Pershing Square Holdings Believes Lowe’s Companies (LOW)’s Long-Term Outlook is Strong

Pershing Square Holdings, an investment holding company, released its second quarter 2022 investor letter. A copy of the same can be downloaded here. The fund generated NAV performance of -26% at the end of the first half, which was slightly higher than the total shareholder returns of -27.3%. Through August 16, 2022, the fund returned -10.8% compared to a -8.8% return for the S&P 500 index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.

Pershing Square Holdings discussed stocks like Lowe’s Companies, Inc. (NYSE:LOW) in the second quarter investor letter. Based in Mooresville, North Carolina, Lowe’s Companies, Inc. (NYSE:LOW) is a home improvement retailer. On September 15, 2022, Lowe’s Companies, Inc. (NYSE:LOW) stock closed at $191.04 per share. One-month return of Lowe’s Companies, Inc. (NYSE:LOW)  was -9.61% and its shares lost 8.61% of their value over the last 52 weeks. Lowe’s Companies, Inc. (NYSE:LOW)  has a market capitalization of $118.579 billion.

Here is what Pershing Square Holdings specifically said about Lowe’s Companies, Inc. (NYSE:LOW)  in its Q2 2022 investor letter:

“Lowe’s Companies, Inc. (NYSE:LOW)’s is a high-quality business with significant long-term earnings growth potential underpinned by a superb management team that is successfully executing a multi-faceted business transformation.

COVID-19 was a transformational event for the US housing market, causing homeowners to invest significantly in their homes as they shifted nearly all their daily activities to the home environment, including work, school, and leisure. The increased use of the home during COVID, in turn, increased the need for repair, maintenance and remodel activity, which significantly benefited Lowe’s same-store sales. As consumers return to spending more time and money on out-of-the home activities the near-term demand for certain Do-It-Yourself (“DIY”) categories has decreased. Moderation in DIY demand combined with increased mortgage rates and decreased housing affordability has caused many market participants to become concerned that the home improvement industry may give up a significant part of their COVID pandemic sales gains.

While we expect that there will be some near-term volatility and continued moderation of DIY demand, growth remains strong for projects requiring professional installation (the “Pro” business) due to a substantial backlog of projects undertaken during COVID, which should support industry growth in the near-term. In addition, we believe the medium[1]term growth outlook for the home improvement industry remains strong as demand is likely to normalize at a materially higher level as compared to the pre-COVID era. For the decade prior to COVID, home improvement industry sales were notably depressed relative to their long-term averages as a percentage of overall consumer spend and GDP and have only now returned to their longer-term historical levels. Moreover, we believe COVID has permanently renewed consumers’ focus, appreciation, and utilization of their homes, which combined with higher home equity values, strong consumer balance sheets, low levels of home inventory for sale and an aging housing stock that requires an increasing level of maintenance, will likely result in a structurally higher level of ongoing home industry spending in the future. In the most recent quarter demand strengthened throughout the quarter as DIY consumers returned from summer vacations and focused on less seasonal home improvement projects…” (Click here to read the full text)

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Lowe’s Companies, Inc. (NYSE:LOW) is not on the list of  30 Most Popular Stocks Among Hedge Funds. As per our database, 53 hedge fund portfolios were held by Lowe’s Companies, Inc. (NYSE:LOW)  at the end of the second quarter which was 65 in the previous quarter.

We discussed Lowe’s Companies, Inc. (NYSE:LOW) in another article and shared Baron Funds’ views on the company. In addition, please check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other leading investors.

Disclosure: None. This article is originally published at Insider Monkey.