Should You Hold Bel Fuse (BELFB) for a Long-Term?
Atai Capital, an investment management firm, recently released its second investor letter. A copy of the same can be downloaded here. The fund returned 8.32% in the second quarter of 2023 and 13.06% year-to-date, net of all fees, compared to a 16.89% total return for the S&P 500 YTD and an 8.09% total return for the Russell 2000 YTD. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Atai Capital highlighted stocks like Bel Fuse Inc. (NASDAQ:BELFB) in the second quarter 2023 investor letter. Headquartered in Jersey City, New Jersey, Bel Fuse Inc. (NASDAQ:BELFB) engages in the design, manufacturing, and marketing of products used to power, protect and connect electronic circuits. On July 12, 2023, Bel Fuse Inc. (NASDAQ:BELFB) stock closed at $55.63 per share. One-month return of Bel Fuse Inc. (NASDAQ:BELFB) was -6.62%, and its shares gained 225.29% of their value over the last 52 weeks. Bel Fuse Inc. (NASDAQ:BELFB) has a market capitalization of $694.185 million.
Atai Capital made the following comment about Bel Fuse Inc. (NASDAQ:BELFB) in its second quarter 2023 investor letter:
"Bel Fuse Inc. (NASDAQ:BELFB) is an electronic components manufacturer, and despite the rather large run-up in share price, we are still being provided with an attractive opportunity to buy a good business at a dirt-cheap price today. They design, manufacture and market a broad array of products that power, protect and connect electronic circuits. Like many industrials, they have 1,000s of SKUs (stock keeping units, which is just a fancy way of saying product), so I won’t be diving into each product they make, but a few examples would be magnetic ethernet connectors for servers, fuel quantity monitors for aircraft, and cable assemblies + fuses for electric vehicles.
Most of their products aren’t exactly “ground-breaking” or super differentiated, but this is true of any electronic component manufacturer. Despite selling some commoditized products, these companies benefit from a low-cost but high cost of failure product offering. For example, while a fuse itself is usually a cheap and commoditized product in relation to the product it goes in, it remains an essential safety device that can save several other components. Customers want and need these products to work, and work well. Furthermore, while the switching costs for most of these commoditized products are usually low, it just doesn’t make sense in most cases to risk failure and pick up pennies in front of a steamroller. However, because there typically aren’t significant technological differences between fuses, connectors, etc., switching is easy. Hence, businesses offering these more commoditized components need to make sure inventory levels stay stable to maintain customers. If your fuses and other products are consistently in stock at distributors and affordable, it’s unlikely customers have any good reason for switching. These more commoditized products are usually sold through distributors (~33% of Bel’s business is through distribution) rather than to customers directly because these products tend not to be “custom built” for a specific end product. However, commoditized/distribution doesn’t necessarily always mean low margin, and Littelfuse (one of Bel Fuse’s competitors) is a good example of this. Despite having 75% distribution exposure in their electronic components segment, they still maintain low-twenties operating margins..." (Click here to read the full text)
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Bel Fuse Inc. (NASDAQ:BELFB) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 17 hedge fund portfolios held Bel Fuse Inc. (NASDAQ:BELFB) at the end of first quarter which was 17 in the previous quarter.
We discussed Bel Fuse Inc. (NASDAQ:BELFB) in another article and shared the list of best performing tech stocks of 2022. In addition, please check out our hedge fund investor letters Q2 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.
