Sound Shore Management, an investment management firm, published its second-quarter 2022 investor letter – a copy of which can be downloaded here. The Sound Shore Fund Investor Class (MUTF:SSHFX) and Institutional Class (MUTF:SSHVX) declined 13.45% and 13.41%, respectively, in the second quarter of 2022, trailing the Russell 1000 Value Index (Russell Value) which declined 12.21%. As long-term investors, Sound Shore’s 30-year annualized returns of 9.65% and 9.91%, for SSHFX and SSHVX, respectively, as of June 30, 2022, were ahead of the Russell Value at 9.54%. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.
In its Q2 2022 investor letter, Sound Shore Fund mentioned Lennar Corporation (NYSE:LEN) and explained its insights for the company. Founded in 1954, Lennar Corporation (NYSE:LEN) is a Miami, Florida-based home construction company with a $23.8 billion market capitalization. Lennar Corporation (NYSE:LEN) delivered a -27.82% return since the beginning of the year, while its 12-month returns are down by -20.39%. The stock closed at $83.84 per share on August 19, 2022.
Here is what Sound Shore Fund has to say about Lennar Corporation (NYSE:LEN) in its Q2 2022 investor letter:
“Another detractor was homebuilder Lennar (NYSE:LEN), one of the industry’s largest. We added the name during the fourth quarter of 2018 market selloff when Lennar was trading below normal at 7.5 times earnings and 1.1 times tangible book value. We believed the company had scale-driven advantages over small and mid-size builders, and also less exposure to sluggish premium housing trends versus its competitors.
Since the end of 2018, Lennar’s net debt to capital has declined from 32% to 13% in the most recent quarter. The increased cash flow has also enabled more than $2.1B of stock repurchases over the past four quarters. Lennar plans to simplify its portfolio to focus more as a pure-play builder, with less asset intensity, which will increase returns on capital and cash flow.
After material outperformance in 2020 and 2021, during which we trimmed our exposure, Lennar has been hit hard in 2022 by the sharp increase in interest rates, adding to concerns around home affordability. Given the selloff this year, Lennar’s valuation has fallen to 4 times earnings and price to tangible book value retreated back to 1.1 times at the end of June, despite the company earning an approximate 30% return on tangible equity over the past year…” (Click here to see the full text)
Our calculations show that Lennar Corporation (NYSE:LEN) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Lennar Corporation (NYSE:LEN) was in 50 hedge fund portfolios at the end of the second quarter of 2022, compared to 52 funds in the previous quarter. Lennar Corporation (NYSE:LEN) delivered a 12.63% return in the past 3 months. 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.
