CVCO - Cavco Industries Inc.: A Compounding Small Cap Stock | Benzinga
With Quiver Quantitative’s recent institutional holdings data, we can see that hedge funds and asset managers have been increasing their holdings in Cavco Industries Inc. (NASDAQ: CVCO). Firms such as T. Rowe Price, Millennium Management, and Pacer Advisors have all recently added to their CVCO positions. Most notably, Pacer Advisors increased shares held by 66.64% (as filed on 9/30), bringing their total CVCO holdings to 122,917 shares worth nearly $37.4 million dollars at current market prices. With this in mind, we took a closer look at some of the reasons why many investors may be bullish on Cavco Industries Inc.
In November, Cavco Industries Inc. reported earnings for the second quarter of fiscal year 2024. This earnings report was a little shaky, due to unfavorable market conditions. Net revenue was $452 million dollars in the second quarter of FY24, compared to $577 million dollars in the second quarter of FY23 (21.7% decrease). Additionally, backlogs were $170 million at the end of the quarter, down $7 million from $177 million three months prior. Despite this, nearly $47 million dollars was returned to shareholders via share repurchases, showcasing the management’s strong capital allocation priorities that put shareholders first. While this short-term hiccup in earnings isn’t positive, management still remains committed to long-term business objectives, such as deepening distribution partnerships, developing innovative products and finance solutions, and improving the customer experience. When commenting on the quarter, CEO Bill Boor mentioned "Prospective homeowners have gotten no relief from the impact of rising interest rates and the affordable housing crisis is intensifying.” This further showcases the secular tailwinds positively affecting the manufactured and modular home construction market that Cavco Industries’ operates within. With these earnings results in mind, we took a closer look at some of the reasons why many investors are bullish on Cavco Industries Inc.
Cavco Industries Inc., headquartered in Phoenix, Arizona, is a leading manufacturer of factory-built homes in the United States. Founded on June 30, 2003, it stands as the successor corporation to previous Cavco entities that have been operational since 1965. The company specializes in designing and producing a wide range of factory-built homes, including manufactured homes, park model RVs, vacation cabins, and factory-built commercial structures. These homes are marketed under various brand names, such as Cavco, Fleetwood, Palm Harbor, and Solitaire, to name a few. Cavco operates 29 homebuilding production lines within the U.S. and two in Mexico, distributing its products through a network of independent and Company-owned retailers across 48 states and Canada, including 64 U.S. retail stores, 50 of which are in Texas. In addition to home manufacturing, Cavco's finance subsidiary, CountryPlace Acceptance Corp., provides mortgage services and is approved by major national mortgage associations. Its insurance subsidiary, Standard Casualty Company, focuses on property and casualty insurance for manufactured homes, primarily serving the southwestern U.S. The company's recent acquisition of Solitaire Homes has expanded its manufacturing capabilities into Mexico and bolstered its market presence, especially in the Southwest.
The manufactured housing industry, where Cavco Industries operates, offers affordable alternatives to traditional housing and appeals to a diverse demographic, notably those with incomes under $40,000, individuals aged 55 and older, and young adults, including Millennials. In 2022, manufactured homes accounted for about 14.9% of all new single-family home sales in the U.S., with a significant increase in shipments since 2009. The industry benefits from positive secular trends like the growing U.S. adult population, expected to expand by 8.3 million between 2023 and 2028, and the increasing interest ...