Ensemble Capital, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be seen here. While this recent quarter represents the fund’s largest degree of underperformance, so too did its 2020 results. In 2020 the Fund was up 30.89% vs the S&P 500 up 18.39% for 12.51% outperformance. It is clear to us that the pandemic has caused much larger and more rapid relative swings in asset pricing as investors struggle to grapple with the implications of an economic event of an unprecedented nature. In this context, you can see that the fund’s first-quarter underperformance of 11.03% is clearly a bad outcome, and yet is not inconsistent with other periods of weak performance that have occurred in the context of its long-term track record of outperformance. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.
In its Q1 2022 investor letter, Ensemble Capital mentioned The Home Depot, Inc. (NYSE:HD) and explained its insights for the company. Founded in 1978, The Home Depot, Inc. (NYSE:HD) is an Atlanta, Georgia-based home improvement company with a $325.6 billion market capitalization. The Home Depot, Inc. (NYSE:HD) delivered a -24.06% return since the beginning of the year, while its 12-month returns are down by -1.97%. The stock closed at $315.14 per share on April 20, 2022.
Here is what Ensemble Capital has to say about The Home Depot, Inc. (NYSE:HD) in its Q1 2022 investor letter:
“Home Depot (7.7% weight in the Fund): The demand surge for remodeling and home improvement goods sparked by shelter in place orders, remote work going mainstream, and a shortage of homes on the market to buy, ran headlong into the supply chain crisis, triggering surging prices in the products Home Depot sells. But the company has been able to pass nearly all of these increased costs on to customers, with revenue growing 37% over the past two years while gross profits, or the profits the company makes on each item they sell, increased by 35%. Even this small difference appears to be due not to inflation eating away at Home Depot’s profits, but rather be a function of the huge increase in revenue the company has been generating in low margin lumber sales.”
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Our calculations show that The Home Depot, Inc. (NYSE:HD) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. The Home Depot, Inc. (NYSE:HD) was in 68 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 58 funds in the previous quarter. The Home Depot, Inc. (NYSE:HD) delivered a -9.85% return in the past 3 months.
Earlier this month, we also shared another hedge fund’s views on The Home Depot, Inc. (NYSE:HD) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.
Disclosure: None. This article is originally published at Insider Monkey.
