Black Bear Value Partners, an investment management firm, published its first quarter 2023 investor letter, a copy of which can be downloaded here. Black Bear Value Fund returned +0.8% in March and +2.9% YTD, at the same time the S&P 500 returned +3.7% and +7.5% and the HFRI Index returned +1.2% and +4.5% in March and YTD, respectively. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Black Bear Value Partners highlighted stocks like Builders FirstSource, Inc. (NYSE:BLDR) in the first quarter 2023 investor letter. Headquartered in Dallas, Texas, Builders FirstSource, Inc. (NYSE:BLDR) is a building material, manufactured components, and construction services provider. On July 3, 2023, Builders FirstSource, Inc. (NYSE:BLDR) stock closed at $136.33 per share. One-month return of Builders FirstSource, Inc. (NYSE:BLDR) was 13.30%, and its shares gained 137.26% of their value over the last 52 weeks. Builders FirstSource, Inc. (NYSE:BLDR) has a market capitalization of $17.45 billion.
Black Bear Value Partners made the following comment about Builders FirstSource, Inc. (NYSE:BLDR) in its first quarter 2023 investor letter:
“Builders FirstSource, Inc. (NYSE:BLDR) is a manufacturer and supplier of building materials with a focus on residential construction. Historically this business was cyclical with minimal pricing power as the primary products sold were lumber and other non-value-add housing materials. Since the GFC, BLDR has focused on growing their value-add business that is now 40%+ of the topline. The company has modest leverage and has been using their abundant free-cash-flow to buy in over 30% of the stock in the last 18 months.
While mortgage rates are higher, they are not unusual versus history. The low rates of the last 5-10 years are the outlier. We have a structural shortage of housing in the USA. With existing homeowners locked into lowrate mortgages, the aspiring homeowner may increasingly need to find a home from a homebuilder. The next 6-12 months could be rocky as people adjust to the increase in pricing and rates. Eventually the housing market should adjust to the new normal (or rates could go down).
Normalized free-cash-flow per share looks to be in the range of $8-$12 per year. At quarter end pricing of ~$89 that implies a free-cash-flow yield of 9-13%. If we owned this business privately and someone offered us a this annual cash-flow yield, we would be jumping at it!”
Copyright: kadmy / 123RF Stock Photo
Builders FirstSource, Inc. (NYSE:BLDR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 51 hedge fund portfolios held Builders FirstSource, Inc. (NYSE:BLDR) at the end of first quarter 2023 which was 52 in the previous quarter.
We discussed Builders FirstSource, Inc. (NYSE:BLDR) in another article and shared Bonhoeffer Capital Management’s views on the company. In addition, please check out our hedge fund investor letters Q1 2023 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.
