Giverny Capital, an investment management company, recently published its fourth-quarter investor letter in 2022. A copy of the same can be downloaded here. The model portfolio of the firm appreciated 8.49%, net of fees in the fourth quarter compared to a 7.56% return for the Standard & Poor’s 500 Index. For 2022, the fund delivered a -22.65% return compared to a -18.11% return for the Index. Oil and energy was the strongest sector in the year increased by 65%. In addition, you can check the top 5 holdings of the fund to see its best picks for 2022.
Giverny Capital highlighted stocks like Coherent Corp. (NASDAQ:COHR) in its Q4 2022 investor letter. Headquartered in Saxonburg, Pennsylvania, Coherent Corp. (NASDAQ:COHR) is a manufacturer and distributor of semiconductors and optical materials. On January 27, 2023, Coherent Corp. (NASDAQ:COHR) stock closed at $45.14 per share. One-month return of Coherent Corp. (NASDAQ:COHR) was 28.60%, and its shares lost 28.80% of their value over the last 52 weeks.
Giverny Capital made the following comment about Coherent Corp. (NASDAQ:COHR) in its Q4 2022 investor letter:
“Coherent Corp. (NASDAQ:COHR)’s stock price plunged last year in response to the merger of predecessor company II-VI and the laser systems manufacturer Coherent. The combined company is a leading designer and manufacturer of compound semiconductors, opto-electronic components and laser systems used in optical communications, manufacturing, life sciences and defense applications. Coherent generally is a number one or number two supplier to customers in structurally growing markets. The bad news is that the old II-VI borrowed a lot of money to buy Coherent, and the new company could be at risk in a recession if demand sinks below levels required to service the debt.
II-VI’s stock price was $90 when it agreed to buy Coherent. We bought the stock at around $60 as the market digested the news. And as I write this, the new company, which kept the Coherent name but is run by II-VI management, trades for about $40. That is roughly 10x expected earnings for 2023 of about $4 per share. Given the deep moats around its intellectual property and strong demand from customers, I believe Coherent needs to make progress on paying down acquisition debt over the next year or two to unlock significant equity value. Coherent finished the year as our smallest position at about 1.5%. We added to the position in January.”
Coherent Corp. (NASDAQ:COHR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 36 hedge fund portfolios held Coherent Corp. (NASDAQ:COHR) at the end of the third quarter, which was 33 in the previous quarter.
We discussed Coherent Corp. (NASDAQ:COHR) in another article and shared Carillon Tower Advisers’ views on the company. 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.
