Merion Road Capital, an investment advisor, released its fourth-quarter 2022 investor letter. A copy of the same can be downloaded here. In the fourth quarter, Merion Road Small Cap Fund returned -3.5% compared to a 6.2% return for the Russell 2000 Index and 3.2% for the Barclay Hedge Fund Index. Along with this, MRCM Long Only Large Cap returned -6.4% compared to a -4.9% return for the S&P 500 Index. For the full year 2022, Merion Road Small Cap Fund declined 17%, and MRCM Long Only Large Cap was down by 35%. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
Merion Road Capital highlighted stocks like Ferguson plc (NYSE:FERG) in the fourth quarter 2022 investor letter. Headquartered in Wokingham, the United Kingdom, Ferguson plc (NYSE:FERG) is a plumbing and heating products distributing company. On January 16, 2023, Ferguson plc (NYSE:FERG) stock closed at $139.08 per share. One-month return of Ferguson plc (NYSE:FERG) was 10.92%, and its shares lost 19.29% of their value over the last 52 weeks. Ferguson plc (NYSE:FERG) has a market capitalization of $28.808 billion.
Merion Road Capital made the following comment about Ferguson plc (NYSE:FERG) in its Q4 2022 investor letter:
“Ferguson plc (NYSE:FERG). Increasing risks for a slow-down in new residential construction have yet to appear in the company earnings as they grew revenue and EBITDA by 23% and 22% respectively over the trailing 12 months. There is little doubt that the pull-back is coming given what we have seen in new permits and residential construction starts. Remember that only half of FERG’s business serves the residential market and 60% of their business is used for repair, maintenance, and improvement. FERG has historically grown a few percentage points in excess of the market and has a strong balance sheet to capitalize on others’ weakness. Assuming revenue falls 12% (15% organic offset by acquisitions) and EBITDA margins drop from almost 11% to 9%, the company would still generate over $7 a share in cash. Importantly I can see earnings recovering to $10 a share in the next couple years. FERG fell 29% to end the year at $127, implying just 18x/13x depressed/normalized earnings.”
Ferguson plc (NYSE:FERG) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. Per our database, 42 hedge fund portfolios held Ferguson plc (NYSE:FERG) at the end of the third quarter, and 32 in the previous quarter.
We discussed Ferguson plc (NYSE:FERG) in another article and shared Madison Funds’ views on the company. In addition, please check out our hedge fund investor letters Q4 2022 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.
