Bernzott Capital Advisors, an investment management firm, published its “US Small Cap Value Fund” second-quarter 2021 investor letter – a copy of which can be downloaded here. The fund recorded a quarterly portfolio return of +1.5% for the second quarter of 2021, compared to its benchmarks, the R200V Index that was up by 4.29%, and the R2500V Index which gained 5.0% for the same period. 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 Bernzott Capital, the fund mentioned Hillenbrand, Inc. (NYSE: HI) and discussed its stance on the firm. Hillenbrand, Inc. is a Batesville, Indiana-based burial casket manufacturing company with a $3.2 billion market capitalization. HI delivered a 10.75% return since the beginning of the year, extending its 12-month returns to 38.88%. The stock closed at $44.08 per share on August 20, 2021.
Here is what Bernzott Capital has to say about Hillenbrand, Inc. in its Q2 2021 investor letter:
“Hillenbrand (HI): The stock’s 7% decline in 2Q was amplified in the contribution calculation by its relatively large weight of 5%, which is partly a result of our long holding period of over a decade. After the stock was a leading contributor in 1Q, it cooled off this period despite a good earnings report in May which evidenced healthy backlog, strong cash flow, continuing deleveraging, and good execution managing cost input pressures seen by many.”
Photo by Rhodi Lopez on Unsplash
Based on our calculations, Hillenbrand, Inc. (NYSE: HI) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. HI was in 14 hedge fund portfolios at the end of the first half of 2021, compared to 15 funds in the previous quarter. Hillenbrand, Inc. (NYSE: HI) delivered a -3.90% 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.
