Artko Capital LP, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. A return of 30.9% was delivered by the fund for the first quarter of 2021, outperforming the S&P 500 Index, also the Russell 2000, and Russell Microcap Index, that delivered a 6.2%, 12.7%, and 23.9% return respectively for the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Artko Capital, in its Q1 2021 investor letter, mentioned ChannelAdvisor Corporation (NYSE: ECOM), and shared their insights on the company. ChannelAdvisor Corporation is a Morrisville, North Carolina-based E-commerce company that currently has a $707.3 million market capitalization. Since the beginning of the year, ECOM delivered a 48.87% return, extending its 12-month gains to 78.07%. As of June 22, 2021, the stock closed at $23.79 per share.
Here is what Artko Capital has to say about ChannelAdvisor Corporation in its Q1 2021 investor letter:
“We are in the process of continuing to build up a Core Portfolio position in an insurance microcap and we did sell our position in Channel Advisor (ECOM) both for an individual red flag reason and for de-risking the portfolio from a frothy tech sector
after a nice 40% plus return.We sold our position in Channel Advisor in the low $20s during the quarter. While we do consider ourselves long-term investors with an average holding period of over 3.5 years and tend to be tax conscious with respect to capital gains and losses, we just felt increasingly uncomfortable with the behavior of the tech sector. More importantly a slew of insider sales, including from the director whom we have followed into the story, have always been a red flag signal for us which more often than not follows some bad news/decline in the stock and we just were not comfortable with the position. We took our 40% gain and ran.”
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Our calculations show that ChannelAdvisor Corporation (NYSE: ECOM) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the first quarter of 2021, ChannelAdvisor Corporation was in 12 hedge fund portfolios, compared to 15 funds in the fourth quarter of 2020. ECOM delivered a 14.54% 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.
