Smead Capital Management, an investment management firm, published its “Smead Value Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of 8.97% was recorded by the fund for the second quarter of 2021, compared to an 8.55% return of the S&P 500 Index and a gain of 5.21% of the Russell 1000 Value Index. 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 Smead Capital, the fund mentioned Discovery, Inc. (NASDAQ: DISCK), and discussed its stance on the firm. Discovery, Inc. is a New York, New York-based mass media company, that currently has a $14.1 billion market capitalization. DISCK delivered a 4.43% return since the beginning of the year, while its 12-month returns are up by 31.74%. The stock closed at $27.89 per share on August 11, 2021.
Here is what Smead Capital has to say about Discovery, Inc. in its Q2 2021 investor letter:
“We were most negatively affected by Discovery’s (DISCK) stock backing off from their meme-stock fame of the first quarter. Their share price then weakened further by announcing a merger with Warner Media to aggregate the best of unscripted TV shows with the best of sports and scripted TV and movies.”
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Based on our calculations, Discovery, Inc. (NASDAQ: DISCK) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. DISCK was in 40 hedge fund portfolios at the end of the first quarter of 2021, compared to 31 funds in the fourth quarter of 2020. Discovery, Inc. (NASDAQ: DISCK) delivered a -11.03% 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.
