Headwaters Capital’s Top Detractor: Floor and Decor (FND)

Headwaters Capital, an investment management firm, published its first-quarter 2022 investor letter – a copy of which can be downloaded here. The Headwaters Capital portfolio declined by -10.9% for the first quarter of 2022 compared to the -5.7% decline of the Russell Mid Cap index for the same period. 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, Headwaters Capital mentioned Floor & Decor Holdings, Inc. (NYSE:FND) and explained its insights for the company. Founded in 2000, Floor & Decor Holdings, Inc. (NYSE:FND) is an Atlanta, Georgia-based specialty retail company with an $8.4 billion market capitalization. Floor & Decor Holdings, Inc. (NYSE:FND) delivered a -38.68% return since the beginning of the year, while its 12-month returns are down by -28.13%. The stock closed at $79.72 per share on April 29, 2022.

Here is what Headwaters Capital has to say about Floor & Decor Holdings, Inc. (NYSE:FND) in its Q1 2022 investor letter:

Floor & Decor (“FND”) -38%. The sell-off in Floor and Décor was driven by general concerns around slowing consumer discretionary spending as stimulus benefits wane and consumers shift their spend toward services. More specifically, there is also concern that slowing home sales due to higher mortgage rates will negatively impact home remodel spending. I believe a lot of this remodel concern is misplaced given that the US housing stock continues to age and consumers are sitting on record levels of home equity due to recent home price appreciation, which should support continued strong remodel activity. As of FND’s analyst day on March 14th, management had not yet seen signs of slowing consumer spending given that the company reiterated guidance for same store sales growth of at least 10% for 2022. FND is currently trading at a 20% discount to its pre-COVID multiple, which represents an attractive valuation for a competitively advantaged specialty retailer with a long runway for new store growth.”

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Our calculations show that Floor & Decor Holdings, Inc. (NYSE:FND) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Floor & Decor Holdings, Inc. (NYSE:FND) was in 36 hedge fund portfolios at the end of the fourth quarter of 2021, compared to 33 funds in the previous quarter. Floor & Decor Holdings, Inc. (NYSE:FND) delivered a -22.80% return in the past 3 months.

In March 2022, we also shared another hedge fund’s views on Floor & Decor Holdings, Inc. (NYSE:FND) 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.