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BlueLinx (BXC) Has Fallen 44% in Last One Year, Underperforms Market

If you are looking for the best ideas for your portfolio you may want to consider some of Maran Capital Management’s top stock picks. Maran Capital Management, an investment management firm, is bullish on BlueLinx Holdings Inc. (NYSE:BXC) stock. In its Q2 2019 investor letter – you can download a copy here – the firm discussed its investment thesis on BlueLinx Holdings Inc. (NYSE:BXC) stock. BlueLinx Holdings Inc. (NYSE:BXC) is a wholesale distributor of building and industrial products.

On July 24, 2019, Maran Capital Management had released its Q2 2019 investor letter. The investment firm said BlueLinx Holdings Inc. (NYSE:BXC) stock is one of the top five positions held in Q2 2019. BlueLinx Holdings Inc. (NYSE:BXC) stock has posted a return of -43.9% in the trailing one year period, underperforming the S&P 500 Index which returned 13.7% in the same period. This suggests that the investment firm was wrong in its decision. On a year-to-date basis, BlueLinx Holdings Inc. (NYSE:BXC) stock has risen by 25.8%.

In Q2 2019 investor letter, Maran Capital Management said the fund posted a return of 2.8% in the second quarter of 2019, underperforming fund’s benchmark the S&P 500 Index which returned 4.3% in the same period. Let’s take a look at comments made by Maran Capital Management about BlueLinx Holdings Inc. (NYSE:BXC) stock in the Q2 2019 investor letter.

“Careful readers of these letters will recall that we purchased a homebuilder in December of last year. At that point, I felt that it was pricing in a major homebuilding (or broader) recession, while having a number of favorable bottoms-up attributes, and thus that the stock’s risk/reward ratio was favorable. Despite the market (and homebuilding sector) rally since then, I believe the setup in BXC is currently similar.

We owned BlueLinx once before (after Cerberus exited their position via a block trade, but before BlueLinx announced the acquisition of Cedar Creek). It is a company I know fairly well, having followed it and its peers for most of my career (recall prior to launching Maran I spent a decade-plus focused mostly on basic material companies, including lumber, timber, building products, and homebuilding). It is well-run, and I believe it is currently inexpensive.

I believe BXC is mispriced because it is misunderstood across a number of vectors. The company made a transformative acquisition last year, and the integration has taken time and has not been without noise. On a backwards-looking basis, the company has reported a series of losses. Compounding this, the company is small, uncovered, and has a complex balance sheet. It certainly does not screen well.

But as one-time integration costs roll off (removal of negatives) and synergies from the acquisition are fully realized (introduction of positives) in the coming quarters, I believe investors (including those of the quantitative variety, who do engage in screening) will begin to see a more accurate reflection of what BXC should look like going forward. And I think they will like what they see.”

Adam Cowell/Shutterstock.com

In Q1 2020, the number of bullish hedge fund positions on BlueLinx Holdings Inc. (NYSE:BXC) stock decreased by about 14% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t seem to agree with BlueLinx’s growth potential. Our calculations showed that BlueLinx Holdings Inc. (NYSE:BXC) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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