Madison Funds, managed by Madison Investment Management, released its “Madison Small Cap Fund” fourth-quarter 2022 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the fund (Class Y) returned 5.66% compared to a 6.23% rise for the Russell 2000 and a 7.43% increase for the Russell 2500 Index. In 2022, the fund underperformed its benchmarks and returned -24.64%. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
Madison Funds highlighted stocks like The Hain Celestial Group, Inc. (NASDAQ:HAIN) in the Q4 2022 investor letter. Headquartered in Lake Success, New York, The Hain Celestial Group, Inc. (NASDAQ:HAIN) operates as an organic and natural products manufacturer and distributor. On January 20, 2023, The Hain Celestial Group, Inc. (NASDAQ:HAIN) stock closed at $18.86 per share. One-month return of The Hain Celestial Group, Inc. (NASDAQ:HAIN) was 18.99%, and its shares lost 49.37% of their value over the last 52 weeks. The Hain Celestial Group, Inc. (NASDAQ:HAIN) has a market capitalization of $1.684 billion.
Madison Funds made the following comment about The Hain Celestial Group, Inc. (NASDAQ:HAIN) in its Q4 2022 investor letter:
“Stock selection was the poorest for us in this sector. Two stocks in particular – The Hain Celestial Group, Inc. (NASDAQ:HAIN) and Scott’s Miracle-Gro (SMG) – while big winners for us in 2020 and 2021, hurt the portfolio in 2022.
While both companies were so-called COVID beneficiaries (businesses that benefited from consumers staying home and spending on their homes during COVID), we felt they possessed certain additional drivers that would maintain their fundamentals into 2022 and beyond. Hain, for example, has a strong portfolio of organic health and wellness brands that target a higher-end demographic. As strong as their brands are, there is ample room for growth. Put simply, there are channels of distribution like Costco and Walgreens that their brands don’t currently serve, but we believe eventually will. Furthermore, we believed HAIN’s portfolio had pricing power to pull them through this inflationary period.
While we were largely correct on both counts, we underestimated the challenges they faced in their European business (40% of revenue), which overshadowed their success in North America. Entering 2022, HAIN’s stock had just hit a 5-year high of $45. However, the good times were short-lived as Russia invaded Ukraine early in 2022, sending energy prices materially higher in Europe. Although HAIN has a #1 or #2 market share in their brand categories, they could not withstand the economic shock from the war. The pressures on Hain’s European business came from multiple fronts: Rising energy prices skyrocketed their manufacturing and transportation costs. Essential ingredients for their products, like sunflower oil, became scarce as Ukraine is a key exporter of grains. The pressure on energy prices exacerbated an already weakened U.K. consumer due to BREXIT. And finally, the structure of the grocery market in the U.K. led to a delay in price increases. All of these factors weighed heavily on earnings and cash flow. Although we reduced our position size in the early summer, the stock took considerable punishment. As we enter the new year, HAIN’s European business has stabilized considerably. Natural Gas prices have meaningfully corrected, bringing relief not just to their costs but to the U.K. consumer.”
Image by Aline Ponce from Pixabay
The Hain Celestial Group, Inc. (NASDAQ:HAIN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held The Hain Celestial Group, Inc. (NASDAQ:HAIN) at the end of the third quarter which was 25 in the previous quarter.
We discussed The Hain Celestial Group, Inc. (NASDAQ:HAIN) in another article and shared the list of best environmental stocks to buy. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
