Blue Hawk Investment Group’s Opinion on Floor & Decor and Splunk

Blue Hawk Investment Group, LLC is the management company of the Blue Hawk Fundamental Growth Fund, LP. Insider Monkey has recently published a copy of Blue Hawk Investment Group’s Q1 2020 investor letter. A copy of the letter can be downloaded here. Jake DuBois is the fund’s founder and managing member. The fund was founded in 2016. For Q1 2020, the fund reported a net return of -10.01%, while the S&P 500 returned -20.00%.

In the said letter, Jake DuBois highlighted a few stocks and Floor & Decor Holdings Inc. (NYSE:FND) is one of them. Floor & Decor is a retailer of hard surface flooring and related accessories. Year-to-date, FND stock lost 33.4% and on April 21st it had a closing price of $34.09. Its market cap is of $3.5 billion, and FND is trading at a price-to-earnings ratio of 23.50x. Here is what Jake DuBois said:

“The Russell 2000 Index (a proxy for small companies in the US) is down 30% year to date, indicating the investor pessimism for smaller/younger companies in the current environment. Floor and Décor has shared in this pain, down 35% on the year. We think some of this price action is warranted as housing-related businesses may come under pressure over the next couple quarters if the recession is prolonged. That said, Floor and Décor has no debt on its balance sheet, and ultra-low interest rates should create a very constructive environment longer-term for housing- related stocks as the world settles. To be clear, this is a bet on an excellent company and not its industry. Trading at its 2017 IPO price, we think it is a great bargain.”

Hedge funds have been bullish on FND stock since the end of June 2019 (see the chart here).

Blue Hawk Investment Group’s comments on Splunk

In the said letter, Jake DuBois also highlighted Splunk Inc (NASDAQ:SPLK) stock. The company collects and processes machine-generated data that comes from websites, applications, servers and networks. Here is what Jake DuBois said:

“Splunk first came onto our radar in summer 2018, when our now-analyst Mike covered the Cybersecurity industry for his summer project (it isn’t a pure cybersecurity company, though it has key use cases in cybersecurity). Splunk’s software is used for monitoring, searching, analyzing, and visualizing unstructured machine data4 in real time and at massive scale. The company has generated impressive growth over many years and has built up deep relationships with a largely enterprise customer base, while making tangential acquisitions that enhance its offering. We really liked the company at the time, but we didn’t like the valuation, so we waited for a better entry point. After a particularly good quarterly report in November – including details about its business model transition to the cloud – the market got extremely excited about Splunk and bid up the stock price even higher. We thought we had missed the boat, but the price fell precipitously during the market downturn, and we took advantage of what we believed to be a very attractive entry point in mid-March – at a price that was 40% lower than a month earlier. The stock price subsequently bounced off this near-bottom, and it ended the quarter as one of our top contributors. We think Splunk will be a long-term winner in the data space and we’re excited about our entry point.”

Hedge funds have been bullish on SPLK stock since the end of June 2019 (see the chart here).

Disclosure: None. This article is originally published at Insider Monkey.