Merion Road Capital Management, an investment advisor, released its third-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the third quarter, Merion Road Small Cap Fund returned 5.0% compared to 12.4% return for the Russell 2000 Index. The long-only portfolio of Merion Road returned 10.1% during the quarter compared to the S&P 500’s 8.1% return. The portfolio’s performance was largely driven by the strong performance of Kratos. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.
In its third-quarter 2025 investor letter, Merion Road Capital Management highlighted stocks such as American Woodmark Corporation (NASDAQ:AMWD). American Woodmark Corporation (NASDAQ:AMWD) is a leading manufacturer and distributor of kitchen, bath, and home organization products. The one-month return of American Woodmark Corporation (NASDAQ:AMWD) was -25.78%, and its shares lost 50.80% of their value over the last 52 weeks. On November 20, 2025, American Woodmark Corporation (NASDAQ:AMWD) stock closed at $47.84 per share, with a market capitalization of $696.98 million.
Merion Road Capital Management stated the following regarding American Woodmark Corporation (NASDAQ:AMWD) in its third quarter 2025 investor letter:
“I bought shares in American Woodmark Corporation (NASDAQ:AMWD) following their announced merger with Masterbrand (“MBC”). AMWD & MBC are two of the largest US manufacturers of residential cabinets. What stood out to me were the identified synergies relative to their current earnings power. Specifically, the companies have identified $90mm in cost synergies relative to ~$490mm in EBITDA, an 18% increase. Importantly, MBC management is already 1 year into acquiring Supreme and have stated that the integration progress is on track relative to their initial estimates. Unlike Supreme, which has many high-end and customized products, AMWD has a more standardized product offering; as such any rejiggering of manufacturing locations with AMWD should be a lot easier.
MBC is run by Dave Banyard who will remain as CEO of the combined company. Having previously worked in senior roles at both Danaher and Roper, he has a lot of experience in acquisitions and operational excellence. Keeping in mind that this is a highly cyclical industry, from 2019 to LTM, Dave was able to grow revenue at MBC by 5.7% organically; this compares positively to AMWD which grew 0.2% during the same period. From a margin perspective, MBC performed favorably as well. MBC expanded its EBITDA margin from 11.1% to 12.5% (+1.4%) while AMWD compressed from 13.9% to 11.1% (-2.8%). I expect that the combined entity will benefit from Dave’s leadership.
We are now more than three years into the pullback in new housing starts and are running at pre-covid levels. Interest rates have already started to come down and the consensus is that they will move lower over the next year. At some point housing activity will pick up again and sentiment will improve. Furthermore, President Trump has put in place a 25% tariff on imported cabinets with a scheduled increase to 50% on January 1st 2026. Of course this could change at a moment’s notice, but for the time being this protectionist act will greatly benefit the clear-cut #1 domestic manufacturer. AMWD/MBC currently trade at 6.6x / 9.7x their depressed EBITDA / free cash flow.”
American Woodmark Corporation (NASDAQ:AMWD) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 22 hedge fund portfolios held American Woodmark Corporation (NASDAQ:AMWD) at the end of the second quarter, up from 19 in the previous quarter. While we acknowledge the risk and potential of American Woodmark Corporation (NASDAQ:AMWD) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than American Woodmark Corporation (NASDAQ:AMWD) and that has 10,000% upside potential, check out our report about this cheapest AI stock.
In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
