Merion Road Capital Management, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 2.5% was reported by the fund’s Long Only Large Cap Fund, while its Long Short Small Cap Fund delivered a 23.8% in the first quarter of 2021, outperforming its Russell 2000 and Barclay Hedge Fund benchmarks that had a 12.9% and 4.9% gains respectively in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Merion Road Capital Management, in their Q1 2021 investor letter, mentioned Rocky Brands, Inc. (NASDAQ: RCKY) and shared their insights on the company. Rocky Brands, Inc. is a Nelsonville, Ohio-based shoe manufacturing company that currently has a $406.9 million market capitalization. Since the beginning of the year, RCKY delivered a whopping 99.93% return, impressively extending its 12-month gains to 172.16%. As of April 09, 2021, the stock closed at $56.12 per share.
Here is what Merion Road Capital Management has to say about Rocky Brands, Inc. in their Q1 2021 investor letter:
“Rocky Brands (“RCKY”) was our largest position heading into the year and was also the top gainer for the quarter. I have followed and invested in the company since 2017 when new management stepped in to address some blocking and tackling missteps from the prior team (I discussed RCKY in that year’s annual letter). Today the company is a well-run boot manufacturer and distributor predominately in the work, western, and military markets. RCKY has historically traded at a discounted valuation despite two meaningful strengths. Unlike other retail, their products serve function over form which leads to stable product demand and low inventory obsolescence. Secondly, the company has successfully built a high growth B2B operation. Within this division they create specialized websites for their customers (i.e. United Airlines, Pepsi) that serve as a portal for employees to buy their work boots, be it a RCKY brand or one of their competitors. Customers prefer this as it streamlines the purchasing decision and ensures safety compliance. It’s good business for RCKY too, as they move closer to the end user and can capture a slice of the pie from competitor sales.
With the improvement of the company’s financials over the past several years, RCKY had swung from a net debt to a fairly sizeable net cash position. Management has been smart with deploying capital, be it internally (B2B operations, direct to consumer initiatives) or through share repurchases. In January they announced that they would acquire Honeywell’s outdoor boot brands, effectively doubling the size of the company. These brands appear to fit well with RCKY’s utilitarian focus and will add to their existing outdoor product lines. On their Q4 earnings call management gave the first glimpse into their rationale for the transaction. While the acquired brands have been well-run, it appears there are many opportunities for RCKY to leverage their infrastructure and operating experience. These include cross-selling, fulfillment consolidation, and growing the new brands’ direct to consumer sales. Importantly management has demonstrated their ability to be successful in these endeavors, as they mirror many of the tasks they took on a few years ago.”
Our calculations show that Rocky Brands, Inc. (NASDAQ: RCKY) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Rocky Brands, Inc. was in 11 hedge fund portfolios, compared to 8 funds in the third quarter. RCKY delivered a stunning 83.10% return in the past 3 months.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
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Disclosure: None. This article is originally published at Insider Monkey.
