Diamond Hill Capital, an investment management firm, published its “Diamond Hill Small Cap Fund” second-quarter 2021 investor letter – a copy of which can be downloaded here. The portfolio performed roughly in line with the Russell 2000® Index in the quarter, delivering solid absolute results and remaining ahead of the benchmark year to date. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Diamond Hill Capital, the fund mentioned Allegiant Travel Company (NASDAQ: ALGT) and discussed its stance on the firm. Allegiant Travel Company is a Las Vegas, Nevada-based airline company with a $3.3 billion market capitalization. ALGT delivered a -0.27% return since the beginning of the year, while its 12-month returns are up by 41.81%. The stock closed at $188.72 per share on September 10, 2021.
Here is what Diamond Hill Capital has to say about Allegiant Travel Company in its Q2 2021 investor letter:
“Bottom contributors included Allegiant Travel. The airline industry overall gave back some gains in Q2 following strong returns over the past three quarters. We believe Allegiant, along with our other travel & leisure names, remains well positioned to benefit from pent-up demand as vaccine distribution expands and capacity restrictions are removed. Leisure travel, where Allegiant is focused, has been recovering first, and Allegiant is benefiting from having a more flexible route structure than peers.”
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Based on our calculations, Allegiant Travel Company (NASDAQ: ALGT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. ALGT was in 29 hedge fund portfolios at the end of the first half of 2021, compared to 22 funds in the previous quarter. Allegiant Travel Company (NASDAQ: ALGT) delivered a -10.57% 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.
