LRT Capital Management, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. A return of +30.47% was recorded by the LRT Economic Moat strategy year-to-date, putting its 24-month return to +4.34%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
LRT Capital Management, in its Q4 2021 investor letter, mentioned Watsco, Inc. (NYSE: WSO) and discussed its stance on the firm. Watsco, Inc. is a Coconut Grove, Miami-based HVAC company with a $10.8 billion market capitalization. WSO delivered a -10.59% return since the beginning of the year, while its 12-month returns are up by 19.72%. The stock closed at $279.74 per share on March 03, 2022.
Here is what LRT Capital Management has to say about Watsco, Inc. in its Q4 2021 investor letter:
“Watsco is a family-controlled company, and the largest distributor of air conditioning, heating, refrigeration equipment, and related parts in the North American HVAC/R industry.Watsco operates primarily in the residential HVAC equipment, and parts business. 69% of the company’s revenues come from HVAC equipment sales, while Other HVAC, and Commercial refrigeration products account for 28% and 3% respectively.Watsco is far and above the leader in the highly fragmented North American HVAC/R industry. The overall market in the U.S. contains approximately 2,100 distributors. Today, Watsco has captured approximately 5.2% of the $97 billion HVAC/R market.
Watsco distributes a broad selection of systems, parts, and accessories from over 1,200 OEMs and suppliers, with large brands such as Carrier, Trane, and Rheem. The company’s primary customer base
is contractors, who purchase, and receive HVAC products through dealers and distributors, including the regional companies Watsco acquires. Contractors use the dealer’s resources to order, and furnish parts and equipment for HVAC repair, replacement, or installation jobs. The contractors sell to the end users, who in this case are the homeowners, or business owners. Watsco now supplies over 100,000 contractors and dealers in the United States, Canada, Latin America, and the Caribbean, from over 600 locations. In fiscal year 2020, revenues topped $5 billion, representing a 78x increase in revenues over a 31-year period.Watsco was founded in Hialeah, Florida in 1956. Watsco began its life as a manufacturer of parts, components, and tools. The company quickly expanded and went public in 1962. The company’s shares began trading on the American Stock Exchange shortly after, in 1968.
Watsco’s growth by acquisition strategy dates back to the 1970s when Watsco began buying smaller companies. The business still focused on the manufacturing of tools, and components. In 1977, Watsco acquired a hair care products manufacturer, which further molded the company to fit the description of the popular conglomerate model of the time. The company would go on to divest its hair care operations in 1982 for nearly twice what it paid. Watsco remained unfocused on any particular activities in its businesses, and earnings were unspectacular as a result…” (Click here to see the full text)
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Our calculations show that Watsco, Inc. (NYSE: WSO) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. WSO was in 31 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 30 funds in the previous quarter. Watsco, Inc. (NYSE: WSO) delivered a -6.49% return in the past 3 months. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
