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 North American Construction Group Ltd. (NYSE:NOA), in the third quarter 2024 investor letter. North American Construction Group Ltd. (NYSE:NOA) offers mining and heavy civil construction services to customers in the resource development and industrial construction sectors. The one-month return of North American Construction Group Ltd. (NYSE:NOA) was 5.72%, and its shares gained 2.83% of their value over the last 52 weeks. On December 30, 2024, North American Construction Group Ltd. (NYSE:NOA) stock closed at $21.44 per share with a market capitalization of $575.171 million.
Bonhoeffer Capital Management stated the following regarding North American Construction Group Ltd. (NYSE:NOA) in its Q3 2024 investor letter:
“Our broadcast TV franchises, leasing, building products distributors and dealerships and service outsourcing, fall into this category. One trend we find particularly compelling in these firms is growth creation through acquisitions, which provides synergies and operational leverage associated with vertical and horizontal consolidation. The increased cash flow from acquisitions and subsequent synergies are used to repay the debt and repurchase stock, and the process is repeated. This strategy’s effectiveness is dependent upon a spread between borrowing, interest rates and the cash returns from the core business and acquisitions. Over the past few months, long-term interest rates have been declining and short-term rates are expected to follow so a large and growing spread is available to firms, like North American Construction Group Ltd. (NYSE:NOA) who have a high return on capital. One way to measure future expected returns are post-synergy cash flow ratios paid for acquisitions. Another way to measure future growth in expected returns is through incremental return on incremental invested capital (RoIIC).
Many of our holdings used the acquisition/buyback model described above. Some of these firms have also used modest leverage to magnify the returns of equity to 20% and above, over the past five to ten years from the acquisition/buyback model. These firms include: Terravest, Asbury Automobile, Ashtead, Autohellas, Builders First Source and NOA. In addition, many of these firms are buying back stock and the modest current valuations make these buybacks accretive…” (Click here to read the full text)
A specialized team conducting site dewatering operations in a vast open pit mine.
North American Construction Group Ltd. (NYSE:NOA) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 11 hedge fund portfolios held North American Construction Group Ltd. (NYSE:NOA) at the end of the third quarter which was 11 in the previous quarter. While we acknowledge the potential of North American Construction Group Ltd. (NYSE:NOA) 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 North American Construction Group Ltd. (NYSE:NOA) and shared the list of most undervalued Canadian stocks to buy according to analysts. 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.