White Brook Capital, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A portfolio return of -5.86% was recorded by the fund for the third quarter of 2021, underperforming its S&P 400 benchmark that delivered a -1.76% return for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
White Brook Capital, in its Q3 2021 investor letter, mentioned Cogent Communications Holdings, Inc. (NASDAQ: CCOI) and discussed its stance on the firm. Cogent Communications Holdings, Inc. is a Washington, D.C.-based internet service provider company with a $3.4 billion market capitalization. CCOI delivered a 21.75% return since the beginning of the year, while its 12-month returns are up by 26.88%. The stock closed at $72.79 per share on October 20, 2021.
Here is what White Brook Capital has to say about Cogent Communications Holdings, Inc. in its Q3 2021 investor letter:
“Shares of Cogent Communications (CCOI) were sold during the third quarter. Cogent was the last ongoing position in a broader “return to normal” thesis. Cogent provides the best and cheapest internet access to multi-tenant office buildings in Tier I and Tier II metropolises. In normal times, where the alternative is a full-office environment, work’s hybridization is a net positive for Cogent as Cogent provides additional services that are needed. When the alternative to hybridization is a full remote environment, the small offices that Cogent’s growth are built on are replaced, in part, by home offices, where Cogent does not compete. The Delta variant solidified the willingness for small and satellite offices to go fully remote and figure it out later and is an early preview of the years to come. While the company will rebound, I believe its total addressable market has permanently contracted or at least the pace at which things return to the pre-covid ratio of economic activity to office bandwidth needed is now elongated. While we bought the stock well, and I believe Cogent will either figure it out or sell the company soon, I prefer to invest in solid companies taking share in stagnant or growing markets rather than those that may have to compete in constricting markets, given the price paid. The Fund sold the stock and redeployed the capital where I thought there was better long term opportunity.”
Photo by Mika Baumeister on Unsplash
Based on our calculations, Cogent Communications Holdings, Inc. (NASDAQ: CCOI) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CCOI was in 22 hedge fund portfolios at the end of the first half of 2021, compared to 18 funds in the previous quarter. Cogent Communications Holdings, Inc. (NASDAQ: CCOI) delivered a -3.21% 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.
