Here’s Why Baron Small Cap Fund Thinks Building Products (IBP) is Cheap
Baron Funds, an asset management firm, published its “Baron Small Cap Fund” first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 2.67% was delivered by the fund’s institutional shares for the Q1 of 2021, trailing the S&P 500 Index, which appreciated 6.17%, and modestly underperforming the Russell 2000 Growth Index which rose 4.88% for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Baron Small Cap Fund, in its Q1 2021 investor letter, mentioned Installed Building Products, Inc. (NYSE: IBP), and shared their insights on the company. Installed Building Products, Inc. is a Columbus, Ohio-based residential insulation provider that currently has a $3.6 billion market capitalization. Since the beginning of the year, IBP delivered a 20.98% return, extending its 12-month gains to 144.97%. As of May 14, 2021, the stock closed at $123.32 per share.
Here is what Baron Small Cap Fund has to say about Installed Building Products, Inc. in its Q1 2021 investor letter:
"Installed Building Products, Inc. (“IBP”) is the leading installer of insulation and complementary products for the U.S. residential construction market. IBP is well-positioned to prosper from the acceleration in new home construction, brought about by the decline in interest rates and the attractiveness of the suburbs. IBP has built a powerhouse company with national scale and strong local presence. It was assembled through highly successful strategic and accretive acquisitions, and by expanding into complementary products to leverage existing relationships. The company has grown its top line over 21% compounded for the last seven years and has grown its earnings even faster. Growth in the first quarter of 2021 was dampened by delays in completions caused by other trades and a mix shift towards lower-priced work for larger national builders. This, coupled with the rise in interest rates, caused the stock to trade down after reporting results. We remain excited by the strong organic growth outlook, the prospect of higher margins as increased commodity costs are passed through, a more robust acquisition program in the base residential business, and by the company building its presence in commercial markets. We think the stock is cheap at under 9 times last year’s EBITDA /14 times EPS, and we should benefit from anticipated growth and multiple expansion."
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Our calculations show that Installed Building Products, Inc. (NYSE: IBP) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Installed Building Products, Inc. was in 21 hedge fund portfolios, compared to 20 funds in the third quarter. IBP delivered a -3.95% return in the past 3 months.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
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Disclosure: None. This article is originally published at Insider Monkey.
