Black Bear Value Partners, an investment management firm, published its third quarter 2023 investor letter, a copy of which can be downloaded here. Black Bear Value Fund returned +7.3% in September and is up +26.4% YTD and the S&P 500 returned -4.8% in September and +13.1% YTD. HFRI Value Index returned +8.8% YTD through August. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Black Bear Value Partners highlighted stocks like Builders FirstSource, Inc. (NYSE:BLDR) in the third quarter 2023 investor letter. Based in Irving, Texas, Builders FirstSource, Inc. (NYSE:BLDR) is a building material, manufactured components, and construction services provider. On October 6, 2023, Builders FirstSource, Inc. (NYSE:BLDR) stock closed at $119.31 per share. One-month return of Builders FirstSource, Inc. (NYSE:BLDR) was -15.91%, and its shares gained 86.16% of their value over the last 52 weeks. Builders FirstSource, Inc. (NYSE:BLDR) has a market capitalization of $14.918 billion.
Black Bear Value Partners made the following comment about Builders FirstSource, Inc. (NYSE:BLDR) in its Q3 2023 investor letter:
“Builders FirstSource, Inc. (NYSE:BLDR) is a manufacturer and supplier of building materials with a focus on residential construction. Historically this business was cyclical with minimal pricing power as the primary products sold were lumber and other non-value-add housing materials. Since the GFC, BLDR has focused on growing their value-add business that is now 40%+ of the topline. The company has modest leverage and has been using their abundant free-cash-flow to buy in over 30% of the stock in the last 18 months.
While mortgage rates are higher, they are not unusual versus history. The low rates of the last 5-10 years are the outlier. We have a structural shortage of housing in the USA. With existing homeowners locked into low-rate mortgages, the aspiring homeowner may increasingly need to find a home from a homebuilder. The next 6-12 months could be rocky as people adjust to the increase in pricing and rates. Eventually the housing market should adjust to the new normal (or rates could go down).
The company has realized sustained higher gross margins as they have gained scale. I am now giving them credit for some increased margin and raised my normalized free-cash-flow per share to $13-$17 per year. At quarter end pricing of ~$124 that implies a free-cash-flow yield of 10-14%.”
Dmitry Kalinovsky/Shutterstock.com
Builders FirstSource, Inc. (NYSE:BLDR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 57 hedge fund portfolios held Builders FirstSource, Inc. (NYSE:BLDR) at the end of second quarter which was 51 in the previous quarter.
We discussed Builders FirstSource, Inc. (NYSE:BLDR) in another article and shared Black Bear Value Partners’ views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2023 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.
