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 FirstCash, Inc. (NASDAQ: FCFS) and discussed its stance on the firm. FirstCash, Inc. is a Fort Worth, Texas-based pawn store operator with a $3.6 billion market capitalization. FCFS delivered a 29.37% return since the beginning of the year, while its 12-month returns are up by 60.34%. The stock closed at $89.76 per share on October 21, 2021.
Here is what Heartland Advisors has to say about FirstCash, Inc. in its Q3 2021 investor letter:
“Sign of the times. Financials in the broad market continued to climb; however, strength was limited to businesses closely tied to consumer finance. The portfolio’s holdings in the sector outperformed on a relative basis, and the group included FirstCash Inc., (FCFS), a name we highlighted in the second quarter.
Shares of FirstCash, which operates pawn stores in the U.S. and Latin America, continued to move higher as the impact of COVID-19 stimulus checks began to fade and enhanced unemployment benefits expired. Absent government payments, consumers have returned to pawn stores for short-term loans. We remain constructive on the business due to its high margins and view it as uniquely positioned to thrive if the financial resiliency of consumers continues to soften.”
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Based on our calculations, FirstCash, Inc. (NASDAQ: FCFS) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. FCFS was in 17 hedge fund portfolios at the end of the first half of 2021, compared to 13 funds in the previous quarter. FirstCash, Inc. (NASDAQ: FCFS) delivered a 16.24% 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.
