Merion Road Capital Management, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. Merion Road Capital’s long-only strategy was down 14.3% in the first quarter of 2022. This is roughly comparable to its loss in Q1 2020 during the covid sell‐off. The obvious difference between the two periods is their relative (under)performance versus the broader market. 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, Merion Road Capital mentioned Sportsman’s Warehouse Holdings, Inc. (NASDAQ:SPWH) and explained its insights for the company. Founded in 1986, Sportsman’s Warehouse Holdings, Inc. (NASDAQ:SPWH) is a Midvale, Utah-based outdoor sporting goods retail company with a $472.5 billion market capitalization. Sportsman’s Warehouse Holdings, Inc. (NASDAQ:SPWH) delivered a -8.73% return since the beginning of the year, while its 12-month returns are up by -38.49%. The stock closed at $10.77 per share on April 13, 2022.
Here is what Merion Road Capital has to say about Sportsman’s Warehouse Holdings, Inc. (NASDAQ:SPWH) in its Q1 2022 investor letter:
“During the quarter I added to Sportsman’s Warehouse (“SPWH”). SPWH is an outdoor sporting goods retailer with about half of their revenue coming from hunting & shooting products (guns, ammo). I initiated our position back in December following their failed merger with Great Outdoors on the grounds of anti‐trust concerns. It appeared that the stock was being sold off indiscriminately by merger arbitrageurs and valuation seemed attractive, particularly after adjusting for the receipt of a $55mm termination payment and unwind of excess inventory.
While the dust has largely settled from an investor base perspective, SPWH remains attractively priced with a few upcoming catalysts. Fundamentally the company is well positioned. Following the tragic Parkland school shooting two large competitors to SPWH, Dicks Sporting Goods and Walmart, made the decision to exit the category; their absence makes the competitive landscape for SPWH a lot more favorable than in prior years. Furthermore, it is no surprise that gun and ammo sales during covid experienced tremendous growth. Unlike prior cycles, however, this wave saw an increase in new gun buyers rather than purchases by existing owners. SPWH estimates that over the past 18 months the industry created 12mm new firearm owners; using a prior base of 100mm, thisimplies an increase to their addressable market of 12%. The company is executing on many other internal initiatives including store expansion, omni‐channel growth (e‐comm up to 15% of revenues), loyalty programs (at 3mm members) and new co‐branded credit cards…” (Click here to see the full text)
Our calculations show that Sportsman’s Warehouse Holdings, Inc. (NASDAQ:SPWH) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Sportsman’s Warehouse Holdings, Inc. (NASDAQ:SPWH) was in 28 hedge fund portfolios at the end of the first quarter of 2022, compared to 20 funds in the previous quarter. Sportsman’s Warehouse Holdings, Inc. (NASDAQ:SPWH) delivered a -5.03% 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 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
