Leading global floor product manufacturer, Mohawk Industries, Inc. (NYSE:MHK) was another notable detractor, falling -18.16% in the quarter on weaker than expected earnings. MHK is experiencing operating margin pressure due to raw material price and wage inflation, higher transportation costs, changes in product mix and lower than anticipated revenue due to delays in luxury vinyl tile sourcing. To address these issues, MHK introduced initiatives to improve pricing, increase sales in growing channels and reduce overall costs. We have confidence in this owner-operated management team and believe that the company’s pricing power, benefits from recent heavy capital spend and its strong balance sheet will overcome the headwinds. At current levels, MHK is trading at a -35% discount to our estimate of private market value.
From John Rogers (Trades, Portfolio)' Ariel Fund third-quarter 2018 shareholder commentary.
