Heartland Advisors, an investment management firm, published its “Heartland Value Fund” second-quarter 2021 investor letter – a copy of which can be downloaded here. In the letter, Heartland mentioned that the fund was up double digits for the first half of the year, and its 10 Principles of Value Investing™ continues to lead them to well-managed businesses that are financially strong. You can take a look at the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Heartland Advisors, the fund mentioned Monmouth Real Estate Investment Corporation (NYSE: MNR) and discussed its stance on the firm. Monmouth Real Estate Investment Corporation is a Holmdel, New Jersey-based real estate investment trust company with a $1.8 billion market capitalization. MNR delivered an 8.89% return since the beginning of the year, while its 12-month returns are up by 32.54%. The stock closed at $19.10 per share on August 17, 2021.
Here is what Heartland Advisors has to say about Monmouth Real Estate Investment Corporation in its Q2 2021 investor letter:
“A recently announced acquisition of one of our holdings appears to confirm our investment thesis that attractive valuations are the basis of good investing.
Portfolio holding Monmouth Real Estate Investment (MNR) announced in early May that it had agreed to be purchased by Equity Commonwealth (EQC), an office real estate trust chaired by legendary investor Sam Zell. We originally took a stake in Monmouth, which specializes in warehouses and distribution centers, last year as the sector was still recovering from the steep COVID-19 selloff.
Our confidence came from management’s history of prudent capital allocation, a growing list of Fortune 500 customers and a focus on warehouse properties where demand was likely to balloon to meet the growing needs of online retailers. Perhaps due to its smaller market cap, the business was priced at a significant discount to larger competitors while sporting a handsome cap rate and well-financed dividend.
In mid-December of 2020, Monmouth rebuffed a buyout offer from another peer, holding out instead for a more lucrative offer, which arrived this spring.
With interest rates near all-time lows, we believe the search for under-appreciated assets and sustainable dividends will intensify. The portfolio should be a beneficiary.”
Leonardo da/Shutterstock.com
Based on our calculations, Monmouth Real Estate Investment Corporation (NYSE: MNR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. MNR was in 18 hedge fund portfolios at the end of the 1st half of 2021, compared to 13 funds in the previous quarter. Monmouth Real Estate Investment Corporation (NYSE: MNR) delivered a -0.58% 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage.
Disclosure: None. This article is originally published at Insider Monkey.
