Andvari Associates, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A return of 6.5% was delivered by the fund for the first nine months of 2021, below its S&P 500 and Russell 2000 benchmarks that delivered 15.9% and 12.4% returns respectively for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
In the Q3 2021 investor letter of Andvari Associates, the management firm mentioned Chemed Corporation (NYSE: CHE) and discussed its stance on the firm. Chemed Corporation is a Cincinnati, Ohio-based home health care services company with a $6.6 billion market capitalization. CHE delivered a -20.65% return since the beginning of the year, while its 12-month returns are down by -11.85%. The stock closed at $428.35 per share on October 6, 2021.
Here is what Andvari Associates has to say about Chemed Corporation in its Q3 2021 investor letter:
“A new entrant to Andvari’s portfolio is Chemed. We sold our investment in a large, customer-focused enterprise software company to make room for this overlooked holding company based in Cincinnati, Ohio. Chemed’s two subsidiaries are Roto-Rooter (plumbing and drain cleaning) and VITAS Healthcare (hospice care provider). Chemed checks many of the boxes within Andvari’s qualitative-based investment framework:
Stable and predictable revenues from two recession resistant businesses;
Low capital expenditure requirements;
Roto-Rooter and VITAS have good organic and inorganic growth opportunities as both are the largest players in markets that are still highly fragmented and populated mainly with “mom-and-pop” competitors;
Management has demonstrated excellent capital allocation skills; and
Management is long-tenured and highly aligned with shareholders.”
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Based on our calculations, Chemed Corporation (NYSE: CHE) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. CHE was in 30 hedge fund portfolios at the end of the first half of 2021, compared to 24 funds in the previous quarter. Chemed Corporation (NYSE: CHE) delivered a -11.16% 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.
