Wedgewood Partners, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of +2.75% was recorded by the fund for the third quarter of 2021, outperforming the S&P 500 Index that delivered a +0.58% return for the same period, and the +1.16% gain of the Russell 1000 Growth Index. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.
Wedgewood Partners, in its Q3 2021 investor letter, mentioned The Progressive Corporation (NYSE: PGR) and discussed its stance on the firm. The Progressive Corporation is a Mayfield, Ohio-based insurance company with a $52.6 billion market capitalization. PGR delivered a -8.97% return since the beginning of the year, while its 12-month returns are down by -7.69%. The stock closed at $90.01 per share on October 14, 2021.
Here is what Wedgewood Partners has to say about The Progressive Corporation in its Q3 2021 investor letter:
“Progressive reported higher than expected loss trends during the summer months. Much of this was due to inflation in the automobile supply chain. Over the past few years, its policy pricing actions have been relatively benign, so we think the Company has plenty of room with customers and pent-up goodwill with regulators to take up pricing and offset this pressure while maintaining its double-digit policy volume growth. The stock trades at a significant discount to the market, as financials – particularly insurers – are out of favor with “growth technology” investors. Progressive represents the rare financial that can post attractive growth due to its best-in-class ability to segment its markets and leverage its lowcost direct distribution.”
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Based on our calculations, The Progressive Corporation (NYSE: PGR) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. PGR was in 44 hedge fund portfolios at the end of the first half of 2021, compared to 45 funds in the previous quarter. The Progressive Corporation (NYSE: PGR) delivered a -5.20% 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.
