Builders FirstSource (BFS) in Bonhoeffer Capital 2024 Q2

Leveraging Acquisitions for Growth in Building Products

Apr 15, 2025

Summary

Investment rationale: Public leverage buyout strategy with high return on capital.
Market positioning: Unique among building products distributors with specialty products.
Risks and challenges: Dependence on interest rate spreads for leverage strategy.
Recent performance: Free cash flow increased significantly from $207 million in 2018 to $1.6 billion in 2023.
Future outlook: Continued growth through acquisitions and operational synergies.

Builders FirstSource (BFS, Financial) was featured in Bonhoeffer Capital’s Q2 2024 letter as a prime example of a public leverage buyout strategy. The company’s focus on distributing building products and providing specialty products in fragmented markets has allowed it to achieve high returns on capital. BFS’s strategy involves leveraging acquisitions to create synergies and operational leverage, which are then used to repay debt and repurchase stock, enhancing equity returns.

"BFS is an example of an interesting public LBO. Unique among building products distribution firms, BFS not only distributes building products to a fragmented customer base but it provides specialty products in fragmented product markets that are geographically constrained, such as trusses and millwork." — Keith D. Smith, CFA, Bonhoeffer Capital, Q2 2024 Fund Letter

Read full letter at gurufocus Bonhoeffer Capital 2024 Q2 page.

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