Bonhoeffer Capital Management, an asset management company, released its third-quarter 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter of 2024, the fund returned a gain of 11.3% net of fees compared to 7.7% returns for MSCI World ex-US, a broad-based index, and 8.5% return for the DFA International Small Cap Value Fund. The fund’s stocks have an average EV/EBITDA of 4.6 and a weighted average earnings/free cash flow yield of 12.5% as of September 30, 2024. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Bonhoeffer Capital Management highlighted stocks like Arrow Electronics, Inc. (NYSE:ARW) in the third quarter 2024 investor letter. Arrow Electronics, Inc. (NYSE:ARW) offers products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. The one-month return of Arrow Electronics, Inc. (NYSE:ARW) was -8.29%, and its shares lost 8.02% of their value over the last 52 weeks. On December 30, 2024, Arrow Electronics, Inc. (NYSE:ARW) stock closed at $112.44 per share with a market capitalization of $5.91 billion.
Bonhoeffer Capital Management stated the following regarding Arrow Electronics, Inc. (NYSE:ARW) in its Q3 2024 investor letter:
“In our Q1 2024 letter, our case study was our electronic component distributor, Arrow Electronics, Inc. (NYSE:ARW). Arrow’s model is to modestly grow earnings (5-6% per year) and buyback stock at a rate of about 10%. Below is the updated RoIIC model for Arrow:
Given the cyclicality of Arrow’s earnings, it is better to look at the longer term average RoIICs and averages. In this case, the 5-yr average FCF/Equity is 20% and 4-year RoIIC is 83%. As to forward estimates of growth and earnings below is the current estimated growth to 2029 with declining growth after 2026. This results in a 5-year growth rate of 20% consistent with the past 5-year growth rate and higher than the 10-year growth rate. The rationale for the higher growth rate than the 10-year growth rate is increases in component demand from AI and internet of things. If the past is repeated into the future, the EPS growth rate will be in the low teens. Below is an updated 5-year DCF for Arrow Electronics…” (Click here to read the full text)
A close-up view of a technician soldering a circuit board in an electronics manufacturing facility.
Arrow Electronics, Inc. (NYSE:ARW) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 28 hedge fund portfolios held Arrow Electronics, Inc. (NYSE:ARW) at the end of the third quarter which was 33 in the previous quarter. Arrow Electronics, Inc.’s (NYSE:ARW) third-quarter consolidated sales were $6.8 billion, which was 15% below the previous year’s quarter and above the mid-point of target range. While we acknowledge the potential of Arrow Electronics, Inc. (NYSE:ARW) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
In another article, we discussed Arrow Electronics, Inc. (NYSE:ARW) and shared Fiduciary Management Inc.’s views on the company. In addition, please check out our hedge fund investor letters Q3 2024 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.