Merion Road Capital Management, an investment management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. Merion Road Capital’s long-only large-cap portfolio returned 20% for the year. While this is a strong result on an absolute basis, it lagged the S&P. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Merion Road Capital Management, in its Q4 2021 investor letter, mentioned Rocky Brands, Inc. (NASDAQ: RCKY) and discussed its stance on the firm. Rocky Brands, Inc. is a Nelsonville, Ohio-based footwear manufacturing company with a $299.7 million market capitalization. RCKY delivered a 3.17% return since the beginning of the year, while its 12-month returns are up by 14.31%. The stock closed at $41.06 per share on February 14, 2022.
Here is what Merion Road Capital Management has to say about Rocky Brands, Inc. in its Q4 2021 investor letter:
“At the risk of sounding arrogant, I will say that we left some money on the table (we were flat since June). I’ve talked a lot in the past about our largest position, Rocky Brands (“RCKY”), but once again feel that an update is due. In November the company whiffed on earnings sending the stock down 22% and it continued to trade weak through the end of year. Revenue came in below expectations, not due to a lack of demand but rather a lack ofsupply. Thisfailure appears to be mostly self‐inflicted as RCKY just couldn’t ship boots out of their distribution center. Transitioning the acquired business into their facility got pushed towards the busy season and the company couldn’t handle the increased throughput. This led to all sorts of scary things like an earnings loss and significant draw on their credit facility.
Whenever I see a big surprise like this, I like to ask myself if it will matter in a year or two. Assuming the company does not face any liquidity issues I think the answer is a resounding no. Underlying demand remains strong with order growth up mid‐30% QoQ for the combined business. Customers have largely maintained orders as other manufacturers have been unable to deliver due to global supply chains. From here the question moves onto what RCKY is doing to address the foot fault. Improvements have already been made at their Ohio facility and they are in the process of bringing the new Reno distribution center online. Q4 will likely be sloppy and things will probably not be perfect in Q1 either. Nonetheless, my fundamental thesis remains intact.”
Our calculations show that Rocky Brands, Inc. (NASDAQ: RCKY) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. RCKY was in 10 hedge fund portfolios at the end of the third quarter of 2021, compared to 15 funds in the previous quarter. Rocky Brands, Inc. (NASDAQ: RCKY) delivered a -2.47% return in the past 3 months.
In December 2021, we also shared another hedge fund’s views on RCKY in another article. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
