Should You Consider Investing in Wayfair (W)?

Alphyn Capital Management, an investment management firm, published its  second-quarter 2022 investor letter – a copy of which can be downloaded here. The fund’s Master Account returned -14.7% net in Q2 2022 vs -16.1% for the S&P500. As of June 30, 2022, the top ten positions comprised approximately 69% of the portfolio, and the portfolio held approximately 3.50% in cash. Go over the fund’s top 5 positions to have a glimpse of its finest picks for 2022.

In its Q2 2022 investor letter, Alphyn Capital mentioned Wayfair Inc. (NYSE:W) and explained  its insights for the company. Founded in 2002, Wayfair Inc. (NYSE:W) is a Boston, Massachusetts-based online store company with a $6.3 billion market capitalization. Wayfair Inc. (NYSE:W) delivered a -68.62% return since the beginning of the year, while its 12-month returns are down by -79.10%. The stock closed at $59.61 per share on August 09, 2022.

Here is what Alphyn Capital has to say about Wayfair Inc. (NYSE:W) in its Q2 2022 investor letter:

“With the benefit of hindsight, it is clear that the timing of my investment in Wayfair left something to be desired. I had underestimated the degree to which going from a “covid beneficiary” to a post-covid would hurt the share price. As the market frequently does, it extrapolates recent performance too far. When things are going well, positive momentum hits the stock; when the environment is more challenging, companies can be priced as if they are imminently going out of business. At times like this, it is good to re-assess a position to decide if the issues are likely transient or fundamental.

Wayfair has compounded revenue at over 30% per year to a substantial $14bn. However, as with many fastgrowth tech companies, it did not turn a profit, except in 2020 when Wayfair generated approximately $900m operating profit. (I deduct stock compensation and depreciation from their reported EBITDA numbers, as these are real expenses to my mind). I believe this shows the company can and will be profitable. Unlike many of its tech peers, Wayfair was never valued at obscene sales multiples, reaching a modest 2.6x revenues at its maximum. At today’s approximate $6bn market capitalization, we do not need any heroic assumptions of future profitability to drive a good return…” (Click here to see the full text)

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Our calculations show that Wayfair Inc. (NYSE:W) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Wayfair Inc. (NYSE:W) was in 27 hedge fund portfolios at the end of the second quarter of 2022, compared to 28 funds in the previous quarter. Wayfair Inc. (NYSE:W) delivered a 1.93% return in the past 3 months.

In May 2022, we also shared another hedge fund’s views on Wayfair Inc. (NYSE:W) 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.