Armstrong World Industries Inc

Armstrong World Industries, Inc. (AWI) declined on weaker commercial construction activity and destocking in distribution channels. These factors were outside the company's control, but management partially offset the impacts through growth initiatives. Enhanced visibility in the backlog and momentum from initiatives pair well with AWI's pricing power, leading market position and recovering end markets.

Armstrong World Industries, Inc. (AWI) shares outperformed in the quarter due to beating expectations, driven by favorable positioning in key verticals and strong operating leverage. We continue to like AWI for its consistent execution, strong financials, leading market share and persistent moats through its exclusivity agreements and warranties. Despite trimming our position following recent strength, we maintain an optimistic outlook for the ceiling tile business and AWI’s leading position in an oligopoly.

We continue to like AWI for its consistent execution, strong financials, leading market share and persistent moats through its exclusivity agreements and warranties. AWI shares outperformed in the quarter due to beating expectations, driven by increased volumes from recent acquisitions and an increase in pricing.

We sold one holding during the quarter, Armstrong World Industries. Armstrong is the leading manufacturer of ceiling products, including a dominant position in ceiling tiles. We purchased the stock in the throes of the Covid pandemic, when the stock became cheap given its exposure to the office real estate market. It derives the majority of its revenue from replacement and renovation demand, rather than new construction, and thus, the company has done well despite the continuation of a weak office building market. Both its profits and its share price have risen strongly since our investment, and the resulting increase in valuation is more reflective of its good prospects.