Heartland Advisors, an investment management firm, published its “Heartland Value Plus Fund” third-quarter 2021 investor letter – a copy of which can be seen here. The inflating bubble in large growth companies early in the quarter continued to drain oxygen from value stocks, and the portfolio was off modestly and lagged its benchmark, the Russell 2000® Value Index. Stock selection in Utilities was strong on a relative basis as were holdings in the Financials sector. The portfolio’s holdings in Health Care were down but outperformed the benchmark average for the group. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Heartland Advisors, in its Q3 2021 investor letter, mentioned Portland General Electric Company (NYSE: POR) and discussed its stance on the firm. Portland General Electric Company is a Portland, Oregon-based public utility company with a $4.3 billion market capitalization. POR delivered a 13.19% return since the beginning of the year, while its 12-month returns are up by 18.19%. The stock closed at $48.41 per share on October 21, 2021.
Here is what Heartland Advisors has to say about Portland General Electric Company in its Q3 2021 investor letter:
“Power Play. As investors chased growth stocks for much of the period, less economically sensitive areas of the market and steady performers lagged. Utilities were a prime example of the dynamic. Due to rate regulations under which most utilities operate, the group can be a challenging area to find compelling opportunities for margin expansion. However, we continue to hold some attractive opportunities, such as Portland General Electric (POR), by focusing on balance sheet strength of power companies that operate in growth markets.
Portland General, which provides electric and gas service to Oregon, stumbled last year after it racked up losses on some power trading contracts it engaged in during the height of a West Coast heat wave that sent wholesale energy prices skyrocketing. The company has taken corrective hedging actions to mitigate future issues and has regained investor interest by producing solid earnings.
We believe Oregon is a burgeoning region for the manufacturing and data industries, which should lead to net growth in power demand versus projections of flat or negative demand nationally. Despite its financial strength and positive growth outlook, Portland Electric trades at 8x enterprise value/earnings before interest, taxes, depreciation and amortization. Going forward, we expect multiples will continue to expand.”
Investment
Based on our calculations, Portland General Electric Company (NYSE: POR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. POR was in 21 hedge fund portfolios at the end of the first half of 2021. Portland General Electric Company (NYSE: POR) delivered a -0.12% 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.
