Broyhill Asset Management, an investment management firm, published its second-quarter 2021 investor letter – a copy of which can be downloaded here. Since the availability of vaccines was announced in the fourth quarter of last year, the portfolio has appreciated materially, generating strong absolute performance and attractive returns relative to broad market indices. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Broyhill Asset Management, the fund mentioned Dollar Tree, Inc. (NASDAQ: DLTR) and discussed its stance on the firm. Dollar Tree, Inc. is a Chesapeake, Virginia-based discount store company with a $24.01 billion market capitalization. DLTR delivered a -4.19% return since the beginning of the year, while its 12-month returns are up by 0.85%. The stock closed at $103.51 per share on August 23, 2021.
Here is what Broyhill Asset Management has to say about Dollar Tree, Inc. in its Q2 2021 investor letter:
“The largest detractors to performance during the first half was existing investments in Dollar Tree Stores (DLTR). We trimmed our investment in Dollar Tree after the stock’s first-quarter gains, but the company later disappointed investors with weak guidance that fell short of expectations. Despite the recent acceleration in same store sales growth at the Family Dollar banner – which weighed on the stock for years – the consensus is now more concerned with rising cost pressures eating into margins at the moment. At some point, sentiment will be just right.”
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Based on our calculations, Dollar Tree, Inc. (NASDAQ: DLTR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. DLTR was in 42 hedge fund portfolios at the end of the first half of 2021, compared to 41 funds in the previous quarter. Dollar Tree, Inc. (NASDAQ: DLTR) delivered a -3.24% 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.
