respectively for the same period. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Black Bear Value Fund mentioned Builders FirstSource, Inc. (NASDAQ:BLDR) and explained its insights for the company. Founded in 1998, FirstSource, Inc. (NASDAQ:BLDR) is a Dallas, Texas-based millwork company with a $10.9 billion market capitalization. FirstSource, Inc. (NASDAQ:BLDR) delivered a -27.53% return since the beginning of the year, while its 12-month returns are up by 29.88%. The stock closed at $62.11 per share on April 13, 2022.
Here is what Black Bear Value Fund has to say about FirstSource, Inc. (NASDAQ:BLDR) in its Q1 2022 investor letter:
“Builders FirstSource is a supplier and manufacturer of building materials for professional homebuilders, subcontractors, remodelers, and consumers. Their products include factory-built roof and floor trusses, wall panels and stairs, vinyl windows and custom millwork.
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 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 11-15% free-cash flow yield so little growth is needed for us to compound value at high rates.”
Our calculations show that FirstSource, Inc. (NASDAQ:BLDR) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. FirstSource, Inc. (NASDAQ:BLDR) was in 59 hedge fund portfolios at the end of the first quarter of 2022, compared to 53 funds in the previous quarter. FirstSource, Inc. (NASDAQ:BLDR) delivered a -23.49% return in the past 3 months.
In April 2022, we published an article that includes FirstSource, Inc. (NASDAQ:BLDR) 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.
