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Baron Funds on Installed Building (IBP): “We Think There is Lots to Like, and the Stock is Cheap”

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Baron Funds, an asset management firm, published its “Baron Small Cap Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. A return of 1.32% was delivered by the fund’s institutional shares for the third quarter of 2021. For the first nine months of the year, the Fund is up 10.65%. The Fund soundly beat the performance of the Russell 2000 Growth Index (the “Index”) in the quarter, which was down 5.65%, and for the year, with the Index up just 2.82%. The S&P 500 was up 0.58% for the quarter and is up 15.92% for the year, as large-cap stocks have outpaced small caps this year. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Baron Small Cap Fund, in its Q3 2021 investor letter, mentioned Installed Building Products, Inc. (NYSE: IBP) and discussed its stance on the firm. Installed Building Products, Inc. is a Columbus, Ohio-based residential insulation installer with a $4.0 billion market capitalization. IBP delivered a 34.63% return since the beginning of the year, while its 12-month returns are up by 45.91%. The stock closed at $137.23 per share on December 09, 2021.

Here is what Baron Small Cap Fund has to say about Installed Building Products, Inc. in its Q3 2021 investor letter:

"InstalledBuilding Products, Inc. is the largest installer of insulation and complementary building products to the residential housing market. The stock declined because of mixed business trends, and because interest rates ticked up, which is considered bad for housing stocks. Margins are under pressure as the company is suffering from supply chain issues…primarily getting the products they install in a timely fashion. On the other hand, revenue growth reaccelerated as the company gained market share. Management is positive about the pricing environment and believe they will be able to pass on higher insulation costs. They have been focused on retaining their labor force for years, which is now reaping benefits and is a major competitive advantage. And we expect acceleration in acquisitions, as the pipeline is stocked. These purchases are highly accretive and are a core competency of management. We think there is lots to like, and the stock is cheap."

Pixabay/Public Domain

Based on our calculations, Installed Building Products, Inc. (NYSE: IBP) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. IBP was in 15 hedge fund portfolios at the end of the third quarter of 2021, compared to 12 funds in the previous quarter. Installed Building Products, Inc. (NYSE: IBP) delivered a 12.89% return in the past 3 months.

During the second quarter of this year, we also shared Baron fund’s views on IBP in another article. You can find more than 100 investor letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q3 page.

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