Polen Capital, an investment management company, released its “Polen U.S. Small Company Growth Strategy” fourth-quarter 2023 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the fund delivered 10.46% gross and 10.22% net of fees compared to a 12.75% return for the Russell 2000 Growth Index. The firm views the performance in many respects as evidence of the stability of its investment approach in the face of frequent and significant market swings. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Polen U.S. Small Company Growth Strategy featured stocks such as LGI Homes, Inc. (NASDAQ:LGIH) in the Q4 2023 investor letter. Headquartered in The Woodlands, Texas, LGI Homes, Inc. (NASDAQ:LGIH) is a home builder. On February 20, 2024, LGI Homes, Inc. (NASDAQ:LGIH) stock closed at $116.34 per share. One-month return of LGI Homes, Inc. (NASDAQ:LGIH) was 0.45%, and its shares gained 11.45% of their value over the last 52 weeks. LGI Homes, Inc. (NASDAQ:LGIH) has a market capitalization of $2.743 billion.
Polen U.S. Small Company Growth Strategy stated the following regarding LGI Homes, Inc. (NASDAQ:LGIH) in its fourth quarter 2023 investor letter:
“LGI Homes, Inc. (NASDAQ:LGIH) is a homebuilder primarily concentrated in the southeast and Texas. To some, the addition of a homebuilder may come as a surprise given the industry has not typically been associated with quality, having been among the worst performers during the Global Financial Crisis (“GFC”) of 2008-2009. However, over the past 15 years the industry has evolved significantly (for the better). Drawing on lessons from the GFC, many of the leading homebuilders today are deploying asset-light strategies and carefully building behind demand which in turn has led to better returns, stronger balance sheets, and more disciplined capital allocation. Beyond this, another long-term driver for the industry comes from the structural undersupply that has been in place since the GFC. LGI Homes is focused on building entry-level homes in the ‘exurbs’ about 40 minutes outside of a major metropolitan area. The company has a unique operating model to profitably build affordable homes for first time homebuyers, positioning them to serve what we believe is the part of the market (first-time homebuyers) with the biggest supply/demand shortfall long-term.
Importantly, LGI has a founder-led management team that has proven capital allocation skill over time, best demonstrated by the fact that they remained profitable through the GFC. Looking ahead, we expect a low 20’s internal rate of return (IRR) through the cycle with a relatively wider range of potential outcomes, which is reflected in the position size.”
A worker hammering a nail into the frame of a single-family home under construction.
LGI Homes, Inc. (NASDAQ:LGIH) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, LGI Homes, Inc. (NASDAQ:LGIH) was held by 28 hedge fund portfolios, up from 23 in the previous quarter, according to our database. In addition, please check out our hedge fund investor letters Q4 2023 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.
