Brasada Capital Management, an investment management company, released its Q2,2022 Investor Letter, a copy of which can be downloaded here. The fund returned -25.7% net of fees for the first half of the year. An increase in the 10-year treasury yield leads to a decline in the multiples on investment assets. Check out the top 5 holdings of the fund to have a glimpse of its finest picks for 2022.
In the Q2, 2022 investor letter Brasada Capital Management analyzed Pool Corporation (NASDAQ:POOL) and provided its views about the company’s future performance. Pool Corporation (NASDAQ:POOL) founded in 1993, is a distributor of swimming pool supplies, equipment, and related leisure products and has a market capitalization of $14.209 billion. The one-month return of Pool Corporation (NASDAQ:POOL) is -0.40% while its 12-month return is -23.98%. The stock of Pool Corporation (NASDAQ:POOL) closed at $355.00 per share on July 25, 2022.
Here is what the Brasada Capital specifically communicated about Pool Corporation (NASDAQ:POOL):
“We originally purchased POOL in March of 2020. The stock performed much better than we anticipated due to the unprecedented demand for new pools from families stuck at home. Recurring revenue is one of the key attributes that we look for, and 60% of POOLs revenues are from maintenance type items.
However, we think that a meaningful amount of new pool construction was pulled forward into the 2020 to 2020 time period and that expectations for growth in 2023 are too high. Next, POOL has never had a formidable competitor. Their returns have not gone unnoticed and Leonard Green & Partners is building a legitimate competitor through M&A. Finally, POOL made a sizeable and questionable acquisition of Porpoise Pool & Patio late last year. We originally gave them the benefit of the doubt on this one due to their track record on acquisitions, but through further due diligence we wonder how well this is going to work out.
The combination of these factors made us uncomfortable with the downside risk and we exited the position during the quarter. In hindsight we wish we sold POOL at the end of last year, but we like to “water our flowers and cut our weeds”. POOL is a great company with a great management team, and it’s never an easy decision to sell something like this. Time will tell if we were right or wrong. So far this has the hallmarks of a well-executed sell decision.”
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Although Brasada Capital is invested in Pool Corporation (NASDAQ:POOL), the stock isn’t in the list of 30 Most Popular Stocks Among Hedge Funds. At the end of first quarter Pool Corporation (NASDAQ:POOL) was in 42 hedge fund portfolios, up from 38 in the previous quarter. Pool Corporation (NASDAQ:POOL) shares lost 23.2% of their value over the last 52 weeks.
We recently published another article on Pool Corporation (NASDAQ:POOL) and shared perspective of another hedge fund on why the shares of Pool Corporation (NASDAQ:POOL) continuous to see a strong demand. Other investor letters from hedge funds and prominent investors can be viewed in on our hedge fund investor letters 2022 Q2 page.
Disclosure: None. This article is originally published at Insider Monkey.
