Carillon Tower Advisers, an investment management firm, published its “Carillon Eagle Small Cap Growth Fund” third quarter 2021 investor letter – a copy of which can be downloaded here. Small-cap stocks experienced a bit of a disappointing quarter as both growth and value indexes saw negative quarterly returns for the first time since the pandemic-led market selloff in the early part of 2020. In a continuation of the recent trend, the Russell 2000® Growth Index (down 5.65%) trailed its Russell 2000® Value Index (down 2.98%) counterpart once again, with this quarter now marking four consecutive quarters of underperformance for growth. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Carillon Tower Advisers, in its Q3 2021 investor letter, mentioned CMC Materials, Inc. (NASDAQ: CCMP) and discussed its stance on the firm. CMC Materials, Inc. is an Aurora, Illinois-based semiconductor company with a $4.0 billion market capitalization. CCMP delivered a -8.42% return since the beginning of the year, while its 12-month returns are down by -17.89%. The stock closed at $138.56 per share on November 8, 2021.
Here is what Carillon Tower Advisers has to say about CMC Materials, Inc. in its Q3 2021 investor letter:
“CMC Materials is a supplier of consumable materials used in semiconductor chip production as well as oil pipelines. Recently, the semiconductor segment has performed well, but investors are slightly concerned about potential market share loss at a key customer. The oil pipeline segment declined in the first half of 2021 as crude oil prices pulled back. With oil prices increasing more recently, we believe this segment could see strength going forward. Shares of the firm’s stock currently trade at a deep discount to the company’s intrinsic value as well as other industrial consumable companies.”
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Based on our calculations, CMC Materials, Inc. (NASDAQ: CCMP) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CCMP was in 22 hedge fund portfolios at the end of the first half of 2021, compared to 19 funds in the previous quarter. CMC Materials, Inc. (NASDAQ: CCMP) delivered a 12.39% return in the past 3 months.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: None. This article is originally published at Insider Monkey.
