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Michael Burry

Huttig Building Products
NYSE:HBP
2000-2005
Industry: Distributor (Doors, Windows, Trim)
Category: Value

Context
A leading distributor of building products, such as doors, windows, trim.
100m market cap but 218m enterprise value.

Why the Company was Mispriced
1.2b revenue but razor thin margins in a cyclical industry.
Spinoff from Crane, out of favour.

Alternative View
At time of spinoff, acquired Rugby USA, which increased revenue 60%, a british maker of crement and lime
Huttig is it's industry's most efficient operator, Rugby is a inefficient operator in a similar industry.
Huttig has been profitable since the Civil War, impressive for a cyclical razor thin industry.
Huttig plans to save at least 30m in EBITDA in Rugby's operations.
Additionally, there should be a one-time gain of 20m from Rugby's working capital.
Subtracting the 20m in working capital, Huttig acquired Rugby for 40m, gaining 30m in EBITDA.
Huttig averaged 21m in FCF last 3 years before the Rugby acquisition. Post-acquisition, FCF should just to at least 35m. and EBITDA to 60m.
The enterprise value trades 3.1x EBITDA and 5.1x FCF.
Keep in mind that 130 years of profitability.
Recent transactions suggest a private market value of $10/sh, shares are trading under $5.
Seth Klarman owns a large chunk of the float.

Risks
A short-term price risk, not business risk, is that the Rugby Group now owns 32% of Huttig's shares.

Result
The share price floated around $5 for first 2 years, before dropping to $2.50 in year 3.
In 5 years, the share price was $10.
Burry's sell date in unknown, but he iterated several times over the next year that it was worth north of $10.
I'll be generous and use the 5 year CAGR, which is 15%.