Heartland Advisors, an investment management firm, published its “Heartland Value Plus Fund” second-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio return of 3.35% was recorded by the fund’s Institutional Class for the second quarter of 2021, trailing the Russell 2000® Value Index that delivered a 4.56% return 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 Heartland Advisors, the fund mentioned Dril-Quip, Inc. (NYSE: DRQ) and discussed its stance on the firm. Dril-Quip, Inc. is a Houston, Texas-based oilfield services company with an $863.9 million market capitalization. DRQ delivered a -17.72% return since the beginning of the year, while its 12-month returns are down by -29.61%. The stock closed at $24.25 per share on August 17, 2021.
Here is what Heartland Advisors has to say about Dril-Quip, Inc. in its Q2 2021 investor letter:
“Oil prices remained firm during the period, and Energy stocks benefited. Stock selection in the group boosted absolute portfolio returns. Holdings in the Equipment and Services space were particularly strong, including Dril-Quip Inc. (DRQ), which specializes in serving the offshore/subsea markets.
Dril-Quip’s sales were slightly weaker than forecasted for the most recent period, but the company reported strong margin growth as efforts undertaken to boost bottom-line results began to pay off. Additionally, bookings for future projects were up, and we expect expenses will continue to improve as management’s plan for reducing inventory levels continues to progress.Despite the promising outlook, Dril-Quip trades at less than 8x estimated 2022 earnings before interest, taxes, depreciation, and amortization.”
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Based on our calculations, Dril-Quip, Inc. (NYSE: DRQ) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. DRQ was in 9 hedge fund portfolios at the end of the 1st half of 2021, compared to 10 funds in the previous quarter. Dril-Quip, Inc. (NYSE: DRQ) delivered a -24.37% 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.
