Oakmark Funds: “The Market is Failing to Properly Reward Masco (MAS)”

Oakmark Funds, an investment management firm, published its “Oakmark Fund” second quarter 2022 investor letter – a copy that can be downloaded here.  The Oakmark Fund returned -17.8% during the second quarter, underperforming the S&P 500 Index’s return of -16.1%. In constructing portfolios for its clients, the fund seeks out companies that it believes are trading in the market at significant discounts to their underlying value. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.

In its Q2 2022 investor letter, Oakmark Fund mentioned Masco Corporation (NYSE:MAS) and explained its insights into the company. Founded in 1929, Masco Corporation (NYSE:MAS) is a Livonia, Michigan-based manufacturing company with a $12.9 billion market capitalization. Masco Corporation (NYSE:MAS) delivered a -21.96% return since the beginning of the year, while its 12-month returns are down by -7.90%. The stock closed at $54.80 per share on July 20, 2022.

Here is what Oakmark Fund has to say about Masco Corporation (NYSE:MAS) in its Q2 2022 investor letter:

“We believe the market is failing to properly reward Masco (NYSE:MAS), a leader in home improvement products, for the significant upgrade of its business mix over the past decade. Having previously sold its more cyclical, lower return businesses, such as insulation, windows, and cabinets, what remains are some of the strongest and most recognizable brands in the industry. The company’s portfolio of products-primarily coatings (Behr) and plumbing fixtures (Delta, Hansgrohe)-are more resilient, lower ticket, and higher margin categories. Both segments compete within heavily consolidated industries, exhibit strong pricing power and skew meaningfully toward the less cyclical repair and remodel market. Despite its greatly improved business mix, Masco trades for just 10x next year’s expected earnings, which is a discount to historical levels and comfortably below a market multiple. We believe this dislocation presents an attractive opportunity to invest in a well-managed, high-quality portfolio in a sector that’s currently out of favor.”

PI/Shutterstock.com

Our calculations show that Masco Corporation (NYSE:MAS) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Masco Corporation (NYSE:MAS) was in 35 hedge fund portfolios at the end of the second quarter of 2022, compared to 41 funds in the previous quarter. Masco Corporation (NYSE:MAS) delivered a 5.67% return in the past 3 months.

In December 2021, we also shared another hedge fund’s views on Masco Corporation (NYSE:MAS) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q2 page.

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