Is Builders FirstSource (BLDR) Positioned to Benefit from the Fragmented Industry?

Sands Capital, an investment management company, released its “Sands Capital Global Growth Fund” first-quarter 2025 investor letter. A copy of the letter can be downloaded here. Global Growth adopts a flexible approach to identify the most promising growth companies across the globe. Global equities fell in the first quarter, as per the MSCI ACWI. The strategy underperformed the benchmark amid the weakness. You can check the fund’s top 5 holdings to know more about its best picks for 2025.

In its first-quarter 2025 investor letter, Sands Capital Global Growth Fund highlighted stocks such as Builders FirstSource, Inc. (NYSE:BLDR). Based in Irving, Texas, Builders FirstSource, Inc. (NYSE:BLDR) is a building material, manufactured components, and construction services provider.  The one-month return of Builders FirstSource, Inc. (NYSE:BLDR) was 2.38%, and its shares lost 22.50% of their value over the last 52 weeks. On June 5, 2025, Builders FirstSource, Inc. (NYSE:BLDR) stock closed at $113.36 per share with a market capitalization of $12.528 billion.

Sands Capital Global Growth Fund stated the following regarding Builders FirstSource, Inc. (NYSE:BLDR) in its Q1 2025 investor letter:

“Builders FirstSource, Inc. (NYSE:BLDR) is the largest lumber and building materials distributor in the United States by market share. BFS is well positioned to benefit, in our view, from consolidating the fragmented lumber and building materials industry, which primarily supplies residential homebuilders. New home construction in the United States should benefit from several secular tailwinds, in our view, including demographic shifts, meaningful undersupply, and steady capacity additions by large homebuilders. Meanwhile, despite generating twice as much revenue as its closest competitor, BFS only touches about 30 percent of all U.S. housing starts today. In addition to growing its share of housing starts, we also expect BFS to grow its share of materials within each home from slightly over 10 percent of average construction costs in 2025. The company’s product bundle—which includes loose lumber, prefabricated wall panels, roofing trusses, windows, doors, millwork, and cabinetry—is designed to save homebuilders time and money while easing the logistical burden of vendor management. BFS’s growing installation services offering also helps address the pressing labor needs faced by the residential construction industry. We expect a higher proportion of value-added products, investment in manufacturing automation, and growing bargaining power with suppliers to support margin expansion over our investment horizon.”

Builders FirstSource, Inc. (NYSE:BLDR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 58 hedge fund portfolios held Builders FirstSource, Inc. (NYSE:BLDR) at the end of the first quarter, which was 59 in the previous quarter. Builders FirstSource, Inc.’s (NYSE:BLDR) first quarter sales decreased 6% to $3.7 billion. While we acknowledge the potential of Builders FirstSource, Inc. (NYSE:BLDR) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Builders FirstSource, Inc. (NYSE:BLDR) and shared the list of stock Jim Cramer talked about recently. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

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