Alluvial Capital Management discussed BlueLinx Holdings Inc. (NYSE: BXC) in its Q1 investor letter. The firm expects BlueLinx shares to rise “as market awareness grows and the company achieves its projected cost savings.” Let’s take a look at Alluvial Capital’s thoughts on BXC.
BlueLinx is a new, but relatively large holding for Alluvial Fund. BlueLinx is a building products distributor. The company supplies homebuilders, contractors, and dealers and retailers like Home Depot and 84 Lumber with all manner of materials, mainly for use in home exteriors. As a distributor, BlueLinx compensates for its structurally low margins by attempting to minimize its working capital investment and economizing wherever possible on delivery and service costs.
BlueLinx has just acquired a competitor, Cedar Creek. With the purchase, Bluelinx has nearly doubled in size and will enjoy greater purchasing power and a more efficient distribution network. The company believes the transaction will create at least $50 million in annual savings. The company took on debt to complete the acquisition of Cedar Creek but will pay down this debt rapidly by selling or performing sale-and-leasebacks on the company’s substantial real estate holdings. BlueLinx owns many of its distribution centers outright, and estimates these sites are worth $150-160 million. The company will not owe tax on the proceeds from the sale of these parcels due to accumulated net operating losses.
I believe BlueLinx is capable of earning at least $8 per share in 2019, and perhaps far more if housing starts rise to average historical levels. Even after the purchase of Cedar Creek, BlueLinx remains a small company with a low profile. Shares soared following the announcement of the Cedar Creek acquisition, but I expect them to rise further as market awareness grows and the company achieves its projected cost savings.
BlueLinx Holdings Inc. (NYSE: BXC) is a wholesale distributor of building and industrial products in the United States. The company booked a loss of $13.4 million for the fiscal first quarter of fiscal 2018, versus net income of $0.6 million in the prior fiscal year same quarter. It generated net sales of $437.5 million for the quarter, up $8.9 million from the prior-year first quarter.
On the share market, BlueLinx has been performing well since February. Over the past three months, the stock gained 26.63%, while the share price jumped whopping 309.39% over the past 12 months.
Meanwhile, BXC isn’t a very popular stock among hedge funds covered by Insider Monkey. As of the end of 2017, there were only nine funds in our database with positions in the company.