White Brook Capital Partners, an investment management firm, released its fourth-quarter 2024 investor letter. A copy of the letter can be downloaded here. White Brook Capital’s middle capitalization focused fund had a forgettable year in 2024. With the announcement of fourth-quarter earnings and positive 2025 outlook by the fund’s portfolio companies, fortunes have turned around thus far in 2025. The portfolio’s dominant theme is that it owns quality businesses in sectors that for one reason or another are out of favor. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
White Brook Capital Partners highlighted stocks like Builders FirstSource, Inc. (NYSE:BLDR) in the fourth quarter 2024 investor letter. Based in Irving, Texas, Builders FirstSource, Inc. (NYSE:BLDR) is a building material, manufactured components, and construction services provider. The one-month return of Builders FirstSource, Inc. (NYSE:BLDR) was 14.94%, and its shares lost 1.63% of their value over the last 52 weeks. On January 24, 2024, Builders FirstSource, Inc. (NYSE:BLDR) stock closed at $166.76 per share with a market capitalization of $19.192 billion.
White Brook Capital Partners stated the following regarding Builders FirstSource, Inc. (NYSE:BLDR) in its Q4 2024 investor letter:
“We have two investments taking share in a stagnant US housing market, but are poised to accelerate FCF growth if and when the industry’s recovery continues.
Builders FirstSource, Inc. (NYSE:BLDR) is up 2.5x since we bought the stock, but languished in 2024 on the back of higher interest rates. It is up ~15% so far this year. Their homebuilder customers argue that consumers need 30 year mortgage rates of 6.75% and below to be enthusiastic home purchasers and while that was achieved during 2024, it was true for only a short time. During this trough level of activity Builders FirstSource was able to generate over $1.2 billion in cash flow and believes the same is likely in 2025. Big picture, the nation remains underhoused, their homebuilder customers have begun shifting new builds to smaller homes, which use less homebuilding supplies, but should get volume moving again, and Builders FirstSource is a necessary part of the value chain when building and renovating homes. The increased prevalence of natural disasters is also an unmitigated positive for Builders which supplies the reconstruction activity. Potentially higher lumber prices due to tariffs on Canadian imports is also a positive, as Builders earns a margin on total transaction value. The Company continues to buy back stock and while the upside may not be as explosive in the near term as it was in 2023, we continue to believe it’s a solid core holding with embedded options to achieve significant upside in 2025 and beyond.”
A crane lifting a truss during the construction of a new building.
Builders FirstSource, Inc. (NYSE:BLDR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 55 hedge fund portfolios held Builders FirstSource, Inc. (NYSE:BLDR) at the end of the third quarter which was 59 in the previous quarter. Builders FirstSource, Inc.’s (NYSE:BLDR) third quarter sales were $4.2 billion, a decrease of 6.7% compared to Q3 2023. While we acknowledge the potential of Builders FirstSource, Inc. (NYSE:BLDR) 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 another article, we discussed Builders FirstSource, Inc. (NYSE:BLDR) and shared the list of stocks on Jim Cramer’s radar. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.
Disclosure: None. This article is originally published at Insider Monkey.