High Inflation is Crushing These 5 Stocks

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In this article, we discuss 5 stocks that the high inflation is crushing. If you want to see more stocks that are impacted by inflation, check out High Inflation is Crushing These 10 Stocks

5. Builders FirstSource, Inc. (NYSE:BLDR)

Number of Hedge Fund Holders: 57

Builders FirstSource, Inc. (NYSE:BLDR) is an American provider of building materials, manufactured components, and construction services. As inflation soars, people usually stop investing in home renovations and further construction since these are discretionary expenses. Builders FirstSource, Inc. (NYSE:BLDR) stock has dropped about 17% year to date as of August 10. 

On August 2, BTIG analyst Ryan Gilbert downgraded Builders FirstSource, Inc. (NYSE:BLDR) to Neutral from Buy without a price target. The analyst said that the downgrade is cyclical rather than owing to its Q2 results or corporate strategy, and told investors that results from the firm’s homebuilding coverage, survey work, and Census data all point to buyer demand plummeting in Q2 2022, starting in May and worsening in June and July. The analyst sees limited upside for further outperformance or multiple expansion until macro headwinds subside.

Among the hedge funds tracked by Insider Monkey, 57 funds were long Builders FirstSource, Inc. (NYSE:BLDR) at the end of Q1 2022, down from 59 funds in the prior quarter. Coliseum Capital is the leading position holder in the company, with 5.5 million shares worth $358.42 million. 

Here is what Black Bear Value Fund has to say about Builders FirstSource, Inc. (NASDAQ:BLDR) in its Q2 2022 investor letter:

“Builders FirstSource is a supplier and manufacturer of building materials for professional homebuilders, subcontractors, remodelers, and consumers. Their products include factory-built roof and floor trusses, wall panels and stairs, vinyl windows and custom millwork.

The fundamental discussion about homebuilders applies to BLDR. As more homes are built across the country, there will be an increased need for scaled sourcing of products to homebuilders. There is a large amount of fragmentation in the supply chain which provides BLDR a long runway for acquisitions and realistic synergies.

BLDR should be able to generate $7-$10 a share in cash in the medium term with significant upside if they can scale through acquisition and/or further penetrate existing markets. We own it at a 13-19% free-cash flow yield so little growth is needed for us to compound value at high rates.”

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