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 James River Group Holdings, Ltd. (NASDAQ: JRVR) and discussed its stance on the firm. James River Group Holdings, Ltd. is a Pembroke Parish, Bermuda-based insurance company with a $1.4 billion market capitalization. JRVR delivered a -21.32% return since the beginning of the year, while its 12-month returns are down by -19.90%. The stock closed at $38.67 per share on August 19, 2021.
Here is what Bernzott Capital has to say about James River Group Holdings, Ltd. in its Q2 2021 investor letter:
“James River (JRVR): Owns and operates a group of specialty insurance and reinsurance companies. The vast majority of premiums are originated by the company’s US excess and surplus lines market and nearly all of the premiums are casualty insurance and reinsurance. In 2013, JRVR began insuring rideshare business including Uber which grew to a substantial percentage of the total gross written premium by 2019. JRVR ceased underwriting this business line and placed it in runoff at the end of 2019 following disappointing performance and a desire to refocus on its core E&S business. Paid and incurred loss emergence remained elevated in 2020 and after a change to its reserving methodology JRVR significantly strengthened its reserves by $170 million in 1Q which we believe is now adequate to cover future losses. With the commercial auto distraction behind them, we expect investor attention to turn to JRVR’s strong, core business trends and for shares to trade in-line with similar, high-performing peers.”
Iakov Filimonov/Shutterstock.com
Based on our calculations, James River Group Holdings, Ltd. (NASDAQ: JRVR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. JRVR was in 15 hedge fund portfolios at the end of the first half of 2021, compared to 14 funds in the previous quarter. James River Group Holdings, Ltd. (NASDAQ: JRVR) delivered a 17.93% 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
