Is it Wise to Invest in Builders FirstSource (BLDR)?

Black Bear Value Partners, an investment management firm, published its “Black Bear Value Fund” second-quarter 2022 investor letter – a copy of which can be downloaded here. The Black Bear Value Fund, LP (the “Fund”) returned –6.7% in June and –2.7% YTD. If a downturn is going to impair a business permanently, it’s typically not a fit for this Fund. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.

In its Q2 2022 investor letter, Black Bear Value Fund mentioned Builders FirstSource, Inc. (NASDAQ:BLDR) and explained its insights for the company. Founded in 1998, Builders FirstSource, Inc. (NASDAQ:BLDR) is a Dallas, Texas-based millwork company with an $11.3 billion market capitalization. Builders FirstSource, Inc. (NASDAQ:BLDR) delivered a -23.366% return since the beginning of the year, while its 12-month returns are up by 47.45%. The stock closed at $65.69 per share on July 21, 2022.

Here is what Black Bear Value Fund has to say about Builders FirstSource, Inc. (NASDAQ:BLDR) in its Q2 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.

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 13-19% free-cash flow yield so little growth is needed for us to compound value at high rates.”

Our calculations show that Builders FirstSource, Inc. (NASDAQ:BLDR) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Builders FirstSource, Inc. (NASDAQ:BLDR) was in 57 hedge fund portfolios at the end of the second quarter of 2022, compared to 59 funds in the previous quarter. Builders FirstSource, Inc. (NASDAQ:BLDR) delivered a 5.29% return in the past 3 months.

In April 2022, we also shared another hedge fund’s views on Builders 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.