Miller Value Partners, an investment management firm, published its “Miller Income Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of 10.21% was recorded by Miller Income Fund’s I-shares for the Q2 of 2021, beating its benchmark, the ICE BofA US High Yield Index, which had a 2.77% gain for the same period. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Miller Value Partners, the fund mentioned Home Point Capital Inc. (NASDAQ: HMPT) and discussed its stance on the firm. Home Point Capital Inc. is an Ann Arbor, Michigan-based wholesale lender with a $550.9 billion market capitalization. HMPT delivered a -10.63% return for the past month, and it closed at $3.78 per share on September 21, 2021.
Here is what Miller Value Partners has to say about Home Point Capital Inc. in its Q2 2021 investor letter:
“Home Point Capital (HMPT) was the top detractor over the quarter, falling 36.2% as increased competition and peer price-matching in the wholesale channel pressured the near-term outlook for Gain on Sale margins. Home Point reported Q1 revenue of $422M, well above consensus of $314M driven by a $102M mark-to-market gain on the mortgage servicing rights portfolio. Origination volume of $29Bn topped expectations of $24Bn while Gain on Sale margin dropped 72bps sequentially to 128bps. Management noted higher competitive pressures have further compressed wholesale margins to 78bps in April, though the company expects the move to be temporary with margins normalizing at 115bps in the back half of the year. Management guided to Q2 funded volume of $25Bn-$30Bn, broker partners exceeding 8,000 by year-end (versus 6,000 in Q1), and maintained their commitment to declaring a quarterly dividend of $0.15/share (10.9% annualized yield) in Q2.”
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Based on our calculations, Home Point Capital Inc. (NASDAQ: HMPT) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. HMPT was in 37 hedge fund portfolios at the end of the first half of 2021, compared to 44 funds in the previous quarter. Home Point Capital Inc. (NASDAQ: HMPT) delivered a -38.47% 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.
