Is Ferguson (FERG) a Smart Long-Term Buy?

Right Tail Capital, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. At quarter end, Right Tail was 60% invested across 12 companies that meet our standards – durable competitive advantages, high returns on incremental invested capital, excellent management – and, critically, are currently priced at a discount to intrinsic value. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.

In its Q2 2022 investor letter, Right Tail Capital mentioned Ferguson plc (NYSE:FERG) and explained its insights for the company. Founded in 1887, Ferguson plc (NYSE:FERG) is a Wokingham, United Kingdom-based multinational plumbing and heating products distributor with a $26.1 billion market capitalization. Ferguson plc (NYSE:FERG) delivered a -31.10% return since the beginning of the year, while its 12-month returns are down by -12.41%. The stock closed at $123.60 per share on August 01, 2022.

Here is what Right Tail Capital has to say about Ferguson plc (NYSE:FERG) in its Q2 2022 investor letter:

“Ferguson is a leading, primarily US-based distributor ($23B mkt cap) of plumbing and HVAC supplies that is split roughly evenly between non-residential (44%) and residential (56%) as well as repair/remodel (60%) and new construction (40%). Like other high-quality distributors, Ferguson benefits from a prime spot in its value chain – fragmented suppliers (over 30,000), many customers (~1 million), and small competitors (75% of revenue comes from #1 or 2 market positions where the primary competitors are mom and pops). By providing great service and parts availability, Ferguson can help guide its customers to the parts they want and supply them in a timely fashion. The contractors who buy from Ferguson certainly care about price, but price is likely not as big of a concern for most of them as getting the correct part on time and on budget. While prices going up too high too fast may lead to demand destruction, Ferguson and contractors can often pass-through increases in prices due to the company’s great service, parts availability, and that in many cases the parts are needed…” (Click here to see the full text)

Andrey_Popov/Shutterstock.com

Our calculations show that Ferguson plc (NYSE:FERG) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Ferguson plc (NYSE:FERG) was in 18 hedge fund portfolios at the end of the second quarter of 2022, compared to 12 funds in the previous quarter. Ferguson plc (NYSE:FERG) delivered a  -0.35% return in the past 3 months.

In October 2021, we published an article that includes Ferguson plc (NYSE:FERG) in 11 Best High Dividend Stocks Under $50. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.

Disclosure: None. This article is originally published at Insider Monkey.