Heartland Advisors, an investment management company, released its “Heartland Value Plus Fund” third quarter 2024 investor letter. A copy of the letter can be downloaded here. During the quarter, the market began to broaden as small-cap stocks rose in expectation of interest rate reduction by the Federal Reserve, and companies with compelling self-help strategies are being rewarded. The strategy gained 7.93% in the quarter, compared to a 10.15% return for the Russell 2000 Value Index. The underperformance was due to the stock selection in the Health Care, Information Technology, and Energy sectors. On the other hand, the selection effect helped the Strategy to outperform the benchmark in the Consumer Discretionary, Industrials, and Financials. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Heartland Value Plus Fund highlighted stocks like Hayward Holdings, Inc. (NYSE:HAYW) in the third quarter 2024 investor letter. Hayward Holdings, Inc. (NYSE:HAYW) manufactures and markets a portfolio of pool equipment and associated automation systems. The one-month return of Hayward Holdings, Inc. (NYSE:HAYW) was 8.25%, and its shares gained 13.16% of their value over the last 52 weeks. On October 11, 2024, Hayward Holdings, Inc. (NYSE:HAYW) stock closed at $14.76 per share with a market capitalization of $3.156 billion.
Heartland Value Plus Fund stated the following regarding Hayward Holdings, Inc. (NYSE:HAYW) in its Q3 2024 investor letter:
“During the quarter, we increased our weighting to another industrial company, Hayward Holdings, Inc. (NYSE:HAYW), which makes pool components such as pumps, filters, heaters and cleaners. The company is the second largest player in a trio that controls roughly 90% of the residential pool market in North America. Hayward makes products that are critical for owning a pool but represent a low percentage of the total cost of ownership. This results in pricing power that feeds profitability. HAYW’s gross margins place it in the top 10% of the Russell 3000® Index building products category.
New pool construction has been on a roller coaster ride lately. After peaking during the pandemic, construction activity has taken a plunge thanks to rising interest rates and fluctuating housing starts. HAYW’s revenues, though, seem to be more resilient because half of the company’s sales come from the replacement of components in existing pools, which tends to be steady throughout an entire cycle. Additionally, pool construction has historically lagged new home construction by around one to three years, and single-family home starts have stabilized after slumping from 2022 to early 2023. Meanwhile, Hayward has implemented self-help strategies that include consolidating manufacturing facilities and implementing Kaizen manufacturing principles, which have improved gross margins by nearly 300 basis points. When pool construction and remodeling pick back up, we believe HAYW will earn significantly more due to its improved gross margin profile and operating leverage as capacity utilization improves.”
A technician in safety gear inspecting a pool automated system.
Hayward Holdings, Inc. (NYSE:HAYW) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held Hayward Holdings, Inc. (NYSE:HAYW) at the end of the second quarter which was 21 in the previous quarter. The net sales of Hayward Holdings, Inc. (NYSE:HAYW) increased to $284 million in the second quarter, in line with expectations. While we acknowledge the potential of Hayward Holdings, Inc. (NYSE:HAYW) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In addition, please check out our hedge fund investor letters Q3 2024 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.