HLMN:NASDAQ

The views expressed below are those of Anchor Capital Advisors, LLC (‘‘Anchor’’) as of the date written and are subject to change at any time. They are based on our proprietary research of the stated company and the following is a summary of the primary factors that support our beliefs and rationale for investing in the company. Please see additional disclosures at the end of this publication.

HLMN: NASDAQ

Hillman Solutions Corp (HLMN) distributes home improvement products including fasteners, rods, gloves, eye-war, and keys through kiosk technology.[1] They manage over 112,000 SKU’s, with the majority of brands owned by Hillman.[2] The company was founded in 1964, and is headquartered in Cincinnati, OH. [3]

Investment thesis

We believe Hillman is one of two market leaders in home improvement aisles across retailers including Home Depot, Lowe’s, and Ace Hardware.[4] Hillman plays in a space that we believe has strong industry growth and macro tailwinds. The company has key competitive advantages including a deep member field sales team and long standing relationships with retailers.[5] In our opinion, the company has high barriers to entry, a long history of top line growth, that management is targeting strong growth long term.

Confirmation through research

Within their addressable market they control 22% market share, with PrimeSource a little over half the size.[6] From there it drops off into players that are 15x smaller. In our opinion, the company benefits from tailwinds including a shift toward home improvement and home buying. The company has clearly built a moat with 1,100 field sales members who focus on inventory management at retailers like Lowe’s and Home Depot.[7] They have stocks of products that are up to 1000 bps ahead of other suppliers thanks to this team. Further, they have long-standing relationships with retailers, including 28 years with Lowe’s, and 19 years with Home Depot.[8] The company has a long history of top line growth, growing 6% organically since 2000, with only one year with revenue down 5% in 2008. [9] While the industry is growing at an average of 3% to 4% per year.[10] The management is publically targeting 6% organic growth and 10% EBITDA growth. [11] Finally, we believe the company to be undervalued as it sells for a discount to high quality industrial peers with similar top and bottom line growth rates such as Fastenal, SiteOne Landscape Supply, and Pool Corp. [12]

Variant Perception

We believe the market is not assigning fair value to the business considering its market leadership, competitive advantages, macro tailwinds, history of growth, and growth targets going forward.