Wasatch Global: “TREX is Well Positioned to Pass Along Future Cost Increases”

Wasatch Global Investors, an investment management firm, published its “Wasatch Ultra Growth Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. Growth stocks fared worse than value stocks in the quarter, with the benchmark Russell 2000® Growth Index down -12.63%. The Wasatch Ultra Growth Fund—Investor Class posted a larger decline of -16.69%. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Wasatch Ultra Growth Fund mentioned Trex Company, Inc. (NYSE:TREX) and explained its insights for the company. Founded in 1996, Trex Company, Inc. (NYSE:TREX) is a Winchester, Virginia-based boarding company with a $5.6 billion market capitalization. Trex Company, Inc. (NYSE:TREX) delivered a -62.92% return since the beginning of the year, while its 12-month returns are down by -47.33%. The stock closed at $50.07 per share on June 16, 2022.

Here is what Wasatch Ultra Growth Fund has to say about Trex Company, Inc. (NYSE:TREX) in its Q1 2022 investor letter:

“Stocks that benefited from the pandemic were easy targets for investors seeking to reduce their exposure to equities during the first quarter. Trex Co., Inc. (NYSE:TREX) was among the so-called “Covid winners” that sold off in the quarter on macroeconomic concerns. The company is tied to the home improvement market, which thrived during the worst of the pandemic as homebound Americans chose to upgrade their living spaces instead of eating out and taking expensive vacations. As Covid-19 has subsided, some investors have worried that the growth rates of Trex may slow. The prospect of higher interest rates also appeared to weigh on the companies’ valuations.

Trex manufactures wood-alternative decking primarily from recycled materials. Although higher energy and logistics costs squeezed margins in the company’s most recently reported quarter, Trex was able to raise prices with little impact on demand. We believe the company’s leading position in its product category leaves Trex well positioned to pass along future cost increases as well. Moreover, higher oil prices aren’t likely to significantly affect costs for the recycled plastic from which the company’s products are made.”

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Our calculations show that Trex Company, Inc. (NYSE:TREX) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Trex Company, Inc. (NYSE:TREX) was in 38 hedge fund portfolios at the end of the first quarter of 2022, compared to 28 funds in the previous quarter. Trex Company, Inc. (NYSE:TREX) delivered a -36.39% return in the past 3 months.

In June 2022, we also shared another hedge fund’s views on Trex Company, Inc. (NYSE:TREX) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

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